My First Stock Report Card!

Got the first quarterly earnings report of my first stock today!

Wow, the feeling is kind of like camping for your own exam score - it feels good when the results are good.

Long story short, it was nothing short of stellar. Causeway Point and North Point continues to be the pillar of FCT (Monopoly of the entire North area. No other shopping malls within 5KM distance)

Overall - More rentals, more income, more dividends!

Aside from Bedok Point which is undergoing renovation, all other malls revenue have increased. Renovations are expected to complete by the next quarter, and together with the acquisition of Changi City Point, it's expected to do even further for the rest of the year.

In other areas, occupancy rates are stable. Interest cover have increased, and 94% of FCT's debt are fixed (meaning future interest rate hike will not affect it as much)

Overall, I am very happy with my purchase!

My First Stock - Frasers Centrepoint Trust!

Finally acquire my first stock today, Frasers Centrepoint Trust (FCT)!

Does the logo looks familiar?

FCT own a number of shopping malls in Singapore - its most prized assets being Causeway Point and Northpoint.

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Why did I buy this stock?

1) It meets all the criteria I stated in the previous post - strong fundamentals, high dividends yield, and a solid blue-chip (>1 billion market cap)

2) It is a defensive stock - even in economic downturn, people will still visit shopping malls to eat and watch movies. This fits my goal of holding an income generating asset for very long term. As long as its fundamentals are good, I will hold it and collect dividends till I'm 60 years old. :P

3) It is the most defensive among all retail REITs due to its mall locations. Unlike most other REITs, FCT mall cater more to the sub-urban, heartland areas. It serves place like Woodlands, Yishun, Yew Tee - where they have sole "monopoly". It's not like Jurong East where they have 5 malls competing with each other for traffic.

4) It is something I can understand, and I can see everyday! When I pass by Causeway Point, I know how flooded the mall is. I can see how many percent of the retail areas are rented out, etc...

5) It has enjoyed very good "reviews". From the bloggers I followed to the analyst reports that I read. Most notably, It just acquired Changi City Point (at Expo) recently - which will spur its growth.

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So, that's the 5 main reasons I brought FCT.

In terms of technical, my personal valuation is this:

Disclaimer: These are based on a newbie opinon. Do not follow blindly.

P/E: 16.2	Own adjusted calculation.
NAV: $1.77	Brought it at near NAV. Ideally I would have waited for a better discount. However, I don't think it will drop any further in the short term.
Gearing: 27.6%	Extremely good. Typically REIT gearing is around 30 to 35% This means there is more than enough debt head-room.
Yield: 0.06	Not the highest among all REITs. For a retail one, it is solid. It will grow with the acquisition of CCP.
Interest Coverage Ratio: 6	Again, very good ratio. This means their earnings can cover the debt interest 6 times. Anything above 5 is good.
Estimated Margin of Safety: 43%	Based on my personal extremely conservative calculation. Ideally, I would have wanted around 67% - but you can’t have everything perfect.

My First Investment?

After tons of research, reading, reading and more reading. From SGX, Money Sense, SIAS, Investopedia, Financial Times, Books, Forums, Blogs... [

I think I've now got a good sense of fundamental analysis - interpreting financial reports, figures and ratios.

I've done several exercises where I try to derive financial ratios and figures of the company, based on its financial report alone. (It's sort of like doing 10 years series assessment, then checking the answers at the back)

So.

I think I'm ready to make my first step into the world of investment.

My first security purchase.

As a new investor, my approach will be: Explore around, but be caution.

My personal opinion is:

- The stock market is kind of overpriced right now (STI at >3000). No one knows when the crash will hit.

- I could consider buying ETF (safest), but I feel I won't learn much from it. I want to be more involved and engaged, even if it means slightly more risk. I want to be vested in a company, so that I can learn. The ups and downs, the process, etc...

- I don't want to take on too risky (penny, even mid cap) stocks. I don't need to, and I also don't want to. Maybe when I become more experience, or have more capital, etc... I could allocate some to them. But not now.

- The most reasonable choice now would be blue chips. Unfortuntely, they feel really overpriced. The 3 telcos are high-sky. The 3 banks are out of reach for me. The others are either the same, or not my cup of tea (don't invest in something you don't understand).

- In the end, my conclusion is to wait for the 'crash' before buying stocks. Rather then buy a growth stock, I decide to follow my idol - buy an income stock.

- What are some of the best income generating stock? REITs. Are they without risk? No. They are riskier than the ETF, but safer compared to stock.

- The greatest threat to REIT now is the impending interest rates hike. Therefore, I must choose very carefully.

- Another reason for REIT: I intend to hold this stock for the long term - as long as I need to. Hence, I'm not worried about the price. It just needs to be my extra source of income. :)

- And hence, my first decision - allocate a portion to REITs, and keep the rest as back-up ammunition. Opportunities come to those who wait.

Stocks VS Poker

Now that I've learn a lot more about stocks, I realize how much similar it is with Poker.



Stock: You can control company risk (by choosing the right ones), but you can't control the market risk (crash).
Poker: You can control the cards you choose to play (premium hands), but there's nothing you can do when you run into a cooler.



Both:  You can't be right all the time. You can, however, maximize your profits when you are right and minimize your losses when you are wrong.



Both: It is all about return on investment in the long run - not one or two sessions.



Stock: You can't control the emotions of the market. Even the best companies stock can plummet.
Poker: You can only make sure you get in with the best hand. The rest is up to the gods.



Stock: You need to know when to buy, and when to cut your losses and run.
Poker: You need to know when to hold'em, and when to fold'em.

Financial Education

Stepping up on my homework lately...

- Completed most of the important courses at Wall Street Survivor [Highly recommend their "Reading financial statement series].
- Spent a lot more time reading financial blogs and forums.
- Setting up a watchlist at Google Finance.
- Read through some company financial statements (never thought I'll do that).

I've also began attending some newbie seminars by CIMB.

For most investors (who made money from the price rising), there are 2 criteria you must ask before buying a stock:

1. Is it a good company?
2. Is it the right time? (aka right price)

The speaker gave his 2 cents worth on evaluating a good company:


1. Positive Net Income for the past 10 years

This is the company "take home" pay - what is left of their revenue after paying the workers, taxes, expenses etc...

Companies can sometimes manipulate this figure by playing around with stuff like depreciation to make it look nice, for a year or two - But for 10 years? Not likely. Any scam would have fallen apart.

This means the company is a money-maker.


2. Consistent dividends in good & bad times

This is important as it show that you are taken care of as a minority shareholder.

If the dividend payout ratio is reduced, what is the reason? Is it justified?


3. Positive operating cash flow (OCF)

This sounds very similar to net income, but it's not the same. A company may make lot of net income, but still run in cash flow problems. It only deals with cold hard cash on your hand right now. [Not receivables, buildings, machines]

If this is negative, check what the company did. Maybe it brought a new building/equipment for future investments.