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As share prices decline over a prolonged period, Mr. Market's hope for a swift recovery becomes weaker and weaker. As Mr. Market despairs, he is going to sell stocks at even lower prices. Everything else remaining equal, this means that we can buy stocks with greater margins of safety from Mr. Market.
However, remember that Mr. Market is a fickle creature. His mood swings are well known. So, although waiting for the market to bottom sounds like a great idea, it is only possible to really call the bottom once it has come and gone. Therefore, I made a list of stocks which I would like to buy more of, including the prices which might be good to do so at.
Mr. Market's negativity is centred around expectations of a reduction in global liquidity and increase in interest rates. However, such concerns are really premature since what is really going to happen is a reduction in the growth of global liquidity and, by Ben Bernanke's admission, any increase in short term interest rates is farther into the future.
This suggests that S-REITs which are fundamentally sound will continue to deliver, distributing the income which I have become accustomed to receiving. With prices 15 to 20% lower than the peaks achieved not too long ago, valuations are more reasonable now although I would not say compelling.
So, which stocks have I been accumulating in the current correction?
Marco Polo Marine
I bought more shares of Marco Polo Marine at $0.37 to $0.375. I really like the news that the company bought a new 9,000 BHP AHTS at a bargain from a distressed yard. It would take the company's shipyard 18 months to build one from scratch and buying this AHTS allows Marco Polo Marine to more quickly meet market demands in Indonesia.
"Given the robust demand for OSVs and the gradual and consistent rise in daily charter rates experienced over the past few months, the Group expects its offshore business to continue to spearhead the growth of its overall chartering revenue," Mr. Sean Lee, CEO, Marco Polo Marine.
Marco Polo Marine's listed Indonesian subsidiary has another 2 AHTS on order and these are being built in their own shipyard. Expected to be delivered sometime in 2014, Marco Polo Marine is likely to register much stronger performance next year. Buying at $0.37 to $0.375 is also a bargain as it is at >15% discount to NAV.
SPH
I got more shares of SPH at $4.22. That is some 10% lower than the top of $4.68 touched in early April a couple of months ago. Volume has also been reducing as price weakened. Sellers are less enthusiastic but without strong buying interest, price could drift lower.
Well, as Mr. Market would have it, SPH's share price went even lower today, closing at $4.16, the low of the day. The optimism surrounding SPH's plan to bundle Paragon and Clementi Mall into a REIT seems to have evaporated, hinting at the pessimism surrounding all things S-REITs at the moment.
At this time, remind ourselves that the listing of SPH REIT is a good thing for SPH's shareholders. It strengthens SPH's balance sheet without really compromising its revenue stream from its real estate holdings. SPH will see its gearing level reducing to almost zero.With the promise of a special dividend of 18c per share, post SPH REIT's listing, there is a cushion against further decline in share price which, using Fibo retracement lines, will find support at:
$4.11 (123.6%)
$4.04 (138.2%)
$3.99 (150.0%)
$3.93 (161.8%)
Remember that TA shows where the supports are. There is no promise that the supports will be tested.
Certainly, if the opportunities should present themselves, offers at $3.93 or $3.99 a share cum special dividend of 18c would be more attractive propositions.
NeraTel
This is a stock which I got in at 40.5c a share some time back. This was after the failed take over bid by ST Engineering. I didn't do much research on this company on my own. Neither did I have any experience with it. Instead, I relied on some advice by a very good friend who has been a shareholder for years.
This is a net cash company and has a record of paying consistent and meaningful dividends. Its last payout was 4c a share with an EPS of 5c. At today's closing price of 61c, we are looking at a dividend yield of 6.56% which is very decent. With its recurring revenue streams, dividends are probably sustainable.So, I bought more shares of NeraTel as its share price retreated from a high of 69.5c. With buy prices of 60c to 63c, the dividend yields are from 6.35% to 6.67%. Any further weakness and a possible test of the rising 200d MA (approximating 57.5c now) for support would see me increasing my long exposure.
Certainly, I cannot tell how share prices will move tomorrow. So, I cannot tell if my additional investments made recently will result in paper losses but I can tell if I have made relatively sound decisions.
By looking at charts, I can tell where supports are expected to be found. So, I can tell where I might be adding to my long positions, given the chance.
Some things we know. Some things we don't.
I know, for sure, that we should have a plan and we should stick to it.
Related posts:
1. Spotlight on Marco Polo Marine.
2. SPH: A REIT investment.
3. REITs: When to buy?
4. REITs: Are we asking the right questions?
5. Be cautious climbing the S-REIT tree.
6. Have a plan, your own plan.
Bloggy Award
42 comments:
What will be the expected yield for your Marco Polo Marin purchase?
Hi AK: Your lifestyle is certainly most Spartan. Saving cents, eating cheap food to buy stocks.
Hi Tien,
The primary reason for investing in Marco Polo Marine is not for income. It is a growth stock and undervalued too.
However, in the last two years, the management seemed determined to reward shareholders. A dividend of 0.8c to 1.0c per share a year would mean a dividend yield of 2.13% to 2.67% while we wait for Mr. Market to realise the fair value of the stock.
My lifestyle, although not lavish, is certainly not Spartan. I have a car. ;p
you are really strong. no research and still can end up making so much.
Hi AK,
would you be buying Hock Lian Seng on weakness ?
Hi AK,
I've bought into Marco and Neratel as well! Was looking at SPH too. But my backup war chest not as huge as yours so I've to be more disciplined before I buy into any stocks. Hope all these shares can rally and HUAT! :)
Cheers
QL
warren buffet has a car too.
haha very nice of you to share, buying when market are tumberling, you the good.
but can make known your buying in real time? want to follow le.
Hi Kyith,
I guess you are referring to NeraTel. Well, strictly speaking, I should have done some research but this friend knows the track record of the company so well, being a long time shareholder, that I cut myself some slack. ;p
Anyway, I did eventually get around to doing some research. Otherwise, I would not be comfortable buying more shares at the current price level which is some 50% higher than my initial entry price.
Hi Shouyi,
Hock Lian Seng is on my list too. However, since my last purchase in May, the share price has hardly moved. It is currently only some 3.7% lower.
Hi QL,
Discipline is something I lack!
Good that you did not get SPH when I did. It touched $4.11 which is a support level I identified. This is some 2.68% lower than my recent buy price. Ouch.
Hi coconut,
WB bought a used car at bargain basement price. I bought my car new at sky high price! Same but different. ;p
Aiyoh, real time publishing? If I were a full time blogger, I could consider lor. Who will pay me to blog full time? ;)
Anyway, I am blogging really for my own benefit as I record my thoughts and the rationale for my actions. Don't follow hor.
what don't follow? i already have some reits on hand already! what should i do ah?
haha..
ya i find writing also reenforce my thinking and action, need someone really good like you to sparing.
Hi coconut,
The only person who has the same level of inner strength as you is SMOL. Only he can be your sparring partner and emerge without internal injuries. Please have mercy on me. -.-"
ok i make sure he got bruses everywhere.
Just did a quick check on SPH,
Their declining earnings is a concern to me. Don't think I will go into it.
Hi coconut,
Oh dear.
SMOL = So Many Orh-tchi Loh
You are powderful!
Hi Phileas,
Another reader, Matthew, said the same thing yesterday. ;p
Publishing and property company Singapore Press Holdings (SPH) has delayed plans to list a real estate investment trust in a S$540 million initial public offering due to weak global markets, people with knowledge of the deal said on Monday, Dow Jones Newswires reported.
SPH had planned to start taking orders from institutional investors this week but the process has been pushed back, one of the people said. The company still plans to proceed with the deal at an opportune time, but delays to the order-taking means the REIT isn’t likely to list in early July as originally planned, another person said.
The move comes as jittery investors - fearful that the US Federal Reserve may soon scale back its stimulus programme - dump their equities holdings, particularly in emerging markets and dividend-paying investments such as REITs.
Source:
http://www.todayonline.com/business/sph-delays-s540-million-reit-ipo-sources
Well, too bad. :(
Hi I have been thinking to buy more HL Asia, Stamford land and Marco polo. But my broker asked me if there is any rebound, the blue chip will be on play.
So I wonder should I buy more Marco polo or direct my fund to bank or blue chips.
Hi yeh,
Yes, blue chips usually lead in any market recovery.
What should you do? Know what you want and you will know what to do. :)
Hi AK71,
Don't worry. I'm also a fellow investor ((10% of portfolio) with SPH for the LONG LONG term. I believe that the mgmt is shifting its focus into more property related business in the near future so relatively defensive. Cheers!
SPH had hoped to benefit from investors’ strong interest in trusts. Dividend-paying investments such as REITs had been in demand in recent years as monetary stimulus from central banks in developed markets kept interest rates low.
But both debt and equity markets have weakened since US Federal Reserve Chairman Ben Bernanke suggested last month that the Fed could begin cutting back on its $85 billion-a-month of bond purchases, known as quantitative easing, in coming months. He reiterated that stance last week and upgraded his assessment of the US economy.
Investors’ reactions to Bernanke’s statements have pushed a host of other companies into delaying their IPOs or cutting their size.
Dow Jones & Co, Inc
Tuesday, 25 June 2013 10:29
Hi Kelvin,
If we assume a more conservative dividend of 21c per share, SPH is still an attractive investment for income. Even at $4.20 a share, we are looking at a 5% yield. Pretty decent.
However, with the REIT IPO delayed, we could see share price going much lower. Mr. Market is a manic creature. If it should happen, I want to be ready. ;)
Singapore Press Holdings Limited (the “
Company
”) refers to its announcement on 27 May
2013 in relation to the receipt of the elig
ibility-to-list letter from Singapore Exchange
Securities Trading Limited (the “
SGX-ST
”) in connection with the proposed initial public
offering and listing of SPH REIT on the Main Board of the SGX-ST.
In response to media queries on the timing of the lodgement of the preliminary prospectus of
SPH REIT with the Monetary Authority of Singapore, the Company said that it is continuing
to monitor market conditions and will make an announcement at the appropriate time.
Anybody wants to buy Chinese stocks? The PE ratios are all < 10
HI AK,
I am looking at SPH too, but you let the bag too early, I notice price usually have a rebound when you start buying. Maybe you have more followers than you expect. Haha...
I am waiting for them to give out the 18 cents and the mood to further sour, hoping to get a price closer to 3.90
Btw, since you are in marco polo, have you ever look at Yangzijiang
Hi Capricorn,
Sabana REIT? My views on its fundamentals have not changed from the last two times I blogged about it.
Well, if you are referring to its unit price, I doubt it would dip under $1.00 again in a hurry. Of course, that's just my belief. ;p
I am more interested in NeraTel's POS business which is very scalable. There is also talk of growing the business in Thailand and Indonesia, both huge markets.
Over time, the exponential growth of NeraTel's POS business will more than compensate for any weakness in its telco equipment and network infrastructure businesses.
Hi sillyinvestor,
Well, that 18c special dividend from SPH has been vaporised (for now). So, you could get your wish to buy more shares of SPH cheaper and possibly at under $4.00 a share. ;)
I invest in Marco Polo Marine not because I am interested in the ship building business per se. There is a collection of factors which makes me think that Marco Polo Marine has competitive advantages.
In general, I don't feel very sanguine about ship builders and their prospects in the next couple of years.
Dear AK,
This is only the 2nd time I am posting a comment despite being an avid reader of your blog.
Like you, I set my sights on Neratel for their attractive yield and consistent dividends.
"S-REITs which are fundamentally sound will continue to deliver" "valuations are more reasonable now" -> agree as I am also looking particularly at cache. Depressed price level has increased yield with its fundamentals unchanged. Are you looking to add on this counter at current price? Or awaiting for it to come down closer to NAV?
Having said that, how about other high yield stocks like King Wan & Global Investments?
Hi matchbox,
I feel that my S-REIT portfolio which is primarily for income is at optimum level. I am not looking to add unless valuations are very compelling.
I am not familiar with King Wan or Global Investments. Do you want to share with us your analyses?
The Dividend Yield of SPH is less than 4%.(Please correct me) Seems low now for a shrinking printing business.
Hi Cory,
SPH paid 24c in dividend last year and for years before that as well, iirc.
At $4.20 a share, that is a yield of 5.71%.
It would be myopic of us to focus on SPH's print business to determine if it is a good investment but there is nothing wrong with being more cautious.
So, if we base our investment decision on a possible reduction in EPS and a lower DPS of 21c in the coming years, at $4.20, we are looking at a 5% yield.
hi ak,
if sph reit is published, do you think sph will still paid such a good dividend?
Hi Teny,
If SPH REIT becomes a reality, SPH will retain a 70% interest in the REIT. It will still have the lion's share of rental income from the malls concerned.
There is also tax advantage that comes from a REIT. This together with the fees that come from managing the malls ameliorate any loss of future earnings.
Also, the listing of SPH REIT will send gearing at SPH down to almost zero, reducing finance costs.
At the same time, SPH will have a bundle of cash which it will be able to use to fund investments (to be determined later) for higher returns.
Even erring on the side of caution, a dividend of 21c a year is still very realistic. :)
Of course, now, the IPO has been postponed indefinitely. So, all this is just "talking solders on paper".
So it is still REIT after all..
i am thinking of sharing of stock investment knowledge thru a website or blogsite but not sure whether it will turn out as an unnecessary hassle.
could u share with me the pros n cons of doing so?
cos after making money consistently over the past 5yrs, i dun know if this sharing of knowledge is worthwhile.
appreciate ur advice.
Hi Paul,
Bloggers should blog because they enjoy it. That is the only way to have longevity as a blogger.
So, ask yourself what motivates you to blog. You will have your answer.
As for the pros and cons, you will discover these if you decide to walk this path. I should not take this joy of discovery away from you. ;)
AK,
Coconut is a fun sparring partner in his nonsensical and over the top jibes at me.
Once in a while, I find myself saying: "Wait a minute. What he says make sense! I am wrong."
And for you AK, I find you a good sounding board - although I've never commented in your stock specific posts.
I prefer your lifestyle posts ;)
That's where I like to super poke you! LOL!
Thanks for being a good sport!
Hi SMOL,
Sounding board: A sounding board is a good listener, and either confirms what they hear or offers an opinion when the sound they hear is "off key". (Source: Urban Dictionary)
I learn a new phrase. ;p
You think too highly of me lah.
Hi Capricorn,
I don't think the margins are thin in the POS business. A GP of 41% seems more than decent to me.
I work for a company that has POS terminals and in the last 2 years, I think we only called NeraTel once to replace a faulty terminal. So, I don't know if it is labour intensive.
To me, it seems like a good business that runs on its on most of the time. It is also very scalable.
Of course, setting up new operations in Thailand and Indonesia would see start up costs and fixed costs. However, these should be covered once organic growth of the POS business takes place in those countries.
Of course, my understanding of the business could be incomplete. So, take my views with a spoonful of salt. ;p
As for Boustead, this is a company Musicwhiz did thorough research on. If he is vested, I think it should be OK. :)
Jason Saw and Lee Yue Jer — offshore sector analysts at local brokerage house DMG & Partners Research — have turned to a more selective stock-picking strategy to maximise returns. “ Now that crude oil prices are flat, being selective is the best way to draw value from the offshore sector, which is what our strategy has been since we downgraded the large-cap offshore stocks at the end of last year,” Saw tells.
With charter rates in Indonesia currently 30% to 40% higher than other markets, whoever owns the OSVs in the country is going to see some very nice earnings,” says Lee.
Indeed, at least four Marco Polo Marine OSVs are expected to complete their current charter terms within this year and next, and Lee expects the charters to be renewed at better rates.
SPH is going ahead with its REIT IPO, it seems.
Called SPH REIT, the trust's assets will include the upmarket Paragon mall on the prime shopping belt of Orchard Road and the suburban Clementi Mall.
SPH expects gross proceeds of between S$523 million and S$554 million based on the price range of S$0.85 to S$0.90 per REIT unit.
SPH REIT is offering 308,884,000 units, which consists of an international placement of 224,902,000 units to investors, including institutional and other investors in Singapore, and an offering of 83,982,000 units to the public in Singapore.
Cornerstone investors will subscribe for an aggregate of 251,000,000 units. The Cornerstone investors are Great Eastern Life Assurance Company Limited, Hong Leong Asset Management Bhd, Morgan Stanley Investment Management Company, Newton Investment Management and Norges Bank. None of the Cornerstone investors individually holds 5% or more of the units in issue after the offering.
The REIT is expected to have a distribution yield of between 5.79 and 6 percent in 2014.
Source: http://www.channelnewsasia.com/news/business/singapore/sph-to-raise-at-least-s/739380.html
It is interesting to note the high level of interest from cornerstone investors. The prospect of rising interest rates doesn't spook them at all.
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