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Summary of January 2016 Transactions

Portfolio_201601_Jan

The year started with a lot of turbulence in the stock market. Banks and Offshore Marine Sector stocks are the most impacted, trading at prices last seen during the Lehman Brothers crisis.

Many REITs in my portfolio have announced their results for 4Q2015. Some REITs Distribution Per Unit (“DPU”) increases (Frasers Commercial Trust, Soilbuild REIT) while some REITs Distribution Per Unit (“DPU”) fell (Keppel REIT, Cambridge Industrial Trust, OUE Hospitality Trust).

Applying the average down strategy, I add more of Keppel REIT and Soilbuild REIT. The stock prices for most REITs are falling. At current levels, I feel that the yield is attractive enough to top on more of the REITs although I expect prices to fall further.

Based on the market closing price of S$0.77 on 31st December 2015, the yield for Soilbuild REIT is 8.42% for year 2015.

Based on the market closing price of S$0.93 on 31st December 2015, the yield for Keppel REIT is 7.30% for year 2015.

I added more of ST Engineering as its price fluctuate between S$2.82 to S$2.90. I stick to my personal analysis here (My Personal Analysis of ST Engineering). I checked that there are currently no negative news about ST Engineering and thus I will think ST Engineering is probably affected by the downtrend of oil prices.

I divested all my stake in SMRT although SMRT has claimed to make a profit in 3Q2016 (SMRT Non Fare Business Saved The Day). According to charts, SMRT is on a long term downtrend. Given the recent rise in prices, I decided to sell off all my stake in SMRT. My strategy is such that if prices drop further below S$1.30, I may accumulate back SMRT and wait to sell it when prices rebound. This is usually not my strategy for investing but I am familiar with SMRT after holding on to it for many years (I can be wrong!). For those who have never invested in SMRT, I advise investors to stay clear of this stock.

ST Engineering is now my largest share in my portfolio. In the current bear market, I shall be holding on to cash, accumulate payouts from the REITs in February and invest prudently.

OUE Hospitality Trust DPU Fall for 4Q2015

OUE Hospitality Trust Logo

OUE Hospitality Trust announces its results for 4Q2015 on 25th January 2016. DPU fell 4.5% to 1.70 cents as compared to 1.78 cents in 4Q2014. Distribution income was $8 million lower than 4Q2014 due to lower contribution from Mandarin Orchard Singapore and Mandarin Gallery.

Overview

OUE Hospitality Trust focuses on Hospitality and Retail sector. Its hotel properties consists of Mandarin Orchard Singapore and Crown Plaza Changi Airport. Its retail properties consists of Mandarin Gallery.

Results

OUE Hospitality Trust 4Q2015 Results

From the above figures, we can see that gross revenue is $2.6 million higher than 4Q2014. Hospitality segment posted higher revenue which offset the lower revenue from the retail segment.

Hospitality

The master lease income contribution from Crown Plaza Changi Airport added $4.0 million of hospitality revenueMaster lease income from Mandarin Orchard Singapore was $1.1 million lower than 4Q2014 mainly as a result of lower room sales and lower Gross Operating Profit (“GOP”).

Retail

Retail revenue was $0.3 million lower than 4Q2014 mainly due to lower occupancy and fit-out periods for tenants arising from lease renewals.

Debt Maturity Profile

OUE Hospitality Trust has a high gearing ratio of 42.0%. The average cost of debt is 2.7%.

OUE Hospitality Trust 4Q2015 Debt

Weighted Average Lease Expiry

The weighted average lease expiry by gross rent is 4.5 years. The weighted average lease expiry by Net Lettable Area (“NLA”) is 3 years. From the statistics below, we can see that majority of the leases are expiring between the current period 2016 to 2018.

OUE Hospitality Trust 4Q2015 WALE

Trust Structure

OUE Hospitality Trust Structure

Things to Note

Discount to Net Asset Value (NAV)

OUE Hospitality Trust is currently trading at S$0.77 (As at 31st December 2015) 14% discount to NAV of S$0.90.

Major Biennial Events

Singapore will again host major biennial events such as The Singapore Airshow and Food & Hotel Asia in the first half of the year. It will also be the first year that the country will host the World Rugby Sevens Series in April 2016. These events are expected to increase hospitality demand.

New Leases for Retail

Two international brands Michael Kors and Victoria’s Secret have signed a seven years and ten years lease with Mandarin Gallery respectively.

SMRT Non Fare Business Saved The Day

SMRT Logo

SMRT announces its 3Q FY2016 results on 25th January 2015. Similar to 2QFY2016, operating expenses increased 2.4% to $303.0 million due to higher repairs and maintenance costs, staff costs, depreciation, and other operating expenses.

SMRT Results 3QFY2016

Fare Business

The group’s rail operations (Train and LRT) posted a combined loss of $1.1 million in YTD FY2016 as the increase in operating expenses outpaced revenue growth.

Bus operations posted an operating profit of $3.4 million in 3Q FY2016 on the back of higher revenue, training grants, reliability incentives and lower diesel costs, partially offset by higher staff costs, depreciation, and repairs and maintenance expenses.

Non-Fare Business

Taxi operating profit increased to $4.8 million and Rental operating profit increased to S$21.8 million.

This was due mainly to:

  • Higher taxi rental contribution and more early retirement of taxis in 3Q FY2015.
  • Higher rental revenue contribution from train stations and bus interchanges.

Things to Note

Rail Financing Framework

No news since the last mention which causes the surge in share price (SMRT Shares Surges on Hopes of Rail System Reform).

Bus Services License Expiry

SMRT is in discussion with the authorities on the contract terms for the remaining bus services beyond the license expiry in August 2016.

 

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