Ever since the CPFB introduced a colorful pie chart of our CPF savings a few years ago, I would look forward to mine every year like a teena...
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My last blog on ComfortDelgro attracted some very thoughtful comments from readers and if you are interested, read them: HERE.
I said in reply to a comment that I have been trying to build a more resilient investment portfolio for a few years by now.
Most of this effort has been centered on increasing the size of my investment in the local banks.
I believe that I have strengthened my investment portfolio's resilience in the most recent bear market this way.
This short blog is in reply to the latest comment by a reader in the abovementioned blog.
The reader's comment was about Far East Hospitality Trust.
My reply:
Yes, just like SIA and even SIA Engineering, the hospitality sector has been hard hit by the COVID-19 pandemic.
With the latest Omicron variant, it doesn't look like things are going to improve by much anytime soon.
Buying into hope might be just as painful as buying into hype if things go very wrong.
I significantly reduced my investment in Ascott REIT-BT some time ago.
However, I still retain a smallish position and that exposure to the hospitality sector is enough for me.
Having a larger exposure to the hospitality sector might give outsized returns if the pandemic subsides soon, of course.
As the ongoing COVID-19 pandemic has shown, however, a larger exposure does not make for a more resilient portfolio especially if we are mostly investing for income.
This is especially the case when we are buying into REITs and business trusts which pay out almost all their operating cashflow to their investors.
This is unlike businesses which pay out a fraction of their earnings as dividends to their investors.
With interest rates more likely to rise than not in future, we might want to invest in businesses that will benefit from rising interest rates instead.
As always, it is never my way or the highway.
Have our own plan and we should keep it grounded with realistic expectations or at least try.
Of course, even the most well thought out plan could go wrong.
If we must gamble, make sure the bet will not sink us financially and degrade our lifestyle if things do not go our way.
AK is just talking to himself and seems to have gone off topic.
Anyway, remember that the COVID-19 virus is still here in all its mutations.
Continue to be cautious and stay safe to keep all of us safe.
Omicron Covid variant spreads 'more than twice as fast' as Delta - BBC News
This started as a reply to a reader's comment: HERE. I actually spent more than an hour typing the reply and it became quite long. So, I decided to publish the reply as a blog instead so that more get to hear me talking to myself. Here is my reply to Unknown: There are quite a number of REITs in my portfolio, as you probably know. In 4Q 2019, three of them made it to my list of largest investments which were investments each with a market value of $100,000 or more. The three were: 1. AIMS APAC REIT. (formerly AIMS AMP Cap. Ind. REIT.)
2. IREIT Global.
3. Ascendas Hospitality Trust. (now Ascott REIT-BT.) In the last few weeks, the market values of the trio have plunged, of course. I will look at each of them briefly.
1. AIMS APAC REIT. This has always been a well run industrial S-REIT. Being a landlord of industrial properties and business parks, the REIT is probably better insulated from the negative economic impacts of the COVID-19 crisis compared to retail and hospitality REITs. However, if the crisis drags on for a year or two, then, we could see tenants default becoming a major problem. Even so, industrial REITs usually collect many months of rent in advance and this provides some insurance. Long time readers of my blog know the story of my investment in AIMS APAC REIT. I have not done anything to my investment in AIMS APAC REIT for many years. I thought my investment in the REIT would have fallen below $350,000 in market value by now but even with the big plunge in unit price, it remains above this number. Pleasantly surprised. Reference: AA REIT and free money for me.
2. IREIT Global. I increased my investment in IREIT Global very significantly only a few months ago. Only belatedly, I realised that after I blogged about it, the unit price rose significantly. I like to think that Mr. Market is always right and my decision to increase my investment in IREIT Global significantly when I did was probably a good one. However, as the COVID-19 global pandemic moved to infect Europe, IREIT Global was not spared the wrath of the bear either. Spain is now the most infected country in Europe, surpassing Italy. Of course, unfortunately, IREIT Global very recently bought some properties in Spain. Having said this, I believe most of IREIT Global's income is safe. In a reply to another reader, I said: "Deutsche Telekom and Europe’s largest pension fund, Deutsche Rentenversicherung (DRV) account for about 77% of IREIT Global's rental income.
"Even if all the other tenants go bust, these two won't.
"I am very simple minded and use this as the worst case scenario." This knowledge gave me the confidence to add to my investment in IREIT Global as its unit price declined. The lowest price I paid Mr. Market for this was 42 cents a unit. In fact, I nibbled so much that together the nibbles might be considered a gobble. Due to these nibbles, my investment in IREIT Global remains above $200,000 in market value. Reference: IREIT Global is going to Spain.
3. Ascott REIT-BT. Of the three, the most vulnerable to the economic recession that will be created by the COVID-19 crisis is probably Ascott REIT-BT. The airlines and hospitality industries are the first to feel the heat and will continue to feel the heat for some time to come. Even after the COVID-19 crisis has abated, it is possible that people might take a while to warm up to the idea of travelling again. I watched a documentary on the Spanish Flu and it was said that people who survived that global pandemic were so scarred that they did not even want to leave their homes unless they had to. That went on for a long time after the crisis was over. So, compared to industrial and commercial S-REITs or even retail S-REITs, hospitality S-REITs could take a longer time to recover from the COVID-19 crisis. Due purely to the plunge in its unit price, the market value of my investment in Ascott REIT-BT is now much lower than $100,000. Reference: Ascendas Hospitality Trust getting a bad deal?
I said in a recent blog that we have to be prepared for a reduction or even a suspension of dividend payout in some instances. This is true for investors of these REITs too as their incomes could be compromised. In closing, tougher measures will be implemented in Singapore for a whole month starting next Tuesday, 7 April 2020, in the fight against COVID-19. Let us all be socially responsible and remind each other to do the right things. We owe it to ourselves, our family and friends, to do our part in the fight against COVID-19. We are #SGUnited. For a summary of the stricter measures, watch this 10 minutes video:
Together with this blog post, I am trying out a mobile version of ASSI. So, for those of you who read ASSI using mobile phones, you will notice a difference. With this new look on mobile, several things will be lost. The disclaimer at the end of the blog is not visible on the mobile version and this has been my main reason for not having a mobile version of ASSI for the longest time. Tags or labels at the end of each blog are also missing which means that if I acknowledge that a blog is an advertorial it would not show which was another reason for resisting the new mobile version. With this new mobile version, there are no left and right sidebars which might be a big disadvantage to new readers and an inconvenience to old readers who might want to read older blogs or have access to resources and comments listed in those sidebars. Readers who want to access whatever is lost in the mobile version will have to click on the "View web version" option at the end of the page. Anyway, let me know what you think and I will see whether to keep this or to go back to the old way. Further reading: 1. Largest investments updated. 2. 1Q 2020 passive income: COVID-19 crisis. 3. Survivability and opportunity in times of distress.
From my last couple of blogs, readers would be able to get an idea of what might have changed in my portfolio.
Since the last blog, however, I have made another significant investment or, more accurately, reinvestment.
What am I talking about?
Clue:
Some readers might remember that I reduced my investment in Wilmar significantly in 3Q 2019 in the month of July, booking a pretty decent capital gain in the process. Wilmar lost its position as one of my largest investments in 3Q 2019 as a result of that move.
I explained that the move was based on technical analysis (TA) and not because I thought Wilmar was no longer a fundamentally good investment.
That meant I would be building up my investment in Wilmar again when the time is right.
I still like Wilmar as an investment today and if you are curious as to the reasons, you might want to read the following: 1. 3Q 2018 passive income: Wilmar. 2. Accumulating Wilmar... My investment thesis remains, more or less, unchanged.
Wilmar is an amazing business that has gone unappreciated for a long time.
With the IPO of its Chinese subsidiary in the works, Mr. Market is beginning to appreciate the value that is locked within Wilmar. Since reducing my investment significantly in July, I have been waiting to increase my investment in Wilmar again. Although I wondered if we could see $3.10 or even $3.00 a share again, using TA, I decided that buying at $3.60 a share or lower might be a good idea.
This is because even though Wilmar's share price has retreated, the 200 days moving average (200dMA) in its chart is still rising. The 200dMA is a long term moving average and as it is rising, it should provide a stronger support.
The rising 200dMA is at $3.54, approximately. Of course, TA simply shows us where supports could be found.
TA cannot tell us if the supports would be tested or not. So, what to do?
Start buying at $3.60 a share, maybe.
TA also cannot tell us if the supports would hold or not.
So, what to do?
Make sure we don't throw in everything including the kitchen sink. Anyway, informed by some simple TA, making use of Mr. Market's current depression, I significantly increased my investment in Wilmar so that it is again one of my largest investments. So, together with Wilmar, what are my largest investments now?
$500,000 or more: *CPF. If you are laughing, I hope it is for the right reason. Read: Largest investments updated (3Q 2019). From $350,000 to $499,999: *AIMS APAC REIT. (formerly AIMS AMP Cap. Ind. REIT) Nothing has changed here. Yes, AK is so boring.
From $200,000 to $349,999: *ComfortDelgro. *Centurion Corporation Ltd. *Accordia Golf Trust. *Development Bank of Singapore. *OCBC Bank. *IREIT Global. So, from having only two members, this group's membership has tripled in size, now boasting six members. Increasing my investments in Accordia Golf Trust, DBS and OCBC meaningfully moved them up from the lower bracket.
The fourth new member, IREIT Global, made the biggest jump as it makes its first appearance in this list by skipping the lower bracket altogether. Read related posts at the end of this blog if all these sound new to you.
From $100,000 to $199,000: *Ascendas H-Trust. *Wilmar International. Wilmar returns as one of my largest investments by joining the lowest bracket in the list. If Mr. Market continues to feel depressed about Wilmar, I would probably be buying more.
Now, remember, when we invest, we have to take into consideration our circumstances and not "suka suka" ride on other's coattails.
What?
Cannot find AK's coattails? That is because AK doesn't wear a coat lah.
La la la la... lah. ;p
On a serious note, remember to "eat bread with ink slowly."
It has been almost a year since my last blog on the largest investments in my portfolio. Since then, in the following months, I added to some of my investments such as 1. OCBC at under $11.00 a share, 2. ComfortDelgro at under $2.20 a share and 3. SingTel at under $3.00 a share.
Not much activity on my part, really. Most of the time, I was just collecting dividends while waiting for Mr. Market to recover from his depression. When Mr. Market did recover, I waited to see how euphoric he could get. (To be totally honest, mostly, I was adventuring in Neverwinter but you know that, of course.) After my recent blog on selling into the rally while staying invested, a reader asked if I could do an update on my largest investments.
I suppose I could.
$500,000 or more: CPF. Do I hear laughter?
While the CPF is not an equity and isn't a bond in the purest form, I do consider it an essential part of my portfolio. I consider it essential as it is the risk free and volatility free component of my investment portfolio which pays a relatively attractive coupon. I decided to include my CPF savings to remind readers that I am able to take a bit of risk in the way I invest because my CPF savings is a very significant safety net. Well, for me, it is very significant.
When we invest, remember, we have to take into consideration our personal financial circumstances and not simply ride on other's coattails. I hope that you had a good laugh.
More importantly, I hope you are also aware that this isn't all a joke.
From $350,000 to $499,999: AIMS APAC REIT (formerly AIMS AMP Cap. Ind. REIT) This should not come as a surprise, of course. My investment in this REIT is already free of cost and there is no compelling reason for me to fiddle with something that has worked so well for so many years. There has been talk of a takeover of this REIT and, to be honest, I hope it never happens. Many good income producing investments in my portfolio have been taken away from me and it is difficult to find equivalent replacements.
From $200,000 to $349,999: ComfortDelgro
Centurion Corporation Ltd. From being unloved, ComfortDelgro has become much desired by Mr. Market. I like ComfortDelgro too. Even after trimming my investment in this rally by more than 20%, ComfortDegro still stays in the same bracket because the market value of my investment has gone up by more than 30%.
As an investment for income, ComfortDelgro is probably more reliable than Wilmar and its dividend is probably more sustainable than SingTel's.
Having said this, if Mr. Market should have a feverish desire to pay a much higher price for ComfortDelgro, everything else remaining equal, I would probably accept the offer.
Centurion Corporation Ltd. moved into the same bracket as ComfortDelgro because I added to my investment as its share price languished at about 40c a share.
Centurion Corporation Ltd. is undervalued and there continues to be persistent insider buying.
Peter Lynch said that there are many reasons why insiders sell but there is only one reason why they buy. I like being paid while I wait and a dividend yield of almost 5% is not too shabby.
From $100,000 to $199,000: Ascendas H-Trust Accordia Golf Trust
Development Bank of Singapore OCBC Bank Ascendas H-Trust will probably be replaced by a new entity and I shared my view about the proposed combination with Ascott Residence Trust in two separate blog posts earlier this month.
As for Accordia Golf Trust, it still has the potential to increase DPU significantly in the next few years and I blogged about this before. I am quite happy to be paid while I wait, as usual.
Development Bank of Singapore is doing well and I would like to build a larger position if there is a meaningful correction in its share price. New addition to the list is OCBC Bank. This is the result of several rounds of accumulation at under $11.00 a share as I felt it offered relatively good value for money.
As for SingTel and Wilmar, after reducing my exposure significantly, my positions in SingTel and Wilmar are now worth less than $100,000 each. Not part of my largest investments now, SingTel and Wilmar have been removed from the list here. If Mr. Market should tempt me with better offers, I am likely to give in to temptation and sell what remains. Remember, I am just doing what makes sense to me.
Remember, you have to do what makes sense to you.
Have a plan, your own plan.
"We must understand our motivations for investing in the stocks we are invested in. "The tools we employ and the attitude we have must be appropriate to our motivations. "That way, we will stand a good chance of doing better with a consistent strategy and this is so both financially and emotionally!" From: Rules for investing in difficult times.
It was published on Wednesday, July 3rd, 2019. The blog here is in reply to a reader's comment that it is a bad deal for AHT investors.
AK says... While not fantastic, really, it isn't that bad a deal for AHT investors. For every AHT unit, we will get almost 0.8 unit in the combined entity. Priced at $1.30 per unit, the deal values AHT at almost $1.04 a unit. AHT was trading at way below its NAV (of about $1.01) for too long. See: AHT Stock Fundamentals.
Also, priced at about $1.04 a unit, the yield of AHT would be about 5.76%. At $1.30 a unit, the combined entity will provide us with a distribution yield of about 5.5% which is pretty close to this 5.76%. After taking into consideration the cash payment of 5+ cents per unit which AHT investors will get (and this is close to one year's worth of income distribution), I believe that this is a fair deal.
We should not compare AHT with the new combined entity by looking at yield numbers only. We might see the tree but not the forest. I am willing to accept a slightly lower distribution yield from what I think should be a stronger and more resilient business entity. The new business entity will also have a much lower level of concentration risk which was a negative about AHT.
Of course, if we are pretty sure we are able to secure a much higher yield in a similar investment with a similar risk profile elsewhere, we should move our money to where it will be treated better. Or if we wish to lock in the capital gains, there is nothing wrong with taking profit by selling our units to Mr. Market either. As I do not have an alternative investment in mind, I am quite happy to stay put. :)
In reply to a reader's comment: HERE. Ascendas Hospitality Trust (AHT) has been a good investment for income over the years. AHT has also been rather undervalued by Mr. Market for most of those years.
This deal shows the true value of AHT. "ART will acquire all AHT stapled units at $1.0868 each, comprising $0.0543 in cash and 0.7942 ART-BT stapled units issued at a price of $1.30." Source: Yahoo!Finance.
I first invested in AHT in 2014 and paid a price of 72c a unit. See: AHT: A nibble. Over the years, I accumulated at prices lower than my initial purchase price, sometimes significantly lower, whenever Mr. Market felt depressed about AHT. Of course, AHT became a relatively substantial part of my portfolio. AHT has been generating meaningful passive income for me regularly.
In 2017, I said AHT should continue to deliver. "Not too concerned with the fluctuation in unit price. As long as the trust continues to do well enough to pay me an income that makes sense, I am happy." See: AHT should do well.
I am glad to see that I will receive some cash payment and also receive units in the enlarged entity. This means that I will continue to enjoy income distributions after the deal is done. I like to think that patience will be rewarded. In my experience, it has mostly been the case. Congratulations, fellow AHT investors.
Reader says... Thanks for talking to yourself all these times. You have really helped the average Singaporeans pick up good financial tips. I have been invested in AHT and have collected good dividends. I noticed that prices have dropped so far and am thinking of picking up more.
I read through their latest announcements and I don’t see anything that indicates that their fundamentals have changed. However, their numbers for 2 AU Pullman hotels are not that good. Also the exchange rate is not in their favour.
They also look like they may be thinking of expanding beyond Asia as per their change in mandate.
Try as I could, I can’t figure out whether these factors would be good or bad for AHT. Am I missing something?
I also noticed that even though you are picking up shares in CDG, you are not doing it for SBS? Since CDG taxi biz is at risk, how about just their bus biz?
AK says... AHT is in hospitality. There will be seasonal changes in fortunes. Since I am staying invested for income, as long as AHT is well managed, the bumps will smoothen out over time. Having more assets in different parts of the world could be a good thing because it reduces concentration risk and reliance on the A$. Will have to wait and see.
I find SBS' valuation a bit rich compared to ComfortDelgro. SBS is 75% owned by CDG. I think SBS will be worth more in future but in the meantime, can we accept its richer valuation and also the much lower dividend yield (~ 2%)?
In years to come, SBS could increase dividend payout to shareholders. Of course, then, CDG would be a major beneficiary.
A reader saw my blog on Ascendas H-Trust earlier this year and, after doing some research, decided to invest in the Trust for income. He shared the following with me: 1. 52% of net property income is derived from Australia and this proportion could rise because of the boom in tourism. Number of international flight routes have increased with more Chinese tourist arrivals. 2. 25% of net property income is derived from Japan and tourism has been on the rise in Japan as well. The Japanese government's drive to almost double the number of visitors to 40 million by 2020 is going to give a continued boost to the hospitality sector.
3. The Trust has a gearing level of 33%. Backed by a strong sponsor and having natural forex hedge with its debt largely denominated in local currencies are positives. 4. Through Park Hotel, the Trust derives only 15% of its net property income from Singapore. So, the slowdown in the Singapore hospitality sector is less of a concern for the Trust compared to CDL H-Trust and FEHT which have much larger exposure to the market here. The fact that Park Hotel is master leased provides greater income visibility too. 5. Assets owned by the Trust are mostly freehold and do not suffer from lease decay which is another plus when compared to CDL H-Trust and FEHT.
Good stuff. I will end this blog by saying that I got into the Trust at lower prices and I am investing for income. Not too concerned with the fluctuation in unit price. As long as the trust continues to do well enough to pay me an income that makes sense, I am happy. Related post: More income from Ascendas H-Trust.
See my Japan travel photos: HERE.
Quite a few readers asked me about investing in hospitality trusts and they usually ask me about FEHT or CDL HT. This is not surprising because they have a stronger presence in Singapore.
I don't have a stake in either and with the oversupply of hotel rooms in Singapore, it is probably the case that hospitality trusts with a bigger exposure in Singapore will continue to struggle.
Beyond this, I don't have anything more specific to say about the trusts. Having said this, I do have a good size investment in a hospitality trust, namely, Ascendas Hospitality Trust (AHT). Newer readers might not know this but I first invested in AHT in 2014. I did not invest in AHT during its IPO as I found the financial engineering to boost DPU distasteful. You can read more about this in related post #1 at the end of this blog. Back in 2014, I thought that Mr. Market offered me a pretty reasonable price to invest in AHT, a price which was about 20% lower than its IPO.
With the effect of financial engineering expired, it was also clearer what my return on investment realistically was going to be. A distribution yield of 7.64% was attractive enough, I thought. In August 2015, when AHT's unit price suffered from a severe bout of market pessimism, I was pleased to accept Mr. Market's offer to increase my investment in AHT. Purchases in that month grew my nibble of an investment in AHT in 2014 to a much more significant position, large enough to generate enough passive income to replace a month's worth of earned income (when I was still gainfully employed). My investment in August 2015 would receive a distribution yield of more than 9.5% based on the numbers I used for my purchase in 2014.
AHT has a portfolio of hotels in Australia, China, Japan and Singapore. However, its exposure to Singapore is limited to one hotel, Park Hotel Clarke Quay which was purchased in 2013. So, the effect of oversupply in hotel rooms here will have less negative impact on their results overall. Most of AHT's assets are in Australia which contribute 56% of Net Property Income (NPI). Japan is the second largest contributor accounting for 24% of NPI. The much stronger performance by these assets more than compensate for poorer performance in Singapore.
Year on year, 3Q's DPU improved by 13.1% to 1.64c as a result. Gearing is at 33.3%. NAV/share 85c. In 2014, I said that an appreciation in the A$ would benefit AHT. Together with the stronger JPY, I am hopeful that DPU for 4Q could similarly receive a boost. The oversupply in hotel rooms in Singapore was already apparent in 2014 and AHT was probably a better choice than FEHT or CDL HT. I was lucky to make the right choice.
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