2Q 2018 passive income from non-REITs.

2Q 2018 saw the first income contribution from my investment in ComfortDelgro, the majority of which was made late last year.

Regular readers would remember that my investment in ComfortDelgro was a relatively large one.

So, the dividend received from ComfortDelgro was a pretty significant contribution to my total passive income for the quarter.







Of course, as ComfortDelgro's share price rose in 2Q 2018, I was sitting on some rather nice gains.


After doing some back of the envelope calculations and looking at the chart, I decided to lock in some gains. 

I blogged about the decision to reduce my investment in ComfortDelgro last month.

Read it: HERE.










With a much smaller investment in ComfortDelgro now, its future contribution to my passive income is going to be correspondingly smaller, unless there is a significant special dividend, however unlikely.

It seems that Mr. Market is feeling much better about ComfortDelgro now but if there should be another bout of depression, all else remaining equal, I would be quite happy to take up Mr. Market's special offer again then.






More recently, however, I did nibble at ComfortDelgro after its share price retraced to $2.20. 

This is consistent with what I shared in both the comments section here in ASSI as well as on my Facebook page that any price decline should find some support at $2.20.

Technically, it seems like ComfortDelgro's share price bottomed at $1.90 to $2.00 and that should provide some guidance for those who are interested in price action.

In 2Q 2018, I added to my investment in SingTel which regular readers would remember as another relatively large investment I made late last year and added in 1Q 2018 on price weakness.

SingTel's price moved in the opposite direction of ComfortDelgro's and this has given me the opportunity to add to my investment in SingTel again and again in 2Q 2018.

For sure, all telcos are facing a more challenging environment but SingTel is not Starhub nor M1 and should not be tarred with the same brush.

You might be interested in my recent blog on Starhub: HERE.






I will talk more about SingTel as I received messages and emails from readers who seemed to be in distress after investing in SingTel coincidentally at the same time I did.

When I bought into SingTel late last year, it was obvious from the charts that the share price could see some weakness and I said as much here in ASSI.

I really hope that people did not bite off more than they could chew.

Even so, I can understand that it could be more than unsettling for some people as they see the share price declining.






Why did I go ahead and buy although the chart suggested more weakness was likely?

Well, one could also ask why did I go and buy ComfortDelgro when the chart was bearish too?

I always say that TA is about probability and not certainty.

I knew what I was getting myself into.

I had a plan and I stuck to it.








Our decision should also be informed by FA.

SingTel had bearish charts but from a FA perspective, I thought I was paying a fair price for SingTel but what about ComfortDelgro?

ComfortDelgro was rather undervalued. 

Yes, I paid an unfair price for ComfortDelgro that was to my advantage.








Now, as SingTel's share price plunged, it has also become unfairly priced and to my advantage as a buyer.

Is SingTel undervalued now? 

I think so.

Like how I was accumulating ComfortDelgro, it is only natural that I would be accumulating SingTel now.

Of course, we have to be aware that cheap could get cheaper.






Treating my investment in SingTel as an equity bond (especially after the management's commitment to an annual DPS of 17.5c for the next 2 years), I am quite happy to add to my investment as its share price plunged. 

Basically, dividend yield has expanded which makes it all the more attractive to the income investor in me.

Unless we have good reason to believe that SingTel is going the way of the Dodo, there is really no need to panic and sell if we are investing for income.







OK, I guess some might have reason to panic.

Who? 

For those who used money which they really should not be using to invest with, they might panic.

If it is money we need for other purposes in the near future, we should not be investing with it and, definitely, I would not use borrowings in one form or another to invest with.






Now, treating ComfortDelgro also as an equity bond, with a surge in share price to a high of $2.50 in 2Q 2018, its dividend yield compressed and rather significantly too which made it immediately less attractive as an investment for income when compared to SingTel.


Both SingTel and ComfortDelgro have strong balance sheets and also strong cash flow.

I believe that they will continue to pay meaningful dividends and I will continue to accumulate on any further price weakness.

Mr. Market is probably overly pessimistic about SingTel but, of course, only time will tell (pun unintended).






To cap it off, I have to say that getting a dividend yield of around 5% from entities like ComfortDelgro and SingTel is probably more attractive than getting a 6% or 7% dividend yield from an S-REIT with a gearing level of 35% to 45%.

There is a reason why SingTel has a credit rating of "A" while AIMS AMP Capital Industrial REIT has a credit rating of "BBB-" both from S&P, for example.







S-REITs pay out 100% of their operational cash flow (not earnings) and have no retained earnings while SingTel has retained earnings, not paying all its earnings as dividends.

If there should be another financial crisis, all else remaining equal, SingTel is likely to weather it better than most S-REITs which partly explains the difference in credit ratings.






I should quickly mention that I also made a small investment in Raffles Medical Group in 2Q 2018.

Please refer to the blog if you are interested in this: HERE.

2Q 2018 passive income from non-REITs:
S$ 47,043.92







Overall, 2Q 2018 has turned out pretty well for me with the receipt of passive income, capital gain and also opportunities to buy more good stuff on the cheap.

Related post:
1Q 2018 passive income from non-REITs.

2Q 2018 passive income from S-REITs.

Regular readers know that AK is usually pretty inactive as an investor, preferring to do nothing most of the time and just collect dividends.

Well, in 2Q 2018, in the S-REITs space, there was a bit of action.






There was the 1 for 10 rights issue by Frasers Logistics & Industrial Trust (FLT) in which I took up my entitlement and applied for a small number of excess rights.

To be honest, I did not think that the rights issue was very attractively priced. 

Perhaps, it was fairly priced.

We have to take note that the massive deal weakened the REIT's balance sheet significantly while delivering very little increase to DPU and NAV per unit.






I must say that I feel that the deal was better for the sponsor than it was for the REIT.

We shall see if the REIT's DPU grows in future, everything else remaining equal.

Having said this, the REIT should still be a fairly safe and stable investment for income that keeps me happy enough to stay invested.

Even after the rights issue, the REIT is still only one of my bigger smaller investments (under $100,000 in market value but more than $50,000).

Another thing I did in 2Q 2018 was to nibble at Starhill Global REIT as its unit price declined.

As its unit price declined by 5%, I pointed out to a friend that the drop in unit price did not really make the REIT absolutely more of a bargain than it was before.

Of course, I was not interested in adding to my investment then.

If you remember, I mentioned in an earlier blog that with the new tax levied by Malaysia, I estimated a 5% reduction to the REIT's DPU.

So, with a lower DPU, it is only logical that the REIT's unit price took a 5% hit as well.






However, when its unit price declined by much more than 5% later on, I decided that the selling was probably overdone.

In fact, unit price has declined by more than 10% compared to my initial entry price and I couldn't resist nibbling.

After all, there is reason to be hopeful that Starhill Global REIT could do better in future and that buying at a big discount to its NAV is a very tempting proposition and probably provides a decent margin of safety.







The REIT's portfolio of commercial buildings has intrinsic value.

As an investment for income right now, however, it is really nothing to shout about.

Although I feel that there is nothing fundamentally wrong with the REIT, it is really one for investors who are very patient and who are OK with being paid while waiting.

As I bought more in 2Q 2018, Starhill Global REIT has just crossed the line to become one of my larger smaller investments like Frasers Logistics & Industrial Trust (under $100,000 in market value but more than $50,000) but it is on the smaller side compared to FLT.









I like to think that all investments are good at the right price.

At such a big discount to NAV, it is just too hard for me to ignore but without a clearly stronger income investing angle here, I reminded myself not to take too big a bite.

I don't like choking.






Regular readers should not be surprised that the two largest contributors to my passive income from S-REITs are:

1. AA REIT
2. FIRST REIT






DBS recently did a piece on AA REIT, suggesting that it could be a target for takeover and suggested a target price of $1.55 to $1.65 per unit.

• Resilient industrial gem that offers above-average yield of 7.4%-7.6% over FY19-FY21

• Extraction of value from greenfield projects and addition of c.600,000 sqft of untapped GFA could drive revenues by c.16%

• Potential takeover target amid global hunt for quality assets







Frankly, I am not too enthusiastic about this, having lost quite a few good income generating investments in similar fashion already (with Saizen REIT and Croesus Retail Trust being the largest).

Quite honestly, unless there is another bear market, it is not easy to find robust replacements as more meaningful investments for income.





OK, enough grumbling.

Total passive income from S-REITs in 2Q 2018:

S$ 18,715.33

The next blog will be on my passive income from non-REITs and we will have the full picture for 2Q 2018 then.

Related post:
1Q 2018 passive income from S-REITs.