Thursday, 5 January 2017

Portfolio Update - December 2016

*As of 31 December 2016

Counter
Average Price
Yield on cost(%)
Weightage
UOB Bank
17.8600
4.00
11.05%
OCBC Bank
8.6000
4.00
10.44%
Starhub
3.4700
5.70
9.47%
Singtel
3.6700
4.00
8.91%
First REIT
1.2525
6.75
6.84%
M1
2.3600
5.50
6.44%
SembCorp Industries
2.4500
3.00
5.95%
Capitaland Mall Trust
1.9050
5.80
5.20%
Fraser Logistics & Industrial Trust
0.9200
7.00
5.02%
CDL Hospitality Trust
1.3050
6.80
3.56%
Keppel Corp
5.3700
5.00
4.89%
SPH
3.7500
5.00
3.41%
Keppel DC REIT
1.0822
6.17
2.63%
Capitaland Commercial
1.3523
6.15
2.05%
SPHREIT
0.9293
5.80
1.97%
Ascendas Hospitality
0.6991
8.03
1.06%
Mapletree Logistics
0.9800
7.40
0.89%
STI ETF
2.8058
3.50
10.21%
Total
4.84
100.00%

Legend
CDP
SCB

Total Invested Capital = $32,964.37

Total Expected Dividends/month = $136.52

Average Dividend Yield = 4.97%

Equities for the month December continued their rally from the Trump election into the middle of the month. The rally ended with heavy profit taking, particularly in the banks which were thought to be the strongest beneficiaries from increase in interest rates and Trump policies.

The strengthening USD was a result of the Fed being expected to raise interest rates for the first time this year, which they did, but what was surprising was the conviction in increasing interest rates at a faster pace than the market was expecting. But with so much uncertainty surrounding Janet Yellen's position once Donald Trump takes the White House, her words may not carry much weight in the end.



In this month of expected interest rates, it was my favourite moment. That is because the shock from the expected higher interest rates has caused the price of interest rate sensitive stocks to correct much further. This includes REITs which I was closely monitoring, and eager to add more to my portfolio.

In December, I added 2 REITs, First REIT and CDL Hospitality Trust.

Around the middle of December, First REIT dropped to its lowest in the last 6 months. At $1.255, I picked up some units which was lower than the purchase prices by Ronnie, one of the directors of First REIT, which I felt was a vote of confidence in the REIT. I was considering averaging down my position in Capitamall Trust vs First REIT, but I chose the latter because of its exposure to the healthcare segment which was deemed more defensive than the retail sector.



I was ready to purchase more units in Capitamall Trust should prices correct to $1.855, which my order had been in queue for the past month but it eventually did not trigger, much to my dismay.

In addition, I decided to purchase CDL Hospitality Trust to increase my hospitality segment in my portfolio. I decided not to increase my position in the Ascendas Hospitality because I felt the price of the REIT was more expensive compared to CDL, even though Ascendas was offering higher yields. Finally, I decided to go with past management performance on this one.



This is a short post, and I will end it off here. It has been a very busy month even though December is always considered a lull period, but not for me. Many of the people I know have already collected their bonuses, which I suppose some would have used them to put it back into the market, probably partially the reason why the markets rallied like it did in December. However, it was not so great for me, because I did not receive any bonus this year ever since I made the career switch out of the oil and gas industry. So much of the funds used are mainly from the salary I saved from the past month.


At the time of writing, the prices of REITs has increased in value, along with a general increase in stock prices, which is probably due to the Capricorn effect, for those who believe in it. I am probably not going to do anything, now that prices has risen.

Stay safe and invest wisely!

Sunday, 4 December 2016

Portfolio Update - November 2016

*As of 30 November 2016

Counter Average Price Yield on cost(%) Weightage
UOB Bank
17.8600
4.00
11.88%
OCBC Bank
8.6000
4.00
11.22%
Starhub
3.4700
5.70
10.19%
Singtel
3.6700
4.00
9.58%
M1
2.3600
5.50
6.93%
SembCorp Industries
2.4500
3.00
6.39%
Capitaland Mall Trust
1.9050
5.80
5.59%
Fraser Logistics & Industrial Trust
0.9200
7.00
5.40%
First REIT
1.2500
6.75
3.67%
Keppel Corp
5.3700
5.00
5.25%
SPH
3.7500
5.00
3.67%
Keppel DC REIT
1.0822
6.17
2.82%
Capitaland Commercial
1.3523
6.15
2.21%
SPHREIT
0.9293
5.80
2.12%
Ascendas Hospitality
0.6991
8.03
1.14%
Mapletree Logistics
0.9800
7.40
0.96%
STI ETF
2.8058
3.50
10.98%
Total

4.84
100.00%


Legend
CDP
SCB

Total Invested Capital = $30,660.37

Total Expected Dividends/month = $123.66

Average Dividend Yield = 4.84%

Now, we have yet another surprise in the markets this month, when the US elected the wildcard in all these time, now we have 2 surprises this year, Brexit and now a Trump victory.

The reaction of the markets was deja vu to Brexit, falling initially and quickly rallying afterwards. This is surprising to many, including me. I had believed that a Trump victory would destroy existing trade relations with the world, negatively affecting the corporate profits of companies depending on this. But the markets chose to focus on Trump's potentially fiscally stimulating policies, and his growth focused policies to drive inflation higher.



As a result, we see the usual beneficiaries like defence companies surging as a result, as well as financial stocks like banks who would benefit from higher interest rates as a result of higher inflation.

And just recently, oil and gas related stocks got a boost from the OPEC decision to cut production. Although we know of the tendency of OPEC members to cheat on this agreement, this is a first step in the process of cutting production since 2008. It shows commitment to control prices, though it will take years for current demand to consume the existing supply. In the longer term, it is positive to oil stocks as it provides a floor to prices for oil.



As a result, I have seen my portfolio rise in tandem as it has been heavy on banking and oil and gas stocks despite the drag from the telcom segment.

As the threat from yet another hike in the interest rate approaches, I have been busy snapping up REIT counters. Now, it has boosted my portfolio invested amount to $30k, a rise of $6k in a month, mainly from purchases of REIT counters. Should REIT counters continue to decline further, I may consider to load up further.

Some notable REIT counters purchases include Capitaland Mall Trust and Fraser Logistic Trust.



I like Capitaland Mall Trust because of the management effectiveness from managing over a decade and provided investors with a steady and sustainable stream of income. It is also the largest in terms of capitalisation for the retail REITs. I believe that the dividends paid are sustainable for many years to come, and patient investors will be rewarded. However, should it retest the $2.20 resistance again, I will not rule out offloading and trading off the price movement. Historically, Capitaland Mall Trust has always been a BB plaything, so it has been consistently trading around a price range.

In addition, I have initiated a position with Fraser Logistics and Industrial Trust (FLT). My main reason for entering would be the fundamentals of the REIT. It has a low gearing, currently less than 30% even after recently exercising the 3rd call option, reasonable all-in average interest rate, fair interest coverage ratio and a long WALE. The biggest advantage it has over the local industrial REITs is the presence of the significant freehold properties it holds. Theoretically, it would mean being able to generate income perpetually, but that is based on the assumption that there are tenants leasing out in the first place. Nevertheless, with reasonable rental escalation of 2-3%, I would bet on the fundamentals of this REIT. However, it is likely the pace of increase in its distributions would be slow and gradual, but still better off than having negative trending distributions.



And there we have it, I have reached the highest portfolio value I have invested. At around $30k, and an average yield of 4.84%, it means I get to receive $123 a month. My target of 1k per month is still a while off, but this is a step in the right direction. Positively thinking, to achieve $1k per month of distributions, it would mean around 10 times of the current vested amount, a whooping $300k. Well, seems far, but I will push on and hopefully achieve this by my 35th birthday, just in time to buy a flat if I'm still single then!

Till next time!