Hock Lian Seng returns 100% and more!

One of the things that I like to do is to buy into what looks like a fundamentally sound business when insiders are accumulating. One such stock which has amply rewarded me over the years is Hock Lian Seng.

I already had a small position in Hock Lian Seng but decided to buy more in 2011 when I observed insiders buying. Back then, I paid 24c a share. 





Fully confident that the company would be able to continue with a dividend per share (DPS) of 1.5c, I was looking at a dividend yield of 6.25% back then. That was in October 2011. Read blog: here.

A few months later in February 2012, Hock Lian Seng declared a DPS of 2c which translated to a dividend yield of 8.33%! That it represented only 32.8% of earnings was pleasing. 





They were retaining earnings which increased the value of the stock. Read blog: here.

In both 2013 and 2014, Hock Lian Seng declared a DPS of 1.8c. In between, I had an opportunity to add to my investment, paying 26c a share in May 2013, confident that a DPS of 1.5c remained undemanding. Anything more would have been a bonus. I was not disappointed. Read blog: here.





Almost a year later in February 2014, Mr. Market gave me a chance to buy again cheaply. That time, I paid 25.5c a share. I would have liked to accumulate more later on but Hock Lian Seng received positive media coverage by end of 2014 and its share price quickly rose. Read blog: here.

In 2015, Hock Lian Seng declared a DPS of 4c! Mr. Market's exuberance went through the roof!

I cautioned that the 4c DPS was a one off event and unlikely to be recurring as Hock Lian Seng saw its share price rocketing. 





Too many analysts and investors were waving the 4c DPS around as if it was a regular event. 

I won't be surprised if there were many newly minted Hock Lian Seng investors that year. 

I did not add to my investment but, throughout the buzz, I held on to my investment and enjoyed a dividend yield of 15.38% to 16.66% that year. Read blog: here.





In 2016, Hock Lian Seng declared a more normalised DPS of 2.5c. Mr. Market wasn't enthused and its share price reflected the mood. However, its share price did not go below 30c. If it did, I would have bought more. 

Of course, it stands to reason that Hock Lian Seng should not trade at below 30c a share. It is a more valuable company today than it was in 2011 from retaining earnings for so many years.






Yes, on top of the dividends I have received over the years from Hock Lian Seng, my stake in the business has also appreciated in value. The total return has been more than satisfactory.

Hock Lian Seng's sound fundamentals might have caught the attention of Mr. Market and its share price recently went ballistic. 

I don't pretend to understand everything but I understand that selling about half of my investment in Hock Lian Seng would make my remaining investment free of cost. This is without taking into account the dividends received over the years too. 

I talked to myself, I listened and I acted accordingly. Spooky!






Hock Lian Seng could possibly announce a DPS of 2.5c sometime in the near future. Based on 52.5c per share, that would give a dividend yield of 4.76%. 

Based on my cost, however, I would get dividend yields of 9.6% to 10.4%.

Wait a minute, since my remaining stake in Hock Lian Seng is free of cost, what should my dividend yield on cost be? Alamak. How to calculate like that?






I shared in a blog many years ago that my investment in First REIT was for keeps. To be fair, there are a few other investments in my portfolio which I feel the same way about.

My blog is not very cerebral in nature because I am not a very intelligent person. I am not being modest here. I am being honest.

Not being very intelligent, I hope to be rewarded by simply staying prudent, pragmatic and patient. 





I believe we don't have to be smart to be rich. If AK can do it, so can you.

Related posts:
1. First REIT: This one is for keeps.
(In five and a half years, I would have recovered my capital. )
2. Don't have to be smart to be rich.
3. Robust order book at 3 year high.

Croesus Retail Trust 1H FY2017 Hong Bao.

This was from a recent conversation:

Reader:
"Croesus Retail Trust reported good results but an investor I know sold all his shares already."

AK;
"We have our reasons for buying or selling. If our facts are right and if our reasoning is sound, we should do OK. We could consider facts and reasons offered by other investors in reviewing our investment thesis but don't be influenced by their buying or selling."

Mallage Shobu, a CRT mall in Saitama.

That Croesus Retail Trust (CRT) has done well is something I should really celebrate twice because it was with the funds that I got from selling my rather big investment in Sabana REIT years ago that I invested in CRT. 

I should celebrate that I was lucky enough to get out of a terribly managed REIT with fairly decent gains and I should celebrate that I was lucky enough to build a good size position in CRT at fairly good prices.

CRT has announced a distribution per unit (DPU) of 3.6c for 1H FY2017. Based on a unit price of 87c, CRT currently offers an annualised distribution yield of 8.28%. 

Gross revenue went up. Net property income (NPI) went up. Distributable income went up. DPU went up. This is what we want to see. All is well.

Now, I want to share a couple of things. If we see distributable income up and DPU is down, how like that? If we see gross revenue down and NPI up, how like that? 

To me, these are a couple of things which might hold me back from making an investment or adding to an investment. I would have to investigate into the reasons and see if something was wrong and if the wrong was enduring.

If you don't understand what I am saying, never mind. I am just talking rubbish, as usual.

Mallage Saga, a CRT mall in Saga.

Anyway, back to CRT. I will make only a few points because the presentation slides are pretty self explanatory:

1. One of the benefits of having an internal manager is cost savings and the savings we saw in 1H FY2017 should be more pronounced in 2H FY2017. This is because the cost savings only started more than halfway into 1Q FY2017. CRT's DPU should have some support from this.

2. I said before that I like AIMS AMP Capital Industrial REIT because they engage in asset enhancement initiatives (AEIs) and redevelopment of existing assets. Doing something with our existing assets to enhance their income generating ability is always preferred and usually less costly compared to simply buying another asset. CRT is pursuing organic growth too. How to say I don't like?

3. The negative interest rates in Japan are not going away anytime soon. This is good news for domestically leveraged entities in Japan like CRT. USA's interest rate hikes will have no direct impact on CRT which is not the case for many S-REITs as Singapore imports her interest rates from the USA.

4. Although CRT's gearing ratio has gone up from 45.3% to 46.1%, the interest cover ratio has also gone up from 3.7x to 4.2x. Higher level of debt is not alarming if debt service ability has strengthened.

I like what I see and I will stay invested.

See press release: HERE.

See presentation slides: HERE.