Tuesday, 14 March 2017

Author Creed posted on Tuesday, 14 March 2017 in , , , , , ,
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









Wednesday, 1 February 2017

Author Creed posted on Wednesday, 1 February 2017 in , , , , ,
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











Monday, 23 January 2017

Author Creed posted on Monday, 23 January 2017 in , , , , , , , , , ,
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

Tuesday, 6 December 2016

Author Creed posted on Tuesday, 6 December 2016 in , , , , , , , ,
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




Saturday, 3 December 2016

Author Creed posted on Saturday, 3 December 2016 in , , , ,

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






Saturday, 12 November 2016

Author Creed posted on Saturday, 12 November 2016 in , , , , , , , ,
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




Wednesday, 26 October 2016

Author Creed posted on Wednesday, 26 October 2016 in , , , , , ,
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



Tuesday, 11 October 2016

Author Creed posted on Tuesday, 11 October 2016 in , , ,

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