Letter To Shareholders (11) - Performance Review 2018Q2

Economy Commentary
Market slip further into correction terriority - falling from its peak of 3600+ points in mid May to its current 3200+ points, mostly on fear of trade war between China and America. Yes, we are on the brink of war. Year to date, STI is down about 2%.

Locally, we can see a how a seemingly defensive and government link business - Hyflux, can be brought down by immense debts and losses.


Performance Review Highlights
Our portfolio suffered an almost $10K decline in 1 single quarter, despite a much less severe correction compared to 2015. It proves how much our portfolio have grown - 3 times bigger than 3 years ago. After meeting our warchest goal in 2017, we have been dedicating all future incomes to investments. 

YTD, we underperformed the STI (chunking up 8% losses), mostly due to the continued decline in Telco industry (our biggest holding) and to a lesser extend, REITs and Property. Thanks to the dividends collected over the years, we are still in the green.

We took up 3 big positions this quarter - Netlink Trust, Kimly and adding further into Singtel. We paid out $1500 in dividends in Q2, the highest Q2 payout since inception. At this rate, we should have no issue hitting 5 digits passive income for the year.

Operating Highlights - Income
Q2 income is at all time high, mostly from higher salary (increment and benefits) and passive income. Compare to 2015, our salary have increased almost 30% and our passive income have grown almost 75%! 

Operating Highlights - Expenses
Expenses were horrendously high due to much higher than expected costs during the April vacation, costing nearly $3000 alone in total. It really went beyond my budget.

For recurring expenses, aside from some personal products and a pair of new office shoes (old one was 3 years old and think starting to grow mould), everything else were quite minimal (in line with other years)

Acquisitions

3 big positions taken up this term:

Netlink NBN Trust - This will further beef up our dividend portfolio as we believe this defensive monopoly that will form the backbone of Smart Nation in the next 20 years. We expect earnings and dpu to be minimally around 4.5c (5.5% yield), and in optimal case up to 6% yield on cost. Unless the price drops drastically (which is highly unlikely), we will freeze it for pure income.

Kimly - Defensive consumer staple with strong cash flow and organic growth prospects. This is more of a capital-gain and opportune play.

Singtel - We did not expect the support at $3.3 to give way, but it did. We accumulate yet again at 5.6% commited yield. We first brought into this company at 4.5% yield, so there is no reason why we would not at this price.

Outlook

With the recent acquisitions, we have almost depleted all our working capital. Barring a greater market correction (STI to 3000points), we likely would not dip into our warchest. Our plan is to invest as we re-accumulate our working capital through monthly cash inflow. Instead of buying new stuff, we will actively look for opportunities to do some capital recycling in the next quarter.

Some stocks on our watchlist include:

STI ES3 (3.2), ST Engineering (3.2), Capitaland (2.8), Sembcorp Ind (2.5 or 75% of book value), Mapletree Commercial Trust (1.55), Singtel (3), Raffles Medical Group (0.9), Ascendas H-Reit (0.75), EC World Reit (0.68).

5th Mayday Concert - Life Unlimited

This concert is dedicated to my 1 day dream. The happiest and most heart-breaking 1 day of my life - the dream of a fairytale love story (Private Post).

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First party at the Sports Hub!

The good:

- A "fuller" song list compare to the previous concert, and also inclusion of new songs (终于结束的起点).
- Sound system is fine unlike previous bad reviews.
- "这一生只愿只要平凡快乐，谁说这样不伟大呢" 😭
- Surprise 大咖 guest uncle?! (Based on past exp, I have already resigned to having 路人 tier as their guests)
- 志明与春娇，30 seconds of 心中无别人.
- Got to experience 2 standard endings in one event. (憨人 and 倔强 - Usually only 1 of them happens)

The "too bad":
- Notable missing classics: 温柔, 终结孤单, 孙悟空
- Missing personal favourites: 步步, 星空, 仓颉, 勇敢, 如烟
- Big guest only sing 1 song and it's not even his most well known one? And leave stage when the song not even ended. -.-
- Ended earlier than usual.

The bad:
- We really sucks at calling for encore =.=
- Why is everyone around me so 冷静 😣
- And is it just me who prefer the indoor stadium more?

Conclusion:
- Buying cheap seats really sucks. Hard to get high when the people around you are all so "gloomy".
- Based on past experience, standing in the pit kinda sucks for me too (too short, end up see screen).
- So far, my most enjoyable has been to sit at CAT2. Gonna keep this in mind for future concerts.

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Song list: Looking back at the 2016 post, I realized they actually sang much lesser songs.

1. 派對動物
2. 傷心的人別聽慢歌
3. OAOA
4. 入陣曲
5. 超人
Short film
6. 你不是真正的快樂
Talking
7. 戀愛ing
Talking
8. 笑忘歌
Talking
9. 乾杯
10. 兄弟
11. 人生有限公司
Short film
12. 成名在望
13. 我心中尚未崩壞的地方
14. 知足
15. 少年他的奇幻漂流
16. 頑固
Short film
17. I will carry you
18. 離開地球表面
19. 凡人歌 （special guest 李宗盛）
20. 山丘（李宗盛）
21. 任意門
22. 人生海海
Encore I
23. 終於結束的起點
24. 我不願讓你一個人
25. 轉眼
Encore II 
26. 志明與春嬌
27. 突然好想你
28. 憨人
29. 心中無別人
Encore III
30. 倔強

Quarterly Results Review - 2018Q1

M1
The results were just as I expected as mobile service revenue and profit increased slightly for the first time in a long time, signialling that earnings indeed bottomed in the last quarter. Of course, this is until TPG enters the battlefield.

At worst I 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.'

As before, they are branching into other areas like malware detection solutions, nationwide IOT, smart sensors, "intelligent" waste management system, cloud offering of digital startups. Whether they will take off remains to be seen.

For now, my preference would be to take a small "swing" position to slowly recoup the losses, targetting to sell a portion above $1.9 (less than 6% yield) and buy should it come down to a reasonable price.


CapitaCommercial Trust
Headline figure was quite misleading as DPU drop 10+% due to the enlarged units base. Otherwise, DPU would have increased 7.6%.

Good results (DPU up 8.66%, 6% higher) but the stock price have shot through the sky. I really should have grit my teeth and sell when it was at more than $2. It is really unstainable considering the yield at that price is below 5%.

I believe it would be more fairly valued at $1.65 for a 5.5% yield, or at best $1.8 for 5% yield. The market are pricing in lot of growth from their AEI and Asia Square acquisition.


CapitaMall Trust
Slight increase in DPU to 2.78c for 1Q, and seems to be on track on meeting the 11c target. Yield remains at 5.4% yield at ~$2.0x. 

Announced divestment of Sembawang Shopping Centre which consist of only ~1% of CMT asset, but the surprise was selling it for ~$248m when the independent valuation is only half of that. Forumers who attended AGM mentioned CMT are conservative on their valuation, which seems to be good news if this sale hold any truth.


Starhill Global Trust
Starhill results slightly worse than I expected with DPU dropping by 7.6% (thought max would drop by 5%). Not sure how big a role the renovations played but a 7+% shopper traffic drop at Wisma seems bad. Hopefully DPU will stabalize in 2H with AEI completion in Australia.


Frasers Centrepoint Trust
In summary a good set of results led by Northpoint City.
 DPU of 3.10 cents, up 2.0% year-on-year (2Q17 DPU: 3.04 cents)
 Gross Revenue of $48.6 million, up 6.3% year-on-year
 Net Property Income of $34.8 million, up 6.9% year-on-year
 NAV per Unit of $2.03 as at 31 March 2018 (31 Dec 2017: $2.02)
 Gearing level at 29.2% as at 31 March 2018 (31 Dec 2017: 29.4%)

Frasers Property
Results swell this quarter to make up for the huge hit last quarter. Recurring income maintained at around 70%.

Frasers Centrepoint Limited renamed. Its share price has been on a downtrend since hitting $2.25.

Current NAV fell 4c to $2.42, and I expect dividends to be maintained at 8.6c a year (roughly 60% oapyout ratio). I am really treating this as an ETF and not reading much into the details. might add on more should it come to $1.7 (30% discount to NAV, 5% yield).


Far East Hospitality Trust
Finally we see glimpse of recovery after many consecutive quarters of DPU fall - it rises 1% to 0.94c. 

With contribution from Oasis Hotel Downtown (acquired on 2nd April) and recovery in the industry, better times and DPU should be ahead. Slight drag from Service Residences.

At 67c, this is one of the REIT which haven't run up significantly in price. I might consider adding if there are no better deals and it drops a bit more (to say around 63c).

Expect total DPU of 4c, which gives a yield of around 6%.


Sembcorp Industries
Almost all analysts are predicting $3.5 to as high as $4.4 target prices, but I still see no major turning point in the results. Yield at current price is a pathetic 2% and I am really reluctant to average down on this (I can get better yield from my banks).

Good points? The IPO in India is the major catalyst, and it is trading at relatively big discount to NAV of $3.6. If it falls to $2.70 I might do an average down.


Netlink Trust
Higher than IPO forcasted DPU of 3.24c declared. At $0.81, forecasted yield is around 5.7%

I have built a substantial position in this, and this will form a decent pillar in my dividend income.

Link to DBS Report

Singtel
Management finally committed to a dividend guidance of 17.5c, although I have never doubted Singtel ability to maintain it. This is definitely meant to assure investors in face of earning pressure (profits -18% in Q4). Payout ratio is at the highest at 81%.

At $3.40, Singtel currently trades at 10x EV/EBITDA (minus -2SD from historical mean), below its five year historical mean of 12x. It is also supported by a attractive yield of 5.1%. P/E is close to 10!

I would definitely add on more if I weren't already so heavily vested in it. I think I will fire one more bullet should it falls to $3.3, and reserve 1 final bullet for $3.

Accordia Golf Trust
Yield has gone down to 6% from the 7.5% I estimated when I first invested in this counter (roughly same price). Full year DPU is now just 3.85c, down from 6.04c last year. NAV stands at 90c.

It was hurt really badly by membership deposit in 1H and I doubt it will ever go back up to 78 high again. Utilization rates also plummet in Jan to Mar.

Management continue to iterate Japan's economy recovery, hopefully it prorpogates down to this counter. I will seriously consider selling it if the price rebounds or fundamentals continue to weaken (it has weaken for 3 quarters).


Watchlist / Potential 

M1 - Will sell this at $1.8+ to reduce exposure to Telco sector.

Singtel - Extremely attractive at committed 5.2% yield. Below $3.3.

Raffles Medical Group - Closer to $1. High P/E but long term growth story. China is make or break.

Comfort Delgro - $1.9 and below would be extremely tempting but boat is gone.

SGX - Closer to $7. India exchange saga impact unknown.

ThaiBev - A lot hinges on their Vision 2020. Debt is crazy after the acquisition spree. Results were bad as expected consumer recovery did not happen. Currently at 17.5 P/E, -1sd below 5 year average. 70c maybe?

Mapletree Comm Trust - Closer to $1.5, camping at 6% yield. NAV is $1.37.

ST Engineering - Would likely bite at 5% yield (closer to $3)

[Obsolete]

Capitaland - Look closer to $3.3 or below.

Mapletree Greater China Trust - $1.1 or when it retract to more than 7% yield.

Mapletree Logistic Trust - Despite >10% retracement still pretty expensive. If it comes closer to book value, say $1.1.

China Primary School Kid Knows FIRE

When a kid knows more about FIRE than you...

 It took me nearly 25 years, and this kid has it all figured out during elementary school.

"I don't expect to be able to escape from the trials of reincarnation, but at least I can escape from the repetitive mechanical loop of life."

 

He may have put it very crudely in words - 发财.

But what this boy want is not money, but freedom in life, to get rid of the hollowness of life.

He might not know what it is yet, but what he has described is truly FIRE.

Life Updates 2018

1. The Infinity War made me a Marvel fan again! Started going back to look up on many movies I've missed (Dr Strange, Ant Man, Guardians of Galaxy series, etc) and oh my how much have I missed! Guardian of the Galaxy in particular was the cosmic side of Marvel I never knew, and I really enjoyed the humor in that series.

2. Work-wise there isn't really nothing much to say. Operational stuff takes up a majority of the time, and I'm hoping for more opportunities to strengthen my visualization, analytics and maybe even machine learning skillset. There are definitely times when I feel down and dejected, but I have to persevere for my long-term goal.

3. MED is making me feel like it's University Year 1 all over again, almost 10 years apart. She is one of the little happiness I have here, one of the few things that can put a smile on my face, and I don't really want to risk destroying it and have it become a problem. And I always forget my lyrics.

4. Sometimes, I do get overwhelmed with this feeling of solitude. The feeling of really wanting someone to share experiences with. When I'm watching variety show, I wished there was someone to laugh together with. When I want to sing, to watch movies, I wish there was someone that would always be available - some person that I can always hang out with. Maybe it's just the symptoms of getting old. I think it is also affected by having less friends as they all start to have their own families & babies.

I really envy couples like 15HWW, BFGF, KPO and CZM. How lucky are they to find a significant other who share the same FIRE dream? How easy is it to find someone when your "life goal" is so socially unacceptable?

5. While I still attend board game gathering occassionally, frequency has greatly diminished. Now, it's more like once or twice a month. Somehow, I no longer feel the same vibrancy like the past. Maybe it's just people "moving on with their lives", or "running out of fresh games".

6. BTS and their content are taking up a good part of my entertainment these days. This is the first time I have gotten so into a KPop group (in terms of music anyway) and I can definitely see why they are the number 1 group in the world right now (even John freaking Cena is their fan). It's hard to pin-point exactly what made them so successful aside from being just "pretty boys" - A combination of charisma, chemistry, intellectual and goofiness, cheoreogrpahy, music and production effort (years and years of inter-connected storylines and plot in their MVs, it's like a never-ending suspense movie).

It is quite a feat how they bounce back from a company that was on the verge of bankruptcy (when the members were made fun of and some even had to go hungry) to the profitable entertianment label in Korea, surpassing even the Big 3.

Their life stories are reflected heavily in their songs and touch on an extremely wide amount of topics (lyrically), which is very "Mayday-like" (perhaps 1 of the big reason I like them) - prodigy culture in Korea (望子成龙), studying life, their love for music, comparing depressed youths to the 52Hz whale, society stigma, roasting of haters, to even observations like younger generation leeching on their parents, their YOLO attitude, low self-esteem, the list goes on.

Do I feel too old to like them? Kinda, but this ARMY thing really has a cult-like following and it's really quite entertaining. Fellow youtubers confessing to each other online? Reactions? Crack Videos? Run Episodes and all sorts of creative edits?

Some of my favourite songs, in terms of music: Let Me Know, Crystal Snow, Truth Untold, Awake and in terms of performance: Fire, Blood Sweat Tears, Mic Drop.

7. My insomnia problems are sort of getting better, but it's definitely still affecting me. I reckon it occurs about once a week now, but I would eventually be able to fall asleep say around 3am or 4am. It is not as bad as when I literally stay awake till 7am. I'm taken a few measures like early Gabanite, going to bed half an hour earlier, recording any special food or actions I did the night before and avoid them.

8. Health-wise, I really feel I'm getting "out of shape". I didn't have 6 packs or anything, but at least my tummy was flat and lightly defined. Now, it definitely feel like a mini beer belly developing  (especially after food). I am determined to do something about it - running at least 2 times a week and doing lots of abdomen exercises.

9. There are sooooooo many games I want to play but I just didn't have the time to follow through. Some were released and brought (and played only like once), while others are upcoming games. Here's a list for everything I need to look at: Civ 6 Rise And Fall, Three Kingdoms Total War, Planet Coaster, Cities Skyline, Twopoint Hospital, Jurassic World: Evolution, Plutrocracy, Tropico 6.