I'm selling HPH Trust (NS8U.SI)

Following HPH Trust's result announcement, I've finally decided to part ways with this stocks. In many posts here, here and notably here, I had voiced concerns about the sustainability of the dividends payout and the effect of China's slowdown. Unfortunately, due to procrastination and the time taken up by school work, I was unable to followup with a review of HPH Trust. On top of the 26% drop in underlying NPAT attributed to shareholders, this announcement also came with a very jarring note which stated it is:

"...repaying a minimum of HK$1 billion of debt annually beginning in 2017"

Dividend Issue

Woah, hold it right there. The amount is no small sum at all. Taking 2015's distribution amount which comes up to HK$2996.6 million or 34.40 HK cents per share, repaying HK$1 billion per year will cut this distribution amount to 22.92 HK cents or 33.3% drop!! Now, this is just purely assuming that the repayment solely comes from the hand dipping into the distribution income. Some might be taken from its existing cash pile...?

But take a look at Total Consolidated Cash at 31 March 2016: $5,995.6

It's not much at all. Keep in mind that HPH Trust need $1 billion per year for 5 years, not to mention servicing of short term debt. Another consideration is the dropping NPAT attributable to shareholders (no time to consolidate data, sorry!), which will eventually lead to decreased DPU. 2015's yield was exactly 8.0% based on my purchased price of US$0.68. Given that the first half of the dividend had already dropped 14%, the forecasted yield based on my purchase price is around 6.8% for this year. Conservatively taking out another 20% drop in DPU because of debt repayment, the dividend yield in 2017 will be just 5.5%!!. I had mentioned that my comfortable level was actually 6.5% and this violated my reason to buy/hold HPH Trust.

Will it fit into my portfolio?

5.5% is a decent dividend for any stocks and the fact that STI is one of the top dividend yield index in the region may just be because of HPH Trust! However, does it justify a place in my portfolio after all? I'll be using a concept I've learnt in my FIN3101 class (hello Prof Ruth!) - the Modern Portfolio Theory. 

I'm not going to explain in details about this concept, but in general it is about using diversification to bring the risk of a portfolio down to your acceptable level and get the best expected returns, through varying the weights of your portfolio components. 

To cut to the chase, I had actually found that by removing HPH Trust from my portfolio, the standard deviation or risk of the portfolio did not change and it was actually accompanied by a marked increased in expected mean return of the portfolio. This essentially signified that HPH Trust did not contribute to my portfolio in terms of risk and was actually detrimental in terms of expected returns. 

This was actually my first time using this method to analyze my portfolio and I was excited to find out about this fact! The photo below shows my calculation and any guru that may come by this humble blog can double check my workings. 

Seeing that future dividends are going to be cut and finding out that HPH Trust is useful in my portfolio, I have decided to sell this stock. Queued at US$0.465 all day to no avail, I will continue to try tomorrow or at least in the immediate term. 

My Stock Holdings (December) & Happy New Year 2016!

2015 stock market closed without a bang, neither a plunge. But it's undoubtedly a bad fairly lousy year. Starting the year at 3370.59 and ending it at 2893.19, STI dropped 14.16% excluding dividends. Oil price had bottomed to a 11-year low and does not seem to be recovering any time soon. Relevant companies in the oil industries had taken a hit, in particular Keppel Corp and SembCorp.

In my own portfolio, SingPost dropped almost 8% partly because of its CEO's departure and corporate governance problems. In my previous posts on SingPost, I mentioned how much I admired Wolfgang Baier's leadership in transforming SingPost. Now that he is actually gone, a closer watch on SingPost's performance in e-Commerce will be warranted.

Consistently under-performing stocks in my portfolio will also be reviewed soon. (once I submit my FYP report) These stocks actually include Bank of Ireland (BKIR) and HPH Trust. Since buying them almost 2 years back, they had returned almost zero returns. In fact, accounting for inflation and further brokerage fees and foreign custody fees, they were probably negative returns. In the long term, I am pessimistic about HPH Trust since there is little impetus for the share price. Management guidance of allowing dividend payout to follow cash flow should further compress dividend yield. For Bank of Ireland, there should be a slow recovery of its business towards declaring dividend late 2016 or early 2017. However, holding BKIR incurs foreign custody fee at POEMS and it is very vexing. Given the time, I would love to assess whether switching out BKIR and HPH Trust are preferable. (using capital budgeting concepts I learnt in FIN2004X!)

Rounding the "My Stock Holdings" posts for the year, below is the distribution of my portfolio at the end of December.

I received $150 from k1 Ventures through its capital reduction exercise. Adding it all up for the year, I had received $863.19 in 2015!

Since I will be working in mid-2016, I shall aim to achieve $1000 worth of dividend in 2016! This means putting some portion of salary into the stock market, maybe through dollar-cost averaging of STI ETF! Lastly, I shall write another post regarding my investing performance for 2015 as I started my records on 13 January of last year. Included will be breakdown of my Buys and Sells etc. Since I have not sat down to look at my records, writing that post is equally exciting for me!

Once again, Happy New Year and here's wishing everyone out there a prosperous and joyous year ahead! HUAT AH!

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. 

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

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:

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

Hutchison Port Trust (NS8U.SI)

Hutchison Port Trust (HPH Trust) started trading with much fanfare on 2012. Listed in SGX, it is touted as the world's first publicly traded container port business trust. HPH Trust owns interest in container port assets in Hong Kong and Shenzhen - two of the busiest ports in the world. In 2013, its container berth handled a combined throughput of 22.8m twenty-foot equivalent unit (TEU).

HPH Trust is one of the thirty components in Straits Times Index (STI), having replaced F&N in 3 April 2013. As of 13 December 2014, it is also the highest yielding stock within STI at 7.8%. On 27 October 2014, the company ended the third quarter with an operating profit of HK$1.24 billion, a 3.5% increase year-on-year.

Given the high dividend that HPH Trust pays out every year, one should be prudent and check whether these dividends are sustainable into the future. The key objective of the Trustee-Manager was stated in the 2013 Annual Report as the following: "... to provide unitholders with stable and regular distributions and long-term growth in distributions per unit (DPU)" However, a quick look at the DPU since IPO was actually decreasing.

This also points out the deceptive nature of dividends yield. Dividend yield is based on past dividends and definitely not indicative of future dividends. Furthermore, dividend yield is based on current stock price and this means that falling stock price inflates dividend yield. For instance, HPH Trust indicated that it is distributing 45.88 HK cents in its IPO Prospectus and that translated to 5.8% dividend yield based on IPO price of US$1.01. However, due to the subsequent price fall to US$0.78, the yield had been bumped up to 7.5%. Hence, a lesson to take home is that stock purchase should not be based solely on the dividend yield number.

Besides the falling distributions, there are also a few points that does not paint a rosy picture of its financials. The first point is the enormous payout ratio. In 2011, the payout ratio is 167%. Next year, it increased to 199% and subsequently stood at 213% in 2013. Such high numbers indicated the distributions were likely unsustainable and that might have been the reason why distributions were falling. 

The trust might be able to give out that much dividends with its positive operating cash flow but quick inspection of the cash pile over the years indicated that it is dipping into its coffers to give such high dividends. In other words, the distributions for the past 3 years are unlikely to be sustainable. The Trust must find ways increase its profits otherwise unitholders will be looking at reduced distributions.

Another point of concern is the liabilities of the Trust. While the debt to assets ratio are pretty reasonable at below 50%, we can see that significant portion of the liabilities have been transferred to Current Liabilities recently. Current Liabilities are debts and obligations due within one year and with significant increase in that amount, a cut in dividend might be plausible in the near future. 

With all these data, is HPH Trust properly valued at US$0.69? Analysts opinions were quite differing with UBS having at TP of US$0.67 and DBS at US$0.78. However, one common point in both reports was that the management was considering whether to match cash flow generation to distribution payout more closely. Given that cash flow were negative in 2012 and 2013, distributions look to be suppressed in the mid- to long-term.  

Having bought HPH Trust at US$0.68 way back in 21 November 2013, I am fairly pessimistic about the dividend outlook. However, since I am comfortable with dividend yield above 6.5%, I will hold on to it until capital gains (around US$0.725) justify me switching out to other dividend stocks.