Quick updates

Rather busy, and fell ill. So I shall log down my personal quick views of some of my stocks which has just reported their results.

Starhub
5cts dividend announced.
Net profit fell, EPS drop to 3.39 cts. However, this is because Starhub does not amortize the smartphones sold over 2 years, but recognized it immediately. I expect a much higher EPS over the next few quarters because of this.

A few things to take note for the following quarter:
(i) How loss of EPL will affect its pay TV revenue
(ii) How Next Generation Network will affect Starhub
(iii) How the new law that enables M1 to join the payTV will affect Starhub.

Overall, I will treat this is neutral and within expectations.

Floods in Orchard Road

Dr Yaacob Ibrahim, Environment and Water Resources Minister, says: "You can't design for rainfall of this level, it is just too huge. The thing we can accept is that we can only design our canal of a certain size, and at the end of the day, we have to live with some of these occurrences which occur once in 50 years or so. I know it is inconvenient to some Singaporeans, but on the part of PUB and NEA, we'll do our best to alleviate the problem as quickly as possible."

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A deja vu of Nov 2009, where our minister mentioned a flood of once in 50 years too :)

Starhill Quarterly Results

SINGAPORE, 26 April 2010 – YTL Pacific Star today announced that Starhill Global REIT’s 1Q 2010 income to be distributed was S$18.4 million, 2.0% higher than that of S$18.0 million in 1Q 2009. Distribution Per Unit (DPU) (post-rights) for the period 1 January to 31 March 2010 was 0.95 cents, 2.2% higher compared to the restated 0.93 cents1 achieved for the previous corresponding period. On an annualised basis, the latest distribution represents a yield of 6.88% {based on 56 cents close on 31st March 2010}

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20 lots gives me $190.

Starhill Global Reit Dividends

HIGHLIGHTS
• 4Q 2009 income to be distributed of S$18.8 million represents a 5.6% increase over 4Q 2008
• Acquisition of David Jones Building in Perth completed in January 2010

SINGAPORE, 28 January 2010 – YTL Pacific Star, the Manager of Starhill Global REIT - the S-REIT with the largest presence in Orchard Road – today announced that Starhill Global REIT’s fourth quarter (4Q) 2009 income to be distributed was S$18.8 million, 5.6% higher than that of S$17.8 million in 4Q 2008. Distribution Per Unit (DPU) (post-rights) for the period 1 October to 31 December 2009 was 0.97 cents, 5.4% higher compared to the restated 0.92 cents1 achieved for the previous corresponding period. On an annualised basis, the latest distribution represents a yield of 7.33%. Starhill Global REIT’s portfolio of 10 properties was valued at S$1.98 billion as at 31 December 2009, up from S$1.95 billion as at 15 June 2009.

Approximately S$2.0 million or 2.6% of the income available for distribution (comprising overseas income) for the year ended 31 December 2009 has been retained to satisfy certain legal reserve requirements in China and for working capital and capital expenditure purposes. Starhill Global REIT remains committed to distribute 100% of its Singapore taxable income.


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20 lots, so my dividends will be $194.

Starhill Global Purchase

I managed to enter 10 lots of Starhill at the 200 day moving average at 51 cents. We could consider it as a potential reverse head and shoulders or triple bottom formation technically.

The fundamentals would be as researched earlier:
Starhill REIT

With this purchase, my monthly dividends would increase by about ~$31, assuming no change in DPU (although I expect an increase due to new property purchases).

My total average monthly dividends from my dividend basket is now $490, excluding those from the trading basket.


Merry Christmas!

Starhill Global REIT: David Jones Building

Finally, I have gotten in contact with a friend who is now staying in Australia on the recent purchase of David Jones building by Starhill Global Reit. The following is my friend's reply and analysis:

1. I must admit that I am no expert in properties, less so in Australia. but I will give you my personal view. You decide.

2. David Jones (or DJ as it is popularly known here) is a department store behemoth in Australia. They are like the Takashimaya in Japan. DJ stores are all in the heart of the city, or CBD in its major location. So, DJ the business and its associated entities are all quite well regarded in Australia for now.

3. That said, the David Jones building that Starhill Global Reit acquired is in Perth, so it is no where near the big 2, Sydney or Melbourne. Retail property development in Perth, as you would imagine, lags the big 2.

3a. If you have a short term view, it may not be as attractive as I think it will take a while before the commercial/retail property development takes flight in Perth.

3b. It will be attractive if you plan to hold your stock for a while. For instance, I have a longer term view on stocks ( e.g. I bought Apple stocks @ US$20 and sold at $90+ after split 2 years ago, but I held it for more than 8 years. Of course, on hindsight, I should have kept it as Apple is now about $200 ;-). Nevermind, tt's another story). Reason why it may be worth the thought if you have a long term view on stocks:

3b-i) Perth is one of the fastest growing cities in Australia. the property price median in Perth is amongst the highest, if not highest of all of Australia, even tops Sydney. it has taken a beating last year but it has recovered nicely recently). I think this will apply for commercial properties as well.

3b-ii) Western Australia is resource rich. It has all kinds of minerals imaginable, and also lots of gas and oil field not opened. Hearsays are the government will tender some of these out gradually over the next 20 years, so sustained growth is a given according to many in western Australia. This partly explain 3b-i. Also, because of China's insatiable appetite for resources to fuel its own growth, Australia remains a key partner to China, especially western Australia.

3b-iii) There have been lobbies by businesses in western Australia to get the state government to approve longer retail hours and also store openings on Sundays. The law still forbid this on certain trades to do so. This seems an oxymoron elsewhere. Even if it didn't happen this year or next, it will happen sooner than later. I think this is a forgone conclusion. So, the retail scene in Perth can only get better, imo. Here in Melbourne, there are already 24 hrs shopping like Kmart and Macdonalds. My fave roast pork noodle shop open for supper till 3am. http://www.watoday.com.au/wa-news/last-chance-push-for-extended-shopping-hours-20090929

4. At the macro level, property investors in Australia can do no wrong of late. The population explosion & strong economic outlook contributed to the continuous performance growth here. I think it is what prompted Starhill Global to take the plunge in the DJ building in Perth. DJ the department store will not go away. A quick research tells me that DJ has the tenure at the DJ building in Perth signed till 2032. So, it is quite solid in that respect.

5. So, that's all my 2 aussie cents , or 2.6 SGP cents worth. Hope it helps. As I said, if you plan to hold on to Starhill Global for a while, it may be worth the investment. If you are looking for a quick gain, it may not work to your advantage.

This is a friend I can trust.

So now, with my FA on the Malaysian and Australian properties settled, I think I will still go ahead with my purchase. My target entry price will be 51 cents now as it appears that Starhill is unwilling to break the double support to reach the previous low and 200 MA at 50 cents.

However, I might have to weigh my options between this and Cambridge REIT as well as Cambridge is currently offering a higher yield of around 12%.

Let's see how it goes...

Starhill Global Reit -- selldown unwarranted?

Starhill REIT recently made some acquisitions.

Starhill Global REIT proposes to acquire David Jones Building in Perth for S$148.0 million; And enters into heads of agreement to acquire Starhill Gallery and Lot 10 in Malaysia for S$423.3 million


Simply put, this acquisition will result in increased dividends per unit (DPU). Why not?
Without adding the three new properties, at current price of 53 cents, it's about 7~8% dividend yield. Adding the acquisitions, we could possibly be looking at nearly 9% dividend yield per annum at the current price.

Yet... why the selldown? Some reasons I could think of:

1) Rights issue was supposed to reduce debt, but instead, with these purchases, the amount of debt increased.

But.... If all the rights proceeds are used to pay debt, it would be very silly, because loan interest is much lower than net property yield. In so doing, there will be very little upside on DPU on saved interest.

Acquiring assets which you're familiar with and possess potential for enhancement will generate higher yield than loan interest. Question is, when you have cash on hand, and asset prices to the low side, with bank lending interest at a low too, do you use the cash plus loan to buy cash generating assets or do you use up your cash to pay existing loan? The answer should be obvious.


2) The two Malaysian REITs are bought too expensively. Suck thumbs to retail investors for you have no control.

The key thing is, other than because they buy from their own sister REIT, what are the other reasons? Who determines whether they bought it too high? What and who determines the "too high"...? From the other REIT's investor point of view, it might have been sold too cheaply?

Taking a leaf from MIIF... They sold MEIF... There were also rumours here that claimed that they sold too cheaply to their own people... But the share price has been rising since then...


3) The two Malaysian malls they bought are not good.

Huh?

I asked my Malaysian colleague about the two Malaysian malls... Without knowing anything about Starhill, he told me it's almost like Ngee Ann City and Wisma at Orchard... Is it a coincidence that Ngee Ann City and Wisma are owned by Starhill as well?

Starhill seems to have succeeded in their quest of acquiring assets in prime locations.



Why the selldown? Perhaps some big institution is rebalancing their portfolio. As to whether I can get it at 50 cents.... only Mr. Market knows. Depending on the price actions, I might just buy in more at the 51.5 cents to 52 cents region.

Random Thoughts: Stars stars stars

Recently, I shared that I will still be waiting for Starhub at $1.88 and Starhill at $0.50... Why?

I combined a little FA with a little TA to derive these values.

My FA is purely (and simply) dividend investing... I believe in the long term dividend sustainability of these two companies...

Starhub is a telco, which is defensive in nature. It is in their culture to lead the market (they are the first to have pay TV, free incoming calls, free dial up internet in SG). Hence I believe they have the capability to sustain dividends via their innovativeness. 10.5% yield is attractive.