Wednesday, March 1, 2017

February Transactions and Update

Image result for HUI XIAN REIT


Well market has been on a tear for quite awhile now. From Trump winning the election on Nov 5th, this is the 3rd month market has been on an upswing. Dow has cross 20K, STI has cross 3,100 points and my portfolio has cross 250K.

I have taken the chance in this bull market to reduce some of my position in Kepcorp, Pico, Chow Tai Fook and Bank of China. I have added a REIT (it has been a long while since I have a reit in my portfolio). This REIT in question is Hui Xian REIT listed on HK and its the only RMB listed REIT on the HKSE. I believe a 9% yield is sufficient to cover the risk exposed to China Malls. With gearing at a low of 20% and way below its NAV, to add the cream to the tip of the iceberg, it,s managed by ARA. Current price comes to me as a steal. After comparing it with Singapore listed China REITS, I am not too sure why its trading a such a valuation but it,s a risk I am willing to take for the yield I am benefiting.

Since the bull run, I have been liquidating my holdings bit by bit. I have even contemplated selling my entire stake in PICO however probably my love for this company has stopped my from doing so. The management has been doing an excellent job growing the company.

On the news front, PICO, Food Empire and Riverstone has all had their result announced. All of them have grown their revenue steam, profit of Riverstone has fallen due to higher commodity prices (something that cannot be controlled) all else equal, they are better off. PICO and Food Empire has done well on all fronts with PICO providing higher dividend from last year. Food Empire has also surprise by giving some dividends. I expect them to keep the cash though.

Here’s my portfolio performance for the month of Feb.



No.
Counter
No. of Shares
Market Price
Total Value based on Market Price (Base Currency)
Total Value based on Market Price (SGD)
Allocation(%)
1
Riverstone Holdings Ltd
22,000
0.89
19,580
19,580
7.82%
2
Food Empire
25,000
0.57
14,250
14,250
5.69%
3
Low Keng Huat
10,000
0.62
6,150
6,150
2.46%
4
Bank of China
28,000
3.9
109,200
19,158
7.65%
5
PICO
88,000
2.82
248,160
43,537
17.39%
6
Chow Tai Fook
12,000
7.07
84,840
14,884
5.94%
7
Prada
500
31.3
15,650
2,746
1.10%
8
Sa Sa
21,000
3.24
68,040
11,937
4.77%
9
Belle Int
8,000
5.32
42,560
7,467
2.98%
10
Alibaba
80
102.90
8,232
11,525
4.60%
11
Hui Xian REIT
15000
3.4917
52,376
9,189
3.67%
12
Warchest



90000
35.94%




Total(SGD)
250,422
64.06%

Tuesday, February 14, 2017

Case Study - Backward Valuation (Time to Sell?)


An unstoppable bull. Market has been making highs every other day. Needless to say, my portfolio has been hitting record valuation every other day as well. It’s only February and my Net Worth has went up 11% YTD. Portfolio value has ran up 20% YTD. This is crazy.

When everything is jolly, I am quite cautious in this market looking at opportunity to reduce my holdings whenever market provides me with the incentive to. Well, buying is easy, the difficult part is to do a clean divorce with your holdings. Maybe the problem is when I liquidate, I may lose out on future gain (if any). Also it does not feel good to hold less in a bull market.  Emotion aside, I guess I will need to stick to my resolve if the numbers tell me the stock is now not a price which is attractive in fact it could be a premium its about time I say goodbye to this company no matter how good it is.

The company in question is PICO Far East. I have been holding this company since 2013, providing me with a dividend of 6% annually for the past few years (who says only REITS) provide yield that high. This is a stock providing me the best of both worlds. Growth and Yield.

Bought at a price of $2. This has move up substantially these 2 months to 2.9 today. Thoughts start to run in my mind the past week. Is the price right to bid farewell? I shall try to find out calculating backwards

EPS Model

Using a 5 Year horizon, a discount rate of 15% and a growth rate of 7% based on the arguments stated below. By reversing the calculation, I will be calculating how much EPS will have to be this year to satisfy a price of 2.9.

Current price (P) = HKD 2.9

P = FP/(1+R)^N
FP=P x (1+R)^N
   = 2.9(1.15)^5
   = 5.8


Current PE is trading at 11x earnings not seen since 2012. One of the highest since 2009. Average PE stands at 10.99 (Period 2009-2016)

The missing value here is Future EPS

FP = EPS x FPE
5.8 = EPS x 10.99
EPS = 0.5276

F = EPS(1+R)^N
0.5276 = EPS (1.07)^5
EPS = 0.5276/(1.07)^5
       = 0.37





Using the following assumption, earnings per share for FY16 is 24.57. EPS will need to be 37cents to justify a price of HKD2.9. This indicates that EPS will need to grow close to 50% for FY17. To do that, revenue will need to grow substantially to justify share an EPS.

I have an emotional attachment to this company and love the way the management carry out their business. However the numbers tell me the price has gone ahead of what the company is actually worth.

I will need to trust the numbers that I have calculated and come back to this company when prices are more reasonable. Given a choice now I will never add on to this company at this price. So if i will not but it also means it could be time to sell. Probably its time to say goodbye and hopefully hello in future PICO.


Case Study - Backward Valuation (Time to Sell?)

Wednesday, February 8, 2017

Febuary Net Worth - Cross 250K Mark


  

Ever Since Trump won the Election, world markets have been on drugs. The rally does not seem to stop. Our STI is closing on 3,100 level, DOW, Nasdaq and the S&P have been hitting record high every other day. How long will this continue no one will know. I am kind of jittery now with how much markets have done their run up

I believe all good things will come to an end. I have not been adding additional companies to my holdings except for Under Armor which I have state my case in my previous post.


Looking to sell some of my holdings in fact as they have benefit from this bull run. I find valuation to be probably just about right or trading at a slight premium to what they are actually worth. I am very cautions in this extremely happy market. The sad thing about this run up is that my War Chest is starting to grow. Do not really like cash sitting around not working.


Have shorted some futures contract to hedge my exposure as well. Should market snap I will be able to use the gain to add on to additional position should market starts to catch a cold and do a pullback .

Achievement

My networth has finally cross the 250K mark (Sitting on around 90K Cash). Did not expect this to happen at the start of the year. Its not a convincing cross though as its mostly capital gains from the recent run up, but still a positive for me as I crawl closer to my goal of hitting 1 million by the time I am 40.

Networth

The chart below shows my personal Networth growth ever since I started investing. The power of compounding is really true


Feb Holdings


No.
Counter
No. of Shares
Market Price
Total Value based on Market Price (Base Currency)
Total Value based on Market Price (SGD)
Allocation(%)
1
Riverstone Holdings Ltd
22,000
0.88
19,360
19,360
11.90%
2
Food Empire
25,000
0.62
15,500
15,500
9.53%
3
Low Keng Huat
10,000
0.60
5,950
5,950
3.66%
4
Bank of China
38,000
3.68
139,840
24,533
15.08%
5
PICO
108,000
2.61
281,880
49,453
30.40%
6
Chow Tai Fook
12,000
6.78
81,360
14,274
8.77%
7
Prada
500
31.55
15,775
2,768
1.70%
8
Sa Sa
21,000
3.26
68,460
12,011
7.38%
9
Belle Int
8,000
5.15
41,200
7,228
4.44%
10
Alibaba
80
103.57
8,286
11,600
7.13%




Total(SGD)
162,676
100.00%


Almost all my holdings has an improvement in price movement hence my portfolio has gain substantially in Jan.

Pico Far East (0752:HK) remains my largest holdings. They have recently released their FY16 result and I am optimistic on their business execution for the next 12 months. Dividends has also increased this year which is a slight bonus for me. I am not contemplating on selling a small portion of my holdings in Pico.


There is going to be a string of earnings result in Feb and March. Except for Pico and Alibaba, all my companies have yet to release their result. I am cautiously optimistic on all of them.

The only stock I can still accumulate is Alibaba. Had a blowout result but the price did not appreciate that much. Waiting for March bonus before making a decision.