Wednesday 26 May 2021

Portfolio Addition (May 2021): Alibaba and Ascendas India Trust

 For the month of May, I have decided to venture into the Hong Kong to pick up Alibaba.

The investment thesis was less of a quantitative approach but of a qualitative reasons. Firstly, Alibaba's cloud provider segment has started to EBITDA positive and with operating leverage, this segment can be a billion dollar profit sector through revenue growth. Amazon Web Services, Amazon's cloud provider sector has been profitable and is now generating annual profits of $13 billion. Personally, I think China and its companies will choose Alibaba or other China Cloud Providers. However, it will be enough for Alibaba to have a billion dollar profit in this pie. This points to a potential 10% growth from current earnings.

Secondly, China's middle class disposable income is growing and this means a larger e-commerce market. This also means higher earnings. With that, I have taken some position in Alibaba through the Hong Kong Exchange.

Second Addition: Ascendas India Trust (AIT)

Without getting the ire of the local online community, I personally feel Ascendas India business park's business will continue to grow especially due to the growth of India's e-commerce segment and IT support industry. AIT's holds a few good assets in India's IT hub and has the space and financial capability to build more buildings to expand these business parks.

Once India has recovered from it current COVID situation, I expect the dividends per share to stabilize and be slightly higher than FY 20's (8.8 cents). I am expecting 9 cents dividends. At current share price of $1.38, the REIT is a 6.3% yield which is pretty good in the Singapore REIT's sector. While AIT is an industrial REIT, its current yield is higher relative to smaller and higher levered peers such as Sabana (about 6%) and ESR (6.1%). In my view, the assets held by AIT (while in India) are of better quality than Sabana's and AIT's tenants are of quality MNCs. 

It is probably due to the COVID situation in India that resulted in the beat down price. Otherwise, in my view, AIT is a 5% yield industrial REIT.

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