Portfolio Update - July 2017

Our portfolio grew by 3.32% to $258,487 - $6,741.41 of capital injection and around $1,564.59 of capital growth!

BOUGHT

- Netlink Trust (6,000 units) @ $0.81

- KPO OKP Holdings (5,000 units) @ $0.375

July seems like a busy month with many companies providing their quarterly earnings update which means a fat dividend month :) We applied for 20,000 units for Netlink Trust IPO and was allocated 6,000 units. We were pretty excited since this is the first time we IPO successfully but it turns out to be a pretty boring one when it opened flat. You can read my analysis to see how much of its assets can be attributed to thin air - Just Another Netlink Trust IPO Analysis.

OKP is the company that has been appearing in your FB news feeds because of the PIE work site collapsed. Its share price has fallen by close to 20% from $0.43 (before the accident) to $0.375 (my entry price) and to $0.345 (today). KPO has decided to support OKP in times of trouble. Just kidding, you can read this to find out why I bought OKP - StockResearchAsia Strikes Again - OKP Holdings Ltd. Anyway, OKP has a huge cash position $87,911,000 ($0.285 cash per cash) while its total liabilities is only $50,670,000. So I have decided to buy on fear but seeing the price fall furthers, now I also scare. lol. Just joking, I will probably buy more if it falls further.

This is also the month where the robo-advisors (StashAway and Smartly) went live. I was looking at both and decided to go with StashAway because they have lower fees and I prefer their interface more. While playing with the account, I wrote another article - Introduction to StashAway - Robo-Advisor/Automated Investing.

KPO manage to finish an eBook and wrote a Book Review - Building Wealth through REITS. This book is great because the explanations and REITs discussed were all from Singapore context. KPO also spent $188 on a Cat 1 ticket to watch Chelsea vs Inter Milan - 2017 International Champions Cup Singapore with a group of secondary friends. What a busy month for KPO as well! CZM is busy looking for a new job, more shall be revealed when the time is right. lol.

The total dividends collected this month is $1,541.36. The breakdown is as follows:

Company	Symbol	ExDate	Shares	Total
SPDR STI ETF Units	ES3	28-Jul-17	9,000	$432.00
CapitaLand Mall Trust	C38U	27-Jul-17	3,000	$82.50
Ascott Residence Trust	A68U	26-Jul-17	7,600	$255.06
Singapore Post Ltd	S08	25-Jul-17	7,000	$35.00
First Real Estate Investment Trust	AW9U	21-Jul-17	7,000	$149.80
Soilbuild Business Space REIT	SV3U	19-Jul-17	30,000	$439.80
Frasers Logistics & Industrial Trust	BUOU	03-Jul-17	8,000	$147.20

Total dividends collected for 2017: $6,767.57
Average dividends per month for 2017: $563.96

Just Another Netlink Trust IPO Analysis

This is one of the biggest IPO in recent years and by now there are many articles written about it. You can refer to these articles instead (if you have not), they definitely write and analyze better than me:

1. One cannot make a decision on IPO without Mr. IPO's chili ratings - Netlink NBN Trust (Update)

2. SmallCapAsia - NetLink Trust IPO: All You Need to Know About It In 10 Minutes

3. Investment Moat - The NetLink Trust IPO – A Good 5% Dividend Yield Stock to Hold?

4. SG Budget Babe - IPO Analysis: NetLink Trust

So the question is will KPO go for the IPO? Finally took some time to look at the prospectus and highlight sheet. I will be ignoring those forecast/projected numbers for 2018 and 2019 as they will always paint a bright and happy future. Who will forecast their business to lose money?? lol.

We know that the offer price is at $0.81 with total net assets of $3,070,815,000. Assuming the over-allocation option is exercised in full (3,021,456,001 units), the NAV will be $1.02. If there is no over-allocation, there will be 2,898,000,001 units instead and the NAV will be $1.06. That is about 20% discount, what a good deal?!

Unfortunately, if you were to look at its balance sheets, you can see $1,009,569,000 of intangible assets. To put it in simple terms, that is $1 billion of nothing. lol. KPO is very practical and does not like intangible assets. Digging deeper into the prospectus, one will be able to find the breakdown for the intangible assets which consists of 2 items - Licence and Goodwill.

Such a high goodwill?! Let me provide you a proper definition taken from Investopedia - Goodwill is an intangible asset that arises as a result of the acquisition of one company by another for a premium value. The value of a company’s brand name, solid customer base, good customer relations, good employee relations and any patents or proprietary technology represent goodwill.

Do read these 3 articles for more information:
- Investopedia - Intangible Asset

- Investopedia - Goodwill
- Investopedia - Goodwill vs Other Intangible Assets: What's the Difference?

Personally, I like to be more conservative in calculating the NAV. Hence, removing the goodwill from the total net asset will result in the NAV dropping significantly to $0.79 or $0.75 if the over-allocation option is exercised. If they were to offer at the higher end of the indicative range ($0.80 to $0.93), I would not have participated in the IPO. It seems that the biggest winner is probably Singtel and the banks (bookrunners/underwriters).

With the most recent Yventures IPO, the offer price was at $0.22 and it closed at $0.255. So far 2017 continues to be a great year for IPO and my analysis still holds true! Do take a look if you have not - Will IPO Make Money - IPO Analysis for the Last 3 Years

Paying a little premium for a business with increasing positive operating cash flow year on year, operating in a monopoly market with a dividend yield of around 5.73% seems reasonable. KPO shall apply small small for 20,000 units and hold for 23 years.

Huat ah!