Portfolio Update - October 2017

Our portfolio grew by 6.76% to $286,449 - $8,217.65 of capital injection and around $9,925.66 of capital growth! I got to say the whole of October has been a really good month for property, construction and REIT stocks which form majority of our portfolio :)

There is a lot of activities this month!

SOLD
- Saizen REIT (8,900 units) @ $0.03223 (Delisted - P&L: $3,184.64)
- Sing Holdings (4,400 units) @ $0.47 (P&L: $321.04)
- Wee Hur (5,000 units) @ $0.285 (P&L: -$313.21)
- Croesus Retail Trust (6,801 units) @ $1.17 (Delisted - P&L: $3,339.89)

Saizen REIT was one of our first investment in REIT and we have been holding on to it for about 3 years. I was hoping the reverse takeover would happen but it did not. The huge loss in P&L is because when it got bought over, it distributed its capital in the form of dividends last year. Overall, we made an absolute +39.9% from it and an annualized return of +12.4%.

I was just blogging about Sing Holdings last month that it should trade nearer to its peers PB and it came faster than I expected! It was sold as the trailing stop loss I set got triggered. Fortunately, the price was near what I had in mind and there was a better opportunity (Singtel). Overall, we made an absolute +18.4% and an annualized return of +514.6% for holding 34 days. lol.

I have always wanted to sell Wee Hur because it is not my kind of stocks (not an asset play or a dividend stock). I bought it years back when I was blindly following people in the forum without analyzing the fundamentals myself (I did not know how to do it then). The opportunity came this month when the price shot up too and I sold it on the same day as Sing Holdings for Singtel. Overall, we made an absolute loss of -16% and an annualized loss of -5.8%.

Croesus Retail Trust is another stock that got delisted this month as it was bought over at a premium to its NAV (similar to Saizen). Japan stocks are my lucky star. lol. Overall, we made an absolute +57.8% from it and an annualized return of +20.6% after holding for about 2.5 years.

BOUGHT
- Geo Energy (18,000 units) @ $0.27
- Capitaland Mall Trust (4,000 units) @ $2.02
- Capitaland Commercial Trust (2,000 units) @ $1.643
- Singtel (1,000 units) @ $3.68

In short, Geo Energy is a stock with crazy growth potential and many many years of coal to mine. lol. I will not even try to tell you how to value it because I know I cannot do a better job than these people:

ThumbTack Investor: https://thumbtackinvestor.wordpress.com/?s=geo+energy
SmallCapAsia: Will Geo Continue to Deliver?
Heartland Boy: Geo Energy: Initiation Report
SG investors.io: https://sginvestors.io/sgx/stock/re4-geo-energy-res/analyst-report

We were pretty interested in the Lion-Phillip S-REIT ETF but eventually decided to buy the underlying. Hence, we bought the top 2 REITs in the ETF. I made a mistake with Capitaland Commercial Trust Rights too. You can refer to these articles if you have yet to read them:

1. Mistake on Rights Issue - CapitaLand Commercial Trust
2. How ETFs Work - Using Lion-Phillip S-REIT ETF as an Example
3. 3rd REIT ETF - Lion-Phillip S-REIT ETF

As mentioned above, there was an opportunity to buy Singtel. Given the limited capital and the timely stop loss of Sing Holdings, I went on to liquidate Wee Hur and top up another $200+. Why Singtel?

The above information is extracted from SGX StockFacts sorted by market capitalization. This may come as a surprise to you but the market capitalization of Singtel is actually larger than our 3 banks! Too big to fail? Their business is so diversified that the 4th telco has limited impact. Furthermore, a 4+% dividend yield for a blue chip with the potential for capital growth is extremely attractive!

The total dividends collected this month is $1572.30. The breakdown is as follows:

Company	Symbol	ExDate	Shares	Total
First Real Estate Investment Trust	AW9U	27-Oct-17	7,000	$149.80
CapitaLand Mall Trust	C38U	26-Oct-17	7,000	$194.60
GuocoLand Ltd	F17	26-Oct-17	9,000	$630.00
Mapletree Greater China Commercial Trust	RW0U	26-Oct-17	5,000	$185.70
Soilbuild Business Space REIT	SV3U	20-Oct-17	30,000	$412.20

Total dividends collected for 2017: $10,099.22
Average dividends per month for 2017: $841.60

StashAway

Capital: $2,000
Current: $2,032.56 (IRR: 3.2%)

StashAway made a few changes to their interface and we love it! I will be publishing a separate article to discuss them. Stay tuned :)

StashAway Referral Link for Our Readers
Here you go: KPO and CZM Referral Link

Health - KPO Needs to Lose Weight
Date: 2017-11-02
Weight: 75.6 kg (Lost close to 8kg already!)
BMI: 25.2

Bought a new toy - Mi Smart Scale!

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Mistake on Rights Issue - CapitaLand Commercial Trust

I made a mistake on CapitaLand Commercial Trust (CCT) rights issue! By now you would have come across the news - Capitaland Commercial Trust buys Asia Square Tower 2 for $2.09b. Although the acquisition is not yield-accretive (dividend yield decrease to 4.62% from 5.36%), KPO thought that it would still be a great idea to buy and hold CCT directly instead of the upcoming 3rd REIT ETF - Lion-Phillip S-REIT ETF.

The rights issue presented an excellent opportunity for me to become a shareholder at a price lower than the market price if I were to apply/oversubscribe to the rights! Technically, based on the theoretical ex-rights price (TERP) of $1.648 and a subscription price of $1.363, if I were to get my rights/baby shares at any price lower than $0.285 ($1.648 - $1.363), I would have the chance to get it lower than the market/TERP. Hence, I queued at $0.28 and got it on the second day when the rights started trading.

My plan was to buy 2000 rights and oversubscribe by another 2000 shares in the hope that I will be allocated some "bonus" shares at a cost of $1.363 which will reduce my entry price significantly.

Today, I called SCB and told them my grand plan that I would like to subscribe to all 2,000 rights and apply in excess another 2,000 shares. The person said that it might not be possible and put me on hold. When she returned, she asked if I own the mother shares (CCT), I said no. She replied saying that only those that owned the mother shares (CCT) as of the "Rights Issue Books Closure Date", 29th September 2017 can apply in excess.

I went on to question her if the person sold off all his rights, would he still be able to apply in excess assuming he owns the mother shares (CCT) as of the closure date and she responded with a firm yes!

This is not intuitive at all! The rights to apply shares in excess is not with the person owning the rights/baby shares but with the shareholder that sells you the rights. Do take note of this!

To all the readers, this is the mistake I made and I hope that it will not happen to any of you!

On the bright side, my total commission for owning 2,000 shares of CCT is $1.31 (0.04%). lol.

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How ETFs Work - Using Lion-Phillip S-REIT ETF as an Example

I have written an article on SGX 3rd REIT ETF - Lion-Phillip S-REIT ETF last week. CZM and I were initially quite interested until some of the readers mentioned that there will be a 17% corporate tax which will reduce the dividends significantly! Do check it out if you have yet to read it :)

We all know that Exchange Traded Funds (ETFs) are low cost passive funds but have you ever wonder/know how ETF works? Vanguard has an article explaining this - How ETFs work.

Using Lion-Phillip S-REIT ETF as an example, the ETF sponsor is Lion Global Investors Limited and Phillip Capital Management (S) Ltd. The participating dealers would be the banks and brokerage firms (Phillip Securities Pte Ltd, DBS Vickers Securities (Singapore) Pte Ltd, Commerzbank AG and UOB Kay Hian Pte Ltd).

The Creation Process (Happening Now!)
The participating dealers applies for a creation unit (at least 50,000 units or more) from the ETF sponsor by either giving basket of securities, cash that equals the value of the creation unit or a combination of the two. In this case, I believe the payment is in cash and each unit is valued at a NAV of $1 per unit. The participating dealers can then "sell" them to retail investors or trade them in the exchange/secondary market.

The Redemption Process

The participating dealers can redeem creation units (similarly at least 50,000 units or more) from the ETF sponsor and receives a basket of securities, cash equivalent or a combination of the two. This will probably takes place only after the ETF is listed on the exchange.

Why is there a need to have these 2 processes? The reason is ETF arbitrage can take place where the participating dealers can make more money. This is slightly more complicated and you can research more on it yourself. In short, it provides liquidity to the ETF and it ensures that the market price of the ETF is close to its NAV.

With this new knowledge, let's take a look at the 2 REIT ETFs in the market now and their respective AUM (Asset Under Management):
1. NikkoAM-StraitsTrading Asia ex Japan REIT ETF - S$79.82 million
2. Phillip SGX APAC Dividend Leaders REIT ETF - S$24.23 million

Since Lion-Phillip S-REIT ETF consists of only REITs from SGX, it might not attract investors from the region. Hence, assuming each of the participating dealers were to create S$3 million of ETF shares each, Lion-Phillip S-REIT ETF would have an AUM of S$12 million.

Based on the above weightings, I created a spreadsheet to estimate the number of underlying shares required for each creation (50,000 of ETF units).

If we were to look at the top 3 stocks, each creation would require 26,634 units of Capitaland Mall Trust, 31,250 units of Capitaland Commercial Trust and 26,233 units of Suntec REIT. An AUM of 12 million would require 639,208 units of Capitaland Mall Trust, 750,000 units of Capitaland Commercial Trust and 629,602 units of Suntec REIT.

Would that actually drive the underlying REITs price up? I have no idea. lol. However, putting things into context, the percentage of underlying shares required from the outstanding shares is only around 0.02%. On the other hand, it was stated in CMT 2016 Annual Report that 59.38% of the shares are held with the public. This would mean about 3% of the public float would be purchased/held by the ETF sponsor for a S$12 million AUM portfolio. So what do you think?

You can find the spreadsheet here - LION-PHILLIP S-REIT ETF Creation - Underlying Stocks Required. Feel free to play with it :)

Health - KPO Needs to Lose Weight
Date: 2017-10-09
Weight: 78.5 kg
BMI: 26.2