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FY2017 passive income from non-REITs (Part 4).

Sunday, December 31, 2017

If you have not read the 3 earlier parts, read them HERE (PART 1), HERE (PART 2) and HERE (PART 3).

Although most of my investments have an emphasis on income, regular readers know that I also have some money in investments which would hopefully give me a mix of income and growth. 

Such investments, some bigger and some smaller, as a whole, form a smaller proportion of my portfolio compared to my investments for income.

This is consistent with the capital allocation pyramid which I have shared many times before.

















Keeping this in mind, I added to my investment in Wilmar at under $3.10 a share as Mr. Market turned pessimistic in 4Q 2017.

Buying at a discount to NAV and at a price 10% lower than what Archer Daniels Midland Co paid to increase their stake more than a year ago seems like a good idea to me.


Wilmar is a growth story and I believe that value is still being created.

More valuable than it was in the past, undervalued now, we could see Wilmar's value being unlocked in 2019 if the plan to list in China succeeds.

See related post at the end of this blog for my simple analysis on Wilmar's value.


Wilmar definitely demands quite a bit of patience from investors and with a dividend yield of about 2%, it isn't anything to shout about but it is nice that I am getting some pocket money while I wait.






In the same vein as my investment thesis for Guocoland earlier in the year, I decided to put some money in Ho Bee Land towards the end of 4Q 2017.

After a run up in its share price, I waited for a retreat to a long term support which is the rising 200 days moving average (200d MA) before nibbling.


From a fundamental perspective, with a NAV per share of $4.55, my purchase was at a 47% discount to NAV which is pretty attractive to me.


Of course, there is no point in buying at a large discount to NAV if the investment just sits in our portfolio and looks pretty.






It is only a worthwhile investment if value is unlocked or if it generates an income for us.


Ho Bee Land's major shareholder owns more than 70% of the company but this, in itself, is no guarantee that value would be unlocked. 
So, it is important to be paid while I wait. 

Looking at the numbers, I feel that Ho Bee Land would be quite comfortable with a higher DPS but to avoid disappointment, I am going with an assumption of a rather undemanding 5c annual DPS.

Although I am quite comfortable with my entry price, I am not crazy about it and I would probably be accumulating only if Mr. Market decides to give me a better offer.








After all that has been said, I am expecting 2018 to be a year of reduced passive income as a result of having a greater proportion of investments with lower dividend yields in my portfolio.

That story to be told next year.

To conclude this final blog of 2017, FY 2017 distributions received from non-REITs:

S$ 481,902.09










So, it all works out to be approximately S$40,158.00 a month.

Without the huge distribution from Croesus Retail Trust, everything else being equal, off the top of my head, I estimate a big decline of more than 80% in my passive income from non-REITs in 2018.

Here is wishing everyone a happy, healthy and prosperous 2018!





Related post:

Accumulating Wilmar.

22 comments:

Bruce said...

Good return and happy new year 2018!

K said...

Hi AK,

How do you calculate "distributions received from non-REITs"?

1. Do you add dividends plus gains/losses from shares you have sold? (must the shares be bought during 2017?)

and

2. Should you include the paper "gains/losses" of shares that you still hold (bought during 2017 and earlier)?

Thanks.

Laurence said...

AK is a shining beacon that lights the way for all prudent and sensible ordinary investors. A North Star of the 21st Century.

Investminds said...

AK, wow. A very impressive passive income.congrats for a huat year.

AK71 said...

Hi Bruce,

Thank you and Happy New Year! :)

AK71 said...

Hi K,

It is simply all money distributed by my non-REITs investments to me.

As long as I receive, I account for it.

It doesn't matter how long I have been holding on to the investments.

It doesn't matter whether the stock prices have gone up or down.

AK71 said...

Hi Laurence,

Thank you but I am not sure I deserve such a glowing assessment.

I am happy enough if I am right more often than I am wrong. :)

AK71 said...

Hi IM,

Thanks mostly to Croesus Retail Trust which was one of my bigger investments, 2017 is a very rewarding year.

As for 2018, I would be quite happy if my income investing boat is not rocked too much. :)

GoHuat said...

Impressive figures! Congratulations AK, and all the best for your investments in 2018! Happy New Year too!

AK71 said...

Hi GH,

Thank you and happy new year! :)

David Lim said...

Hi Ak,
Appreciate your generous sharing.
It enable us to focus on specific stocks & read/study/understand the reasons on investment.

This will inspire us to apply similar investment methodologies to other stocks.

Wish you & family a Healthy + Happy 2018.

Best Wishes
David

David Lim said...

Hi AK,
Thank you for your generous sharing:-)

It enable us to focus on specific stocks, read/study/understand the investment rationale.
It also allow us to apply the investing methodologies to other stocks.

Wish you & family a Healthy + Happy 2018.

Best Wishes
David

yeo eng seng said...

Thank you very much for sharing your thoughts and invesment decisions

All the best for the new year

Yeo
KL

sy sy said...

Hi AK

Me long time never post here.
Just want to thanks u for continue blogging.
Wish u happy new year & healthy always :)

cheers
sy

AK71 said...

Hi David,

It is never my way or the highway.

I will be the first to say that my methods are not fail proof.

I can only hope that I am right more often than I am wrong.

If I have inspired others to take steps towards financial freedom, I am glad.

Happy 2018! :D

AK71 said...

Hi KL,

All the best to you too. Happy 2018! :D

AK71 said...

Hi sy,

Thanks for coming by. Happy 2018! :D

AK71 said...

Chairman and CEO of Ho Bee Land, Mr. Chua Thian Poh said, “Despite Brexit, London has proven resilient. The Brexit uncertainty has provided us with the opportunity to suss out excellent investments like Ropemaker Place. We are delighted to add this landmark office tower into our office portfolio in London. This allows the Group to grow its robust and sustainable recurrent income base.”

The S$55.0 million additional rental income would boost Ho Bee’s annual rental income by a signifi cant 37.4% to S$202.0 million and help sustain the steadily increasing dividends (2017 dividend payment was raised from 8 cents to 10 cents/share).

Trading at a valuation at 0.5x book.

JR said...

Hi AK,

Long time reader here, first time poster.

I just bought Ho Bee last week when its price dropped. :P

I am looking at Frasers Property too - I like that it is trying to increase its recurring income. It seems very aggressive in expanding recently, but its debt still seems manageable for now.

Do u have any interest in it, or do u have enough property counters already? :P

Cheers,
JR

AK71 said...

Hi JR,

Total exposure to property developers is probably at around 10% of my portfolio.

My primary reason for buying into these is because they seem to be dreadfully undervalued.

As investments for income, they are not very attractive at all. Not now, anyway.

I might add or I might not.

Unless they trade at an even bigger discount, I don't feel any urgency to accumulate.

JR said...

Hi AK,

Frasers has been paying relatively higher dividend compared to its peers for a few years now. At current price, dividend yield is >5%, so seems more attractive.

But I agree there's no rush to buy. Shall wait and see if it drops some more!

AK71 said...

Hi JR,

Good luck to us all with our investments in property developers. ;)

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