SGR's Analysis (FA, TA) - Buying some dustbins in Wisma

I was just talking about increasing dividend income in my portfolio update earlier for February.

Screenshot taken from "Portfolio - February 2018"

Many would also be aware that I've been trying to add onto my holdings whenever I see some value or that Mr Market like what Benjamin Graham stated in his book 'The Intelligent Investor' is being moody or irrationale.

And in a blink of eye, only days into March.
It happened.

Mr Market seem to be a little pessimistic about Starhill Global REIT and it's shareholder is being punished for this.

I took this opportunity presented by Mr Market to buy somemore dustbins from Ngee Ann City and Wisma.

See. I told you, I'm buying dustbin.

Back to SGR. I've entered an extremely small position with them a year ago at 73.5 cents.
Fast forward to a year later, this opportunity comes back once again and I made use of this opportunity to accumulate another 1,200 shares of Starhill Global REIT at 0.71. In this case, I'm buying more dustbin.

Why would a teenage fella look to buy some dustbin? Strange.

Properties
So what do they own?
SGR owns commercial properties (offices and shopping centers) across 5 countries - Singapore, Malaysia, Australia, China and Japan, for which most of their revenues are derived from shopping center rental income.

Singapore properties: Wisma Atria, Ngee Ann City
Malaysia properties: Lot 10, Starhill Gallery
Australia properties: David Jones Building, Plaza Arcade (Perth), Myer Center (Adelaide)
China properties: Renhe Spring Zongbei (Chengdu)
Japan properties: Daikanyama, Nakameguro Place, Ebisu Fort (Tokyo)

Source: SPH - Wisma Atria

Source: SGR's 2Q FY2017/18 Investor Presentation - Slide 15

A big chunk (62.5%) of SGR's earning is derived from Singapore while the rest is derived from Australia (22.1%), Malaysia (13.2%) and 2.2% from it's property in Tokyo and Chengdu.

A fairly big part is contributed by Toshin's master lease which took up 21.1% of SGR's gross rental. Toshin's lease will be expiring in 2025. Having Toshin's share, it's both dangerous and beneficial for SGR.

With Toshin's master lease, SGR can rest a little on aggressively finding active leases. But this will also mean that if Toshin decide not to renew this master lease on 2025, they will be having some headache. But it's pretty much like FCOT's case which I've talked about previously. It will be good if they diversify themself a little and not over rely on one tenant. But guess, we will leave it for 7 years later.

NAV
Taking a look at SGR's latest financial statement, we can see that it's NAV stands at 92 cents/share. In this case, with the price at 71 cents. We're actually buying a 500k HDB for a price of 386k!

Source: Page 17 - SGR 2Q FY2017/18 Financial Statement

Ok.. Sorry. We're buying SGR at a discount of 22.8% off it's book value.
But is this the end? No!! More to go!!


Gearing
It's important to know the gearing for a REIT. Gearing refers to the level of a company’s debt related to its capital, usually expressed in percentage form. In this aspect, we're looking at how much they "owe".

It's never good to buy a company that has a lot of debt. But eventually debt is one thing that will fuel it's growth and espeically for counters like REIT, where they will need to borrow money in order to acquire properties as they do not have much retained earnings. REITs will have to pay out 90% of their income to it's shareholder which will result in them having little retained earnings.

It's not desirable to have a high gearing for REIT. Coupling with the fact that they have little retained earnings, REIT will look for rights issue when they want to acquire properties. This is when the REIT will come to you asking for money. In this event, if you do not subscribe to the REIT, your shares will be diluted and you're faced with a lesser value.

SGR has gearing of 35.3%

According to MAS ceiling of 45%, SGR does have some room for them to take up debt if they were to acquire properties without a rights issue.

Lease Expiry/WALE

Source: Q2 FY2017/18 Investor Presentation - Slide 20

Seems like most of their leases are expiring in FY18/19 and beyond FY2020/21. 

Looking at the earlier one, we see 35.7% of their leases based on NLA that will expire in 2018/19.

This 35.7% we see consist of Malaysia's master lease. This is one thing investors of SGR would like Should the renewual falls through, DPU will continue to fall and so do price as investor's proceed to sell their shares of SGR.

At a WALE of 6.4 years. It might seem a little more comforting.

Debt Maturity

Source: Q2 FY2017/18 Investor Presentation - Slide 14

Weighted average debt maturity comes at 4 year with most of it's repayment taking place after FY2020. The scary part should come in between FY2021-23 where most of their payments are due.

DPU

This is something that every investor of REIT is looking out for. 

However, we see some headwind in it's Orchard properties and DPU had decreased in 2017. With properties like Plaza Arcade and Lot 10 due by 1Q2018, we should be able to see some positivity out of this where SGR's rental income will increase. This will brings DPU higher than what we see now.

Taking 4.8 cents DPU in 2017 into account, we're looking at a yield of 6.7%, which look relatively delicious. However we must also bear in mind that this higher yield offered by SGR is in compensation for the greater risk we are participating in as compared to other REITs like MCT.

Technical Analysis

Taking a look at the chart. Seems like there's a big bear that ambushed SGR from behind. Price had fallen sharply below 50D, 100D MA and EMA. Price had also fallen below lower band of Bollinger Band with MACD crossing signal line southwards. RSI on the other hand suggest that SGR is over-sold today with a relatively healthy amount of seller we're seeing here today.

Some level of resistance can be identified at 72.5 cents, 75 and 77 cents while support can be seen at 69 cents and 67 cents upon breaching 70 cents support.

While it certainly does not look very beautiful for SGR, it seems like some opportunities might be presenting itself. I might be wrong. I don't know.

Thoughts

The closest match I could get would probably be MCT. However, as MCT is trading at a premium with a relatively lower yield, the offer does not seem as compelling as what I see in SGR today. On a side note, MCT does have a really impressive management which is really proactive and ensuring their unit holders get the most out of it, however for that case, it's compensated by the premium we see over it's book. 

It's nothing wrong to pay a slightly bigger price tag for a lesser risk and wonderful management. Good things usually comes with a premium. However, sadly, my wish to buy a dustbin in Vivo City has yet to materialize and I've failed to accumulate them when the boat comes. I do love Vivo City.

Nonetheless, should things turn out worser than expectations for SGR, I do have some margin of safety from the discount I receive from it's book price. A futher drop in price will just make SGR looks more attractive to me. Definietly one would say that the NAV might drop, but I'm comfortable with this risk I'm taking. Another important thing to remember is that the initiation of position with SGR is for income and not growth.

There might be some surprise element of capital appreciation when price move closer to it's book value but I'm in for the income SGR is able to offer me for the time being. To be more conservative, I will look at SGR with a yield of 6% which represents with a target of 4.3 cents DPU. Am I over-expecting too much from SGR? I don't think so.

Please remember the disclaimer!

Disclaimer: All information published on this site is only meant for general information purpose. No warranties should be carried out on the action that is taken based on information found in this blog and no liabilities will be undertaken by the owner for any losses/damages incurred from the use of this information.

SGR's 2Q FY2017/18 Investor's Presentation Slide can be found here.
SGR's 2Q FY2017/18 Financial Statement can be found here.

Wilmar's Technical Analysis

It's Sunday again. Time truly flies. And on this boring Sunday today, I've decided to do another Technical Analysis post on another company that I own - Wilmar. Once again, please pardon me for the poorly done TA.

Pretty much similar to Singtel, Wilmar's share took a beating and fell from the 3.4 range in November to the recent days where it broke it's 3.00 mark.

Wilmar's chart today display a relatively bearish trend.

You can plot your own graph on InvestingNote

The price for Wilmar gapped down on Friday when the market open and Wilmar started trading at 2.97. Shortly after this level of support is tested, the price rebounded back to the 2.99-3.00 range, before finally closing at 3.00.

We can see a small pinch in Bollinger Band somewhere around late Jan. This action suggest that the moving average is constricted and pretty much. volatility increased after the pinch. The price on Friday has breached the lower band slightly which is indicating that Wilmar is entering the over-sold region.

Taking a look at the next indicators of RSI, we obtain a value of 28.80 which suggest that Wilmar is oversold. The price today has fell below it's EMA, 20D MA and 50D MA which signals that Wilmar is currently in a downtrend.

The negative MACD value we can see also tells us that the short term moving average is below the long term moving average. As per pointed above, this signals a downward momentum and our dear Bear is in action.


While looking at the MACD graph below (most bottom), we can also see that the MACD line (Blue) is away and below from the Signal Line (Red), signalling a Bearish market. At this point, there is no divergence seen as both MACD and Wilmar's share price is moving downwards, this will also tell us that this bear attack might continue.

While MFI does not suggest that Wilmar today is over-sold, but it is much closer to that region than it is to the over-bought region at 36.73. If we get the formula in, we will be able to obtain the MFR base on MSI = 100 - 100/(1 + MFR). Work it backwards, we will obtain a value lesser than zero.

This will suggest to me that the money flowing out is greater than the money that is coming into it. The situation here is much better than Singtel's situation where greater amount of money is flowing out of it.

Using the Fibonacci Retracement certain potential areas of support could be seen at 2.86, 2.79, 2.74 should it once again break the support at 2.97. Likewise, the next area of resistance can be identified at 3.06, 3.14, 3.19 and 3.24. 

At today's price, I can see an attractive value and opportunity presenting for myself to buy more shares from Wilmar. However, as I've promised to strap my fingers to myself, I should now learn to resist onto the temptations!

Also, at this current point where the downtrend might continues, it is better to stay at the side while monitoring the situation.

Wilmar's 1 year chart from Google

Do remember that, TA is all about the probability and not certainty.
Most importantly, the high can get higher and the low can get lower. Once again, please only take this poorly done TA as a pinch of salt.


Oh yes.

Technical indicators and charts aside, the price we see today is below it's NAV and it's priced below 11x their earnings. Concerns about the major market for palm oil, Europe to phase out palm oil in biofuels also posted a threat to Wilmar recently. Aside the European, the 2 other biggest market for palm oil are China, India and not forgetting the other markets like Africa and Middle-East market.

However, Wilmar's investor should also remember that their operation does not only consist of this segment and it compasses a wide breath of operations.

Factoring the uncertainty and pessimism in, the price looks rather appetizing. On a side note, the price we're paying today for the wonderful management in Wilmar does provides some comfort.

We should also remember that Wilmar had conducted share-buy back in 2015 at 3.03 when they felt that the share is currently undervalued. Considering that it had fallen below the price they paid during the last buy back, history might repeats itself and should that happen again, we will get to see some tale from this action.

Once again, I must remind you that, this counter we see here, is a not an ordinary counter. We must also be reminded that by investing in Wilmar, we must be able to see the value and upcoming growth prospect.

Another catalyst in the upcoming days that we can look upon aside the delicious growth prospects of Wilmar will be the listing of it's China unit and list on the Shanghai Stock Exchange in the second half of 2019.

I continue to love the confidence and optimism Mr Kuok has on Wilmar and this brings in another layer of confidence for myself as a pico investor of Wilmar.


Read: Analysis on Wilmar

ST news on Wilmar's share buy-back in 2015 can be found here.
CNA article on EU's Palm Oil Ban can be found here.
Nikkei Asian Review article on Wilmar's listing of China unit can be found here.

Please don't forget about the disclaimer!

All information published on this site is only meant for general information purpose. No warranties should be carried out on the action that is taken based on information found in this blog and no liabilities will be undertaken by the owner for any losses/damages incurred from the use of this information.

Singtel's Technical Analysis

Singtel, one of my favorite stock is the current most frequently debated topic based on the latest movement of it's share price and the tremendous increase in volatility in the recent days. Do pardon me, on my very first post on Technical Analysis, and to trading gurus and seniors, feel free to correct me should you have spotted any mistakes in this post :)

Coming to it, here, we see a very bearish chart from Singtel.

You can plot your own graph for free on InvestingNote as well!

With just a simple look at it, one will be able to easily tell that Singtel in currently in a downtrend.

The price today at 3.49 has breached both it's 20D MA (3.59) and 50D MA (3.63). As much as it had slightly breached the 3.49 mark, slipping to 3.48, immediate support can be seen building at 3.49 which have held the price up till it finally closes.


The Bolliger Band can be seen expanding much in the later days, which suggest that currently, the price are relatively volatile and if anyone notices, the lower band has also been breached with it's most recent price movement, suggesting that it might be oversold.

RSI at 28.45 also shows that it Singtel is currently at the oversold region. The negative MACD value we can see also tells us that the short term moving average is below the long term moving average. As per pointed above, this signals a downward momentum and Mr Bear is in action. 

Using the key Fibonacci Retracement ratio where potential areas of support could be seen at, we can see the next support level at 3.42, 3.38, 3.35 and 3.31, should it once again break the support at 3.49

I will standby at these beautiful levels, to queue behind while waiting to get some Singtel shares that is on promotion.


Now, let's take a look at the more esoteric indicators and see if tells any tale.

The MSI today (16.7594) also suggest Singtel is in the Oversold region.
However, if the downtrend is strong, this will also brings the MSI lower.

Taking a closer look, we will be able to find a relatively small money flow ratio that is below 1 if we work the formula backwards. Now this signal here is telling me that positive money flow is lesser than the negative money flow. In layman term, the money flowing out is greater than the money that is coming into it, which is not very healthy here.

Want something more esoteric?
Based on the chart, we have entered a relatively sharp zig-zac corrective wave based on Mr Elliot's theory and it seemed like we might be entering the end of a wave soon.
 


While waiting for the financial results for 3Q18 to be released, fundamental wise, all else remains equal apart from the latest news on it's cyber security business which is said to hit around $550 million in revenue this financial year.

Singtel's 3Q18 financial results will be released on 8th Feb 2018, which is 5 days away.

Cyber security is a good business that Singtel today is diversifying on, which will further reduce the dependence on mobile communication sector. The increased exposure in ICT will also reduces the risk of facing the declining revenue from TPG's entrant.

I remember one good phase from one wise senior - TA is all about the probability and not certainty. Hence, do take them as a pinch of salt and pardon me once again for this poorly done TA.

Do remember that the high can get higher and the low can get lower. The latter example is clearly exhibited today.

Singtel's chart from Google

If we look back into time, the last time Singtel enter the 3.4 range is 2 years back during January 2016 and back in early 2013. Doing a quick search, the last time (Jan 2016) Singtel entered this price region, is the period when China's stock market bubble back in 2015-16 exploded. (Yes, I like the word exploded.. hehe).

Hence, if we were put our glasses back on, today's market does not exhibit any significant trait that I know of that was as impactful as the China's market crash which might drag Singtel's price down back to this region.

And given that, Singtel in 2018 today, should be a company that is in a relatively well position compared to they are in 2016 with the cash on hand, reduced debt and divestment of Netlink Trust.

Nibble time.. Nibble nibble. Time to be a small little rat!

I do not recommend any buying or selling of any securities based on any post that I've written.
If you're buying in and not too sure why, do remember to find a reason to support your buying.
Buying for income? You have many other alternatives available.
Buying because it's the biggest company in SGX? It's now DBS.
Buying because it's backed by Temasek Holdings? There's more available. Click here to find out more

Straits Times news on Singtel Cyber Security Business can be found here.

Read:
Singtel - Special Dividends of 3.0 cents per share