Friday, January 31, 2020

Portfolio Summary for January 2020

As of 31 January 2020

Cash Equity

Security# SharesPricePortfolio %
DBS400$25.3716.13%
OCBC Bank900$10.8315.50%
SATS2,000$4.5614.50%
ST Engineering2,500$4.1116.33%
ComfortDelGro4,600$2.1715.87%
Old Chang Kee5,000$0.745.88%
HC Surgical19,100$0.5215.79%
Portfolio Market Value = $62,904

SRS Equity

Security# SharesPricePortfolio %
OCBC Bank900$10.8314.16%
SGX1,300$8.7016.43%
SATS2,200$4.5614.58%
SingTel2,000$3.309.59%
CapitaCommercial Trust5,000$2.0614.96%
Sheng Siong8,700$1.2315.55%
HC Surgical19,500$0.5214.73%
Portfolio Market Value = $68,830


We had a smooth start to the year, but the peace did not last long.  News of the Wuhan coronavirus raised alarms throughout the world.  It is no wonder - memories of the 2003 SARS virus, which killed 33 people in Singapore, still linger. At time of writing, there have been 9,929 people infected and 213 deaths [link].  Thankfully, there are only 16 confirmed cases in Singapore so far.

Global fears started to take hold in the last week of January, causing the stock markets to roil in red.  I took opportunity of the sudden downturn to load up on a few stocks.


Trade Actions

HC Surgical Specialists
Last month, I had blogged about my initial purchase of HC Surgical Specialists ("HCSS"). (You can read it here.)  In January, I continue to accumulate the position.  I added 15,000 shares to my cash equity portfolio and 19,500 shares to my SRS equity portfolio.  On 9 Jan, HCSS reported its half yearly result, which was broadly in line with expectations [link].  The happy news is that the board had declared an interim dividend of 1.3 cents per share, up from 1.0 cent previously.  However, on analysis, this amount is 90 per cent of the mid-year EPS, which means there is little left in the company coffers for growth.  On 13 Jan, the company announced its first foray into Cambodia, inking an exclusive collaboration with The Prestige Hospital [link].  HCSS will provide consultancy services on the setup and operation of the hospital's endoscopy centre for a duration of three years.  While creating an additional revenue stream, the experience should be invaluable to the management as they steer towards a regional ASEAN expansion.

ComfortDelGro
I bought 4,600 shares of ComfortDelGro ("CD") for my cash equity portfolio.  CD is the majority owner of SBS Transit, ComfortCab, CityCab and VICOM.  The stock price had gone on a roller-coaster ride to a 52-week high of $2.90 before coming back to earth again.    Analysts have been skeptical of its performance due to lack of growth drivers, intense competition from Grab and high maintenance cost.  However, the operating expenses seem to have stabilized around 88-89 per cent of revenue over the past eight quarters.  Competition from Grab is yesterday's news and has definitely been priced in.  Given that Grab can't go on burning cash without making a profit forever, any further decline in the taxi division should be limited.  Lastly, the most recent 7 per cent increase in public transport fare adjustment should help to offset the bump in maintenance cost.

Frasers Commercial Trust
I sold off the shares of Frasers Commercial Trust ("FCOT") in my SRS equity portfolio.  This is in line with my shift in investment strategy from REITs to companies with healthy fundamentals.  FCOT is pending acquisition by its sister fund, Frasers Logistics & Industrial Trust.  I hate to be left holding an odd lot position, hence the decision to exit this investment.

Capitaland Commercial Trust
The REITs seem to be following the bigger-is-better trend these days, with the latest announcement being the acquisition of Capitaland Commercial Trust ("CCT") by its sister fund, Capitaland Mall Trust ("CMT") [link].  For every share, CCT owners will get $0.259 cash and 0.72 share of CMT.  Based on CMT price of $2.59, this works out to a fair consideration of $2.1238.  Does this mean we should buy CCT everytime it falls below $2.12?  Not exactly, but it does mean that CCT and CMT share price will be locked in tandem.  If you are a professional arbitrageur, there may be a chance to make profit if the share prices deviate.  During end January, I bought another 2,000 shares for my SRS equity portfolio.  The rationale is to have a total of 5,000 shares, which after the merger (if successful) will result in 3,600 CMT shares - a nice round lot number.  The merger is expected to undergo shareholder approval in May 2020, and be completed in June 2020.  That said, if CCT price climbs to an attractive level prior the merger, I will consider to offload my shares than stick around.

SATS
I bought 2,200 shares of SATS for my SRS equity portfolio when the stock price plummeted in the last week of January.  Investors were spooked by the implications of the Wuhan coronavirus.  DBS Group Research put out a report, noting that during the SARS period, SATS net profit fell 15 per cent from S$183.7m to S$155.9m on the back of 9.3 per cent year-on-year decline in revenue to S$868.7m.  However, it must be kept in mind that SATS performance bounced back immediately after the crisis.  Any impact is likely to be temporary in nature.


Savings

The CPF MediSave Basic Healthcare Sum (BHS) was increased from $57,200 to $60,000 with effect from 1 January 2020.  I took the chance to top up $2,800 to my MediSave account, and earn some tax relief at the same time.

Next month's Singapore Savings Bond (SSB) is likely to have an average yield of 1.71 per cent.  Sadly, the fixed deposit offerings in the private market are not that attractive either [link].  My wife's fixed deposit is coming due, and she is looking at endowment plans offered by insurance companies instead.  Besides a higher projected return, there is the safety provided by Singapore Deposit Insurance Corporation (SDIC).  The downside would be a longer lockup period.  The local stock market has retreated from its high a few months ago.  There are a few blue chip counters you can consider if you are a little more adventurous, with solid fundamentals and a dividend yield between 3.5 and 4.5 per cent.


Looking Ahead

It is said that the full blown impact of the Wuhan coronavirus will be known by yuanxiaojie (元宵节) or Lantern Festival, which is the 15th day of the lunar month (8 February 2020).  Talk is that the travel and hospitality sector will be badly hit this quarter (think hotels and airlines).  Nonetheless, it must be kept in mind that such crises are rare and few between.  Most companies recover from the loss of revenue soon after.  Yet it is precisely at the height of fear and panic that stock prices get attractive enough for investment.  I hope there will be more opportunities in February to build up my portfolio.

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