Started writing on this last Friday night and then i broke off from my usual routine to finish it in one go. Too many things going on in my mind recently. One of them is work where we need to plan for mitigation plans due to tariff. Is sure going to be more costly for Americans but considering the significant amount of jobs created, looks like it could be a net plus for average folks. I will be expecting companies to start to move some of their production at least to other countries to reduce their cost from operating in China. Pace could speed up if the tariffs increases some more. From the looks of it, businesses in China will not look good as America is a Consumer Market of the world.
Another thing that keep me busy is Mew Two is now available in Raid. For those who is not familiar, is Pokemon Go game. Yup, I am still in it. The game keeps me busy with some exercise but just be careful on the roads. The other problem is if I am too near to garden or vegetation, there may be mosquitoes. Is still quite amazing that the game attracts a crowd. To take this Pokemon will need about 10 players and indeed a team effort until a lady came up with 4 phones at one go on the raid. Anyone need a new friend please message me. I need to complete a mission ....
Back to investment. I have shown my portfolio of equities previously. This time round I am writing about each of the reit/trusts as I can. My thoughts, fear, wish, dream ... whatever. Don't say what the hell this guy blogging on Friday night. I always could do and anytime whenever I feel the urge and when time permit. The first 2 Reits are the blood vines of Singapore and the other 3 are tapping E.Asia/Australia. As long the country and East Asia do well. So I do have a stake to ensure Singapore continue to prospers at least. In REIT investment I have the opinion that I do not have to max out my earning. I would prefer 有钱大家赚. So as long they perform well consistently, Management / Employees or private placement shareholders are welcome to earn form it.
ASCENDAS REIT, CAPITAMALL TRUST
This stocks have long history of dividends. If I can remember, there maybe some placements along the way. What I focus is the growing DPU. And that's what all matter isn't it ? I remember the former one hits 8% yield years ago. Now the yield has come down to 6% (give and take....) so there is nice capital gains on top of dividends. Is it attractive now ? Well, we can have some financial crisis and money got suck out of the system and stock price could drop to 6% price level. Will it really really happen? I dunno but I do know there is a lot of cash out there. A 2% yield drop could mean more than 20% reduction in stock value. Will take 3 years to recover if the stock continues to stay low. But I can wait while collecting the dividends. I would think is best to size my investment appropriately as there is some fluctuations over the years. I am not too worry if it goes lower. This is provided fundamentally the business has not changed to bad. If we have added up all the DPU and Capital gains over the years, the returns are in many times that we have invested.The thing is we need to have skin in it and forget about trying to time a perfect entry. The dpu would cover them over time.
ASCENDAS-HTRUST, MAPLETREE IND TR, MAPLETREE NAC TR
This is another class of reits that is well managed so far. The hospitality sector has seen it's dynamics so able to grow consistently is not easy. Industrial reit is not cheap I would say. But the growth is there. Maple family has been on growth path so there will be rights issue along the way. My wish is that they stay within private placement sphere. Able to attract this class of private money is like giving confidence to the companies. If we are to issue rights to existing shareholders, I am not sure is it because they have problem to raise money without giving significant discounts. And this may be worrying. I use such indication to reinforce my judgement. So I am ok to earn lesser as long the path is right and make the company more powerful. The Maple managed malls is recent addition. There seems good potential to provide strong DPU. The gearing is high though so I am only comfortable to add only some for now. This 3 reits performance are more dynamic than CMT and Ascendas in my opinion.
FIRST REIT, PARKWAYLIFE REIT
Both Medical Reits. They don't manage the hospital operations. Both if we are to use P/B to value them, will be relatively expensive. The reason I believe is the stable earning it provides at constant growth and the properties. Their moat is high. Really high. Let put it this way. If my wife is pregnant, and need to do NIPS test. And the facility recommends say NIPS+ and the cost increases from $2000 to $4000. The additional $2000 can detect down syndrome much more accurate from 90% to 99%. Will you pay ? Happily, I will. And if there is a invasive test which cost only $500 with 100% accuracy but there is 1% chance she will miscarriage, will you choose this option ? I think most will say no way ! That's how safe is Medical Reit as their tenants have wider ability to pay.
But not all reits are the same. I am always wary of First Reit sponsor. If you have been following this reit, the Sponsor has not been in strong financial position due to over expansion in other businesses. However there are still many hospitals along the pipeline and they have been able to maintain strong DPUs. Is pretty hard to fake giving out money if they aren't making money out of it. The recent event is a case to watch more closely as the sponsor find innovative way to raise money without losing control of the reit. That's how I read it. I don't get to be sleepless over but need to watch it. I feel is unlikely to be a "Sabana Event". I did reduces my exposure a little bit from it and as a result took some losses from it YTD since is reference to end of last year price. Some analysts are positive over the deals. I take it with pinch of salt. The dpu is still good for now.
As for ParkwayLife Reit, I have size it such that I can be relax on it. The 4+ dividends is low but I can accept it as it helps spread my exposure with stable returns long term.
FRASERS L&I TR
Australia currency has not been doing well for couple of years. So I think it does has some impact on the returns. As long the DPU growth able to covers it, the Reit should be ok. They have freehold assets over there so this do make up for long term. They do has rental reversion but I feel it is not a surprise as there is clause within the contract that up the rental fee annually which can move it past the market rate.So not surprisingly when is up for renewal, there is reversion to mean at least. The European acquisition is something I do not really like as it draw away the future funding space so I sold all after. However the current yield is good and do not see reduction of it near term after rights issue. Another concern I have is that they aren't maple. I returned with smaller position nevertheless due to the strong yield.
NETLINK NBN TR
This is not "HPH Trust" or many Trusts out there in my view. Their asset has long term value and good moat.
Singtel hold the max they could on this one which tell me something. The G5 future rest on even more Fibre optics. Down side is that charges are regulated from my read in the internet. The DPU will be stable but I will not be surprise to see fluctuation. Some people hope for deeper correction before they go in. I do not think this make sense. The annual dividends is about 5.8% yield from the top of my head. If we park the money temporarily in SSB is about 2% short term. Opportunity cost is 3.8% yield. The waiting time outside could be expensive.If I am to part my money in other equity, I lose my opportunity fund.
If the Trust is indeed stable even $0.90 to $1.0 is not expensive. Here's the growth I hope for. But then will I sell ? Not if I have enough stake in it to do partial. Will the price go lower and lower. I feel is unlikely to happen unless manhole get obsoleted. They have good profitability improvement from cost cutting. How much can this go without affecting the operation or future growth is unknown but there is limit. I hope to see management take some stakes from the market. So far yet seen.
Cory
2018-0928
Another thing that keep me busy is Mew Two is now available in Raid. For those who is not familiar, is Pokemon Go game. Yup, I am still in it. The game keeps me busy with some exercise but just be careful on the roads. The other problem is if I am too near to garden or vegetation, there may be mosquitoes. Is still quite amazing that the game attracts a crowd. To take this Pokemon will need about 10 players and indeed a team effort until a lady came up with 4 phones at one go on the raid. Anyone need a new friend please message me. I need to complete a mission ....Back to investment. I have shown my portfolio of equities previously. This time round I am writing about each of the reit/trusts as I can. My thoughts, fear, wish, dream ... whatever. Don't say what the hell this guy blogging on Friday night. I always could do and anytime whenever I feel the urge and when time permit. The first 2 Reits are the blood vines of Singapore and the other 3 are tapping E.Asia/Australia. As long the country and East Asia do well. So I do have a stake to ensure Singapore continue to prospers at least. In REIT investment I have the opinion that I do not have to max out my earning. I would prefer 有钱大家赚. So as long they perform well consistently, Management / Employees or private placement shareholders are welcome to earn form it.
ASCENDAS REIT, CAPITAMALL TRUST
This stocks have long history of dividends. If I can remember, there maybe some placements along the way. What I focus is the growing DPU. And that's what all matter isn't it ? I remember the former one hits 8% yield years ago. Now the yield has come down to 6% (give and take....) so there is nice capital gains on top of dividends. Is it attractive now ? Well, we can have some financial crisis and money got suck out of the system and stock price could drop to 6% price level. Will it really really happen? I dunno but I do know there is a lot of cash out there. A 2% yield drop could mean more than 20% reduction in stock value. Will take 3 years to recover if the stock continues to stay low. But I can wait while collecting the dividends. I would think is best to size my investment appropriately as there is some fluctuations over the years. I am not too worry if it goes lower. This is provided fundamentally the business has not changed to bad. If we have added up all the DPU and Capital gains over the years, the returns are in many times that we have invested.The thing is we need to have skin in it and forget about trying to time a perfect entry. The dpu would cover them over time.
ASCENDAS-HTRUST, MAPLETREE IND TR, MAPLETREE NAC TR
This is another class of reits that is well managed so far. The hospitality sector has seen it's dynamics so able to grow consistently is not easy. Industrial reit is not cheap I would say. But the growth is there. Maple family has been on growth path so there will be rights issue along the way. My wish is that they stay within private placement sphere. Able to attract this class of private money is like giving confidence to the companies. If we are to issue rights to existing shareholders, I am not sure is it because they have problem to raise money without giving significant discounts. And this may be worrying. I use such indication to reinforce my judgement. So I am ok to earn lesser as long the path is right and make the company more powerful. The Maple managed malls is recent addition. There seems good potential to provide strong DPU. The gearing is high though so I am only comfortable to add only some for now. This 3 reits performance are more dynamic than CMT and Ascendas in my opinion.
FIRST REIT, PARKWAYLIFE REIT
Both Medical Reits. They don't manage the hospital operations. Both if we are to use P/B to value them, will be relatively expensive. The reason I believe is the stable earning it provides at constant growth and the properties. Their moat is high. Really high. Let put it this way. If my wife is pregnant, and need to do NIPS test. And the facility recommends say NIPS+ and the cost increases from $2000 to $4000. The additional $2000 can detect down syndrome much more accurate from 90% to 99%. Will you pay ? Happily, I will. And if there is a invasive test which cost only $500 with 100% accuracy but there is 1% chance she will miscarriage, will you choose this option ? I think most will say no way ! That's how safe is Medical Reit as their tenants have wider ability to pay.
But not all reits are the same. I am always wary of First Reit sponsor. If you have been following this reit, the Sponsor has not been in strong financial position due to over expansion in other businesses. However there are still many hospitals along the pipeline and they have been able to maintain strong DPUs. Is pretty hard to fake giving out money if they aren't making money out of it. The recent event is a case to watch more closely as the sponsor find innovative way to raise money without losing control of the reit. That's how I read it. I don't get to be sleepless over but need to watch it. I feel is unlikely to be a "Sabana Event". I did reduces my exposure a little bit from it and as a result took some losses from it YTD since is reference to end of last year price. Some analysts are positive over the deals. I take it with pinch of salt. The dpu is still good for now.
As for ParkwayLife Reit, I have size it such that I can be relax on it. The 4+ dividends is low but I can accept it as it helps spread my exposure with stable returns long term.
FRASERS L&I TR
Australia currency has not been doing well for couple of years. So I think it does has some impact on the returns. As long the DPU growth able to covers it, the Reit should be ok. They have freehold assets over there so this do make up for long term. They do has rental reversion but I feel it is not a surprise as there is clause within the contract that up the rental fee annually which can move it past the market rate.So not surprisingly when is up for renewal, there is reversion to mean at least. The European acquisition is something I do not really like as it draw away the future funding space so I sold all after. However the current yield is good and do not see reduction of it near term after rights issue. Another concern I have is that they aren't maple. I returned with smaller position nevertheless due to the strong yield.
NETLINK NBN TR
This is not "HPH Trust" or many Trusts out there in my view. Their asset has long term value and good moat.
Singtel hold the max they could on this one which tell me something. The G5 future rest on even more Fibre optics. Down side is that charges are regulated from my read in the internet. The DPU will be stable but I will not be surprise to see fluctuation. Some people hope for deeper correction before they go in. I do not think this make sense. The annual dividends is about 5.8% yield from the top of my head. If we park the money temporarily in SSB is about 2% short term. Opportunity cost is 3.8% yield. The waiting time outside could be expensive.If I am to part my money in other equity, I lose my opportunity fund.
If the Trust is indeed stable even $0.90 to $1.0 is not expensive. Here's the growth I hope for. But then will I sell ? Not if I have enough stake in it to do partial. Will the price go lower and lower. I feel is unlikely to happen unless manhole get obsoleted. They have good profitability improvement from cost cutting. How much can this go without affecting the operation or future growth is unknown but there is limit. I hope to see management take some stakes from the market. So far yet seen.
Cory
2018-0928
HI Cory, thanks for writing this post. i got some time to sit down and think about things then decide to turn to an expert when my views are clouded.
ReplyDeletefor netlink trust, the key to understanding is the RAB model. it seems they will try to maintain a WACC of 7% so that may be the long term return. to grow, they have to spend on capex, which should be based on the need. i do question whether 5G will bring about more needs. I suppose it should, as a general industry wise. to be see how much the NBAP will work out.
I did a quick search before I invest in Netlink Trust on fibre which I presume requires more manholes to link them up to cells and "thicker fibre" to homes/businesses. Here's the link which I think could show some.
Deletehttps://www.cablinginstall.com/articles/print/volume-26/issue-7/features/design/the-role-of-fiber-in-5g-networks.html
7% is nice.