Buy Now, Pay Later for Groceries

I was reading through Bloomberg Businessweek when I came across an article titled, "Americans Go Deeper Into Debt as They Use Buy Now, Pay Later Apps for Groceries" [link].

My impression of BNPL is that it is typically spent on clothing, fashion accessories, electronic gadgets and the like. But this is the first time I've read of people resorting to BNPL for grocery supplies. This speaks volumes of the dire straits that some people are currently facing.

Unlike clothing and consumer products that may still have some residual resale value, there is none for groceries since they are meant for literal consumption. One is getting into debt just to put food on the table.

In Singapore, we have government financial assistance for families living at the poverty line. There are also welfare organisations that provide needy families with help. Admittedly the support is targeted and some families, while barely making ends meet, may not qualify, or the amount isn't enough. Hence, BNPL and payday loan may appear as attractive alternatives.

According to Investopedia, BNPL volume could exceed $3.5 trillion by 2030 [link]. From what I understand, there are lower hurdles to getting BNPL financing compared to credit cards.

I hope the BNPL culture does not spawn another debt crisis in the future.

Challenging Times for Reit Managers Ahead

The Business Times published an opinion article today titled, "Reit managers, take note: General mandate to issue new units is least popular resolution at S-Reit AGMs" [link]. It described how Sabana Industrial Reit unitholders rejected the resolution for the Reit Manager to issue new units and to make or grant convertible instruments without the expressed approval of unitholders.

Sabana Industrial Reit has been embroiled in a hostile battle between the Reit Manager and one of its investors, Quarz Capital. But having a resolution voted down is rare. Other Reit Managers ought to sit up and take notice.

Since the GFC, Reits have prospered in the ultra-low interest rate environment, where debt can be obtained at a relatively low cost. Consequently, Reits have been able to provide enviable returns to investors. With the rapid ramp-up of interest rates, this era of cheap debt is over. The cost of capital is going to creep up, regardless of how much Reit Managers tout that a major portion of their debt is in 'fixed' rates. Eventually, more of the revenue will be needed to service interest expense.

Reit Managers may also face scrutiny when trying to raise money via private issuance of new units.

If Reit Managers cannnot raise rental rates correspondingly at the risk of losing anchor tenants, then investors will have to settle for less.

The next ten years will be nothing like the last ten years.

Do take note.

Portfolio Summary for April 2023

As of 30 April 2023

CDP

Security	# shares	Price S$	%
DBS	300	32.82	2.56
UOB	300	28.22	2.20
OCBC Bank	700	12.58	2.29
SGX	2,700	9.55	6.68
iFast	5,700	4.62	6.85
CapitaLand Investment	7,400	3.72	7.16
ST Engineering	6,900	3.62	6.50
SATS	8,200	2.54	5.42
Powermatic Data	8,500	2.52	5.57
TheHourGlass	5,000	2.08	2.70
Micro-Mechanics	11,100	2.10	6.06
Vicom	11,800	1.85	5.68
Sheng Siong	13,000	1.77	5.98
Nanofilm	15,400	1.50	6.01
ComfortDelGro	11,200	1.19	3.47
Genting Singapore	11,700	1.14	3.46
Credit Bureau Asia	14,300	0.98	3.64
HRnetGroup	21,900	0.75	4.27
China Sunsine	41,800	0.46	5.00
TalkMed Group	14,500	0.42	1.58
HC Surgical	35,500	0.355	3.28
Silverlake Axis	15,000	0.335	1.31
Kimly	27,000	0.33	2.32

Portfolio Market Value = $384,539

Trades
- None

SRS

Security	# shares	Price S$	%
OCBC Bank	900	12.58	7.91
SGX	1,300	9.57	8.69
iFast	2,100	4.62	6.78
CapitaLand Investment	2,600	3.72	6.76
ST Engineering	3,000	3.62	7.59
SATS	3,800	2.54	6.74
Powermatic Data	3,400	2.52	5.99
Micro-Mechanics	3,100	2.10	4.55
Vicom	4,700	1.85	6.08
Sheng Siong	8,700	1.77	10.76
Nanofilm	5,500	1.50	5.76
ComfortDelGro	6,900	1.19	5.74
Credit Bureau Asia	5,700	0.98	3.90
China Sunsine	10,800	0.46	3.47
TalkMed Group	5,800	0.42	1.70
HC Surgical	19,500	0.355	4.84
Silverlake Axis	6,000	0.335	1.40
Kimly	5,800	0.33	1.34

Portfolio Market Value = $143,119

Trades
- None

Singapore Savings Bonds

Security	Amount ($)	Avg Yld %
GX18070N	12,500	2.63
GX22120S	14,000	3.47
GX23010Z	15,000	3.26

Portfolio Market Value = $41,500

Commentary

Another month passed in the blink of an eye. Market was directionless most of the time, and I stayed on the sidelines.

Economists are worried about a global recession, caused by record high interest rates not seen in the past decade. The Singapore labour market however, is holding up well [release]. While there is the occasional tech retrenchment, e.g. Amazon [news], packed shopping malls and higher Retail Reits' tenant sales are indicators that consumers are still confident to spend, eat out and travel. So B2C companies continue to thrive.

I read about NIM pressure on banks, but not seeing any impact yet. UOB just reported 1Q23 result [here]. Net profit was S$1.58b, up 74% YoY. This came after the bank completed its acquisition of Citi's businesses in Malaysia, Thailand and Vietnam. (Acquisition of Citi's business in Indonesia will complete by year end.) ROE rocketed to 14.9%, up 6.1% YoY. NIM moderated to 2.14% from 2.22% in 4Q22 while NPL ratio remained stable at 1.6%.

Overall, a positive report card. I expect similar good news for DBS reporting on May 2, and OCBC reporting on May 10.

I recently evaluated the companies held in my portfolio. The worst companies - according to my personal performance scorecard - are ComfortDelGro, SATS and iFast.

ComfortDelGro (CDG) has seen improved ridership, but its share price is stuck around the $1.20 range. Broker analysts are optimistic about the company, considering the number of buy calls, but the market isn't hopeful at all. There is sign of P/E contraction, and it begs me to think whether the heyday of Singapore's main public transport operator is over. Currently, CDG is vying to operate metro lines in Sweden from 2025 onwards [news].

SATS hasn't reinstated its dividend since the pandemic. Instead, it boosted staffing in anticipation of demand. It is unknown whether the recent surge in revenge travel from China will translate into tangible earnings for the company. The airport service operator will also need time to integrate WFS into its corporate structure and derive synergy savings. The loan taken to acquire WFS will weigh on the bottom line too.

iFast reported dismay 1Q23 result [here]. Revenue was S$48.9m, down 5.7% YoY. Net profit was S$4.62m, down 18.5% YoY. The company is still nursing a loss from its UK bank acquisition while experiencing reduced YoY AUA (Assets Under Administration). The delayed start of revenue contribution from its Hong Kong ePension Services in late 2023 is a ray of hope that the asset manager will reverse its beleaguered fortune.

Around the same time, I researched on new stock ideas. Ran my screener on local listed companies and it identified Riverstone Holdings, AEM Holdings and UMS Holdings.

Riverstone sells clean-room products (including gloves). Its business soared during the COVID19 period, but now that the pandemic is behind us, its share price has come back down to earth and its dividend yield will probably retrace to the historical 1.5-2.5% range, which is unsatisfactory in my opinion.

AEM manufactures test equipment for the semiconductor industry. The company has seen dramatic improvement in its top and bottom line over the last three years, and has won plaudits from broker analysts. I find fellow blogger TFI's coverage of AEM AGM 2023 [here] to be insightful.

UMS manufactures high precision semiconductor components and complex electromechanical assembly. The company has shown similar improvement in its top and bottom line over the last three years. The company has been consistent in doling out dividends through good times and bad. I have placed UMS on my watchlist.

Both AEM and UMS operate in the same industry as Micro-Mechanics Holdings (MMH) which I currently hold. Of the three, I favour MMH most because of its zero debt burden. But even the healthiest company cannot escape an industry cyclical downturn. MMH reported its 3Q23 result last Friday. Revenue was S$14.9m, down 24.2% YoY. Net profit was S$1.63m, down 63% YoY. Such poor showing was expected, coming off a high base in 2022. MMH share price has declined in recent months. Nonetheless, I'm confident the company will ride through unscathed.

Buffett's "20 slots" punch card rule keeps nagging at the back of my mind. At the moment, I have 23 stocks in my portfolio. If I add UMS, that will be #24. My limited capital is being spread out on too many bets. Ownership bias has afflicted me far too long, especially when the reason I first bought the stock no longer holds. Time to get rid of the laggards and free up capital to focus on my higher conviction ideas. Watch this space.

By the way, James Clear, author of the New York Times bestseller Atomic Habits, explains [here] how you can apply Buffett's "20 slots" rule not just to investments, but to life too.

On the savings side, the latest SSB average yield is 3.07%, worse than prevailing FD rates in the market. I'm sitting out to conserve dry powder. That said, I'm not discouraging anyone from investing in SSB. There is mounting evidence the U.S. has hit peak inflation [article], even though the ECB still struggles to keep inflation in check [news]. The MAS Core Inflation fell to 5.0% YoY in March compared to 5.5% in February [release]. Investing in short-term FDs means one faces reinvestment risk when interest rates start to head south.

Per my February blog post, I have been reflecting on my financial freedom journey. I have doubts on and off whether I will be able to retire comfortably and pursue other interests in life. I am in a stable financial position now, but there is a big hairy audacious retirement goal that I aspire to achieve. (Embarrassing to say it out loud, but you will know when I hit it!)

I'm saddended by the demise of fellow blogger Createwealth8888. I had been a regular reader of his posts. I first learnt about the term "multi-bagger" from his writing. My deepest condolences to his family. (Reminder to self: Life is short. Cherish it. Nothing is worth sacrificing in the pursuit of a big hairy audacious retirement goal.)

Signing off for now. Thank you for reading. Until next time, take care.

Portfolio Summary for March 2023

As of 31 March 2023

CDP

Security	# shares	Price S$	%
DBS	300	33.00	2.55
UOB	300	29.76	2.30
OCBC Bank	700	12.37	2.23
SGX	2,700	8.71	6.21
iFast	5,700	4.91	7.20
SATS	8,200	2.79	5.88
ST Engineering	6,900	3.66	6.49
CapitaLand Investment	7,400	3.68	7.00
Micro-Mechanics	11,100	2.01	5.74
Powermatic Data	8,500	2.43	5.31
Nanofilm	15,400	1.61	6.38
TheHourGlass	5,000	2.18	2.80
Vicom	11,800	1.87	5.67
Sheng Siong	13,000	1.69	5.65
ComfortDelGro	11,200	1.18	3.40
Credit Bureau Asia	14,300	0.975	3.59
Genting Singapore	11,700	1.12	3.37
HRnetGroup	21,900	0.815	4.59
HC Surgical	35,500	0.35	3.19
China Sunsine	41,800	0.47	5.05
TalkMed Group	14,500	0.41	1.53
Kimly	27,000	0.33	2.29
Silverlake Axis	15,000	0.33	1.27

Portfolio Market Value = $388,901

Trades
- Subscribed 4,300 new shares of SATS.

SRS

Security	# shares	Price S$	%
OCBC Bank	900	12.37	7.76
SGX	1,300	9.40	8.51
iFast	2,100	4.91	7.18
SATS	3,800	2.79	7.39
ST Engineering	3,000	3.66	7.65
CapitaLand Investment	2,600	3.68	6.67
Micro-Mechanics	3,100	2.01	4.34
Powermatic Data	3,400	2.43	5.76
Nanofilm	5,500	1.61	6.17
Vicom	4,700	1.87	6.12
Sheng Siong	8,700	1.69	10.24
ComfortDelGro	6,900	1.18	5.67
Credit Bureau Asia	5,700	0.975	3.87
HC Surgical	19,500	0.35	4.76
China Sunsine	10,800	0.47	3.54
TalkMed Group	5,800	0.41	1.66
Kimly	5,800	0.33	1.33
Silverlake Axis	6,000	0.33	1.38

Portfolio Market Value = $143,527

Trades
- Subscribed 1,600 new shares of SATS.

Singapore Savings Bonds

Security	Amount ($)
GX18070N	12,500
GX22120S	14,000
GX23010Z	15,000

Portfolio Market Value = $41,500

Commentary

It is an understatement to say that March was turbulent. The financial world was shell-shocked. Two U.S. banks (Signature and SVB) and one Swiss bank (Credit Suisse) went under. SVB suffered from the classic bank run, while Credit Suisse had to be bailed out by rival UBS and the Swiss regulator.

The situation surrounding Credit Suisse raised many eyebrows. Holders of the bank's AT1 (Additional Tier One) bonds were completely wiped out, but shareholders got a respite through an exchange of 1 UBS share for every 22.48 Credit Suisse shares.

For the first time in my life, equity holders actually survived ahead of bondholders. Clearly, this is an exception, not a precedence. The Monetary Authority of Singapore had to step out and make a statement that "shareholders will absorb losses before bondholders, according to the hierarchy of claims in the event of a liquidation." [news]

As the market gyrated between fear and hope - fear that a Fed-induced recession is imminent; and hope that the Fed will cut interest rates later this year, I stayed on the sidelines and buried myself in work.

I applied for my portion of SATS right shares. I also applied for additional right shares but did not get my full amount. According to the company, the rights issue was 173% oversubscribed, which was a pleasant surprise. I thought investors were pessimistic about the airport services operator, given the low share price. What was even more perturbing was that on the day of the new share issuance (March 29), the share price did not drop to the TERP. Rather, it SOARED, ending the day 21 cents higher at $2.76. Many short sellers must have been caught off guard and badly burnt.

The average yield for the latest tranche of SSB is 3.15%, but I did not apply. I took up the offer by Great Eastern instead. I invested S$20,000 into the recent GREAT SP Series 10, an one-year endowment policy with a guaranteed return of 4%. A little income before I use the money to pay down my mortgage.

The Fed had decided to notch up the interest rate by 25 bps. Heading into Q2, it is possible we will see cracks appear in certain segments of the economy. Companies without strong cashflows that have binged on cheap debt during the previous decade will be in trouble. As Buffett quipped, "Only when the tide goes out do you discover who's been swimming naked."

Portfolio Summary for February 2023

As of 28 February 2023

CDP

Security	# shares	Price S$	%
DBS	300	34.17	2.71
UOB	300	29.92	2.37
OCBC Bank	700	12.67	2.34
SGX	2,700	8.71	6.21
iFast	5,700	4.98	7.50
SATS	3,900	2.83	2.92
ST Engineering	6,900	3.57	6.51
CapitaLand Investment	7,400	3.72	7.27
Micro-Mechanics	11,100	2.28	6.69
Powermatic Data	8,500	2.55	5.73
Nanofilm	15,400	1.50	6.10
TheHourGlass	5,000	2.17	2.87
Vicom	11,800	1.90	5.92
Sheng Siong	13,000	1.63	5.60
ComfortDelGro	11,200	1.21	3.58
Credit Bureau Asia	14,300	0.985	3.72
Genting Singapore	11,700	1.02	3.15
HRnetGroup	21,900	0.80	4.63
HC Surgical	35,500	0.41	3.85
China Sunsine	41,800	0.455	5.03
TalkMed Group	14,500	0.42	1.61
Kimly	27,000	0.33	2.35
Silverlake Axis	15,000	0.335	1.33

Portfolio Market Value = $378,431

Trades
- Bought 2,700 shares of Micro-Mechanics.

SRS

Security	# shares	Price S$	%
OCBC Bank	900	12.67	8.14
SGX	1,300	8.71	8.08
iFast	2,100	4.98	7.46
SATS	2,200	2.83	4.44
ST Engineering	3,000	3.57	7.64
CapitaLand Investment	2,600	3.72	6.90
Micro-Mechanics	3,100	2.28	5.04
Powermatic Data	3,400	2.55	6.19
Nanofilm	5,500	1.50	5.89
Vicom	4,700	1.90	6.37
Sheng Siong	8,700	1.63	10.12
ComfortDelGro	6,900	1.21	5.96
Credit Bureau Asia	5,700	0.985	4.01
HC Surgical	19,500	0.41	5.71
China Sunsine	10,800	0.455	3.51
TalkMed Group	5,800	0.42	1.74
Kimly	5,800	0.33	1.37
Silverlake Axis	6,000	0.355	1.43

Portfolio Market Value = $140,124

Trades
- None

Singapore Savings Bonds

Security	Amount ($)
GX18070N	12,500
GX22120S	14,000
GX23010Z	15,000

Portfolio Market Value = $41,500

Commentary

February came and went in a jiffy. I only executed one trade. As the market sentiment soured on semiconductor-related stocks, I built on my position in Micro-Mechanics Holdings (MMH). I believe the drop in demand for chips is cyclical in nature and does not herald any permanent change to the company's fundamentals.

DBS reported a beautiful set of results. FY2022 total income was a record S$16.5B, up 16% YoY. Net profit was S$8.19B, up 20% YoY. Q4 dividend was increased to 42 cents, and an one-time special dividend of 50 cents was declared. Going forward, dividend from the bank will be an indicative S$1.68 per year, or 42 cents per quarter. The stock price has run up a fair bit, though it has stabilised recently. I will wait for retracement before adding my position.

The other two local banks reported respectable results too. UOB FY2022 total income was S$11.575B, up 18% YoY. Net profit was S$4.819B, up 18% YoY. A final dividend of 75 cents was declared, making it S$1.35 for the whole FY. OCBC FY2022 total income was S$11.675B, up 10% YoY. Net profit was S$5.748B, up 18% YoY. A final dividend of 40 cents was declared, making it 68 cents for the whole FY.

Across the three banks, the common trend was a drop in wealth management fees. But some analysts are hopeful the trend will reverse in 2023.

Genting Singapore finally escaped its ill fortune. FY2022 revenue was S$1.725B, up 62% YoY. Net profit was S$340.1M, up 86% YoY. A final dividend of 2 cents was declared, making it 3 cents for the whole FY.

On the other hand, things were not so rosy for CapitaLand Investment (CLI). FY2022 revenue was S$2.876B, up 25% YoY. But total PATMI declined 36% YoY to S$861M. The drop is attributed to lower revaluation of China assets and absence of one-off portfolio gain. A dividend of 12 cents was declared, coupled with a dividend-in-specie distribution of 0.057 units of CapitaLand Ascott Trust (CLAS) per share.

Honestly, I'd rather CLI offload the CLAS units to institutional investors and distribute the proceeds instead. Selling off odd lots is a hassle.

Next month's issuance of Singapore Savings Bond has an average return of 2.9%. This is below my preferred level, so I will not subscribe for the issue.

I had just completed my annual performance evaluation with my manager. We discussed about the accomplishments and challenges during the previous year. The most important topic in the conversation was the salary adjustment for the new workyear. As my company does not provide 13th month bonus, the salary adjustment is a crucial motivational factor. Percentage-wise, the increment is on par with inflation. In dollars and cents, my salary sits above the median in the industry, so I have no complaint. However, one of my team mates was unsatisfied with her increment. I suggested to her to speak to our TL, rather than keep brooding about it.

I know my manager and TL are satisfied with my work last year. However, I am feeling burnt out handling the demanding clients assigned to me. I told my TL during our 1:1 meeting that I want to change to a different role. Somehow, the management is not keen for me to do so. Nonetheless, I have been honest to my TL that should the situation worsen and I lose my morale at work, I will request for a transfer. It may sound like a threat, but it isn't. I just don't want any unpleasant surprise down the road.

During mid-month, I suffered a bout of flu which impacted my fitness. I had to pause my regular exercise regime. Thankfully, it was a light week and I didn't have critical matters to attend to. I was able to rest at home, and I took the chance to reflect on my own financial journey.

My investment capital is not growing as fast as I would like because I'm keeping part of my salary aside to pay down my mortgage next year. Once the $330,000+ housing loan is cleared, I will be able to invest more into my stock portfolios. Looking at my snail pace of wealth accumulation however, I doubt I will be able to quit my job until I'm past 55 years old. So much for F.I.R.E. (Sigh.)

I started on this financial freedom journey with the sole purpose of building a retirement nest egg. Sometimes I wonder if I am being harsh on myself and my family. I see my friends drive big cars, stay in private housing and enjoy extended holidays in exotic destinations, while I scrimp and save my hard-earned money. Once, I joked to my wife that I'm trying to survive each month on the equivalent of a security guard's pay. If we are contented with simple pleasures on a shoestring budget, then we need not fear being retrenched anytime. With adequate savings, life can carry on as normal, and we can take our time to find the next preferred job, if it is still required.

Thanks for reading.

SATS' Right Issue

Airport services operator SATS has finally revealed the long-awaited Right Offering [here].

Subscription Price is S$2.20 per Right (20% discount to last traded price of S$2.75). Allotment Ratio is 323 Rights for every 1,000 existing Shares held.

SATS also gained the European Union's regulatory approval to proceed with the acquisition deal for WFS.

I guess there is no turning back from here. I will likely subscribe for my portion, given it is an opportunity to acquire the shares cheaply. But I expect short-term pain for SATS (read:higher costs) over the next few years as it assimilate WFS into its existing corporate structure. I don't expect SATS to return to profitability and dole out sizeable dividends anytime soon.

Portfolio Summary for January 2023

As of 31 January 2023

CDP

Security	# shares	Price S$	%
DBS	300	35.79	2.82
UOB	300	29.83	2.35
OCBC Bank	700	12.93	2.38
SGX	2,700	9.22	6.54
iFast	5,700	5.20	7.79
SATS	3,900	3.02	3.09
ST Engineering	6,900	3.68	6.67
CapitaLand Investment	7,400	3.96	7.70
Micro-Mechanics	8,400	2.48	5.47
Powermatic Data	8,500	2.68	5.98
Nanofilm	15,400	1.44	5.83
TheHourGlass	5,000	2.08	2.73
Vicom	11,800	1.92	5.95
Sheng Siong	13,000	1.64	5.60
ComfortDelGro	11,200	1.20	3.53
Credit Bureau Asia	14,300	0.95	3.57
Genting Singapore	11,700	0.99	3.04
HRnetGroup	21,900	0.81	4.66
HC Surgical	35,500	0.40	3.73
China Sunsine	41,800	0.465	5.11
TalkMed Group	14,500	0.415	1.58
Kimly	27,000	0.345	2.45
Silverlake Axis	15,000	0.36	1.42

Portfolio Market Value = $380,626

Trades
- None

SRS

Security	# shares	Price S$	%
OCBC Bank	900	12.93	8.10
SGX	1,300	9.22	8.35
iFast	2,100	5.20	7.60
SATS	2,200	3.02	4.63
ST Engineering	3,000	3.68	7.69
CapitaLand Investment	2,600	3.96	7.17
Micro-Mechanics	3,100	2.48	5.35
Powermatic Data	3,400	2.68	6.34
Nanofilm	5,500	1.44	5.51
Vicom	4,700	1.92	6.28
Sheng Siong	8,700	1.64	9.93
ComfortDelGro	6,900	1.20	5.77
Credit Bureau Asia	5,700	0.95	3.77
HC Surgical	19,500	0.40	5.43
China Sunsine	10,800	0.465	3.50
TalkMed Group	5,800	0.415	1.68
Kimly	5,800	0.345	1.39
Silverlake Axis	6,000	0.36	1.50

Portfolio Market Value = $143,620

Trades
- None

Singapore Savings Bonds

Security	Amount ($)
GX18070N	12,500
GX22120S	14,000
GX23010Z	15,000

Portfolio Market Value = $41,500

Commentary

Throughout January, I was in surveillance mode and did not execute any trade.  China's post-COVID19 re-opening and the first sign of moderation in U.S. inflation brought the animal spirits in investors to drive regional markets higher.

SATS reported an overwhelming acceptance by shareholders on its acquisition of WFS during the EGM [filing].  In reality, there was no alternative.  I will be looking at the terms of SATS' right offering before deciding my next step.

I am disappointed that the average yield on Singapore's latest Savings Bond issuance has fallen below 3 percent.  I opted not to subscribe for the bond this month.

Family-wise, the Lunar New Year passed without much fanfare.  We visited the parents on both sides.  Other than that, we stayed home.  It was a welcome respite over the long weekend, before life gets hectic again.

My wife broached the topic about quitting.  I sensed her lack of satisfaction in the job, as well as the tiredness from juggling work and family.  I told her I will respect her choice if she decides to tender her resignation.

As for me, I am looking forward to my next financial milestone, which is to pay off our housing mortgage in twenty months' time.  Once that is cleared, a heavy load will be off my mind.  I still have a long way to go to accumulate a sizeable retirement nest egg.  But I do hope once my age hit the fifties, I can take one notch down in my pace to appreciate the quieter things in life.

Earnings reporting season is coming right up.  Not expecting any surprise for the companies on my watchlist.  Under the looming threat of recession, I hope the management and board of directors will be cautious and watch the overheads carefully.