My Stock Holdings (November)

November brought down prices of a lot of my stocks, most notably Singapore Post and ST Engineering. I would probably not average down any time soon unless capitulation takes place. At the meantime, their dividends will keep me satisfied. 

I had also bought k1 Ventures at a price of $0.20 on 10 November. This was prior to the capital reduction exercise conducted by the company, in which it gave out $0.015/share to shareholders. k1 Ventures is a investment company and has a great track record of delivering returns to shareholders. It is a bit of a pity that I had noticed this company so late. Between 30 October 2013 to 29 January of this year, the company had return $0.11 of dividends. That's 50% of the price I paid, excluding any capital gains! A risk involved in buying the stock at such a late stage is that most of the monies made from divestment gains had already been given out, hence returns may not be as great as before. Future investments made by k1 Ventures may not be as successful but given the track record, I am willing to place a small amount of money with them in hope of reaping a good returns. However, writing on hindsight with the price standing at $0.183 now, it is unnerving that the stock seem to drop with everything I might touch. The opposite of Midas Touch, perhaps the market is currently not optimal for new investments despite good fundamentals. 

The pie chart shows the current distribution in my portfolio. In the month of November, I received dividends from Keppel Reit and Singpost. Hence the dividends I had received from start of the year to date is $713.19. 

Gordon Growth Model on Singapore Post (S08.SI)

Singapore Post (S08.SI) is Singapore's postal service provider for over 150 years. To combat the trend of declining mail volume, the company had been diversifying into e-Commerce business. This was done primarily through acquisition of e-Commerce related companies like TradeGlobal and logistics provider like Jagged Peak.

Currently at a closing price of $1.80, Singapore Post has a market capitalisation of $3.88B and annual dividend of 7 cents. In this post, we shall attempt to gauge what is an appropriate valuation of Singpost using one of the valuation methods I learnt in school.

Gordon Growth Model

In earlier posts I used to value stocks, I projected EPS growth and applied suitable P/E to arrive at a value expected in the future. A new method I've actually learnt in my finance class in school is actually the Gordon Growth Model. Basically in the model, the intrinsic value of an asset is determined by the size and timing of all future cash flows, discounted to the present value using the asset's required rate of return. 

Hence, for a stock valuation, the future dividends of the stocks are discounted to the present to get the estimated stock price it should be today. 

Using Gordon Growth Model, the formula for a firm paying constant dividends is: 

Share Price = Constant Dividend / Discount Rate

Another scenario which a firm paying a constant dividend growth, and the equation is:

Share Price = Expected Dividend in a Year's Time / (Discount Rate - Expected Dividend Growth)

The Discount Rate we are talking about here is actually gotten using the Capital Asset Pricing Model (CAPM) and the equation goes like this:

Discount Rate = Risk-free Rate + Beta (Market's Rate of Return - Risk-free Rate)

Now we can start hunting values to fit into the CAPM equation. For risk-free rate, we can refer to the yield of Singapore's 10-year government bond, which currently stands at 2.47%. For market's return, we can refer to returns generated by STI ETF since inception in April 2002. The total annual return inclusive of reinvested dividend is 7.21%. Beta of Singapore Post can be found in Reuters and it is at 0.52. Substitute them all into the CAPM equation and the discount rate equals to 4.93%.

Which Dividend Model and Value?

To be conservative, the constant dividend model should be chosen. This is based on the dividend history where SingPost maintained a constant 6.25 cents dividend for 8 straight years. With the recent dividend at 7 cents combined with a discount rate of 4.93% = 0.0493, the expected share price actually comes up to $1.42. This is a far cry from the current $1.80. 

However, if you are actually optimistic about the dividends from Singpost, you can try estimating the share price using the dividend growth model. Since dividend did actually grow by 12% after 8 years, one can conservatively approximate that dividend grow by 1% annually. Using the constant dividend growth formula, the share price will increase to $1.80. This is practically the current price. 

Based on these two sets of share prices, one can conclude that SingPost is actually overpriced to fairly priced. In my opinion, with SingPost's acquisition spree recently, it is safer to guide for constant dividend since cash flow will be tighter. 

Dividend Reinvestment Plan (DRP)

Recently I purchased the Keppel Reit while in search for good income stock. Admittedly Keppel Reit is not a fantastic Reit to own but I decided forge ahead to buy this stock mainly because of its DRP (Distribution Reinvestment Plan) feature. DRP, simply, is a dividend scheme that allows the investor to claim shares as dividends instead of cash. So what’s the deal about DRP?

Compounding Power + 0 Commission

I had always been a fan of compounding interest because of its power to grow wealth exponentially given the necessary time. Supposed you re-invest all of the dividend back into Keppel Reit, you can double the value within 10 years (at prevailing dividend yield of 7%, constant dividend and price). Receiving cash and not investing it, you will need 14 years to receive to get back the capital. I had tried to “reinvest” my dividends in Singpost before but I stopped doing it because of the commissions needed to buy and sell small lots – roughly around $10. So while many books advocate the need for dividend reinvestment, there is a limitation because of the commissions needed. Hence one of the attractive feature of DRP scheme is that it eliminates commissions from brokerages when you reinvest dividends.

Investing Discipline

Another advantage of DRP is forcing the investor to invest long term. This is one of the main intentions of companies when they offer DRP schemes and it is also my reason to invest with them. When u opt for DRP, the odd lots you receive periodically make it very hard to divest your holdings. It is a strange concept, but personally, by receiving these odd lots, I’d be forced to commit to the company. As a result, I get to reap the results of compounding returns through long term investing. As someone that gets tempted to sell whenever share price is up, this is a very good self-imposed discipline plan.

While I like the idea of DRP, there are many who will do not like DRP. Admittedly there are disadvantages to DRP and here are some of them

Selling is a Problem

While DRP commits you to a company, it also makes the selling process very hard when you decide to take the money elsewhere. Because of the odd lots, you either have to sacrifice the extra commission fee or just keep the odd lots. However, with the scaling down of trading size to 100, keeping odd lots is less costly.

Investing in a wrong company

A huge disadvantage of DRP is actually if you invest in the wrong company, and this is the biggest hurdle I had to clear before I decided to opt for DRP. Suppose I invested in 1000 shares of Keppel Reit for $1 per share. When it announces dividend of $0.017 per share, I get 17 shares at the price suppose the issued share is also at $1. If the share price tanks to $0.80 1 year later, I actually will have a 20% capital loss on that dividend compared to 0% if I opted for cash! This is the scariest part of DRP that you will have to consider before opting for it.

In this case however, I reasoned that I want to opt for DRP because I see the viability of the trust in the long term. Also, the regular dividends that Keppel Reit issue are very beneficial in terms of compounding power. So I feel that in the long term, the compounding effect will overweigh capital loss notwithstanding the fact that depressed share price will have chance to recover in the long term. In addition, when prices are depressed you get to receive more shares as dividend assuming dividends are CONSTANT.

Having said my piece, what are your thoughts to DRP? Will you subscribe to it given the option? Will you specially hunt for companies that have DRP? Leave your comments! 

My Stock Holdings (October)

Student life is killing me. At my last year of study, who knew things would be so tough. Final Year Projects, meetings upon meetings. Presentations and presentations. Deadlines and more deadlines. Nevertheless for my own sake and maybe to some extent yours, here's my holdings in October 2015.

No change in holdings but it seems that the market is doing well for the last month.

There are no dividends issued for the month of October, therefore it stands at $616.49. 

A number of investment activities in the upcoming month:
Number one is to ballot for some IPO shares of Jumbo. A review of the IPO can be found in Mr IPO's website. I almost always ballot for IPO to sell on the first day unless its a very compelling business. Jumbo does not look to be the exception but I think Jumbo can open at least above $0.30. With only 2 million shares for public subscription, hope is not high to get the shares.

Number two is to indicate to opt for Keppel Reit's dividend in form of shares. I will explain this scheme/decision in the next post, hopefully before the next monthly report.

My Stock Holdings (September)

Have been busy with school work this month due to Final Year Project and job-finding (holy shit!) hence not much time to update. 

I did buy Keppel Reit at $0.945 on 2 September as part of my income stocks. Also, dividends received in the month of September include $50 from ST Engineering and $86.05 from HPH Trust. 

Dividends Year-to-Date: $616.49

My Stock Holdings (August)

Portfolio at the end of August:

Note that it's a JPEG because I gave up using Google Sheets. Google keep republishing my charts although I unchecked that option. That is also why I deleted all my previous charts as it was overwritten.

So this month was quite a ride and my portfolio lost a value of $1000. Nothing to sweat about as I'm going for the long-term and not short term volatility. Looking forward, I really hope to buy in ST Engineering on the cheap especially since it had formed a bottom. Straco is really good for averaging down since I have only a small stake in it.

I'm also looking at Reits, in particular K-Reits and possibly Soilbuild Reits. We will see what Singapore market can offer.


In the dividend department, I received an additional $67.50 from Singapore Post.

Dividends Year-to-Date: $480.44

Dealing Bear Market as a Long Term Investor

The last 2 weeks saw the worldwide market in a wild seesaw and I started to question myself on what to do if the drops continued through. Being one that started investing only in 2011, I had never experience a bear market akin the generation that never experience the Long Night in Game of Thrones. Therefore, this post shall help illustrate my thought process on my road map in case of a bear market.

A little background on what happened over the last week:

• On Wednesday, China cuts benchmark interest rates by 25 basis points to 4.6% and cuts banks' reserve requirement ratio by 50 basis points. This moves releases capital to stimulate the economy, as well as the possibility of propping up share price.
• On Black Monday, Dow Jones lost 1089 points on opening and claw back some losses to close down 586 points. 
• VIX, which gives a measure of volatility in the market spiked to a intraday high of 53, highest since 2009
• Following which on Tuesday, STI lost 4.3% to close at 2843.39 (lowest close of the year)

"The cheaper things have become, the more I’ve wanted to buy".

- Warren Buffet

1. Keep Calm

Keep calm. Market volatility always exist in the market and good investors/traders should be steady and react calmly to the market. Draw out an investment plan and stick to it. Remember that stock investing is a long term commitment. These few months and years of volatility and news are just noises in your next 50 years of investing, assuming you are young. If you can be zen about living and religion, I'm sure you can translate the zen to investing. These moments shall pass and you should be looking at the larger picture eg. which companies have a competitive moat and can survive long? which companies are capable of generating long and sustainable earnings?

So start drawing a plan now and start following it!

2. Review Portfolio

All my stocks were taken a hit during the past month. Also, note that today's market posted a rally of which ST Engineering had an incredible 8% gain in a day. This meant the drop were even uglier somewhere during the month.

Example QN: Is there any particular stock I want to increase stake in especially with such discount?

HPH Trust: With the China market in such volatility and economy in much uncertainty, I would not like to increase exposure to this stock even given the good yield based on historic dividends. Personally, I feel that if there is to be another prolonged market downturn, it will probably come from China. With container port businesses very tied to economy, I will not risk being caught further in wrong side of trade

Bank of Ireland: Banks are not defensive in nature and coupled with the fact that it is a foreign stock, I definitely will not increase stake in BKIR

Singapore Post: Singpost has not had such good price since 1 year ago. (Note how media normally use words like "low", "bad") At $1.78, the dividend yield is at 3.9%. It is very tempting to nibble at this stock. Singpost is a relatively defensive stock given its Mail business. However with the lower yield and newer businesses like Logistics and eCommerce, the status of Singpost being defensive is questionable. I would say Singpost at $1.78 is a "meh" buy  given my cursory analysis.

Straco: Straco is another business whose main revenue is generated from from the China. Unlike HPH Trust, I look more favourable to this stock and hope to accumulate more through the large bid spread in the stock. For example, Straco closed at $0.885 but nobody was above my buy queue of $0.805. With the eventual freeing up of China's economy, Straco can capitalise on China's transition to a consumer market. However, when I buy this stock, I should recognised that the gains will not be immediate since tourism is tight to economy strength as well.

ST Engineering: Among all of them, I would like to accumulate more on ST Eng the most. If recession is on us, ST Eng is a safe and defensive stock to own. With its 5% yield and a business that does not correlate much to the economy, this stock is the best to hold in a recession. If price goes down, give me more!! As in my earlier post, ST Engineering business has a long way to go given its ties to the Singapore's Defence Force and drop in price means I get to buy on discount.

Me & My Money (Mock Interview)

Me & My Money has always been one of my favourite section of Sunday Times Invest for a long while, perhaps even before I started investing. Recently, Sunday Times had been interviewing some youths about their investing journeys. I sure hope I have a chance to be interviewed for that column, but without any outstanding positions in investment-related CCAs, I doubt I'll have the chance. So, in this little heaven of mine, let's do a buaypaiseh mock session of Me & MyMoney!

Courtesy shot of Me!

While many NSFs were sleeping in bunks or surfing the web during their downtime, the Unabashed Writer (UW) here was busy reading on investing books like The Intelligent Investor by Benjamin Graham or Winning the Loser's Game by Charles D. Ellis. It was a habit picked up from one of his platoon mate who was constantly being ridiculed by others for being a bookworm.

UW recalled, "My platoon mates were always asking if the books he was reading were even useful and said it was a waste of time. After realising that if I chose to read investing books, I might be picking up useful skills and be productive in the 2 years of army."

Looking back, the years in army did actually give him a headstart in the world of investment. Picking up his first stock in 2011, he rode the bull run that came after the Lehman Brothers collapse and the European sovereign debt crisis. For the first three years of his investment journey, he managed to achieve a compounded annual growth rate of 9.25%, beating out inflation and bank interest rates.

After the years of investing, he increasingly realised that investing or personal finance are skills that everyone should have some knowledge of.

UW, who studies Chemical Engineering at National University of Singapore laments, "After almost 4 years of investing, I realise not many of my friends know the value of it. They see it as gambling or think it is risky. Many of my female friends who are working do not even save regularly. This is where I think personal finance comes into play. Know that inflation eats your money away when you deposit them into banks. The only way to beat inflation is to put a comfortable level of cash into higher-yielding assets like stocks or bonds. I always direct my friends to my anonymous blog in order to gain some insights on investing."

The avid investor proposes that personal finance courses should be introduced at university level. SGX can be roped in to conduct these courses and at the same time, reap rewards such as increased investor participation rate in the local stock market.

Asked about his end goal of investing, UW replied, "At the end of the day, I hope to amass a portfolio of stocks that generates sufficient passive income for me to be financially independent. That does not mean I will retire. It just means I will have less stress about job security or just simply means I have the luxury to decide what I want to do for a living. It has always been my secret ambition to sell takoyaki at shopping mall."


Q Moneywise, what were your growing-up years like?
A I am a middle child born to two hawker parents. My parents were hardworking and consequently, I never had a moment where I could not get what I needed. I also learnt the value of money from young as I helped out at my parents' stall since Primary 3, starting with cashiering and counting of money at the end of the day. I got desensitised to big sums of money early as the cash at the end of the day was in thousands. (low end, in case you are thinking I'm rich)

Every cent counts!

My grandma taught me to save. Excess pocket money, angbao money and Edusave scholarships were all saved up in my POSB bankbook without question. Besides all these, my grandma also had the foresight to "force" my parents to cough up $100 every month and deposit it into my bank account. Every drop of water makes an ocean. By the time my grandma let me have free rein of my finances (which is around my army period), she had already helped me accumulate almost $20k in the account.

Q How did you get interested in investing?
A I knew the existence of the stock market when I was in primary school. Back then I thought it was this magical place that would send cheques to my mother and we will have a good treat after that. Sometimes my mother will call me and my siblings to use Teletext and read stock prices to her.

I only formally got interested in investing during NS days where I decided to pick up useful skills during downtime. Investing books were the only books I picked up because I wanted to know how investing actually works; what was Buy, Sell and Vol. It turned out that investing was an universe of its own and trading was only a small part of it. I was particularly intrigued by the concept of compounding interest and also of passive income.

Q Describe your investing strategy.
A My investing strategy follows what Benjamin Graham and Warren Buffet advocated. Seek out fundamentally stable companies that is undervalued and whose prices provide a sufficient margin of safety ie. low enough such that downside is limited. In a long run, the true value will be recognised by the market. As such, I believe in an insufficient market that holds hidden gems, and their values will be realised in the long run.

To find these undervalued stocks, I regularly use the stock screener in Google Finance. In the stock screener, there are many criteria that can be used to filter stocks that are to your liking. Personally, I require the company to pay out dividend, P/B less than 1, P/E less than 20 and positive 10 year EPS growth rate. After that, I will individually assess the companies to see why is it undervalued despite the attractive financial metrics. Sometimes it might be because they recorded one-off gains, but were stuck in unfavourable market conditions. Many a times, it was because the companies are in unpopular industries like local chemical or construction industries.

When I first started using this method in 2013, I found hidden gems like Straco and Nordic. Increasingly, it is hard to find these companies anymore as they becomes fully valued in a bull market.

Q What do you invest in?
A I mainly hold Singapore equities because one needs to be familiar with the business before buying a stake in the company. I usually hold mid-cap stocks for affordability in contrast to blue chips and avoids penny stocks because of their speculative nature.

I had invested in foreign companies that I was confident in. They were few in numbers such that I can list them here from memory. They were Bank of America, Apple Inc and Bank of Ireland. Forex adds to the risk of buying stocks thus I generally avoids foreign stocks.

Q What does money mean to you?
A Many says money cannot buy happiness but I think it is the precursor to happiness. You can make your money work for you and generate passive income through stock dividends, bond interests etc. Up to a critical mass of passive income, you will have enough money to further your pursuit of happiness.

Q What's the most extravagant thing you have done?
A It was the exchange program I did recently, where I travel to Sweden to study for a semester. Since I was at Europe, I took the opportunity to travel to most parts of the continent. In the 6 months period, I spent a total of $20k. It was a worthy trade for the experience as there will never be any chance to travel for such an extended period of time once I start working.

Viewing Northern Lights in Iceland

Besides the travel experience, I had also learnt many soft skills during the exchange. One of the most notable skill I picked up was crisis management. This came after I went through many unfortunate incidents including theft, card phishing and flight cancellation. Each time I managed to handle them with quick judgement and allowed me to recover my loss as much as possible. For theft, I recovered half of my loss through insurance. For card phishing, I managed to block the transaction by contacting the seller directly after getting information from the bank. In the case of the flight cancellation, I managed to turn the crisis into fortune by claiming substantial insurance even though we did not lose out much in terms of accommodations or itinerary changes.

I am very fortunate to be given the chance and study in a foreign country. Despite the extravagance, I feel that it was very justified for the cost and the experience is something I will hold dear for the rest of my life.

Q What is one of your biggest regrets when it comes to investing
A One of my biggest, biggest regret was not picking it up earlier to guide my mother. My mother uses the stock market to feed her gambling habits. As she does not follow economic news, her trading were as good as throwing darts blindfolded. It did not help that her broker was giving her recommendations based on volumes and "insider news".

I vaguely remembered my mother requiring a "bailout" of $100k from my father because of the CLOB saga. Adding salt to wound, her mood fluctuated according to the stock market. My relatives would always joke about how they can tell the market was up or down based on her mood.

Recently I took a copy of her SGX statement and calculated her date-to-current gain/loss. With a portfolio approximately $200k two months ago, she had already incurred a loss of $68k. She also did not keep track of the buy price which made tracking of gain/loss difficult.

All these investing atrocities were happening since I was in Primary School. One can imagine how much she had lost over the years. One can imagine how much life will be easier for her if she invested prudently. This is the result why I regret not picking up investing earlier. Currently, I am trying to convince her to hand over the remaining portfolio for me to handle. However, I am facing resistance as she hopes the stocks will recover to their former glories. It is really saddening how she works long hours at the hawker centre only to flush the money down the drain that is the stock market.

Best and Worst Bets
Q What has been your biggest investing mistake?
A In all truthfulness, it was actually "lending" money to my friend. By "lending", it actually giving money to my friend in promise of decent returns, 5-7%. According to him, it was to used to buy into some gold trading scheme. I had asked for reports or documentation about his investment but he repeatedly played on the word, "trust". He even said he will guarantee my investment with his day job pay.

Regrettably, payment started getting delayed and eventually stopped coming in. The promise of guaranteed returns with his salary turned out to be false. He would say to give him more time but it has been 6 months since last payment. In total, this friend owes me $4600, an amount neither large nor small. I would definitely hope the money will be returned one day, never mind the interest. However, I see this sum of money as payment for a valuable lesson learnt. Never trust anyone with your money, not even close friends or relatives. At the end of the day, it is their well-being they are concerned about, not yours. If you are well-versed in personal finance, you do not need to rely on others to manage your money.

Q And what has been your best investment move?
A My best investment was buying Singpost at $0.98 on March 2012. At $1.92, it represents a 95.3% over three years. It had also gave out $890 of dividend since purchase. (22% of my buy-in) At my purchase price, Singpost gives out 7% dividend yield with the recent hike of dividend to 7 cents a year.

I went to my first AGM for Singpost and its CEO, Wolfgang Baier presented himself excellently and shown leadership on the future prospect of Singpost. I will be holding this stock for a very long time and hope for better years to come.

My Stock Holdings (July)

Bought Straco at $0.935 as the buy and sell price ($1) was at a huge difference. I had already known the good fundamentals that Straco possessed hence I casually queued at the buy price. Take a look at the EPS growth of Straco over the years since IPO. The CAGR of its EPS is calculated to be 33.08%.

Input that CAGR into the Future Value Calculator together with present value of 4.45cents (current full year EPS), you get an EPS value of $0.1857 in 5 years.

With a low P/E of 8, the stock price can be valued at $1.485 in 5 years. At historical P/E of 21.68 ( from POEMS Stocks Analytics), the stock price can be as high as $4.025.

The exact calculation method can be found here in my blog.


Overall portfolio for July is as follows:

Singapore Post (S08.SI)

Sustainability of dividend

I like dividend stocks. The money is better in my pocket and tangible rather than getting stuck in the company balance sheet. That is the reason why I like Singpost so much. Having bought Singpost at $0.98 and yielding 6.25c dividend then, it was giving me 6.37% dividend yield. Recently, management raised dividend to 7c, amounting to 7.14% yield. While I welcome the dividend bump, I worry that it may not be sustainable. Many companies spam lots of dividend only to abruptly stop the flow of money when the cash pile depletes.

I've compiled the changes in the cash pile of Singpost over the years and displayed it in the chart below.



As one can see, there is no definite pattern in the change of cash positions year to year. However, it can be seen that the data is skewed towards net increase. Even it out over the years, Singpost has actually increased its cash pile despite giving generous dividends. Increasing yearly dividend by 0.75c will only increase cash demand to the tune of $16.1m (based on outstanding shares of 2,146,774,225). That is less than 10% of the net cash increase during the latest financial year. Therefore, I would conclude barring unforeseen circumstance, Singpost is in good position to service that additional dividend payout.

P/E and P/B valuation

For the full year ended 2014, the EPS was 6.849c. Based on the price of $1.90, Singpost currently has a P/E of 27.7. The P/E is admittedly on the high side as I am more comfortable with stocks with P/E below 20. 

Net asset value per share was 68.40c. P/B is 2.78. Similarly I'm usually not comfortable with P/B value above 1. When trawling the market for gems, I will look for P/B < 1 for safety margin and also for bargain. 

From P/E and P/B valuation point of view, Singpost is indeed overvalued. A P/E of 27 is usually accorded to company with growth potential. Even though Singpost increased its revenue by 12% for the whole year, its underlying net profit only increased by 5.2%. This can be attributed to the low profit margin associated with the Logistics business Singpost is diversifying into. Mail segment is stagnating for a few years but is sadly, the cash cow of Singpost. Can such a high share price justify the high revenue growth but low bottomline growth of Singpost? 

I would hold the stock myself since I bought it low and yield from my capital outlay is good. However, looking at valuations, Singpost is currently overpriced and there are better dividend yielding stocks out there.

Acquisitions and Disposals

In times of boom, companies had been known to go on an acquisition spree only to find that they had overpaid. Singpost, in its bid to diversify from its traditional mail business, had gone through a restructuring. The restructuring included acquisitions of logistics company and disposals of some traditional businesses, together with joint ventures and investments from Alibaba. I'm mainly concerned with the pace of acquisitions and the price that the management paid for the companies. Here's the rundown of the acquisitions and disposals Singpost did for the past year. 

Acquisitions

• The Store House1
• Paid S$121,000 for 75% of shares with net tangible asset last recorded as S$11,000
• F.S Mackenzie2
• Consideration up to S$14.8m for entire paid up share capital
• Net asset value was S$5.4m 
• Couriers Please Holdings3
• Acquisition at S$105m with prior net tangible asset recorded at roughly S$3m
• From the change in net profit after acquisition, it seems that Couriers Please Holdings added $9,417,000 to the net profit of Singpost (if assumption is correct, the P/E at which Singpost paid for Couriers Please seems reasonable)
• Famous Pacific Shipping4
• 90% holdings for NZ$3.6m with potential consideration up to NZ$8m because of potential earn-out consideration (don't really know what earn-out consideration is)
• Net asset value is NZ$816,104
• Hubbed Holdings5
• Quantium Solutions (Australia) acquired 30% of Hubbed Holdings for S$4.6m
• Quantium will get 5% more shareholdings if some pre-determined performance benchmark not met. If performance met, Quantium will pay an extra S$1.06m
• Net asset value of Hubbed Holdings is roughly S$1m 

Disposals

• Novation Solutions & DataPost (HK)6
• Entirely disposed of both assets for $24,388,951
• Net tangible asset recorded as $19,214,000
• DataPost Pte Ltd7
• Sold 90% of shares for $39,299,511
• Net tangible asset was recorded as $30,690,000 

I see that what Singpost paid was consistently much higher than the net asset value the acquired company possessed. However, I also feel that book value of company is not a good gauge for valuation the companies. Singpost itself is valued at nearly 3x P/B. Instead, the EPS of the company would be a better guide to see value. I will appreciate announcements to be like that of Couriers Please where impacts to net profits were shown. Looking at the announcement details, it would seem Singpost paid a reasonable price for Couriers Please and I would hope to extrapolate it to the other acquisitions. 

With the exception of Couriers Please, the other acquisitions were relatively small and should not impact Singpost greatly if it was a bad investment. Furthermore, the capital expenditure for acqusitions is supported by disposals of companies whose considerations were significant. 

From what I heard at Singpost's AGM, the M&A actions are not likely to stop just yet and there are more to come. Chairman was very supportive of the director that oversees M&A.

Earnings

As mentioned at the AGM, revenue rose 12% to the highest ever at S$920m. Underlying net profit similarly rose 5.2% to S$157m, highest ever.  I am disappointed that profit has not kept up with the growth of revenue. This was actually mentioned at the AGM with one lady pointing out that net profit actually decreased. CEO of Singpost reasoned forcefully that in the process of transforming Singpost, there were many charges that cut into profits. They had to strip them out to show that the core businesses were actually doing well. 

What was impressive about CEO Wolfgang Baier, was that he acknowledged the Mail business of Singpost was declining and never going back. 150 years of good business, it's not going to improve. Instead, Singpost had to transform to maintain its competitiveness. I liked his pragmatism and honesty. That is how problems get solved. Many management refused to acknowledge problems and refuse to change or improve. It was my first time attending an AGM and I was really impressed with the management, replying tough questions cordially and directly.

Conclusion

My confidence with Singpost remains strong especially after witnessing the strength of the management. On the day of AGM, it was announced that Alibaba invested a further S$279m in Singpost. Chairman kept reiterating that Alibaba was a tough investor to satisfy. Given that Alibaba had given Singpost their stamp of approval, I will likewise trust my investment in Singpost. 

I will continue monitoring the growth of profit along with growth of revenue. It has been almost 2 years where profit growth had disappointed me. Perhaps at some point, I will realise Singpost is not going to be as profitable as before, but the time is not now. 

Since buying Singpost at 2012, the dividends had paid almost 20% of my initial investment. Hopefully I will hold it till the stock pays itself. While I am not going to sell my holdings anytime soon, I think ultimately at $1.90, Singpost is overvalued and not a value buy for buyers. Dividend yield stands at 3.7% and while this is respectable, there are better companies out there that provides better yield and growth opportunities. Hence, people looking at Singpost, just pray it may drop. I may also increase my shareholdings if it ever drop low enough! (at least 5% div yield). 

1. http://infopub.sgx.com/FileOpen/SGX_Ann.ashx?App=Announcement&FileID=307340

2. http://infopub.sgx.com/FileOpen/SGXNET_Ann.ashx?App=Announcement&FileID=305964

3. http://infopub.sgx.com/FileOpen/SGXAnn.ashx?App=Announcement&FileID=326908

4. http://infopub.sgx.com/FileOpen/SGXAnnc.ashx?App=Announcement&FileID=331404

5. http://infopub.sgx.com/FileOpen/SGX_Ann.ashx?App=Announcement&FileID=356240

6. http://infopub.sgx.com/FileOpen/SGXAnn.ashx?App=Announcement&FileID=352614

7. http://infopub.sgx.com/FileOpen/SGX_Ann.ashx?App=Announcement&FileID=356716

My Stock Holdings (June)

June has been a busy period for me as I was busy packing stuff to go back to Singapore. It seemed that this month has been a volatile month due to the effect of Greece flirtation with the possibility of default.

ST Eng's price was pushed to a low of 3.24 before recovering recently to above 3.3, which is my average buy-in price. Many people in forums have expressed the opinions that ST Eng is richly valued in terms of P/E and P/B. I had see that the valuations are rich but dividend yield remains good. Given time, perhaps I'll see whether its dividend policy is sustainable and whether cash holdings is decreasing. 

Singpost also recovered its price dip to above 1.90. This can be attributed to annual dividends increasing to 7c from 6.25c previously. Also, it divested some of its traditional business for a profit and that might also had lead to price increase. There's some points I'd like to read up on Singpost given time and they are listed as follows: 

• Sustainability of dividend
• Debt obligations and dividends against earnings
• P/E and P/B valuations (Benjamin Graham had advocated sale of share when it reaches overvaluation state. Therefore, I want to see if Singpost is grossly overvalued and warrant a sale. It is unlikely though, as I regard Singpost as my crown jewel. I know falling in love with stock is no good..)
• Review growth of earnings (can be quite hard as Singpost recently changed its accounting practice)

Lastly, HPH Trust has been slowly dipping through the month of June while Bank of Ireland closed pretty high at the end of June amidst signs of Greece coming out of the talks with a solution. 

There was no dividend issued for the month of June. Hence, dividend received remains at $278.25


**Edit: Chart removed because I set it to update with latest information -- not accurate info

My Stock Holdings (May)

Many companies are reporting their financial results this month and this lead to some price fluctuations. In my portfolio, all had reported their results with the exception of Bank of Ireland. As of now, I have no intention to sell any stock in my holding based on the results. Hence barely any change in the composition of my holding.

Also, I'm scouting for good stock to add to the portfolio and will buy in when I return to Singapore from my exchange.

One of my criteria for buying a stock is that it must give out dividend. Singpost, ST Eng and HPH Trust gives out dividend in my portfolio. Bank of Ireland is an exception as I recognise that it is a high growth stock and does not necessarily need to give out dividend.

As of May 2015, I received a total dividend of $278.25

**Edit 1: Revised dividend amount to a lower value as I accidentally calculated dividends I haven't receive.

**Edit 2: Chart removed because I set it to update with latest information -- not accurate info

My Stock Holdings (April)

Starting this month, I will try to show my monthly portfolio in this blog.

Whenever I buy or sell a stock, I will try to justify the cause. My investing mantra lies between an investor and a trader. Therefore, you'll see quick transactions on some stocks while others may be there for years. So here's my portfolio for this month!

**Edit: Chart removed because I set it to update with latest information -- not accurate info

Risk of Buying Foreign Stock

It's has been a while since I've updated this blog. Being on study exchange do take up my a whole load of my time. In this post, I want to talk about the risks of buying foreign stocks listed on foreign exchanges. In my 3 years plus experience, I had only purchased several foreign stocks. These stocks were namely Apple Inc, Bank of America and Bank of Ireland. As one can see, buying an average of 1 stock per year seems awfully miniscule. This is because of the added risks of buying shares of a foreign company.

1) Foreign Currency Risk

Perhaps the most prominent reason to research doubly hard when one is buying into a foreign company and that is the foreign currency risk. The ultimate aim of buying stock is to grow the money you have and that is achieved through capital gain and dividends. When purchasing foreign stocks, the foreign currency risk adds another layer of hindrance to the desired capital gain. A prime example is my purchase of Bank of Ireland (BKIR). I bought it at 0.34 EUR back in 21 February 2014. As of today, I have an approximate gain of 6% at 0.36 EUR. BKIR Chart

Admittedly, the gain is not up to standard given the time invested. Now, take a look at the EUR-SGD rate. On 21 Feb 2014, the rate stood at 1.7346. Today, it is a whopping low of 1.4492 - a drop of almost 17%. As you can see, my capital gain was wiped out by my currency loss. Foreign currency risk needs no further explanation.

2) Lack of Information

Knowledge is king as many once said. Keeping in times with financial news is important when it comes to stocks. Many a times, news can convey a sense of general sentiment in the stock market. Also, crucial news will reach you last unless you are specifically hunting for it (eg. results release). I normally use Google Alerts to update me of any news related to the foreign companies I buy into. However, it is not enough in my opinion as I am not in the midst of the "battlefield". In the case of Bank of Ireland, I am unsure of Irish opinions on the bank. I am unsure of BKIR's reputation in Ireland. I am unsure of its scale within Ireland. These are some of the many uncertainties that one have to deal with when buying into a foreign company and thus foreign stocks are not suitable for investors without much experience.

3) Different Time Zones 

Another disadvantage of buying foreign stock is dealing with different time zones. If you own European stock, the market opens in the afternoon and closes at SG evening time. That seems fine enough. If you hold US stocks, the market only opens ~ 9pm and closes just before you wake up. In the time that you are asleep, crucial news might emerge and affect stock markets without you knowing. That is the stuff one has to deal with when buying foreign stock.

Despite all these shortcomings, one might consider buying foreign stock due to several reasons. One might be to diversify stock holdings out of one's country. Second, it might be due to the long time horizon of a stock where you have faith in. As a result, short term fluctuations that might be disadvantageous to investors would not be significant. However, as mentioned earlier, it is not advisable to invest in foreign stock unless one accumulated enough experience in the market.

Selling Stocks with a Purpose

It's been a long while since I've posted on this humble investing blog. The reason being that this Singaporean child here is currently residing in Sweden for student exchange programme. Settling in has been time-consuming. In this post, I want to touch on the topic of selling stocks. If you did not know, I advocate long-term value investing as influenced by Warren Buffet. This means that you buy undervalued stocks and hold long term as the intrinsic value will definitely be realised eventually. Personally, I think holding stocks is the easy part while selling brings about more emotional struggle.

In one of the books I've read (but cannot remember), the author suggested investing and by extension, selling stocks with a purpose. This purpose is non-exhaustive and can range from buying a car, paying child's university education to retirement fund. The concept is essentially like a saving accounts albeit that investing in stocks will generate high returns. Need money for house at 32 years old? Start putting money into stocks every month till the time you buy a house.

The reason why I’m mentioning this is due to the fact that I had sold my Apple Inc holdings recently. I had mainly thought to sell Apple Inc as its iPad sales were weak and the next catalyst should be the launch of iWatch. Having tried the cheaper version of Mi band, I feel that wearable devices are not going to be as indispensable as something like the iPhone. Within one month putting the Mi band, I had stopped wearing it as it was too troublesome to keep it on all the time and the function of tracking steps and sleep was not worth the trouble. Having Apple trading at the high, I decided to sell it at $124.30.

Should I have sold this stock due to short-term gains? For me, investing right now is for capital appreciation and to fund my university education. Selling in this period even for short-term gain seems like an OK choice personally. The lesson to take away here is that investing should be done with a final aim in mind. Only when you are approaching the period when you need the physical cash that you should start liquidating the holdings you have.

Apple is currently trading at $129.49 and it looks like I sold too early or on wrong premises! However, gain is still a gain. 40% gain for this stock.

STI ETF Monthly Investment Plans in Singapore

It's been awhile since my last post. The reason being that I'm currently residing in Sweden for an overseas exchange programme and had been spending the time preparing for this exchange. The cost of living in Sweden is indeed high. A McChicken meal here costs 65 SEK, equivalent of nearly $12 in Singapore. And nope, the portion is the same. The huge expenditure that is going to come with this exchange got me thinking how to recoup the money back eventually. I can only depend on my fixed salary in the future to recoup this expenditure.


However, it is obviously known that the salary is going to be the same every month. How do you maximise this salary that is going to come in every month? INVEST! Like what Warren Buffett once said, "Pay Yourself First". Take out a portion of your salary each month and invest it in monthly investment plans that are provided by POEMS ShareBuilder Plan, OCBC Blue Chip Investment Plan (BCIP) and POSB Invest-Saver. These platforms allow you to invest as low as $100 each month at lower commissions. Once the GIRO instruction goes through, the designated amount will be deducted every month and invested into counters you chose at the start. I highly recommend that you choose one counter to invest in and that is the STI ETF counter. Without going too deep into the subject, STI ETF tracks the STI index and it has been shown that it is very hard to beat the index's return even for seasoned hedge fund managers. So instead of fretting which counters to invest in at the start, I am recommendeding just one: STI ETF



I did a comparison of the three low-cost investment plans and it is shown in the table below.

A few points to note here:

1)  Buying-in Commission

POSB appears to be the lowest cost amongst the three at 1% flat rate. Suppose you choose to invest $100 per month, the commission rate of POEMS itself will be 6%! If you are investing $600 per month, then go for POEMS. $500-$600, you might want to go for OCBC BCIP.

2) Dividend Reinvestment

To me, this dividend reinvestment differentiates POEMS Sharebuilder Plan from the other two. Any dividend from STI ETF will be reinvested the following month. On the other hand, OCBC and POSB only credit the dividend into your bank account. Those who are privy to the power of compounding interest will know that reinvesting dividend will "snowball" your gains over the longer time horizon. Therefore POEMS wins in this aspect.

3) Misc Costs (Dividend Charges, Sell Commission)

After praising POEMS to the sky in point, it's time to point out the elephant in the room. The so-called "hidden costs" in POEMS are pretty high. Any dividend issued by STI ETF will be subjected to a $1 charge. Not mentioned in the table, there are also charges for scrip dividends, corporate actions, insufficient amount for GIRO. Furthermore, the commission that comes with selling the shares accumulated is definitely a downer. From all this, I gather POEMS is trying to attract people that are willing to invest more per month such that all this costs become negligible.
Edit: Self-assisted selling using POEMS is possible at min $25

4) Underlying ETF

The underlying STI ETF that each platform buys differs. However, the difference is minute and should not concern us. For general info, SPDR has a lot size of 1000 shares while Nikko AM has lot size of 100 shares. Also SPDR charges a fund fee of 0.3% per year while Nikko AM charges 0.39%. Again, this only concerns the people running the three platforms.

5) Partial/Total Redemption

POEMS and OCBC allow partial redemption of the shares accumulated. POSB, on the other hand, only allows total redemption. This might be disadvantageous if you are in an urgent need of money. However, since I believe that once you sign up with these investment plans, you should be looking at the time frame of at least 5 years. Therefore this account should not be your piggybank when you want to go on a Europe trip or something. That said, if you happen to run out of money, you can opt to freeze the GIRO payment and continue earn dividends, rather than redeeming the shares for cash. 

EDIT (18/1/16): Partial redemption of STI ETF units is now possible for POSB.

Conclusion:

If you are investing upwards of $500, go with POEMS for the dividend reinvestment. However, if you are still uncomfortable with the numerous charges that POEMS carries, by all means go with OCBC BCIP. 

If anything between $100-$500, choose POSB because of the low commission cost. Also, if you are new to investing, POSB is good as it is more clear cut with the charges. 

As much as I would like to start this monthly investment plans right now, I'm a poor student that can only afford to invest $100 a month at most. However, I really like the automatic dividend reinvestment provided by POEMS Sharebuilder. Therefore, I'd prefer to start with the Sharebuilder plan when I draw a regular paycheck upon graduation.