Creed's Cash Flow

My Two Portfolio Picks for a Recession - Keppel DC REIT (AJBU) & NetLink Trust (CJLU)

2019-08-14T15:15:00.001-07:00

As I write this, the Dow Jones Index has fallen about 800 points in light of a negative indicator from the bond markets - apparently, the yield curve between the 2-year and 10-year bonds has inverted for the first time since 2007, thus triggering a recession warning. This led to a sell-off in stocks as investors moved into bonds and gold, nullifying the Trump administration's decision to hold off on applying more tariffs on Chinese goods. I expect to see a mirrored effect take place in Singapore markets over the next few days as investors move to safer assets due to short-term fear.

(Above) President Trump laying blame on the Federal Reserve for the yield curve inversion.

Recession-worries are nothing new. In fact, murmurs of recession have been present for many months, and people have been bracing for hard times. Friends and acquaintances have been cutting back on spending, and making less risky investments. It is undeniable that Singapore's position as a port city leaves it vulnerable to collateral damage from global events. Recent events in the Asian region threaten to inflict greater volatility on our markets: an economic slowdown affecting China, a trade dispute between South Korea and Japan, no signs of the US-China trade war abating, ongoing protests in Hong Kong, and escalating tensions between India and Pakistan. All signs point towards a slowdown in global growth.

I have received questions from young investors and old friends alike on investment opinions for "slow-growth/recession periods" that can still return a decent yield. Having defensive counters in any portfolio is always a decent option for diversification. With the current slow-growth environment in mind, I want to highlight a few things that I look out for when analyzing picks:

(1) Exposure to trade
(2) Resilience of business
(3) Exposure to foreign currency risk
(4) Exposure to interest rate risk
(5) Dividend yield
(6) Possible plans that would bolster business

I just wanted to share my views on a couple of defensive picks that I feel have resilient fundamentals and have been paying decent dividends.

(1) Keppel DC REIT (AJBU)

Data centres are largely untouched by the trade war, and remain a crucial component for business operation and continuity in any market climate. In fact, as the world moves towards greater digitization, increased demand for data becomes essential across all sectors of business, from fast-moving consumer goods (FMCG) companies to financial service corporations. Even in an economic slowdown, data usage (driven by insights, analytics, media consumption, etc) is still an essential part of business. Data needs to be housed, and more companies are turning to data centres as they seek greater access to cloud capabilities and connectivity. Analysts have predicted robust growth for the data centre industry worldwide. Citing multiple predictions:

American real-estate management firm Jones Lang LaSalle (JLL) predicts that demand for data centres in America will double by 2021.

DBS mentions that demand in Hong Kong is set to increase at 15% per annum, possibly entering a supply shortage by 2021 due to lack of available land space for new construction.

OCBC Investment Research indicates that demand for data centres in Singapore should grow by about 40% by 2022, as demonstrated in the chart below:

(Above) Data Centre Demand, Supply, and Utilization in Singapore
Source: Sbr.org

Keppel DC REIT manages 16 holdings throughout Asian, Australia, and Europe, with one holding in Australia expected to be completed in 2020. With the rise of 5G technology, and with global demand for cloud technology steadily increasing, data centres stand to benefit. With all that has been said, Keppel DC is poised to be a defensive pick during troubled times - data is essential regardless of bull or bear market, and the accompanying storage for the necessary systems also reaps the same benefit.

Keppel DC's distribution-per-unit (DPU) has been increasing since 2017, last stopping at 7.6 cents a year. The REIT's books also look decent, as borrowings stand at 31.9% of assets, giving it room to acquire and expand if necessary. The REIT's portfolio of data centres has 93.2% occupancy, and has a weighted-average lease expiry (WALE) of 7.8 years (among the longest in the S-REITS market). Ability to account for interest expense is healthy, with an Interest Coverage Ratio of 12.9.

Regarding fluctuations in interest rates and foreign currency, the REIT has hedged 80% of their loan book with floating-to-fixed interest rate swaps, with forward contracts and natural hedging serving to mitigate fluctuations in the foreign currency market.

Keppel DC REIT last traded at $1.70 on Wednesday (14th August).

(2) NetLink NBN Trust (CJLU)

In determining business resilience, I generally consider monopolies a big bonus, especially if the product/service offered is essential and has the potential to be boosted by government plans.

NetLink NBN Trust has not seen much growth in price since its IPO, but management aims to pay out 100% of Cash Available For Distribution, which has resulted in a DPU of 4.88 cents for FY2019.

DPU aside, the main thing that drew me to this Trust was NetLink's core business, which is operation and development of the fibre network infrastructure of the Singapore government's Nationwide Broadband Network (NBN). Currently, NetLink stands as a monopoly, as it is the sole provider of fibre broadband services for roughly 1.3 million residences in Singapore. There was minor concern that newcomer SPTel (a collaboration between ST Engineering and Singapore Power) would eat away at NetLink's market share, since SPTel's stated goal was to provide an alternative fibre network for Singapore. However, SPTel will compete with NetLink only for clients in the business and government sectors, leaving NetLink dominant in the residential market. It is unlikely that SPTel will venture into residential broadband, since the infrastructure has already been laid by NetLink, and costs to develop an alternative would be exceedingly high.

Due to the nature of NetLink's business, the majority of NetLink's revenue is recurring. Prices are regulated by the Infocomm Media Development Authority of Singapore (IMDA). Under the Regulatory Asset Base (RAB) Pricing Framework, NetLink earns revenue by obtaining a certain return on capital expenditure. This rate of return has been set at 7% by the IMDA, allowing NetLink to get a 7% return on capex investments. Currently, almost 80% of NetLink's revenue is obtained under the RAB Pricing Framework, thus implying a recurring and regulated stream of revenue. Furthermore, an additonal 10.5% of revenue (from Co-Location and Central Office) is also recurring instead of one-off, thus giving NetLink a grand total of 89.9% recurring revenue out of all its businesses.

Additionally, it has been mentioned that the rate of return stipulated by the IMDA is revised once every five years, so provided nothing unforeseen occurs, returns from the RAB segment will be constant until 2022. Even if SPTel does eat into NetLink's non-residential connections revenue, the segment only comprises 8.3% of NetLink's total revenue. Analysts consider this unlikely, as NetLink and SPTel favour different groups of corporate clients.

(Above) Breakdown of NetLink's Revenue Streams.

Source: NetLink NBN Q1 FY20 Presentation

Even in a recession, it is nigh impossible that households and corporations would choose to cut broadband services as a means to save costs. With the Smart Nation initiative ongoing, NetLink still stands to benefit as the prime provider of fibre network services to the island. As new housing developments come to fruition, NetLink also stands to gain additional revenue through installation and recurring connections. Further growth is expected, as NetLink is monitoring 5G development, and stands ready to provide infrastructural support.

Being that its operations are limited to Singapore, NetLink has little exposure to currency fluctuations. NetLink is also relatively unaffected by global trade headwinds, since it operates in an uncorrelated industry. 100% of NetLink's existing bank loans have been hedged against interest rate risk - in the same manner as Keppel DC REIT, NetLink also uses interest rate swaps to mitigate risk.

NetLink NBN Trust last traded at $0.89 on Wednesday (14th August).

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I wish you guys all the best during these times.

Until next time.

Creed

In Search of a REIT: CapitaLand Commercial Trust (C61U) - Is It Worth It?

2019-03-29T14:21:00.000-07:00

So I've been satisfied with how my chosen REITS (Keppel DC & Keppel) have been performing, and I've been looking to add a little diversification to my portfolio. I'm in the mood for something steady, sustainable, and resilient, so I thought I would focus on a couple of other REITs. As per usual, I will be conducting a quick analysis to determine if a particular REIT is a decent investment opportunity for me. Naturally, I thought I would work my way down the list, and the name right at the top was CapitaLand Commercial Trust (C61U), touted as the "first and largest REIT to be listed on the SGX."

So what is this REIT?

The CapitaLand Commercial Trust Group (CCT Group) manages a portfolio of office and commercial properties mainly situated in Singapore, except for one commercial building located in Frankfurt, Germany. These properties produce income mainly through the letting of property space. Now, I already have a REIT in my portfolio (namely, Keppel REIT) that focuses on properties, which will also be affected by similar headwinds and tailwinds as CapitaLand Commercial Trust in the future (e.g. appreciating or depressed office rentals). However, I am also aware that Keppel REIT has properties in both Singapore and Australia - if CapitaLand Commercial Trust is able to offer a diversified selection of properties which are showing healthy rentals along with a decent balance sheet, I will consider it for an addition to my portfolio. CapitaLand Commercial Trust's long-term corporate credit has been given a BBB+ rating by Standard & Poor's, indicating "adequate protection parameters" but also that the Trust is vulnerable to adverse economic conditions that may affect its ability to pay its obligations.

CapitaLand Commercial Trust currently has the following properties in its portfolio:

[Singapore]

1) Capital Tower
- Gross Revenue 2018: $71.4 million
- 10% of leases expiring in 2019 and 2020
- Roughly 90% of leases expiring in 2021 and beyond
- Net Property Income increased by $0.5 million from 2017 to 2018

2) Asia Square Tower 2
- Gross Revenue 2018: $105 million
- 40% of leases expiring in 2019 and 2020
- Net Property Income increased by $2.6 million from 2017 to 2018
(estimated, due to $12.9 million being Net Property Income for 2 months in 2017, so $77.4 million for 12 months)

3) CapitaGreen
- Gross Revenue 2018: $91.1 million
- 48% of existing leases expiring in 2019 and 2020
- Net Property Income increased by $3.2 million from 2017 to 2018
- Committed Occupancy dropped (0.3% from 2017 to 2018)

4) Six Battery Road
- Gross Revenue 2018: $68.9 million
- 52% of leases expiring in 2019 and 2020
- Net Property Income increased by $1.4 million from 2017 to 2018

5) One George Street (50% interest)
- Gross Revenue 2018: $25.1 million
- 42% of leases expiring in 2019 and 2020
- Net Property Income decreased by $0.25 million from 2017 to 2018
(since CLCT owns a 50% interest, Net Property Income has been adjusted accordingly)
- Committed Occupancy dropped (0.2% from 2017 to 2018)

6) Raffles City (60% interest)
- Gross Revenue 2018: $138.3 million
- 41.3% of leases expiring in 2019 and 2020
- Net Property Income decreased by $0.24 million from 2017 to 2018
(since CLCT owns a 60% interest, Net Property Income has been adjusted accordingly)

7) 21 Collyer Quay (HSBC Building)
- Gross Revenue 2018: $20.4 million
- Lease to HSBC expires in 2020
- Net Property Income constant from 2017 to 2018

8) Bugis Village
- Gross Revenue 2018: $11.8 million
- ALL leases expiring in 2019 and 2020
- Net Property Income decreased by $0.1 million from 2017 to 2018

9) CapitaSpring (45% interest, to be completed in 2021)
- On track to be completed in 1H 2021
- JP Morgan has signed on as anchor tenant, occupying 24% of the building

[Frankfurt]

1) Gallileo
- Gross Revenue 2018: $12.8 million
- Less than 1% of leases expiring in 2019 and 2020
- Majority of leases expiring in 2024 and beyond
- 100% Committed Occupancy

Source: CCT Annual Report for Period Ended 31/12/2018

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Total gross revenue for CCT in FY 2018 was $557.4 million - this indicates that the Group's major earners are Raffles City, Asia Square Tower 2, and CapitaGreen. These three holdings make up almost 60% of the Group's gross revenue. Normally, I would cite (as a potential point of concern) that each of these holdings has >40% of their respective leases expiring in 2019 and 2020, but my concern is mitigated by redevelopment plans which will be discussed later in the article. At the close of 2018, total committed occupancy for Singapore was 99.3%. The sole holding in Germany - Gallileo - is a freehold property that is currently 100% occupied, with Commerzbank AG as the anchor tenant. Commerzbank's rent is currently adjusted based on inflation every two years, and has an option to terminate their existing lease in 2024 with 24-months' notice. Gallileo was acquired with a partial mix of debt and equity - the amount borrowed for the acquisition itself was $339.5 million at an assumed interest rate of 1.4% per annum.

The CCT Group has set a hard cap of 20% of total portfolio property value on overseas exposure, thus limiting their exposure to foreign investment risk. Currently, the CCT Group's overseas exposure is limited to their sole holding in Germany, and currently accounts for 5% of total portfolio value. CCT is currently on the lookout for potential acquisitions in Germany and other regions.

I am always interested in examining a REIT's debt portfolio to see how resilient it would be against potential interest rate changes. More S-REITs have been shifting to fixed-rate loans in anticipation of rising interest rates in 2019, and CCT Group has done the same - CCT has issued multiple medium-term-notes and bonds, with rates ranging from 2.7% - 3.33% per annum. As such, the Trust should be relatively shielded against any potential interest rate hikes. At the moment, CCT has been refinancing borrowings ahead of maturity. Most recently, Raffles City Singapore (RCS) Trust, through which CCT and CapitaMall Trust (CMT) jointly manage the Raffles City property, issued two medium-term notes: $275 million 7-year fixed rate @ 3.2% due 2025, and $150 million 6-year fixed rate @ 3.05% due 2024. The proceeds from these notes were used to refinance bank loans due in 2018, 2019, and 2022. Ultimately, CCT Group has $148.3 million due at the end of 2019, and I foresee no difficulty in CCT's ability to handle this. CCT Group's debt portfolio has a term-to-maturity of 3.9 years as at end of 2018, while average cost of debt remains stable at 2.6% per annum.

Source: CCT Annual Report for Period Ended 31/12/2018

Looking to the future...

The Urban Redevelopment Authority (URA) plans to rejuvenate "mature towns and major recreational corridors" according to the URA's Draft Master Plan 2019, which is currently on exhibition. The URA plans to introduce "more homes in the CBD and Marina Bay to increase the vibrancy of the office-dominated Downtown," by offering incentives to encourage the conversion of existing office developments into mixed-use properties, which will include hotel and residential developments. This would be a boon for CCT, as their holdings are located either in or near the CBD area. As a side note, this would also benefit my other holding - Keppel Reit, since Marina Bay Financial Centre is in their portfolio. In time, these redevelopment plans would serve two purposes: (1) encourage tenants to lengthen their leases AND attract new tenants to fill existing slots due to increased activity and greater accessibility in the area, and (2) increase foot traffic for CCT's mixed-use developments.

Source: "URA Draft Master Plan to boost mixed-use properties in CBD", Singapore Business Review, 28 MAR 2019

Additionally, Grade-A office rents increased by 14.9% to $10.80 psf/month in 2018, and property consultants are optimistic on office rental growth in 2019, while office vacancy is expected to trend downwards during the same period. According to the CBRE Group, rents on Grade-A properties in the CBD area are expected to increase by about 2% in 2019 (to $11.01 psf/month), and another 2% in 2020 (to $11.27 psf/month). Demand looks to be stable, and leasing interest for new developments appears decent - CCT's latest development CapitaSpring already has JP Morgan occupying 24% of space as anchor tenant.

Source: CBRE Research

Using a simple Net Asset Value (NAV) model to value this REIT, we arrive at an NAV of $1.83. The Trust is therefore trading at a 6% premium to NAV. However, I expect to see more upside for CCT's earnings over the next couple of years due to (1) expected rise in office rents over the next few years, and (2) limited office supply. Therefore, should spare cash be available, I would feel comfortable parking some cash here for yield over the next two to three years. I expect to see CCT's price move to the $2.00 - $2.10 region.

Until next time.

Creed

Re-examining Singtel (Z74): Two Years Later

2019-02-28T23:15:00.001-08:00

Hey, guys - it's been a while. I've been busy with personal consulting projects, so I haven't had a chance to take a proper look at my investment portfolio. I felt there was no better way to start than by re-analyzing Singtel (Z74), a company that I first analyzed in May of 2017. The aim here is to examine how the company's circumstances have changed after two years.

What I'm Hoping To See

My portfolio is mostly geared towards the 'Smart Nation' idea - this means I am interested in companies that have a strong focus on technology and data services. I am hoping to see that Singtel has made developments in any of these areas:

(1) Digital Technology Advancement
(2) Data Analytics
(3) Cyber-security

I am expecting an increased demand for data and digital services, so I am hoping to see these services constitute a larger share of Singtel's bottom-line. I am also hoping to see stronger performance from regional associates.

The Recap

When I last left off in mid-2017, Singtel had been facing stiff pressure overseas as investments (e.g. Bharti Airtel [India] & Telkomsel [Indonesia] and subsidiaries (e.g. Optus [Australia]) alike encountered increased competition. Early 2017 saw Singtel's share price dip to the $3.70+ region from $4 after international fund managers sold off their Singtel holdings due to concerns over increased regional competition. Singtel had the most internationally-diversified portfolio out of the 3 local Telcos, which meant heightened exposure to foreign investment risk. At the time, TPG Telecom stepped up expansion plans in Australia, directly threatening Singtel-owned Optus (the second largest telco in Australia). UK's Vodafone completed a merger of its Indian subsidiary with a competitor to form Vodafone Idea, which became India's largest wireless telecom carrier, thus unseating former leader Bharti Airtel in the process. Singtel also faced the prospect of increased local competition due to TPG's entrance into the Singapore market at the time.

3QFY17 results revealed a net profit of S$994 million.

The Current Situation

The onset is not rosy, with net profit of 3QFY19 disclosed at S$823 million, a sharp decrease from the $994 million from two years ago. This represents an almost 17% decrease in net profit over two years. In Singapore, revenue from mobile services and equipment sales has decreased by 6% from the same period in FY18, but this has been mitigated by increased data usage. This has resulted in a stagnant revenue figure of S$4.63 billion. Singtel's share price has suffered as well, closing at $3.02 on 28th Feb - this is a slight recovery from the $2.90+ range that Singtel touched some time ago. With the second Trump-Kim summit having apparently failed, world markets have gone down, and I expect to see Singtel's price either head downwards or remain in the $3.00+ range in the near future as macro trends take hold.

Overseas competition continues to plague Singtel, with investments in Bharti Airtel suffering the most - the Indian telco giant produced a S$129 million loss in profit before tax (PBT). This stems from pricing pressures in the mobile market, as new competitor Reliance Jio has effectively stolen part of Airtel's consumer base. There are talks ongoing of Airtel possibly entering into a joint venture with rival Vodafone Idea (mentioned in The Recap above) in order to go toe-to-toe with Reliance Jio in the optical fibre space. Telkomsel, however, exhibited recovery with S$305 million positive PBT, which helped to buoy profit figures for Singtel. While the Indonesian market has shown signs of delayed recovery, I expect continued trouble from the Indian market, unless actions are taken to combat Reliance Jio's entrance into the market. To that end, I hope to see more news about Airtel's joint venture with Vodafone.

Source: Singtel 3QFY19 Announcement

In spite of poor performance from regional associates, there is a silver lining in Singtel's digital arm. Group Digital Life (GDL), established in 2012 to focus on technologies for digital disruption, has begun an initiative to introduce video streaming on Grab's platform through HOOQ, a joint venture from Sony, Warner Brothers, and Singtel. GDL has also been focused on pursuing distribution partnerships with various counterparties, but these partnerships could take time to bear fruit.

TPG Telecom has not covered much ground in Singapore since 2017. Recently, the telco announced a year-long trial that offered subscribers free mobile services, indicating that it is still actively trying to encourage usage of TPG services. Singtel could potentially expect lower revenue from Singapore voice services as TPG steps up marketing and advertising.

Source: Singtel.com

Singtel has continued to secure partnerships in the gaming/e-sports industry as part of its digital service strategy. Singtel has also partnered with China Mobile to improve the "Internet of Things (IoT) network infrastructure across the Asia Pacific region," as quoted from the Straits Times. For the uninitiated, an IoT network is a network of devices that have features that allow them to connect, interact, and share data. These devices are typically not connected to the Internet (e.g. vehicles, home appliances, etc) instead of devices like smartphones and computers. Singtel's head of IoT has mentioned that this partnership will allow for economies of scale for both companies. Furthermore, revenue from Singtel's cyber-security services has continued to increase, as well.

Using the Gordon Growth Model (DDM) with a slow growth rate (g) of 0.825% (ROE x Retention Ratio), a price of $3.21 is derived.

Going Forward

I expect Singtel's price to dip below $3.00 in the short term due to macro trends and continued regional pressure to associates. As things progress, we might see a further drop to the $2.80 - $2.90 region. At this point, I see no point in liquidating, as annual dividend yield has been 5-6%. I'll continue to keep my holdings and take another look at Singtel further down the road.

Until next time.

Creed

Will OCBC Reclaim $13?

2018-10-13T16:10:00.000-07:00

Hey, everyone. It's been a long time since I've posted - I apologize, I've been busy with personal projects and school. After the recent market dip, I received a few queries regarding local bank stocks and their viability. I've always thought about adding a bank stock to my portfolio for the purposes of diversification, but never got around to it. So I thought today would be a good time to take a look at OCBC Bank (O39).

A couple of weeks ago, the US Federal Reserve announced a hike to its benchmark interest rate - an increase to 2.25% from 2%. Interest rates in Singapore (e.g. SIBOR) are likely to increase, mirroring the rise in US interest rates. This could represent a potential driver of growth for the bank's Net Interest Margin (NIM = Interest Earned minus Interest Paid Out). Mortgage loans are likely to be a big contributor - loans with floating interest rates would entail higher interest payments for the bank. Earlier this year, OCBC Management had already stated intentions to reprice certain portions of its Singapore mortgage book during the latter half of 2018. Despite increases in SIBOR in early-2018, mortgage loan growth has reportedly remained consistent, and I do not expect property-related loans to decrease. Mortgages currently account for roughly a quarter of OCBC's total loans.

The bank's first two quarters reflected positive year-on-year growth in net profit, with increases of 29% and 16% in 1Q18 and 2Q18, respectively. Customer loans and deposits have been growing, entailing decent liquidity and capital. This growth, however, was slightly impaired by OCBC Malaysia's performance in 1H18, where Net Profit decreased by approximately 2% year-on-year.

Source: Yahoo! Finance

Having derived an estimated dividend growth rate of 7.59% from the bank's ROE (through the use of ROE times Retention Ratio), the forecasted dividend is $0.40. Using the Gordon Growth Model (DDM), we obtain a target price of $13.83, with rising interest rates being the catalyst for short-term price growth. This is a conservative estimate, but since OCBC is currently trading near 1.1x - 1.2x book value, I would definitely keep my eye on this stock. I am redeveloping a war chest - when the time comes, I will perform a cursory re-examination of the stock before I buy it.

OCBC closed at $10.75 on Friday, 12th October.

Until next time.

Creed

Neopets: On The Importance Of Modernization

2018-03-17T14:25:00.002-07:00

It's been a while since I last posted - adjusting to a post-grad schedule has kept me quite occupied. I just wanted to pen something that arose out of a small nostalgia trip: Neopets, and how the former entertainment giant is a stark reminder of how important it is to constantly upgrade yourself, and to keep in touch with modern trends in order to stay competitive and relevant. I wanted to share this because I felt that this topic bore plenty of relevance to all my readers, both old and young. This especially goes out to my readers who are fresh graduates, or who might be taking their first step into the working world soon - you have youth on your side, so don't get complacent.

If you were born in the '80s and '90s, and happened to use the fledgling Internet, you probably played (or at the very least, heard of) Neopets, a Pokemon-esque game website that allowed you to own pets, train them, feed them, and battle them. A player-run economy allowed players to buy and sell items for whatever price they chose. For many of us, this was our first introduction to things such as banking (the concept of interest), capitalism (player-owned shops/open market), supply/demand (players jacked up prices of medicine when there was an outbreak of disease), and inflation (rising prices).

This was the "Central Hub" as I recall it in 2002. You will notice the presence of a bank, a pharmacy, and an auction house. For many young children, this was a safe introduction to "adult life." [Source: neopets-archeology]

It was a huge hit. It was so successful that it managed to release lines of plushies, stickers, and toys. It was addictive-as-hell, too. It made you keep coming back every day, to play the games to earn NeoPoints (currency), to collect interest from the bank, to train pets, etc. Storylines and quests were developed that involved millions of players in plots and battles where their collective efforts could turn the tide of events.

Codestones (above) were scarce, and were used to upgrade pets.

Dubloons (above) were more easily obtained, and were therefore cheaper. Prices of these commodities were set by players on the open market, and could fluctuate across weeks/months. The player-run economy was a huge portion of the game.

Eventually, a real-money currency called NeoCash was added, which allowed players to spend real money to obtain rare outfits and bonuses for their pets. They were probably ahead of their time - this formula was (and still is) repeated in many online games a decade later. Even big, blockbuster-level developers have implemented real money transactions in their games.

With such a winning formula, one could definitely be forgiven for thinking that Neopets would stand the test of time. Unfortunately, player numbers dwindled, and the Neopets name doesn't even come up in conversations nowadays. Truth was, it faced a new generation of competitors - smartphones enabled mobile gaming, and kids nowadays have access to phones and tablets. Neopets had the right foundations for success, but it didn't change with the times. As a result, it was left in the dust. Unfortunately, a dwindling playerbase continued to plague the site, as old players left for other ventures, but no new players filled the void. A large portion of the development team was laid off in 2015.

This is the same "Central Hub" in 2018. The only thing that has changed after 16 years is the artwork. No change in accessibility, mechanics, or gameplay. [Source: Neopets wiki]

Imagine what could have been for the company behind Neopets if it had embraced a new generation of players with their smartphones and tablets. There was a huge money-making opportunity that the company sorely missed out on - maintaining playerbase levels would possibly have given rise to higher NeoCash purchases (and thus, higher revenue). There was slight talk of a potential transition to mobile gaming, with a mini-game called 'Ghoul Catchers' released onto app stores, but the game flopped and failed to become popular. In the meantime, games on the site were still the exact same Flash games released in the late 90s-early 00s. To this day, the Neopets website has not been optimized for mobile/tablet usage, which tends to be a big no-no nowadays.

This was what I wanted to talk about - it is not a bad thing to upgrade to keep up with the times. Nowadays, sharing economies (where consumers 'share' assets) like Uber, Airbnb, and Ofo are extremely prevalent, while retail platforms like Alibaba facilitate the movement of millions of goods without actually owning any inventory. We exist in a digital age, where information comes and goes rapidly. Flexibility and adaptability is one key element to survival in such an age.

To my readers - your competitors are the people who know how to access the right information faster than you and deliver the appropriate results. For example, those of you who are looking to enter/swap careers into jobs related to finance or treasury banking should brush up on your skills with Microsoft Excel. Computer literacy is a question that comes up during interviews for positions such as these. Things like V-lookup and Pivot Tables would be useful to know. Get used to apps like LinkedIn for professional connections, and market yourselves through these platforms.

Thanks for reading, guys. Have a good one.

Until next time.

Creed

Ripple (XRP) - Why I Invested, From An Ex-Banker (FX/Remittance)

2017-12-29T15:56:00.000-08:00

This is gonna be a long one, ladies and gents.

As of the time of writing, Ripple (XRP) has crossed the 2 USD price mark, unseating Ethereum (ETH) as the second-largest crypto-coin by market cap.

I'd heard rumblings about XRP for quite some time - I searched up interviews and did research about the company behind it (also called Ripple, formerly known as RippleLabs), and was pleasantly surprised to find that their project had to do with making cross-border payments more efficient. In simpler terms, they want smoother and faster transactions when you remit money overseas. Naturally, this puts them at odds with SWIFT, which most banks worldwide currently use for financial correspondence. I'd been working in a bank for a couple of years, specializing in Forex and Remittance, so I was glad to do a comparison between the system that I knew (SWIFT) versus the new kid on the block.

The future of remittance?

From conversations with peers and relatives, I have found that not many people are familiar with the remittance process. I mean, yeah - your money leaves your account, and ends up in someone else's account. You may have noticed that it sometimes takes a few days for your money to be received. To that end, let me break down the process for you guys:

How Normal Remittance Works (Where Your Money Goes)

(1) You head to the Internet Banking section of your chosen bank, and choose to remit money overseas. Let's say, for the sake of the example, that you guys want to send money from Singapore to Australia. Your chosen currency of remittance is the Australian Dollar (AUD).

(2) Once all the details have been entered, you click the 'Confirm' button, and away your money goes! Funds are debited from your account, and are on their way to the beneficiary bank (the bank that ultimately receives the money; or the bank where the receiver's account is located).

(3) Now here's the interesting part - your money may not go straight to the beneficiary bank. Your Singaporean bank and that Australian bank may not have a relationship. Therefore, your money needs to be sent to a bank that has relationships with both of your banks. This bank is called an intermediary bank. Just imagine a cold war between husband and wife, with the child acting as a messenger. It's something similar - Dad says to tell Mom that she needs to do something, Child runs to Mom and tells her. In this case, the Child would be the intermediary between the two people.

(4) Your money heads off to the intermediary bank, and finally, to the beneficiary bank. In more complex examples, multiple intermediary banks are required, thus passing your money through multiple banks until your money finally reaches the receiver, with handling fees (also called lifting fees) deducted by each bank along the way. In the meantime, banks need to maintain multiple Nostro accounts, which are accounts with other banks in foreign currency. Funds are drawn from these accounts to facilitate the transfer of funds. When you remit AUD from Singaporean Bank, they tell the Australian Bank, "Hey, could you take XYZ amount of AUD out of our account there and help us send it to ABC Bank over in your country? Thanks!"

(5) Your funds finally reach the receiver.

(above) Credit: ripplelabs. How the traditional system works.

(above) Credit: ripplelabs. What Ripple plans to do, after overhauling the old system.

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Why I Chose To Invest + Risks

Ripple plans to overhaul the system by connecting banks and payment providers through RippleNet, which in theory would provide a smoother experience sending money globally. Their coin, XRP, would be a digital asset that is marketed to banks and other financial institutions - these organizations will be able to use these coins to further reduce costs when remitting customers' funds overseas.

They presented an interesting idea - they aim to reduce remittance time by cutting away the need for multiple intermediary banks, and by freeing up cash that is essentially stuck in Nostro accounts for more liquidity. It is very true that the current process of remittance has not yet caught up with the modern trend of 'anything at any time.' In a world where we can talk to friends overseas instantaneously, share pictures and videos taken in a foreign country with friends back home, and have video calls with people half a world away, traditional remittance is lagging. If funds are delayed, there often is a long wait to find out what happened and why. A message needs to be sent out to the intermediary banks, saying, "Hey, do you have the money? If not, who did you pass it to? My client still hasn't received it." Several of my previous clients have expressed frustration with the current system.

In terms of technology, XRP handles 1,500 transactions per second (as compared to Bitcoin's 6 and Ethereum's 15), and is touted to be able to scale until it handles the same load as Visa.

credit: steemit.com

Tranches of XRP coins are held in escrow, set to be released on the first of every month for the next 54 months, marketed towards institutional investors and financial companies. Any coins left unpurchased will be returned to escrow, joining the back of the queue.

Ripple has made some good partnerships over the past few years, including American Express, SBI, and Standard Chartered. Their cross-border solutions are already being tested or implemented in small doses. Their consortium has more than 70 global banks, including clients such as Bank of America, UBS, and MUFG. I have also heard vague rumours of Ripple being added to Coinbase as one of the crypto-coins for trade. This is unsubstantiated, but if it occurs, XRP's price can be expected to head upwards.

While I am one to support advancements in tech, I will give SWIFT props - I have never seen money lost. Money can be delayed, but not lost, because banks will maintain records of 'I received money from ABC bank, and I sent money to XYZ bank.' I suppose that the use of blockchain and distributed ledgers would somewhat alleviate this problem, although SWIFT has commented that 'some big banks might not be comfortable putting large transactions on a distributed ledger.'

My other concern was regarding compliance, anti-money laundering (AML), and counter-financial terrorism. This is a BIG part of remittance, and it serves to make certain that no illicit funds are transmitted. This process could often take a lot of time - intermediary banks might have their own internal 'watchlists' and someone who seems all right to one bank might be held up for screening at another. Banks still would have to conduct these compliance and AML checks on their own, even on the Ripple platform.

Another risk would be if banks choose not to utilize Ripple's digital assets (meaning the XRP coins), while simply using the Ripple protocol/payment system. That would entail a severe overvaluing of the coins.

I am willing to take a punt on Ripple and their digital asset XRP, as I believe the advantages outweigh the drawbacks. To that end, earlier on in the week, I managed to get 10,000 XRP on Binance at 1.21 USD per coin. This means that thus far, I'm pretty satisfied with the returns. I'll consider whether or not to keeping holding to take some profit first.

Until next time. Thanks for reading, guys. As again, with cryptocurrency being as volatile as it is, I'm still learning about the market, and I'm willing to take higher risks with these investments.

UPDATE: I eventually chose to liquidate my XRP holdings for a near 100% return. This was triggered by observing more and more people around me get hit with "crypto-fever." I was wary of a bubble bursting, so I moved to sell my holdings. I could have made a little more if I had held on a bit longer, but then again, everything always seems easier in hindsight. I was glad to have escaped the massive drop in price that occurred a while later. I will continue holding ETH into the future - I am very curious to see what new developments await. Again, I must emphasize to my readers that cryptocurrency is not backed by any central bank, and is a very risky investment. NEVER trade cryptocurrency with money you cannot afford to lose.

Creed

My Dive Into Cryptocurrency - Experiencing My First Market Drop

2017-12-24T09:34:00.000-08:00

Ah, cryptocurrency - the "magic internet money."

I wanted to get this post out before Christmas. For the uninitiated, cryptocurrency is generally a decentralized digital currency. 'Decentralization' means that no central bank, administrator, or governing body has authority over this currency. You guys probably have heard of Bitcoin and Ethereum to some extent; YouTube has ads everywhere, one of your friends probably preaches about it on their Facebook feed, and certain news outlets report price movements daily. Nowadays, plenty of coins exist on the market to be bought and sold at will - each with their own purpose and endgoal. The Blockchain technology that came with Bitcoin is currently being trialed by international companies, including the Big Four accounting firms, to see if implementation is a good idea. Still, a good number of financial institutions (and people) refuse to touch cryptocurrency because of (1) heavy volatility, and (2) a fear of market manipulation and insider trading.

I wrote a post earlier in the year about day-trading on the stock market. I had some funds in my warchest that I was planning to use for trading, but I figured that since I was willing to risk these funds, I might as well dive into cryptocurrency and see what happens. I was interested in Ethereum instead of Bitcoin - the prospect of smart contracts and decentralized apps suggested greater longevity and utility.

So, on the 4th of December, I bought 20 Ether (ETH) at 480 USD on Gemini Exchange, as recommended by a mentor in the industry. That was 9,600 USD worth, and I was prepared to get out at a loss if necessary. I was also aware of the risk of flash-crashes, hacked exchanges, and anomalies in pricing. Looking back, I consider myself lucky for buying in at that price, because it gave me confidence to hold it through a shaky event that occurred only a few days ago.

In the past week, cryptocurrency holders have experienced a mixture of euphoria and uncertainty. We saw Bitcoin (BTC), the largest coin in terms of market cap, reach a staggering all-time-high of US$19,857 before correcting down to US$11,000+. The entire market fell as well, and Ethereum was no exception. Ethereum hit upwards of 800 USD, before plummeting to 500+ USD. I admit, this was my first rodeo in the crypto world, and it was my first time seeing a correction so rapid and big, but I chose to ride out the storm instead of panic-selling. It wasn't easy to do, seeing your profits go from 60% all the way down to 6% in a heartbeat. During that time, I was scouring the net for news, any news, that could explain the sudden dip.

Credit: coinmarketcap.

Eventually, the price stabilized, and moved back to the high-600-low-700 range. It was then that I
decided to take profit and move some money out to pay for the first installment of my school fees. So:

I cashed out with a profit of 50.83% on my initial investment, after roughly three weeks. This was an exhilarating experience, overall. However, I still am bullish on Ethereum - it maintains the largest market share for Initial Coin Offerings (ICO) on its blockchain, and CBOE President Chris Concannon has indicated that we might eventually be seeing Ethereum-futures.

Today (24th Dec), the market experienced another slight dip. To that end, I've decided to establish another position in Ether:

We'll see how this goes. I'll look into reserving a spot in my portfolio for cryptocurrency. I plan to hold this going forward into 2018. I'll look at adding more coins to my portfolio soon - I've heard good things about Ripple and Dash.

For those of you who are interested in getting into investing, picking up some technical analysis wouldn't hurt. Also, NEVER trade with money that you cannot afford to lose.

Thanks for reading, guys. Have a Merry Christmas!

Until next time.

TENCENT - Is It Done Yet?

2017-11-22T05:57:00.001-08:00

When I examined Singapore Press Holding's sunset industry in print media, I was given a stark reminder that we need to be forward-looking, and to always look for new investment opportunities wherever they arise. I've been doing some reading on fintech, e-wallets, and blockchain technology - this could prove to be a huge area for future growth.

This brings us to Chinese tech giant Tencent Holdings (0700.HK). Tencent is the mastermind behind WeChat, and their core revenue comes from various holdings including video gaming, digital sales, online advertising, and electronic payment. Various major Tencent subsidiaries have decent synergy, allowing for smoother integration and partnerships.

[NOTABLE HOLDINGS]

Tencent Chairman, Mr. Ma Huateng, has expressed confidence in the company's short-term future, especially regarding the company's video-streaming subsidiary: Tencent Video. Tencent Video has exceeded 43 million subscribers as of October 2017, making it one of the biggest streaming service providers in China. This is slightly less than half the number of subscribers that the American-based Netflix has, for comparison (100+ million).

Tencent also has a major stake in video games on the PC - a diversification that netted the company 27% year-on-year growth during 3Q. Tencent acquired Riot Games - the makers of online hit League of Legends - in 2015, and have been making efforts to promote and retain players through tournaments and advertising. League of Legends consistently remains among the top-five most viewed games on game-streaming site Twitch. Personally, as a gamer myself, this segment requires monitoring - gaming trends come and go, and massive titles eventually fade away. Tencent's investing habits (which I'll go into later) indicate that they have some spare cash to burn - as gaming and e-sports is on the rise, we might see more acquisitions coming their way over the next couple of years. On a side note, the creators of League of Legends have gone into brainstorming for a potential new game. *UPDATE* It has just come to my attention that Tencent has acquired exclusive rights to publish the successful PlayerUnknown's Battleground's (PUBG) game in China. 40% of the game's playerbase originates from China anyway, and it might do the playerbase good to have home-run servers with little lag.

Riot Games was acquired by Tencent in 2015. [Source: PCGamesN]

Revenue from smartphone gaming grew more than 80% year-on-year, revealing a booming market for mobile gaming in China. Tencent has mentioned that they would be looking into R&D to widen their mobile gaming portfolio. Tencent has expressed active interest in overseas expansion - they have investments overseas to help the transition when it happens, and one of the things they plan to move to foreign markets is mobile gaming. This is one area in which I feel pessimistic/unsure about, because I do not know how the Western audience is going to react to games that have mainly catered to a Chinese audience. The gaming market in the United States, for example, is still dominated by consoles (e.g. Playstation, Xbox) and PCs, although mobile-games like Clash of Clans have enjoyed international success (which is good news for Tencent, since they acquired the company that developed Clash of Clans).

[FINANCIALS]

The company has been in the spotlight recently for vastly outperforming third-quarter estimates. The company posted a 3Q2017 revenue of 65,210 million RMB, a huge 61.4% increase year-on-year from 2016's 40,388 million RMB. More than two-thirds of this revenue came from Value-Added Services, with the remainder coming from online advertising revenue, and other businesses including cloud services. Net income rose 67.4% from the previous year, and net profit margin has had a slight increase from 3Q2016. Tencent has recorded a great increase in Net Cash year-on-year, which might signal greater investments for the company in the near future. The debt/equity ratio has slightly increased from the previous quarter.

Unaudited income figures 3Q2017 [Source: CNBC]

[FUTURE PLANS]

Tencent has an extensive investment list, extensive enough that the company would not really be affected if a couple of them went under. Tencent has a decent amount of money invested in foreign companies (like SNAP, founder of Snapchat), and I believe they plan to use these investments to springboard their communication platforms, digital services, and online games into foreign markets. Once again, the question is will it pay off? Cross-cultural examples have been very clear indicators that what works in one country might not work in another. The Simpsons, for example, was a massive hit in the West, but received only a mild response in Japan. Some countries might be too paranoid to transition into a cashless society, thus nullifying the e-payment/mobile payment aspect that WeChat/Tencent offers. Additionally, WeChat has attempted to penetrate the messenger-app market in South Africa, but Whatsapp still remains the app of choice for messaging and communication. WeChat South Africa, however, is continuously forging partnerships and increasing advertising in the hopes of capturing more market share.

Foreign risk aside, the Chinese middle class has experienced tremendous growth in the past few years, and estimates are optimistic that numbers will continue to climb as 2020 approaches. A larger middle class means more consumers who are able to spend money - as one of the largest service providers in China, Tencent stands to benefit from heightened consumer spending. The market in China has not been fully tapped yet; even if overseas aspirations are not realized, Tencent still has growth to expect at home.

In conclusion, despite all the risks, Tencent still has growth potential. As more quality-of-life enhancements are made available on their electronic platforms, and as their platforms possibly see more use overseas (e.g. Malaysia, Singapore, etc), increased revenue from Value-Added Services can be expected. All things considered, there is still room for the stock price to move upwards within the next two years.

Until next time.

Creed

I Took 2 Weeks' Leave to Day Trade in July - What I Learned

2017-09-08T08:15:00.001-07:00

I've been radio silent since the NetLink Trust IPO. Work piled up, and things happened in my personal life that left me very little time for recreation, let alone writing. However, I thought I'd take the time to pen something I experienced in mid-to-late July: day-trading on our local SGX. I'd always been curious about the idea of day-trading, and the allure of working from home and being your own boss is always undeniable.

Of course, I've also heard the horror stories of traders being burned because of bad calls or unstable companies. It is also commonly stated that only a small portion of day traders make a profit - most of them lose.

Source: Tradeciety

Inspired by the 'Wallstreet Bets' reddit group (r/wallstreetbets), I applied for two weeks leave in July to begin my experiment - I took leave from 17th July to 28th July, and set aside roughly 10,000 SGD for my day-trading purposes. My only rule was that I had to close all outstanding positions at the end of the day, regardless of whether or not I made a profit or a loss. I've always been a fundamental analyst, but I have a background in technical analysis. DBS Vickers was my chosen brokerage, and I would be using Cash Upfront to take advantage of the reduced commission. I would be open to trading BOTH penny stocks and blue chips - the counter didn't matter, as long as I made enough money to beat commission at the end of the day. I realized after the fact that I entered the market during a time when penny stocks were volatile, so results might have been different had I entered at another time.

My focus would be on price movement and volume.

If you asked me whether or not I'd do it again, I'd say yes in a heartbeat. The highs and lows of my experience were very interesting, and provided a lot of learning material. People say that you learn something new everyday while you day-trade. Here are my personal takeaways - reminders and lessons for myself in the future.

1) Don't hate the idea of losing - revenge will kill you

I think it's a human instinct to not want to lose at anything, whether it be at games, sports, work, relationships, etc. I've been speaking to a few professional day-traders ever since my experience, and they told me they all learned this lesson the hard way - it's much better to lose a little than to lose a lot. Before I began, I was advised to have a daily stop-loss limit for myself just in case, for days where everything seems to go wrong. A daily stop-loss is a percentage of money that one is willing to lose before they stop all trading for the day, and just take a break to cool off. The idea of this was to prevent revenge trading when fueled by emotion, much like a gambler who doubles his bets trying to recoup his losses.

Rowsley (A50) was my go-to stock for a couple of days - I was lucky enough to begin trading when Peter Lim announced his intent to inject medical assets into Rowsley. The price shot up, and I made a few points every day. Then the price reversed, and began moving down. I began selling, making losses. In response, I began buying aggressively, hoping to recoup. In the end, I was left with a slight profit, which could've been avoided if I'd kept my cool.

2) Always shop around - emotion gives you tunnel vision

At the same time of Rowsley's decline, there were other opportunities in the market. Counters like Sincap (5UN) and Jiutian Chemical (C8R) were on the rise, and if I hadn't had tunnel vision, I could've taken a loss in Rowsley and moved into either counter, which would've netted me a lot more. I did eventually move into Sincap, where I profited a couple of days, before I cut loss when the price began to dip. Fortunately, I'd learned from the Rowsley incident, and I exited with a tiny loss. I was glad I did, too - the price moved further down over the next few days.

3) Percentages don't mean anything - look at numbers instead

Now, I didn't learn this the hard way. Rather, it was something I picked up along the way. I can't remember which counter it was, but apparently results were superb, with quarterly profits tripling or so from the previous year's numbers. It sounded impressive on the surface; thing is the company had only just managed to make a profit the year before, so their profits in the previous year were minuscule. The much-lauded "triple profits" didn't even bring quarterly numbers back up to the levels they were a few years ago, when the company (and the stock price) was doing much better.

Even under pressure/time to make buy/sell decisions, there's a lot of difference between '400% increase in profit' and 'only made $1 last year, but made $5 this year.'

As expected, the stock price didn't rise much. In fact, it didn't rise at all.

4) Get a strategy and stick to it

The idea of freedom and being your own boss is a great goal to work towards, but that's all it is - a goal. I didn't have a solid trading strategy in place when I began. My premise was simply make as much money as possible. The most professional/profitable day-traders have developed their own plans or strategies that help to keep them focused and cool during trading. In my case, I made the mistake of chasing profits in order to make up for bad days. A common misconception about day-trading is to make a couple of hundred dollars every day, then shut off the computer and have a cup of coffee. Profits are uncertain here. You might lose a couple of hundred over three days, then break even the day after. Just get a strategy and keep at it.

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So, how'd things turn out?

All in, I walked away from that two-week experience with a rough 9% return off my intial $10,000. I made a ton of mistakes, and I aim to learn from them, even in investing. However, the experience was something special - the exhilaration of locking in profits, and the Dark Souls-esque frustration of accepting losses. Much respect to real day-traders out there, who have managed to implement strategies of their own, and who have managed to quit their jobs and control their own income.

In the meantime, I am studying for the GMAT exam, with a Master's as the target. If any of y'all want study material, you can hit me up.

Thanks for stopping by.

Until next time.

Creed

So, What's Going On With NetLink Trust?

2017-07-08T21:28:00.000-07:00

This is gonna be a LONG one, ladies and gentlemen – subscriptions for the Netlink Trust IPO are opening next week. As it stands, Singtel stands to reap a potential $2+ billion SGD windfall from divestment of 75% of their Netlink Trust holdings. Now, the lowdown - Netlink Trust currently owns and maintains a fibre network that supports roughly 1.1 million residences in Singapore, with installation points deployed in another 200,000 more residences (representing more than 80% of residential homes in Singapore). The Trust also maintains has 38,500 non-residential connections. This network was developed with fiscal assistance from the Singapore government in accordance with the Intelligent Nation 2015 Masterplan (iN2015), which is a 10-year master plan to transform Singapore into a Smart Nation Hub by improving infocomm infrastructure.

I’ve always tried to gear my portfolio towards the Smart Nation idea, and I admit I’m glad to see this IPO. But the question is – is it worth it? As the first Trust of its kind in Singapore, there are no precedents to compare it to, so this is somewhat unchartered territory.

[REVENUE]

So I’m taking a closer look at this. In terms of revenue, the Trust’s revenue stream is pretty streamlined and regulated. Pricing is regulated by the Infocomm Media Development Authority of Singapore (IMDA). The bulk of their revenue is generated from monthly fees for residential and non-residential connections, along with one-time installation charges for installing termination points. As of 31 March 2017, this revenue accounted for 75.1% of the Trust’s total revenue.

The Trust’s primary clients are actually companies that provide fibre services to residential and non-residential users. As such, their customer base includes Singtel, Starhub, M1, ViewQwest, and MyRepublic. As of 31 March 2017, 10% of the Trust’s revenue was generated from deals made with these clients regarding rental of manhole and duct space, where their clients are allowed to utilize space owned by the Trust for a fee. As mentioned in the prospectus, the Trust has an arrangement with Singtel, where Singtel will acquire a certain amount of manhole and duct services from the Trust. This agreement has an initial year-term of 25 years, and is set to commence in 2021.

The Trust has experienced steady financial growth over the last 3 years. At a glance, financials are decent – total revenue grew from S$217 million in 2015 to S$258 million in 2016 (19% growth), finally stopping at S$300 million in 2017 (16% growth). This was due to increased demand for fibre services, with the bulk of the revenue generated from residential connections. Installation-related revenue rose in 2016, but dipped the following year, which is understandable – as the network is deployed throughout Singapore, there are only so-many ‘one-time installation charges’ that can be charged. This segment will not die – as new homes, BTOs, condominiums, and office buildings spring up, the Trust will continue to have business here, but stagnation in this particular segment is to be expected.

REVENUE CHART - Source: NetLink Prospectus

[NET PROFIT & CASH FLOW]

Accordingly, while operation expenses and installation costs have risen, net profit has risen alongside them. The Trust’s net profit in 2017 was S$75 million, more than double the previous year’s S$36 million. The Trust actually made a loss of S$15 million in 2015, due to massive operation expenses from the integration of OpenNet with Netlink, but they recovered in the following years. Cash flow has been positive for the past 3 years.

EXPENSES CHART - Source: NetLink Prospectus

[DEBT]

The Trust’s debt portfolio has remained at S$1.6 billion throughout the last 3 years. The Trust entered an ST Facility Agreement with Singtel in 2011 for a loan of S$1.325 billion, which was increased to S$1.605 billion in 2014. These loans were used to acquire infrastructure assets from Singtel. Annual interest rates at that point in time were 2.39%, amended to 2.51% after November 2014. In 2016, the Trust borrowed S$510 million from banks to pay off the equivalent amount in their original Agreement. This bank loan was a term loan with an effective interest rate of 1.97% in 2017. As per the prospectus, the proceeds from the IPO will be used to settle the remaining S$1.1 billion from the ST Facility Agreement, with the remaining S$477,000 to be settled with operating cash flow. This leaves the bank loan unsettled. As of June 2017, the Trust has borrowed an additional S$210 million from the banks for capital expenditure. These bank loans (with variable interest rates) expose Netlink to interest rate risk, and the management has responded by entering a series of fixed-for-revolving interest-rate swaps until 2021. According to management, 100% of their bank loans have been hedged, and the all-in blended fixed-rate is 2.91% per annum. This segment bears looking into.

LOANS & DEBT - Source: NetLink Prospectus

[TO THE FUTURE]

Earnings per unit (EPU) for 2016 and 2017 respectively were 1.04 and 2.06 cents. The Trust hopes to produce yields of 4.73% - 5.50% in 2018. EPU is forecasted to be 1.14 and 1.70 in 2018 and 2019 respectively. As it currently stands, with a 2017 EPU of 2.06 cents, and with an initial offer price of S$0.81, P/E is expected to be 39.32, which is REALLY high as compared to other Trusts. Netlink has a lot of hype surrounding it, but this leads to question as to whether or not this is overvalued.

As of 31 March 2017, monthly subscription prices for residential connections were S$15. Monthly non-residential charges were S$50. These prices were reviewed and revised in May 2017; the new prices are expected to come into effect on 1^st January 2018. The price for residential connections is expected to be revised to S$13.80 by the regulator. This represents an 8% decrease in price. Non-residential connections have charges bumped up to S$55. Forecasted revenue for 2018 is expected to fall before recovering in 2019. Accordingly, net profit is expected to fall in 2018, to S$44 million (a drop of 41%). Residential and non-residential fibre subscriptions are expected to grow towards 2021 at a CAGR of 6.5%, with residential connections spurred on by continued migration from old tech to fibre, and with non-residential connections bolstered by SME requests for connectivity.

MPA SUBSCRIPTION PROJECTIONS - Source: NetLink Prospectus

The heavily-regulated structure of the Trust does not allow Management to alter prices as they see fit. Any changes in price has to be approved by the IMDA. I would wish that the Management diversifies the business. While fibre-connectivity is a forward-looking business, the Trust could benefit from diversification and synergy.

Additionally, the Trust has included a disclaimer that they may not be able to pay dividends to unitholders. Note that this is classified as a Business Trust, and not a REIT. REITS are required to pay out 90% of their taxable income.

The Public Offer opens on 10 July, at 5pm.

The Public Offer closes on 17 July, at noon.

Until next time.

Creed

More on Singtel - Collaboration with AliBaba

2017-06-19T15:53:00.001-07:00

This is a follow-up post to my Singtel post from last month. I decided to park some cash in Singtel after their results came out on May 18. As expected, there was an overall drop in net earnings and group revenue - overall group revenue dipped 1.5% from the previous year, down to S$ 16.71 billion. Net profit dipped only slightly in comparison, down 0.5% to S$ 3.85 billion. Share prices dipped slightly in the following week, but stayed above 3.70, and eventually recovered past 3.80 at one point.

Source: Google Finance

I re-invested with an eye towards data and technological development, mainly the Netlink Trust IPO, which should result in an upwards movement in stock price for Singtel, as well as a warchest for expansion due to divestment of Netlink Trust holdings. Singtel has announced that they are making good progress, and hope to proceed with the IPO this financial year.

There are further developments in that field - on June 19, Singtel announced a collaboration with the AliBaba Group. The e-commerce giant owns AliBaba Cloud, the leading cloud services provider in China. Singtel's Cloud Access service will connect to AliBaba Cloud, allowing enterprises in Singapore and China access to a more secure and far-reaching cloud infrastructure.

Source: Capacity Media - The GM of Alibaba Cloud Global comments on the partnership.

This is a good step forward - as fintech corporations rise and connectivity becomes more important for SMEs both domestic and international, access to public cloud providers like Amazon and Microsoft becomes more important. AliBaba Cloud is Singtel's latest partner in this endeavour. I am glad to see more updates on this front - companies need to look towards the future when they develop/expand. Business with China is inevitable - Singtel has made a good move here. Additionally, Singtel faces increased competition both locally and internationally, as explained in my previous article. Their investments and holdings in India and Australia have come under attack by fierce competition. Locally, they have the new telecom to contend with. As such, it is refreshing to see the Group pursue development outside of their main business. Out of all the telecommunication stocks listed on the SGX, I am the most optimistic on Singtel, with decent diversification to hedge against unforeseen circumstances.

Singtel closed at 3.80 on Monday (19th June 2017). The next round of dividends is expected to be paid in August.

Until next time.

Creed

What's Up with SPH? Based off a Whatsapp Convo

2017-05-31T09:52:00.002-07:00

Singapore Press Holdings (SPH)[T39] has not been on my watchlist for a long time. My last purchase of SPH was at the start of 2016, when the market dipped as a whole. I eventually sold off my SPH holdings a few months later, and never bought back because I geared my portfolio towards the 'Smart Nation' idea. Recently, with news that the ex-NOL Chief Executive Officer Mr. Ng Yat Chung would be stepping up to take the reins, I had a Whatsapp session with a couple of close friends. They had received SPH shares as birthday gifts from family members slightly after Chinese New Year 2017 (when the price was roughly (3.40 - 3.50), and got worried after they saw the price dip to to 3.20 range.

I had actually advised them to sell off their SPH shares when they first got them, because I felt that there were better investment opportunities out there. However, I told them my honest opinion - I felt that SPH's investments and subsidiaries lacked synergy (e.g. nursing homes, print media, property management) and that they really needed to modernize their core business. Easier said than done, I know, especially when print media is a sunset industry. However, operating revenue and net profit have steadily decreased four years in-a-row, with the largest drop reflected in FY2016. Accordingly, SPH's Net Profit Margin has consistently decreased along with their revenue and net profit, despite cost-cutting measures. FY2016's operating revenue stood at S$1.124 million, 4.5% lower than FY2015's S$1.177 million. Their Media segment suffered with lower Advertising and Circulation revenue. It is worth mentioning that the drop in operating revenue was buffered by their Property segment, with higher rental revenue from their retail holdings.

Source: Yahoo Finance

The entry of Mr. Ng Yat Chung has thrown the stock price into slight upheaval. With his track record of managing NOL, it is understandable that some public sentiment would be against him. After the announcement, SPH's stock price has sunk to 3.17 as of today (31st May). This figure is the 52-week low, from a high of 4.08.

However, I told my friends that I knew SPH was trying to diversify. Their recent acquisition of nursing home provider Orange Valley might prove to be a successful venture. Singapore currently has an aging population, and experts state that the numbers are only expected to go up. I feel that care for the elderly is a business that has no horizon, and SPH might be able to reap a decent profit on this acquisition. My only concern was that this acquisition move seemed very out-of-the-blue; their other holdings offer little-to-no synergy with nursing homes or the medical sector.

SPH may weaken, but print media is still crucial enough that it will not die out. As new developments arise, and as SPH's venture into nursing homes bears fruit, the price might recover (optimistically speaking). However, this might take time, and I believe there are better investment opportunities in the meantime. I told my friends that my honest opinion was for them to sell off their shares and to park the cash in the Technology or Electronics sector.

---

In the meantime, I decided to pick up some shares of Singtel at their recent dip @ 3.76. My views on the Telco are listed in my previous article.

Until next time.

Creed

So What About Singtel? (Z74)

2017-05-16T13:45:00.000-07:00

I had a few lots of Singtel (Z74) in my portfolio a while ago, which I liquidated for a small profit when I wanted to park my money somewhere else. I have a habit of re-examining my past holdings to see if there is good cause for re-investment. I've already pumped some more money into ST Engineering. Now, I have my sights set on Singtel once again.

Source: Google Finance

Singtel's share price dipped in December of 2016 (alongside competitors M1 and Starhub) as TPG Telecom won the bid to become Singapore's 4th Telco. After decent 3Q results, which saw net profit climb 4% to S$994 million, we saw Singtel's stock price climb back up to 3.90+ levels, leaving M1 and Starhub in the dust with dismal financial results. However, in the past few weeks, Singtel's price has dipped once more with international fund managers selling off their Singtel holdings due to concerns about increased regional competition. Out of the 3 local Telcos, Singtel has the most internationally-diversified portfolio, with stakes in Indonesia (Telkomsel), Australia (Optus), and India (Bharti Airtel), among other areas. These markets have come under attack, as TPG Telecom stepped up expansion plans in Australia, directly threatening Singtel-owned Optus. UK's Vodafone completed a merger of its Indian subsidiary with a competitor, forming India's largest wireless telecom carrier and unseating Bharti Airtel, the former leader, in the process.

Singtel and its holdings are facing increased pressure and competition, both domestic and offshore. TPG's entrance as the fourth Telco directly threatens Singtel's hold on the Singapore market, while heightened international competition has thrown their regional holdings and stakes into disarray. Mr. Sat Duhra, a fund manager for Henderson Global Investors, which recently divested their Singtel holdings, mentioned increased competition as their main reason for selling the stock. "It's going to face some short-term pressure," he said, and I do agree with this analysis. Singtel will need to look towards other areas for investment and development. Note the phrase 'short-term pressure'. The Netlink Trust (NLT) IPO would be very important for Singtel - divesting their holdings in NLT would give Singtel a massive warchest with which to pursue expansion with, and would raise their stock price accordingly. Singtel has been given until April 2018 to divest their stake to less than 25%.

As an aside, I would like to see if Singtel is willing to increase funding/development in their cyber security (Trustwave) and data analytics (DataSpark) arms - my portfolio is geared towards the "Smart Nation" idea, and as such, I would be interested in companies with a strong focus on data/technology/cybersecurity.

In the meantime, Singtel's results will be out on Thursday (May 18), and I am expecting to see an overall drop in net earnings and operating profit. I would expect this to bring the price down slightly. If Singtel moves back down to the high 3.60 - low 3.70 region, I would consider picking some lots up.

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My investments into SGX have not panned out as I'd hoped. I will be taking a small loss as I unload my SGX shares while I wait for another opportunity.

Until next time.

Creed

Warchest is Ready - Taking Aim at SGX (S68)

2017-03-31T16:35:00.000-07:00

With my warchest ready, I've been taking a look at Singapore Exchange [SGX] (S68) after talking with a friend from college (his name is Kean, and there is a link to his own blog in my links section). This counter is relatively ignored among my peers, but I figure increased trading volume from the recent bull-run could benefit SGX, especially if good sentiment persists throughout 2017.

FY2016 results demonstrated a 5% increase in revenue, from S$779 million to S$818 million, mainly driven by SGX's Derivatives segment (from an increase in volume in Iron Ore contracts and SGX FTSE China A50 Index futures). FY2016 numbers for net profit remained unchanged from FY2015's at S$349 million, due to higher expenses in technology and staff.

This was all before Trump was elected US President, and the markets took off in a bull run. The STI is currently sitting at 3100+ levels, a sharp rise from November 2016 levels. In fact, overall market statistics for February 2017 showed decent growth in year-on-year volume in Securities (17%) alone, with Securities Daily Average Value (SDAV) at S$1.4 billion, up 11% year-on-year. 2 new Catalist listings during the month raised S$49.2 million on their own. With the much-hyped Kimly Limited's IPO, and with other potential IPOs to come (e.g. potentially Netlink Trust, and Aramco if SGX offers enough incentive for them to enable dual-listing), I expect much greater turnover for FY2017 under the new CEO's charge.

Additionally, there are discussions for SGX to become the first Asian bourse to allow dual-class listing of shares, which speculators think could enable SGX to compete for big international listings. This, if properly done without alienating retailers, would mean higher volume for SGX and more major IPOs as well.

There were talks of implementing a lunch-hour break for the Singapore stock market recently. If it does come to pass, I expect trading volume to dip, but overall volume/SDAV should be bolstered by the recent bull-run and by the increased number of IPOs in FY2017.

I've decided to pick up 1000 shares of SGX at 7.55 earlier this week. The 52-week high was 8.05 in April of last year, when the market recovered from the bear market in late 2015/early 2016. Due to higher turnover, and potential implementation of policies that would improve trading volume, I expect to see SGX's price move towards 8.00 as the middle of the year approaches. SGX closed at 7.70 on Friday.

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In the meantime, I've also increased my holdings in ST Engineering and Keppel DC Reit. I'm a believer in their link to Singapore's Smart Nation ideal, and I believe they'll do well.

Until next time.

Creed

ST Engineering - A Look at the Future

2017-03-14T10:57:00.000-07:00

ST Engineering (S63) has been a part of my dividend portfolio for a while, ever since I picked it up early last year. I have a tendency to re-evaluate my dividend stocks/REITs every year or so - I want to see if I should take profit and park my money somewhere else, or if I should continue having them in my portfolio.

ST Engineering closed at 3.67 on Tuesday, and dividends are upcoming in April. The company, as a whole, did well in 2016. FY16 revenue improved by 6%, from 6.33 billion to 6.68 billion, with the main contribution coming from their Aerospace and Electronics sectors. The Aerospace sector encountered more than S$2 billion worth of new contracts, and their business is well diversified overseas. The Electronics sector the probably provides the most optimism, as Singapore moves towards the dream of a Smart Nation. S$2.33 billion of new contracts were announced, and new R&D methods have been put in place, one of which is the launching of the ST Electronics-SUTD Cyber Security Lab. ST's Marine sector delivered less revenue due to weaker shipbuilding efforts, and ST's Land sector dropped due to divestment of their GJK and JHK subsidiaries, but the drop of $208 million from two sectors was buffered by the overall gain across all sectors.

At the close of 2016, ST Engineering had an orderbook of S$3.7 billion expected to be delivered in 2017.

Source: ST Engineering Website

For the same reason that I invested in Keppel DC Reit, the Singaporean shift towards a Smart Nation is keeping me invested in ST Engineering. ST Engineering is currently Singapore's main link to technology for the Smart Nation project. As progression is made towards a Smart Nation, I expect cyber security and communications technology to rise in importance, which means more contracts and development opportunities for ST. Assuming another 10% growth in revenue for FY2017, the Electronics sector would be poised to bring in more than S$2 billion.

With good FY2016 results and opportunities for growth around the corner, I have an optimistic view on ST Engineering, and I will be holding onto this stock for the coming year. It might be a while before it regains the $4+ levels of 2013, but it still remains a solid blue chip stock with decent growth potential. I might consider picking up more if the price manages to retrace to the 3.40-3.50 level - it is currently too expensive right now.

Until next time.

Creed

Keppel REIT - Does Lower DPU = Lower Potential?

2017-02-01T16:38:00.000-08:00

A visitor to this blog asked about Keppel REIT (K71U) in the comments section of my Keppel DC REIT post. I'd been focusing on Keppel DC at the time, but I told him that I thought it would be a good time to enter Keppel REIT if the price dropped under $1.00. Following that, I began taking a serious look at Keppel REIT.

Keppel REIT has ownership of commercial properties in Singapore and Australia. They have stated in their FY2016 earnings release that 2016 was a "difficult year for the Singapore office market given the oncoming supply of office space and aggressive leasing efforts from newly completed buildings." We can expect these troubles to continue into 2017.

Keppel REIT's stock price reached highs of 1.13+ in late 2016, a sharp increase from the 0.90+ at the beginning of the year, representing an approximate 25% increase. The price eventually tapered down near to $1.00 in January 2017. FY2016 financials dropped across the board, with total property income at S$161.25 million, down 5.3% from the previous year's S$170.35 million. Distributable income dropped to S$208.12 million from S$217.27 million, a drop of 4.2%. As explained by Keppel REIT management, these drops were mainly due to (1) the divestment of Australian asset 77 King Street in 1Q2016, thus lending no contribution in the following quarters, (2) less contribution from Bugis Junction Towers, due to occupancy issues (94% filled at the end of 2016).

Distribution per unit (DPU) for FY2016 was 6.37 cents, a drop of 6.3% from FY2015's 6.80 cents. Based on a stock price of $1.02 as at 31 December 16, total yield would have been 6.2%.

Management, however, reported good performance from Singaporean assets at One Raffles Quay, Marina Bay Financial Centre, and Australian assets at 8 Chifley Square. While total borrowings only recorded a slight improvement from FY2015, Management has completed all refinancing requirements for 2017. Percentage of their debt portfolio at fixed-rate borrowing is 75% (a change from 70% in 2015), giving their debt portfolio a slight buffer against volatility, especially as potential interest rates hikes are introduced in 2017.

A record-setting bid was made for the Central Boulevard office site, which is expected to be completed in the first half 2017. Office rents should drop as office space floods the market, continuing the troubles Keppel REIT encountered in 2016. Overall portfolio occupancy for Keppel REIT stands at 99.2%, which is still high. Any impact that lower office rental prices may have on Keppel REIT in FY2017 is buffered by the fact that only 3.9% of leases are pending renewals in 2017.

Keppel REIT closed at $1.015 yesterday evening. Although the Singapore office market is to be facing gloomy days ahead, this S-REIT still has steady financials and fundamentals. At current prices, they represent a cheap alternative for dividend investing. I chose to bolster the dividends section of my portfolio by picking up 2000 units at $1.015. I will monitor the office market through 2017, to see how badly office rental prices are affected, and react accordingly.

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In the meantime, I sold off my holdings of DBS at $18.85, netted a rough 6% return. This leaves me with some extra cash to park somewhere else in the near future. Blue-chip wise, I will be looking at Singtel and SGX.

Until next time.

Creed

Is SembCorp Marine a potential gold-mine or ticking time-bomb?

2017-01-23T10:07:00.000-08:00

Which way, oh which way, will the oil price go?

SembCorp Marine's (S51) stock price languished in 2016 along with KeppelCorp's, as oil prices were driven down at the beginning of the year by severe global overproduction. SembCorp traded above $3.00 per share at the start of 2015. In early 2016, prices fell as low as $1.32 per share (demonstrating a 56% drop in a year), as oil prices plummeted. SembCorp suffered as contracts for rig-building dried up, and was forced to cut staff in the second half of 2016 as earnings dipped. The company, however, had an optimistic outlook:

"Despite the challenging outlook and intense competition, we believe that growth prospects for the offshore and marine industry remains encouraging over the long term."

December 2016 brought a ray of hope to the industry, as OPEC member and non-member countries stunned critics agreed to cut oil production by January. Recent reports [credit: Sydney Morning Herald] have cited that both OPEC and Russia have been cutting production a lot faster than expected, with as much as 1.5 million barrels being removed from the market daily. While Brent Crude is a far cry from its days above US$100 per barrel, the price has recovered to the 50+ region from the 30s, as critics await to see what effect these cuts would have on the oil price.

Hypothetically, if oil prices move higher due to the constant cuts, we can expect to see crude oil prices move upwards, which could eventually lead to companies resuming their oil-related activities, which were previously abandoned due to plummeting oil prices. Additionally, as mentioned in my previous post on DBS, the Singaporean government has stepped in to assist the Oil and Gas sector, announcing financial schemes to assist in financing projects through the Ministry of Trade and Industry.

Source: Yahoo Finance

It would be easy to maintain an optimistic view of 2017, but SembCorp's order book needs to be closely monitored - if their order book remains dry, stock prices can be expected to fall as quarterly results are revealed. Currently, the company's subsidiary - Jurong Shipyard - is bidding to construct parts of an Oil and Gas vessel for Norway's Statoil [credit: Upstream Online]. Additionally, with Trump taking office, we will need to see what his 'America First Energy Plan' entails - Trump hopes will make America independent from OPEC by tapping into energy to replace oil.

SembCorp Marine closed at 1.535 yesterday. Optimistically, we should see a conservative 2.00 by June this year, but only after a few retracements to the 1.40 region as oil prices fluctuate. Oil prices drastically need to recover if Sembcorp is going to stay afloat, as current prices are still too low for oil firms to confidently restart development. I'll be keeping my eye on this.

Until next time

Creed

Looking Into DBS - When Will the Dream End?

2016-12-06T12:41:00.001-08:00

Not any time soon, I reckon.

After witnessing the impressive rally that took place over the course of the past few weeks, I bought into DBS (D05) late at 17.80 with the intention of doing a bit of short-term trading. The stock has surged roughly 20% since Donald Trump was elected President of the United States, and it should continue to head upwards as we approach the New Year.

The Italian referendum took place on Sunday (4th December), and the Prime Minister has announced his resignation. DBS's price seemed to be unaffected on Monday - the stock price only dipped slightly before recovering and powering up to 17.90+ amidst positive sentiment. The wave continued on Tuesday, kissing the 52-week high of 18.20 before closing at 18.16.

Third quarter performance (3Q2016) exhibited good numbers, with total income rising 8% against the previous year (3Q2015). Lower operating expenses caused total expenses to fall by 5%. Net profit remained stable, due to higher allowances for bad debt.

Source: Yahoo Finance

Positive sentiment seems to have been fueled in the aftermath of the OPEC agreement, where OPEC member and non-member countries stunned critics by agreeing to cut oil production by January. While the deadline is still a month away, the news sent oil prices soaring. Brent Crude trades above $50 this week, though it might face some difficulty breaking $60 before January arrives. With the rise in oil prices, optimism has been injected into the Oil and Gas sector, an area in which DBS has a lot of exposure (as a major moneylender to the O&G industry). Additionally, the Singaporean government has stepped in to assist the Oil and Gas sector, announcing financial schemes to assist in financing projects through the Ministry of Trade and Industry. While this does not completely eliminate DBS's exposure to Oil and Gas turmoil, it does help to mitigate their position.

With the US Federal Reserve's upcoming rate hike in mid-December, both American and Singaporean bank-related stocks are also expected to rise along with interest rates - the effect on US interest rates has tended to spillover to Singapore markets in the past. Plus, DBS is currently among the top ten largest private banks in Asia, and they have recently made acquisitions in wealth management and retail banking from ANZ.

The run doesn't seem to be halting any time soon, although profit-taking might occur after mid-December. I would anticipate a conservative short-term target price of 19.00.

Until next time.

Creed

Portfolio Update - Keppel DC Reit

2016-12-03T13:36:00.002-08:00

And there goes my war chest. Apologies for the late post, but December has begun, and Winter has come at work.

So I've been looking at Keppel DC Reit (AJBU) for a while. I was busy with work and missed the opportunity to pick it up when the price dipped after the preferential offering - but I didn't see the need to wait any longer. The price recovered very quickly from the mid 1.10s to 1.20+ after the offering. I anticipated that I wouldn't have time to catch up on stock prices when the potential rate hike hit (December tends to be a hellishly busy time for me at work), so I moved to pick 4,500 shares up at 1.21.

Keppel DC is diversified overseas - their assets are located throughout Australia, Europe, and Southeast Asia. This mitigates risk should anything unsavoury occur.

The need for data centres should only increase as we continue into a digital age - as IT and Fintech continue to increase the need for data creation, usage and storage. Growth in 2017 would be bolstered by their recent DC acquisitions.

The potential US rate hike might make the price dip again, but I expect strong recovery in the following weeks. This serves to bolster the dividend segment of my portfolio - I am expecting growth to be consistent and steady over the next few years. Keppel DC closed at 1.22 on 2nd November.

Source: Keppel DC REIT site - moving forward with a recent acquisition

If I have the time, I'll be looking into picking up some DBS and KeppelCorp shares in the near future for some minor trading. With oil prices recovering after the OPEC deal, I expect to see Oil and Gas related companies rally. The upcoming rate hike should prove to be good for DBS as well.

Until next time.

Creed

Taking a Risk on Election Day - Taking a Look at the Future

2016-11-12T14:11:00.001-08:00

2016 has been a year of change. Brexit shook the world in the middle of the year, sending markets into flux. Yesterday, it was the US Election. I had to head into the office early to prep, and even that early in the morning, Forex prices on my screen were already going nuts. All of us were on Bloomberg, watching the US slowly turn red.

I still tried my best to keep an eye on the stock market - I was trying to look for opportunities, which were all over the place, since almost all the counters on the front page of the SGX website were in the red. Midday, the bank stocks dropped like flies - DBS, OCBC and UOB went down. When I saw that UOB's price had hit close to 18.00, I decided to take the plunge and pick up 1,000 shares. I managed to get in at 18.13, and I held it overnight. At 18.13, I figured it was at a big-enough discount, so I wouldn't be too badly affected even if the price continued to drop.

Behold, America - your new President.

I was expecting another red day for the stock market on Thursday, but prices recovered really sharply. Today (Friday), I was prepared for UOB to correct and head further down, but UOB prices remained strong over the course of the day. Due in great part to uncertainty about next week, I decided to replenish my war chest by taking profit on UOB. I think I'll be needing it for the next couple of months.

So, with a surprising stock market surge, and with relative uncertainty in the weeks to come, these are the areas I'll be watching over the next few weeks:

1) REITS (Keppel DC)

I've been wanting to get into REITS for a while, more specifically Keppel DC REIT (AJBU). I missed the opportunity to buy in at $1.00+, so I've been waiting for the price to come down before entering. The need for data centres should only increase going forward, its numbers are solid, and this particular REIT has demonstrated decent growth since its inception. REIT prices tend to drop when the US raises interest rates, and an upcoming rate hike is due, should nothing else change.

It is yet unknown if the rate hike will continue as planned (although several analysts so it will), because the USD has strengthened over the last couple of days, with USD/SGD moving into the 1.41 region. Regardless, I would considering entering Keppel DC REIT when the price moves closer to $1.10. It closed at $1.195 on Friday. There is a preferential share distribution due next week, so I will wait to see if the price gets diluted.

2) Telcos (Singtel)

Price closed at $3.77 on Friday. With the potential fourth Telco incoming, I expect that Singtel (Z74) would be the least affected. Out of the current three, Singtel is the most diversified overseas, even though Australian subsidiary Optus is facing stiff and cutthroat competition Down Under. A 6.8-cent dividend will be paid out in January 2017. If Singtel continues paying >4% dividends per year, it might be worth a pick up.

I remember picking it up at the beginning of the year at 3.49. I would consider going in again if it drops to 3.50+.

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I will also be watching the banks over the next few weeks, to see what happens. To any and all of you trading or investing next week, all the best.

Until next time.

Creed

Trump Vs Clinton - Time to Watch & Wait?

2016-10-26T11:29:00.001-07:00

With the upcoming US Election looming near, uncertainties abound. Whatever the outcome will be, world markets will most certainly be affected, much like Brexit. Hillary seems the more stable choice, but even then, whomever gets put into office will throw the SGX into a bit of turmoil.

Whoever wins, be careful you don't wind up a loser.

I will be taking great care to watch my positions heading into the election, and I'd advise that you do so as well, especially if you lack holding power. Don't get caught with your pants down.

I figure that my position in ST Engineering is stable enough to weather whatever storm brews up, so I'll be leaving that alone. My recent trading attempt with HMI didn't get me a 10% return as I'd hoped for, but I managed to sell it off at 0.645 for a bit of coin before the price began plummeting. I figured that I would abstain from any more trading until the election was over. My war chest is now ready, and I am watching for opportunities. I will be looking for blue chips and REITs at bargain prices.

I've had my eye on Keppel DC Reit for a while, but it's pretty expensive now. I'll take a look again when the US decides to change interest rates.

Until next time.

Creed

Health Management International Ltd - Riding the Wave?

2016-10-11T10:19:00.000-07:00

Recently, a healthcare stock has been on the rise - Health Management International Ltd. (588.SI), more commonly known as HMI on the local stock exchange, closed at 0.64. Their current price is a far cry from the 0.48 at the start of September. The stock has been picking up speed recently, hitting a high of 0.65 today.

I've been looking to get into some trading after liquidating Sino Grandness last week - the loss wasn't too great, but an overall profit on any portfolio isn't a bad thing. I was delving into the healthcare sector for opportunities when HMI caught my attention. At the time, I decided to pick some up at 0.61.

Something brewing?

Health Management International Ltd. owns and operates the Mahkota Medical Centre in Malacca and Regency Specialist Hospital in Iskandar Malaysia. Currently, plans are to expand the Regency's medical block due to strong patient demand. Construction is set to begin in 2017, and is expected to take roughly 2.5 years to complete. The Regency has also begun advertising overseas, and has started to attract Indonesian patients. Mahkota's Nuclear Medicine division is pending a license to begin activities, and plans to add a new inpatient ward in 2017. With plans already in motion, the company is expected to keep growing as it moves into the future.

Their FY16 results were released in August. Revenue increased by 15.2% to MYR 397 million as compared to last year, with the increase being mainly due to higher patient count and an overall increase in bill size. Their Net Profit After Tax, however, decreased by 14.8%, largely due to an increase in income tax expenses - a one-off recognition of MYR 9.4 million deferred tax assets and higher administrative costs contributed to this.

As at June 30 2016, HMI had a cash & cash equivalents position of MYR 78.9 million, up from the MYR 66.1 million at March 31 2016. This amount is almost double their position as at June 30 2015.

Due to healthy results, the company has announced a dividend of MYR 0.0075, with the ex-date being on 31 October 2016. HMI also recently announced an AGM to be held on the 24th of October, during which they will propose to renew their Share Buyback Mandate. The company had already approved the Mandate for the period of Oct 2015 to Oct 2016, during which they bought shares back at the 0.30 - 0.40 range.

At this juncture, my short-term target price is 0.685 - I believe this to be reasonably conservative, given the healthy news and dividend announcement. I am wary of chasing the price too far at this juncture.

Until next time.

Creed

Portfolio Update - Time to Cut Losses (T4B)

2016-10-07T16:47:00.001-07:00

I've been holding onto this stuff for way too long. I could've sold everything off when prices hit upwards of 0.70, but I didn't. Could've, would've, should've - it's all water under the bridge. I took a gamble on the Garden Fresh IPO from Sino Grandness (T4B), and it's about time I liquidated my holdings. I would most definitely make a loss, but I am thankful that my other trades (thank you, Silverlake Axis) somewhat made up for it

Time to get out? I'm done with speculating on this stock for now.

For the uninitiated, allow me to give you the cliffnotes: Sino Grandness, a Chinese beverage and canned foods producer, had been wanting to spin-off its subsidiary, Garden Fresh, for quite a while. They eventually submitted an application to have Garden Fresh listed on the Hong Kong Stock Exchange (HKSE) on 1st April 2016. The spin-off would have created huge value for Sino by potentially bringing in big investors and by providing a means to settle some of their outstanding debt. Many people (myself included) saw target prices above 0.80. The price crossed 0.70 earlier this year, but eventually, the price started tanking. It dropped to 0.60. 0.50 followed soon after. After a few short-sell attacks, and a horrendous miscommunication of news (a rumour was spread that Garden Fresh products had failed an official food test when they had actually passed), the price settled in the 0.40 region. After it became clear that the IPO application was going to lapse, the price dropped to the 0.30 region. Thus far, Sino Grandness has not released any more information regarding the IPO application apart from the fact that they would still be trying to get Garden Fresh listed on the HKSE.

Now that the IPO application has lapsed, overall negative sentiment has sent the price tanking to the 0.30+ region. A sudden move back to 0.50+ is unlikely at this juncture, and with the upcoming rights issue (with the intention of raising money to fund their business activities), the share price looks to drop even further due to dilution. I feel like Sino's management could have handled this fiasco a lot better.

I knew the risks when I invested in an S-chip - this time round, my gamble didn't pay off. It's high time I cut my losses and put the money to better use somewhere else. I'm done waiting.

Until next time.

Creed

When couples have different views on finance

2016-09-25T10:03:00.003-07:00

Sarah has a husband who is uninterested in all things financial. He doesn't care about insurance, investing, financial planning, etc. What he earns every month goes into his savings account with POSB and only leaves when he spends it. Sarah, however, is financially savvy, and asks that she be allowed to manage their money - she plans to put their combined earnings to work for them. She also gives him advice on what type of insurance to buy. "Sure," he says. "Go right ahead, love."

Sarah has a brother - Sean - who is also married. Discussions about finance are a cringe-inducing topic in Sean's household. He wants to invest his money, and urges his wife to do the same. His wife, however, has heard the horror stories that typically accompany stock crashes, and prefers to keep things simple. She doesn't want him doing anything potentially risky, and nags whenever she sees him looking at stocks, bonds, and other investment vehicles. She would rather he put his money into a savings account, just like she does. Sean, on the other hand, disagrees, and this causes friction between them. He doesn't agree with how she spends her money. To make things worse, she doesn't agree with his methods either.

Money isn't the root of all evil, but differing ideas on finance could be cause for arguments.

As long as one person is willing to bear the burden of being the couple's financial planner-cum-investor, financial apathy is easy to deal with.

However, when couples have different views on money and how it should be saved or spent, the situation gets tricky. What is to be done? One's a spendthrift, the other a miser. One doesn't trust stocks, the other is more willing to invest and trade. One wants a family car for the sake of convenience (and also for face in some cases, although this usually isn't said out loud), the other insists on public transport because cars are too expensive in Singapore.

For those of you in this particular pickle, I feel you. I feel for you. It can be difficult, but perhaps some middle ground could be found with the following points:

1) It doesn't hurt to have a savings account with a decent interest rate

For simplicity, some people would rather put their cash in a POSB savings account and just be done with it. Even if your partner likes to keep things simple, having a savings account with a decent interest rate would be safe enough for them to venture.

Try the OCBC 360 account - it's simple enough to earn the bonus interest, and ATMs are fairly common around the island. Banks like CIMB and BOC do offer higher-than-usual interest rates on their savings accounts, but accessibility could present an issue.

2) Try to have the 'talk' before marriage

This is important, and should have been the first point, but it's true - try to get to know your partner's spending/investing habits before marriage, so this issue can be worked out in advance. The best remedy to a problem is the prevention of it in the first place. These ideas don't suddenly change because of a wedding band.

If both parties cannot agree on finances, I've personally borne witness to too many real-life horror stories to know how badly it could go. If this issue persists after marriage, it starts getting messier and messier. If you can't trust your spouse with money, how do you trust them with other matters?

I've seen people break up just one week after making wedding preparations because the issue of money reared its ugly head. If both parties really can't agree, you can foresee stormy clouds in the future.

3) Start them off slow, and don't forget to show proof

For the more risk averse, it can be a daunting challenge for them to do something with their money which is - as far as they know - not guaranteed. What if the stock does badly? What if the company can't settle their debts and end up like Swiber? What if the economy does badly and the stock sinks too?

If you're into investing in blue-chips and you've been making a steady passive income, tell them what you've been doing. If possible, bring out the black-and-white. Records of steady dividends (along with the amount of capital spent) might help you along in your quest to win your partner over. If you succeed in breaking the ice, consider teaching your partner a little about investing.

%-%-

On another note, my trading portfolio isn't looking so good right now - I'm going to hold on a little while longer to see how things turn out.

Until next time.

Creed

Silverlake Axis: A Brief Interlude

2016-08-17T10:58:00.001-07:00

I'd originally planned to get this post up a lot sooner than I did (especially since I have a preference for posting as soon as possible after a trade), but work, Pokemon Go, and Overwatch have been keeping me well occupied.

It's been a while since I parked some cash in Silverlake Axis (5CP) at 0.575, with short-term trading in mind while other opportunities presented themselves.

A couple of days ago, with the price reaching a recent high of 0.625, I decided to take profit at 0.62 (resulting in a 7-8% return) and adopt a wait-and-see approach. I missed such an opportunity on the 18th of July, and although my short-term target price of 0.635 wasn't achieved, I thought it would be safer to take profit first, and wait to see what happens next. Congratulations to the guys who made a bit of coin out of this.

I have two views of the future:

I could either

1) buy into Silverlake once more when the price drops below 0.57 and look for more short-term potential. There was a brief period of time when Silverlake's price crossed 0.60 before it fell back down to the mid-50s after the 18th of July. If history repeats itself, this might present a brief opportunity for trading, especially if Management keeps buying back their own stocks; or

2) park my cash in a fresh opportunity if one does present itself. I am presently keeping my eye on Singtel, SPH, DBS and OCBC, to name a few - I am currently looking for blue-chip stocks to re-construct my portfolio.

Until next time.

Creed