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2Q 2021 passive income: COVID 19 endemic and rights issues.

Friday, July 2, 2021

One of Gurmit Singh's songs on the COVID 19 situation has a line that goes, "Things different already."

That was when the COVID 19 pandemic was relatively new and we had to implement a circuit breaker in Singapore which was more or less a lockdown for two months.

Lives and livelihoods were all badly affected and after more than a year, are things still different?

Well, this is the new normal and if we think that this normal is going to be the one that lasts, then, things are going to be the same but not the same as before the pandemic.

So, COVID 19 has become endemic just like the seasonal flu which we have been living with forever.

COVID 19 is just more infectious and, in some cases, deadlier.

I know some people who get themselves vaccinated yearly against the seasonal flu but I am not one of them.

However, I might be getting vaccinated against the COVID 19 on a yearly basis.

All of us probably would have to do this to help ensure that we do not give the virus room to mutate and become harder to deal with.

This is a major worry as so many countries in the world are not vaccinating their population fast enough.

Anyway, as Singapore recovers from the pandemic and learns to live with the higher probability of COVID 19 becoming endemic, I expect my investments to continue to bring home the bacon although smaller in size for now.

So, what did I do in 2Q 2021?

I thought it would be absolutely nothing until SMM or SembCorp Marine announced that they would be having a 3 for 2 rights issue at 8c per rights share to raise $1.5 billion to strengthen their balance sheet.

Didn't they just have a rights issue a year ago for the same reason?

Regular readers know that I rather like rights issues when the money is used to generate even more income.

However, I don't like rights issues when the money is used to strengthen balance sheets as it does nothing for income investors like me.

So, shareholders of SembCorp Marine who supported the 5 for 1 rights issue at an issue price of 20c per rights share a year ago just got bamboozled in the backside again.

Last year, when the demerger of SembCorp Industries and SembCorp Marine was announced, I bought more shares of the former and was consequently given many free shares in the latter.

I don't mind holding on to the free shares as I wait for SembCorp Marine to transform and maybe do better in time to come.

Of course, there is also the possibility of a merger with KepCorp's O&M business which seems set to happen and if that should happen, SembCorp Marine will need more money.

However, I am less inclined to pump in my own money at this point into SembCorp Marine as it is anyone's guess how many years it is going to take for them to generate an income for me.

In my retirement, I cannot afford to be too adventurous with my money and I decided to let go of my free shares in SembCorp Marine.

I also have another rights issue on my plate and that is a 214 for 1000 rights issue at an issue price of 59.5c per unit by IREIT Global.

For sure, I like this rights issue a lot more than SembCorp Marine's.

The money will go towards the purchase of 27 freehold assets in France to be leased to a global sporting goods company.

By supporting this rights issue, I will be expecting more passive income in future and as an income investor, this makes me happy.

Anyway, how did 2Q 2021 fare for me on the passive income front?

Some of my businesses like ComfortDelgro are still having a hard time and paying less or no dividends while some like the local banks are capable of paying more dividends but have yet to do so for various reasons.

Although faced with challenges, my portfolio generated a decent amount of passive income in 2Q 2021:

S$ 44,874.21

This is much lower than the $57,395.95 received last year in 2Q 2020.

However, last year saw contributions by Centurion Corporation and also Accordia Golf Trust and they were both large positions.

Those contributions are missing this time.

Centurion Corporation is paying down debt instead of distributing income to shareholders which is probably a good thing in the longer run as the business is still generating good cashflow.

I expect Centurion Corporation to emerge from the pandemic stronger than before and I hope they remember to reward their loyal shareholders like me then.

Last year also saw much bigger contribution made by ComfortDelgro, of course.

Increasing exposure to the local banks last year has helped to mitigate the expected reduction to my passive income in 2Q 2021.

Together the local banks accounted for about a quarter of the passive income received and I expect this to rise once they increase their dividend payouts as the Singapore government expects COVID 19 to become endemic and things go back to normal.

This is important for me because 2Q 2021 passive income was helped by Wilmar's higher dividend to reward shareholders after the listing of its business in China and also a higher distribution by AIMS APAC REIT (AA REIT) as they released some distributable income they held back before.

These bigger distributions provided a boost to my 2Q 2021 passive income but I probably should not expect them to be repeated.

Other investments which are significant contributors to my passive income in 2Q 2021were VICOM, Ho Bee Land, ST Engineering and Frasers Logistics and Commercial Trust.

Hmm, I guess that's all for now. 

Everybody, till the next blog, please stay safe to keep everybody safe.

No one is safe till all of us are safe.



john said...

I had also sembcorp marine shares from Sembcorp Industries distribution earlier.

The price declined rapidly now to 12.5 cents from 19 cents pre announcement,

May I know what price do u unload for your free shares?

Dun like the right as well but can't exit due to low price now.

AK71 said...

Hi John,

These SMM shares are free of cost.

So, I feel rather Zen about the decline in share price.

Sold at 15 cents a share.

Free money is always good money. ;)

iwimsasl said...

Do you continue to hold onto Singtel, Sph, Cdg? Any plan to add more? Their dividends have been decreasing over the years tho.

AK71 said...

Hi iwimsasl,

I am still invested in SingTel, SPH and ComfortDelgro.

I did increase my investment in all three entities last year but I won't be adding more unless Mr. Market offers me prices which are too good to ignore.

SingTel and SPH are smallish investments in my portfolio while ComfortDelgro is one of my larger investments as I believe that ComfortDelgro is a better investment for income.

1. 4Q 2020 passive income.
2. Investment in SPH is larger now.
3. Investment in ComfortDelgro is larger now.

foolish chameleon said...

AK, please talk to yourself about Wilmar. they have dropped drastically since their peak of 5+ a few months back.
planning to add more? unload or status quo?

Cory said...

thanks for your Q'ly report. Always looking forward to it to reaffirm my thoughts on several companies that I am vested into. What will you do after your gaming fever is gone ? Will it ever ? LOL

AK71 said...

Hi fc,

The lower its share price, the more attractive Wilmar is because the fundamentals are intact.

I would like to buy more at some point but my priority now is IREIT Global's rights issue which is going to drain my war chest quite a bit.

AK71 said...

Hi Cory,

Good to hear from you too. :)

I just started on Black Desert Online in March this year and it is such an amazing world with so much to do which will probably keep me busy for at least a couple of years.

A couple of years is a conservative estimate as Neverwinter kept me very busy for about 5 years after all. ;)

I still log in to Neverwinter daily but it is more to stay in touch but I will probably be more active again from the 27th of this month as they introduce a new class, new levelling system and new recruitment event with more rewards!

They are both F2P games for me and really enjoyable ones too. :)

john said...

I sold off my sembcorp shares at 12.5 cents today. It taught me a lesson. Any right is which is raised and cash is burned off. Should Do not expect miracle to happen. The drough often last longer than one think in most cases.

AK71 said...

Hi John,

Things will get better one day but it is hard to say with certainty when.

So, unless we have deep pockets like Temasek Holdings, it is probably better to err on the side of caution.

For example, IATA said international air travel would recover only in 2024 and even if they are right, it would mean many more years before SIA starts paying dividends again.

When we take into consideration the amount of debt they must repay, even when international air travel recovers, SIA might not pay dividends for some time thereafter.

If we are investors for income, these are pertinent considerations.

laurence said...

The Real New Normal is AK's investments continuing to generate huge quarterly passive income even when a pandemic rages across the globe.
This shows our Oracle of Reits, Trust and Dividend Stocks is apocalypse-proof !!!!
Won't be surprised if AK's profits keep rolling in like magic even if half of humanity has transformed to zombies. ;)

AK71 said...

Hi Laurence,

If only it is as you say. LOL.

We can only do what we feel is right and hope for the best. :)

C said...

hi AK Shifu

Can you please talk to yourself

Few years ago, you bought wilmar at support $3.80. Now that it is much more valuable company, roughly i look at the fibowave, if it breaks $4.40, perhaps I can buy some when it hit the next support at around $4.20 ? (since 52 wk low is at $4)

sincere thanks.

AK71 said...

Hi C,

Wilmar at between $4 to $4.20 a share should see good support.

Of course, support could break but if it happens, it just means that we will get more value for our money.

This is a well run company with good long term fundamentals and I would add to my investment.

Good luck to all of us. :)

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