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Portfolio review: Unexpectedly eventful.

Saturday, May 10, 2014

At the end of last year, I shared the results of my efforts in the stock market and also my strategy to grow wealth and augment income in the new year. Quite a few things have happened since then. So, I decided to do a review of how things have moved.

In the S-REITs department, the biggest change this year to my portfolio has to be the major divestment in Sabana REIT. My current long position in the REIT is just a bit more than 10% of my investment at its largest. Whatever I have left is free of cost and will continue to generate passive income although on a much smaller scale.

Also in the S-REITs department, I took part in AIMS AMP Capital Industrial REIT's rights issue and tried to get more excess rights but without much success. Recently, I sold a small percentage of my investment, believing that it was the right thing to do as its unit price ran up, post rights. This REIT is still my largest investment in S-REITs. Having said this, passive income received from this REIT will shrink some 15% this year, given the dilution from the recent rights issue.

In the Business Trusts department, I decided to divest completely my investment in Perennial China Retail Trust after receiving another round of income distribution which I concluded was unsustainable. This was before the takeover offer by St. James.

Also in the Business Trusts department, in late January, I more than doubled my investment in Croesus Retail Trust, believing that, trading at a discount to valuation and offering an attractive income distribution, it is a more dependable passive income generator than Perennial China Retail Trust. Although its relatively high level of gearing is a concern for some, there is unlikely to be any nasty surprises in the area of financing over the next few years.

In other stocks, I added to my long positions in Yongnam and Hock Lian Seng. Yongnam hit a rough patch, as expected. However, things are likely to improve later this year and probably the next. It is a leader in what it does and it has a very good track record. Last year's performance was exceptionally bad and probably would not be repeated. I like how Yongnam started to pay meaningful dividends in recent years and this is likely to continue, conditions permitting.

Hock Lian Seng, like Yongnam, is in the construction sector and also like Yongnam, I expect it to be a beneficiary of increased spending on infrastructure projects in the country. Already, Hock Lian Seng won two major projects which have bumped up its order book and will provide earnings visibility for some time to come. There will probably be more order wins in future. Of course, Hock Lian Seng also pays meaningful dividends which I like.

One stock which I have been waiting for an opportunity to accumulate was CapitaMalls Asia. Well, it is a pity that it will be taken private by its parent, CapitaLand, which offered $2.22 a share. I feel that it is a fair enough price which, perhaps, suggests that the price at IPO was unfair but I will let readers draw their own conclusions in this contentious issue. My acceptance form has been sent out.

A stock which I have turned more cautious on is Marco Polo Marine. Recent developments mean that the business is now somewhat different from what I envisioned it to be in my initial investment thesis. Not giving enough consideration to how the tugs and barges could be a drag on overall performance before, I decided to trim my exposure to the stock. Things could improve in future but, for now, the level of clarity has lowered.

The first few months of the year have turned out to be a bit more eventful than expected on the investment front. My war chest is now fuller through some divestments as well as dividends received. I do not have any immediate plans for the funds and I will probably just hold on to them for now. After all, I had felt that I was too much invested in the stock market and had desired a bigger cash position.

Of course, if I were to keep the status quo, I will, for sure, receive a much lower level of income from my investments in S-REITs this year. How much lower? I guess we will know by end of the year.

Having said this, my decision to increase my level of investment in SPH and NeraTel last year so that my overall portfolio is less reliant on S-REITs for passive income was pre-emptive. Enlarging investments in Hock Lian Seng and Croesus Retail Trust earlier this year has also helped to reduce reliance on S-REITs for passive income.

What next? I certainly do not know if the economy will do well or if it would suffer a decline in the next few years. However, I do know that I am staying invested as long as my investments have reasonably sturdy fundamentals and, preferably, are able to generate reasonably good income for me. They don't have to be stellar performers and I don't have a problem with getting rich slowly.

I will simply wait for Mr. Market to feel depressed enough to sell more to me at prices I cannot refuse while I collect regular dividends in the meantime.

Related posts:
1. A strategy to grow wealth and augment income.
2. Sabana REIT: 1Q 2014 DPU 1.88c.
3. AIMS AMP Capital Industrial REIT: $1.425.
4. Perennial China Retail Trust: Fully divested.
5. Croesus Retail Trust: DPU above forecast.
6. Yongnam: DPS of 0.6c.
7. Hock Lian Seng: $221.8 million contract.
8. CapitaMalls Asia: Farewell.
9. Marco Polo Marine: Price weakness.
10. SPH: Within expectations.
11. NeraTel: A very good investment.


Anonymous said...

Hi AK,

It is even more eventful in the geopolitical fronts. Not trying to imply anything about the state of markets or timing.

Just that we are very forgetful. It is only last year, that we have the Arab spring with Libya and Syria only somewhat resolved. We though, or at least I thought, North Korea with its new leader will be the next spanner. Who would have thought all big powers in Asia are all playing the Pie Kia game, China in South Chjna sea, Russia in Ukraine, North Korea as usual, even Thailand courts.

Appreciate Singapore, dun take things for granted.

L said...


Again thank you for your regular blogging. It's really helpful!

What do you think of Neratel's current price which is significantly down from its recent highs amidst a drop in income?

I've been quite curious about why choose Hock Lian Seng over another public infra developer like OKP?

Btw, what do you think of M1 as an investment proposition for growth (it's going into corporate Fibre and data plans in general in a big way) and income (its yield is OK?

Since the banks here are so ex, what do you think of ICBC (1398.HK)?

Thank you and sorry for asking so many questions.

AK71 said...

Hi Mike,

I agree with you totally. There is definitely potential for many things to go wrong and they could also all go wrong at the same time. Dr. Marc Faber has been predicting a big global event like another massive war for some time.

This is also why I keep reminding people that it is very important to have a war chest ready. I cannot imagine being 100% invested but I know some people are as they want to extract maximum benefit from their money.



AK71 said...

Hi L,

Oh, I am just talking to myself as usual. I can be quite loud. My apologies. -.-"

Neratel is fairly priced now. Not cheap but not expensive either. Lots of stuff have been put in place for the next stage of growth. I would accumulate on further weakness, if any. :)

I like Hock Lian Seng's strong balance sheet. It is not a grower but a consistent performer. It appeals to me as an income investor. Would you like to share your research on OKP? I am assuming that you have looked at it which is why you asked. :)

As for telcos, apart from those shares in SingTel which I bought donkey years ago, I don't have any other exposure. I think Drizzt over at Investment Moats is the guy you want to talk to. He has blogged extensively on telcos. :)

I have zero knowledge of ICBC. :(

Coodust said...

Hi AK,

Just curious, how much of your war chest(cash) has changed since end of last year?

I remember you sharing about the pyramid diagram, your base consists of war chest and income? Does it means you always keep more cash with you than investment?

I am an advocate of contrarian, considering whether to dilute my investment to increase war chest. Dow jones hitting all time high? To me not a good sign, time to increase war chest.

AK71 said...

Hi Paul,

That pyramid is a nice visual of how my portfolio is structured.

The base is made up of cash and cash equivalents (i.e. war chest), the next level is not income but investments for income. Earned income is not part of the pyramid (i.e. portfolio).

The next level consists investments for income and growth. The next, purely for growth and the next consists more speculative positions.

I am now working towards having cash and investments more equal weighted. Currently, I estimate that I am still more than 70% invested.

Betta man said...

Yongnam's latest DPU is $0.006. Against a price of $0.24, yield is only 2.5%.

Doesn't look too appealing as compared to King Wan Corp or HLS at the moment. What's your take on this, AK.

AK71 said...

Hi betta man,

You might be interested in this blog post:


SAFE said...

Hi, AK71,

What do you think about china merchant?

Coodust said...

Thanks AK71 how do you decide when to change the weighting? ie when to have more investment, when to have more cash.
I thought as income investor, we do put most of our cash in relatively safe investment for long run.
I find it difficult to decide how much to inves, assuming all the cash are savings which will not be needed for mid term.
Hope to hear your thoughts.

L said...


Thank you for your tips.

I have not done much research into OKP but was interested because I find that they are pretty quick at delivering road works and seem to have a good idea of what they are doing in terms of work quality. Of course this is from a layman observer's perspective. Someone from PUB or LTA may have a different story to tell.

Anyway, about that research:

They've been around since 1966 so that's a long time. They have grown a fair bit since then and got listed in 2002.

Last year they made revenue of 128.3 mil which is 22.8% more than the previous year. Earnings per share is 1.6c which admittedly is not fantastic.

Their expenses increased a fair bit due to heavy competition, subcontractor costs and the expected manpower costs. On the latter the chairman said that they have to increase productivity and I guess that's true all around.

Gross profit margin dropped by 22.4% yoy for the said reasons.

Net tangible asset stands at 37c per share (latest share price is 30c). Share price has been on the decline.

Last year they secured 7 govt contracts worth about 80 mil. They also JV-ed wit Swee Hong to bid for MRT infra works. That's a multi-billion dollars market.

They also have a JV to do exec condos. That's their sideline of sorts.

OKP has an order book that will last until 2015.

One big issue is that dividends are dropping. They said they want to stash the cash and be prudent amid uncertainties. So I guess buying OKP means waiting for dividends to come back.

FY10 they distributed 76.9% or 5 dividend, FY11 33.3% and 3c, FY12 37.1% 1.5c and FY10 19.2% 0.3c which is a yield of 0.9%!

I think that even if the economy takes a dive, govt will press on or increase infra spending so the revenue stream is safe as long as OKP can bid for jobs. Amidst oversupply in a few asset categories I think specialising in govt infra work may be a great strategy.

I suppose dividend will come back when repositioning and diversification efforts are completed and the next stage of growth is reached. But I guess only management knows for sure.

Oh yeah, they have a clean loan sheet.

AK71 said...


I don't have any thoughts on China Merchant. Haven't looked at it. :)

AK71 said...

Hi Paul,

You might be interested in my blog posts on when to Buy, Sell or Hold. :)

There is no hard and fast rule as to how much to invest or divest. Our level of comfort is important too and this is different for different people. You might be interested in this:

If your level of cash holding is causing you discomfort, then, you know that you have to do something about it. It can be as simple as that. :)

AK71 said...

Hi L,

Thanks for sharing on OKP. From what you have said, it seems that OKP is rather expensive from a valuation perspective. PE ratio is almost 19x.

If you are thinking of businesses that will benefit from the doubling of MRT lines from now till 2030, Yongnam and Hock Lian Seng seem like a better fit.

I think OKP has to roll out something that will convince investors that it will be able to grow earnings rapidly to justify its rather rich valuation. Otherwise, its share price could continue declining.

This is the impression formed from information provided in your comment. :)

Janice said...

Hello AK,

Do you mind me asking what is your EP on Hock Lian Seng?


AK71 said...

Hi Janice,

That was the price at which I added to my long position earlier this year. :)

Casey said...

Hi Ak,

Saizen was not mentioned at all... Thought it was one of your favorite?


AK71 said...

Hi Casey,

Quite a few were not mentioned here. These are the ones which retained the status quo. Saizen REIT is one of these.

Art Collector in SG said...

Hi AK,

You seemed to look at biz trust different from REIT in terms of rising interest consideration. Aren't they both leverage trust that's sensitive to interest rate? I'm looking at them in the same way and using high yield stocks to replace REIT/Biz Trust.

AK71 said...

Hi Tony,

There are important differences between REITs and Business Trusts. So, I look at them differently since they are categorically different.

Within each investment category, leverage is always a consideration. It does not matter if it is a REIT, Business Trust or any other business.

If a business entity is able to use leverage to its advantage, then, it is a good thing. Leverage is not necessarily bad although it would be nice to have strong growth without the use of any leverage. :)

cp said...

I am just being direct but AK would you join me as buyers at 34 cents for MPM?

AK71 said...

Hi Clueless Punter,

34c? That sounds like a good entry price. ;)

I think the lowest I ever got was 32c or was it 31c? Memory is a bit patchy. -.-"

Blueocean said...

Hi AK,

I would like to find out how many times does Croesus pay dividend annually? From SGX website, I can only see that they have paid once in May 2014.

Is it a good price to enter now?

AK71 said...

Hi Blueocean,

They pay twice yearly. :)

I won't answer the other question though. Regular readers know that I usually don't answer questions like this. ;p

You might want to search my blog for all the blog posts on Croesus Retail Trust. Then, do some independent research to satisfy yourself that the Trust does what you want it to do for you. After that, you decide. :)

Anonymous said...

It is not even half the year yet! :D

Good news, CMA revised the price to 2.35. :)

AK71 said...

Hi Rusty,

Oh dear. Am I too early doing a review? -.-"

Yes, good news about the revised offer by CPL for CMA. Well, for some of us, anyway. :D

AK71 said...

Hi Capricon,

I believe that the big picture remains very promising and as a leader in its field, I cannot imagine Yongnam not getting a slice of the pie.

However, whether the management is up to scratch, only time will tell. Have they simply been lucky in the last few years? Luck definitely had a role to play but I do not believe that the management relied purely on luck to bring Yongnam to where it is today.

So, I am willing to wait another few quarters to see how things turn out. :)

Anonymous said...

Hi AK,

I stumbled across your blog last year and it got me started (very late in life) on investing. Thanks for all the useful articles!

Being a newbie, I'm sorry if this is a dumb question or if I'm posting it in the wrong place.

On 23 Apr I bought some Keppel Corp shares via the SCB platform, ahead of Keppel's dividend record date which was 25 Apr. However I did not receive the dividends which Keppel paid out on 7 May.

Checking with SCB, I was told that even though the trade was executed on 23 Apr, the settlement date was actually 28 Apr so I was not entitled to any dividends. I feel a bit cheated because I would not have paid the price that I did, if I had known that I would not be getting the dividends. SCB told me that this "T+3" rule is common knowledge among all investors. Is this true?

Thanks in advance

AK71 said...

Hi kenne,

It is true that buying on 23 April, you would not have been entitled to the dividends.

You bought Keppel Corp's stock when the counter went XD on 23 April. Once you see "XD", it means that stock purchased on that day would not be paid the dividend.

Anonymous said...

Thanks AK, learnt an expensive lesson. Will be wiser in future.

AK71 said...

Hi kenne,

Keppel Corp's stock opened at $10.76 on 23 April and touched a low of $10.55. Today, the price touched a high of $10.62. Not too bad. Doesn't seem like an expensive lesson to me. ;)

Don't let this bother you too much. :)

Anonymous said...

Thanks AK

AK71 said...

"Given the growing construction activities, we remain positive on rising demand for structural steel and dormitories in Singapore.

"We prefer exposure to Yongnam Holdings (YNH SP, BUY, TP SGD0.29), the largest structural steel player in Singapore, as a proxy to growing construction activities.

"Trading at 0.95x P/BV, YNH’s valuation seems undemanding. For YNH, catalysts ahead include a potential earnings turnaround in 2HFY14."

OSK-DMG, 15 June 2014.

carrot said...

Hi AK,

May i know why you said Hock Lian Semg (HLS) is not a growth stock? Just wonder because i got abt 10 cent eps arising from ark@gambas & ark@kb for early next year result. My calculation might be wrong because it is just a rough calculation. I am just a newbie, perhaps you could shed some light on HLS.

Thank you!

AK71 said...

Hi carrot,

More accurately, Hock Lian Seng is a cyclical stock. Of course, there will be periods of growth for such stocks if the business is well managed. :)

You have your eyes on the earnings recognition for the two industrial properties too? ;p

However, after this, it is really hard to be optimistic. If you are thinking of Skywoods when I say this, you are right. Crossing fingers. -.-"

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