Thursday 9 November 2023

Purchase of Ping An shares- 6% Dividend Yielder, Portfolio Becoming a half dividend yielder

With the sell down in Ping An shares, I have added 2,000 shares. This amount was financed by the sale of my Alibaba shares and a 10,000 share reduction in PRIME REIT (which i took some profits off). To summarise, I now own 2,000 Shares of Ping An and 300,000 shares in PRIME REIT

Why Ping An?

Insurance is an industry that I love for the supernormal profits it makes. Once consumers sign up for a policy, they are milked throughout the duration of their policy, where the insurer is able to use their proceeds to invest wisely while giving policyholders a share of the profits earned. Even if policyholders want to terminate their policy early, there are penalty fees they have to shoulder which means profit to the insurer. It is a wonderful model.

In stock exchanges, many insurers are valued as a defensive stock and their dividends yield are no more than 3-4%. Even the largest insurer in China, China Life is expensively valued (5% yield). Ping An, on the other hand, due to its sell down has transformed into a 6.5% dividend yielder. 

While 6.5% is relatively lower than the dividends I obtain from YZJ Finance (9%) or that from Keppel Pacific Oak (19.5%), the fact that Ping An has been prudent with its capital structure and is in the defensive industry of insurance; a 6.5% yield makes it attractive in its own right. 

Well I understand there are market talks of Ping An being forced to take a bad deal order from the China Government to bail out Country Garden, I do not think it will be such a bad deal that it makes Ping An a zombie insurer. 

Portfolio Becoming a Dividend Portfolio

42% of my portfolio are now dividend stocks. 15% Kep Pac REIT (19.5% yield), 12% in PRIME REIT (29.5% yield), 9% in YZJ Finance (9% yield), 4% in Ping An (6.5% yield) and a prospective 2% in Yanlord (estimated diviend will restart at 6% yield). The rest are in Alibaba and Sea Group which are 0% dividend but companies who are likely to engage in share buybacks.

Dividend wise, my entire portfolio is around 7-7.5%. The main risk comes from PRIME where I have to prepare for a scenario of a cash call because the REIT needs to delever. Hopefully the REIT manager takes the route of selling one building and waive off the disposal fee; which will fully ensure the REIT's survival. Otherwise, I expect a 50 million equity cash call if it happens and fork out a cash of est SGD15,000. I have to prep for this scenario. i  hope it does not occur too soon, given that Kep Pac Oak and Ping An are at very attractive prices.

Going forth, I have cash in hand to buy more shares and what I am eyeing are beaten down companies with strong financials/balance sheet. 4 contenders I am evaluating are - Kep Pacific Oak REIT, UnitedHampshire REIT, Ping An & ICBC.

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