Finally we saw a glimpse of the bear in February. Volatility is returning and hopefully we will get some chances to deploy our funds. There were a couple of days when the DOW fell more than 1000 points, but it quickly rebounded. STI hasn't even retract 10% and this is definitely nowhere near major sale-terriority yet.
Macro wise - we have the threat of US-Sino trade war brewing, de-nuclearization of North Korea, more incoming interest hikes and who knows what else the crazy president is going to do.
Locally, there is a lot to learn from the Noble Group saga. When it fell from over $1 to 60c, people were saying "there is no point selling now, it is already so cheap. It can't possibly get any cheaper." Well, cheaper did it get. After a 10-to-1 reverse stock split and more rights issue, it has since lost a further 90+% of its value. The important lesson here is not just that cheap can get cheaper, but how crucial the management are to a company, particularly for a cut-throat business. When you got selfish, incompetent and some might even say corrupted management, it is just not worth investing in the company no matter how cheap it is.
Performance Review Highlights
Our portfolio underperformed for Q1, losing 2% compared to STI which is still up 1% YTD. It was dragged down mostly by the recent REITs correction and the slight decline in Singtel (our biggest holding). At the trough, our portfolio was down as much as by $8000 from peak.
Interesting note: Our equities holding is nearly doubled from the same period last year! This is proof of how much we are pumping into investments.
In this quarter - we added Starhill Global REIT and M1 Limited, decisions we would elaborate more on below. Thanks to Singtel special dividends - we paid out over $2000 in dividends in Q1 (the largest amount of any quarter by far)!
I really did not expect main income to exceed the record 2016Q1 figure, but the higher base-income plus good bonus made it about 5% higher. Financial-wise, moving on to this new job is definitely the right move. We made higher income in all the past 4 quarter - and I think the difference will be even more pronounced this year. Looking forward to the year end tally.
On top of one-time income from CNY angbaos, we made some gambling winnings ($300+) this year (compare to a loss last year). Passive income is also signifcantly higher. In local news, government announces a minor angbao to be credited later in this year.
A lot was spent on insomnia supplements and other sleep aid "devices" . Some of them are quite ridiculous, but I am desparate now. I will try it as long as it has a sound chance of working, and I will continue to hunt for an effective cure. I also "impulse add-on buys" a couple of board games at Amazon for over $150, which are mostly bad buys looking at it now. I don't forsee the games being played much going foward, and it really goes against my minimalism philosophy. Will definitely work on curbing these buys in the future.
2018 marked the first year of giving my mum CNY angbao, and I intend to keep this "tradition" going forward. This made up the bulk of the "one-time" expense category. Interestingly, when I compare recurring expenses for the past 4 years, it is almost equal (within ~5% of each other).
New Account - DBS Multipler
One of the major decision this quarter was moving from OCBC360 to the new DBS Multipler. I will not go into specific review of the Multipler (you can read it here), but for our case, it offers a more compelling rate, especially after the repeated downgrade made to OCBC.
For OCBC 360, I get 1.55% every month, and 1.85% occassionally.
For DBS Mutlipler, I get at least 1.9% every month, often 2.2-2.3%, and perhaps even 3.5%!
A rough estimation:
OCBC: $70000 x 1.6% = $1120
DBS + CIMB: $50000 x 2.0% + ($17000 x 1.0%) = $1000 + $170 = $1170
DBS + Maxigain: $50000 x 2.0% + ($17000 x 2.0%) = $1000 + $340 = $1340
This is assuming the $3K remain in OCBC to maintain the account fall below fee. I am leaving the account open to faciliate switching back if either banks revise their terms in the future, and also it is quite an hassle to close it due to all the GIRO payments.
Other side reasons:
- I no longer have to worry about "clocking $500" to meet the spending requirement of OCBC365.
- I have heard stories of OCBC beinga adamant about not waiving annual fee if you do not meet their spending requirements. This is in preparation for that day. (coming this year October)
Overall, I estimate this shift to earn an additional $200+ of free money per year.
Acquisitions
2 big positions taken up this term:
Starhill Global REIT: We have been eyeing to buy it this below 70c. When it seems like it would never come, we finally give in to pay a higher price. Still, it should be decent value. Near 6.5% yield (could drop further in next quarter, but confident that it would stablize once the AEI completes), 0.8P/B, a decent gearing of 35% and generally good management. There are plans by the government to "rejuvenate" Orchard Road - I'll reserve my judgement on how effective it would be.
M1: We would not deny it is partly a gamble to "recoup losses", but there are several positives we are betting on. Management guided lower capex next year ($120M in 2018 vs $150M in 2017), inclusive of spectrum rights. In our view, Q4 results showed sign of bottoming, with revenue increasing, EBITDA stabalizing and increasing customer base.
At worst we forsee another 5-10% drop in earnings. EPS is 14.c in Y2017 - Assuming the worst case drop and EPS of 12.8c, an 80% payout ratio is 10.3c DPU which at $1.74 still gives a 5.9% yield. Assuming a steady DPU of 11c, we are hoping it would yield 6.3%. They have lot of initiatives such as waste management, SG bikes, corporate segment growth which we hope would eventually replace the declining mobile revenue. A secondary factor is confidence boost by several like-minded investors.
2 big positions taken up this term:
Starhill Global REIT: We have been eyeing to buy it this below 70c. When it seems like it would never come, we finally give in to pay a higher price. Still, it should be decent value. Near 6.5% yield (could drop further in next quarter, but confident that it would stablize once the AEI completes), 0.8P/B, a decent gearing of 35% and generally good management. There are plans by the government to "rejuvenate" Orchard Road - I'll reserve my judgement on how effective it would be.
M1: We would not deny it is partly a gamble to "recoup losses", but there are several positives we are betting on. Management guided lower capex next year ($120M in 2018 vs $150M in 2017), inclusive of spectrum rights. In our view, Q4 results showed sign of bottoming, with revenue increasing, EBITDA stabalizing and increasing customer base.
At worst we forsee another 5-10% drop in earnings. EPS is 14.c in Y2017 - Assuming the worst case drop and EPS of 12.8c, an 80% payout ratio is 10.3c DPU which at $1.74 still gives a 5.9% yield. Assuming a steady DPU of 11c, we are hoping it would yield 6.3%. They have lot of initiatives such as waste management, SG bikes, corporate segment growth which we hope would eventually replace the declining mobile revenue. A secondary factor is confidence boost by several like-minded investors.
Outlook
Aside a $1000+ upcoming vocation, recurring expenses should be similar to last year.As of now, we still have working capital for 4 more acquisitions - and our watchlist includes Comfort Delgro, Raffles Medical Group, ThaiBev, Mapletree Commercial/Logistic/Greater China Trust, ST Engineering, Netlink Trust and Singtel.
Should a major correction comes a long, we intend to build a more substantial position in STI as long-term foundation - strategy is 1 bullet from 3200 points and another for every 200 points drop.
