STI inches up slightly in Q3 by 0.8% while the Dow Jones continue to break historical high despite tensions with North Korea. Our portfolio grew by 0.5% with most coming from dividends. No major acquisitions in Q3 except for a very small stake in Netlink Trust gotten from IPO. Our assessment is still that the SG Market is fairly valued now, although some blue chips are falling into bargain territory.
We paid out dividends of over $1500, the highest ever for a single quarter. This is almost doubled the same period last year.
Operating Highlights
The most important milestone is that we have officially secured our revenue source, extending our lease expiry by another year. It comes with a good positive renewal, affirming the board's strategic decision last year.
Income for the quarter was about 23% higher largely due to mid year bonus in July. Other one-time revenue came from the numerous IPT sessions in August. We expect income to be higher in Q4 as well from the year end bonus, which should make up for the loss in Q1 this year.
Overall, total income this year should be comparable to last year.
We do not foresee any major expense coming up for the rest of year, except the slight possibility of getting a laptop for work purposes.
We came very close for a few purchases but it always seem to slip us by, and now our cash holdings are almost back to Q1 level. The only purchase this quarter is a very small stake in Netlink Trust.
CapitaComm Trust would be doing a rights issue soon and while we are slightly doubtful of the acquisition (non DPU accretive), analysts claim it will be beneficial in the long term. That said, we see no reason not to sign up for it. Closing date is 19th October.
The general intention would be to once again deploy more into investments in the next 3 months, especially since we anticipate more cash inflow.
This is a first world problem. We are still deciding if we should make do with a little less margin of safety and make more "fair value" purchases instead of waiting for huge bargains.
Outlook
We have a long list of potential acquisition targets and prices that would warrant us to "take a closer look".
Comfort Delgro - This transport giant has fallen >30% from its $3 peak. Management guided declining revenue in almost all segments, and it is plagued by competition from Grab. However, we must know that only 30% of revenue comes from Taxis. Buses and MRTs are still largely profitable, and there must come a point where valuation is cheap enough to worth it. $1.9 and below would be extremely tempting.
SGX - Closer to $7. Monopoly business with a stable and safe 28c DPU per year. The problem is how much yield is sufficient to reduce capital-loss risk? We think 4% is fair while not being over excessive.
Raffles Medical Group - Closer to $1. Despite crashing near 40%, it is not really that cheap based on historical valuation (its PE is around 23, right around the 5 year mean). More investors are cutting back expectations after management guided "3 years turnaround time" for China operations. We are lacking healthcare exposure and still largely believe in RMG growth story in the long term (5 to 10 years). However, we need a good margin of safety, especially when this is not a dividend stock (1+% yield).
Starhill Global Reit - DPU was about 10% lower last quarter due to large number of AEIs. DPU per year should range around 4.92c to 5c range, which gives around 6.5% yield at $0.75.
Mapletree Comm Trust - Below $1.5, camping at 6% yield. Vivo City is a shopping paradise (well-managed and diversified, especially with the upcoming AEI) and Mapletree Business Centre is just icing on the cake. NAV is $1.37, so the key is just to not pay too high a premium.
ST Engineering - Compared to Singtel which has a higher yield of 4.7% (at $3.68) and lower payout ratio, ST Engineering just doesn't seem as appealing at $3.4. Their dividends are safe but stagnant. I have been looking to join back this solid Ah Gong company for a long time. and would likely bite at 5% yield (closer to $3)
