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Invest in property developers? My portfolio.

Monday, March 27, 2023

Oh, no! Another short blog?

Although I like undervalued investments, there is always the possibility of such investments staying undervalued for an extended period of time.

Some readers might have noticed that this is usually the case with property developers.

My preference is, therefore, to invest in property developers that are able and have shown a willingness to reward shareholders with meaningful dividends.

The wait can be a long one and being paid while we wait makes it more affordable for most people.

Although individually my investments in property developers are definitely not big enough to be in my list of largest investments, collectively, they could be.

In late 2019, I shared the list of property developers I was invested in.

They were the following:

1. Guocoland

2. Ho Bee Land

3. Hock Lian Seng

4. OUE

5. Perennial Holdings

6. Tuan Sing

7. Wing Tai

The list has shrunk as I let go of my positions in Tuan Sing, Perennial Holdings and OUE. 

Tuan Sing was sold a few years ago when its share price rose to what I felt was fair value. 

Perennial Holdings was delisted and I made a small gain in the process a few years ago. 

OUE was a very small investment in the list and it wasn't very impactful. 

So, I let go of that investment and used the money to increase my exposure to our local banks instead.

For a while now, I have been left with the following property developers in my portfolio:

1. Guocoland

2. Ho Bee Land

3. Hock Lian Seng

4. Wing Tai

With interest rates much higher today, property developers are unlikely to do much better than before.

However, these four companies are undervalued and they should still be able do well enough to pay meaningful dividends.

I like being paid while I wait.

For example, Wing Tai Holdings which is trading at close to 70% discount to NAV is offering a 4% dividend yield.

It is like Warren Buffett buying socks at a huge discount but it doesn't stop there because the socks, in this case, pay us for wearing them!

Having said this, I am not increasing exposure to property developers although I am more than comfortable to hold on to my existing investments.

Related posts:
1. Perennial Holdings stock spikes!
2. Invested in Tuan Sing Holdings.
3. Hock Lian Seng should be 69c.
Recently published:
Fixed income strategy. My plan.


honest_me said...

Hi AK,

DBS is offeirng Savvy Endowment at guaranteed 3.92% for 2 years.
Is this a better option than the upcoming SSB and Tbills?


AK71 said...

Hi honest_me,

I would not say if it is a better option than SSB or T-bills because it would be like comparing apples and oranges.

I am assuming there is an insurance component since it is an endowment policy.

If so, 3.92% p.a. is pretty decent for a lock in period of 2 years, especially now with yields on the decline. It is not 3.92% for 2 years, I hope, which would make it rubbish.

A downside is your money has to be locked up for the full duration.

Well, if it is money you don't need for the next 2 years. :)

zhenling said...

Hi AK,

somewhat related to property developers, propnex's(OYY) high dividend yield has caught my attention. I like that it is a simple business I can understand, and requires little debt to operate unlike property developers. what do you think of it?

AK71 said...

Hi zhenling,

Propnex is a cyclical business but has an asset light model, unlike property developers.

As long as the property market is booming, Propnex will do well.

I don't have any skin in the business as I don't like it for a personal reason which I rather not share here.

Some things are risky to say in a blog because it is too public a space. ;p

garudadri said...

Dear AK
Good to read about your property developer portfolio allocation. I do remember your post about Guicoland from a few years ago. SG developers are lowly valued and generally perceived as slow movers. No Bee has a big promoter holding and I would not be surprised if there is a privatization offer. Sadly, such offers are low ball offers with the small retail investors having not much of a say. Their dividends are a decent consolation but still not attractive from total shareholder return point of view
I have traded the big 2 ie, CDL and UOL on three occasions over the past 6-7 years
Each time , I buy when there is poor sentiment after coooling measures are annoyand hold for often less than a year exiting my investments and eking out a 2-3% dividend as bonus with around 10-15% total gains
Now started nibbling very small portions at a time hoping to do the fourth round
CDL has better yield at 3-4% range now and UOL is also not too bad either
Hoping to sow the seeds in small installments in 2023 and reap the mini harvest next year when rates fall and share prices go higher
Warm regards

AK71 said...

Hi Garudadri,

Thanks for a very thoughtful comment, as usual. :D

I agree that Singapore property developers aren't really attractive as investments.

My foray into Tuan Sing was an exception but only because I liquidated my position after an impressive run up in its stock price.

The incentive to sell after that massive price appreciation was strong as Tuan Sing was a terrible investment for income.

So, it was definitely an asset play.

In contrast, when Hock Lian Seng's share price doubled, I sold only half my investment because I rather liked Hock Lian Seng's dividends.

The idea of getting free money for life was strongly appealing to me.

In my retirement, passive income is really my number one consideration.

Of course, I am also too lazy to actively trade stocks these days. ;p

Hock Lian Seng returns 100% and more.

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