14 December 2017

Fundamental BUY call: HongKongLand (H78) Target price $8.30

Hi All, this is our first (official) fundamental stock pick as we seek to create a place with both fundamental and technical ideas for sharing with investors and traders reading our blog. Welcome any feedback and ideas from our readers. 

We will also be including it in our model dummy fundamental portfolio to track the performance of our investment track record (mostly for our own learning purposes). For fun reading and sharing. Happy holidays! :)


Hong Kong Land

About
One of the largest property developer and investment group in Asia, owning and managing almost 800,000 sqm of prime office and retail property in key Asian cities. Hong Kong and Singapore made up bulk of the portfolio with 452,000 sqm (56%) and 165,000 sqm (20%) respectively.


FY16 Operating income by segment:
Commercial property: 77.8% (should be mostly investment property rental income)
Residential property: 22.2% (should be mostly property dev profits)



Source: HKL

My View: 
  • While this is just an over simplistic way of looking at the stock, I see HKL as a good proxy to the property market in HK, with its Grade A office assets in Central HK, that may benefit from the booming Chinese economy. Valuations are also backed by its grade A prime office and retail properties such as (Exchange Square, Forum, Jardine House etc in HK, and 33% owned One raffles Quay and MBFC in Singapore).
  • With P/B near a multi year low (0.5x), and potential for rise in dividend in the near term (given the dividend history and potential increase in rental income from contributions from new assets, and also multi year low net gearing), think HKL may be a good addition to my medium to long term portfolio at $7.22.
  • While waiting, I get a dividend yield of 2.6 % (based on current DPS of $0.19- same as CPF – might as well)

Investment merits:
Trading At 0.5x P/B (with most of its assets at prime locations in cities such as Hong Kong and Singapore), which is near a multi year low and -1SD of its 10 year range. Also attractive when vs its peers like CK asset, Swire properties and Champion REIT who are trading at 0.6-0.9x P/B.

P/B is near a multi-year low and -1SD of its 10 year range.











Source: Bloomberg

Leasing momentum slowed, but overall rental growth still positive in HK. The vacancy rate for prime office space in HK Central rose to 2.4% in 3Q from 1.7% in 2Q, according to Colliers International. According to Colliers, Rents in Central/ Admiralty increased 0.4% QOQ, supported by sustainable renewal and new demand irrespective of the rising relocation trend. Hong Kong’s office area forms 48% of HKL’s total investment portfolio (by floor area).
  • ·   For 1H18, HKL’s HK central office portfolio as at 30th Jun 17 maintained its high occupancy rate with only 1.5% vacancy rates. Average office rent rose to HK$106 psf vs HK$103 in 1H and 2H 16. Its HK central retail portfolio was 99.4% occupied with little change in base rents. There were some mildly negative rental reversions in its Sg office portfolio (S$9.1 psf vs $9.4 psf and $9.2 psf in 1H and 2H16 respectively), but occupancy rate remained strong with vacancy of only 0.2% as at end of Jun 17.


New contribution from Beijing retail mall coming on stream in 4Q?  (84% owned) WF Central (Beijing ) comprising luxury retail complex and 74 room Mandarin Oriental hotel is scheduled for completion in late 2017 and 2018 respectively.



Good free cashflow yield… As a result of its steady rental income from investment properties, HKL typically generates very good free cash flow of more than US$500m in the last 3 years (FY16: US$948m, translating to a free cashflow yield of 5.5%). This has helped it continuously pare down its net gearing to only 5.5%, which will allow HKL to scoop up good assets if investment opportunities arises. 
US$m
FY 2012
FY 2013
FY 2014
FY 2015
FY 2016
Last 12M
12 Months Ending
12/31/2012
12/31/2013
12/31/2014
12/31/2015
12/31/2016
06/30/2017
Cash From Operations
299
908
699
896
1,096
1,202
Capital Expenditures
(515)
(134)
(137)
(152)
(148)
(139)
Free Cash Flow
(216)
774
562
744
948
1,063

Net Debt To Shareholders Equity
12.5%
11.2%
9.6%
8.1%
6.4%
5.5%
Source: Bloomberg

and potential for rising dividends? Noted that dividend/share has been stagnant for 2014-2016 at US$0.19 (dividend yield: 2.6%). If you study the pattern of its dividend payment, DPS remained at US$0.16 from 2009-2011 (3 years) before slowly increasing DPS by US$0.01/year from 2012-2014. If 3 years is a cycle, can we potentially see management raising dividend again this year by at least US$0.01 (or best 1 shot US$0.03). This is considering the potential rise in core investment property rental income (from the potential positive rental reversion in its HK office rentals, new revenue contribution from the new mall in Beijing, WF Central (84% owned) which will be coming up soon in 4Q, and continuously decreasing net D/E which is now at 5.5% (lowest in years)

US$
FY 2008
FY 2009
FY 2010
FY 2011
FY 2012
FY 2013
FY 2014
FY 2015
FY 2016
Dividends per Share
0.13
0.16
0.16
0.16
0.17
0.18
0.19
0.19
0.19
Diluted EPS
(0.05)
0.78
2.02
2.27
0.61
0.51
0.56
0.86
1.42
Dividend Payout Ratio
19.8%
7.6%
7.0%
27.8%
35.6%
33.7%
22.2%
13.4%
Source: Bloomberg

Technically, prices have been consolidating between $7.10-7.80, after a strong rally from $5.95 at the start of the year. With prices near the low end of the trading range, and potential near-term catalysts such as the completion of the 84% owned WF Central in Beijing and hopefully higher dividends (my guess- prays), hopefully the stock will be ready to retest $7.80 and breakout soon.













05 December 2017

SGstocksandshares (SGSAS) 2018

SGStockandshares has started more than 5 years ago. I meet very interesting people along the way, sharing trading ideas as a stockbroker and exchanging market views. Some are my clients and many my friends now, helping each other to network and achieve greater heights together. I have to say it is an enjoyable experience and fruitful journey. Thank you!

Coming 2018, there will be some changes and revamps to the sections of this site. Very likely there will be a change of content too. Fundamentally the aim of the blog remains the same; sharing and learning together. It should continue to serve all my followers in a simple yet concise manner. And naturally, I welcome all passionate friends to join me as clients on this investing journey.

So stay tuned, and let's continue our stock pick journey in 2018! 

Feel free to drop me a message via at the bottom right-hand corner of the window!


28 November 2017

BUY PARKSON RETAIL (O9E) FOR 40% UPSIDE

update:

JOHOR BARU: The largest mall in Malaysia's Johor state opened its doors on Tuesday (Nov 28). 
Located along the Skudai Highway, Paradigm Mall JB spans more than 2 million sq ft and is just a 20-minute ride from the Woodlands Causeway.  

(Source: Paradigm Mall JB) 

The mall is bigger than Singapore's largest shopping centre VivoCity, which has a gross floor area of 1.5 million sq ft. 
Paradigm Mall JB will feature the largest movie theatre in the state operated by Golden Screen Cinemas, premium supermarket Village Grocer as well as department store operator Parkson.
Parkson will be the mall's anchor tenant, taking up 200,000 sq ft of space. The outlet is Parkson's first regional store in the southern part of Peninsular Malaysia. 
For adrenaline junkies, the mall showcases a 20,000 sq ft ice skating rink, a Camp5 indoor climbing gym and Malaysia's first indoor skate park.

With more than 500 retail lots spread over six floors, some well-known names among the tenants include H&M, Uniqlo, Harvey Norman, Wendy's, Marrybrown and Under Armour. 
Apart from the retail and mall space, the complex also features a 24-storey serviced apartments tower and a 296-room four-star hotel. 
Paradigm Mall, which has another shopping complex in Petaling Jaya near Kuala Lumpur, is owned and developed by WCT Holdings. 

Read more at http://www.channelnewsasia.com/news/lifestyle/johor-s-largest-shopping-centre-paradigm-malljb-opens-9446578






The last report on Nov indicated that Parkson retail has S$12m losses, majorly due to an increment of operational cost and gestation of new stores.

As a result, the shares have tanked from 0.125 to a low of 0.063.


Recent buying volume below 0.075



Note the stated reason is for the lack of revenue. It states that it is due to the absence of festival holidays of Hari Raya/LeBaran.

However, this also means that it will be starting in June 2018.


Eid al-Fitr 2018 will begin on the evening of

Thursday
14 June
and ends on the evening of

Friday
15 June

This means that there will be likely no negative results that will be released from now until June.

Next, Tan Sri Cheng Heng Jem holds, directly and indirectly, 53.52% of the voting shares in PHB, which is the sole shareholder of East Crest International Limited. East Crest International, in turn, owns almost 70% of Parkson. There is no insider selling, and I assume the Parent would want money to flow back upwards, hence I believe the "will" to distribute dividends will be there.


They are paying themselves peanuts. I like in terms of presence in popular malls, parkson has done a good job too. Look at the three links

1) http://www.kuala-lumpur.ws/klshopping/top-10-shopping.htm

2) http://www.wonderfulmalaysia.com/faq/top10-shopping-malls-in-kuala-lumpur.htm

3) http://web.parkson.com.my/whatson/store-locator/

In either survey, Parkson is the anchor tenant in 4- 5 of the most popular malls.

Also, if u take a look at Aeon, a competitor in the department store space. U compare Apple to Apple, by taking only Aeon Retailing Segment and Parkson Malaysia Segment, Parkson again fare better.

Now looking at the charts, there are some buying volume from any prices below 0.070.

I strongly believe that it will retest the 0.100 price level first, and then 0.125 if there is strong volume.






This is backed by the latest EPS (Earnings Per Share) as well as NAV (Net Asset Value) of the shares.

In other words, given the current price 0.074, we are looking at an upside of 35% if it hits 0.100. Worth a try to do some bottom fishing here!

Good luck!



Summary:

Entry:  below 0.075
First Take Profits: 0.090 to 0.100
Second Take Profit: 0.115 to 0.121

Cut Loss: 0.065

21 November 2017

SELL CALL: Singapore Dividends to Drop: study




Taken from : http://www.businesstimes.com.sg/companies-markets/singapore-dividends-to-drop-study


SINGAPORE dividends are in for another tough year to the dismay of the legions of retiree investors; they also take some shine off the bull run in which the Straits Times Index has risen some 12 per cent since January.
Aggregate dividends (ordinary plus special) in 2017 will fall 3.6 per cent year on year (yoy) to S$16 billion from S$16.6 billion reported a year ago, said financial data provider IHS Markit.





This will be the second straight year that single-digit negative growth is reported.

Disappointing income huggers are dividend stalwarts such as StarHub, SPH and Keppel Corp. Picking up some of the slack with higher payout would be, among others, DBS and property stocks such as CapitaLand, CapitaLand Commercial Trust and Ascendas Real Estate Investment Trust.

Excluding special dividends, ordinary dividends from companies in FTSE STI and MSCI Singapore are projected to be down 2.5 per cent yoy to S$15.9 billion, compared to 0.6 per cent growth in 2016.

IHS Markit covers 31 stocks from FTSE STI and MSCI Singapore. Projected dividends selected for each year are based on the dividend announcement date, so 2017 total dividends for a stock may consist of FY16 final dividend and FY17 interim dividend.
Special dividends are forecast to be down about 56 per cent yoy to S$120.8 million as Singapore Technologies Engineering opts to stick to ordinary dividend payments. The company gradually reduced yearly paid special dividends to S$155.2 million (five cents per share) last year and plans to distribute specials only when there are one-off events in future.

This leaves the number of companies that pay special dividends to two - City Developments and SPH.

Not so long ago, seven companies paid out special dividends in 2012 and 2014. But the highest special payouts in the past six years was by five companies totalling over S$1 billion in 2013, which included a bumper S$401.1 million from SPH as it listed SPH Reit.

City Developments announced two special dividends in 2017 - four cents in February and four cents in August.
"We are expecting SPH to declare a flat amount of three cents in October," said Hyeyoung Jo, IHS Markit research & analysis manager, dividend forecasting.

She also expects the final dividend to fall to six cents from eight cents. SPH is scheduled to report full year results on Oct 11. SPH declared in April an interim dividend of six cents, down from seven cents a year ago.
IHS Markit is also projecting ordinary dividends from SPH to be down 20 per cent yoy from S$239.8 million to S$192 million, added Ms Jo.

"There is a further downside risk in upcoming dividends as receding media revenue growth continues to impact the group earnings. The company's cash flow and cash equivalents have been downwards, putting additional pressure on dividend growth," said Ms Jo.

Also slashing dividends is StarHub, causing the telco sector to post a cut in aggregate dividends for the first time in five years. This is due to a dividend policy revision, effective FY17. StarHub's net profit and free cash flow in recent years have been weighed down by intensified market competition and the company decided to downgrade its annual dividend per share by 20 per cent to 16 cents from 20 cents which it had maintained since FY10.

In 2017, StarHub's total dividends are forecast to be down 15.2 per cent at S$293.8 million and the sector's total dividends are expected to fall 0.5 per cent.

Banks and telcos continue to dominate 2017 ordinary dividends, respectively accounting for 26.9 per cent and 19.8 per cent of total dividends expected for the year. Banks' dividends are set to rise 3.5 per cent, against a drop of 4.1 per cent in 2016 (minus 12.3 per cent including specials), which was primarily impacted by United Overseas Bank's policy change to keep an equal split between interim and final dividends.

This year, UOB and OCBC have declared flat dividends from the previous year while DBS decided to pay out 10 per cent higher interim dividend. Since UOB omitted special dividends in 2016, aggregate dividends from DBS surpassed its two local peers and the bank alone takes up around 10 per cent of the total dividends expected from Singapore in 2017.

Dividends from two oil and gas companies, Keppel Corp and Sembcorp Industries, have been lacklustre and the sector is projected to report the biggest cut compared to other sectors in 2017. The sector has declared 32.4 per cent lower dividends in 2017 following a 37.5 per cent decrease in the previous year.

Besides DBS, other dividend stars come from real estate. The real estate sector is projected to deliver dividend growth of 8 per cent yoy.

Six out of the nine companies in the sector are forecast to maintain flattish dividend per share (DPS) in 2017 compared to the previous year while CapitaLand Commercial Trust (CCT), CapitaLand and Ascendas Real Estate (A-Reit) are projected to deliver higher DPS, said Ms Jo.

All three companies' revenues and net property income have benefited from recent acquisitions, she noted.
A-Reit leads the sector's dividend growth and is projected to deliver the highest growth of 30.8 per cent in DPS (or 40.9 per cent in aggregate dividend) after a drop of of 33.6 per cent (or minus 25.6 per cent in aggregate dividend) a year ago. This is mainly attributable to the full-year contribution from new acquisitions in Q3 FY16 and FY17, namely the Australian logistics properties and ONE@Changi City.

Both CCT and CapitaLand have already confirmed 6.3 per cent and 11.1 per cent higher DPS respectively, equivalent to 8.4 per cent and 10.9 per cent growth in aggregate dividends. The growth is partially due to higher recurring income from CapitaGreen acquired in 2016.

Despite some dividend cuts, investors are keeping their faith with Singapore stocks.
Said Carmen Lee, head of OCBC Investment Research: "Overall, based on current prices, dividend yield for the STI is projected at about 3.4 per cent for this year and 3.5 per cent for next year.

"The STI has done well for several reasons. The key outperformers for the year included several of the big cap companies, especially those in the financial and property sectors."

This is clearly seen from the gains for the finance and property indices, she said.
The finance, Reits and real estate indices are up as much as 18 per cent for the year compared to the STI's slower 12 per cent. The STI closed at 3,218.57 last Friday.

"The STI should continue to trade towards 3,400 by year-end," said DBS Group Research in its Q4 outlook.
The reflation trade is still alive in Singapore where a synchronised pick-up in global activity is still underway, it said. "We believe the banking and property sectors should still drive index performance."

OCBC's Ms Lee said: "The recent renewed interest in the local en bloc property market has sparked interest in property trading and transactions and has also benefited listed property companies' share prices. Based on the Real Estate index, and despite recent gains, the index is still trading currently at 0.9x book value, effectively implying a discount to book value."