It is the end of the January month and we can already see some turbulence in the market, especially affected by the news of the EM crisis we are having right now. The overall STI index has gone down by 4.42% in this one month alone and it does look like the trend will continue to spread in the February month.
I’ve listed down a couple of stocks that I am currently keeping a close look on. I may not necessarily buy them in the near term nor is this a call buy for you to follow on. But it may be worthwhile taking note on these stocks as they may provide a longer risk reward horizon.
| Counters | 31-Dec-13 | 30-Jan-14 | % Change |
|---|---|---|---|
| Capitaland | 3.03 | 2.76 | -8.91% |
| Far East H. Trust | 0.84 | 0.785 | -6.55% |
| Croesus Trust | 0.885 | 0.875 | -1.13% |
| Raffles Medical Group | 3.11 | 3.00 | -3.54% |
| DBS | 17.1 | 16.47 | -3.68% |
| Wilmar | 3.42 | 3.12 | -8.77% |
| CapitaRChina | 1.33 | 1.32 | -0.75% |
| STI Index | 3167 | 3027 | -4.42% |
Out of the 7 stocks listed above, Capitaland, FEHT and Wilmar have underperformed the index while the other 4 have performed slightly better.
Capitaland for instance, have fallen almost 9% from Dec due to poor market sentiment from China and the downward pressure coming from the local residence market. Having said that, I am still pretty bullish on the new CEO management as they have indicated a stronger ROE target to meet within the next 5 years.
I am equally bullish on DBS as they have posted a stronger set of results this year as compared to the past. The higher profit means that the same payout has now attributed only 30% of earnings as compared to 38% in previous year so I do expect the management to dish out a higher distribution for FY14.
With most of the stocks now below their moving average, we could see downtrend pressure within the next few months, which would be really interesting if that happens. What about you? Are you looking for any opportunities in the market?
Hi B,
I am also keeping watch on CapitaRChina and Croesus Trust, With Croesus Trust, the fundamental seems good for the short term even though that management has no track record (this trust is new). My only concern is the sponsor for Croesus Trust. I have never heard of this sponsor and it seems relatively new, set up in 2005. What do you think of this?
Renewed investor
Hi Renewed Investor
Are you talking about Daiwa and Marubeni as their main sponsors?
I kind of like the management even though the trust is new. The management has multi-years of experience in the Japan retail sectors and I think they will do a good job at handling it.
The thing I like about Croesus is the fact that their average costs of debt is low with debt maturity >4 years and the high dividend yield which almost doubled Japan Retail Reits.
My only concern that trusts listed in SG generally doesn't bode well for investors, hence strong upside may be limited in the short term.
Hi B,
I am also keeping tabs on Croesus. However with the sales tax about to kick in his April, I am not sure how the Japanese will react to this. So I am adopting a wait-and-see approach first. What do you think?
Aceirus
Hi Aceirus
I think the sales tax from the current 5% to 8% later in April is far due long ago in order to reduce the country's current deficit. Even though it may affect domestic demand in the short-run, I'll doubt that plays a major part for domestic consumption in the long run. Even when SG adopts the 7% increase in GST in 2007, it has a short-term hiccup but generally consumption has increased over the long term. That is what I believe will happen to Japan as well.
Hi B,
If I am not wrong besides Daiwa and Marubeni, the main sponsor of Croesus Trust is Croesus Group (80%). It is Croesus Group that I don't know anything about. It's run by 2 Singaporeans. Do you know anything about them?
Renewed investor
Hi Renewed Investor
I have to apologize as I am not aware of such a Group. Will keep note of it and if I may know I will share with you 🙂
Hi B,
FEHT have been dropping a lot recently. What do you think of it now?
Is it a good time to enter?
S
Hi S
Recent results have shown disappointment and I think they will ended up with around 10% variation from their prospectus net profits. The thing about hospitality is that the occupancy rate is ok but the rev/par is something which they have underrate when planning ahead.
I closely benchmark FEHT against others like Ascott and/or CDL Hospitality Trust. If the three offers the same yield, I would prefer FEHT as they are focused more on Singapore hotels with lower volatility rate. I think the price could be somewhat oversold, so I might be going in pretty soon on it 😉
Hi B,
Thanks for your advice! I am also looking to enter FEHT soon 🙂
S
Hi B,
Wilmar looks quite attractive now. Good for long term investment. I'm pretty sure they will rise back up again. They are still one of the largest palm oil producers in Asia. Will be watching it closely too.
Croesus retail trust i'm vested in it. The income is pretty attractive and DPU should still continue to increase as they acquire more assets into their portfolio. With the Japanese economy turning around, things are looking favourable for them. They have also put in place all the necessary hedges to minimize currency and interest rate risk. The management knows what they are doing so far.
Hi SGYI
I do keep a lookout on wilmar but they are too volatile for me. Maybe if I do buy them it will be for a quick trade in and out for profits. I certainly wont be holding them for too long as I do hv experience with noble in the past years which I hv gotten rid of them.
Croesus is something which both yourself and AK have owned in recent times. I think it is attractive and hv been stable despite recent market turbulence. Im just waiting to see if there are more attractive options than croesus 😉
Hi,
I'm curious to know why Raffles Medical Group is attractive. Thanks for sharing!
Hi laurence
I hv never purchased rmg so perhaps im not the best person to comment.
Having said that, the stock has somewhat impressive returns in terms of its cagr over the past 5 years and it is still growing at that level i suspect. I like the fact that the growth story was done via no debt at all so they are in a fully cash position.
Hi B,
I noticed that FCT have been dropping despite higher DPU every quarters. Are you going to average down or just holding for dividend play ?
Hi anonymous
Fct at current price of $1.66 I think is attractive. So I will be accumulating them unless there is a more attractive options which interests me. St eng is definitely one of them and im looking at the two.
Hi B,
What about SIAEng? The price dip a bit to below 4.8, looks attractive but also the business has been stagnant for a while? What's your view? Thanks!
Hi boonchin
Sia Eng has announced its q3 results a few days ago and it is disappointing as I expected.
The core business was declining as we know so if there is going to be anyupside it will need to come from their jv or subsidiary profits. Unfortunately these segments only grow at around 2% in the 3rd quarter so they are in big trouble.
Current price definitely looks expensive. If I were to lipick a price I probably will start picking them from 4.50 and below. Even so they are still considered quite expensive. So no go definitely at current price.
Hi B,
Same as you, I am also eyeing on FCT and ST Engineering. I find FCT at $1.66 still expensive. I hope to buy at a lower price, ideal will be $1.50. ST Engineering as well. I hope it will fall further.
Renewed investor
Hi renewed investor
I think fct is quite attractively priced at the moment. I will be comfortable accumulatingthem from this point onwards. I bought them at 1.45 during the 2011 europe crisis. From then they hv really grown in these 2 to 3 years so to reach 1.50 may be a little hard.
But never say never. If they do then it will be a screaming buy for me.
Hi B,
Though $1.50 for FCT is an ideal price, I am likely to entry by buying some at $1.60. The other stock that I want to buy is Fraser Commercial Trust (FCOT). My entry price is $1.20. I think that is a reasonable price. Also, you mentioned about buying Maple Greater China Trust in your earlier blog.
I believe that a good alternative to a China exposure reit is Capitaretail China Mall Reit. It has a good track record, regular dividend payout, low gearing, good assets. Price is a bit high now. Waiting for a good entry point.
Best,
Renewed investor
Hi B,
What do you think about First reits? At current $1.02, dividend is about 7%. NAV is $0.96. Do you think it's too expensive?
P.S. I bought some Frasers centrepoint yesterday at $1.68. Will buy more if the price decreases. Otherwise, at least I have acquired a bit. 🙂
Renewed investor
Hi renewed investor
Wah you've bought fct today. Congrats. Ive been wanting to add but somehow keeps waiting and waiting. I might miss this if market keeps going up these days.
I think first reit at $1.02 is a pretty fair price at a decent yield of more than 7%. Ceo has been buying in also in recent days. Im just hoping the hospitality reits will get lower these days, ive been wanting to accumulate them. So we'll see how it goes ;). Do let me know if you bought first reits 😉
First Reit is in my watch list too. Hopefully it drops more. Buying below its fair price is more attractive.
Hi B,
Yes, I have reentered the stock market after an absence of 1.5 years. Blogs like yours and some others online (dividend warrior, ak71) have helped me understand the benefit of accumulating stocks for dividends. In the past, I was alone in my pursuit of stocks purchase. Through the internet, it is great to see like minded people who are all working towards financial independence.
Do you have any first reits stocks? If you do, I wonder what is your average price? Currently, I am 1 /4 invested. Slowly but surely 🙂
Best,
Renewed investor
Hi Renewed investor
I bought my First Reits throughout the past couple of months at around the current price. If I have to say the average price it would have been around $1.03. Oh well, the dividend yield is quite good. I am more invested than you do though, I'm about 90% invested.
Hi B,
I have looked at the fundamentals of first reits and I believe that it serves me well to buy some at current price. If the price drops, I will add more to my portfolio. Market analysts predict that though the market will go through corrections this year, overall, it will still increase till around 3500 by the end of the year (so they predict).
If that's the case, then it is good to at least be partially invested now. If market goes up, I get capital gain. If market goes down, I still have some war chest left to add more.
Renewed investor
Hi renewed investor
Do you have a specific amount of lots that you wanted to have for first reits? For e.g hoe many is enough for you before you think its taking up more percentages in your portfolio?
Hi B,
Don't you think the Indonesia Rupiah volatility now will adversely affect FReit further?
Aceirus
Also, another thing I am uncomfortable with is they have floating interest rate debt which accounts for 46% total debt
Aceirus
Hi Aceirus
First reit income is in sgd instead of rupiah. So it wont affect the distribution in that manner. Having said that, should the rupiah and economy continues to decline it will certainly give lippo group more pressure and it may affect the company.
The company is highly geared at the moment so this is another point im worrying about. At current price im not that comfortable to take it yet.
Hi B and Aceirus,
I think first reits gearing is about 30%. I read in the latest financial slides that management wants to keep it below 35% (if I am not wrong). In terms of gearing, it is acceptable for me.
B, in the beginning, I will accumulate first reits at 4% of my overall portfolio. First reits should constitute about 10% of my overall portfolio if the price drops further. I have also been accumulating industrial and retail reits. E.g. aims amp, ascenda, lippo, croesus etc for my initial portfolio.
Renewed investor
Hi Renewed investor,
Based on their latest financial report, gearing ration at 32.3% and management wants to keep it under 30%.
Aceirus