Value Investing Archives - Page 2 of 6

Temasek Giant Stocks Corporate Actions (淡马锡股)

Posted on August 18, 2020 Written by Dr Tee (Ein55)

Having a strong sponsor or major shareholder is crucial for stock investment, especially during period of uncertainty such as COVID-19 stock crisis. In this article, Dr Tee will review these 7 Temasek stocks with 4 major corporate actions:

1) Keppel Corp (SGX: BN4)

– Abandon of Partial Acquisition by Temasek

2) Sembcorp Industries (SGX: U96) & Sembcorp Marine (SGX: S51)

– Successful Demerger under Temasek

3) Singapore Airlines, SIA (SGX: C6L)

– Impact of Rights & Bonds Issues for Survival

4) CapitaLand Mall Trust (SGX: C38U) & CapitaLand Commercial Trust (SGX: C61U)

– Merger of CapitaLand (SGX: C31) Giant REITs with coming change in 30 STI component stock with Keppel DC REIT (SGX: AJBU)

Temasek helps to manage national wealth of Singapore, having over 40 stocks globally with about S$300B investment (淡马锡股). There are at least 26 Temasek / GLC stocks in Singapore, controlling shareholder with 15% or more ownership directly or indirectly:

Singtel (SGX: Z74), DBS Bank (SGX: D05), ST Engineering (SGX: S63), Singapore Airlines (SGX: C6L), SIA Engineering (SGX: S59), Singapore Exchange (SGX: S68), SATS (SGX: S58), Sembcorp Industries (SGX: U96), Sembcorp Marine (SGX: S51), Olam (SGX: O32), CapitaLand (SGX: C31), CapitaLand Mall Trust (SGX: C38U), CapitaLand Commercial Trust (SGX: C61U), Ascendas Reit (SGX: A17U), Ascott Hospitality Trust (SGX: HMN), Ascendas Hospitality Trust (SGX: Q1P), CapitaLand Retail China Trust (SGX: AU8U), Ascendas-iTrust (SGX: CY6U), Keppel Corp (SGX: BN4), Keppel Reit (SGX: K71U), Keppel DC Reit (SGX: AJBU), Keppel Infrastructure Trust (SGX: A7RU), Mapletree Logistics Trust (SGX: M44U), Mapletree Commercial Trust (SGX: N2IU), Mapletree Industrial Trust (SGX: ME8U), Mapletree NAC Trust (SGX: RW0U).

Temasek stocks portfolio also affect about 15% of STI index stocks, which has strong impact on Singapore stock market. Here are 30 STI component stocks:
DBS Bank (SGX: D05), Singtel (SGX: Z74), OCBC Bank (SGX: O39), UOB Bank (SGX: U11), Wilmar International (SGX: F34), Jardine Matheson Holdings JMH (SGX: J36), Jardine Strategic Holdings JSH (SGX: J37), Thai Beverage (SGX: Y92), CapitaLand (SGX: C31), Ascendas Reit (SGX: A17U), Singapore Airlines (SGX: C6L), ST Engineering (SGX: S63), Keppel Corp (SGX: BN4), Singapore Exchange (SGX: S68), HongkongLand (SGX: H78), Genting Singapore (SGX: G13), Mapletree Logistics Trust (SGX: M44U), Jardine Cycle & Carriage (SGX: C07), Mapletree Industrial Trust (SGX: ME8U), City Development (SGX: C09), CapitaLand Mall Trust (SGX: C38U), CapitaLand Commercial Trust (SGX: C61U), Mapletree Commercial Trust (SGX: N2IU), Dairy Farm International (SGX: D01), UOL (SGX: U14), Venture Corporation (SGX: V03), YZJ Shipbldg SGD (SGX: BS6), Sembcorp Industries (SGX: U96), SATS (SGX: S58), ComfortDelGro (SGX: C52).

At the same time, over the past 1 year, there are 4 major corporate actions in these Temasek stocks which worth review here.

1) Keppel Corp (SGX: BN4)

– Abandon of Partial Acquisition by Temasek

The partial acquisition offer by Temasek (increase ownership of Keppel Corp to 51% at price of $7.35/share) was initiated before COVID-19 stock crisis. Under this unprecedented health crisis, global stock market suffers 30-50% correction. Therefore, it does not make sense for Temasek to acquire Keppel Corp at premium price before COVID-19 crisis.

Keppel Corp was making loss in Q2/2020, providing an option for Temasek to withdraw the acquisition as cash or capital may be more critical for other Temasek stocks during this period of uncertainty. Temasek could also use the money for other better investment, eg. recently increase stake in BlackRock (NYSE: BLK), a giant fund stock with $4.8B which is clearly stronger than Keppel Corp.

Despite it may be a sound decision for Temasek but other Keppel Corp shareholders could be disappointed with share prices falling below critical $5/share support, nearly last 10 years low. Keppel Corp is mainly supported by property segment of business as Oil & Gas segment has been making losses due to low optimism oil prices.

Keppel Corp stock investor may need to align decision making (sell or hold) with own personality. Current share price is low optimism, it would be “Sell Low”. The situation is different from SIA which is also at low optimism share prices but business is making loss. Keppel Corp still has strong property business while oil & gas has strong potential to recover with rising oil prices (higher demand with fading of COVID-19 threat). It is also an option to copy Temasek action to “Change Horse” (Sell weaker Stock A, Buy stronger Stock B), eg. transferring the capital to invest in stronger giant stocks such as BlackRock. Afterall, not all could be a patient long term investor for Keppel Corp to regain giant stock title as 10 years ago during bullish Oil & Gas sector.

Although with controlling ownership (over 51% shares), it may be easier to implement potential plan for merging of Keppel O&M with Sembcorp Marine but if outcomes are beneficial to both stocks, a major shareholding (21% of Keppel Corp) may be sufficient to initiate this potential corporate action in future.

2) Sembcorp Industries (SGX: U96) & Sembcorp Marine (SGX: S51)

– Successful Demerger under Temasek

With abstain of voting by Sembcorp Industries and Temasek, the demerger during EGM is still successful, partly because there is no strong second major shareholder (less than 1% shareholding), especially for Sembcorp Marine.

Fundamentally, parent company Sembcorp Industries (with more defensive utilities and growing land development businesses) is much stronger than subsidiary Sembcorp Marine (declining Oil & Gas over the past 5 years) but 1/3 overlapping in accounting (revenue) has dragged down the share prices of Sembcorp Industries which is tied with the same boat under Oil & Gas crisis.

Therefore, after demerger, Sembcorp Industries share prices generally move higher while Sembcorp Marine is still at relative low price position. In medium term, Sembcorp Industries would become a “new company” without 1/3 negative Oil & Gas business. In longer term, cyclic Oil & Gas sector could help Sembcorp Marine investors to have higher upside but patience is required. In general, Sembcorp Industries and Sembcorp Marine are 2 very different type of stocks, differences in share prices would be clearer in future.

Again, Sembcorp stocks investors need to make decision (Buy, Hold, Sell, Wait, Shorting), aligning with own unique personality. The world of stock market is large, over 1600 global giant stocks, there may be no need to “fall in love” with a stock for life.

3) Singapore Airlines, SIA (SGX: C6L)

– Impact of Rights & Bonds Issues for Survival

Airlines sectors has been in very critical condition, some airlines (without strong sponsor) even go bankrupt as passengers drop over 90% compare with before COVID-19, business could sustain more than 6 months. Vaccine development may take another 6-12 months before COVID-19 crisis could be over.

Impact on Singapore Airlines could be more severe during pandemic as it does not have domestic flights (Singapore is too small), therefore the Rights and Bonds issues came in right time to ensure the company could survive through the most critical 12 months period, before Singapore Airlines could fly again proudly.

However, even after the corporate action, SIA share prices continue to decline, about half price since the beginning of COVID-19, about 1/3 of peak prices (after adjustment of rights issues). In fact, Singapore Airlines business fundamental has been declining gradually over the past decade, not just during pandemic (sudden dip). This is due to competitive airlines sector which need to provide good services (well known for SIA but at the price of higher cost) at lower price, therefore earnings and profit margin would be affected.

A stock investor needs to carefully select the right industry or sector for investment. During pandemic, healthcare and technology (eg. online / software solution) stocks would have higher chances to recover than airlines stocks. “Buy Low” is reasonable with condition a stock business fundamental is not much affected. It would be a rare opportunity if business of a stock is growing but share prices fall due to fear driven sales during global financial crisis.

4) CapitaLand Mall Trust, CMT (SGX: C38U) & CapitaLand Commercial Trust, CCT (SGX: C61U)

– Merger of CapitaLand (SGX: C31) Giant REITs with coming change in 30 STI component stock with Keppel DC REIT (SGX: AJBU)

CapitaLand is under Temasek portfolio, the 2 giant REITs, CMT and CCT will be merged by end of 2020 to become the third largest REIT in Asia (largest Asian REIT is Link Reit, HKEX: 823). A giant stock may not need to be large in size, internal business strength with strong economic moat is even more crucial.

Merging and demerging are neutral corporate actions, impact depends on the long term plans of major shareholders. Both CMT and CCT are defensive REITs which could generate steady passive incomes (about 5-6% dividend yield, depending on the share prices). However, the growth is slow (but steady), therefore an investor may position as a defender while diversifying capital over a portfolio of other giant stocks including mid-fielders (eg. growth stocks) and strikers (eg. cyclic stocks or momentum stocks).

When CMT and CCT are merged, would form a new stock, CICT with only 1 stock. Therefore, 30 STI index component would invite the next reserve stock, Keppel DC Reit (SGX: AJBU) which is also a REIT but much stronger growth. The best time to buy a growth stock is usually during global stock crisis (eg. COVID-19 pandemic) with great fear in the market but business continues to make money each month.

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A smart investor may carefully design a portfolio of global giant stocks (defenders, mid-fielders, strikers) while an experienced trader may take action following the trend with S.E.T. (Stop Loss, Entry, Target Prices) in trading plan.

Drop by Dr Tee free 4hr webinar (learning at comfort of home with Zoom) to learn how to position in global giant stocks during COVID-19 stock crisis with 10 unique stock investing strategies, knowing What to Buy, When to Buy/Sell.

Zoom will be started 30 min before event, bonus talk (Q&A on any investment topics from readers) for early birds. There are many topics we will cover in this 4hr webinar, Dr Tee can have more time for Q&A if you could stay later after the webinar.

Dr Tee will cover over 20 case studies, Singapore giant stocks, eg. CapitaLand Mall Trust (SGX: C38U), Singapore Exchange (SGX: S68), Keppel Corp (SGX: BN4), Top Glove (SGX: BVA), Jardine Matheson Holdings JMH (SGX: J36), Vicom (SGX: WJP) and many others, Malaysia giant stocks, Hong Kong giant stocks and US giant stocks, both long term investing and short term trading.

There are limited tickets left for this 4hr free webinar, please ensure 100% you could join when register: www.ein55.com

Dr Tee Video Education: Defensive Investing Strategies during Stock Crisis (危机入市的防御性投资策略)

Posted on June 24, 2020 Written by Dr Tee (Ein55)

In this Dr Tee 1-hr video education (Defensive Investing Strategies during Stock Crisis ), you will learn:
1) Bull (Unlimited Quantitative Easing) vs Bear (COVID-19)
2) Value Investing Strategy – Dividend Stock Investing with Singapore Giant REIT as Case Study
3) Value Investing Strategy – Growth Stock Investing with Malaysia Giant Stock as Case Study
4) Investing Personalities: Kiasu vs Kiasi
5) Defensive Investing Strategies during Stock Crisis.

Here is English Version of Dr Tee Video Course (Chinese version is also available as Dr Tee is bilingual). Enjoy and give your comments for improvement. You may subscribe to Dr Tee Youtube channel (Ein Tee) for future Dr Tee video talks. Collect 3 extra bonuses here.

English Video: https://youtu.be/_shZqTa1eEs

在这Dr Tee 60分钟教育视频（危机入市的防御性投资策略），您可学习：
1）牛市（无限量化宽松）与熊市（新冠病毒）。
2）价值投资策略 – 高息股（新加坡房地产信托股个例）。
3）价值投资策略 – 成长股（马来西亚成长强巨股个例）。
4）投资性格 – 怕输与怕死。
5）危机入市的防御性投资策略。

这儿是 Dr Tee 华语视频（英语视频也已完成，Dr Tee 双语皆行）。请欣赏鄙作，留言求进步。您可订阅 Dr Tee Youtube 频道(Ein Tee)，链接未来投资视频。这里得额外三红利。

Chinese Video (华语视频): h ttps://youtu.be/kOZ05rc_XRY

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Defensive investing strategies may be considered for a portfolio of 10-20 global giant stocks with multiple entries, protected by dividend stocks during bearish market with bonus of capital gains with growth stocks during bullish market.

For investors who don’t know how to select individual giant stocks, may consider stock indices ETF of countries with growing economies, eg. Singapore STI, Malaysia KLCI, Hong Kong HSI, US S&P 500 and Nasdaq, Germany DAX, etc. Therefore, some index component stocks may be applied for defensive stock investing strategies.

This defensive investing strategy may be applied to 30 Singapore STI index component stocks (investor has to focus only on giant stocks for investing):
DBS Bank (SGX: D05), Singtel (SGX: Z74), OCBC Bank (SGX: O39), UOB Bank (SGX: U11), Wilmar International (SGX: F34), Jardine Matheson Holdings JMH (SGX: J36), Jardine Strategic Holdings JSH (SGX: J37), Thai Beverage (SGX: Y92), CapitaLand (SGX: C31), Ascendas Reit (SGX: A17U), Singapore Airlines (SGX: C6L), ST Engineering (SGX: S63), Keppel Corp (SGX: BN4), Singapore Exchange (SGX: S68), Hongkong Land (SGX: H78), Genting Singapore (SGX: G13), Mapletree Logistics Trust (SGX: M44U), Jardine Cycle & Carriage (SGX: C07), Mapletree Industrial Trust (SGX: ME8U), City Development (SGX: C09), CapitaLand Mall Trust (SGX: C38U), CapitaLand Commercial Trust (SGX: C61U), Mapletree Commercial Trust (SGX: N2IU), Dairy Farm International (SGX: D01), UOL (SGX: U14), Venture Corporation (SGX: V03), YZJ Shipbldg SGD (SGX: BS6), Sembcorp Industries (SGX: U96), SATS (SGX: S58), ComfortDelGro (SGX: C52).

Below are all the 30 Singapore STI component stocks, sorted by 2 key strategies (Growth vs Dividend) with 2 minimal Fundamental Criteria:
1) ROE (a criteria for growth stock, eg. ROE > 5% to ensure efficient business) + Dr Tee Giant Stock criteria is needed.
2) Dividend Yield, DY (a criteria for dividend stocks, eg. DY > 5%, depending on strategy) + Dr Tee Giant Stock criteria is needed.

Name	Ticker	Div Yield (%)	ROE (%)
Ascendas Reit	A17U	4.3	7.4
CapitaLand Commercial Trust	C61U	5.0	6.0
CapitaLand	C31	4.1	8.8
CapitaLand Mall Trust	C38U	5.9	9.0
City Development	C09	0.9	5.2
ComfortDelGro	C52	6.3	10.2
DBS Bank	D05	5.9	12.3
DairyFarm USD	D01	4.6	26.8
Genting Singapore	G13	5.2	8.5
HongkongLand USD	H78	5.3	0.5
JMH USD	J36	4.1	9.4
JSH USD	J37	1.6	6.1
Jardine C&C	C07	5.6	12.8
Keppel Corp	BN4	3.3	6.3
Mapletree Commercial Trust	N2IU	4.0	9.4
Mapletree Industrial Trust	ME8U	4.1	10.3
Mapletree Logistics Trust	M44U	4.2	8.2
OCBC Bank	O39	5.9	10.3
SATS	S58	6.2	15.1
Singapore Exchange	S68	3.7	35.9
Singapore Airlines	C6L	0.8	-9.1
ST Engineering	S63	4.5	26.0
Sembcorp Industries	U96	2.6	3.1
Singtel	Z74	4.8	4.0
Thai Beverages	Y92	3.0	20.1
UOB Bank	U11	5.3	11.0
UOL	U14	2.5	4.8
Venture Corporation	V03	4.3	14.5
Wilmar International	F34	3.0	7.7
YZJ Shipbuilding SGD	BS6	4.7	10.0

Not all Singapore STI component stocks are giant stocks, some could be weaker fundamental stocks (eg. making losses or asking investors for reserved passive incomes through rights issues). Even for a giant stock, it requires at least yearly review with Dr Tee criteria to ensure it is still a giant stock or a change in strategy may be required (eg. crisis stock investing if there is any potential high risk). Similarly, those stocks which are not highlighted in this article, some could be marginal giant stocks, may obtain the giant stock title one day, which worth longer term investing or trading.

A smart stock investor has to further select the right type of giant stock to align with own personality to be successful in short trading, medium term investing or long term investing, knowing What to Buy, When to Buy / Sell.

This powerful strategy can be extended to global giant stocks including 30 Malaysia Bursa KLCI Index component stocks (investor has to focus only on giant stocks for investing):
CIMB (Bursa: 1023) CIMB GROUP HOLDINGS BERHAD, DIALOG (Bursa: 7277) DIALOG GROUP BERHAD, DIGI (Bursa: 6947) DIGI.COM BERHAD, GENM (Bursa: 4715) GENTING MALAYSIA BERHAD, GENTING (Bursa: 3182) GENTING BERHAD, HAPSENG (Bursa: 3034) HAP SENG CONSOLIDATED BERHAD, HARTA (Bursa: 5168) HARTALEGA HOLDINGS BERHAD, HLBANK (Bursa: 5819) HONG LEONG BANK BERHAD, HLFG (Bursa: 1082) HONG LEONG FINANCIAL GROUP BERHAD, IHH (Bursa: 5225) IHH HEALTHCARE BERHAD, IOICORP (1961) IOI CORPORATION BERHAD, KLCC (Bursa: 5235SS) KLCC PROPERTY HOLDINGS BERHAD, KLK (Bursa: 2445) KUALA LUMPUR KEPONG BERHAD, MAXIS (Bursa: 6012) MAXIS BERHAD, MAYBANK (Bursa: 1155) MALAYAN BANKING BERHAD, MISC (Bursa: 3816) MISC BERHAD, NESTLE (Bursa: 4707) NESTLE MALAYSIA BERHAD, PBBANK (Bursa: 1295) PUBLIC BANK BERHAD, PCHEM (Bursa: 5183) PETRONAS CHEMICALS GROUP BERHAD, PETDAG (Bursa: 5681) PETRONAS DAGANGAN BHD, PETGAS (Bursa: 6033) PETRONAS GAS BERHAD, PMETAL (Bursa: 8869) PRESS METAL ALUMINIUM HOLDINGS BERHAD, PPB (Bursa: 4065) PPB GROUP BERHAD, RHBBANK (Bursa: 1066) RHB BANK BERHAD, SIME (Bursa: 4197) SIME DARBY BERHAD, SIMEPLT (Bursa: 5285) SIME DARBY PLANTATION BERHAD, TENAGA (Bursa: 5347) TENAGA NASIONAL BHD, TM (Bursa: 4863) TELEKOM MALAYSIA BERHAD, TOPGLOV (7113) TOP GLOVE CORPORATION BHD.

Below are all the 30 Malaysia Bursa KLCI Index component stocks, sorted by 2 key strategies (Growth vs Dividend) with 2 minimal Fundamental Criteria:
1) ROE (a criteria for growth stock, eg. ROE > 5% to ensure efficient business) + Dr Tee Giant Stock criteria is needed.
2) Dividend Yield, DY (a criteria for dividend stocks, eg. DY > 5%, depending on strategy) + Dr Tee Giant Stock criteria is needed.

No	Company	Div Yield (%)	ROE (%)
1	AXIATA (Bursa: 6888) AXIATA GROUP BERHAD	3.0	4.5
2	CIMB (Bursa: 1023) CIMB GROUP HOLDINGS BERHAD	8.2	4.7
3	DIALOG (Bursa: 7277) DIALOG GROUP BERHAD	1.0	15.2
4	DIGI (Bursa: 6947) DIGI.COM BERHAD	4.5	212.0
5	GENM (Bursa: 4715) GENTING MALAYSIA BERHAD	9.4	-3.5
6	GENTING (Bursa: 3182) GENTING BERHAD	6.6	-0.2
7	HAPSENG (Bursa: 3034) HAP SENG CONSOLIDATED BERHAD	4.8	14.8
8	HARTA (Bursa: 5168) HARTALEGA HOLDINGS BERHAD	0.6	20.4
9	HLBANK (Bursa: 5819) HONG LEONG BANK BERHAD	3.4	8.7
10	HLFG (Bursa: 1082) HONG LEONG FINANCIAL GROUP BERHAD	2.9	8.8
11	IHH (Bursa: 5225) IHH HEALTHCARE BERHAD	0.8	-0.8
12	IOICORP (1961) IOI CORPORATION BERHAD	1.8	6.5
13	KLCC (Bursa: 5235SS) KLCC PROPERTY HOLDINGS BERHAD	5.0	5.6
14	KLK (Bursa: 2445) KUALA LUMPUR KEPONG BERHAD	2.2	6.9
15	MAXIS (Bursa: 6012) MAXIS BERHAD	3.9	20.1
16	MAYBANK (Bursa: 1155) MALAYAN BANKING BERHAD	8.9	9.1
17	MISC (Bursa: 3816) MISC BERHAD	4.4	-1.0
18	NESTLE (Bursa: 4707) NESTLE MALAYSIA BERHAD	2.0	90.8
19	PBBANK (Bursa: 1295) PUBLIC BANK BERHAD	4.6	11.4
20	PCHEM (Bursa: 5183) PETRONAS CHEMICALS GROUP BERHAD	3.2	5.2
21	PETDAG (Bursa: 5681) PETRONAS DAGANGAN BHD	4.0	6.2
22	PETGAS (Bursa: 6033) PETRONAS GAS BERHAD	5.0	13.9
23	PMETAL (Bursa: 8869) PRESS METAL ALUMINIUM HOLDINGS BERHAD	1.0	13.1
24	PPB (Bursa: 4065) PPB GROUP BERHAD	1.7	5.7
25	RHBBANK (Bursa: 1066) RHB BANK BERHAD	6.6	8.3
26	SIME (Bursa: 4197) SIME DARBY BERHAD	4.3	5.5
27	SIMEPLT (Bursa: 5285) SIME DARBY PLANTATION BERHAD	0.8	5.4
28	TENAGA (Bursa: 5347) TENAGA NASIONAL BHD	9.2	5.9
29	TM (Bursa: 4863) TELEKOM MALAYSIA BERHAD	2.4	8.6
30	TOPGLOV (Bursa: 7113) TOP GLOVE CORPORATION BHD	2.3	37.5

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There are over 1500 giant stocks in the world based on Dr Tee criteria, choice of 10 Dream Team giant stocks have to align with one’s unique personality, eg. for shorter term trading (eg. momentum or swing trading) or longer term investing (cyclic investing, undervalue investing or growth investing). Readers should not just “copy and paste” any stock (What to Buy, When to Buy/Sell) as successful action taking requires deeper consideration (LOFTP strategies – Level / Optimism / Fundamental / Technical / Personal Analysis) which you could learn further from Dr Tee Free 4-hr Webinar.

Zoom will be started 30 min before event, bonus talk (Q&A on any investment topics from readers) for early birds. There are many topics we will cover in this 4hr webinar, Dr Tee can have more time for Q&A if you could stay later after the webinar.

Dr Tee will cover over 20 case studies, Singapore giant stocks, eg. CapitaLand Mall Trust (SGX: C38U), Singapore Exchange (SGX: S68), Keppel Corp (SGX: BN4), Top Glove (SGX: BVA), Jardine Matheson Holdings JMH (SGX: J36), Vicom (SGX: WJP) and many others, Malaysia giant stocks, Hong Kong giant stocks and US giant stocks, both long term investing and short term trading.

There are limited tickets left for this 4hr free webinar, please ensure 100% you could join when register: www.ein55.com

Filed Under: Fundamental Analysis, Market Cycle Investing, Stock Market, Value Investing Tagged: defensive stock, dividend stock, growth stock, stock strategies, value investing, video education

30 Singapore Banking and Finance Stocks (狮城财神)

Posted on June 18, 2020 Written by Dr Tee (Ein55)

30 Singapore Banking and Finance Stocks DBS OCBC UOB SGX

The best way to make money is to let money make more money. In this article, you will learn 30 Singapore Banking & Finance Stocks which are efficient in making money with money for investors, focusing in 6 groups of stocks (with strategies for 3 major bank stocks: DBS, OCBC and UOB):

1) Bank Stocks
2) Finance Stocks
3) Insurance Stocks
4) Stock Broker Stocks
5) Pawnbroker Stocks
6) Investment and Other Stocks

There are only 30 Banking & Finance stocks in Singapore, relatively less than other sectors as Singapore has tighter regulation in finance sector for services such as lending money (limited licenses available):

AMTD IB OV (SGX: HKB), B&M Hldg (SGX: CJN), DBS Bank (SGX: D05), Edition (SGX: 5HG), G K Goh (SGX: G41), Global Investment (SGX: B73), Great Eastern (SGX: G07), Hong Leong Finance (SGX: S41), Hotung Investment (SGX: BLS), IFAST Corporation (SGX: AIY), IFS Capital (SGX: I49), Intraco (SGX: I06), Maxi-Cash Finance (SGX: 5UF), MoneyMax Finance (SGX: 5WJ), Net Pacific Finance (SGX: 5QY), OCBC Bank (SGX: O39), Pacific Century (SGX: P15), Prudential USD (SGX: K6S), Singapore Exchange (SGX: S68), SHS (SGX: 566), Sing Investments & Finance (SGX: S35), Singapore Reinsurance (SGX: S49), Singapura Finance (SGX: S23), TIH (SGX: T55), Uni-Asia Group (SGX: CHJ), UOB Bank (SGX: U11), UOB-KAY HIAN HOLDINGS (SGX: U10), UOI (SGX: U13), ValueMax (SGX: T6I), Vibrant Group (SGX: BIP).

From the table sorted for 30 Singapore banking & finance stocks, mostly are profitable (26 / 30 stocks were making money in businesses last year) but still undervalue (22 / 30 stocks have Price to Book ratio, PB < 1, some have higher quality asset such as cash, properties and equities, potential target for future acquisition).

There are 7 stocks having PB < 0.5 with 50% discount over asset but an investor must double check on quality of assets and whether the business could be sustainable to make money. If not, undervalue stock may continue to be undervalue for a long period of time, may not suitable for long term stock investing nor short term stock trading.

No	Name	Ticker	PB = Price /NAV	ROE (%)
1	SGX	S68	8.06	35.9
2	AMTD IB OV	HKB	3.37	13.7
3	DBS	D05	1.12	12.3
4	ValueMax	T6I	0.77	11.7
5	Great Eastern	G07	1.11	11.7
6	TIH	T55	0.48	11.3
7	UOB	U11	0.94	11.0
8	MoneyMax Finance	5WJ	0.74	10.8
9	Maxi-Cash Finance	5UF	0.98	10.7
10	IFAST	AIY	3.33	10.6
11	OCBC Bank	O39	0.88	10.3
12	UOI	U13	1.05	9.7
13	Global Investment	B73	0.71	6.2
14	Hong Leong Finance	S41	0.58	5.4
15	Sing Investments & Finance	S35	0.50	5.4
16	IFS Capital	I49	0.42	5.2
17	Hotung Investment	BLS	0.55	5.0
18	Uni-Asia Group	CHJ	0.24	4.7
19	UOB Kay Hian	U10	0.64	4.6
20	Prudential USD	K6S	2.59	4.0
21	Vibrant Group	BIP	0.34	3.8
22	Singapore Reinsurance	S49	0.65	3.6
23	Pacific Century	P15	0.74	3.0
24	Singapura Finance	S23	0.50	2.9
25	G K Goh	G41	0.62	1.9
26	Intraco	I06	0.31	1.5
27	B&M Hldg	CJN	2.57	-9.0
28	Net Pacific Finance	5QY	0.68	-9.7
29	SHS	566	0.67	-13.6
30	Edition	5HG	0.85	-33.7

Based on Dr Tee criteria, from the 30 Singapore Banking & Finance stocks above, only 8 are giant stocks, some are marginal giant stocks (despite business fundamentals are reasonably good). A few Banking & Finance giant stocks were discussed with more details in Dr Tee earlier articles (see www.ein55.com/blog), eg. DBS (SGX: D05) and Singapore Exchange (SGX: S68).

Focus of this article is discussion on 6 main groups of Banking & Finance stocks in Singapore, understanding the risks and opportunities:

1) Bank Stocks

After decades of merging and acquisition, there are only 3 major local banks in Singapore: DBS (SGX: D05), OCBC (SGX: O39), UOB (SGX: U11), all are STI component stocks. Naturally, these 3 blue chip stocks become the first choice for investment in bank stocks. DBS, OCBC and UOB contribute in total to 1/3 of STI Index weightage, therefore could easily move up or down the entire Singapore stock market whenever there is major move in bank sector.

Here is a list of 30 STI component stocks sorted by size of market cap (significant contribution by 3 major bank stocks):
DBS Bank (SGX: D05), Singtel (SGX: Z74), OCBC Bank (SGX: O39), UOB Bank (SGX: U11), Wilmar International (SGX: F34), Jardine Matheson Holdings JMH (SGX: J36), Jardine Strategic Holdings JSH (SGX: J37), Thai Beverage (SGX: Y92), CapitaLand (SGX: C31), Ascendas Reit (SGX: A17U), Singapore Airlines (SGX: C6L), ST Engineering (SGX: S63), Keppel Corp (SGX: BN4), Singapore Exchange (SGX: S68), Hongkong Land (SGX: H78), Genting Singapore (SGX: G13), Mapletree Logistics Trust (SGX: M44U), Jardine Cycle & Carriage (SGX: C07), Mapletree Industrial Trust (SGX: ME8U), City Development (SGX: C09), CapitaLand Mall Trust (SGX: C38U), CapitaLand Commercial Trust (SGX: C61U), Mapletree Commercial Trust (SGX: N2IU), Dairy Farm International (SGX: D01), UOL (SGX: U14), Venture Corporation (SGX: V03), YZJ Shipbldg SGD (SGX: BS6), Sembcorp Industries (SGX: U96), SATS (SGX: S58), ComfortDelGro (SGX: C52).

Most bank stocks are cyclic in nature, including Singapore and global bank stocks in US, Malaysia, Hong Kong, etc. Therefore, market cycle investing strategy is required with alignment to Optimism Strategies to Buy Low Sell High, as well as good understanding the global stock market and economic cycle. Bank sector is the key pillar of economy (business needs money to operate), therefore investment in giant bank stocks in a country with growing economy would enjoy the capital gains of prosperity (狮城财神).

So, which of the 3 major Singapore bank stocks are better? Well, the choice is dependent on stock trading or investment strategy which is personality dependent. The historical stock price chart of DBS, OCBC and UOB with STI (could be considered with STI ETF) shows that these 4 counters are aligned in general directions in longer term.

In longer term, the differences of DBS, OCBC and UOB are mainly on pattern of stocks. DBS is the largest Singapore bank, also the most cyclic among 3 bank stocks, usually correcting more than STI during global financial crisis (eg. Year 2008-2009, falling below $10/share) and outperforming STI, OCBC and UOB during the bullish phase of economy. DBS is more suitable for cycling investing (Buy Low Sell High) and possibly momentum trading (Buy High Sell Higher) when stock market is bullish.

OCBC is the second largest Singapore bank, more defensive with less volatility in prices. OCBC is more suitable for dividend stock investor who prefers to Buy Low and Hold for a long term. So, each global stock crisis (following optimism strategies) could be an opportunity to add more position.

UOB is the smallest bank in Singapore, performance is also in between DBS and OCBC. In general, an investor may choose between DBS and OCBC and their business sizes are larger than UOB. In fact, for short term to mid term trading (months), differences of 3 major bank stocks are limited, any of the 3 bank stocks may be considered but trading rules should be followed (eg. setting S.E.T. in trading plan with Stop Loss / Entry / Target Prices) for Swing Trading or Momentum Trading.

There is no need to invest in all the 3 major bank stocks for diversification as in general, they are all relatively safer than most of the banks in the world due to tight MAS regulations for Singapore banks. Investing in a particular bank stock could be better than investing in STI ETF because bank stocks could have higher dividend yield (5-6%, depending on entry share prices) and growth are stronger than STI (which are diversified over 30 stocks, which some are weaker than DBS, OCBC and UOB).

In general, being a bank has a strong economic moat, especially in Singapore as there are limited licenses issued by government. A smart investor could become a “banker” through investing in any of these 3 major Singapore banks. Each of them has strong sponsor with decades of history in businesses, eg. DBS by Temasek, OCBC by Lee Family, UOB by Wee Cho Yaw.

So, it is possible to invest for lifetime (Buy Low & Hold for life) or even pass to next generation (eg. OCBC has nearly 100 years of history for several generations). Disruptive technology (eg. online payment or virtual bank) would have less impact on traditional bank stocks as bank sector is tightly regulated by local government due to sensitive asset of money. Bank stocks usually are more suitable as positioning as defender in a stock portfolio, more gradual growth with consistent passive income.

Due to low global bank interest rates (nearly 0 for US), the interest income would be less with lower Net Interest Margin (NIM). However, banks could still be profitable with interest income, just the return would be lower. Banks also have other businesses such as investment, credit card, insurance, wealth management, etc, which could provide non-interest income but usually would also be affected in a bearish economy. Therefore, entry with low-optimism stock price far below the fair value (following Dr Tee Optimism Strategies) is key for success in bank stocks investing.

2) Finance Stocks

Finance companies could provide similar services as banks (eg. loan & deposit) but with much smaller scale. There are a few Finance Stocks in Singapore: Singapura Finance (SGX: S23), Sing Investments & Finance (SGX: S35) and Hong Leong Finance (SGX: S41). These 3 finance stocks have reasonably good business fundamental but these 3 Singapore Finance Stocks may not be in the same grade for investing as 3 major Singapore bank stocks.

Finance stocks have relatively weaker business fundamental than bank stocks. Stock investment is always relative comparison, looking for the best, not just good or acceptable. In addition, Singapura Finance, Sing Investments & Finance and Hong Leong Finance are less well known, therefore lower confidence by customers (to deposit money) and investors (to invest in finance stocks).

Hong Leong Finance has a strong sponsor of Kwek Leng Beng (Hong Leong Group Singapore / City Development – SGX: C09). However, its cousin (Kwek Leng Chan of Hong Leng Group Malaysia) stock of Hong Leong Bank (Bursa: 5819) would be a much better choice between 2 stocks as 1 is finance stock, 1 is bank stock with strong business fundamental. Details of Quek / Kwek family of stocks are described by Dr Tee in earlier article (https://www.ein55.com/2020/05/15-hong-leong-group-and-kwek-family-stocks/).

In short, a stock investor may ignore weaker Finance Stocks, aiming for stronger Bank Stocks directly, considering both the stock and business performance, especially for lifetime investing. For shorter term trading, it is possible to consider Finance Stocks if there are positive signals in this group.

3) Insurance Stocks

There are a few Insurance Stocks in Singapore: Great Eastern (SGX: G07), Prudential (SGX: K6S), UOI (SGX: U13), Singapore Reinsurance (SGX: S49) and other stocks which provide partial services on insurance. These 4 Singapore insurance stocks have good business fundamental but only 2 are considered giant stocks (based on Dr Tee criteria) worth longer term investing.

Usually insurance companies are also suitable partner for banks, eg. Great Eastern is under OCBC, UOI is with UOB, LPI (Bursa: 8621) is with Public Bank (Bursa: 1295), etc. This way, similar pool of clients in both banks and insurance groups may be approached with higher chance of success. A stock investor may choose to invest directly in subsidiary (insurance stock) or indirectly through parent stock (bank which has partial business in insurance), if both are giant stocks, the choice is dependent on own personality and pattern of stock.

Confidence in business stability is important for an insurance client (to ensure compensation would be received if any misfortune based on agreement). Therefore, a reputable insurance brand with decades of business history (supported by strong sponsor) is crucial.

There are only 2 business sectors almost guaranteed to make money in long term: Insurance and Casino (eg. Genting Singapore, SGX: G13) as they apply probability in business to make money. It is possible for unexpected hurricanes to destroy houses, US insurance companies (including Warren Buffett’s Berkshire, NYSE: BRK) could suffer losses in 1 particular year. However, past statistics (eg. accident rates in driving, Covid-19 risks, etc) would help to naturally adjust the future premium. If there is a need, resinsurance company could help to share the risks of primary insurance company. Similarly, a stock investor should apply probability investing in making decision of What Stocks to Buy, When to Buy / Sell.

However, insurance business requires customer interactions, eg. meet-up before a policy may be eventually signed. During Covid-19 with global lockdown, both banks (eg. wealth management) and insurance companies suffer due to less chances to meet-up with customers. Due to less income from Great Eastern (subsidiary), parent company OCBC reported 40% less income in Q1/2020. However, insurance sector could recover with restart of economy which allows social interaction for businesses.

4) Stock Broker Stocks

There are a few Stock Brokerage related Stocks in Singapore: Singapore Exchange, SGX (SGX: S68), UOB Kay Hian (SGX: U10) and IFAST (SGX: AIY) are listed in SGX. CGS-CIMB is a joint venture with 2 overseas parent stocks from China and Malaysia: China Galaxy Securities, CGS (HKEx: 6881) and CIMB (Bursa: 1023). Maybank Kim Eng has a parent company in Malaysia, Maybank (Bursa: 1155).

These 6 Stock Brokerage related stocks and parent stocks have good business fundamental but only 3 of them are giant stocks (including Singapore Exchange, SGX, details were given in earlier Dr Tee article: https://www.ein55.com/2020/05/5-global-stock-exchanges-stocks/).

Due to relatively low stock volume in Singapore stock market (except during bullish market or stock crisis time), stock broker stocks with only stock trading business has limited profits when stock market is “quiet” with little price volatility (eg. STI has been ranging around 3000 +/- 300 points over the past 10 years). Only when stock market is very bullish (eg. crazy bull in Years 2000 and 2007) or during global stock crisis (eg. dumping of stocks in Years 2008-2009 and Mar 2020), then stock volume would be relatively higher.

At the same time, Singapore Exchange has more products (stocks and derivatives) for local and overseas customers with profitable monopoly business (unless stock brokers have to compete for similar business of stock trading, lowering commission to gain business but lower profit margin). Singapore has relatively smaller market with less number of traders and investors with more stable (“quiet” market), therefore stock brokerage could become part of a parent company business, may not be the main business to remain profitable. For example, UOB Kay Hian is with UOB group, could also be integrated with UOI (insurance) business with sharing of similar pool of potential clients. So, an investor may invest directly in more profitable parent stock if subsidiary stock (eg. stock brokerage) is playing supporting role with less income.

IFAST is a relatively young stock with strong business fundamental. In fact, stock brokerage business is considered bonus for IFAST as its main business is on fund management which itself could grow naturally (high recurring incomes) yearly with compounding effect. Similarly, the integrated business of fund, stock, insurance, bond, etc, giving an edge to IFAST business. IFAST has high potential with overseas business expansion and even bidding for virtual bank license in Singapore (but intense competition). The main weakness of IFAST is that it is a younger player, therefore relatively less well known among the investors, resulting in “undervalue” share prices, not aligned with its business performance.

5) Pawnbroker Stocks

Interestingly, there are only 3 stocks in Singapore having the name “Max” and all are Pawnbroker Stocks: ValueMax (SGX: T6I), Maxi-Cash Finance (SGX: 5UF), MoneyMax Finance (SGX: 5WJ). Pawnbroker is a special “Finance” stock as it provides easy way of loan, especially to needy people who may not get the loan easily from banks.

A pawnbroker stock has pawnshops that offer secured loans to people, with valuables (eg. gold, silver, jewelry, coins, luxury handbags, etc) used as collateral. If an item is pawned for a loan, within a certain contractual period of time, the pawner may redeem it for the amount of the loan plus some agreed-upon amount for interest. If the loan is not paid (or extended, if applicable) within the time period, the pawned item will be offered for sale to other customers by the pawnbroker.

Since gold or related jewelry is a common valuable as collateral for loan, the “value” of pawnbroker stock would partly related to gold prices. After reaching high optimism, gold market started to from about US$1900/oz in Year 2012 to US$1000+/oz in Year 2016, then recovering gradually to current price of US$1700+/oz in Year 2020. The chart below shows the correlation of falling in gold price and stock prices of ValueMax, Maxi-Cash and MoneyMax which has weaker business fundamental during this period of time (clients or pawners may choose not to redeem the gold as prices have been falling in these 4 years from 2012 o 2016), holding to assets which are declining in values.

3 Singapore Pawnbroker Stocks ValueMax Maxi-Cash Money Max Gold

However, gold started to become bullish from Years 2016 to 2020, business fundamentals of all 3 pawnbrokers (ValueMax, Maxi-Cash and MoneyMax) have improved significantly. However, the rising of gold price with strong business fundamental do not help much on their share prices, simply changing from downtrend to sideways. In fact, all 3 pawnbroker stocks also pay dividend like bank stocks, having high dividend yield now: 5% for ValueMax, 10% for Maxi-Cash and 65 for MoneyMax. However, the catch is an investor would suffer high capital losses due to “undervalue” or downtrend prices (correcting over 50% since IPO, even continue to underperform after business fundamental is improving). Despite the business fundamental is good, pawnbrokers stocks are not suitable for dividend investing due to inconsistent share prices.

The divergence between business and pawnbroker stocks prices may partly due to uncertain gold prices (which crashed before in the past) and also there are better choices for investment in Singapore bank stocks which are more predictable and “safer”. Lack of confidence and little knowledge in pawnshop business may deter potential investors from supporting their share prices.

So, these 3 pawnbroker stocks may not be suitable for investing due to misalignment between business and stock performance. Even during the bullish period of gold, pawners may choose to redeem the collateral (if containing gold), then pawnbrokers would just gain the interests. The 3 pawnbrokers stocks have many branches with relatively high level of debt over asset (a form of leveraging), therefore this business model is not as safe as bank or even traditional finance stocks.

6) Investment and Other Stocks

The remaining Singapore Banking and Finance stocks are mostly related to investment holding, fund management or other diversified businesses. These are some of the investment holding stocks: Hotung Investment (SGX: BLS), G K Goh (SGX: G41), Global Investment (SGX: B73), TIH (SGX: T55) and IFS Capital (SGX: I49). However, most of these stocks have weaker business fundamental, especially if the investment portfolio of companies may not perform during global stock crisis.

Hotung is an undervalue stock (Price-to-Book ratio, PB = 0.55) with stable profitable business (venture capital). It may be considered mainly for medium term dividend investing (about 7% dividend yield) but growth is limited if holding for long term. The company has no debt but undervalue business behave as those undervalue property stocks, safe but slow.

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If you feel there are too few Banking & Finance Stocks in Singapore (only 8 are giant stocks), then you may consider over 1500 global giant stocks in the world, some are much stronger bank stocks than DBS, OCBC and UOB. Learn to form a Dream Team stock portfolio with 10-20 global giant stocks from over 3 sectors and 3 countries, aligning the strategies with own personalities.

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Filed Under: Commodity Market, Fundamental Analysis, Macroeconomy, Market Cycle Investing, Market Optimism, Stock Market, Technical Analysis, Value Investing Tagged: bank stock, cyclic investing stock, dbs, dividend stock, Finance Stock, insurance stock, ocbc, undervalue stock, uob

47 Undervalue SG Property Stocks for Privatization including Perennial (弱肉强食)

Posted on June 13, 2020 Written by Dr Tee (Ein55)

Singapore Undervalue Property Stocks Perennial Privatization

Perennial Real Estate Holdings (SGX: 40S) becomes the next target for privatization. However, not all the acquisition news is good for retail investors. In this article, Dr Tee will share the considerations by Big Boys or major shareholders to acquire or privatize a stock with Perennial as an example, with sharing of Reverse Takeover (RTO) stocks. You will learn the 47 undervalue Singapore property stocks which are profitable with over 50% price discount in asset value.

Interestingly, Perennial started its property business in year 2014 through Reverse Takeover (RTO) of St. James Holdings (entertainment business) which IPO in 2008. RTO is a quick way of “IPO” by acquiring an existing company which could be different business nature. A more famous example would be RTO of Berkshire Hathaway (NYSE: BRK) by Warren Buffett in year 1965, transforming an original textile manufacturing company into an insurance company.

There are quite a few property related stocks also get listed indirectly through RTO, eg. Hatten (SGX: PH0) and Centurion (SGX: OU8) / (HKEx: 6090). Therefore, a stock investor has to be careful in analysis of stock prices and business fundamental, viewing the RTO company as new IPO company, especially if the business is totally different with new management. So, the past performance (share prices and businesses) would not be meaningful references after RTO.

Perennial original IPO (under St. James) price was $12.95/share which shareholder would “lose” 95% if compare with price of $0.69/share before the privatization offer of $0.95/share. However, Years 2008-2014 was reflection of St James share prices and businesses. Perennial actual stock record should be from Years 2014-2020, share prices vary from about $1 to about $0.30 during the recent Covid-19 crisis. Perennial is not a giant stock but it is also not a junk stock. The bearish stock prices over the past 6 years are aligned with other Singapore property stocks (quite many are corrected by over 50% in share prices).

However, Perennial is relatively weaker than other Singapore property stocks. Therefore, the recent offer $0.95/share (despite lower than RTO price when Perennial first started in 2014) is considered attractive to investors after RTO. It is getting harder to delist or privatize a company in Singapore, therefore the offer must be significantly higher (38% for this case) to extend the current 82% shareholding to over 90% for mandatory takeover.

Perennial major shareholders include Wilmar (SGX: F34), together with other “big boys”, although 38% premium in offer price seems attractive but this amount (about $277M) will be paid by the new investor, Hopu Fund of China. Perennial has many good quality properties in both Singapore and China, last 1 year has significant cash from investing (sales of property), currently having $120M cash in the company which will be unlocked after privatization. More importantly, the company is undervalue, Price-to-Book (PB) ratio is 0.44 with 56% discount. This implies that the offer to 18% minority shareholders is technically “free” to major shareholders as Net Asset Value (NAV) is $1.58/share. Assuming PB of only 0.75 (25% discount) as market price (if were to sell the properties today), then the value gained from privatization would be $390M, more than enough to cover $277M cash.

Nevertheless, it is unlikely for Perennial to sell properties cheaply after privatization. With both high-quality commercial buildings and promising healthcare services, there is always an option for the company to get listed again (could be in other stock exchange) in future with higher valuation after another IPO or even RTO.

A few years ago, Wheelock Properties (SGX: M35) with over 50% discount in PB was acquired by parent company in Hong Kong, Wheelock Co (HKEx: 20), cash unlocked after acquisition was more than cash offered. Therefore, some cash rich companies have also tried to delist the company but not all the Big Boys are lucky. Previously, Challenger Technologies (SGX: 573) could not pass this barrier due to objection by minority shareholders as the company is fundamentally strong with cash rich. Breadtalk (SGX: CTN) acquisition offer was attractive partly due to severe stock crisis during Covid-10.

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There are 140 property & construction stocks in Singapore (REITs are excluded, see earlier articles by Dr Tee if interested: www.ein55.com/blog), many are undervalue but also losing money, “Buy Low” may simply get lower in share price.

3Cnergy (SGX: 502), A-Smart (SGX: BQC), AEI^ (SGX: AWG), AIMS Property (SGX: BVP), APAC Realty (SGX: CLN), Abterra (SGX: L5I), Acromec (SGX: 43F), Amara (SGX: A34), Amcorp Global (SGX: S9B), AnnAik (SGX: A52), Astaka (SGX: 42S), BBR (SGX: KJ5), BRC Asia (SGX: BEC), BlackGoldNatural (SGX: 41H), Boldtek (SGX: 5VI), Bonvests (SGX: B28), Boustead (SGX: F9D), Boustead Projects (SGX: AVM), Bukit Sembawang (SGX: B61), Bund Center (SGX: BTE), CSC (SGX: C06), CapitaLand (SGX: C31), Casa (SGX: C04), Chemical Industries (SGX: C05), China Great Land (SGX: D50), China International (SGX: BEH), China Real Estate (SGX: 5RA), China Yuanbang (SGX: BCD), Chip Eng Seng (SGX: C29), City Development (SGX: C09), DISA (SGX: 532), Debao Property (SGX: BTF), ETC Singapore (SGX: 1C0), Edition (SGX: 5HG), EnGro Corporation (SGX: S44), Fraser and Neave F&N (SGX: F99), Far East Orchard (SGX: O10), Figtree (SGX: 5F4), First Sponsor (SGX: ADN), Fragrance (SGX: F31), Frasers Property (SGX: TQ5), GYP Properties (SGX: AWS), Gallant Venture (SGX: 5IG), Golden Energy (SGX: AUE), Goodland (SGX: 5PC), GuocoLand (SGX: F17), HL Global Enterprises (SGX: AVX), Hatten Land (SGX: PH0), Heeton (SGX: 5DP), Hiap Hoe (SGX: 5JK), Hiap Seng (SGX: 510), Ho Bee Land (SGX: H13), Hock Lian Seng (SGX: J2T), Hong Fok (SGX: H30), Hong Lai Huat (SGX: CTO), Hong Leong Asia (SGX: H22), Hongkong Land USD (SGX: H78), Hor Kew (SGX: BBP), Huationg Global (SGX: 41B), Hwa Hong (SGX: H19), IPC Corp (SGX: AZA), ISOTeam (SGX: 5WF), Imperium Crown (SGX: 5HT), Jasper Investments (SGX: FQ7), KOP (SGX: 5I1), KSH (SGX: ER0), Keong Hong (SGX: 5TT), Keppel Corp (SGX: BN4), Keppel Reit (SGX: K71U), King Wan (SGX: 554), Koh Brothers (SGX: K75), Koon (SGX: 5DL), Kori (SGX: 5VC), LHN (SGX: 41O), Ley Choon (SGX: Q0X), Lian Beng (SGX: L03), Low Keng Huat (SGX: F1E), Lum Chang (SGX: L19), MMP Resources (SGX: F3V), MYP (SGX: F86), Metro (SGX: M01), OIO (SGX: KUX), OKH Global (SGX: S3N), OKP (SGX: 5CF), OneApex (SGX: 5SY), Oxley (SGX: 5UX), PSL (SGX: BLL), Pacific Century (SGX: P15), Pacific Star Development (SGX: 1C5), Pan Hong (SGX: P36), Pavillon (SGX: 596), Perennial Holdings (SGX: 40S), Pollux Properties (SGX: 5AE), PropNex (SGX: OYY), Raffles Infrastructure (SGX: LUY), Regal International (SGX: UV1), Renaissance United (SGX: I11), Rich Capital (SGX: 5G4), Roxy-Pacific (SGX: E8Z), Ryobi Kiso (SGX: BDN), SHS (SGX: 566), SLB Development (SGX: 1J0), SP Corporation (SGX: AWE), Sasseur Reit (SGX: CRPU), Second Chance (SGX: 528), Sin Heng Mach (SGX: BKA), Sinarmas Land (SGX: A26), SingHaiyi (SGX: 5H0), SingHoldings (SGX: 5IC), Singapore-eDev (SGX: 40V), Sinjia Land (SGX: 5HH), Soilbuild Construction Group (SGX: S7P), Starland (SGX: 5UA), Straits Trading (SGX: S20), Swee Hong (SGX: QF6), Sysma (SGX: 5UO), TA (SGX: PA3), TTJ (SGX: K1Q), Tai Sin Electric (SGX: 500), Thakral (SGX: AWI), Thomson Medical Group (SGX: A50), Tiong Seng (SGX: BFI), Top Global (SGX: BHO), Tosei (SGX: S2D), Transcorp (SGX: T19), Tritech (SGX: 5G9), UIC (SGX: U06), UOA (SGX: EH5), UOL (SGX: U14), USP Group (SGX: BRS), Vibrant Group (SGX: BIP), Wee Hur (SGX: E3B), Wing Tai (SGX: W05), Yanlord Land (SGX: Z25), Yeo Hiap Seng (SGX: Y03), Ying Li International (SGX: 5DM), Yoma Strategic (SGX: Z59), Yongmao (SGX: BKX), Yongnam (SGX: AXB), Yorkshine (SGX: MR8).

There are only 47 undervalue (PB < 0.5) Singapore property stocks are profitable in the last 1 year, including Perennial.

From table below, we could see property stocks with PB = $/NAV from 0.13 to 0.5. Despite over 50% discount in share prices over NAV with profitable business, majority of stocks are not giant stocks. An undervalue stock may remain undervalue for a long term, sometimes may be even acquired by Big Boys at low optimism price in a bearish stock market (弱肉强食).

No	Name	Ticker	PB = Price/NAV	ROE (%)
1	Huationg Global	41B	0.13	5.3
2	Hor Kew	BBP	0.16	1.0
3	Top Global	BHO	0.18	0.2
4	Casa	C04	0.18	4.5
5	ETC Singapore	1C0	0.22	5.8
6	Hong Lai Huat	CTO	0.23	1.4
7	Hong Fok	H30	0.24	5.6
8	Koh Bros	K75	0.24	1.9
9	SP Corp	AWE	0.24	4.5
10	Pavillon	596	0.24	1.1
11	HongkongLand	H78	0.25	0.5
12	Heeton	5DP	0.25	3.0
13	HL Global Ent	AVX	0.27	1.1
14	Tiong Seng	BFI	0.28	4.0
15	Lian Beng	L03	0.28	4.7
16	China Intl	BEH	0.30	5.6
17	Sinarmas Land	A26	0.30	15.1
18	AnnAik	A52	0.31	3.3
19	TTJ	K1Q	0.34	2.3
20	Vibrant Group	BIP	0.34	3.8
21	Keong Hong	5TT	0.36	7.3
22	Far East Orchard	O10	0.37	2.1
23	Chemical Ind	C05	0.38	8.8
24	Pan Hong	P36	0.38	15.4
25	Ho Bee Land	H13	0.39	9.4
26	Hiap Hoe	5JK	0.39	2.9
27	King Wan	554	0.40	1.6
28	LHN	41O	0.40	8.3
29	Thakral	AWI	0.41	6.7
30	Metro	M01	0.41	5.6
31	Yanlord Land	Z25	0.41	11.9
32	Wing Tai	W05	0.42	1.3
33	EnGro	S44	0.42	4.7
34	Bonvests	B28	0.43	0.4
35	Kori	5VC	0.43	0.2
36	GuocoLand	F17	0.43	6.1
37	Perennial Hldgs	40S	0.44	0.1
38	Low Keng Huat	F1E	0.44	1.9
39	Straits Trading	S20	0.44	5.6
40	UIC	U06	0.44	8.3
41	Pollux Prop	5AE	0.44	2.5
42	SingHaiyi	5H0	0.44	0.1
43	Wee Hur	E3B	0.44	8.8
44	SingHoldings	5IC	0.45	15.4
45	Lum Chang	L19	0.45	9.1
46	Chip Eng Seng	C29	0.48	3.6
47	Hong Leong Asia	H22	0.50	4.5

Based on Dr Tee criteria, from the 47 shortlisted Singapore property stocks above, only 8 are giant stocks. A few undervalue property giant stocks were mentioned in earlier articles (see https://www.ein55.com/tag/property-stocks/), eg. GuocoLand (SGX: F17) and Hongkong Land (SGX: H78). However, not all major shareholders are interested of delisting the undervalue property stocks because some are family owned for decades, value of shares may recover to NAV only when they are ready to sell one day. It may be hard for Big Boys or external funds to acquire. For example, Li Ka-shing was hoping to acquire Hongkong Land in 1980s but was rejected with tighter control by parent stock from Jardine Group, Jardine Matheson Holdings JMH (SGX: J36) and Jardine Strategic Holdings JSH (SGX: J37).

Property stocks (both Singapore and regional stock markets in Malaysia and Hong Kong, etc) are cyclic in nature. Therefore, market cycle investing strategy is required with alignment to Optimism Strategies to Buy Low Sell High, as well as good understanding the local property market cycle. Property stocks is an integration of stock and property markets, knowledge in both markets are required to enhance the chances of success in investing.

Undervalue stocks are bonus for additional safety (huge discount in price below value with high quality asset of property), especially for property stocks but mainly suitable for patient long term investors. A smart investor may integrate undervalue stocks with dividend strategies. This is suitable for passive income investing, similar to property investment, an alternative to REITs but an investor of property stock (non-REIT) could also enjoy the capital gains (or suffer the losses) of property valuations, not just the rental income. For example, many property stocks (including Hongkong Land) are lower in valuation (affecting earnings) in Hong Kong but cash flow is not much affected.

So, reading between the lines for 3 financial reports (Income Statement, Balance Sheet, Cash Flow statement) are important to fully understand the property stocks, especially property development company has different project cycles which may last a few years, resulting in cyclic property business results and stock prices. So, Level Analysis of Level 1 (individual stock), Level 2 (Property Sector), Level 3 (local country) and Level 4 (world economy and global stock market) are required.

There are hundreds of global property giant stocks (may not need to be undervalue), an investor just needs to select 1 of Top 10 property stocks, adding to a dream team stock portfolio of 10-20 giant stocks (eg. best stock in each sector, min 3 sectors: REIT, Healthcare, F&B, Oil & Gas, Bank, Commodity, Insurance, etc). Value investors may own these 10-20 companies at undervalue price to work for us through shareholding, generating incomes (capital gains of higher share prices and dividend payment) over a lifetime (even beyond own retirement) with yearly review of giant stock status to continue the holding. So, every stock crisis is an opportunity to Buy Low with condition that it must be a giant stock.

There are 30 STI index component stocks including property stocks: CapitaLand, Hongkong Land, City Development and UOL (investor has to focus only on giant stocks for investing):
DBS Bank (SGX: D05), Singtel (SGX: Z74), OCBC Bank (SGX: O39), UOB Bank (SGX: U11), Wilmar International (SGX: F34), Jardine Matheson Holdings JMH (SGX: J36), Jardine Strategic Holdings JSH (SGX: J37), Thai Beverage (SGX: Y92), CapitaLand (SGX: C31), Ascendas Reit (SGX: A17U), Singapore Airlines (SGX: C6L), ST Engineering (SGX: S63), Keppel Corp (SGX: BN4), Singapore Exchange (SGX: S68), Hongkong Land (SGX: H78), Genting Singapore (SGX: G13), Mapletree Logistics Trust (SGX: M44U), Jardine Cycle & Carriage (SGX: C07), Mapletree Industrial Trust (SGX: ME8U), City Development (SGX: C09), CapitaLand Mall Trust (SGX: C38U), CapitaLand Commercial Trust (SGX: C61U), Mapletree Commercial Trust (SGX: N2IU), Dairy Farm International (SGX: D01), UOL (SGX: U14), Venture Corporation (SGX: V03), YZJ Shipbldg SGD (SGX: BS6), Sembcorp Industries (SGX: U96), SATS (SGX: S58), ComfortDelGro (SGX: C52).

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Drop by Dr Tee free 4hr investment course to learn how to position in global giant stocks with 10 unique stock investing strategies, knowing What to Buy, When to Buy/Sell.

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Filed Under: Fundamental Analysis, Market Cycle Investing, Property Market, Stock Market, Value Investing Tagged: acquisition, Perennial, Property Stocks, undervalue stock

3 Strategies for Double Top Stock Market (峰回路转)

Posted on June 12, 2020 Written by Dr Tee (Ein55)

US stock markets (both S&P 500 and Nasdaq indices) start to form potential “Double Top” at high optimism levels, after last few days of correction, indices are approaching / below 20 days moving average. At the same time, Asian stock markets (Singapore, Hong Kong, China, Malaysia, etc) are still struggling to recover gradually at moderate low optimism level but may need to follow the footstep of US.

In this article, Dr Tee will share 3 main strategies with 3 unique personalities for the current global stock markets, either short term trading or long term investing, both follow-trend and counter-trend. Before that, let’s understand the main driver of stock and economic crisis: Covid-19 conditions locally and globally.

US has reported a few positive economic signals (eg. job market is not as bad as expected) but recovery phase would take longer time while stock market is back to high optimism level before Covid-19 crisis again. Covid-19 condition in US shows very gradual drop in number of infected cases as social distancing may not be strictly enforced while many people could not wait to restart the economy. Based on projection, Covid-19 in US may need to wait until end of summer (around Aug 2020) to fade away. The positive signal is the number of new daily death cases are dropped to only about 1/3 of the peak, although number of new daily infected cases are still about 2/3 of peak cases. This implies the strain of Covid-19 is getting weaker after 5 months of pandemic.

At the same time, world number of infected Covid-19 cases are still increasing (7.5M cases), mainly due to high increment in a few high population countries such as Brazil and India which may be hard to balance between lockdown (minimize health crisis) and continuation of economy (minimize financial crisis). Some more healthy people may not mind take the risk to work as no income may be higher “risk” to the family. Again, positive signal is number of death cases are in declining mode globally.

For Singapore, most of the Covid-19 cases are within worker dormitories which are under control (few cases in the community) and very few death cases. Therefore, Singapore government has restarted economy in phases. There are even plans to start travel within the regions with countries having mild condition (eg. China). Malaysia has also restarted the economy, similar to many other global countries.

In short, Covid-19 condition is improving in many countries (at least within major economies: US, China, Japan, Europe), may fade away by end of summer. With restart of economy, the worst of monthly economic performance could be over (during last few months of global lockdown). However, each of the global government has to work hard to avoid Covid-19 induced short term economic crisis is extended into a longer term and bigger scale global financial crisis.

The most direct method would be economic stimulus plan, different names in each country, eg: Quantitative Easing (QE) in US which is unlimited in scale. As a result, there is a divergence between stock market (V-shape recovery) and economy (sluggish). When US stock markets are recovering back to the level before Covid-19 crisis (Nasdaq has even achieved new historical high of 10000 points), market starts to show correction.

Stock correction is healthy for longer term growth, similar to a person climbs up a hill, need some rests or slowing down in bumpy path to preserve the energy (峰回路转). However, potential “Double Top” pattern for US stock market at high optimism is still a big threat as no one would know the possible scales of correction: minor correction (less than 10%), major correction (10-20%), stock crisis (eg. 20-30% during Covid-19) or even global financial crisis (over 50%).

Therefore, it is important for a stock trader or investor to take action (Buy / Hold / Sell / Wait / Shorting) aligning with own personality. Here are 3 potential strategies for 3 unique personalities when there are potential signals of stock market correction (different levels):

1) Short Term Momentum / Cyclic Trading (trend-following)
A short term trader would exit progressively or reduce position with S.E.T. (Stop Loss / Entry / Target Prices) trading plan. When stock market is back to bullish again for short term, can always re-enter the trading (acceptable even the price could be higher than the selling price). Selling a stock is taking an insurance for a trader to reduce the risk, especially when uptrend price is corrected below own risk tolerance level.

Friend of a trader is always the clear price trends and bonus is strong fundamental business (just in case a retail trader could not follow the trading, if forced to become a long term investor, at least the giant stock would give the protection). Of course, it is possible to apply reversed strategy to do shorting, same requirement of following trading plan but in a reversed way (eg. downtrend price with weak fundamental business, best with negative market news).

2) Long Term Growth Investing
A long term growth investor would either reduce position (if trend-following but price is corrected more than own risk level) to protect the capital gain or possible to hold (regardless of potential stock crisis) but need to ensure stock portfolio is well diversified, based on 10-20 growth giant stocks with strong business fundamental. When stock is back to bullish again, may consider to “Average Up” with multiple entries for longer term investor.

For investor who could also trade, there is also an option for hedging (shorting for short term while holding to position for long term if not selling).

3) Long Term Dividend Investing

A long term dividend investor, if applying contrarian strategy (counter-trend to buy low in bearish stock market), possible to apply multiple entries to enter while stocks are falling, 10-25% (or X% defined by individual) price gap between each entry to maximize the dividend yield (especially for Asian stock market at lower optimism) but need to ensure stock portfolio is well diversified, based on 10-20 giant dividend/growth stocks with strong business fundamental.

This is “Average Down” method, suitable for unknown scale of stock crisis (minor correction or global financial crisis), no need to guess the bottom as consistent averaging in prices would help but an investor needs to follow the discipline to continue to buy low (only for giant stocks) while others are fearful.

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It is possible for 3 strategies above to be integrated, eg. trend-following dividend investing or growth + dividend investing, etc. There are over 10 different stock trading or investing strategies but one has to adjust to fit own personality. For example, for market cycle investor, needs to follow market optimism closely as US is back to high optimism level (>75%). Commodity stock investor (eg. oil & gas stock) needs to integrate different market cycles of stock market and commodity market.

Of course, the last possible option is do nothing all the time, regardless up or down in stock market: zero risk, zero reward. A stock trader or investor has to learn to take action (Buy / Hold / Sell / Wait / Shorting) unless “Do Nothing” (Wait or Hold) is part of strategy.

Drop by Dr Tee free 4hr investment course to learn how to position in global giant stocks with 10 unique stock investing strategies, knowing What to Buy, When to Buy/Sell.

You are invited to join Dr Tee private investment forum (educational platform, no commercial is allowed) to learn more investment knowledge, interacting with over 9000 members.

Filed Under: Macroeconomy, Market Cycle Investing, Market Outlook, Stock Market, Technical Analysis, Value Investing Tagged: coronavirus, market outlook, stock strategies, technical analysis

Rights Issue and Demerger of Sembcorp Marine from Sembcorp Industries (难兄难弟)

Posted on June 8, 2020 Written by Dr Tee (Ein55)

Rights Issue Demerger Sembcorp Marine Sembcorp Industries Temasek Keppel Corp

Temasek stocks of Sembcorp Industries SGX: U96, parent stock) and Sembcorp Marine (SGX: S51, subsidiary stock) just announce 2 bundled corporate actions of rights issue for Sembcorp Marine and then demerger from Sembcorp Industries. In this article, Dr Tee will compare both Sembcorp stocks and share the possible causes and effects of such actions with deeper analysis.

Recently, Temasek stock of Singapore Airlines, SIA (SGX: C6L) just completed the rights and mandatory convertible bonds (MCB) issues to inject extra capital to save the company from Covid-19 crisis encountered in airlines sector with over 90% drop in number of flights. Temasek would become the sponsor to take up additional rights and bonds if not taken up by other shareholders.

Temasek may have modified the “rescue” recipe for another company (Sembcorp) which need helps under both Covid-19 and Crude Oil Crises. Temasek owns 49.3% of Sembcorp Industries, a parent stock which subsequently owns 61% of Sembcorp Marine from oil & gas sector (see diagram).

The proposed corporate actions are bundle of 2 actions (see diagram), requiring both to pass together to be effective. Sharing here are for educational purpose, please make your own decision in investment.

Rights Issue Demerger Sembcorp Marine Sembcorp Industries Temasek

1) 5-for-1 Rights Issue for Sembcorp Marine

There are a few ways to “borrow money” for a business, eg. borrowing from banks or issue bonds but this would increase the debt level (both Sembcorp Industries and Sembcorp Marine have relatively high level of debt over asset) and additional cost to business with interest of loans. Therefore, an alternative way is to “borrow” money from shareholders through rights issue as this strategy would not increase the debt level and no interest is required. However, if shareholders don’t welcome this move (may be under pressure to invest with new capital), they may reflect the negative sentiment with lower share prices which affect the market cap of company or hidden wealth of shareholders.

Sembcorp Marine hopes to raise S$2.1 billion under 5-for-1 renounceable rights issue at an issue price of $0.20 per share. Based on recent average price of $0.74 for Sembcorp Marine, the theoretical ex-rights price (TERP) is

TERP = [($0.20 x 5) + ($0.74 x 1)] / 6 = $0.29/share

Since the rights are renounceable (similar to previous SIA rights), current shareholders of Sembcorp Marine may either accept the rights (requires extra cash to invest more on this stock) or they could simply sell the rights in stock market at later stage if action is approved.

Action of rights issue is a neutral corporate action, there is no right or wrong, decision partly depends on how the new capital is used (eg. paying debt, saving company or expanding the business, etc) and also whether a stock has strong business fundamental or strong sponsor. Similar to SIA, Sembcorp Marine needs additional capital to cope with the current crisis which is even worse, not limited to shorter term Covid-19 crisis (affecting most sectors) but also longer term oil & gas crisis with bearish crude oil price (affecting most oil & gas companies, including Sembcorp Marine and Keppel Corp, SGX: BN4).

When crude oil market was bullish 10 years ago, Sembcorp Marine and Keppel Corp were still giant stocks, doing well with growing businesses. However, when crude oil price dropped from over US$100/barrel since Year 2015 to less than US$50/barrel over the past few years, businesses of Sembcorp Marine and Keppel Corp (business segment of Keppel O&M) turn to negative, becoming losses.

Sembcorp Marine revenue size is about 1/3 of Sembcorp Industries, seriously affecting the earnings of parent company, which could still remain profitable with support of other business segments (energy/utilities and urban) but it has been weaker over the past 5 years. Keppel O&M (not listed) also contributes to most losses of Keppel Corp which is mainly supported by property segment. Due to prolonged oil & gas crisis over the past 5 years, these 3 Temasek stocks have lost the titles of giant stock (based on Dr Tee criteria): Sembcorp Industries, Sembcorp Marine and Keppel Corp.

Therefore, as a stock investor, decision of whether to take up rights issue is similar to additional investment, whether Sembcorp Marine worth investing. Currently crude oil market is still at low optimism but it is on recovery phase. It might take a few years for customers (oil producers) of Sembcorp Marine and also Keppel Corp (Keppel O&M) to become profitable and increase the capital investment. So, the cold winter of business might be much longer for Sembcorp Marine and Keppel O&M which could be a stopper for recovery of share prices despite at low optimism level.

Besides accepting / selling rights issue, current shareholders also have the option to sell the stock before corporate actions (but price may correct down if mass market views the action negatively). If the action is “Sell”, a shareholder may not suffer permanent loss if knowing how to “Change Horse”, use the remaining capital (after selling) to “Buy” an oil & gas giant stock or even a non-crisis giant stock on the same day. During oil & gas crisis period of last few years, a few oil & gas companies actually profit from the crisis, eg. those related to oil storage.

2) Demerger of Sembcorp Industries and Sembcorp Marine

Although Sembcorp Marine is only a subsidiary of Sembcorp Industries with 1/3 revenue but it contributed to most of the losses of parent company. From the chart below, it is shown that over the past 14 years (since 2006), both Sembcorp Industries and Sembcorp Marine behave more like siblings (难兄难弟), instead of parent-subsidiary relationship, having very close long term stock price trends (key difference is Sembcorp Marine is more volatile than Sembcorp Industries).

This implies 1/3 business connection of 2 Sembcorp stocks have contributed to nearly 90% strong correlation in share prices. Therefore, the proposal of demerger of 2 stocks would help Sembcorp Industries more in longer term. Sembcorp Industries shareholders would get compensation through dividend stocks of between 427 and 491 Sembcorp Marine shares for every 100 Sembcorp Industries shares owned. After demerging, since there is no connection in business, Sembcorp Industries would become more profitable (growing earnings contributed by energy/utilities and urban business segments) without affected by possible losses of Sembcorp Marine. Currently, Sembcorp Marine is as if a negative asset (contributing to losses) to Sembcorp Industries, therefore if parent company could sell away with some compensation, this would help Sembcorp Industries become a giant stock again.

After demerger, Temasek would become direct sponsors (major shareholder) for both companies which would become siblings or even cousins in Temasek family of stocks. The future losses of Sembcorp Marine would be sustained partially by Temasek, not by Sembcorp Industries anymore. In fact, energy/utilities (gas / power / water / waste / renewable energy) business of Sembcorp Industries are defensive in nature, would support the future share prices of “new” Sembcorp stock without “Marine” business segment. The smaller “Urban” segment (land and property development) is only 3% of company revenue but contributes to about 25% of company profits, a highly potential segment to grow further when “burden” of Marine is put aside.

To be fair to Sembcorp Marine, it is a stock with high potential but currently more suitable as crisis stock investing, implying if the potential losses in next few years could be sustainable (partly with help of rights issue), when crude oil price may be back to high optimism as 10 years ago, then Sembcorp Marine could outperform Sembcorp Industries.

Therefore, after demerging, both Sembcorp stocks would be clearer in personalities with more unique businesses. Sembcorp Industries would be mainly suitable for gradual growth, defensive investor. Sembcorp would be more for crisis stock investor who view high volatility (both potential high losses and high gains) as main driver for capital gains. Of course, a stock investor also has the option not to consider either Sembcorp stocks by selling them or not considering at all.

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Current Sembcorp Industries and Sembcorp Marine shareholders have to make a few decisions in the next few months. With support of Sembcorp Industry as major shareholder, likely the rights issue of Sembcorp Marine could be approved. However, this action is conditional based on the approval by both Sembcorp Marine and Sembcorp Industries for the other action, acceptance of demerger of 2 companies, which both Sembcorp Industries and Temasek would abstain from voting.

In short, the bundled corporation actions ultimately depend on minority shareholders for approval, therefore it is fair from democracy point of view. After excluding Temasek and Sembcorp Industries which are 50-60% ownership in both stocks, remaining minority shareholders are scattered (some are big funds), a simple majority >50% votes is required for both companies to approve the entire package.

Therefore, it may be similar to an election process, hard to predict the outcome unless there is alliance or rally among the minority shareholders. When 1 “party” feels in disadvantaged position, it may not approve, then whole deal would fail.

There are at least 26 Temasek / GLC stocks in Singapore including Sembcorp Industries and Sembcorp Marine, controlling shareholder with 15% or more ownership directly or indirectly:

Singtel (SGX: Z74), DBS Bank (SGX: D05), ST Engineering (SGX: S63), SIA (SGX: C6L), SIA Engineering (SGX: S59), SGX (SGX: S68), SATS (SGX: S58), Sembcorp Industries (SGX: U96), Sembcorp Marine (SGX: S51), Olam (SGX: O32), CapitaLand (SGX: C31), CapitaLand Mall Trust (SGX: C38U), CapitaLand Commercial Trust (SGX: C61U), Ascendas Reit (SGX: A17U), Ascott HTrust (SGX: HMN), Ascendas-hTrust (SGX: Q1P), CapitaR China Trust (SGX: Au8U), Ascendas-iTrust (SGX: CY6U), Keppel Corp (SGX: BN4), Keppel Reit (SGX: K71U), Keppel DC Reit (SGX: AJBU), Keppel Infrastructure Trust (SGX: A7RU), Mapletree Logistics Trust (SGX: M44U), Mapletree Commercial Trust (SGX: N2IU), Mapletree Industrial Trust (SGX: ME8U), Mapletree NAC Trust (SGX: RW0U).

The results of SIA rights issue and subsequently the Sembcorp resolutions, could give some direction of what possible actions to take for other Temasek stocks which may need help in business. Among the 30 STI component stocks with Temasek control (over 15% share ownership), these 4 Temasek stocks would need more help: Singapore Airlines, Sembcorp Industries (linked to Sembcorp Marine which was STI component stock before) and Keppel Corp.

So, regardless the outcome of Sembcorp actions, Temasek may also consider other options in future, eg. demerger of Keppel O&M from Keppel Corp, merging with Sembcorp Marine for cost saving of 2 oil & gas companies. For all the actions, there is a positive common point, which they all have a strong sponsor, Temasek. It is a bonus to have a strong sponsor but a business still needs good management with right strategies for each of the business sector. These performances would be reflected in both yearly financial reports and daily stock prices, especially for longer term trends. So, it may not be difficult for a stock investor to make a sound decision (Buy, Hold, Sell, Wait, Shorting), aligning the right Temasek stock with own personality, supported by growing business.

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On surface, this topic seems to be just on corporate actions of 2 Sembcorp stocks. When understanding further, it requires understanding of 2 current financial crisis, Crude Oil crisis and Covid-19 crisis, when they may end or fade away. When going to another deeper level, it may also involve political economy and global stock market, especially potential impact of US-China trade war. So, a stock investor should master at least 5 key LO-FTP strategies (Levels 1-4, Optimism, Fundamental, Technical, Personal Analysis).

There are 30 STI index component stocks including Sembcorp Industries (investor has to focus only on giant stocks for investing):
DBS Bank (SGX: D05), Singtel (SGX: Z74), OCBC Bank (SGX: O39), UOB Bank (SGX: U11), Wilmar International (SGX: F34), Jardine Matheson Holdings JMH (SGX: J36), Jardine Strategic Holdings JSH (SGX: J37), Thai Beverage (SGX: Y92), CapitaLand (SGX: C31), Ascendas Reit (SGX: A17U), Singapore Airlines (SGX: C6L), ST Engineering (SGX: S63), Keppel Corp (SGX: BN4), Singapore Exchange (SGX: S68), Hongkong Land (SGX: H78), Genting Singapore (SGX: G13), Mapletree Logistics Trust (SGX: M44U), Jardine Cycle & Carriage (SGX: C07), Mapletree Industrial Trust (SGX: ME8U), City Development (SGX: C09), CapitaLand Mall Trust (SGX: C38U), CapitaLand Commercial Trust (SGX: C61U), Mapletree Commercial Trust (SGX: N2IU), Dairy Farm International (SGX: D01), UOL (SGX: U14), Venture Corporation (SGX: V03), YZJ Shipbldg SGD (SGX: BS6), Sembcorp Industries (SGX: U96), SATS (SGX: S58), ComfortDelGro (SGX: C52).

Drop by Dr Tee free 4hr investment course to learn how to position in global giant stocks with 10 unique stock investing strategies, knowing What to Buy, When to Buy/Sell.

You are invited to join Dr Tee private investment forum (educational platform, no commercial is allowed) to learn more investment knowledge, interacting with over 9000 members.

Filed Under: Commodity Market, Fundamental Analysis, Personal Analysis, Stock Market, Value Investing Tagged: crisis stock, keppel corp, sembcorp industries, sembcorp marine, singapore airlines, temasek

42 Singapore REITs & 16 Business Trusts (稳如泰山)

Posted on June 5, 2020 Written by Dr Tee (Ein55)

Singapore REITs, Business Trusts, Dividend Stocks

Singapore REITs are popular investment for passive income through stable dividend stocks. In this article, you will learn on how to invest in 21 giant stocks from 42 Singapore REITs and 16 Business Trusts with 3 key strategies (Striker / Mid-fielder / Defender) in 8 categories:

1) Retail REITs

2) Office REITs

3) Industrial REITs

4) Healthcare REITs

5) Diversified REITs

6) Data Center REIT

7) Hospitality REIT

8) Business Trusts

There are 6 Singapore REITs which are also Business Trusts, so total there are 42 + 16 – 6 = 52 Singapore REITs and Business Trusts as of current stock market. Currently, out of 30 STI Index stocks, 5 are REITs. Soon, SPH (SGX: T39) with declining trading market capitalization (lower share price and/or lower trading volume) will be replaced by Mapletree Industrial Trust (SGX: ME8U) as 6th REIT of STI. CapitaMall Trust (SGX: C38U) will be merged with CapitaCom Trust (SGX: C61U) to form new CapitaLand Integrated Commercial Trust (CICT) Reit, therefore free up 1 seat in 30 STI. In near future, 5 reserve list of STI are all REITs or Business Trust:

Keppel DC Reit (SGX: AJBU), Suntec Reit (SGX: T82U), NetLink NBN Trust (SGX: CJLU), Frasers Logistics & Industrial Trust (SGX: BUOU) and Keppel Reit (SGX: K71U).

It implies at least 10 out of future 30 STI components would be from REITs and Business Trust. Future STI ETF (SGX: ES3)/(SGX: G3B) would be a more defensive investing tool, more dividend income but growth could be limited due to nature of Singapore REITs.

Diversification through REITs ETF (SGX: FSTAS8670) may not be a good strategy as not all stocks selected by index or fund manager are considered giant REITs (based on Dr Tee criteria) and systematic risk such as global financial crisis could potentially correct the REITs prices by more than 50% (eg. 70% price drop in 2008-2009 subprime crisis and about 40% correction in 2020 Covid-19 crisis) if an investor simply buys and hold for long term.

By law, REITs have to redistribute 90% taxable income (from property rental income) back to shareholders in the form of dividend. Therefore, a retail investor could play the role of landlord of giant property (shopping malls, commercial buildings, hospitals, hotels, etc) with minimal capital (could be less than $1000), saving the hassle to buy/sell property (REIT manager would help), no need to deal with tenants or operations (property manager would help). Singapore REITs are exempted from corporate tax, therefore an Singapore investor could gain extra 1-2% rental or dividend yield compared with overseas REITs.

Business Trust is not limited to property rental, could be any form of business and even a company has good track record of dividend payment, it is not a legal obligation to do pay dividend in future, especially when there is a potential business crisis (eg. Covid-19) which needs more cash reserve. Therefore, from the perspective of a dividend stock investor, Singapore REITs are more preferred than Business Trusts for passive income generation.

However, a REIT investor has to buy the right REIT which could grow in rental business (most important action), aligning own personality with 3 possible strategies:

1) Striker – trading or crisis investing (Buy Low Sell High), mainly for capital gains

2) Mid-fielder – medium term investing, mainly for capital gains (dividend income as bonus)

3) Defender – long term investing, mainly for dividend income (capital gains as bonus)

After confirming a REIT / Business Trust is a giant, then investor has to master the investment clock (When to Buy / Sell), depending on type of REITs. The best time to invest in a defensive REIT is usually during global stock crisis (with condition that the rental business is not significantly affected) which could maximize both the dividend yield and also higher upside for capital gains.

Below are all the 52 Singapore REITs and Business Trusts based on the last price traded (4 June 2020), sorted by type of REITs with details of 3 key strategies (Striker / Mid-fielder / Defender) and 3 critical Fundamental Criteria:
1) ROE (a basic criteria for REIT, eg. ROE > 0% to ensure business not losing money),
2) Dividend Yield, DY (a criteria for dividend stocks, eg. DY > 3 – 5%, depending on strategy),
3) Price-to-Book (PB) ratio, Price/NAV (a bonus for REIT is undervalue, eg. PB < 1).

No	Ticker	ROE	Dividend Yield (%)	PB = Price /NAV	Type	Strategy
1	BHG Retail Reit (SGX: BMGU)	11.4	6.4	0.7	Retail
2	CapitaLand Mall Trust (SGX: C38U)	9.0	5.7	1.0	Retail	Defender
3	CapitaLand Retail China Trust (SGX: AU8U)	8.8	7.3	0.9	Retail	Defender
4	Frasers Centrepoint Trust (SGX: J69U)	8.3	4.7	1.2	Retail	Defender
5	Lippo Malls Trust (SGX: D5IU)	-0.7	15.4	0.7	Retail
6	Sasseur Reit (SGX: CRPU)	11.8	8.4	0.8	Retail
7	SPH REIT (SGX: SK6U)	6.1	5.9	0.9	Retail
8	Starhill Global Reit (SGX: P40U)	3.4	8.2	0.6	Retail	Defender
9	United Hampshire US Reit (SGX: ODBU)	4.1	–	0.789	Retail
10	CapitaLand Commercial Trust (SGX: C61U)	6.0	5.0	1.0	Office	Defender
11	Elite Commercial REIT GBP (SGX: MXNU)	–	–	1.2	Office
12	IREIT Global (SGX: UD1U)	19.4	7.7	0.9	Office	Mid-fielder
13	Keppel Pacific Oak US REIT (SGX: CMOU)	9.3	8.4	0.9	Office
14	Keppel Reit (SGX: K71U)	2.6	4.8	0.9	Office	Defender
15	ManulifeReit USD (SGX: BTOU)	3.8	7.2	1.0	Office	Mid-fielder
16	OUE Commercial Reit (SGX: TS0U)	3.5	8.0	0.7	Office
17	Prime US ReitUSD (SGX: OXMU)	4.1	3.5	1.0	Office
18	AIMS APAC Reit (SGX: O5RU)	9.0	7.6	0.9	Industrial
19	ARA LOGOS Logistics Trust (SGX: K2LU)	-2.1	9.8	1.0	Industrial
20	Ascendas Reit (SGX: A17U)	7.4	4.4	1.5	Industrial	Defender
21	EC World Reit (SGX: BWCU)	9.5	8.4	0.8	Industrial
22	ESR-REIT (SGX: J91U)	-0.1	9.7	1.0	Industrial
23	Mapletree Industrial Trust (SGX: ME8U)	10.3	4.6	1.6	Industrial	Mid-fielder
24	Mapletree Logistics Trust (SGX: M44U)	8.2	4.2	1.5	Industrial	Defender
25	Sabana Reit (SGX: M1GU)	3.5	7.8	0.7	Industrial
26	ARA Hospitality Trust USD (SGX: XZL)	2.2	10.1	0.5	Hospitality
27	Ascott Trust (SGX: HMN)	5.1	7.2	0.8	Hospitality	Striker
28	CDL Hospitality Trust (SGX: J85)	6.1	8.2	0.7	Hospitality	Striker
29	Eagle Hospitality Trust USD (SGX: LIW)	18.2	25.3	0.2	Hospitality
30	Far East Hospitality Trust (SGX: Q5T)	3.6	7.2	0.6	Hospitality
31	Frasers Hospitality Trust (SGX: ACV)	3.4	8.9	0.7	Hospitalit
32	First Reit (SGX: AW9U)	5.7	12.1	0.7	Healthcare	Striker
33	ParkwayLife Reit (SGX: C2PU)	10.4	3.8	1.8	Healthcare	Mid-fielder
34	Cromwell Reit EUR (SGX: CNNU)	8.3	8.9	0.9	Diversified
35	Cromwell Reit SGD (SGX: CSFU)	8.3	8.5	0.9	Diversified
36	Frasers Logistics & Commercial Trust (SGX: BUOU)	9.8	3.9	1.9	Diversified	Mid-fielder
37	Lendlease Reit (SGX: JYEU)	–	–	0.9	Diversified
38	Mapletree Commercial Trust (SGX: N2IU)	9.4	3.8	1.2	Diversified	Mid-fielder
39	Mapletree North Asia Commercial Trust (SGX: RW0U)	2.6	7.7	0.7	Diversified	Defender
40	Soilbuild Business Space Reit (SGX: SV3U)	4.0	10.2	0.7	Diversified
41	Suntec Reit (SGX: T82U)	6.5	6.0	0.7	Diversified
42	Keppel DC Reit (SGX: AJBU)	5.7	3.1	2.2	Data Center	Mid-fielder
43	Accordia Golf Trust (SGX: ADQU)	-17.0	6.4	0.8	Business Trust
44	Ascendas India Trust (SGX: CY6U)	18.2	4.6	1.3	Business Trust	Defender
45	Asian Pay Tv Trust (SGX: S7OU)	1.8	7.4	0.2	Business Trust
46	Dasin Retail Trust (SGX: CEDU)	-1.9	8.2	0.6	Business Trust
47	FSL Trust (SGX: D8DU)	5.0	29.3	0.5	Business Trust
48	HPH Trust SGD (SGX: P7VU)	2.0	11.9	0.3	Business Trust
49	HPH Trust USD (SGX: NS8U)	2.0	12.6	0.3	Business Trust
50	Keppel Infrastructure Trust (SGX: A7RU)	2.9	7.0	2.1	Business Trust
51	NetLink NBN Trust (SGX: CJLU)	2.7	5.0	1.4	Business Trust	Mid-fielder
52	RHT HealthTrust (SGX: RF1U)	–	145.5	0.9	Business Trust

The risk (and also opportunity) of REITs are cyclic stock prices, therefore each global stock crisis could be good opportunity to Buy Low for giant Defender REITs, maximizing dividend yields with multiple entries if diversification is needed during uncertain Global Financial Crisis. For Mid-fielder stocks, alignment with price trends are important for trading (momentum and cyclic / swing trading). Covid-19 pandemic would disrupt the stable distribution of rental income for some REITs (eg. Retail, Office, Industrial, Hospitality) with reduced or delayed dividend for 6-12 months but it has less impact on longer term investors who could hold longer than 1 year.

We may group 52 Singapore REITs and Business Trusts in the following 8 categories with 21 selected giant stocks in 3 main roles (Striker / Mid-fielder / Defender).

1) Retail REITs

There are 9 Retail REITs listed in Singapore (some with overseas business, eg. in China, Hong Kong and US):

BHG Retail Reit (SGX: BMGU), CapitaLand Mall Trust (SGX: C38U), CapitaLand Retail China Trust (SGX: AU8U), Frasers Centrepoint Trust (SGX: J69U), Lippo Malls Trust (SGX: D5IU), Sasseur Reit (SGX: CRPU), SPHREIT (SGX: SK6U), Starhill Global Reit (SGX: P40U), United Hampshire US Reit (SGX: ODBU).

Retail REITs are usually cyclic in nature, tenants occupancy rate and rental rate mainly follow economic cycles and strength of local economy. 4 Giant Retail REITs are good choices as Defenders to collect dividend income: CapitaLand Mall Trust (SGX: C38U), CapitaLand Retail China (SGX: AU8U), Frasers Centrepoint Trust (SGX: J69U), Starhill Global Reit (SGX: P40U).

2) Office REITs

There are 8 Office or Commercial REITs listed in Singapore (some with overseas business, eg. in US, UK and Europe):

CapitaLand Commercial Trust (SGX: C61U), Elite Commercial REIT (SGX: MXNU), IREIT Global (SGX: UD1U), Keppel Pacific Oak US REIT (SGX: CMOU), Keppel Reit (SGX: K71U), Manulife Reit (SGX: BTOU), OUE Commercial Reit (SGX: TS0U), Prime US Reit (SGX: OXMU).

Office REITs are usually cyclic in nature, tenants occupancy rate and rental rate mainly follow economic cycles and strength of local economy. 4 Giant Office REITs are good choices, 2 as Defenders to collect dividend income: CapitaLand Commercial Trust (SGX: C61U) and Keppel Reit (SGX: K71U) and 2 as Mid-fielders (both capital gains and dividend income in medium term trading): Manulife Reit (SGX: BTOU) and IREIT Global (SGX: UD1U).

3) Industrial REITs

There are 8 Industrial REITs listed in Singapore (some with overseas business, eg. in China and Asia Pacific):

AIMS APAC Reit (SGX: O5RU), ARA LOGOS Logistics Trust (SGX: K2LU), Ascendas Reit (SGX: A17U), EC World Reit (SGX: BWCU), ESR-REIT (SGX: J91U), Mapletree Industrial Trust (SGX: ME8U), Mapletree Logistics Trust (SGX: M44U), Sabana Reit (SGX: M1GU).

Industrial REITs are usually cyclic in nature, tenants occupancy rate and rental rate mainly follow economic cycles and strength of local economy. 3 Giant Industrial REITs are good choices, 2 as Defenders to collect dividend income: Ascendas Reit (SGX: A17U) and Mapletree Logistics Trust (SGX: M44U) and 1 as Mid-fielder (both capital gains and dividend income in medium term): Mapletree Industrial Trust (SGX: ME8U).

4) Healthcare REITs

There are only 2 Healthcare REITs listed in Singapore (with local and overseas business, eg. in Indonesia, South Korea, Malaysia, Japan and), both are giant stocks:

First Reit (SGX: AW9U) as striker and ParkwayLife Reit (SGX: C2PU) as Mid-fielder.

Healthcare REITs are usually more defensive in rental business due to very long term agreement signed with tenants (hospitals which need stability in operation). First Reit used to be a Mid-fielder with strong growth but investors confidence are affected with bearish outlook of sponsor, Lippo Group, therefore new role as a Striker could be more suitable for crisis stock investing. Parkwaylife REIT is much more stable with support of strong sponsor, IHH Healthcare (SGX: Q0F) but dividend yield is limited, therefore more suitable as a Mid-fielder.

5) Diversified REITs

There are 8 Diversified REITs listed in Singapore (some with overseas business, eg. in China, Asia Pacific and Europe):

Cromwell Reit EUR (SGX: CNNU) / Cromwell Reit SGD (SGX: CSFU), Frasers Logistics & Commercial Trust (SGX: BUOU), Lendlease Reit (SGX: JYEU), Mapletree Commercial Trust (SGX: N2IU), Mapletree North Asia Commercial Trust (SGX: RW0U), Soilbuild Business Space REIT (SGX: SV3U), Suntec Reit (SGX: T82U).

Diversified REITs have different types of REITs within the REIT portfolio (eg. Office / industrial / retail, some are integrated of smaller REITs, eg. Frasers REITs, through Merging & Acquisition), therefore usually cyclic in nature, tenants occupancy rate and rental rate mainly follow economic cycles and strength of local economy. 3 Giant Industrial REITs are good choices, 1 as defender to collect dividend income: Mapletree NAC Trust (SGX: RW0U) and 2 as Mid-fielders (both capital gains and dividend income in medium term): Frasers L&C Trust (SGX: BUOU) and Mapletree Commercial Trust (SGX: N2IU.

6) Data Center REIT

There is only 1 Data Center REIT in Singapore (with business locally and globally), also a Mid-fielder Giant Stock: Keppel DC Reit (SGX: AJBU).

Technically, Mapletree Industrial Trust, MIT (SGX: ME8U) has partial business in Data Center as MIT has 40% ownership (another 60% by parent company, Mapletree Investment) of Mapletree Redwood Data Centre Trust (MRDCT) which has 14 data centers in US since 2017. So far, Mapletree group (Temasek as sponsor) has 4 REITs listed sequentially over the past decade. So, there is no surprise if MRDCT may be listed in future when business is more stable one day. Currently, an investor may invest indirectly through MIT, which is an Industrial REIT including partial business in Data Centers.

Data Center REITs are usually more defensive due to longer term agreement signed with tenants (could be local government and big companies with confidential customer identities due to sensitive nature of database) which may view stability and security as more important factors than cost of rental. With popularity in internet (driven further by 5G) and tremendous growth in database required globally, demand for data centers at safer locations / countries would be increasing. Both Keppel DC Reit and MIT are younger REITs, more suitable to position as Mid-fielders, aiming mainly for capital gains (dividend is only a bonus), may evolve into growth investing in future.

7) Hospitality REIT

There are 6 Hospitality REITs (some with business overseas, eg. global hotels chain) which also have Business Trust to form Stapled Securities due to requirement of business model:

ARA Hospitality Trust USD (SGX: XZL), Ascott Trust (SGX: HMN), CDL Hospitality Trust (SGX: J85), Eagle Hospitality Trust USD (SGX: LIW), Far East Hospitality Trust (SGX: Q5T), Frasers Hospitality Trust (SGX: ACV)

Hospitality REITs are mostly considered as crisis sector (especially for hotel / resort business) due to Covid-19 pandemic, few international visitors during this period. Without strong sponsor, a REIT could be in trouble. Eagle HTrust is a good example, stock is suspended after less than 1 year of IPO (about 80% capital loss for a stock investor), with big losses in business, default of loan and additional sell down during Covid-19 crisis as last straw which breaks the camel’s back. Usually for a young IPO stock without stable business record, there is always a risk that business may not be sustainable. So, a proven REIT with higher price could be more valuable than a young REIT with lower price.

2 Giant Hospitality REITs may be considered, both as Strikers (crisis investing stocks) as they are supported by strong sponsors despite weak business during Covid-19: Ascott Trust (SGX: HMN) is supported by CapitaLand (SGX: C31), while CDL HTrust (SGX: J85) is supported by City Development (SGX: C09). An investor may need to wait for quarterly or semi-annual financial report to understand the real impact of Covid-19 during Q1-Q2/2020 on Hospitality REITs. There are other non-crisis REITs (or limited impact of Covid-19) which an investor may consider, there is no need to take risk on Striker stocks if it goes against the personality of investors who may aim for defensive investing with stable dividend income.

8) Business Trusts

There are 10 pure Business Trusts listed in Singapore which dividend payments are not protected by law:

Accordia Golf Trust (SGX: ADQU), Ascendas India Trust (SGX: CY6U), Asian Pay Tv Trust (SGX: S7OU), Dasin Retail Trust (SGX: CEDU), FSL Trust (SGX: D8DU), HPH Trust SGD (SGX: P7VU), HPH Trust USD (SGX: NS8U), Keppel Infrastructure Trust (SGX: A7RU), NetLink NBN Trust (SGX: CJLU), RHT Health Trust (SGX: RF1U).

There are a few weak Business Trusts with very high dividend yield which are potential value traps, eg. FSL Trust (29% dividend yield). Dividend yield is always computed based on past dividend record and a high number could be derived due to weak business with very bearish share price. Buy Low may not able to Sell High for a junk stock as share prices would become lower. So, high dividend yield has to combine with a giant dividend stock or giant REIT (either Mid-fielder or Defender strategy), following Dr Tee criteria.

2 Giant Business Trusts with strong sponsors may be considered: Ascendas India Trust (SGX: CY6U) as a Defender (property trust in India) is supported by CapitaLand (SGX: C31), while NetLink NBN Trust (SGX: CJLU) as a Mid-fielder is supported by Singtel (SGX: Z74). Ascendas-iTrust is still property related, therefore even it is a Business Trust, asset quality is high. However for NetLink Trust, it is based on owner and operator of Singapore Fiber Network (prices regulated by authority, a form of monopoly) which technology may evolve in future, eg, towards 5G. So, close review of future technology and monitoring of financial performance are required. Therefore, young technology Business Trust of NetLink Trust, is more suitable for role as a Mid-fielder.

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There are 140 Property Stocks in Singapore excluding 52 REITs and Business Trusts (investor has to focus only on giant stocks for investing):
3Cnergy (SGX: 502), A-Smart (SGX: BQC), AEI^ (SGX: AWG), AIMS Property (SGX: BVP), APAC Realty (SGX: CLN), Abterra (SGX: L5I), Acromec (SGX: 43F), Amara (SGX: A34), Amcorp Global (SGX: S9B), AnnAik (SGX: A52), Astaka (SGX: 42S), BBR (SGX: KJ5), BRC Asia (SGX: BEC), BlackGoldNatural (SGX: 41H), Boldtek (SGX: 5VI), Bonvests (SGX: B28), Boustead (SGX: F9D), Boustead Projects (SGX: AVM), Bukit Sembawang (SGX: B61), Bund Center (SGX: BTE), CSC (SGX: C06), CapitaLand (SGX: C31), Casa (SGX: C04), Chemical Industries (SGX: C05), China Great Land (SGX: D50), China International (SGX: BEH), China Real Estate (SGX: 5RA), China Yuanbang (SGX: BCD), Chip Eng Seng (SGX: C29), City Development (SGX: C09), DISA (SGX: 532), Debao Property (SGX: BTF), ETC Singapore (SGX: 1C0), Edition (SGX: 5HG), EnGro Corporation (SGX: S44), Fraser and Neave F&N (SGX: F99), Far East Orchard (SGX: O10), Figtree (SGX: 5F4), First Sponsor (SGX: ADN), Fragrance (SGX: F31), Frasers Property (SGX: TQ5), GYP Properties (SGX: AWS), Gallant Venture (SGX: 5IG), Golden Energy (SGX: AUE), Goodland (SGX: 5PC), GuocoLand (SGX: F17), HL Global Enterprises (SGX: AVX), Hatten Land (SGX: PH0), Heeton (SGX: 5DP), Hiap Hoe (SGX: 5JK), Hiap Seng (SGX: 510), Ho Bee Land (SGX: H13), Hock Lian Seng (SGX: J2T), Hong Fok (SGX: H30), Hong Lai Huat (SGX: CTO), Hong Leong Asia (SGX: H22), Hongkong Land USD (SGX: H78), Hor Kew (SGX: BBP), Huationg Global (SGX: 41B), Hwa Hong (SGX: H19), IPC Corp (SGX: AZA), ISOTeam (SGX: 5WF), Imperium Crown (SGX: 5HT), Jasper Investments (SGX: FQ7), KOP (SGX: 5I1), KSH (SGX: ER0), Keong Hong (SGX: 5TT), Keppel Corp (SGX: BN4), Keppel Reit (SGX: K71U), King Wan (SGX: 554), Koh Brothers (SGX: K75), Koon (SGX: 5DL), Kori (SGX: 5VC), LHN (SGX: 41O), Ley Choon (SGX: Q0X), Lian Beng (SGX: L03), Low Keng Huat (SGX: F1E), Lum Chang (SGX: L19), MMP Resources (SGX: F3V), MYP (SGX: F86), Metro (SGX: M01), OIO (SGX: KUX), OKH Global (SGX: S3N), OKP (SGX: 5CF), OneApex (SGX: 5SY), Oxley (SGX: 5UX), PSL (SGX: BLL), Pacific Century (SGX: P15), Pacific Star Development (SGX: 1C5), Pan Hong (SGX: P36), Pavillon (SGX: 596), Perennial Holdings (SGX: 40S), Pollux Properties (SGX: 5AE), PropNex (SGX: OYY), Raffles Infrastructure (SGX: LUY), Regal International (SGX: UV1), Renaissance United (SGX: I11), Rich Capital (SGX: 5G4), Roxy-Pacific (SGX: E8Z), Ryobi Kiso (SGX: BDN), SHS (SGX: 566), SLB Development (SGX: 1J0), SP Corporation (SGX: AWE), Sasseur Reit (SGX: CRPU), Second Chance (SGX: 528), Sin Heng Mach (SGX: BKA), Sinarmas Land (SGX: A26), SingHaiyi (SGX: 5H0), SingHoldings (SGX: 5IC), Singapore-eDev (SGX: 40V), Sinjia Land (SGX: 5HH), Soilbuild Construction Group (SGX: S7P), Starland (SGX: 5UA), Straits Trading (SGX: S20), Swee Hong (SGX: QF6), Sysma (SGX: 5UO), TA (SGX: PA3), TTJ (SGX: K1Q), Tai Sin Electric (SGX: 500), Thakral (SGX: AWI), Thomson Medical Group (SGX: A50), Tiong Seng (SGX: BFI), Top Global (SGX: BHO), Tosei (SGX: S2D), Transcorp (SGX: T19), Tritech (SGX: 5G9), UIC (SGX: U06), UOA (SGX: EH5), UOL (SGX: U14), USP Group (SGX: BRS), Vibrant Group (SGX: BIP), Wee Hur (SGX: E3B), Wing Tai (SGX: W05), Yanlord Land (SGX: Z25), Yeo Hiap Seng (SGX: Y03), Ying Li International (SGX: 5DM), Yoma Strategic (SGX: Z59), Yongmao (SGX: BKX), Yongnam (SGX: AXB), Yorkshine (SGX: MR8).

Not all Singapore REITs or Business Trusts are giant stocks, some could be junk stocks (eg. making losses or asking investors for reserved passive incomes through rights issues). Even for a giant stock, it requires at least yearly review with Dr Tee criteria to ensure it is still a giant stock or a change in strategy may be required (eg. crisis stock investing with Striker role if there is any potential high risk). Similarly, those stocks which are not highlighted in this article, some could be marginal giant stocks, may obtain the giant stock title one day, which worth longer term investing or trading.

Although there are 21 giant REITs and Business Trusts listed in this article (3 roles of Striker / Mid-fielder / Defender), not all stocks are suitable for everyone. A REIT investor has to further select the right type of giant stock to align with own personality to be successful in short trading, medium term investing or long term investing, knowing What to Buy, When to Buy / Sell.

Ideally, a smart investor should form a dream team stock portfolio (striker / mid-fielder / defender) with 10-20 giant stocks from over 3 sectors and 3 countries. REIT sector may contribute 1-2 stocks while it is important to diversify with more sectors (eg. Healthcare, Banking & Finance, F&B, Technology, Oil & Gas, Property / non-REIT, etc).

Since some REITs have overseas business, knowledge of Forex (eg. USD/SGD, SGD/IDR, etc) would be critical. A qualified REIT investor should also understand property market cycle, macroeconomy behavior, integrating with dividend investing or growth investing or cyclic / momentum trading.

Drop by Dr Tee free 4hr investment course to learn how to position in global giant stocks with 10 unique stock investing strategies, knowing What to Buy, When to Buy/Sell.

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Filed Under: Forex, Fundamental Analysis, Macroeconomy, Market Cycle Investing, Market Outlook, Stock Market, Technical Analysis, Trading, Value Investing Tagged: Business Trusts, dividend stock, passive income, reit, Singapore REITs

8 Glove Stocks & 6 Sectors Profit in COVID-19 (易如反掌)

Posted on June 1, 2020 Written by Dr Tee (Ein55)

Crisis glove stocks Top Glove Hartalega Kossan Supermax Riverstone Covid-19

In this article, you will learn 8 glove manufacturer stocks in Singapore and Malaysia and 6 other sectors which could profit from Covid-19 crisis, each requiring unique stock strategies for investing or trading.

1) Top Glove (SGX: BVA) / (Bursa: 7113) – Singapore / Malaysia Giant Glove Stock

2) Hartalega (Bursa: 5168) – Malaysia Giant Glove Stock

3) Kossan (Bursa: 7153) – Malaysia Giant Glove Stock

4) SuperMax (Bursa: 7106) – Malaysia Giant Glove Stock

5) Riverstone (SGX: AP4) – Singapore Giant Glove Stock

6) Comfort Gloves (Bursa: 2127) – Malaysia Glove Stock

7) Careplus (Bursa: 0163) – Malaysia Glove Stock

8) Rubberex (Bursa: 7803) – Malaysia Glove Stock

Crisis is opportunity for stock investing, especially true for glove manufacturers during Covid-19 crisis as demand for gloves are surging. In the past 1 decade, glove stocks are in the best time of era, strong growing business supported by 4 main factors:

1) Growing economy – higher manufacturing needs, especially glove is consumable (cheap but frequently used / replaced), recurring income.

2) Pandemic – higher healthcare needs, including Covid-19, H1N1 and other virus outbreaks.

3) Lower cost – especially for latex glove as rubber price has been low optimism due to bearish global commodity market. Thailand and Malaysia are rubber main producers, supplying to factories of these glove manufacturers within the same countries, saving more cost.

4) Stronger USD – forex becomes advantage for glove manufacturers as local expenses are mostly paid in ringgit but customers are based from overseas (world), therefore collecting payment (incomes) in USD which is stronger relative to ringgit. Of course, this advantage may become a weakness in future when USD becomes weaker.

Fundamentally, Covid-19 crisis helps to improve the business of these glove stocks, Q1/2020 financial results are even stronger than previous year. A strong fundamental business when encounter high demand due to market greed (which may be due to fear), the share price could be speculated higher.

Strong Fundamental + Market Greed = Positive Speculation

[Higher Sales + Stronger (USD/MYR) – Lower Cost] + Higher Greed (Pandemic Fear) = Higher Share Price

Indeed, all of these 8 glove stocks have surged more than 2 times in share prices over the past few months of Covid-19 pandemic. However, the current prices are at high optimism, mainly suitable for very short term momentum trading (Buy High Sell Higher).

Top Glove (listed in both Singapore and Malaysia), Hartalega, Kossan and SuperMax are considered the Big Four of glove manufacturers in Malaysia, all are giant stocks (based on Dr Tee criteria), will be discussed in further. Riverstone is a smaller player (listed in Singapore) but having strong business fundamental, will have more comments as well later. As for other 3 glove stocks (Comfort Gloves, Careplus, Rubberex) which are smaller in size, only have stronger business over the past 5 years (likely due to leftover demand, competing with lower prices or niche market), mainly suitable for short term trading, not a giant stock.

So, we will elaborate here mainly on 5 giant glove stocks (Top Glove, Hartalega, Kossan, SuperMax, Riverstone) which may be considered for both longer term investing (when correcting below a fair price with holding power) and short term trading (following S.E.T. trading rule – Stop Loss / Entry / Target Prices).

1) Top Glove (SGX: BVA) / (Bursa: 7113) – Singapore / Malaysia Giant Glove Stock

Top Glove is the world’s largest rubber glove manufacturer with many types of latex and nitrile gloves from manufacturing facilities in Malaysia, Thailand and China. Founder and major shareholder is Lim Wee Chai (27% ownership), also the No 14 richest person in Malaysia (Forbes’ List), supported mainly by rising share prices over the 2 past decades (share price goes up over 500 times since IPO till now). Top Glove has become 1 of 30 KLCI component stock, showing its business strength.

Top Glove has dual listing in Malaysia Bursa (longer history) and Singapore SGX. The relative stock performance are aligned but due to different group of investors, short term share price in SGX (BVA) is even more bullish than in Bursa (7113). Fundamentally, each share (SGX or Bursa) is the same but short term share price may not be due to difference of forex (SGD/MYR) alone.

Top Glove is a strong growth stock (supported by growing businesses with strong cash flow) but highly leveraged (high debt) to expand its capability further, strengthening its position as world’s largest glove manufacturer. Scale of economy is also a form of economic moat, position as bigger player could help to lower down the unit cost, therefore increase the profit margin.

Due to high optimism in share price, Top Glove may be considered as a mid-fielder stock (aiming for high capital gains with little dividend yield as bonus). It may also be considered for very short term momentum trading despite share price is speculated (Buy High Sell Higher strategy).

2) Hartalega (Bursa: 5168) – Malaysia Giant Glove Stock

Hartalega is the world’s largest nitrile glove manufacturer. Founder and major shareholder is Kuan Kam Hon (about 50% ownership with family), also the No 9 richest person in Malaysia (Forbes’ List), supported mainly by rising share prices over the past decade (share price goes up nearly 100 times since IPO till now). Hartalega has become 1 of 30 KLCI component stock, showing its business strength.

Hartalega main product of nitrile glove has higher profit margin compared to latex (rubber) glove. However, this profitable product segment also attracts many competitors, therefore the high growth of Hartalega is getting slower, now is more aligned (sustainable rate) with other major competitors, sharing the big pie of glove industries.

Hartalega is a strong growth stock (supported by growing businesses with strong cash flow) with lower debt level (having potential to expand further with more leveraging if needed). Scale of economy is also a form of economic moat, position as bigger player (nitrile glove) could help to lower down the unit cost, therefore increase the profit margin.

Due to high optimism in share price, Hartalega may be considered as a mid-fielder stock (aiming for high capital gains with little dividend yield as bonus). It may also be considered for very short term momentum trading despite share price is speculated (Buy High Sell Higher strategy).

3) Kossan (Bursa: 7153) – Malaysia Giant Glove Stock

Kossan is the world’s second largest glove manufacturer (technical rubber products, medical gloves, cleanroom products, etc). Founder and major shareholder is Lim Kuang Sia (about 50% ownership), was in 2017 Forbes’ List for Malaysia No 30 richest person, supported mainly by rising share prices over the past 2 decades (share price goes up about 60 times since IPO till now).

Kossan is a strong growth stock (supported by growing businesses with strong cash flow), performance is comparable with the main competitor, Top Glove. Kossan has moderate debt level, having potential to expand further with more leveraging if needed. The glove industry is big enough for major players to share the big global pie of growing demand for gloves in manufacturing and healthcare sectors.

Due to moderate high optimism in share price (compared to other 4 giant glove stocks at high optimism), Kossan has more upside potential, may be considered as a mid-fielder stock (aiming for high capital gains). It may also be considered for very short term momentum trading despite share price is speculated (Buy High Sell Higher strategy).

4) SuperMax (Bursa: 7106) – Malaysia Giant Glove Stock

SuperMax is a leading medical / latex gloves manufacturer. Founder and major shareholder is Thai Kim Sim (about 40% ownership together with wife) who was charged with insider trading in Year 2017. However, this negative news does not stop investors from supporting SuperMax, share price goes up about 60 times over the past 2 decades. During Covid-19 pandemic, SuperMax share price is the most bullish among 5 giant stocks, surging over 5 times in a few months time.

Among 5 giant glove stocks, SuperMax has relatively weaker business (but still a giant stock), earning has been declining despite growing revenue, indicating weaker profit margin which is not comparable with other competitors. Due to very high optimism in share price, SuperMax is more speculative in short term. For longer term investing, other 4 giant stocks are relatively safer for consideration.

5) Riverstone (SGX: AP4) – Singapore Giant Glove Stock

Among 5 giant glove stocks, Riverstone is the smallest player but it has its niche market. Riverstone manufactures cleanroom glove (eg. hard disk drive and semiconductor) and healthcare gloves. Founder and major shareholder is Wong Teek Son (about 50% ownership), also the No 44 richest person in Malaysia (Forbes’ List), supported mainly by rising share prices over the past decade (share price goes up nearly 20 times since IPO till now).

Riverstone is a Malaysia company but stock is listed in Singapore, therefore the share price potential is also partially affected by Singapore stock market. Choice of stock exchange for listing does not affect the company fundamental (same share ownership) but due to different characteristic of global investors in each stock exchange (eg. US, Hong Kong, Singapore, Malaysia), etc, would make a big difference in share prices which is the ultimate goal for a company to be listed. As a result, certain stock exchange is more popular of IPO stocks but may not be fundamentally strong. So, a stock investor has to consider a stock or even stock exchange, aligning with own personality and strategy, either on long term investing or short term trading.

Riverstone is a strong growth stock (supported by growing businesses with strong cash flow), a small player with potential to expand further with more leveraging if needed (current debt level is very low). A giant stock is not determined by its business size, if Riverstone could remain highly profitable within its niche market (also a form of economic moat), it can be a good stock investment.

Due to high optimism in share price, Riverstone may be considered as a mid-fielder stock (aiming for high capital gains with little dividend yield as bonus). It may also be considered for very short term momentum trading despite share price is speculated (Buy High Sell Higher strategy).

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Top Glove and Riverstone are not 30 STI index component stocks but they are much stronger than most of these blue chip stocks in Singapore (investor has to focus only on giant stocks for investing):
DBS Bank (SGX: D05), Singtel (SGX: Z74), OCBC Bank (SGX: O39), UOB Bank (SGX: U11), Wilmar International (SGX: F34), Jardine Matheson Holdings JMH (SGX: J36), Jardine Strategic Holdings JSH (SGX: J37), Thai Beverage (SGX: Y92), CapitaLand (SGX: C31), Ascendas Reit (SGX: A17U), Singapore Airlines (SGX: C6L), ST Engineering (SGX: S63), Keppel Corp (SGX: BN4), Singapore Exchange (SGX: S68), Hongkong Land (SGX: H78), Genting Singapore (SGX: G13), Mapletree Logistics Trust (SGX: M44U), Jardine Cycle & Carriage (SGX: C07), Mapletree Industrial Trust (SGX: ME8U), City Development (SGX: C09), CapitaLand Mall Trust (SGX: C38U), CapitaLand Commercial Trust (SGX: C61U), Mapletree Commercial Trust (SGX: N2IU), Dairy Farm International (SGX: D01), UOL (SGX: U14), Venture Corporation (SGX: V03), YZJ Shipbldg SGD (SGX: BS6), Sembcorp Industries (SGX: U96), SATS (SGX: S58), ComfortDelGro (SGX: C52).

Some investors may be envy of owners of these 5 giant stocks which most founders are Top 50 richest persons in Malaysia. In fact, the easiest way to get very rich may not be through a business. Rather, it is through stock market with a growing business to support the rising share prices which could be over 10-100 times in wealth after IPO (易如反掌). This is the reason why for successful businesses, most of the founders plan to list the stock at certain point of time.

Since all 5 glove giant stocks are mostly controlled (over 50% shares ownership) by founders and families, a key consideration for long term investing is on succession plan to either second generation or capable professionals. A smart retail stock investor has to review a giant stock yearly or even quarterly to ensure it is still a giant stock before continuing the long term support. A sector may not be bullish all the time, including glove industry as profitable business usually would attract many potential competitors which would reduce the profit margins with lower price, lower sales or higher cost.

Here is a list of 30 Malaysia Bursa KLCI Index component stocks which may be considered (investor has to focus only on giant stocks for investing):
CIMB (Bursa: 1023) CIMB GROUP HOLDINGS BERHAD, DIALOG (Bursa: 7277) DIALOG GROUP BERHAD, DIGI (Bursa: 6947) DIGI.COM BERHAD, GENM (Bursa: 4715) GENTING MALAYSIA BERHAD, GENTING (Bursa: 3182) GENTING BERHAD, HAPSENG (Bursa: 3034) HAP SENG CONSOLIDATED BERHAD, HARTA (Bursa: 5168) HARTALEGA HOLDINGS BERHAD, HLBANK (Bursa: 5819) HONG LEONG BANK BERHAD, HLFG (Bursa: 1082) HONG LEONG FINANCIAL GROUP BERHAD, IHH (Bursa: 5225) IHH HEALTHCARE BERHAD, IOICORP (1961) IOI CORPORATION BERHAD, KLCC (Bursa: 5235SS) KLCC PROPERTY HOLDINGS BERHAD, KLK (Bursa: 2445) KUALA LUMPUR KEPONG BERHAD, MAXIS (Bursa: 6012) MAXIS BERHAD, MAYBANK (Bursa: 1155) MALAYAN BANKING BERHAD, MISC (Bursa: 3816) MISC BERHAD, NESTLE (Bursa: 4707) NESTLE MALAYSIA BERHAD, PBBANK (Bursa: 1295) PUBLIC BANK BERHAD, PCHEM (Bursa: 5183) PETRONAS CHEMICALS GROUP BERHAD, PETDAG (Bursa: 5681) PETRONAS DAGANGAN BHD, PETGAS (Bursa: 6033) PETRONAS GAS BERHAD, PMETAL (Bursa: 8869) PRESS METAL ALUMINIUM HOLDINGS BERHAD, PPB (Bursa: 4065) PPB GROUP BERHAD, RHBBANK (Bursa: 1066) RHB BANK BERHAD, SIME (Bursa: 4197) SIME DARBY BERHAD, SIMEPLT (Bursa: 5285) SIME DARBY PLANTATION BERHAD, TENAGA (Bursa: 5347) TENAGA NASIONAL BHD, TM (Bursa: 4863) TELEKOM MALAYSIA BERHAD, TOPGLOV (Bursa: 7113) TOP GLOVE CORPORATION BHD.

Covid-19 could be a crisis for most sectors but there are still few sectors could remain profitable or having less impact than overall economy. Besides glove stocks, there are 6 other sectors which may be considered for stock investing during pandemic:

1) Supermarket stocks – eg. Sheng Siong (SGX: OV8), Dairy Farm International (SGX: D01), Wal-Mart (NYSE: WMT), Costco (NASDAQ: COST). etc. NTUC Fairprice is not publicly listed but it has limited private shares for members of NTUC Fairprice, paying about 6% yearly dividend yield. Those supermarket stocks with online business would have more advantages during pandemic.

2) Telco / 5G stocks – eg. Singtel (SGX: Z74), Apple (NASDAQ: AAPL), Xiaomi (HKEx: 1810), AT&T (NYSE: T), Verizon (NYSE: VZ), etc.

3) Semiconductor / Technology stocks – eg. Micro-mechanics (SGX: 5DD), UMS Holdings (SGX: 558), AEM (SGX: AWX), Frencken (SGX: E28), TSMC (NYSE: TSM), Intel (NASDAQ: INTC), AMD (NASDAQ: AMD), Nvidia (NASDAQ: NVDA), Qualcomm (NASDAQ: QCOM), Broadcom (NASDAQ: AVGO), etc.

4) Online / Software stocks – eg. BAT-FAANG stocks: Baidu (NASDAQ: BIDU), Alibaba (NYSE: BABA) / (HKEx: 9988), Tencent (HKEx: 0700), Facebook (NASDAQ: FB), Amazon (NASDAQ: AMZN), Apple (NASDAQ: AAPL), Netflix (NASDAQ: NFLX), Google / Alphabet (NASDAQ: GOOGL), etc.

5) Healthcare stocks – eg. 3M (NYSE: MMM), Gilead Sciences (NASDAQ: GILD), Raffles Medical Group (SGX: BSL), Q&M Dental Group (SGX: QC7), IHH Healthcare (SGX: Q0F), etc.

6) Stock Index ETF or stocks – eg. stronger defenders of major stock indices (STI, KLCI, DJI, S&P 500, MSCI, etc). STI ETF (SGX: ES3) / (SGX: G3B) or STI index component stocks with stronger businesses: DBS Bank (SGX: D05), OCBC Bank (SGX: O39), UOB Bank (SGX: U11), Singapore Exchange (SGX: S68), ST Engineering (SGX: S63), CapitaLand Mall Trust (SGX, C38U), Mapletree Commercial Trust (SGX: N2IU), Mapletree Logistics Trust (SGX: M44U), Jardine Matheson Holdings JMH (SGX: J36), Jardine Strategic Holdings JSH (SGX: J37), etc.

A stock investor may study Q1-Q2 / 2020 financial reports to compare the global giant stocks relatively to understand impact of Covid-19 for 3 group of stocks during pandemic with 3 unique stock strategies:

1) Profitable stocks – trading at higher prices with momentum trading (similar to glove stocks, Buy High Sell Higher strategy).

2) Defensive stocks – stable business with some price correction, collecting higher dividend yield or gradual growth in share prices (Buy Low and Hold strategy).

3) Crisis stocks – business disrupted by Covid-19 but no major risk (eg. bankruptcy), buying at low optimism price with cyclic investing or trading (Buy Low Sell High strategy).

Drop by Dr Tee free 4hr investment course to learn how to position in global giant stocks with 10 unique stock investing strategies, knowing What to Buy, When to Buy/Sell.

You are invited to join Dr Tee private investment forum (educational platform, no commercial is allowed) to learn more investment knowledge, interacting with over 9000 members.

Filed Under: Fundamental Analysis, Market Outlook, Stock Market, Technical Analysis, Trading, Value Investing Tagged: Bursa Malaysia, coronavirus, crisis stock, glove stock, growth stock, hartalega, Riverstone, supermax, top glove

25 MSCI Singapore & 30 STI Stocks (仙人指路)

Posted on May 30, 2020 Written by Dr Tee (Ein55)

30 STI Index Component Stocks New MSCI Singapore

Both MSCI Singapore Index (SiMSCI, 25 stocks) and Straits Times Index (STI, 30 stocks) are important guidance for Singapore stock investors on “Good” stocks for investing. In this article, you will learn on how to invest in index stocks in a right way. MSCI Singapore Index has recently removed 4 blue chip stocks (which are also 30 STI component stocks) from the list:

1) ComfortDelGro (SGX: C52)

2) SATS (SGX: S58)

3) Sembcorp Industries (SGX: U96)

4) Singapore Press Holdings, SPH (SGX: T39)

and adding only 1 stock as replacement: Mapletree Logistics Trust, MLT (SGX: M44U), a giant Singapore REIT, which is also 30 STI component stock.

MSCI Singapore Index component stock selection criteria is stricter than STI index (only based on trading market capitalization, a weaker blue chip stock with high trading volume may still stay) although most of the component stocks of both indices are similar.

Comfortdelgro (taxi business) and SATS (airlines sector) are affected by recent Covid-19 crisis, having good chance to come back again to MSCI Singapore when sector crisis is over, business could recover to support reversal of share prices with higher trading volume.

Sembcorp Industries (utility sector) has weaker business, especially in Oil & Gas sector with subsidiary stock, Sembcorp Marine (SGX: S51) which has losing business due to bearish crude oil market. Similarly, SPH (newspaper/media & property businesses) has declining press business over the past decade, supported mainly by property business (including subsidiary SPH Reit, SGX: SK6U). For both Sembcorp Industries and SPH, they are harder to come back again to MSCI Singapore Index as it would take a long term for overall business to recover again.

These 4 blue chip stocks delisted from MSCI Singapore Index may not be delisted from 30 STI in near future as they still have high trading volume, despite bearish share prices. CapitaCom Trust – CCT (SGX: C61U) will be the next to be delisted from 30 STI when it is merged with CapitaMall Trust – CMT (SGX: C38U) around June 2020. If so, the 5 reserve stocks of STI in waiting list are:

1) Mapletree Industrial Trust (SGX: ME8U)

2) Suntec REIT (SGX: T82U)

3) Keppel REIT (SGX: K71U)

4) Keppel DC REIT (SGX: AJBU)

5) Netlink NBN Trust (SGX: CJLU)

These 5 emerging STI stocks (dividend-based stocks, all are REITs / Business Trust) are selected purely based on trading market capitalization (trading price x trading volume). Therefore, not all are giant REITs (based on Dr Tee giant criteria). Stock investors who follow either 30 STI or 25 MSCI Singapore Index component stocks may not invest in high quality stocks.

Below are the 30 STI component stocks based on the last price traded (29 May 2020), sorted by trading market cap (share price x volume) from low to high (selection criteria for 30 STI is the Top 30 stocks with the highest values).

Despite DairyFarm and ThaiBev have stronger business fundamental than most 30 STI stocks, they have the lowest trading market cap, therefore having higher risk of being delisted in future. The earlier 4 blue chip stocks which are delisted from MSCI Singapore Index are relatively “safe” in 30 STI due to high trading volume, despite weaker business with bearish share prices. From stock investing perspective, it does not make sense at all but this is the rule of the game.

No	Name	Ticker	Last $	Volume	Trading Market Cap
1	Dairy Farm International	(SGX: D01)	4.22	1,963	8,282
2	Thai Beverage	(SGX: Y92)	0.63	18,774	11,827
3	Hongkong Land	(SGX: H78)	3.76	5,770	21,694
4	Jardine Strategic Holdings JSH	(SGX: J37)	19.95	1,089	21,730
5	UOL	(SGX: U14)	6.84	4,218	28,850
6	Venture Corporation	(SGX: V03)	15.3	1,968	30,105
7	Genting Singapore	(SGX: G13)	0.785	41,441	32,531
8	City Development	(SGX: C09)	7.69	4,424	34,018
9	Jardine Cycle & Carriage	(SGX: C07)	21.86	1,575	34,427
10	YZJ Shipbldg SGD	(SGX: BS6)	0.94	39,560	37,187
11	ST Engineering	(SGX: S63)	3.19	12,029	38,373
12	Wilmar International	(SGX: F34)	3.98	12,231	48,681
13	CapitaLand Commercial Trust	(SGX: C61U)	1.75	28,113	49,197
14	CapitaLand	(SGX: C31)	2.89	17,751	51,301
15	Keppel Corp	(SGX: BN4)	5.91	10,231	60,466
16	Singapore Airlines	(SGX: C6L)	3.82	16,551	63,225
17	Jardine Matheson Holdings JMH	(SGX: J36)	40.15	1,586	63,697
18	Mapletree Commercial Trust	(SGX: N2IU)	2	43,283	86,567
19	CapitaLand Mall Trust	(SGX: C38U)	2.03	55,627	112,924
20	OCBC Bank	(SGX: O39)	8.55	13,772	117,751
21	Ascendas Reit	(SGX: A17U)	3.13	38,228	119,653
22	Singapore Exchange	(SGX: S68)	8.28	15,306	126,734
23	DBS Bank	(SGX: D05)	19.47	7,941	154,613
24	Sembcorp Industries	(SGX: U96)	1.36	115,462	157,028
25	Singtel	(SGX: Z74)	2.49	71,375	177,724
26	SPH	(SGX: T39)	1.28	205,814	263,442
27	UOB Bank	(SGX: U11)	19.5	13,724	267,622
28	SATS	(SGX: S58)	2.66	102,907	273,732
29	ComfortDelGro	(SGX: C52)	1.44	255,744	368,272
30	Mapletree Logistics Trust	(SGX: M44U)	2.05	314,294	644,303

Since trading market capitalization is insufficient, a stock investor should include minimum 3 key Fundamental Criteria for 3 types of stocks: Growth / Dividend / Undervalue:
1) ROE (a criteria for growth stocks, eg. ROE > 5%),
2) Dividend Yield, DY (a criteria for dividend stocks, eg. DY > 5%),
3) Price-to-Book (PB) ratio, Price/NAV (a criteria for undervalue stocks, eg. PB < 1).

In each of the category, additional stock criteria has to be included to ensure they are giant stocks (based on Dr Tee criteria). For example, SPH has 8.6% dividend yield, it does not mean it is a good dividend stock as this high yield is generated with declining dividend and low share prices, driven by weaker business fundamental which is a value trap.

No) Stock (Ticker): ROE (Div Yield %) PB = Price/NAV
1) Ascendas Reit (SGX: A17U) 7.4% (4.4%) 1.5
2) CapitaLand Commercial Trust (SGX: C61U) 6.0% (5.1%) 1.0
3) CapitaLand (SGX: C31) 8.8% (4.1%) 0.6
4) CapitaLand Mall Trust (SGX: C38U) 9.0% (5.9%) 1.0
5) City Development (SGX: C09) 5.2% (1.0%) 0.7
6) ComfortDelGro (SGX: C52) 10.2% (6.8%) 1.2
7) Dairy Farm International (SGX: D01) 26.8% (5.0%) 4.7
8) DBS Bank (SGX: D05) 12.3% (6.4%) 1.0
9) Genting Singapore (SGX: G13) 8.5% (5.1%) 1.2
10) Hongkong Land (SGX: H78) 0.5% (5.9%) 0.2
11) Jardine Cycle & Carriage (SGX: C07) 12.8% (5.4%) 0.9
12) Jardine Matheson Holdings JMH (SGX: J36) 9.4% (4.3%) 1.0
13) Jardine Strategic Holdings JSH (SGX: J37) 6.1% (1.8%) 0.6
14) Keppel Corp (SGX: BN4) 6.3% (3.4%) 1.0
15) Mapletree Commercial Trust (SGX: N2IU) 9.4% (4.0%) 1.1
16) Mapletree Logistics Trust (SGX: M44U) 8.2% (4.0%) 1.6
17) OCBC Bank (SGX: O39) 10.3% (6.2%) 0.8
18) SATS (SGX: S58) 15.1% (7.1%) 1.8
19) Sembcorp Industries (SGX: U96) 3.1% (3.7%) 0.4
20) Singapore Exchange (SGX: S68) 35.9% (3.6%) 8.2
21) Singapore Airlines (SGX: C6L) -1.4% (0.8%) 0.8
22) Singtel (SGX: Z74) 4.0% (4.9%) 1.5
23) SPH (SGX: T39) 5.8% (8.6%) 0.6
24) ST Engineering (SGX: S63) 26.0% (4.7%) 4.5
25) Thai Beverage (SGX: Y92) 20.1% (3.4%) 2.7
26) UOB Bank (SGX: U11) 11.0% (5.6%) 0.9
27) UOL (SGX: U14) 4.8% (2.6%) 0.6
28) Venture Corporation (SGX: V03) 14.5% (4.6%) 1.8
29) Wilmar International (SGX: F34) 7.7% (3.1%) 1.1
30) Yangzijiang (SGX: BS6) 10.0% (4.8%) 0.6

For a stock to be listed in 30 STI or even 25 MSCI Singapore Index (to be reviewed quarterly), it implies more support from global investors, especially for institutional investors who view index as key guidance (仙人指路). However, the stock selection criteria based on trading market cap is insufficient, therefore a smart investor should select 10-20 global giant stocks over 3 sectors and 3 countries (eg. Singapore, US, Hong Kong or any country with growing economy), forming own fund (no management fee is needed).

Choice of global stock market is important on type of giant stocks (Defenders / Mid-fielders / Strikers), as well as personality of investor (eg. long term investing or short term trading). Defender stocks aim for dividend collection, Striker stocks are more for quicker return (eg. trading momentum stocks) while Mid-fielder stocks is a well-balance between capital gains and moderate dividends.

1) Singapore stock market is more suitable for dividend stocks (eg. Singapore REITs) but growth is limited with defensive strategy alone. Global stock crisis is a good opportunity to pick up some strong giant dividend stocks with high dividend yield. High dividend yield

2) US stock market is more suitable for growth stocks (investing) or momentum stocks (trading) but minimal dividend to protect investors during correction. An investor may focus on stocks with strong business fundamental as a form of protection. A trader may need to monitor the price trends, following S.E.T. (Stop Loss / Entry / Target Prices) trading plan.

3) Hong Kong stock market has a good mix of dividend and growth stocks but become center of political power fighting between US and China, therefore prices are more volatile which may be suitable for those higher risk tolerance investors and traders.

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“Sell in May and Go Away” happen again for Singapore (STI Index) and Hong Kong (HSI) Index stock markets for Year 2020. A reason for month of May (Q2) to be bearish could be due to final dividend given in Q2, some investors start to sell after the harvest or the share prices drop after significant dividends are given out, especially when there are news of uncertain financial markets.

Singapore and Hong Kong have many good dividend giant stocks. Price correction after Ex-Dividend is common, especially when combine with this psychological barrier in May. Dividend is just a bonus, more important is Capital Gains for a giant dividend stock.

For US and other global stock markets (eg. Malaysia, Germany, Japan, Taiwan, etc.), mostly have positive gains in May 2020. In fact, US S&P 500 Index is recovering above critical resistance of 3000 points again, an important milestone to support short term trading, especially with Buy High Sell Higher trading strategy. US Nasdaq Index is above 9000 points, challenging the new historical of 10000 points, supported by bullish technology sector of stocks.

Therefore, a stock investor or trader needs to equip with more skills to profit in current global stock market. Start learning 5 essential LOFTP Strategies (Level / Optimism / Fundamental / Technical / Personal Analysis).

Drop by Dr Tee free 4hr investment course to learn how to position in global giant stocks with 10 unique stock investing strategies, knowing What to Buy, When to Buy/Sell.

You are invited to join Dr Tee private investment forum (educational platform, no commercial is allowed) to learn more investment knowledge, interacting with over 9000 members.

Filed Under: Fundamental Analysis, Market Outlook, Stock Market, Technical Analysis, Value Investing Tagged: dividend stock, growth stock, market outlook, MSCI, reit, STI Index Stock, undervalue stock

5 Singapore Semiconductor 5G Stocks (力争上游)

Posted on May 27, 2020 Written by Dr Tee (Ein55)

Semiconductor 5G stocks, AEM, UMS, Frencken, Micro-Mechanics, Avi-Tech Electronics, Telco

In this article, you will learn 5 Singapore semiconductor supplier stocks which could benefit from emerging 5G technology, requiring 5 different stock strategies for investing or trading.

1) Micro-Mechanics Holdings (SGX: 5DD) – Singapore Semiconductor Giant Stock

2) UMS Holdings (SGX: 558) – Singapore Semiconductor Giant Stock

3) AEM Holdings (SGX: AWX) – Singapore Semiconductor Stock

4) Frencken Group (SGX: E28) – Singapore Semiconductor Stock

5) Avi-Tech Electronics (SGX: BKY) – Singapore Semiconductor Stock

Over the past few decades, semiconductor sector is driven mainly by telecommunication (eg. smart phones and related products) and consumer electronics (eg. PC, portable devices, etc). Telco sector introduces new Generation of technology about every 10 years (1980s = 1G with analog voice, 1990s = 2G with digital voice, 2000s = 3G with mobile data, 2010s = 4G with mobile broadband, 2020s = 5G with much faster system to maximize Internet of Things – IoT). Current development of 5G, would help to support growth in global semiconductor value chain over the next decade.

Semiconductor (front-end / back-end) technology development milestones are driven by Moore’s Law which predicted IC capacity or density would double itself about every 18 months. So, telco technology Generation of every 10 years is related to Moore’s Law 2X cycle of every 18 months (1.5 year):

Telco / Semiconductor = (10 / 1.5) = 6.67 times of doubling

So, telco capacity in every Generation of 10 years = 2^(6.67) = 102 times difference. Indeed, 5G technology speed and capacity is about 100X faster or more than current 4G technology, supported by Moore’s Law (力争上游).

Gordon Moore only did a rough extrapolation of future technology a few decades ago. However, it serves as a roadmap for smart scientists to challenge the technology limit at each junction, motivating giant semiconductor and telco companies to invest billions of dollars in R&D to achieve these goals which Moore’s Law is still valid today.

Unique technology knowhow (could be in the form of technical patents or trade secrets with amazing powerful new products) is a strong economic moat for a technology company, especially with a stock. Every good news in leadership in new technology (eg. from 4G to 5G, from 7nm to 5nm semiconductor technology, etc) would help to grow the share prices. In fact, the semiconductor or telco company investor earn much more from stock market than from the actual business. The business is simply a driver (if positive growing results) to drive the stock prices. So, it is important for a stock investor to differentiate among business investment (pure fundamental), stock investment (long term) and stock trading (short term).

There are several ways to invest in 5G related companies, for example through major mobile phone manufacturers (eg. Apple – NASDAQ: AAPL, Xiaomi – HKEx: 1810, etc), global and local Telco companies (eg. AT&T – NYSE: T, Singtel – SGX: Z74, etc), leading semiconductor companies (eg. TSMC – NYSE: TSM, Intel – NASDAQ: INTC, AMD – NASDAQ: AMD, Nvidia – NASDAQ: NVDA, Qualcomm – NASDAQ: QCOM, etc) or other related supplier businesses.

There are 53 Electronics stocks and 28 IT stocks, total 81 Technology Stocks in Singapore which have connections with semiconductor industry:

AEM Holdings (SGX: AWX), Accrelist Limited (SGX: QZG), Acma Limited (SGX: AYV), Adventus Holdings (SGX: 5EF), Allied Technologies Limited (SGX: A13), Amplefield Limited (SGX: AOF), Avi Tech Electronics (SGX: BKY), Ban Leong Technologies (SGX: B26), CDW Holding (SGX: BXE), CFM Holdings (SGX: 5EB), CPH Limited (SGX: 539), Chuan Hup Holdings (SGX: C33), Creative Technology (SGX: C76), Datapulse Technology (SGX: BKW), Dragon Group International (SGX: MT1), Dutech Holdings (SGX: CZ4), Ellipsiz Limited (SGX: BIX), Excelpoint Technology (SGX: BDF), Frencken Group (SGX: E28), Global Invacom Group (SGX: QS9), GP Industries (SGX: G20), Global Testing Corporation (SGX: AYN), Grand Venture Technology (SGX: JLB), HGH Holdings (SGX: 5GZ), Hu An Cable Holdings (SGX: KI3), JEP Holdings (SGX: 1J4), Jadason Enterprises (SGX: J03), Karin Technology Holdings (SGX: K29), Libra Group (SGX: 5TR), Manufacturing Integration Technology (SGX: M11), Maruwa Yen1k (SGX: M12), MeGroup Limited (SGX: SJY), Micro-Mechanics Holdings (SGX: 5DD), Plastoform Holdings (SGX: AYD), Polaris Limited (SGX: 5BI), Powermatic Data Systems (SGX: BCY), Renaissance United (SGX: I11), SEVAK Limited (SGX: BAI), SUTL Enterprise (SGX: BHU), Serial System (SGX: S69), Shinvest Holding (SGX: BJW), Sunright Limited (SGX: S71), Sunrise Shares Holdings (SGX: 581), TT International (SGX: T09), Thakral Corporation (SGX: AWI), The Place Holdings (SGX: E27), Trek 2000 International (SGX: 5AB), Valuetronics Holdings (SGX: BN2), Venture Corporation (SGX: V03), Willas-Array Electronics Holdings (SGX: BDR), World Precision Machinery (SGX: B49), Alpha Energy Holdings (SGX: 5TS), Alset International (SGX: 40V), Artivision Technologies (SGX: 5NK), Asiatravel.com Holdings (SGX: 5AM), A-Smart Holdings (SGX: BQC), Azeus Systems Holdings (SGX: BBW), Boustead Singapore Limited (SGX: F9D), Captii (SGX: AWV), Challenger Technologies (SGX: 573), CSE Global (SGX: 544), DISA (SGX: 532), International Press Softcom (SGX: 571), ISDN Holdings (SGX: I07), Keppel DC Reit (SGX: AJBU), Koyo International (SGX: 5OC), M Development (SGX: N14), Mapletree Industrial Trust (SGX: ME8U), New Silkroutes Group (SGX: BMT), New Wave Holdings (SGX: 5FX), PEC (SGX: IX2), Plato Capital (SGX: YYN), Procurri Corporation (SGX: BVQ), Rich Capital Holdings (SGX: 5G4), Silverlake Axis (SGX: 5CP), SinoCloud Group (SGX: 5EK), Stratech Group (SGX: BRR), Synagie Corp (SGX: V2Y), YuuZoo Networks Group Corp (SGX: AFC).

Global and local semiconductor stocks are mostly cyclic in nature, following the economic cycles (affecting consumer’s demand with purchasing power, usually stronger business during bullish economy). US NASDAQ stock exchange has many technology stocks, including semiconductor sector, therefore its stock index also behaves in cyclical way, suitable with “Buy Low Sell High” Optimism Strategy. Few technology stocks could be the leader for long term (a few decades) due to the competitive technology development (including possible mastering of knowhow by competitors with time or by chance). Therefore, a smart investor needs to monitor a technology stock (could be semiconductor, telco, etc), ensuring it is a giant stock (applying Dr Tee criteria) each year before continuing long term investing, otherwise safer to position only in short term or medium term trading during bullish cycle of semiconductor sector.

In Singapore, 5G related stocks are mainly semiconductor suppliers (eg. process/testing equipment, precision engineering, printed circuit board, etc), smaller players but at least 2 are giant stocks (based on Dr Tee giant criteria). Semiconductor sector is considered essential business during Covid-19 pandemic, manufacturing could still continue in Singapore and some other countries.

Here, 5 Singapore semiconductor supplier stocks with reasonably good fundamental (growing business with low debt) are selected for review, potentially could benefit from 5G business (driven by clients’ demand). However, each 5G stock requires different positioning of stock strategy, either for long term investor or short term trading. Only Micro-Mechanics and UMS are giant stocks for investing but other stocks may be considered for trading.

1) Micro-Mechanics (SGX: 5DD) – Singapore Semiconductor Giant Stock

Micro-Mechanics designs and manufactures high precision parts and tools used in applications for the wafer-fabrication (front-end) and assembly processes (back-end) of the semiconductor industry. The company operates in 5 countries: Singapore, Malaysia, Philippines, USA, and China.

Micro-mechanics is a multi-role giant stock, suitable for different personalities of investors. It could be a long term growth stock (supported by growing businesses with strong cash flow and little debt). It is also ideal for medium term cyclic trading with “Buy Low Sell High” optimism strategy. It may be considered as a defender for dividend stock investor with about 6% dividend yield currently. Each of the 3 stock strategies require different entry and exit plans.

2) UMS (SGX: 558) – Singapore Semiconductor Giant Stock

UMS provides high precision front-end semiconductor components, and electromechanical assembly and final testing services. Semiconductor is main business. It operates manly in Singapore, Malaysia, Taiwan, US, South Korea and China.

UMS is a highly cyclic giant stock (despite fundamentally strong), currently at moderate high optimism, therefore not suitable for consideration for long term investing (requiring a global financial crisis with bearish semiconductor cycle before the next entry with condition business fundamental will still be strong). UMS is ideal for medium term cyclic trading with “Buy Low Sell High” optimism strategy, recovering well from nearly 50% price correction in recent global stock crisis due to Covid-19 pandemic. It may be considered as a mid-fielder for mid-term investing with about 4% dividend yield while waiting for capital gains.

3) AEM (SGX: AWX) – Singapore Semiconductor Stock

AEM provides system testing and handling solutions for semiconductor and electronics companies in Asia and globally. It operates through Equipment Systems Solutions, System Level Test & Inspection, Micro-Electro-Mechanical Systems, and Test and Measurement Solutions segments

AEM is a very cyclic stock in long term (partly due to cyclic business of semiconductor cycle), currently at high optimism, therefore not suitable for consideration for long term investing (requiring a global financial crisis with bearish semiconductor cycle before the next entry with condition business fundamental will still be strong). AEM is suitable for medium term momentum trading with “Buy Low & Hold” position trading strategy, supported by strong business performance over the past 5 years due to bullish semiconductor cycle. It may also be considered as a striker for very short term momentum trading with “Buy High Sell Higher” strategy but requiring strict compliance with S.E.T. (Stop Loss / Entry / Target Prices) trading plan.

4) Frencken (SGX: E28) – Singapore Semiconductor Stock

Frencken operates as a capital and consumer equipment service provider worldwide. It has 2 segments, Mechatronics and Integrated Manufacturing Services (IMS). It only has partial business related to semiconductor, therefore closer to a technology stock with diversified sectors.

Frencken is a cyclic stock in long term (despite reasonably strong business fundamental over the past 5 years, following economic cycle), currently at high optimism, therefore not suitable for consideration for long term investing (requiring a global financial crisis with low optimism before the next entry with condition business fundamental will still be strong). Frencken is ideal for medium term cyclic trading with “Buy Low Sell High” optimism strategy, recovering well from nearly 50% price correction in recent global stock crisis due to Covid-19 pandemic. It may also be considered as a striker for very short term momentum trading with “Buy High Sell Higher” strategy but requiring strict compliance with S.E.T. (Stop Loss / Entry / Target Prices) trading plan. It has particularly strong business fundamental in 2019, supporting the rising prices then, careful monitoring of future quarterly financial performance is required for short term trading.

5) Avi-Tech Electronics (SGX: BKY) – Singapore Semiconductor Stock

Avi-Tech Electronics provides burn-in, manufacturing and printed circuit board assembly, and engineering services for the semiconductor, electronics, life sciences, aviation, and other industries. It only has partial business related to semiconductor, therefore closer to a technology stock with diversified sectors. It serves customers in Singapore, US, Malaysia, Germany, Philippines, Thailand, Taiwan, and China.

Avi-Tech is an average performance technology stock in long term (despite reasonably good business fundamental over the past 5 years, following economic cycle), currently at moderate high optimism, therefore not suitable for consideration for long term investing. Avi-Tech is also not a good choice for trading due to lack of price strength. It may be considered as a mid-term defender for dividend stock investor with about 6% dividend yield currently. However, since there are so many better choices of 5G stocks (even Micro-Mechanics or Singtel also has 6% dividend yield, supported by stronger businesses), Avi-Tech is clearly a choice from the bottom of the list, reviewed for the sake of comparison with other 5G stocks.

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Technology stocks (including semiconductor) could be exciting experience for an investor, especially with cyclic investing. Sometimes, a strong momentum technology stock could surge more than 100% in price in less than 1 year. A stock trader could be in dilemma, whether to sell (potential “risk” is may miss further upside in prices) or to hold (potential risk is huge price correction during stock crisis, eg. price may cut by half in recent Covid-19 pandemic).

A simple and powerful stock strategy is to apply “50/50” method, i.e. whenever stock price of a giant stock is doubled, just sell half of the stocks, since capital is recovered (with 2X price, selling 50% stocks), an investor has stronger holding power for the remaining 50% position as the worst could happen in future would be 0% gain, not losing money at all (assuming remaining 50% stocks drop to $0, possible worst case). However, for technology or semiconductor stocks which are cyclic at high optimism, it is relatively safer to sell 100% of stock first, buying back the same giant stocks at lower optimism in the next opportunity.

Micro-Mechanics, UMS and AEM are not 30 STI index component stocks but they are much stronger than most of these blue chip stocks (investor has to focus only on giant stocks for investing):
DBS Bank (SGX: D05), Singtel (SGX: Z74), OCBC Bank (SGX: O39), UOB Bank (SGX: U11), Wilmar International (SGX: F34), Jardine Matheson Holdings JMH (SGX: J36), Jardine Strategic Holdings JSH (SGX: J37), Thai Beverage (SGX: Y92), CapitaLand (SGX: C31), Ascendas Reit (SGX: A17U), Singapore Airlines (SGX: C6L), ST Engineering (SGX: S63), Keppel Corp (SGX: BN4), Singapore Exchange (SGX: S68), Hongkong Land (SGX: H78), Genting Singapore (SGX: G13), Mapletree Logistics Trust (SGX: M44U), Jardine Cycle & Carriage (SGX: C07), Mapletree Industrial Trust (SGX: ME8U), City Development (SGX: C09), CapitaLand Mall Trust (SGX: C38U), CapitaLand Commercial Trust (SGX: C61U), Mapletree Commercial Trust (SGX: N2IU), Dairy Farm International (SGX: D01), UOL (SGX: U14), Venture Corporation (SGX: V03), YZJ Shipbldg SGD (SGX: BS6), Sembcorp Industries (SGX: U96), SATS (SGX: S58), ComfortDelGro (SGX: C52).

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Filed Under: Fundamental Analysis, Market Cycle Investing, Stock Market, Technical Analysis, Trading, Value Investing Tagged: 5G stock, AEM, Avi-Tech Electronics, cyclic investing stock, Frencken, Micro-Mechanics, semiconductor stock, technology stock, telco stocks, UMS

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