Property Archives

7 CapitaLand Giant REITs for Dividend (CMT + CCT = CICT) (双剑合璧)

Posted on April 29, 2020 Written by Dr Tee (Ein55)

CapitaLand is Temasek property giant stock, having 2 giant Singapore REITs: CapitaLand Mall Trust (CMT) and CapitaLand Commercial Trust (CCT). Many Singapore investors like REITs for passive income generation through quarterly dividend payment. After the announcement of merging, both REITs suffer about 40% price correction during global stock crisis with Coronavirus fear, dividend yields are more than 6%, attractive for long term investors.

Some potential REIT investors would like to know should they invest in CMT or CCT before the merging, which one has more potential, or should they wait until the merging of 2 REITs into CapitaLand Integrated Commercial Trust (CICT), the largest Singapore REIT by June 2020.

Read the article further to find out the critical answers for CMT and CCT, not learning only 2 REITs but all 7 stocks related to parent stock CapitaLand, including 4 REITs and trusts in the same group: Ascendas REIT, Ascott Residence Trust, Ascendas India Trust and CapitaLand Retail China Trust.

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CapitaLand is the largest property developer in Asia (after merging with Ascendas and Singbridge), becoming a key Temasek property investment portfolio. CapitaLand has total of 6 REITs / Business Trust in Singapore:

1) CapitaLand (SGX: C31) – Singapore Property Giant Stock

2) CapitaLand Mall Trust, CMT (SGX: C38U) – Retail REIT Giant Dividend Stock

3) CapitaLand Commercial Trust, CCT (SGX: C61U) – Office REIT Giant Dividend Stock

4) Ascendas REIT (SGX: A17U) – Industrial REIT Giant Dividend Stock

5) Ascott Residence Trust (SGX: HMN) – Hospitality REIT Dividend Stock

6) Ascendas India Trust (SGX: CY6U) – Business Trust Dividend Stock

7) CapitaLand Retail China Trust (SGX: AU8U) – Retail REIT Dividend Stock

In summary, all 7 CapitaLand group of stocks have reasonable strong business fundamental, all 6 REITs / trusts may be considered for dividend investing but only 3 of them are giant REITs stocks (based on Dr Tee giant criteria): CMT, CCT and Ascendas REIT. Sibling stocks of Ascott Residence Trust, Ascendas India Trust and CapitaLand Retail China Trust are relatively weaker, more suitable for pure dividend investing but subject to cyclic stock market risk (eg. capital loss during global stock crisis with limited long term growth). Parent stock, Capitaland, is a blue chip stock, behaving as if a fund with all the subsidiary stocks, more suitable for low capital investor who needs diversification.

There are 30 STI index component stocks including CapitaLand Mall Trust and CapitaLand Commercial Trust (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), 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).

By law, 90% of REIT incomes has to be redistributed back to shareholders in the form of dividend, therefore it is a popular passive income generator. If a REIT pay 4 times yearly, an investor with 3 REITs could receive 12 payments yearly, helping to offset monthly expenses. When return from monthly dividend is more than monthly expenses, an investor would become financial free. However, certain REITs may not pay consistent dividend due to unstable business and a few could even go bankrupt if not properly managed. Business Trust (eg. Ascendas India Trust) seems similar to REIT but it is not required by law to pay dividend, therefore creating an uncertainty in the future which dividend payment is not guaranteed.

In this article, we will focus on 2 giant REITs, CMT and CCT which will be merged soon. Sharing is for educational purpose, please make your own decision. Before merging announcement, CMT performs relatively better than CCT from overall investing consideration. So, CCT investors would benefit more than CMT investor.

CapitaLand Giant REITs for Dividend CCT CMT

The merging deal is for CMT to acquire CCT by exchange every share of CCT with 0.72 share of CMT + cash $0.259/share. Since the announcement from 22 Jan 2020 until today, CMT and CCT share prices are closely correlated as mirror image with this formula:

CCT = 0.72 CMT + 0.259

It means after the merging announcement, there is not much difference now as CMT and CCT prices movement of stocks follow the equation above closely. Even if an investor is interested in CMT, the decision of whether to invest now or after official merging in June 2020, should be based on stock market outlook, not expecting any drastic change in share price after the official merging. In fact, over the past 2 months of global stock crisis, both CMT and CCT dropped by about 40% in share prices, even after recovering in the last few weeks, CMT is still at low optimism < 25%. In general, before merging, CMT is more defensive while CCT is more cyclic, therefore future CICT REIT may behave in between both REITs, more cyclic than CMT, more defensive than CCT.

Coronavirus pandemic has affected both CMT and CCT as some tenants may not pay rents on time but this could be recovered later when Coronavirus has ended or fading away over the next few months. Occupancy rates of both REITs are high (about 99%), any withdrawal by tenant (eg. a few weaker F&B or consumer companies may not be able to sustain) may be quickly replaced by new tenant but rental increase would be limited. If Coronavirus is not a long term issue (under the worst case, vaccine could be developed in about 1 year), major correction in share prices for either CMT or CCT could be an opportunity to accumulate with dividend yield around 6%. Assuming the worst case of losing 20% tenants (dropping from 99% to 80% occupancy) if Coronavirus may stay for 1 more year with 20% people in the world staying at home during lockdown, average dividend yield is correct to around 5%, still better than keeping cash in bank with only 1% dividend. When crisis is over, an investor could enjoy the capital gains with potential share price appreciation due to market greed.

Before merging, CMT and CCT already has joint portfolio, eg. Raffles City (40% CMT, 60% CCT). After merging, the new CICT REIT would dominate both retail shopping malls and offices in Singapore, having more capital to expand in overseas. However, inorganic growth through more acquisition (eg. overseas properties) may or may not add value to CICT as it depends on expertise of REIT manager, able to find high quality properties at discounted prices (eg. during economic crisis), adding more potential to DPU (dividend per unit). Over expansion sometimes may result in higher risk (higher gearing ratio, which would become higher after merging as CMT has to pay some cash to CCT investors) but acceptable for CICT with dual level sponsors of CapitaLand and Temasek.

There could be more merging and acquisition activities during the global stock crisis. A giant stock does not need to be the “biggest” company, more importantly, strong in fundamental with growing business, therefore even a small company could be a giant stock.

A smart investor may consider only the strongest subsidiary giant stock of CapitaLand group, which is protected by the sponsor CapitaLand, which is further protected by another bigger sponsor, Temasek. This implies for the giant stock to fail (eg. go bankrupt), it has to hurt CapitaLand or even Temasek first. However, safer stocks may not be the best choice for investment as growth are limited.

There are 52 REITs and Business Trusts stocks including CapitaLand Mall Trust and CapitaLand Commercial Trust (investor has to focus only on giant stocks for investing):
AIMS APAC Reit (SGX: O5RU), ARA Hospitality Trust USD (SGX: XZL), ARA LOGOS Logistics Trust (SGX: K2LU), Ascendas Reit (SGX: A17U), Ascendas India Trust (SGX: CY6U), Ascott Trust (SGX: HMN), Asian Pay Tv Trust (SGX: S7OU), BHG Retail Reit (SGX: BMGU), CapitaLand Commercial Trust (SGX: C61U), CapitaLand Mall Trust (SGX: C38U), CapitaLand Retail China Tr (SGX: AU8U), CDL Hospitality Trust (SGX: J85), Cromwell Reit EUR (SGX: CNNU), Cromwell Reit SGD (SGX: CSFU), Dasin Retail Trust (SGX: CEDU), Eagle Hospitality Trust USD (SGX: LIW), EC World Reit (SGX: BWCU), Elite Commercial Reit (SGX: MXNU), ESR-REIT (SGX: J91U), Far East Hospitality Trust (SGX: Q5T), First Reit (SGX: AW9U), Frasers Centrepoint Trust (SGX: J69U), Frasers Hospitality Trust (SGX: ACV), Frasers Logistics & Commercial Trust (SGX: BUOU), FSL Trust (SGX: D8DU), HPH Trust SGD (SGX: P7VU), HPH Trust USD (SGX: NS8U), IREIT Global (SGX: UD1U), Keppel Infrastructure Trust (SGX: A7RU), Keppel Pacific Oak US REIT (SGX: CMOU), Keppel DC Reit (SGX: AJBU), Keppel Reit (SGX: K71U), Lendlease Reit (SGX: JYEU), Lippo Malls Trust (SGX: D5IU), Manulife Reit (SGX: BTOU), Mapletree Commmercial Trust (SGX: N2IU), Mapletree Industrial Trust (SGX: ME8U), Mapletree Logistics Trust (SGX: M44U), Mapletree North Asia Commercial Trust (SGX: RW0U), NetLink NBN Trust (SGX: CJLU), OUE Commercial Reit (SGX: TS0U), ParkwayLife Reit (SGX: C2PU), Prime US Reit (SGX: OXMU), RHT HealthTrust (SGX: RF1U), Sabana Reit (SGX: M1GU), Sasseur Reit (SGX: CRPU), Soilbuild Business Space Reit (SGX: SV3U), SPH Reit (SGX: SK6U), Starhill Global Reit (SGX: P40U), Suntec Reit (SGX: T82U), United Hampshire US Reit (SGX: ODBU).

Learn from Dr Tee 4hr Free investment course on global dividend giant stocks to collect passive income during low optimism in stock crisis, then enjoying capital gains with growing share prices when crisis is over.

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Filed Under: Property Market, Stock Market, Technical Analysis, Value Investing Tagged: acquisition, Ascendas India Trust, Ascendas REIT, Ascott Residence Trust, Blue Chip Stocks, capitaland, capitaland commercial trust, CapitaLand Integrated Commercial Trust, capitaland mall trust, CapitaLand Retail China Trust, cict, cmt, defensive stock, dividend stock, High Dividend Stocks, merging, Property, Property Stocks, reit, temasek

5 Cheung Kong Super Hong Kong Stocks (长江一号)

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

Cheung Kong Stock CKH CKI CKA Power Assets Fortune Reit HKEx HPH Trust

Sir Li Ka-Shing (李嘉诚) is the richest person in Hong Kong for decades, earning a nickname of “Superman Li” for his reputation in the business world. He was born in 1928 in Chao Zhou (潮州) of China (Dr Tee visited there several years ago, Li Ka-Shing donated a lot of money to his hometown), therefore 92 years old so far. Technically he has retired but mentally never stop working for 1 day, still an advisor to his children and his beloved Cheung Kong Holdings.

Cheung Kong Group is famous initially as a property company, then expanding over the decades, becoming a multinational conglomerate with diversified businesses. CK parent stock is assigned #1 stock ticker in HKEx stock exchange (长江一号), showing its strength as a Hong Kong blue chip giant stock. In Year 2015, there is a major restructuring of Cheung Kong, merging with Hutchison Whampoa, forming a new company Cheung Kong Holdings (registered in Bermuda, could be due to long term planning) with 2 main companies with 2 stocks:

CK Hutchison (CKH) – (HKEx: 1) – For non-property related business

CK Assets (CKA) – (HKEx: 1113) – For proper related business

This way, it is clearer to investors on choices of investment based on these 2 divisions. However, the reorganization has affected the long term analysis of Cheung Kong as there are significant relocation of assets between 2 divisions of companies. Therefore, it is a born of 2 “new” companies with 5 years of history in integrated business reporting but share price of CKH is much longer due to its extension of former parent stock, providing additional references on share prices. It is important for a smart investor to analyze each segment of business for both CK companies before making decision of which stock to invest.

In fact, CK Holdings have at least 11 stocks listed within the group (only 5 highlighted ones are giant stocks):

1) CK Hutchison (CKH) – (HKEx: 1) – CK Parent Giant Stock (Non-property Division)

2) CK Infrastructure (CKI) – (HKEx: 1038) – Utility Parent Giant Stock

3) Power Assets (PA) – (HKEx: 6) – Utility Subsidiary Giant Stock

4) CK Life Sciences – (HKEx: 775) – Biotechnology Stock

5) Tom Group – (HKEx: 2383) – Chinese language media stock

6) HPH Trust – (SGX: P7VU) – Port Trust Stock

7) Husky Energy – (TSE: HSE) – Energy stock listed in Canada

8) CK Assets (CKA) – (HKEx: 1113) – CK Parent Giant Stock (Property Division)

9) Fortune Reit – (HKEx: 778) – CK Giant Reit

10) Hui Xian REIT – (HKEx: 87001) – CK Reit

11) Prosperity REIT – (HKEx: 808) – CK Reit

Out of 10 CK stocks, there are 4 giant stocks included in 50 Hang Seng Index component stocks: CKH, CKA, CKI and PA. So, technically Superman Li could move Hong Kong stock market (about 4%). This is similar to “rival” Jardine Group, could move Singapore Straits Times Index (about 15%) with 5 component stocks. In 1980s, Li Ka-shing was aiming to “invest” more in Hongkong Land of Jardine Group but was defeated by cross-shareholding structure of Jardine (another long story, read Dr Tee earlier article on Jardine Group of 7 giant stocks).

Not all the 10 CK stocks are strong based on Dr Tee giant stock criteria. There is only 1 more giant CK subsidiary stock, Fortune Reit is a giant Reit (formerly dual listing, after delisting from SGX, now only listed in HKEx).

So, additional comments will be given below on these 5 giant CK stocks from different businesses. An investor may select either the parent group (CKH or CKA) if want to consider average of entire group business (non-property vs property) as if a fund, or focusing on smaller individual stock of subsidiaries (CKI, PA, Fortune Reit) on specific business segment.

1) CK Hutchison (CKH) – (HKEx: 1) – CK Parent Giant Stock (Non-property Division)

CK Hutchison has 5 main business segments in non-property division. Investing in CKH stock means investing in all business segments.

1.1) Port

The port businesses are relatively stable in the past but Coronavirus crisis in Year 2020 would affect the results for Year 2020. HPH trust (not a giant stock with limited business potential) is only a small part of CK port business.

1.2) Retail

Major business is Watson for health and beauty (15794 stores with 12 brands worldwide). Business growth in China and Asia are faster than in western world. This is consumer related business, therefore Coronavirus would seriously affect the business for a few quarters. Temasek is also a shareholder for Watson, was planning to sell it.

1.3) Infrastructure / Utilities

This is main passive income generator for CKH. More details later under discussions of subsidiary giant stocks CK Infrastructure and Power Assets.

1.4) Telecommunication

This segment of business is growing in general, having mixed performance in different countries. It is a more defensive business.

1.5) Energy / Investment / Others

Energy segment is making losses while other remaining business is less significant to contributing to entire group.

CKH business (non-property) is not as defensive as CKA (property), therefore over the past 5 years since the group reorganization, share price has been dropping to nearly to 1/3 from peak of $120 to $45. Despite the Price to Book (PB) ratio is 0.5 but the asset is non-property, not as high quality. The main investing advantage for CKH is low optimism level < 25%, aligning to global stock crisis (following economic cycles) but it could suffer in business during Coronavirus crisis due to global lockdown.

Dividend yield of 5.7% is attractive but investors may need to prepare for potential 50% cut as the worst case scenario (despite CKH has good track record of consistent dividend payment) during the winter time of CKH business, implying 3% yield which is still better than holding cash with 1% interest for cash deposit in bank. CKH has significant business in Europe, when economy is restarted, CKH quarterly business performance would improve gradually.

2) CK Infrastructure (CKI) – (HKEx: 1038) – Utility Parent Giant Stock

3) Power Assets (PA) – (HKEx: 6) – Utility Subsidiary Giant Stock

Both CKI and PA stocks may be studied together as CKH owns CKI, then CKI owns PA, all inter-related, just different ways of grouping. So, an investor may decide investing in parent company or subsidiary business specifically in utilities.

CKI has many global businesses of infrastructures and utilities (electricity, water, gas), holding strategic asset of certain countries and cities (eg. main electricity supplier of London). Power Assets invests mainly in electricity, eg. providing partial electricity supply to Hong Kong, duopoly with another giant electricity stock, China Light and Power, CLP (HKEx: 2). Readers may guess if CKH could get HKEx stock ticker #1, CLP could get stock ticker #2, implying it is another blue chip stock with proven history (if there is a chance, we may share further on CLP or other monopoly stocks in future).

Utilities business are defensive as people may not need to shop during Coronavirus pandemic or global financial crisis but they still need basic usages of electricity, water and gas. So, utilities or infrastructure related stocks usually show their strength during economic crisis as defensive stocks which could still pay dividend with steady cash flow generated, then gradual capital gains in longer term with recovery and subsequent growth of economy.

In general, both CKI and PA are having close performance in stocks, prices have dropped by half over the past 5 years (more defensive than parent stock CKH which dropped to nearly 1/3 from the peak price), dividend payment has been stable due to defensive industry, current dividend yield is over 5%. The main “risk” of both stocks is bearish price trend over the past few years (despite at lower optimism level, buy low may still get lower in prices), not so much on business risks (minimal), therefore investors who are reluctant to catch the falling knife in prices, may wait for uptrend in prices, sacrificing passive income (dividend yield) with higher price to exchange for confirmation in price reversal to bullish range.

4) CK Assets (CKA) – (HKEx: 1113) – CK Parent Giant Stock (Property Division)

CK Assets are property-based businesses, listed as a new stock, therefore only having 5 years of share price history so far which are more defensive than CKH (dropping to 1/3), but price is cyclic in nature, dropping to half price. Price to Book (PB) ratio is also coming to a new low of 0.5, having 50% safety margin for high quality asset of property.

However, Hong Kong property market (about 20 years for 1 market cycle) has been at high optimism after the average prices gone up by 4 times over the past 2 decades. Therefore, property stocks in Hong Kong in longer term, may suffer “loss” in valuation due to lower property prices if there are any crisis related to China or Hong Kong property bubble. CKA at current price is 50% discount but “rival” property stock, Hongkong Land has 75% discount with PB around 0.25. So, after relative comparison with peers, CKA 50% discount in price may not be excellent. In fact, there are many other property giant stocks in Hong Kong which are “cheap and good”, readers may learn from Dr Tee to explore more in future.

5) Fortune Reit – (HKEx: 778) – CK Giant Reit

There are 3 REITs listed from CKA parent group: Prosperity Reit and Hui Xian Reit are relatively weaker, so we focus only in Fortune Reit. Previously, Fortune Reit has dual listing in both HKEx and SGX but now only left HKEx. There is little difference to Singapore investors as there is no capital gain tax nor dividend withholding tax for Hong Kong stocks, except HKD/SGD is currently at high optimism (HKD is pegged to USD, similar trend for USD/SGD), future potential forex loss (when USD or HKD is depreciated vs SGD) could be compensated by dividend and capital gains of Hong Kong or US stock.

Fortune Reit drops over 40% in share price over the past 2 months of global stock crisis, resulting in high dividend yield of 7.4% with consistent dividend payout of its REIT portfolio. Risks of Coronavirus is minimized as China / Hong Kong conditions are much better than the rest of the world. Social unrest (eg. Hong Kong protesters last year) is also a lower risk now. The REIT is protected by Price-to-Book (PB) ratio of 0.4, rare for a strong REIT with 60% discount, implying under the worst case scenario, even if the company goes bankrupt, investors could still get back the capital (unlike other investors would suffer permanent loss buying stocks with low quality assets). Usually PB is not a strong criteria for REIT, consistent rental collection from tenants is more important which Fortune Reit has a good track record. The REIT manager is also another familiar name: ARA Asset Management, used to be a giant stock with good reputation in Singapore but delisted several years ago (not surprise as this company is too good to share in long term with the public).

In short, investing in Fortune Reit could receive the protection from sponsor, CK Group, in addition to 60% safety margin in share price to property asset value. REIT (rental payment) could be more predictable than property-based business (eg. parent company CKA) which may suffer when property value declines. For a reit, even property value may decline, rental won’t fall as much, especially if located in strategic places with higher populations.

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If you could read until this line, it means that you are a serious investor as Dr Tee has spend half a day to write this article, you only need less than 30 min to read but need a few more days to digest to align the right CK stocks (1 of the 5 giant stocks) to your own personality. Each of the 5 CK giant stocks has its own pros and cons, may not be suitable for everyone. Overall, they all are at low optimism < 25%, implying higher potential for longer term investors. Their main “risks” may not be on business (Coronavirus could affect for Year 2020 but may not for long term), but more on bearish stock price trends since the group reorganization in 2015 till now. Global investors still try to find a sweet spot of balance between price and value for the “new” CK group of stocks.

Cheung Kong has been blue chip stocks for decades in Hong Kong, paying consistent dividend despite bearish stock prices or fluctuation in businesses. The main intangible “asset” of CK Group could be Li Ka-Shing, a trusted icon of CK for decades. Despite Mr Li has retired, he has transferred his business and investment knowledge to his 2 sons, Victor Li (taking over his empire of CK business) and Richard Li (inheriting most of his cash to start own business beyond CK Group). This way, 2 “tigers” won’t be in same jungle (only 1 main decision maker), smart move by a father with far vision to minimize potential family conflicts in the same business.

So, if readers may not have the same wisdom as Li Ka-Shing on investing, we may leverage on him through investing in CK group of giant stocks at lower optimism prices. Li family are unlikely to sell their stocks, therefore they would work day and night for you to grow the business as they are major shareholders (interest is aligned). Better still, readers may contribute no effort except just capital for investment at the right price (ability to press the button when seeing the signal with strategy aligning to own personality), Li family could then work for you for another generation until Victor Li may retire one day as well or passing to the third generation. Of course, you may then sell the stocks for capital gains one day or transfer the stock to your own second generation to keep.

If readers worry Li Ka-Shing may go bankrupt during global financial crisis (he went through at least 9 times over his 92 years of life experience), then smart investor may look for Top 10 richest persons in the world (Li Ka-Shing is only the 30th richest in the world), investing in their best stocks with stronger business than CK Group, forming a portfolio of Top 10 richest person’s giant stocks as a dream team portfolio. Of course, you may not get a good discount in share prices when their businesses are very strong now, therefore stock “crisis” is usually a good opportunity to own some of these giant stocks with growing businesses.

Li Ka-shing stocks are stronger than many 50 Hang Seng HSI index component stocks or 30 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).

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Filed Under: Market Cycle Investing, Market Optimism, Stock Market Tagged: Cheung Kong, CKA, CKH, CKI, defensive stock, dividend stock, Fortune Reit, growth stock, HKEx, Hong Kong Market, li ka-shing portfolio, Power Assets, Property, Property Stocks, reit, telco stocks, undervalue stock, utility stocks, Watson

7 Jardine King of Singapore Stocks (狮城股王)

Posted on April 10, 2020 Written by Dr Tee (Ein55)

Jardine Group SGX Jardine Matheson J36 Jardine Strategic Holding J36 Jardine Cycle & Carriage C07 Astra Asii Mandarin Oriental Hotel M04 Hongkong Land H78 Dairy Farm D01 Singapore Stocks Creative Technology C76 Berkshire BRK NYSE Sheng Siong OV8

Jardine Group is not just a company, it is a giant group with nearly 200 years of business history (started in 1832, then controlled by Keswick family for many generations till now). Jardine group of companies cover many industries, eg. engineering, automotive, properties, hotel, supermarkets, etc.

Jardine group has 7 giant stocks (Jardine Matheson, Jardine Strategic, Jardine Cycle & Carriage, Astra, Hongkong Land, Dairy Farm, Mandarin Oriental Hotel), all are falling to very low optimism (mostly with optimism <10%) over the past 2 months of global stock crisis. Since 5 of Jardine giant stocks (except Mandarin Oriental Hotel and Astra International – listed in Indonesia) are 30 STI component stocks (contributing to about 15% weightage), it has the strongest influence to Singapore stock exchange, more than individual stock of 3 major banks (DBS, OCBC, UOB) and Singtel.

There are 30 STI index component stocks including 5 Jardine 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).

6 Jardine stocks listed in Singapore Stock Exchange are secondary listing (primary listing in London Stock Exchange) and traded in USD (currently at high optimism vs SGD). USD usually performs better in bear market (safe haven), weaker during bull market, the longer term forex disadvantage of USD/SGD (about -2%/year USD depreciation) could be compensated by higher growth of 10+%/year of Jardine stock prices.

So, let’s learn to position in 7 Jardine stocks, all are giant stocks based on Dr Tee criteria but each Jardine stock has different characteristic, which may be considered for different personality of investors.

1) Jardine Matheson Holding – JMH (SGX: J36)

2) Jardine Strategic Holding – JSH (SGX: J37)

Jardine Matheson Holding, JMH is “King” of Singapore stocks (狮城股王), the highest share price in Singapore stock market history. JMH share price was peak around US$70/share a few months ago, before falling by 30% during Coronavirus crisis to about US$50/share. It is costly to invest even with minimum of 100 shares per lot (price in USD) = $50 x 1.43 (USD/SGD) x 100 = S$7150.

Highest stock price may not be always a giant stock, although most of the time, high stock prices are giant stocks, higher prices due to growing business over the decades. For example, world’s most expensive stock, Berkshire Hathaway (NYSE: BRK) managed by Warren Buffett, 1 share alone could be US$344,000 (nearly S$500k, could buy a 5-room HDB flat), currently selling at discount of US$290,000 (for details of Berkshire stock, refer to free eBook by Dr Tee on global Top 10 stocks).

The former Singapore stock king was Creative Technology (SGX: C76) with over S$60/share peak stock price recorded in year 2000 dotcom bubble. After the burst of technology bubble, not only stock price in crisis, Creative Technology also lost the giant stock title, company is no longer growing, share prices declining for 20 years till as low as $1/share. Therefore, long term investing requires monitoring of business fundamental, otherwise buy low may get lower over time, suffering huge capital loss. A common mistake for beginner in stock investing is usually buy a famous brand of stock at historical low price or 5-10 years low, assuming the price may recover in future which may not because future business is the key.

Similarly, during Coronavirus crisis, some sectors are badly affected (eg, airlines, F&B, hotel, etc), an investor needs to review whether the business with losses (more than 90% drop in revenue) could last with cash or net asset available. After the crisis is over, could the business recover quickly?

Jardine Strategic Holding, JSH is sibling of JMH, both are owning each other, a special cross-holding structure which could prevent hostile takeover. See another article of this topic: https://www.ein55.com/2017/03/jardine-group-uob-group-cross-holding-stock-network/

Both JMH and JSH stock performance are very close in longer term (eg over 10 years). Investing in either JMH or JSH is as if investing in Jardine fund of stocks with most the Jardine businesses. JMH has average of 1% higher dividend yield than JSH but JSH has average of about 1% higher yearly growth in share price than JMH, so effect is about the same. More details of JMH in earlier article: https://www.ein55.com/2016/04/choose-stocks-grow-30-times-price/

Both JMH and JSH are considered cyclic growth stocks, need to position with optimism less than 25%, best during global stock crisis or global financial crisis. Due to cyclic nature of these 2 stocks with minimal dividend for protection, it is more suitable for investing during recovery phase of stock crisis, avoid buying low get lower. When positioned right at significant low optimism in a severe global stock crisis, JMH and/or JSH may be considered for longer term holding due to high growth but need to monitor its cyclic businesses to certify that they are giant stocks (based on Dr Tee criteria) as this title of giant stock is not forever, eg. Creative Technology lost this title about 20 years ago.

“Buy Low” could only have chance to “Sell High” in longer term with condition that it is a giant stock. If not, “Buy Low” may become “Lower” in prices.

3) Jardine Cycle & Carriage – JCC (SGX: C07)

4) Astra International (IDX: ASii)

Jardine Cycle & Carriage, JCC is only a subsidiary of JSH but itself is already a giant automotive stock (familiar car brands: Mercedes-Benz, Toyota, Honda and Kia). JCC also owns Indonesian automotive giant stock, Astra International (listed in Indonesia Stock Exchange).

JMH owns JSH, JSH owns JCC, JCC owns Astra. So, it is as if 4 levels of stock connection but stock performances are close. JMH and JSH could be considered together (either one). Similarly, JCC and Astra may be considered together through JCC (if easier to invest in Singapore stock than Indonesian stock, Astra).

JCC is a dividend growth giant stock (not for Astra), suitable for investing during low optimism stock market, protected by nearly 6% dividend yield (assuming car business drops during crisis, 50% cut in dividend still has about 3% dividend yield left, more than 1% bank interest rate for cash). When crisis is over, likely the growing business will justify for normal distribution of dividend. However, since it is not a REIT (by law needs to distribute 90% taxable income to shareholders as dividend), the company has the right to choose not to give dividend. Over the past 10 years, JCC has record of giving around 3% dividend yield, current high dividend yield of nearly 6% is mainly due to price dropped by about 50% over the past few months of global stock crisis, therefore dividend yield is doubled from 3 to 6%.

If one believes the Coronavirus crisis or any future crisis are unlikely to stop people from buying cars more than 1 year (eg. could not get out of home for 1 year to view the cars in showroom), then crisis in JCC stock prices could be an opportunity. However, for Q1-Q2/2020 with less shoppers due to global lockdown, there could be temporary drop in business which may be justified by 50% discount in share price.

5) Hongkong Land (SGX: H78)

Hongkong Land is a well-known property stock, owning grade-A commercial properties in both Hong Kong central and Singapore marina area. There are quite a few past articles by Dr Tee on Hongkong Land (https://www.ein55.com/tag/hongkong-land/), mainly an undervalue property stock. However, over the past few years, buy low may get lower as Hongkong Land is not only following Jardine group, also affected by Level 2 property sector (Hong Kong / Singapore) and Level 3 stock property, as well as political economy (eg. over 100 days of Hong Kong protesters last year before Coronavirus crisis).

Among all the 7 Jardine giant stocks, Hongkong Land is the “safest” due to property asset selling at over 70% discount (price to book ratio, PB, is less than 0.3). The high dividend yield of 5% (eg from property rental) is a bonus for long term investor of Hongkong Land, providing passive income (even if 5% dividend yield is cut by half for next 12 months, still suitable as defender), no issue even if “crisis” of any form (protester, virus, etc) may last more than 5 years. During Coronavirus crisis, tenants of property could lose money due to less shoppers but landlord (Hongkong Land) still could collect stable rental.

Mid-term risk of Hongkong Land could be high property valuation in Hong Kong may not be sustainable if the average 20 years property cycle of Hong Kong falls from high optimism. So far Coronavirus only affects global stock markets and badly affect business of certain sectors, but not yet on property sector. Even so, long term outlook for Hong Kong and Singapore property sectors are steady gradual growth as a country surrounded by sea with limited land but nearly unlimited future population (both has the top 10 highest population density in the world with growing economy for decades) would support the growing property prices in decades to come.

In short, investing in Hongkong Land stock is an investment in Singapore and Hong Kong countries through as integrated stock and property markets.

6) Mandarin Oriental Hotel (SGX: M04)

Mandarin Oriental Hotel is not only a hotel in Singapore, it has many hotels globally. During Coronavirus crisis, hotel (hospitality sector) is badly affected. So, investor needs to monitor Q1 and Q2/2020 results of Mandarin Oriental Hotel before making decision.

Mandarin Oriental Hotel is a marginal giant stock, the weakest among 7 Jardine stocks. Even before Coronavirus crisis, business fundamental has been declining. Despite 60% discount in hotel asset with PB of 0.4, Mandarin Oriental Hotel is not as valuable as Hongkong Land.

For short term or mid-term cyclic trading strategy, this stock may be considered if there is a strong reversal in price trend, especially when Coronavirus condition may improve but risk is relatively higher than other 6 Jardine stocks.

7) Dairy Farm International (SGX: D01)

Dairy Farm is famous of its supermarket and consumer business (Wellcome, Cold Storage, Seven Eleven, IDEA, etc) in Hong Kong, Singapore and regional countries. During Coronavirus period, supermarket business should perform better (see how crowded when lockdown was announced) as is a consumer staples business, people still need to eat and drink, if they could not go out from home.

However, before Coronavirus crisis, Dairy Farm only has average business performance. It even sells some its seven eleven stores. It has stable dividend payment record, about 4% yield currently, possible to position as midfielder role. Competitor supermarket stock, Sheng Siong (SGX: OV8) performs better than Dairy Farm for business and stock prices. Sheng Siong has recovered the “losses” in stock prices as business is doing too good during Coronavirus period. Sheng Siong is only a young giant stock but does well in the current global stock crisis, having potential to be a true giant stock in future with more proven record.

Therefore, not all sectors are affected by the same crisis. Investor may explore stocks with stable businesses, leveraging on market fear to ask for over 20% discount in those growth stocks. Crisis is Opportunity when stock prices fall due to fear but business is still strong. Crisis is crisis when stock prices fall mainly due to weaker business.

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In summary, all 7 Jardine stocks are giant stocks at low optimism. However, the stock prices have been bearish for a few years, undervalue asset becomes more undervalue each year. Therefore, these Jardine stocks may not possible for traders without strong holding power as buy low may get lower in short term to medium term, unless there is a clear reversal in stock prices to uptrend again.

For long term investors who apply undervalue investing may consider Hongkong Land and Jardine Cycle & carriage stocks which pay over 5% dividend yield (but assume this amount may be cut by 50%). For very conservative investor, Hongkong Land with over 70% discount in asset value (PB < 0.3) is another strong consideration, even if Hongkong Land could not survive the unlikely Great Depression (<5% chance it may happen), investors may not lose the capital due to high safety of margin.

Strategies for investing in Jardine group is similar as other giant stocks at low optimism, multiple entries, eg 1, 3 or 5 “bullets” of capital, first entry at low optimism < 25%, subsequently optional entries could be either downtrend (5-10% lower, average down for investing) counter-trend investing or uptrend (5-10% higher, average high for trading) follow-trend trading if optimism is still less than 25%. It is fine if only 1 “bullet” (1 entry) is triggered (eg. stock market has V-shape recovery), future may follow short term or mid term trading for actions, to be reviewed again.

Sharing above for 7 Jardine stocks are for educational purpose (almost spend 1 day of Dr Tee valuable time writing this long article, hope it is an useful reference for readers). Please make your own decision with independent thinking. If you could read until this sentence, implying you have the determination to learn and apply stock investing.

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Filed Under: Stock Market Tagged: ASii, Astra, Berkshire, Blue Chip Stocks, Dairy Farm, dividend stock, growth stock, Hong Kong Market, Hongkong Land, hotel, jardine, Jardine Cycle & Carriage, Jardine Matheson, Jardine Strategic Holding, Mandarin Oriental Hotel, NYSE, Property, Property Stocks, SGX, Sheng Siong, Transportation, undervalue stock, warren buffett

Grandparents Blue Chip Stock SPH (远虑近忧)

Posted on April 7, 2020 Written by Dr Tee (Ein55)

Singapore Press Holdings (SGX: T39), SPH, is a well-known blue chip stock with 35 years of history of press business. It is popular especially among “grandparents” level of investors as a passive income generator through dividend payment.

In the past (over 20 years ago), there was little competition in this monopoly business, therefore SPH could gain income easily through advertisements with more circulations of hardcopy newspapers. However, in the internet era over the past 10+ years, disruptive technologies have changed the rules of the game, providing more channels of news (mostly free) through webpages, blogs, videos and social media (eg. Facebook).

As a result, number of SPH newspapers readers have been declining over the past decade (while Facebook and other internet users are booming), resulting in gradual falling of business fundamentals (revenue, earning, cashflow, even dividend) during the same period. The share price of SPH has fallen by half from the peak price of $5+/share, supressed further by recent global stock crisis, dropping to only 1/3 of peak price, $1.52/share, the lowest point at least for the past 26 years. Dividend yield is 7.1%, seems impressive (second highest in 30 STI component stocks, just behind Capital Mall Trust) but this could be a value trap.

A blue chip stock suitable for grandparents time may not be suitable for next generation now. SPH has lost the giant stock title (based on Dr Tee criteria) since 10+ years ago. Long term investing is not simply buy any stock and hold, especially for weaker fundamental stock in a sunset industry (monopoly is not a protection) of press business, buying low in prices would become lower in long term. SPH is a classic example as company never lost money, simply making less profits each year, long term stock investors may suffer huge capital losses if never review the business condition for decade, assuming a stock paying dividend yearly must be worth holding for lifetime.

The high dividend yield (DY = Dividend / Share Price) is mainly generated by share prices falling (1/3) more than falling of dividend payment (1/2) over the past decade. A common mistake of beginner in dividend stock investing is to pursue high dividend yield or simply check company is profitable (SPH has over 5% ROE for the past decade, not a junk stock, despite it is not a giant stock). The understanding of economic moat and business climate is crucial which is disadvantaged to SPH with popularity of internet, full with free news (including when you read this article, no need to pay even 1 cent to SPH).

This negative business cycle would continue, making harder for SPH to improve the financial condition with press business segment, despite promoting digital media over the past few years and reduce the workforce to save cost. 《人无远虑，必有近忧》is a Chinese idiom of wisdom, educating that one needs to have a long term plan, otherwise there might be risks in near future.

SPH new management may know there is a natural limitation in press business (despite considering 101 ways of improvement), therefore a solution way is to diversify into other business. Since SPH with P = Press, therefore it is hard to abandon press business overnight, especially this is an important mission empowered by government to ensure true news are shared with people (instead of internet, sometimes could have fake news).

So, an easy way out is to create second revenue Pillar of SPH with P = Property. Over the past decade, SPH has successfully establish a portfolio of properties (eg. Clementi Mall, Paragon, Seletar Mall, Rail Mall, etc) and even spin off another stock, SPH Reit (SGX: SK6U), to collect rental for some of the properties. SPH Reit is a young REIT with reasonably good business performance but share price is also corrected by 40% over the past 2 months of global stock crisis. In fact, SPH property business contributes to over 50% net profit of company, about 2 times of press business, one day may become Singapore “Property” Holdings.

Besides, SPH also diversifies the businesses to healthcare (eg. Orange Valley Nursing Home), education (eg. Mindchamps) and even Telco (M1 through partnership with Keppel Corp, another blue chip stock which also depends on property business to last through cold winter of oil & gas crisis). However, unlike property business which may be more passive in nature (investment decision), other businesses in different sectors could be out of circle of expertise for SPH, results of diversification have to be proven over time (so far property business is proven to be in right path).

For long term stock investors of SPH who have been making losses (more than 50% capital loss, even if collecting dividend yearly), may be in a dilemma of whether to cut loss (painful) or give SPH a chance to grow in property (proven) and other new businesses (still uncertain) beyond press business. One possible option is to apply “Change Horse” strategy as shared in earlier article, which is to sell a weaker fundamental stock, using the remaining capital to buy another giant stock with strong business fundamental (eg. existing competitors of SPH, internet related giant stocks which have growing businesses with more readers each month) on the same day, as if stock is never sold, just name is changed.

If not, at least SPH stock investor may consider to change P of SPH from Press to Property through SPH Reit (swapping between parent and subsidiary stocks) which focuses on property rental (may not be a giant REIT but performance is better than SPH as a whole). In this way, decade of downtrend in SPH business may be changed to potential decade of uptrend in SPH Reit business (with condition REIT manager is making the right decisions, eg. buying new property at lower price during crisis, etc).

The story of SPH has many hidden learning lessons. Firstly, there are few blue chip stocks which investors could buy and hold for lifetime as disruptive technologies (eg. another grandparents blue chip stock, Comfortdelgro with new challenger in taxi business but condition is more stable than SPH) may change the rule of game or there could be unexpected business crisis at certain point of time (eg. SARS and Coronavirus crisis to airlines sector but this is a short term risk). A smart investor has to regularly monitor the business at least with half-yearly annual reports. Buy a stock means one is in partnership with company doing business together, sharing the pains (if losses or less profits) and fortunes (if more profits which could justify more dividend payment).

Besides, SPH press business is a mirror of some individual who could not control own active job (eg. could be a worker in a declining semiconductor sector or a staff who does not have pay increment for years, etc) as they have been working for decades, not able to change the profession easily. So, if one could learn to convert the active income (salary from a job who may not have a bright future prospect) into 10-20 giant stocks, then literary one has 10-20 “jobs” which could generate money at the same time. The best is these additional incomes don’t need active “work”, therefore it is called passive income with dividend yearly or even quarterly, when holding long enough, potential capital gains due to growing business (with condition focusing in a portfolio of giant stocks, ideally buying low during global stock crisis). If these 10-20 giant stocks could pass the yearly certification process as a giant stock, then an investor may have option to hold for long term or even for lifetime or passing to the next generation as family wealth (this is common for those rich families with investment funds but individual may pass a few giant stocks to the next generation).

Dr Tee is still a long term supporter of SPH newspaper (not stock, but a reader), could not change the habit of reading daily newspaper for several decades. Personally, I hope SPH could continue to be strong in property and new business, so that the press business is sustainable.

So, until SPH becomes a giant stock again (to be proven, see if could pass Dr Tee criteria one day), an investor has the choice to invest in over 1500 global giant stocks, supported by growing business.

In Year 2020, SPH is officially removed from 30 STI index component stocks (investor has to focus only on giant stocks for investing, not just buying grandparents blue chips 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).

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Filed Under: Market Outlook, Property Market, Stock Market, Value Investing Tagged: Blue Chip Stocks, monopoly, Property, reit, SGX, Singapore Press Holdings, SPH, SPHReit, T39

Temasek Acquires Crisis Stock Keppel Corp (趁虚而入)

Posted on April 3, 2020 Written by Dr Tee (Ein55)

Temasek has offered partial acquisition to Keppel Corp (SGX: BN4) shareholders at the price of $7.35/share up to 51% ownership over 1 year period (with some conditions applied). Since this is not a full acquisition, some investors may be confused of what is fair price for Keppel Corp. Let’s study this acquisition offer in details.

Temasek owns 20.45% of Keppel Corp, intending to purchase shares owned by remaining shareholders (100 – 20.45% = 79.55%) to top up to 51% (still need 51% – 20.45% = 30.55%). So, it is partial acquisition of 30.55/79.55 = 38.4%. It means for every 1000 shares, 384 unit will be acquired.

The offer price of Temasek at $7.35 is about 20% premium over the average price before acquisition, aligned with several other acquisitions in Singapore. However, it only has 38.4% power, not the same as 100% power as other full acquisition (eg. Breadtalk current acquisition offer of $0.77, price would surge near to this price overnight after the announcement). Assuming the Keppel Corp share price is $5/share (on certain day), the theoretical share price after 38.4% partial acquisition = $5 + (7.35 – $5) x 0.384 = $5.90/share. Reader may replace this equation of $5 share price with any latest share price of Keppel Corp before acquisition.

Over the past 1 month of global stock crisis, Singapore stocks fall by about 30% in average but Keppel Corp only falls about 20%, aligning with 38.4% potential acquisition by Temasek which is about 1/3, therefore the stock corrections is also reduced by about 1/3 from 30% to 20%.

It means the global stock crisis still has about 60% impact on Keppel Corp prices. Therefore, an investor has to make decision mainly based on global stock crisis and current stock market condition with Keppel Corp value, not to assume price would recover to $7.35/share price eventually.

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Keppel Corp is a diversified corporation with 4 businesses: offshore &marine, property, infrastructure and investment. The 2 main pillars are Property (Keppel Land, contributing to about 50% company profits) and Oil & Gas (Keppel O&M, main source of losses over the past few years). Over the past 5 years after the oil price fell from $100 to $27/barrel, Keppel Corp suffers directly as main clients reduce the capital expenditure (eg. oil rigs), therefore Oil & Gas becomes a losing segment.

Since 2015 crude oil crisis, Keppel Corp has temporary lost the giant stock title, currently a marginal giant (likely will become giant stock again after oil & gas sector recovery). Luckily Keppel Corp still has 50% earnings from Property (eg. Keppel Land and Keppel Reit), even Oil & Gas is a loss for several years (recovering to small profits in last 1 year), the entire company as a whole could still make a profit. Compared with competitor or sibling, Sembcorp Marine (SGX: S51, also owned by Temasek through Sembcorp Industries) which has full risk exposure to oil & gas crisis, losing money for several years, resulting in share prices falling from $5 to $0.70 (last 17 years low).

Some may think it is “cheaper” to invest in Sembcorp Marine stock (85% correction) compared to Keppel Corp stock ($13 falling to $5/share during oil & gas crisis, about 60% correction). This comparison is only valid if both companies are giant stocks (which are not) because “crisis is not opportunity” if business fundamental is weak, eg for the case of Sembcorp Marine. For Keppel Corp, it is still a 50% giant stock due to strong property business. Therefore, investor of Keppel Corp is actually investing in value of Keppel Corp property (main value) while taking advantage of falling share price (due to Oil & Gas crisis). It was a good move in year 2015 (beginning of oil & gas crisis) for Keppel Corp to offer full acquisition of Keppel Land which 100% profits of property business goes to Keppel Corp, offset the losses in Oil & Gas segment in Keppel O&M.

Assuming Temasek could successfully own 51% of Keppel Corp by end of 2020, it is a full control of company. This may allow possibilities of strategic merging of Temasek subsidiaries companies (eg. Keppel O&M and Sembcorp Marine) or restructuring of Temasek companies, eg. Keppel Corp and Sembcorp Industries (Temasek nearly has 50% control), etc, to maximize the asset values.

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During crude oil crisis with Keppel Corp at low optimism prices, Temasek leverages on crisis to have majority control of Keppel Corp at reasonable low price of $7.35/share. This also provides an option for Keppel Corp investors to sell for 20% profit. However, the global stock crisis has disturbed the plans as prices of Keppel Corp are falling even lower than before acquisition news.

Analysis on Keppel Corp is beyond stock and Temasek, also requires understanding of property market and crude oil commodity market. So, it is a stock with complicated interactions of market signals, reflecting in final share prices.

Here is a special Ein55 style, 50% Discount Method for investing in Keppel Corp during crisis (with or without Temasek acquisition) with multiple entries to fight against unknown market crisis ahead. Assuming $10 is a common high level prices (occurred during when economy and crude oil market are bullish), an investor may apply 50% discount in prices each time before each multiple low due several unforeseen market crisis.

$10 = High Level Price (potential future selling price level)

$5 = Crude Oil & Stock Crisis (3 times in 2009, 2016, 2020) after 50% discount x $10

$2.50 = Global Financial Crisis (17 years low) after another 50% discount x $5

$1.25 = Great Depression (20 years low) after another 50% discount x $2.50

This is a non-linear version of multiple entries for very conservative investor who hopes to buy low but afraid of prices could get lower. Assuming all the crisis come (hopefully not), this is average price after 3 entries (like Keppel Corp with property pillar could still survive):

($5 + $2.50 + $1.25) / 3 = $2.92

This is lower than using linear average down method at low optimism (assuming 3 entries with $1 lower each time):

($5 + $4 + $3) / 3 = $4

Each method (linear or non-linear 50% discount) has its benefits. Linear method is more likely to achieve in practical market, for those who wish to reduce downside risk through averaging (eg. 3 times x 33% capital). Non-linear method is for very conservative investor, demanding 50% discount each time before willing to take out precious cash from the pocket for investment. During the long holding period (could be 1-3 years, depending on severity of crisis), Keppel Corp investor may be given an average of 4-5% dividend yield (past 10+ years record), assuming the dividend is also cut by 50% due to crisis, one could still get about 2% dividend yield which is higher than fixed deposit in banks with 1% interest rate. After the crisis is over, assuming the average entry price is only $5 (only 1 crisis experienced), an investor may not need to sell at $10 average high prices for 100%, could even sell near to Temasek fair acquisition price of $7.35 which is over 40% higher than $5 price.

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Charlie Munger (partner of Warren Buffett) said the big money is not in the buying and selling, but in the waiting. Global stock crisis may happen only every 5 to 10 years. Similar to a lion ambushed, waiting patiently for target, when opportunity comes near, only then strike for higher chance of winning. It is the same for current global stock crisis, for investors “ambushed” for many years, it could be the right time to plan for a strategy to take action in stocks.

Frankly speaking, there are over 100 global giant property stocks and 44 global oil & gas giant stocks (based on Dr Tee criteria), which are much stronger than Keppel Corp. Some of these giant stocks are also falling in prices 20% – 50% recently, “Crisis is Opportunity” investing in these growing business (value) with significant discount in prices.

There are at least 26 Temasek / GLC stocks in Singapore including Keppel Corp, controlling shareholder with 15% or more ownership directly or indirectly (investor needs to focus only on giant Temasek stocks):
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).

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: Market Outlook, Property Market, Stock Market, Technical Analysis, Value Investing Tagged: acquisition, Blue Chip Stocks, crisis stock, keppel corp, oil & gas, Property, Property Stocks, reit, sembcorp industries, sembcorp marine, temasek, undervalue stock

3M of Stock Investment Plan (Hongkong Land)

Posted on March 16, 2020 Written by Dr Tee (Ein55)

Some investors may think Hongkong Land (SGX: H78) or any giant stock at 0% optimism is a no-brainer stock investment, simply buy now (Price-to-Book, PB ratio of 0.26 with 74% discount in price for high quality property asset) and hold long term for crisis to be over with price recovery, sure will make money with capital gains.

Above is half understanding based on pure “Method”. There are 3M to consider:

3M Investment = Method x Mind X Money Management.

Whenever any 1 of the 3M is weak or zero, entire investment plan would fail due to multiplication effect.

Let me extend the earlier sentence from 1M to 3M:

Hongkong Land is a good buy now at current price, if one is prepared to hold long term with contrarian strategy (including diversification over a portfolio of 10 global giant stocks) which is comfortable with one’s personality (eg. the person will not check share price daily, will not be sleepless each night when seeing Hongkong Land stock price may fall by another 50% in next 6-12 months). If the person is willing to lock the Hongkong Land stock share in a drawer for at least 5 years (only check the price and business fundamental quarterly), then probably near to the rare quality of 5% group of contrarian investors. The person would be similar to Warren Buffett mindset, able to take the finger pointing by others (eg. “you are wrong, should not buy, now is a bad market, etc”).

Let’s do a simulation of application of only 1M (Method). After buying Hongkong Land (assuming the same low price now with PB ratio = 0.26), assuming Coronavirus could be out of control in US & Europe in next few months, many death reported, global stock markets drop from current mid optimism to low optimism, Hongkong Land may fall down another 25% in price. If global financial crisis is induced due to weaker economy over 6-12 months, then Hongkong Land could fall down another 25%, perhaps the PB could be 0.26/2 = 0.13 then (more discount given).

If the person is very comfortable with falling in share prices (treat is as different degree of discount, no need to buy at the most discount with the lowest price) as main concern is to ensure asset value with business won’t be affected in long term. If there is a global financial crisis, it is possible for Hong Kong property valuation to drop 20%, especially Hong Kong property market is at relatively higher price or optimism level over the past 20+ years but it usually won’t last long in this way), then it is a good buy for this person, especially if the position of Hongkong Land stock is no more than 10% of entire portfolio.

Some investors may think if one follows exactly as the Method required (either long term investing or short term trading), then there is no harm to follow. However, once the person make an surprised loss (Mind Control is affected), especially over trade or invest in only 1 stock (poor Money Management).

In short, when finding a Method for stock investment, learn and choose a strategy aligned with own personality (many factors to consider), not just because it is a “sure win” Method. Due to mismatch of personality, this is why traders mindset may fail in investing, while investor mindset may fail in trading. There is also 5% of rare group which could invest and trade, having “dual” personalities, able to make money in both short term trading and long term investing. For majority of the people, there is no need to be greedy to earn all the money in the market, just focus on 1 way comfortable with oneself, be the master with years of practice with stock market experience as the teacher.

There are 30 STI index component stocks including Hongkong Land (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).

There is no get-rich-quick or sure-win investment or trading method. Each “Method” requires own experience with own “Money” through own “Mind” to convert into a skill which is repeated. Some may take more time, some may be faster to achieve this goal. The current stock market crisis could be a pain to many people but will be helpful in reshaping one’s strategy (经一事、长一智).

Apply probability investing in planning of stock investment or trading. High probability does not mean 100%, even cash deposit in bank is not 100% safe. A weak bank could go bankrupt, $1 Million deposit could only get $75k compensation. Risk tolerance level is also one of the “PA” (Personal Analysis).

There are 140 property & construction stocks in Singapore including Hongkong Land (47 of them are undervalue with PB<1):
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).

For students before joining 6-day Ein55 course (www.ein55.com/course), they would do this homework (a series of psychological tests) to know their unique personality better, before aligning with the strategies later.

Stock investment is not as easy as it sounds but when one aligns with own personality, it would become a positive habit, as easy as breathing or drinking water.

Learn from Dr Tee 4hr free investment course on 3M way of stock investment or trading with a dream team of global giant stocks. Register Here: www.ein55.com

Filed Under: Property Market, Stock Market, Value Investing Tagged: 3M strategy, contrarian investing, Hong Kong Market, Hongkong Land, investing strategies, jardine, Personal Analysis, Property, Property Stocks, stock investment, stock strategies, undervalue stock

Contrarian Investing Stock – Hongkong Land (SGX: H78)

Posted on March 15, 2020 Written by Dr Tee (Ein55)

Hongkong Land (SGX: H78) is at 0% Optimism after falling in share prices over the past few years (especially over the past few months), very bearish (similar situation for other Jardine Group siblings of giant stocks – JMH, JSH, Jardine C&C, Dairy Farm, etc). Jardine Group of stocks are mainly suitable for contrarian investors (i.e. Warren Buffett styles) who only buy based on price below value, ignoring the falling knife of share prices.

There are 30 STI index component stocks including Hongkong Land (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).

Price to book ratio (PB) of Hongkong Land is around 0.26 based on my memory (presented in yesterday workshop), implying 74% discount of price below net asset value which mostly is property. This is the lowest PB or most undervalue stage of Hongkong Land history over the past 10+ years.

If one could buy a giant stock with 50% discount in high quality asset (property or cash), even the company go bankrupt immediately, still can make money as the person only pays for 50% of the value, could get at 70% of remaining asset when company go under liquidation.

Of course, Jardine Group with nearly 200 years of history may disappoint investor for not able to go bankrupt immediately (it is a game of patience), Hongkong Land buildings still stand firm despite Hong Kong protesters 1 year ago and current with Coronavirus or global stock market meltdown.

It is not easy to be a contrarian investor (Be greedy when others are fearful; Be fearful when others are greedy), one needs to have independent thinking (eg. many people point fingers at Warren Buffett for wrong move to buy airline stocks with falling in prices and businesses). Alternatively, one has to switch off all the channels (eg. social media, news, newspaper, etc) to prevent the noises. Investment journey is lonely, especially for this group of rare contrarian investors, only 5% of investors may have this personality.

Most investors are more suitable for trend-following trading or investing as it is human nature to investor making money, not making loss (even it may be for a limited period of time). Either contrarian investors or trend-following traders are fine, more importantly one needs to align with own personality, do not force oneself to copy another expert’s best method (eg. Warren Buffett styles), ending up regret for life as could not follow through.

Learn from Dr Tee free 4hr investment course to apply 10 different strategies for 10 unique personalities for stock trading or investing, including contrarian investing and trend-following trading. Register Here: www.ein55.com

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Filed Under: Fundamental Analysis, Property Market, Stock Market Tagged: contrarian investing, Hong Kong Market, Hongkong Land, investing strategies, jardine, Property, Property Stocks, stock strategies, undervalue stock, warren buffett

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