Wednesday, February 16, 2011

A Quick Take on the recent results of some companies I own

Quite a number of my holdings released results over the past two weeks. The companies are
Starhub, AIMSAMPIREIT, Saizen REIT, Silverlake, new purchase GLP, CitySpring, Starhill, CCT, K-Green, First REIT, GRP, ST Engg

Time is really tight for me, with family commitments due to Chinese New Year, with my recent take up of being a trainer for a sec sch's Junior Physics Olympiad team and the long hours spent on preparation of materials, with my continuous authoring of my planned A level physics guidebook, and with my engineer work.

I took a quick look at the recent results, and but I know time doesn't allow me to do and post a detailed analysis on each and every counter. The main thing I garnered was buying cheap defensive blue chips giving good dividends in a recession seldom go wrong.

My comments collated over the last few weeks:

1) Starhub
Overall, the results are in line with expectations. Dividends remain at 5c for this stable defensive counter, and intends to remain the same for FY2011.

This is one counter where I had been truly successful by being contrarian. Most of my purchases were done when they announced a loss of EPL contract to Singtel. I still remember that was the time where many analysts were calling for SELL because of the EPL loss.

Starhub was distributing 4.5cts dividends per quarter at that time, and on the following quarter, started distributing 5cts per quarter. The analysts that were calling for SELL immediately decry that this is not sustainable, and maintained SELL.

My contrarian view and action to purchase was based on my thoughts:

It was there that I mentioned about the loss of EPL:  "Of course, the true impact will only be known from Jun 2010 onwards. Let's see how it pans out. My belief is that the impact will be minimal."

Analysts report are now claiming more bullish views on Starhub. In fact, one of them mentioned that "overall, the impact of the EPL loss on STH’s subscribers has been less significant than previously feared". Are we to trust these "professional analysts" who called for SELL on Starhub at $2, and call for BUY at $2.6?

In fact, I'm waiting for the dividends to eventually grow higher.
"I have confidence in Starhub's management and its ability to exceed expectations again. The final blow to the analysts' report will come if and when Starhub raises its dividend payout to 5.5 cts come 2011 or 2012."

I'm glad I listened to what I know about electronics as an electrical engineer, and not some analysts who probably don't even have an idea how telecommunications work.

Moral of the story, read analysts report with a discerning mind. This applies for all blog posts as well, including mine.

I shall still hold on to this counter for its stable dividend payouts.

Again, results were within expectations. 0.51 cents was declared for the quarter.

What gives the twist was a sudden announcement of private placements, and AIMS has decided to issue another 0.285 cents dividends before the new units are issued.

There are some who decry that private placements are always bad. Not necessarily so for my case. My warchest has dwindled substantially due to recent purchases of GLP, so a rights issue might not be right for me at the moment. Furthermore, I'm not concerned of any dilution because my stake is too small. This exercise merely reduces my stake from 0.006% of AIMS to 0.0054%.

To me, people just like to complain. If they give placements, there will be complaints why rights aren't issued where everyone gets to participate. If they give rights, there will be complaints why they rights are issued again. It's a never ending complaining process which leaves me scratching my head. I prefer to see it in a simple way. I'm contented if there's little change to the DPU. Dilution doesn't matter to me if yield and gearing remains comparable.

My Quick calculations on the DPU after the placements. 
1) Only 42m (that they are paying in cash) can provide dividends to us, and the 30.9m they are drawing from loan gives zero dividends
2) Dividends per annum is at 2cts
3) Rounding off, we have 2b units now, and 0.2b units are issued.
4) The new building indeed gives 7.6% yield.

A conservative estimate of the new DPU would be
(2 * 2b / 2.2b) + (0.076 * 42m / 2.2b * 100) = 1.96 cts per share.

I'm pretty sure my estimate is much too conservative, and in all likelihood, it will remain the same.

The gearing remaining rather constant, 34% to 33.6% following sale of property announced earlier, while NAV should drop from 27cts to about 26.5 cts.

All in all, I'm supporting this placement as having a larger and more diverse property base would ensure a more stable property income. Having lots of tenants offers stability in income receivable in itself.

3) Saizen REIT
Dividends of 0.52 cts was declared. While it may seem low (0.52*2/16 * 100% = 6.5% yield on my cost), one have to take note that
(i) properties have been sold to reduce the absolute quantum of the YK Shintoku loan.
(ii) 0.26 cts per share was used to reduce YK Shintoku's loan.

Supposed a breakthrough manifests itself that YK Shintoku's loan was successfully refinanced, and assuming that a conservative 50% of the 0.26cts is distributed as dividends, the yield on my cost would then be (0.13 + 0.52) * 2 / 16 * 100% = 8.125%.

There are still warrant proceeds which have not been used yet to clear the loan. I believe the refinancing would become more attractive to banks once the loan is reduced further.

If anyone has the warrants at a cheap price, please convert to help :)
I have a tutorial to help here: How to exercise your warrants?

4)  Silverlake
There was a 62% increase in revenue, along with many other increases. However, we have to take note too that there were acquisitions done, and hence increases in revenue is expected.

Dividends of 0.3 cts have been announced.

I believe this company is interesting, and I shall continue to monitor it.

5) GLP
GLP profited. I entered at $2 and $1.88 the subsequent day, having a total of 6 lots now and an average price of $1.94, just 2 cents below the IPO price.

Nothing really interesting.

6) CitySpring, Starhill, CCT, K-Green, First REIT, GRP, ST Engg
I group these together because there are nothing big in their reports, to me at least.

CitySpring: 1.05cts dividends declared. Nothing new for a boring company, apart from promises, be it empty a not, to review the capital structure of CitySpring.

Starhill: 1.04cts dividends declared. Nothing exciting this round.

CCT: 3.93 cts dividends declared.

K-Green: 4.31cts dividends declared, slightly more than expected. A no gearing trust with potential to increase this payout, even though it might be paying down from depreciation.

First REIT: 0.87cts dividends declared. Defensive healthcare REIT with low gearing.

GRP: 0.01cts dividends declared... How much more boring can it get? But I like boring dividend stocks :)

ST Engg: 11.55 cts dividends declared, with a larger orderbook and expectations of even higher turnover in FY2011. 30.3% ROE with EPS 16.1cts. This is a true testament, along with Starhub, that it is very very seldom wrong to buy into defensive dividends blue chips during recessions at lows!!


  1. Hi JW,

    I believe that the acquisition of Northtech is good for AIMS AMP Capital Industrial REIT too. It reduces counter party risks, for sure. Although I would have preferred a rights issue and I did make a fair bit of money in the last rights issue, I understand where you are coming from.

    As for Saizen REIT, I agree that the downside is pretty limited and things can't get much worse from here. Things are looking up, especially if we take into consideration that their current loans are amortising in nature. If not for this fact, their distributable income would be 50% higher! However, it is already the largest investment in my portfolio. So, instead of converting the warrants, I have sold them, locking in some gains.

    Good luck to us all. :)

  2. Hi AK,

    I have no issue with AIMS doing the placements. I guess they are more afraid of investors feeling the pinch if they were to issue rights again.

    I'm expecting a share consolidation on this REIT somewhere in the future... Same for Saizen as well...

  3. in both cases the caveat is management. like Nick used to say, its hard to fark up a reit. those that fark it up in the past management should be scrutinized.

    Investment Moats.com

  4. Hi, are u still holding cityspring? What are ur thots on this counter?

  5. saizen has warrants which should be factored into the NAV.



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