Tuesday, February 28, 2017

Ireit Global - FY16 Results & Thoughts

Ireit Global announced their full year results expectedly much better with a 20.8% yoy increase in the DPU to 6.33 cents for FY16. At the current share price of 75 cents, this represents a dividend yield of 8.5%. Do also note that from FY17 onwards the management can exercise their discretion to distribute up to 90%, so they might just reduce the level of distribution.

Gross Revenue and Net Property Income both grew double digit as the contribution from the Berlin campus kicked in this year. Gross revenue of EUR 34.4m was 28% higher than previous year of EUR 26.9m. Net Property Income of EUR 30.8m was also 28.4% higher than previous year of EUR 24m.

Against Forecast, DPU actually performed better operationally from EUR point of view but was lower when converted to SGD due to forex reason. They hedged 100% of the income at $1.53 for 2016 but at a higher $1.55 for 2017. So we can almost expect a higher DPU for 2017 just based on the exchange rate alone.

Nothing that was surprising from their balance sheet. They still geared heavily at 41.6% at a low effective interest rates of 2% with a interest coverage ratio of 8.4x. I suspect with the elections looming next year in the Europe with countries such as Germany and France, the rates might remain low for quite a while more. In this regard, it's good that they geared optimally at an attractive rates for now.

WALE is at 5.9 years as at 31 Dec 2016.

Operationally, there was an update on the Munster building as Deutsche Telekom will be vacating one of the six floors from 1 April 2017 and the management will seek to find new multiple tenants to occupy the vacated space. We'll probably have to go to the agm to find out more on these updates.

There was also a 10% increase in the rental income for the Bonn campus, which is CPI linked activated. The building is currently occupied by GMG on a 6.3 years lease left so this is a good news.

The management started to introduce Tikehau capital network and will likely be injecting new assets in the retail or industrial sectors into the portfolio shortly. Given the high gearing they are in at the moment, a placement or rights issue is imminent and only a matter of time and not if.

It's a hold for me for now and I'll be seeking to understand the prospective better once I have attended their agm.

Tuesday, February 21, 2017

Recent Action - Kingsmen & FY16 Results Review

Kingsmen announced their full year results late yesterday night which was anticipated to be bad.

In my Q3 review, I anticipated their nopat to come in at $11 million by putting an assumption of 3.5% net margin based on the order book the company revealed. I was not far from that as the nopat comes in at $11.8 million with a net margin of 3.61%.

Here are some of the highlights which came to my attention:

  • Topline continued to remain solid as the company continued to win order books despite pressure from some of the division.
  • Gross Margin % continued to remain competitive and stable at 25.31%.
  • Exhibitions and Thematic division continues to see growth as they ventured out to Middle East and China. Retail and Corporate Interiors will be the key to watch out for in coming years.
  • The drop in profit of 38.4% year on year was mainly due to the one-off contribution last year from exceptional item of $5.9m. Excluding that, the profits would drop lesser at 9.3% year on year.
  • Net Margin continues to struggle as the company continued to incur higher operating expenses, mainly from depreciation charges and salary charges, which continued to increase at 3.2% as a result of increment wages.
  • Operating lease for the year is currently at $3.8m. The company acquired their new HQ for $35m ($29m + $7m land) and will be capitalizing their building at probably 30 years based on IFRS. That works out to be at about $1m per year. Costs will continue to come in between now to 2018 when the HQ is ready so more depreciation is expected.
  • FCF continued to be strong this year as they only had 3.5m capex. FCF per share is at 5.84 cents for the year.
  • Dividends were cut to 2.5 cents as a result of tough and tougher times to come and the company will be needing and conserving their cash for the building of their new HQ over the next financial year. This translates into a 3.9% yield based on current share price.
  • Balance sheet continues to strengthen as cash equivalent increases by $4m from previous year.
  • In terms of valuation, PER is not cheap at 10.7x and is the most expensive in the past 10 years. I suspect if we do a DCF valuation based on cashflow it might be better as the company is a strong cashflow generator.
  • Outlook - As at 31 Jan 2017, the company has secured contracts of $106m, lower as compared to $113m in previous year.

Recent Action

I made a decision to divest my 60,000 shares of Kingsmen at a share price of $0.63 this morning after much thoughts.

I'm taking a short term view on this but feels like the company has still much to do from both keeping their topline and margin competitive and also keeping up and tightening its operating expenses over the next 2 years at least.

If I take a look at how the company manages to go over $1 in 2013/2014, it is because they managed to close a net margin of close to 6% which gives them a PER of around 10x.

Unless the company can increase their topline significantly or keeping cost competitive by increasing their net margin at 6% (from current 3.5%), then it's hard to see how the valuation is able to price its share price upward.

I'll continue to keep a monitor on the progress each quarter and will attempt to get back in once the sky is clearer.

Sunday, February 19, 2017

My Personal Cashflow

Kyith wrote a good piece of information this morning (Link Here) regarding segregating the difference between balance sheet and cash flow/cash and connecting the dots between how we look at company the same way we tend to shape our very own lifestyle and finances.

After reading the article, I am tempted to look deeper into my own cashflow because I don't track my income and expenses very closely, let alone cashflow. I feel like I am at the stage where such tracking to the cents does not give me much marginal benefit compared to the time I'm spending them on to track. I get the idea what I needed to do on the most basic level of finances, i.e to spend less than whatever I earn

The idea at first was to leave open the approach in that manner to allow myself room to endeavor around the income and expenses amount. If I need to increase my expenses by 10%, I would first find ways to increase my income by 10% or at least to that range. If my income was cut by 10%, I needed to do the same to my expenses. I think the survival guide needed to survive will allow one to adjust to that circumstances, not necessarily easy but definitely doable.

Balance Sheet

Before I go to the cashflow portion, I'd have to review on the balance sheet because they are somewhat interlinked.

On my own backend, I have the impression that I yield net positive cashflow as I seem to be able to add onto to my existing equity portfolio every month but that is about all I can guess. I do not exactly know the quantum on the amount.

For the purpose of easy reference, I had only included the equity portfolio so no cpf or anything else.


I was curious to find out and so went ahead to calculate this afternoon when both my boys were having their afternoon nap. 

I knew expenses were creeping up due to certain circumstances these days so I was expecting my cashflow to be poorer than before.

I took a piece of paper and computed the big item range expenses I could think of and wrote it down. Some of the big item expenses that has a direct impact to my cashflow include insurance, taxes, school fees (pre-nursery), groceries, utilities, domestic helper & nanny's salaries, transportation, meals, monthly doctor's visit for my newborn, weekend spending and miscellaneous. 

Cash inflow in my circumstances would only be coming from salary and dividend income. CPF was not taken into consideration in this instance because it doesn't represent a cashflow for the time being.

My calculation shows that my current ratio of cash outflow to cash inflow (only salary excluding dividend income) stands at 78%, which means I have a net cash inflow of around 22% as a percentage of income every month. Including dividend, the ratio would drop to 57%, which translates to a net cash savings of 43% every month.

I am rather worried and more conscious on the spending these days because this sort of cash outflow has elevated to levels I have not seen before. My ratio of savings in the past was well over the 95% to 110% range but it has gone downhill after that. This means that my expenses are creeping up faster than my income could fetch.

Final Thoughts

I am rather glad I did this exercise because on some days I am rather complacent with the expenses portion since I do not track them closely.

I think with the elevated expenses and a rather tightening of cashflow, I might need to be more conscious on spending certain expenses now that I have the number with me on hand.

For those who have a rather poor controlling on their finances or cashflow, I'd encourage you to do this simple exercise just from a high level point of view. I think there's a lot to takeaway and think about from this example.

Friday, February 17, 2017

Recent Action - Comfortdelgro

I've been on a rather buying spree this month. I think I needed to review my cash balance all over again to see how much I have left.

I added Comfortdelgro this week by buying 11,000 shares at a share price of $2.43 (5,000 shares) and $2.41 (6,000 shares) on two different tranches.

This is a company which I had to do my thesis presentation for my MBA corporate finance class about 3 years ago, and I have to admit that the business has so many different divisions and in so many different parts of the country that it makes it difficult to prospect.


I don't think I have to run through the financials and their recent full year results as it is available easily on the sgx website.

I'd just quickly run through what I feel is important to take note.

For so many years, many investors have prospected Comfortdelgro as a single digit growth company with earnings coming from various division.

The public transport division (bus & railways) take up almost 45% of the pie, while the taxi division takes up the other 40%. The rest of the 15% can be divided amongst the driving center, car leasing, vehicle inspection and engineering service.

The company has operated at a steady net margin over the years of around 7.5% and they payout about 65% to 70% of the company's earnings as dividend. Dividend yield is at around 4%.

Balance sheet has strengthened over the years and the company has been a net cash company for a long time. Net cash per share is currently at 44 cents.

Company's Prospect

The bus segment, both overseas and local is the probably the only division worth hoping for as the company moves towards the contracting model framework which has benefitted the UK model so much and is already proven to be a success looking at how SBS has performed. SBS has also stated optimistic outlook in the bus division for FY17.

DTL3 will commence operations in the 2H17 and there is a big expectation on this to be successful. To me, I think costs will continue to start creeping in and margins are still relatively unknown so I'm more wary than hopeful on this.

The taxi division will almost definitely be lower as they face pressure from various competitions such as grab and uber and leasing also has stated to be lower.


At this valuation, the company is not cheap. I repeat not cheap.

They seem cheap because many investors are anchoring their share price and valuation to what it is for the past 3 years, where valuation has gone to as high as 22x. This is similar to Keppel when folks used to anchor their share price when oil was at its peak. We need to remind ourselves when we invest in these decisions.

EV/EBITDA is also at around 6.5x. That is almost fair valuation.

If you look at the various analyst's report on CDG, I found Citibank and CIMB Research on CDG to be overly bullish. If I recall, they built in higher positive single digit growth and gave a higher valuation at around 19x. In addition, they were so bullish about the contribution of DTL3 contributing to the bottomline. It ends up with a target price of around $3. I think that's way overly optimistic at this moment and unlikely to happen within the next 12 months. So don't get your hopes up.

Final Thoughts

My plan on buying this is likely to hinge for a short term trade of 10% (4% dividend yield + 6% capital gain). If it reaches my desired target, I may let it go depending on any further news development and review thereafter.

My theses is based on the projection that the company will stalled their growth in FY17 but will have a higher dividend payout as they are freeing up more cashflow since they have less maintenance capex to deal with. So I think 4% yield is almost a certainty for me within the next year.

If you are an investor buying this thinking that it may go back to $3 fast, then I think it's almost quite impossible in the near term (next 1 year). You may want to rethink your decision.

If you are an investor buying this for the long term, I think it'd do just fine. You can sit back, relax, collect dividend and wait for the shares to retrace back to the higher range of the valuation. I think there is always a chance given the company often engage in M&A activities.

If you need further margin of safety, then I think you can wait till the selling dust has settled and it goes below their long term valuation.

Whether or not this is a suitable buy, I think it depends on what our objective is.

Sunday, February 12, 2017

Recent Action - ISO Team

I bought 70,000 shares of ISO Team at a share price of 41 cents for a catalyst play. My previous catalyst play were for Noel Gifts and more recently Spackman and they have done considerably well. I hope this turns out equally good. Still, the risks are always pertinent there.

The valuation based on TTM isn't actually cheap but I've always felt that positive earnings expectations will propel the company to be re-rated upwards, with an even higher valuations. Based on the FY16 TTM, the EPS for the company is at 3.2 cents. Based on the current share price, this means that it is trading at a PER of 12.8x.

In any case, here are my quick observations for the company (since this is a catalyst play, I won't be doing a full case analysis on the company).

1.) As mentioned above, valuation based on TTM isn't exactly compelling. For such a company, a PER of 12.8x would only look cheap if based on reverse DCF, they can sustain a growth of 7-8% for the next 5 years using a WACC of 10%. I think the company is more than capable of doing that looking at the various engine drives they had on hand.

2.) The company made a recent acquisition for Rongshun which guarantees them both order book and pre-tax net margin in excess of 12% (higher than the existing company's net margin). The acquisition is made part cash and part treasury shares, so this is going to be directly accretive to the bottomline.

3.) Net cash per share is increasing, balance sheet is strengthening and FCF is positive. The fact that they only paid out around 20 to 30% payout as dividends means they retained quite a bit for growth. I think we could see more acquisitions to come which will be earnings accretive. The ROIC impact to the cash though will be unknown until a few years the acquisition pans out.

4.) New contract won on the renewable energy installation which is one of the engine drives yet to be fully utilized thus far. It's a good first fortray into winning these contracts for more to come.

5.) The R&R and A&A business on the maintenance and repair are backed by public sector demand hence this seems to be recurring every few years based on government requirement. This would form the baseline support while the company is embarking on growth elsewhere.

Final Thoughts

The only drawback for such catalyst play is that the valuation is not as cheap.

The upcoming earnings result will probably be key on whether forward earnings can compensate for forward PER and that's where I am putting my money on.

With market buoyant as a whole, we might just see some surprises ahead.

Thursday, February 9, 2017

FCL - Q1 FY17 Results & Thoughts

I initiated the purchase of this company not too long ago last Oct which I have written here. Since then, the company has dished out a dividend of 6.2 cents and are now sitting at around $1.60.

The company announced its first set of results for FY17 yesterday and I will just take the highlight of what I see from the report.

1.) Npat for the quarter jumped up 90.1% year on year

This will be mostly the headline that everyone will see and focus on the news but it warrants a deeper look what the increase is due to.

As it is, these gains are mostly from the completed sale of their development sales in Suzhou and Songjiang. These will be lumpy in nature and will be non-repetitive, so we shouldn't expect similar gains in future period.

2.) Australia remains a key market for residential and industrial 

The company continued to replenish their land banks by purchasing the land at Wyndham Vale for a purchase price of $457m. They also made a land bank purchase at Mulgrave, Berrinba and Horsley Park. There is an unrecognized revenue of $2.9 billion as at 31 Dec 2016.

Sydney and Melbourne, the two main cities for the industrial properties they had, have compressed to about 6% in rental yields.

3.) Diversification into Thailand

The company recently completed a strategic investment joint venture with Ticon Industrial and Golden Land Property in a bid to increase their exposure for industrial and hospitality into Thailand. One of the reason for the substantial increase in net profit is also due to the latter as they recognized profit contribution from their Golden Land associates.

4.) Total Assets In Terms of Geographical

Singapore remains the key major assets especially with Northpark residence, Northpark retail and Fraser Tower to be completed within next 2 years hence profit from these contributions will start to kick in.

Meanwhile, the company started ramping up their diversification towards Australia, China and Thailand.

5.) Focus into recurring income sustainability

The management is putting this as one of their focus key drivers.

By recurring, it means including part of their income stream from the Reits and management fee income. For this quarter, they managed a recurring income of $65.6m.

6.) Consistent Dividend Yield Payout

Still, something which investors are looking out and focusing on.

The company has made 3 consecutive years of 8.6 cents dividend since listing, which translates into a respectable 5.8% yield.

For 8.6 cents, they would require $250m to payout. If we annualized the recurring income portion, it would be sufficient to pay this amount out. Hence, I believe they will continue to pay 8.6 cents for a longer time to come.

7.) Net Interest Coverage at 14x

Many people continued to worry about its high gearing but we can see that the company is comfortable to repay off the interest costs which the coverage is at 14x. This is higher than most reits listed out there.

Final Thoughts

I am vested with 10,000 shares and this is still a hold for me.

I still think the company is faring well and the decent dividend yield will propel me to continue staying with the company for some time.

Wednesday, February 8, 2017

Child Portfolio - "Feb 17 - SG Transactions & Portfolio Update"

I usually try to update this twice a year - one after the Chinese new year and another during their birthday month.

I also try to make this update as consistent as possible every year to discipline myself of the intention I had from the start because I know this could easily be brushed aside once more important things came up and took over. It has obviously less importance at this stage but it could have a big impact to how the funds are going to shape up over the years.

For readers who are new to the blog, my intention is to compound these money for the children received from special events such as the Chinese New Year or birthday and have them invested in companies that I thought will do decent over the long run. These funds will continue to go under my cdp account for now but these will be meant to fund their future education and to give them a head start when they graduate from school (hopefully there are still something left). I also tried my best to pick companies which I thought will yield greater returns in a much longer span and if there are unfortunate circumstances that will make the portfolio lose the money, it will be on me so I'll make it up for it.

As they grow older, I will impart the value of saving and investing slowly so that they can see the fruits of their labor when they are independent on their own.

Child Portfolio 1 (Age: 2 years and 10 months)

No. of Shares
Market Price (SGD)
Total Value (SGD) based on market price
Allocation %
ST Engineering
Total SGD

For my elder son, he receives red packets amounting to $540 during the cny from relatives, parents, grandparents and friends. I topped up $228 a little more for him to make the grand total $768 on his behalf. I then bought 200 shares of Singtel for him at a price of $3.82 on his behalf.

Child Portfolio 2 (Age: 1 week)

No. of Shares
Market Price (SGD)
Total Value (SGD) based on market price
Allocation %
Total SGD

For my newborn son, he receives red packets amounting to $2,230 mainly from parents, grandparents and relatives. I topped up $828 a little more for him to make the grand total $3,058 on his behalf. I then bought 800 shares of Singtel for him at a price of $3.82 on his behalf.

Final Thoughts

This is the 3rd year I am doing this and is more a reference to me than anything else.

I hope by the time they are independent on their own, they are able to take over this on their own and is money rightfully theirs which I only help them to manage.

Tuesday, February 7, 2017

"Feb 17" - SG Transactions & Portfolio Update"‏

No. of Shares
Market Price (SGD)
Total Value (SGD) based on market price
Allocation %
Fraser Logistic Trust
CDL Hospitality Trust
IReit Global
LippoMall Trust
ST Engineering
Sabana Reit
First Reit
Total SGD

February turned out to be a very good month as many stocks went on a rampant run upwards.

I've been very fortunate to have many of my companies "breaking out" either due to good news or good results and as a result this has propelled the portfolio upwards this month.

There's not a whole lot of transactions which I did for this month as I was pretty busy with home domestic tasks especially with the newborn of my son.

I added an additional 15,000 shares of Kingsmen at 60 cents as I continued to build my position up. In my view, this is still a company which I thought was cheap due to its depressed gloomy outlook and I will continue to build my position slowly in this one as time goes by. The near term catalyst to the PnL in my view will be when their newly built HQ will be ready in 2018. Putting numbers into perspective, I think they would capitalize the $35m less $7m land (assuming no other improvements to the building) for a period of 30 years. This works out to be $1m each year as compared to the current $4m operating lease they are paying. This will immediately be profitable to the bottomline. In terms of cashflow, this will also improve.

I also doubled my position in Fraser Logistic Trust (FLT) at 93.5 and 92.5 cents respectively and this immediately become my biggest position in the portfolio. Their recent results was decent and somewhat expected and there are no big surprises. I still believe that this is a good young portfolio of assets which will yield a decent 7% for quite a while.

I have also added (update 8 Feb) Singtel for additional 2,000 shares at a price of $3.82. This is in line with the accumulation of telcos strategy which I am doing at the moment.

Net Worth Portfolio (Feb 2017)

The portfolio for the month is currently up to $492,646 (+0.9% month on month; +44% year on year; this includes capital injection, dividend reinvested and capital gain unrealized).

The cash portion has been reduced to around 21% as I continued to allocate capital to a few companies abovementioned.

Dividends (Feb 2017)

This is a massive month in terms of dividends for me.

I'd be receiving quite a bit of dividends this month which I have not taken into consideration so this would go into the next month warchest unless I choose to deploy.


Cashflow has been brutal this month as I had registered negative cashflow of near to $15k due to the hospital bills. Thankfully, this is something which I have budgeted before hand so everything is going well and expected. No surprises on this one though it's rather heavy on the shoulder.

Other Investment

I mentioned about this in my Jan post so I will not repeat to it again here.

Just to update on the status, it appears now that likely it will be a winning ticket so I will be expecting for quite a lump sum in the next few months. This is currently valued conservatively at $0 value on my balance sheet.

That's about it for this month.

I am currently still on paternity leave as I am handling a few administration task related to the immigration but will be back to work next week. Busy times ahead. Let's work our ass off on this one.

Saturday, February 4, 2017

Sabana Reit Is My Top Performing Investment In 2017

Sabana Reit is probably one of the most deafening and worst performing Reits we have listed in the SGX market. There has been so much recent news surrounding the company that it appears there are many uncertainties on its future.

I made my initiation purchase on Sabana (Link Here) just last month and to date it has been my top performing counter ahead of any other companies with current unrealized gain sitting at around 28%. The company has also recently went ex-dividend for a 0.88 cents so I will also be entitled to the dividend.

There are some of my friends who received their entitlement of the rights + excess so their average price could be a lot lower than mine and hence sitting on higher gains at this point. Kudos to these folks.

While the gains in terms of percentage are rather decent, it is not a big position (2% of portfolio) so the gains are not material to the overall portfolio.

Rather, there are two important lessons which was my personal key takeaway that I received from this.

The first takeaway I get was that there are opportunities investing in a not so good company, as long as it is not a total crap company. Companies like Sabana, which are backed by hard assets (net of assets less liabilities) are almost impossible to get to 0 valuation for as long as the assets are real. In this case, the share price and valuation has been battered so bad and shunned by so many people that it becomes an attractive investment at some point. I think I came to that conclusion when I decide to enter them at 34 cents.

At some point, I think there is a need to do a risk reward ratio and while we can never say never to a company that might go bust, the potential for the reward need to be there. On the other hand, it is pointless to average down on a company that has no chance for a turnaround or risk reward ratio that is lower than your expectation.

The second takeaway I get from this was that as minority shareholders (I mean what can I do with only 30,000 shares), it is almost impossible to influence the strategic business decision as a business owner position. 

Sure, the recent activist decision to remove the manager of the Reit is welcomed by many of us, including myself, but surely if you are just one of the pawn soldier in the big organization, it is easier to get out early and divest the stock and move on when things get patchy instead of waiting for so many years before making "noises" hoping things go in your favor. Don't get me wrong as I think the recent activist noises are helping minority shareholders to improve their values but the time could be better spent on others instead of harping on one bad investment idea.

For now, I'd be a happy quiet shareholder waiting to watch the show hoping to see some sparks coming out but if not, I'd be an equally happy shareholder moving on with my other investment.