Portfolio Update Sep 2020

Portfolio value increases $9k to $206k mainly due to more than $7k of capital injections.

I nibbled Mapletree Logistics Trust, topped up Sembcorp Marine received from the demerger from Sembcorp Industries and added Aims Apac Reit.

See related posts:

Nibbled Mapletree Logistics Trust and Sembcorp Marine

Added Aims Apac Reit

The local stock market has generally been stagnant. Corporate actions such as the impending equity fund raising by Frasers Centrepoint Trust and merger between CapitaLand Mall Trust and CapitaLand Commercial Trust did not help to propel these Reits higher but caused massive exodus of foreign funds instead.

I am happy that they stay this way so that I can still add on more Reits and bank counters at decent valuations for the rest of the year. As 3Q 2020 ends, we shall await the quarterly reporting season and get to know the dividends to be received in Oct to Nov period.

Total Portfolio Value = $206k

The SRS portfolio remains largely stagnant and dips $1.1k to $68.7k. 

Thanks for reading.

With love & peace,
Qiongster

CMT + CCT = CICT

After a long 9 months wait since my first post on CMT + CCT = CICT in Jan 2020, this merger proposal is finally approved.

All resolutions in the CapitaLand Mall Trust and CapitaLand Commercial Trust EGMs are passed today on 29 Sep 2020.

This means CMT + CCT = CICT will confirm take place and be completed before end Nov 2020.

Both EGMs started with a brief presentation and recap on the benefits of this merger. 

The benefits can be summarized as such:

a) to future proof for large acquisitions and grow beyond Singapore
b) to improve credit rating and boost financing power
c) DPU accretive to unitholders of both Reits
d) reduce single asset class risk through diversification

CapitaLand Mall Trust EGM

Resolution 1: To approve the proposed amendments to the trust deed constituting CMT (99.75% For)

Resolution 2: To approve the proposed merger of CMT and CapitaLand Commercial Trust by way of a trust scheme of arrangement (the "Merger") (98.89% For)

Resolution 3: To approve the allotment and issuance of units of CMT to the holders of units in CapitaLand Commercial Trust as part of the consideration for the Merger (98.88% For) 

The CEO Tony Tan concluded the meeting by thanking shareholders for the unwavering support for this transformative merger and they will continue to work for sustainable dividends for great interest of unit holders.

CapitaLand Commercial Trust EGM

Resolution 1: To approve the CCT Trust Deed amendments (96.04% For)

Resolution 2: To approve the proposed trust scheme (98.23% For)

The CEO Kevin Chee is grateful for the decisiveness of CCT shareholders and thankful for the unwavering confidence and trust in supporting the merger. He has also mentioned about waiver of odd lots trading offered by several brokerage houses to cater to CCT shareholders having to deal with odd lots after receiving the CICT shares. 

We can refer to the indicative timetable found on Capitaland Mall Trust slides to understand what will happen next.

As a CMT shareholder, no action is required and there will be some sort of cleanup distribution to reconcile the books before listing of CICT entity. As a CCT shareholder, one is expected to receive 0.72 share of CICT and 25.9 cents for every share of CCT owned. The 25.9 cents of cash consideration capital return is expected to be credited on 28 Oct 2020. CCT is expected to be delisted after 16 Oct 2020.

I am looking forward to the listing of CICT on 21 Oct 2020 and happy to be onboard this largest Reit in Singapore. 

Thanks for reading. 

With Love & Peace,

Qiongster

Added Aims Apac Reit

In May, I blogged about trying to add Aims Apac Reit but failed. In the end, I used the funds to nibble Frasers Centrepoint Trust instead.

Today I decided to try my hands on adding Aims Apac Reit (AA Reit) again and succeeded. This will increase my holdings to 32,000 shares, making AA Reit the largest constituent of my investment portfolio.

Why did I want to add Aims Apac Reit even though it is not the strongest and best industrial Reit?

1. To reinvest dividends collected from Aims Apac Reit.

In recent quarters, there are no dividend reinvestment plans for the dividends distributed by AA Reit unlike last year. I have collected more than $1k of dividends from AA Reit and am determined to buy back units myself during a time when there is 13% discount from NAV to achieve the compounding effect by putting money where the mouth is.

2. Well managed small industrial Reit

Unlike its small industrial Reit peers such as ARA LOGOS, Sabana, ESR etc, I believe that AA Reit is well managed though several yield accretive Asset Enhancement Initiatives to increase its gross floor area i.e. redevelopment of 3 Tuas Ave 2 and Northtech in Woodlands Industrial Park E1, recent acquisitions of freehold properties in Australia i.e Boardrider HQ in Gold Coast and increasing its exposure to the resilient logistics sector through recent acquisition of 7 Bulim Street near to future Tuas Mega Port. Its divestments were value accretive as they were sold at above book values.

3. Offers value and decent yield

Unlike branded industrial Reits that yield less than 5%, AA Reit is still offering close to 7% yield while trading at 13% discount off its NAV. There is greater income stability and visibility as more than 30% of its Gross Rental Income comes from master leases with built-in rental escalations. Master lease renewal for 12 years with Optus will commence in July 2021 and the additional property income from recent acqusitions and redeveloped properties have not been factored in yet. With untapped GFA of over 500,000 sqft, there is great potential for organic growth. Hence, I believe AA Reit will be able to steadily increase its DPU back to at least 10 cents in time to come.

4. Prime acquisition target

With ESR Cayman secretly collecting shares and increasing its stakes on AA Reit, it will be no surprise that AA Reit will be acquired and delisted one day. Also with the trend of Reits consolidation in recent times, especially the most recent one involving Reits between ESR and Sabana Reits, AA Reit remains a prime acquisition or merger target sooner than later.

5. Technically stable

The share price of AA Reit has been in consolidation phase since many weeks ago. Although its 20 days MA has cut below the 50 days MA and 100 days MA, all 3 lines are horizontal with no major price movements on low volumes and does not really test its next support level at 1.14. I believe that if the 20 days MA can cut above the 50 days MA and surpass next resistance at 1.21 with high volumes, it is poised for a breakout to test 1.28 and will hover in the 1.20s range. Hence, the next quarter results will be crucial to determine its short-term future price movements.

I do acknowledge the risks in investing in AA Reit such as erosions to land lease tenures lowering NAV, small sponsor, Forex risks from AUD and so on. However, in such low interest rate environment, I believe in the need to stomach some risks in order to let monies earn decent yields.

Thanks for reading.

With Love & Peace,

Qiongster

Frasers Centrepoint Trust EGM

I watched the webcast of Frasers Centrepoint Trust EGM this morning. The share trading of FCT has been halted this morning prior to the EGM.

The CEO of FCT, Richard Ng started the EGM with a presentation of the background, benefits of this acquisition and addressing shareholders' posted questions before preceeding with the resolutions.

Questions asked by shareholders are related to the timing of this acquisition, prospects of suburban malls in Singapore, Asset Enhancement Initiatives in future for existing malls, and how current valuations of malls are affected by Covid.

Costly tax payment due to the indirect ownership of malls held by ARF is the driven motivation behind this move. FCT's focus is still on Singapore suburban malls and there are no plans to acquire malls overseas nor any other acquisitions in the short future. 

The benefits of this acqusition can be summarised in this slide.

All the 4 resolutions have been passed in the EGM.

a. The proposed Asia Retail Fund transaction

b. The proposed equity fund raising

c. The proposed sponsor placement

d. The proposed whitewash resolution.

e. The proposed Bedok Point divestment.

This means shareholders of FCT should prepare some cash to be ready for the involvement of equity fund raising through preferential offering. I believe the details will be released by FCT soon. I am looking forward to it. 

Updated after FCT released details of important dates on 28 Sep around 3.30pm:

We must remember to apply for our entitled shares and excess shares of preferential offering before 19 Oct 2020, Monday 9.30pm by electronic means. 

As a bonus to reconcile the books before 7 Oct 2020 for the private placement to big boys, FCT also announced dividends of 2.804 cents from 1 Apr to 6 Oct and retained distribution of 1.681 cents from 1 Oct 19 to 31 Mar 20. 4.485 cents of CD payable on 4 Dec 2020. Huat ah! 

Thanks for reading!

With love and peace, 

Qiongster

Passive Income in 3Q 2020

With a blink of an eye, almost 9 months of 2020 have passed by. 

In third quarter of 2020 from July to Sep, I have collected the following streams of interests from savings bonds and dividends. 

$107.00 SSB (1 Jul)

$87.00 Mapletree Ind (28 Jul)
$581.60 Ascendas Reit (27 Aug)
$76.65 Suntec Reit (27 Aug)
$83.76 Ascott Reit (28 Aug)
$334.00 Capcom Trust (28 Aug)
$164.58 Capmall Trust (28 Aug)
$141.91 Keppel Reit (28 Aug) SRS

$101.00 SSB (1 Sep) 

$235.00 ST Engineering (2 Sep) SRS
$327.90 Far East Orchard (4 Sep)
$576.00 Aims Apac Reit (17 Sep)

That add up to $2,816.40 of passive income for 3Q 2020.

My passive income in the first half 2020 is $7,343.82

Hence, my passive income for 9 months of 2020 has surpassed $10k!

This is supposed to be the quarter most heavily affected by the health pandemic. In my portfolio, several companies such as Comfortdelgro, SATS have not been able to pay dividends while retail and commercial REITs have seen their DPU slashed by more than 50%.

This crisis is a good test for investors like us to understand which counters in our portfolio are most resilient and allow us to reposition our portfolio for the future, especially if our objective is to build a steady source of dividend income. We should have already known the answers from the V shaped recovery of several counters. 

Thanks for reading. 

With love and peace, 

Qiongster

Net Worth Update Sep 2020

My net worth increases $14k or 2.1% to $965k from Aug 2020.

Dividends received, savings from active income, CPF contributions, recovery of stocks particularly retail Reits in my portfolio contribute to the strong increase.

More than half of my net worth (55%) is illiquid in CPF, SRS and Insurance plans. I am still working on increasing the percentage of my liquid net worth in cash and stocks.

The component of stocks (Reits & Equity) -21% is almost on par with my cash (19%). My short term target is to be less conservative and increase the percentage of my stocks to 25%.

I have started to build up war chest in Phillips POEMS Money Market Fund from dividends received and active income. This will come timely as I look forward to participate in the upcoming equity fund raising by Frasers Centrepoint Trust.

I also look forward to the merger between Capitamall Trust and Capitaland Commercial Trust, that may possibly propel the share price of Capitamall Trust higher. Together with the imminent recovery of the likes of Mapletree Commercial Trust and Frasers Centrepoint Trust, they should give my net worth a boost in the coming months.

I am grateful and fortunate to be working in the recession proof IT industry immune from Covid-19 to allow me to continue farming the CPF contributions and monthly cashflows.

I am glad that my long term strategy of staying vested in the markets and not chicken out during market crash continue to boost my net worth and financial health.

I believe this health pandemic will make the rich go richer and the poor go poorer. While this crisis presents immense money making opportunities for many in recession proof businesses and stock market, there are many rank and file workers affected deeply by losing their jobs. More companies will not be able to survive in the new world and go bust in the coming future, causing more people to lose their jobs. All these happenings in the world only reinforce my belief in the pursuit of passive income and financial freedom through frugal and simple living.

We should be grateful for what we have, be optimistic on the future and always be prepared for the worst that can happen to our lives.

 Thanks for reading.

With love & peace,

Qiongster

Nibbled Mapletree Logistics Trust and Sembcorp Marine

The share price of Mapletree Logistics Trust (SGX:M44U) has taken a beating in recent weeks and I decided that it is time to initiate a long term position for this high quality logistics Reit riding on the booming waves of e-commerce. Also, to complete the quadruple Mapletree collection.

While technically MLT's share price may correct further below 2, I would then be happy to slowly accumulate more in future. Practically, I am practising the commonly used dollar-cost averaging strategy to build up my investment portfolio.

I have also received the "free" shares of Sembcorp Marine (SGX: S51) demerged from Sembcorp Industries (SGX: U96) today.

As I have 2400 SCI, based on the payout ratio of 4.911 shares to each SCI share, I got 11,786 shares of SMM credited to my CDP account.

There is an ongoing $5 commission promotion by Phillips Capital POEMS for odd lots trading in Sembcorp Marine shares from 11 Sep to 9 Oct. I decided to round up my SMM to the nearest 100 even though the commission is more than the shares value because I wanted to have the flexibility to sell off all my SMM shares entirely if I decide to do so in future.

I have shared my thoughts on the demerger of SMM from SCI previously.

What will I do about Sembcorp Industries Part 2?

What will I do about Sembcorp Industries?

I gauged a fair value of SCI to be around $2. After the demerger, one would be able to get around $2.01 of value from the SCI share price of $1.18 and $0.83 from the 4.911 SMM shares at $0.170 at the time of writing. It is not a bad deal if one managed to keep SCI through the end of this demerger process as SCI was only closed trading at $1.91 on the cum entitlement day.

I look forward to other upcoming corporate actions affecting my portfolio - Merger between Capitamall Trust and Capitaland Commercial Trust, and the Equity Fund Raising by Frasers Centrepoint Trust to acquire its remaining stakes in AsiaRetail Fund.

While local stock market remain weak and sluggish, I still intend to continue building up my investments slowly and steadily for the rest of 2020.

Thanks for reading. 

With love & peace,

Qiongster

What will I do about Frasers Centrepoint Trust?

I traded Frasers Centrepoint Trust to make quick kopi money a few times this year.

When I last nibbled it on 7 Aug 20 at 2.34, I decided to keep for long term because after visiting the grounds of NorthPoint City and Causeway Point, I am convinced that the retail landscape has recovered and will be stronger than pre-covid days.

The picture below depicts the queue of waiting to go through thermal scanner to enter Northpoint City when the mall was at maximum capacity on 5 Sep 2020.

 

From supermarkets, cafes, f&b outlets to electronics and furniture stores, the crowd is back and the only difference from pre-covid days is the implementation of safe distancing rules by theory and wearing of masks.

The huge pent up demand after the circuit breaker, work from home creating demand for furniture and electronics product needs, and travel lock down curbing short trip visits to JB for cheap grocery shopping and food have resulted in suburban malls to be a favourite hangout for shopping and food other than exercising in parks.

Frasers Centrepoint Trust (FCT) announced on 4 Sep 2020 that it plans to raise $1.39 billion from equity fund raising through private placement and preferential offering to purchase the remaining 63.1% stake in AsiaRetail Fund (ARF) for $1.06 billion from its sponsor Frasers Property.

ARF owns five suburban retail malls - Tiong Bahru Plaza, White Sands, Hougang Mall, Century Square and Tampines 1 in Singapore and Central Plaza office building in Malaysia.

This is a strategic, shrewd and well-timed move as Setapak Central, a mall in Kuala Lumpur will be sold off by ARF and Bedok Point which is more ulu in Bedok central will be divested at the same time. This also comes at around the time when Capitamall Trust and Capitaland Commercial Trust are merged, leaving FCT as the only pure Singapore Retail Reit. The share price of FCT has also run up recently, making equity fund raising palatable.

This proposal will greatly strengthen FCT's portfolio of suburban retail malls to 11 properties spread all over Singapore island. FCT will become the 8th largest Reit by market capitalisation and 53.6% of its gross rental income will derive from tenants providing essential services. Most importantly to investors, its DPU is accretive by 8.59%.

While the details and timeline of preferential offering are not released yet, the EGM date has been announced on 28 Sep 2020, Monday at 10am. Shareholders can click on the link in FCT's website to register the EGM and mail back the forms to vote.

From the pro forma illustration, there are 585.6m new shares to be created in this equity fund raising.

I hope there will be more involvement from preferential offering to retail shareholders relative to preferential offering to institutional shareholders. In May 2019, out of the 184m new shares created, only 28.8m new shares were allocated to preferential offering and it was on a basis of 31 for 1000 existing shares. I hope this time round will be on a basis of at least 200 for 1000 existing shares.

I expect the share price of FCT to languish between $2.50 and $3 in the years to come in a low interest environment where we still have a Reit offering more than 4% yield based on an estimated DPU of 12 cents at $2.60. There will be minimal buying opportunities and we can only hope for another health or financial crisis for its share price to crash in the future. Other than that, dips that may come from interest rate hikes and US-China tensions may present small window opportunities to add.

The preferential offering is a no brainer decision. I will subscribe to my entitled shares and excess shares at the indicative price of $2.22. I believe this will be a great long term investment for at least next 5 to 20 years.

Thanks for reading.

With love & peace,
Qiongster