VICOM: Initiated long position at $5.71.

I drive and I own a car. So, I should be interested in VICOM. Sounds straightforward enough.

I have been looking at it for a year or so but found that the valuation was a bit rich.





During one of the evenings with AK and friends, we had a lively discussion regarding VICOM's future too.

As is the case with any asset, when everybody wants a piece of it, price goes up. VICOM's price skyrocketed not too long ago. 

At those prices, its PE ratio was closer to 20x. I wasn't prepared to pay that high a PE ratio for the stock. 





It wasn't too long ago that the PE ratio was closer to 15x, I observed.

2014's EPS was 34c. Assuming 5% growth in 2015, EPS could be 35.7c this year. 

A 15x PE ratio would give us a fair value of $5.36 or so per share.




Assuming a 50% pay out ratio, we could see a DPS of 18c which would give a dividend yield of 3.35% in the year 2015. 

It isn't a sexy proposition, admittedly, especially when we expect risk free rates to rise in future.



Based on technical analysis, during an "Evening with AK and friends", I mentioned that VICOM could retreat to $5.50 a share which is where the share price might find support from a golden ratio (161.8%) if we believe in Fibo lines.




In the meantime, looking at the charts, we see possible supports at $5.82, $5.70 and $5.61. These are possible nibbling points.

This morning, my smallish overnight BUY order was filled.

Related post:
Have a plan, your own plan.

Risk averse and putting money in STI ETF, REITs or stocks?

Reader says...

Have been reading your blog for some time now and it has been a great source of financial/investment information. Thanks!

I have always been interested in investing but had only started recently after reading your blog and some other materials. 




However, I'm not sure if I'm heading in the right direction and would like your opinion.

I am kind of risk averse hence have decided to start of my investing journey with ETFs, specifically STI ETF. My plan is to buy a lot every month and slowly build up from there. 

But recently I have been thinking if it is worth it to use my spare cash to buy ETFs or should i venture into other products such as REITS or stock. 




One reason for thinking this way is because I feel that since I'm only 28 (okay maybe not really that young), I can afford to invest in more risky products.

Another reason is because per my understanding, ETFs can be bought using CPF monies so it might make more sense to use it to buy ETFs and use the cash to invest in REITs.

I'm considering the following options and would greatly appreciate if you could give some pointers if they are viable. 





I have prepared an initial capital of about $5-10k which I could use and would be able to set aside $500/mth. 

It's not alot but hope it's enough to get started. :)

Option 1: Continue with buying ETF every month and invest the initial capital of $5k in REITs. Read your blog on Aims AMP Reit, First Reit and Saizen Reit and am considering these.



Option 2: Buy ETF with CPF monies and concentrate my investment in REITs and shares (eg SPH, SingTel, etc). Probably 50% on each. Any other recommended apportionment is greatly welcomed.

Option 3: Since my capital is not alot, perhaps it is better to concentrate my investment in blue chips stock and hold.

My purpose in investing is actually for passive income so please share if you have any better alternatives.

Lastly, would like your thoughts on using Standard Chartered online banking platform for trading. 

I am currently using it because of the no min commission fee but am abit skeptical because it would mean that I am actually not holding on to those products I am buying. 

Tried searching your blog on this topic but was unable to find any.

Sorry for the lengthy email and thanks for your time.

AK says...

Welcome to my blog. :)

I never blog about SCB's brokerage because I don't use it. I use Lim&Tan and Kim Eng. 

Frankly, I don't think the savings on brokerage fees is a lot unless we trade often. 

I don't want to say this in my blog because I know I would probably be flamed for saying it. ;p




Buying into the local ETF is a good idea for people who do not have the time or inclination to do stock picking. 


It allows anyone to participate in the health of Singapore's economy.

Long term investors who invest regularly should do reasonably well.

However, we should be realistic and not think that the STI will do as well as it did in the last 20 years or so.

A bigger portion of future performance could come from dividends.





Investing in stocks and REITs require more active management of your portfolio. 

I do not know if this would outperform or underperform the STI ETF.

However, this should beat inflation by a comfortable margin.

How you ultimately apportion your resources is up to you. I won't make recommendations.

However, you must be very sure that your methods match your motivations as an investor. 

You must sleep well at night. 

Peace of mind is priceless. :)

Related posts:

1. OCBC Blue Chip Investment Plan.

2. 13 blog posts for a session in investing for income.

3. Having peace of mind as an investor.
4. Fresh grads or graduating? Think financial security.
5. Tea with Solace: Getting ready for investment.