Tuesday 30 May 2023

Intrinsic Valuation from Financial Modelling is Dead in the Current Market

If one follows the Singapore Scene on investing in Alibaba, there are a few who espouse the value propostion of investing in Alibaba. Yesterday, one of them, Tay Chi Keng used the textbook valuation models of EBITDA and P/FCF to show Alibaba's intrinsic valuation as US$240 per share.

Textbook is Textbook, Real Life is Different

Like the above "financial influencer" who is young and still in his last year at a prestigious business school in Singapore, my comment is that if valuation models are the law; many of us, including yours truly, would be millionaires applying the valuation models I learnt at my university. 

From what I have experienced in my investment journey, other factors never taught in our academic textbooks are more important.

Sentiments to a Company

They say the stock market in the short run is a voting machine while in the long run, it is a weighing machine. To be honest, I don't know what the caveat is "in the long run", it could be holding it till I am dead and the intrinsic value will not be realised until 10 lifetimes later. Hey thats still called "long run"!

To me, the most important determinant of a share price is sentiments. It contributes to definitely more than half of the company's value. The China stock market bubble and Tech Bubble in 2020/2021 are evidence. For China companies, their forthy valuation were curtailed when China clamped hardly on them and now companies are trading at less than half of the multiples they were commanding in 2020.

Ditto to US tech companies who have risen and fell. Nvidia is another example where it rode the tech wave, then moved down, then with the AI wave now and good guidance, Nvidia's share prices is moving back to its 2021 highs. However, valuations and growth trajectory has remained unchanged through these years. It is just people expecting their business will "huat" with each mentioned of a new wave.

Structure of the Company- Kingboard Copper Foil

This is another component I learnt where whatever fancy valuation model is thrown at it, due to this, the company will never reach the target price.

9 years ago, I chanced upon this SGX company called Kingboard Copper foil which was trading below its net net value with a good cashflow generating ability. Even before i chanced upon it, its 5 years financial results stretching to FY2010 was reporting a high net profit with good cashflow.

However, the controlling shareholder, who was the parent company, never gave out good dividends to reward shareholders. Cash was just accumulating in the balance sheet. Privatisaion eventually followed and those who held on made insignificant gains.

There are a few companies such as Sing Holdings which had a low price to book ratio and strong earnings; however due to its structure where the controlling family had little chance to be voted out from their management positions, offered low dividends to minority shareholders and paid themselves a high management salary. The price today and price when I sold off (at a loss) has not changed since 8 years ago. I was forecasting a doubling of price based on "valuation models", this has never been reached for 8 years. So what is "long run"?

While still a value investor type, I will like to say sorry to the Accounting and Finance professors who had taught me at University. Those models and what nots are not useful in real life. I scored an 'A' for my finance valuation projects but truthfully its not even worth a D grade in the real world of investing.

Investing is like how many of our Asian Chefs and Hawkers cook- in two words, its called "agar agar". To non malay readers, agar agar is a terminology where people estimate the amount of ingredient to add into a dish as and when they cook it, there is no definite amount that is added. Investing is the same, it is based on estimate and not some complex number crunching excel modelling.

Monday 29 May 2023

Property Crash- HDB reaffirms the launching and building of 100,000 flats from 2021-2025

In the latest news on HDB launch, HDB has continued its pledge to deliver 100,000 flats for launch in 2021 to 2025. This means from early 2025, 100,000 flats will flood the Singapore market until 2029.

146,000 new housing units in 5 years time

As what I have written in my previous housing post, without a dramatic increase in population, housing prices will tank with the addition of 146,000 confirmed new housing units. This is because the growth in foreigner population has been relatively slow; in turning leading to a large rental supply  in the market with rental demand from foreigners not catching up.This will force rental prices down.

I will not be surprised to see rental rates falling, unless Singapore decides to increase the foreigner population tap to save property investors.

Current OCR condo yields are at the low 4-4.2% and a reduction in rental rates will force yields to be far below the interest rates of property loans that are currently pegged to SORA. 

Do not forget among the housing types, HDB flats are eligible for the lower interest CPF loan provides at 2.6%, this means HDB owners who are renting out their flat can undercut private condo unit's investors. This may force OCR condo to fall to the 3% yield level based on current prices.

Effect of 3% Yield for Condo Units

If loan interest rates are 4.1% (current rate), while the rental yield is lower than that; the leverage effect will mean private unit investors will earn pittance even if they are renting out. And if they are unable to rent out, they are in a deeper cashflow negative state.

Magnitude of the Crash in the Private Market

With HDB housing loan able to sustain a compression in yields thanks to the 2.6% loan interest rate, I will be genuinely unsurprised that the private market can fall to a 3% yield because the premium of a swimming pool + gates will not be enough to justify a large differential from HDB flats.

Without a drastic increase in the foreigner population (e.g. +500,000 foreigners until 2027), I really forsee a compression in yields especially in the private condo market. My prediction is that yield rates will fall to a 3.2-3.5% level, this translates to a 20% drop in housing prices.

Current private property investors will suffer a loss or otherwise be continuously funding a loss making venture in their property market. This is the likely scenario. 

The saving grace will come from the government should it decide to increase the foreigner population dramatically or increase the annual citizen naturalisation rate drastically from its annual 21,000 rate; otherwise I believe a crash is imminent.

Who Benefits?

The fall in prices will definitely benefit the youths of Singaporeans who will enjoy the effects of an affordable house. Otherwise, current youths will continue to suffer from the effect of skyhigh housing prices especially in the HDB resale market that is directly correlated to the housing privates of the private condo market.

There is a side story if the government wants to help the future of the country or bail out the leveraged property investors who bought a house not to build a home but to profit from it.

Sunday 28 May 2023

Why Singapore's Interest Rate Remain Low and a Way to Earn More Interest?

I have seen a few articles covering Singapore's low interest/T bills rate. There are a few reasons why these rates have remained low and will likely remain at such levels for the next few years (venture a guess it could be for the next 3-5 years)

High Leveraged Society on Real Estate

Look no further beyond Singapore's property market. The market is in a buying overspree mode, with people leveraging heavily to buy multiple properties in hopes of profitting from it

The overbuying of properties help spurs Singapore's GDP as the construction industry overbuilds ahead of population growth. While the government is aware of the overleverage, it has sought to minimise interest rates hikes that kills property investors. This is because a higher interest means it is more difficult to service debt obligations, foreclosure happens and this will trigger a downturn of prices which causes margin call among property investors. This will freeze Singapore's banking sector via a domino effect. Hence it is important currently to keep SORA (the SIngapore's offical benchmark) rates low to prevent it.

The pace of SIngapore's interest hikes (SORA) is only 60% the pace compared to the US mortgage industry.

With the ever appreciating SGD, investors have parked their cash here with no complains of the low interest rate. This is because the appreciation of SGD against their foreign counterparts helps to earn a few percentage in "extra interest". Take for example the Japanese Yen and Korean Won, SGD has appreciated by 6-10% in a year. Japan and Korean investors would have profitted from such movements. It is the appreciation of the SGD where foreign investors are earning and not from the SGD deposit rates.

Outside of US Interest Rates are Still Low

Singapore's 3 month SORA is at 3.6%

The 3 month Euribor (Europe Interbank) is at 3.7%.

China's Prime 3 month rate is at 3.65%. 

Hong Kong 3 month Interbank is 4.63%. 

Japan's 3 month TIBOR is 0.08%

Only the US is at the 5-5.25% range.

Singapore might be slightly lower but it is not totally far off from the rest.

What Can We Do Living in Singapore?

Given the low (but not so low) interest rates, strong Sing Dollar, I have been considering to exchage some Sing Dollar into foreign currency deposits.

Among UOB and other local banks, USD foreign deposits are at highs of 4.9% 

There is an opportunity to aribitage where if one is able to change SGD into USD/HKD at money changers at Raffles Place Arcade Exchange, deposit in our local banks in the stated foreign currency, the returns is higher vis a vis a Sing dollar deposit. 

The current spread at Arcade from the offical FX rates are about 0.2%, so a 2 way conversion means you lose 0.4% in spread. This still netts a positive 0.7%. Do note you are subjected to foreign exchange risk if the Sing Dollar keeps appreciating non stop, like as present.

I am not sure if the method of changing foreign currency at Raffles Place Arcade and then depositing the currency as FD at a bank branch in Raffles Place is allowed. 

For readers, if you are aware it is allowed, please dispense your advice on how it works. I am sure many will be grateful for this advice to earn more interest in the low interest rate Singapore environment.

With Just $1 Deposit for 30 days, Get US$50-500 + $20 cash via paynow for New Webull Sign Ups

Until 30 May 2023, this is the final chance to Register here and individuals can receive 5 free fractional shares worth between US$50 to US$500 + a $20 cash gift when they (i) sign up a new account (via Singpass), (ii) make a deposit of any amount and (iii) keep the amount in webull for 30 days. It is better than many fixed deposits out there because putting in $1 or a few dollars will nett you at least US$50! The new fractional shares can be found under the "My rewards" tab

The offer is valid until 30th May 2359hrs. please remember to maintian the amount that you had first deposited for 30 days, then your last 2 free shares entitlment will appear under the "rewards tab" on day 30. Otherwise, without putting the money in for 30 days, you will only get 3 fractional shares.

Steps to Sign Up and How to Get the Free Gifts

To qualify for the promotion:

  1. Register for a webull account here
  2. Click on the "Get Free Shares Now", complete the sign up process.
  3. Then deposit any amount (S$1 also can) and you will get 3 free shares worth between US$30-US$300. After which complete this google form with details to get your $20 cash paynow
  4. Maintain your funds for 30 days and you will get 2 free shares worth between US$20-US$200

Each free share is a fractional share worth between US$10 to US$100 each. It is a roulette with each spin giving you a certain amount, if you are lucky, you will be able to get US$500 with 5 spins. Most of the time, it is US$10 worth of Tesla shares per spin. 

How to Deposit Funds into your new Webull Account:

After your account is approved, it’s time to make a deposit. Inside Webull mobile app, select “menu" at the bottom left of the screen, then clock on the "more" word icon boxed red


Next click "Deposit", boxed red.


There are a few ways to make a deposit: eDDA, Fast or Telegraphic Transfer. 

The eDDA Deposit method is the easiest, where you will authorise Webull to transfer money from your bank account into your Webull account. To use this method, you can select the “eDDA Deposit” option, as a first time deposit, login to your internet banking, and set the transfer limit. 

If you'd prefer to manually transfer funds from your bank account, then you can use the FAST method. However, do note that this option is applicable only for SGD deposits, and you'll need to remember to notify Webull that the transfer has been completed. So the eDDA deposit option is the easiest

IMG_4979.jpg

How to Redeem Your Free Shares

On the homepage, click "My Rewards" which is boxed green and then claim your free shares there


Every fractional share sale will incur a $0.02 Commission

Do note for every different company fractional share sold, a $0.02 commission is present due to the charges incurred by the US Stock Exchange. Example if you get Tesla, Amazon and Alphabet fractional shares and you sell all the total is $0.06 comission ( 3 multipled by $0.02 commission for each company). Feel free to sell and encash them upon the end of the 30 days you have deposited your first fund into webull.

Disclaimer: I may receive an affiliate/referral fee when you sign up for services/products on this site. I only recommend services/products I am personally using to readers, however I do not provide any warranty or guarantee for the quality of these services/products

Thursday 25 May 2023

Alibaba Break Up: How much is the Broken Entity Worth?

 As the first steps of breaking up the empire, Alibaba has announced the spin off of (i) Alicloud, (ii) Hema (Freshippo), (iii) Cainiao (which it holds a 67% stake)

In this post, I will try to evaluate the worth of these 3 entities so as to guage the fair value of what they are. This will help to decide the fair value of them when they list

Alicloud

This is the second largest segment of Alibaba and touted the fastest growth. While the company is growing faster, it is now cutting prices to keep up with the compeition. Due to its relapse into loss making, a P/E value is not effective, instead a price/sales (P/S) ratio is a good measure. 

At about US$11 billion in revenue, a 5 times P/S will be where it stands; I know there are loss making cloud companies that are valued in the region of 10 times, but given that Alicloud can only compete in China, a 5 times P/S is valid.

A US$55 billion valuation

Cainiao (48% stake)

The close listed comparable is Coupang (which is valued at about 140 times P/E and 1.4 times P/S) and Kerry Logistics (5 times P/E and 0.3 times P/S)

Cainiao is still loss making so using P/S as the guage and with continued growth, it may mean Cainiao is worth about 2 times its current P/S, Cainiao reported RMB55 billion in revenue (US$7.8 billion). Hence alibaba's stake is worth US$7.5 billion

Hema

Hema is a supermarket chain which uses technology to efficiense itself and provide consumer insights.

In July 2022, it was reported that Freshhippo was raising funds valuing it at US$6 billion. So let's take it.

Overall value of the three spun out entity

The three entities value to existing shareholders is about US$66.3 billion

Alibaba holds 33% in ANT's stake (the whole of ANT is valued at US$100 billion) and $36 billion worth of shares in other companies.  Netting everything out, this means its China Commerce (the largest revenue generator) is valued only at US$96 billion.

Alibaba's china commerce segment generated RMB$172 billion in profits (US$24 billion) in its latest financial year. At its estimated valuation of US$96 billion, it is priced at 4 times P/E, which i find is relatively undervalued

Potential Upside

Personally, a 10 times P/E for its china commerce segment is fair and this place it at US$240 billion. 

My views is the fair value for Alibaba on a whole is about US$390 billion. At current valuation, a doubling of market value can be easily achieved but I feel modelling and assumptions are no longer valid in the stock market environment we live in

Wednesday 24 May 2023

ManuLife US REIT Secured its Safety (For Now)

In the latest update, Manulife REIT has announced the impending sale of its Phipps Property. Forming about 10.5% of the REIT's valuation, the sale is likely to protect the REIT from breaching the 50% regulatory limit and lower its interest expense tremendously

Approximate Leverage Ratio (Post Disposal)

With the sponsor announcing the waiver of disposal fees, it is likely most of the proceeds from the sale will be used for debt repayment. I expect ManuLife's REIT leverage to fall to 45% post sale. This prevents it from running into the danger of breaching MAS's regulatory limit.

MIRAE Severe Dilution Off the Table

With the Phipps sale, the need for equity injection by Mirae is less urgent. If Manulife is capable of taking on more of the REIT's property disposal, the need of Mirae is not there. This could spell the closure of a turbulent chapert in Manulife's history.

Dividends could be secured as well, however, I expect the payout ratio to be reduced to 90% permanently.

While Manulife continues to be my least favourite among the 3 commercial REITs, the fact that the parent is able to come in to buy disposals (albeit at a low valuation), there are signs that its net asset value can be realised at some discount. This should spell confidence to the whole sector. Hopefully, Keppel and Prime could do the same if the need arises

Monday 22 May 2023

[One Last Call for Webull Sign ups] - $1 Deposit for 30 days, Get US$50-500 + $20 cash via paynow for New Sign Ups

I am doing a similar post to Stockscafe who posted today too. Webull is likely ending their current generous sign up promotion where with a $1 deposit for 30 days, you get US$50-500.

This is the last week to get the sign up gifts - do sign up through this link: https://www.webull.com.sg/i/investmoolah

What's more, you will get a $20 paynow gift upon successfully funding the account that readers have obtained after signing up with my link. To read more, please refer to the post i wrote yesterday here

Its the end of another good promotion. 



Presence of So Many Foreigners in Singapore is to Protect Overleveraged Property Investors

Besides the need for labour to supplement the ageng workforce, another reason why many foreigners are present is to support the property market in Singapore. Without the continous growth of foreigner numbers while Singapore has overbuilt in the housing market, there is a high probability scenario that property prices in Singapore will fall drastically over the next years; hence more foreigners are needed to support the property market.

[A] Foreigners - the Rental Demand that Supports the Property Market

Due to a combination of ABSD and housing policies as well as the nature of foreign workers where many stay in Singapore temporarily before returning, they rent for their housing needs.

Singapore's House to Population Ratio has Fallen to the Lowest in History

In 2017, Singapore no of people per house rate fell below 4 for the first time and stood at 3.96.

5 years on, the ratio has fallen further and at an all time low in the country's history (3.69) 


Sources: Data from HDB, URA, Singstats

One would notice the resident population (Citizen + PR) grew only 100,000 over the past 5 years. On the contrary, housing units grew by 112,000 units (7.9%) for the same period. While this alleviates the housing crunch in 2018 and before, the reverse has happened, there is now a high vacancy rates in Singapore housing market, property investors are holding empty units in the hope of selling for a higher prices than they had bought (after all they were promised by housing agents that Singapore property prices will appreciate). Potential home owners are turned off by it as their income is not high enough to meet the high asking prices.

In current reality, what Singapore suffers from is not a housing crunch; instead what we suffer from is the lack of accessible affordable housing for citizens.

Secondly, individuals (property investors) are purchasing second or third houses, using it as rental income as part of their investment plans. This is similar to the concept of REIT investing and a marketing tactic used by property agencies. Hence many more houses (both private & public) are now used as investing purposes instead of forming a home

[B] Supply Pipeline

To combat the lack of accessible affordable housing, the government has announced increasing BTO supplies at 20-21k units a year. In 5 years, we are looking at 100,000 more HDB flats.

Based on URA stats, over the next 4 years, we will see 46,000 units of EC + condos being completed. 

This means 146,000 new units in 5 years time.

[C] Private Housing are not Yield Accretive

Even with sky high rentals, property investors are seeing a 3.8-4.2% yield from renting out condos based on current market conditions. A housing loan is currently offered at the 4.0-4.5% interest range as SORA rates are now at 3.6%.

What this means is that owning and renting a condo is no longer yield accretive; with leverage, people are only earning 4.2% or less; with few investors earning much lower because interest rates are higher than their condo rental yield. People are proftting off from capital appreciation instead.

The exceptions have been the HDB resale market due to the ability to tap on HDB housing loan rates of 2.6%.

If foreigner inflow which spurs demand do not pick up while supply in part (B) kicks in, it becomes a renter market and lower yields will be witnessed by property owners. With lower yield and a higher interest expense, existing property owners will face capital loss and a risk of margin call as they breach regulatory limits for loans (reminder of what is happening to Manulife US REIT and other US commercial REITs)

[D] Protecting the Leveraged Property Investors

A falling housing market prices is not ideal to the government of Singapore now. Take a look at present day China where housing prices took a tumble. Despite reopening from COVID, china retail sales growth is at less than 10% and many are not spending because they are hampered by (i) high housing loan servicing obligations, (ii) lack of a foreigner pool to rent to and (iii) the Chinese renters being able to command lower rents now due to the oversupply of houses.

Singapore faces the same problem now and it will not want to see rental prices falling. While Singapore can lower interest rates to cushion the pain of servicing a house loan, there is a limit on how low rates can go given we are price takers.

With supply at 146,000 new units over the next 5 years, the only way to meet this supply is to spur rental demand, otherwise a cascading downward effect will hit property investors owning their second/third and more homes.

Unfortunately, with the resident population growing at 100,000 over 5 years, it is insufficient to cover the upcoming supply. Using a ratio of 3.5 individuals to 1 unit, Singapore needs a growth of 510,000 in population to meet the impending housing supply. This means 400,000 more foreigners, which equates to a 25% growth over the next 5 years. 

I will not be surpised that by 2027, Singapore crosses the 6 million population, with a marked increase of foreigners. This to protect property investors.

Sunday 21 May 2023

With Just $1 Deposit for 30 days, Get US$50-500 + $20 cash via paynow for New Webull Sign Ups

 Webull has a sign up offer which is good! Register here

Individuals can receive 5 free fractional shares worth between US$50 to US$500 + a $20 cash gift when they (i) sign up a new account (via Singpass), (ii) make a deposit of any amount and (iii) keep the amount in webull for 30 days. It is better than many fixed deposits out there because putting in $1 or a few dollars will nett you at least US$50! The new fractional shares can be found under the "My rewards" tab

In addition, for May, Webull is having a lucky draw for new sign ups; where weekly there are (i) 10 winners of US$888 worth of Tesla Shares and (ii) a lucky winner for the month who will win a Tesla 3 Car! 

The offer is valid until 30th May 2359hrs. I had signed up with a referral link, kept a sum there for 30 days and received 5 fractional shares. Again, please remember to maintian the amount that you had first deposited for 30 days, then your last 2 free shares entitlment will appear under the "rewards tab" on day 30. Otherwise, without putting the money in for 30 days, you will only get 3 fractional shares.

Steps to Sign Up and How to Get the Free Gifts

To qualify for the promotion:

  1. Register for a webull account here
  2. Click on the "Get Free Shares Now", complete the sign up process.
  3. Then deposit any amount (S$1 also can) and you will get 3 free shares worth between US$30-US$300. After which complete this google form with details to get your $20 cash paynow
  4. Maintain your funds for 30 days and you will get 2 free shares worth between US$20-US$200

Each free share is a fractional share worth between US$10 to US$100 each. It is a roulette with each spin giving you a certain amount, if you are lucky, you will be able to get US$500 with 5 spins. Most of the time, it is US$10 worth of Tesla shares per spin. 

How to Deposit Funds into your new Webull Account:

After your account is approved, it’s time to make a deposit. Inside Webull mobile app, select “menu" at the bottom left of the screen, then clock on the "more" word icon boxed red


Next click "Deposit", boxed red.


There are a few ways to make a deposit: eDDA, Fast or Telegraphic Transfer. 

The eDDA Deposit method is the easiest, where you will authorise Webull to transfer money from your bank account into your Webull account. To use this method, you can select the “eDDA Deposit” option, as a first time deposit, login to your internet banking, and set the transfer limit. 

If you'd prefer to manually transfer funds from your bank account, then you can use the FAST method. However, do note that this option is applicable only for SGD deposits, and you'll need to remember to notify Webull that the transfer has been completed. So the eDDA deposit option is the easiest

IMG_4979.jpg

How to Redeem Your Free Shares

On the homepage, click "My Rewards" which is boxed green and then claim your free shares there


Every fractional share sale will incur a $0.02 Commission

Do note for every different company fractional share sold, a $0.02 commission is present due to the charges incurred by the US Stock Exchange. Example if you get Tesla, Amazon and Alphabet fractional shares and you sell all the total is $0.06 comission ( 3 multipled by $0.02 commission for each company). Feel free to sell and encash them upon the end of the 30 days you have deposited your first fund into webull.

Disclaimer: I may receive an affiliate/referral fee when you sign up for services/products on this site. I only recommend services/products I am personally using to readers, however I do not provide any warranty or guarantee for the quality of these services/products

Saturday 20 May 2023

Grab 1Q Update: Slowing Growth in GMV/TPV but Far from Profitability

Grab's latest 1Q results paint a negative picture. Most investors had the same conclusion and after its financial results, share prices fell more than 10%. So what is worrying about Grab's results?

Slowing Growth but Far from Profitability

The header sums it. GMV only grew by 3% while losses for the quarterly period, year on year (YoY), has halved from -440 million to -235 million. Grab did not turn profitable unlike Sea which had about the same growth trajectory; the latter's reduction to 1 ply toilet papers, removal of pantry food and retrenchements made it profitable across all segments.


Grab has been cost cutting by reducing the incentives it gives to its gig workers and consumers but this is definitely not enough.

Slowing GMV Growth In Deliveries but Positive EBITDA

One of the surprises was how the company is starting to deliver positive profits in deliveries. This came at a reduced GMV despite inflation being rampant in South East Asia. This shows many of Grab's delivery orders were negative margins. Incentives for deliveries were also reduced by 40% year on year.

Grab should continue cutting its incentives and I believe this segment may turn profitable on an operating accounting.



Financial Services- Black Hole


TPV growth is very slow, YoY growth was only 2% and a decline in payment processed outside of Grab is observed. While Grab has been removing low margin transactions like removing Grabpay on AXS, I do not think its enough.

A good move by Grab is to launch its flexi loan which charges about 6-7% per annum (in Singapore) with early repayment. It seems to target the less well off segments who are unable to obtain a credit card (in Singapore, if one can get a credit card, a similar loan product can be obtained for 4-5% interest, which is 2% lower than Grab's)

As an investor, grab is doing things right by offering new products which is profitable and will improve margins. As a consumer, if you are forced to borrow at this rate, it is worrying and I will not recommend to take it from a personal financial point of view; but well beggars cant be choosers. I expect Grab to report larger loan provisions as the credit profiles of borrowers on this flexiloans are not good.

Results wise, an EBIDTA of -70 million is not great because it points to operating losses of at least -$100 million. For now, this segment is better off being closed as I dont see much scaling and incentives have been cut to the bare bones. I expect TPV to remain flattish until 2024 (likely peaking at US$3.8 billion). It depends on how well can Grab maintain its margin.

Conclusion

Grab is still using EBITDA metrics to determine its profitability unlike Sea Group which has moved to reporting income/losses according to general accounting practices. Grab has not even crossed the first hurdle of EBITDA profitability. At EBITDA outlook of losses of $195-235 million for the full year, this points to operating losses of $600-900 million. 

On the other hand, Sea Group is profitable with $125 million and EBITDA profits of $500 million. This shows how far behind Grab is during Financial Year 2023. 

Grab's cash holdings has continued to shrink albeit at a smaller cash burn rate of $200 million this quarter. On the contrary, its share based compensation has seen the amount of shares issued to increase by 3% (3.71 billion shares grown to 3.85 billion shares). 

With a net liquidity balance of US$5 billion and a share base of 3.85 billion (which grows by 3% annually), I expect $1.30 to be a decent entry price and value the company at about $2 per share. The price difference is dependent on my expectations of how well Grab continues to grow its margins and turn around the sinking ship. The company is doing badly in cost controls and definitely has to learn from Sea Group who did it wonderfully and rather brutally to its employees.

To repeat, $1.30 is a good entry price.

New to webull? Register here to earn free US$50 in shares which can be encashed anytime after 30 days of sign up

Disclaimer: The publication of my posts is solely for informational purposes and is not to be construed as a solicitation or financial advice as I am not a certified financial adviser. My analysis on companies covered are not an offer to buy or sell any stocks and I encourage readers to do your own due diligence before investing.
 

Porfoilo Update: Accumulating US REITs and Alibaba

Given that there was a drastic selldown since my last portofilo update on 2 April 2023, thought it would be good to show what I am doing.

I have sold off my shares in Wei Yuan and Huya. 

Huya's financial results was a let down as the China recovery is not materialising in the e sports and advertising segments. Chinese youth are still not spending likely due to the factors of being sandwiched with little savings and the prospects of expensive housing in China main cities. Huya has been struggling to produce profits and the US REITs were providing a larger margin of safety; hence the rotation.

Bought Alibaba, PRIME US and KORE

The latter 2 are my new value convictions and hence their accumulation has been faster than Alibaba (only 1000+ HK Shares). 

The portfoilo has been narrowed to a 4 stocks composition where research has been thoroughly put into these 4. Moving forth, these 4 will remain, barring any change in their value story.

The US REITs carry a risk where if there is a full blown recession in USA, companies may go bankrupt and affect the vacancy rates of these REITs. I have set aside some cash in case it happens (10% of the US REITs value) as this may trigger equity raising.

If there is further accumulation, it will be Yangzijiang Financial. Below is my portfoilo composiiton (as of 20 May 2023):




Wednesday 17 May 2023

Keppel PacificOak US REIT- 15% Dividend Yielder for a Keppel-Related Company

Recently, I have started to purchase Keppel PacificOak US REIT (KORE). Thought it will be good to document a company overview and why I feel it is a good investment given its current prices.

Summary

  • Potential 15% dividend yielder at current share price of 29 cents
  • Evenly distributed debt maturity profile
  • Prudent management moves and Healthy leverage ratio of 38.7%

Overview of Business

Similar to Manulife and PRIME, KORE operates a portfoilo of office buildings in US which it leases out. Its properties are all freehold in nature and spread across multiple US cities. There is some concentration with about 43.5% of income coming from one city, Seattle. This is a risk investors have to evaluate as there is a heavier reliance on the fortunes of one city.

Otherwise, KORE looks okay and given its properties are freehold in nature, its almost a perpatual 15% (based on its annualised US$47 million in distributable income generated)


Debt Profile

This is where the REIT stands out. Unlike Manulife or PRIME whose lenders are US based, KORE has clarified that it borrows from a club of local/foreign banks with presence in Singapore. If i were to venture a guess, Keppel probably has DBS as one of the lenders.

The weighted average interest rate of KORE is now 3.96% and its debts are evenly spread for maturity across 2024 to 2028. This is in contrast to PRIME where almost all of its debts are due in a few years time. It can be seen that the maturity of KORE's debt profile is 3.4 years, which is significantly longer than PRIME's of 2.5 years. A large proportion of its debts is at fixed rates.

Hence there is much buffer by KORE against the risk of interest rate hikes.



Prudent Management Actions

Over the past months, KORE's REIT manager has decided to (i) take the base fee in cash which prevents severe dilution to unitholders as its share prices are now low and (ii) only distribute 90% of avaliable income in order to keep for buffer and loan repayment.

To me, these are good moves. It is worth noting KORE was the only 1 of the 3 US REITS to do these. This ensures the REIT is well capitalised and eliminates much rumours of a cash call (worth noting its leverage ratio is 38.7%, well below the 50% MAS leverage regulatory limit)

All in all, given these 3 points and with the sell down in prices, a 15% dividend yielding machine is enticing.

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Disclaimer: The publication of my posts is solely for informational purposes and is not to be construed as a solicitation or financial advice as I am not a certified financial adviser. My analysis on companies covered are not an offer to buy or sell any stocks and I encourage readers to do your own due diligence before investing.

Tuesday 16 May 2023

Best General Spending Credit Card Both Miles and Cashback: HSBC Revolution Card

I am not earning any referral fee from this. Just switching gears from the topic of shares/investing to general spending.

Today, I shall share the current credit card I am using for expenditure. Without doubt, regardless of gender (because of UOB's lady card), this is the best miles and/or cashback credit card in Singapore. It has been the undisputed winner for a year + and HSBC rarely goes into advertising it (hence this is why this post has no sponsored content and no other financial or miles chaser bloggers have been actively advertising it)

Summary

  • No annual fees
  • Best For General Spending for Miles Chaser and Cashback Camp, as credit card can earn at most offline stores through contactless payment
  • Counts its reward in $1 rounded down blocks, unlike $5 rounded down blocks by most other banks

The HSBC Revolution Visa Card (One of the Best For Miles or Cashback)


The screenshot from HSBC Credit Card website speaks for itself

Spend anywhere via contactless payment (Visa paywave/google pay/apple pay/xnap app) and you get either 4 miles per dollar or 2.5% cashback. This means almost any category of general spending outside (except the usual suspects of topping up mobile wallets, tax payments, bill payments) will get you that much. Its almost like a "general spend" credit card.

And for credit card users, you can choose to use the HSBC points for either (i) redemption as miles or (ii) cashback to offset credit card bills. 

The next best "general spend" credit cards are UOB Unionpay (2%) & UOB Amex Cashback (1.7%), while in the mile categories other than the UOB Lady's card (6 miles per dollar), other credit cards are giving 4 miles per dollar. The HSBC Revolution Visa is a leader in both the cashback and miles category!!

How HSBC Credit Card Counts its HSBC Points

Unlike other credit cards which count by $5 blocks and run it down to the nearest $5 (referring to the UOB and DBS cards), HSBC counts everything to the nearest $1 block. This enables credit card users to earn more points. Let me show you with an example with a $6.50 bill:

Under a $5 block consideration: $6.50, credit card only counts as $5 and gives 4 miles per dollar for the $5. Total amount of miles: 20

Under a $1 block consideration: $6.50, credit card counts as $6 and gives 4 miles per dollar for $6. Total amount of miles: 24

Eat Hawker Food and earning either 2.5% cashback or 4 miles

Yes, I am earning that much for my hawker food purchases. This is due to the combination of using XNAP app to pay on the SG QR code that hawkers have, which is then recognised by Goggle Pay as a MCC code for eatery which HSBC revolution card recognise as a valid MCC code for its credit card rewards.

Limit of only $1,000 expenditure Per Month

The HSBC has a limit where only the first $1,000 per month gets the above cashback or miles. However, being a small spender, I have rarely hit this $1,000 per month expenditure so it dosent affect me.

All in all, if you are in the miles camp or cashback camp, you got to admit the HSBC Revolution Visa card has to be in your favourite list. No complains here.

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Sunday 14 May 2023

UnitedHampshire REIT 1Q 2023 Results: Stable Results and A Good Look for Dividend Investors

United Hampshire REIT just released its 1Q results. If one notices, I have started to cover the US based REITs. This is because, in my view they are currently one of the best as an asset class for dividend investors.

Summary (TLDR)

  • Revenue Up 11%
  • Net Income Up by 13%
  • Overall Dividends likely to be higher year on year and set to be 14% yielder
  • My view is its undervalued and can be a 9-10% yielder. REIT is in the market of malls and storage places which are in a stronger position than the US office space.
REIT's Property Segment It is In?

For those who are new to hearing about United Hampshire REIT, the REIT consists of a portfoilo of operating malls and self storages spaces. They earn from the rental revenue of leasing spaces. Its malls are anchored by grocery tenants to bring in the shopper foot fall (think of NTUC Fairprice/Cold Storage in Singapore context, but Walmart/Target in US's context). The footfall is then used to entice other retail tenants to bring the mall experience. It operates similarly to Capitaland malls.

For the self storage, it rents space for people to put their items in compartmentalised units.

Well Managed Debt Profile

In the latest update, the REIT has exercised the option to extend its debt maturity to 2026. This leaves all except US$21.1 million in debt to be due in 2026 and beyond. Furthermore, 80% of the debts is fixed at a low rate. This gives it a weighted average interest rate of 3.02%.

Revenue Up Distributable Income Up

Due to the built in rental escalations it has with its tenants, revenue has expectedly increased. However it is worth noting occupancy has been trending down, similar to that in the US office space. 

All in all, the continuous increase in rental per square foot has offset the falling occupancy rate. This resulted in the REIT reporting an overall positive revenue growth to offset rising interest expenses and other expenses. This has increased the distribution avaliable for shareholders. It is a positive sign.


Conclusion

The mall and self storage space segments in the US are in a definite better shape than the US office space (Keppel, Prime, ManuLife) is in. Vacancy rates are not in the double digits. This is why despite having all its properties situated in the US, the REIT is priced at 13+% as compared to the other US REITS listed in SGX where the yield is between 15% to 25%. It is a defensive segment to begin with.

I am definitely looking at United Hampshire given its resilient portfoilo occupancy and the fact  dividends are growing well despite the challenges in the US economy. The REIT enjoys a long WALE of 7.4 years with a low number of leases (2.1%) expiring this year. This is a big contrast to that of the office spaces. Grocery is a less price sensitive good item as compared to others and hence I am not surprised the trust's occupancy has not deviated downwards much.

Its a definite draw for investors seeking dividends, and I do view the REIT as undervalued. Given the segment it is operating in, I feel it can be a 9-10% yielder when the economic dust settles in USA. At its forward yield of 14%, there is a an approximate 50% upside to its current share price in SGX.

<Not vested in UnitedHampshire at time of writing, but observing> 

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Disclaimer: The publication of my posts is solely for informational purposes and is not to be construed as a solicitation or financial advice as I am not a certified financial adviser. My analysis on companies covered are not an offer to buy or sell any stocks and I encourage readers to do your own due diligence before investing.