High yield portfolio

In case anyone is interested in building up a portfolio of high yielding Singapore counters, here are a few counters worth considering:

Saizen REIT - For a potential yield of 13% from middle of 2010. Lower gearing in time. A strong Yen is a plus as distributable income is converted to S$ for distribution to unitholders. At 15c, it is deeply undervalued. Please refer to the earlier entry on Saizen REIT for a more detailed write-up. Passive income with high yields: Saizen REIT

MI-REIT - Soon to be renamed AIMS AMP Capital Industrial REIT. With its recent recapitalisation exercise, gearing is at 29% and the yield is a respectable 10% with price at 20.5c. NAV is 31c. I like Singapore industrial properties a bit more than office buildings as the demand is more inelastic. AIMS-AMP Capital Industrial Reit (MI-REIT)


LMIR - A joint venture between Indonesian powerhouse, Lippo, and Mapletree (a subsidiary of Singapore's Temasek Holdings). Indonesia never did go into a recession. It kept growing through the financial crisis. This REIT owns shopping malls in the country. With domestic consumption forming 60% of GDP plus a growing middle class, this REIT will do better in time. Indonesia needs more malls. Yield is at 9.5% with price at 51.5c. Gearing is a low 12%. Price has closed above resistance. 50c might just be resistance turned support. LMIR

First REIT - Owned by Lippo, it primarily owns healthcare facilities in Indonesia and Singapore. Yield at 9.5% with price at 80c. Gearing is a low 16%. This counter has been doing a levitation act. Seemingly infallible.

Suntec REIT - A respectable yield of 8.6% with price at $1.35. Gearing is at 34%. However, its price is close to resistance. Might want to wait for a pullback before entering. $1.25 or thereabouts would be a nice entry price.

SPH - My favourite high yield blue chip. At the price of $3.60, I'm estimating a fairly conservative 5.5% yield in 2010. Strong balance sheet. Price seems to be going through a basing process now.

I own units or shares in all the above. These are for long term passive income generation. So, I won't be too bothered by short term price fluctuations. There will come a time when I should liquidate these. This is when there is a change in the longer term trend.
A new year and a new decade. Strategy for 2010. 

Update (added on 13 Oct 2010).

Passive income with high yields: Saizen REIT

I've talked about a cyclical stock (Golden Agriculture) and a growth stock (Healthway Medical). Now, it's time to talk about my favourite topic: yield stocks.

I've always liked high yields. Who wouldn't be attracted to a 10% yield which is 100 times more than the interest payment from a good ol POSB bank savings account? 

Of course, it's not that simple.

In this last financial crisis, I learned the hard way that high yields might come with high risk. REITs which had high gearing levels crashed despite their high yields. Some went bankrupt (like a couple in Japan). All suffered lower valuations on their properties and most suffered from lower revenues. These affected the NAV and the distributable income respectively.

In Singapore, all the REITs have survived and many have managed to raise capital either through rights issues or share placements.

I believe that majority of the REITs in Singapore will continue to appreciate in time with stronger balance sheets and a stronger economy.

In fact, many have doubled or tripled in price since the March lows. Some are even trading above their NAVs! It's harder to find value now.

A REIT which I am accumulating is Saizen REIT. It owns residential buildings in Japan. The demand for such properties is relatively inelastic.

 

The occupancy rate has been consistently above 90% even through the crisis. Its financial health has improved with a successful rights issue earlier this year and a suspension of distributions to repay loans.

In one scenario, we could see the gearing level drop to less than 20% and its NAV drop to 29c by 2012. The manager plans on resuming distributions in mid-2010. By my calculations, we could see a dpu of about 2c per annum. The REIT closed at 15c today. This means a potential yield of 13.3%.

Soon, Saizen REIT's gearing will be lower than many S-REITs. Anyone who is concerned about its debts should go take a look.

The question many would ask now is if this is a good time to buy.

Charting shows a symmetrical triangle. It reminds me of the symmetrical triangle I saw in Hyflux Water Trust's chart many months ago. Apex of triangle is in late Feb 2010. Expecting price to breakout on the upside anytime before then. Strong support provided by the rising 200dMA which coincides with the uptrendline of the symmetrical triangle. This is at 14c. Expect strong resistance to be provided by the rapidly descending 100wMA, currently at 22c. Limited downside compared to the potential upside.

Good luck to us all.