Summary of July 2016 Transactions

Portfolio_201607_July

This month, the stock market seems to continue to rally. The “brexit” didn’t have much impact on the current market. Some companies started to announce their financial results. Weakness in the retail market can be felt as Suntec REIT and Starhill Global REIT announces almost nil growth in DPU. There has been no transactions in my stock portfolio as I continue to hold for dividend gains.

This month, I have gotten my performance bonus. There are some who complain of getting “peanuts” while some seems satisfied with what they have gotten. While there are people who immediately spend on a holiday, buying a new gadget or buying a new car to reward themselves, I choose to replace my spoilt television and investing the rest of my bonus into the stock market.

Weighing the risk of some stocks I am watching, I bought into Starhill Global REIT after doing my analysis (My Personal Analysis of Starhill Global REIT). I didn’t add it into my stock portfolio, instead, I added Starhill Global REIT into my spouse’s stock portfolio.

There are two reasons for doing so

  1. Her portfolio only has two stocks and thus more diversification is required.
  2. My portfolio has more than 15 stocks which is already difficult to manage.

Thus, below is her stock portfolio for the month of July 2016.

Spouse_Portfolio_201607_July

My Personal Analysis of Starhill Global REIT

Starhill Global REIT Logo

Starhill Global REIT has been in my watch list for a few months. The stock price fell as low as $0.73 when there was a rental dispute with Toshin in Ngee Ann City property. I did not rush in to buy as at that point of time, I didn’t do any analysis on Starhill Global REIT. Buying without doing my homework is purely speculation. Today, the stock price has went up to $0.79.

I managed to find some time among my busy work schedule and here is my research of Starhill Global REIT.

Portfolio

Starhill Global REIT owns mainly retail assets in Singapore (Wisma Atria, Ngee Ann City),  Australia (Myer Centre, David Jones, Plaza Arcade), China (Renhe Spring Zongbei), Malaysia (Starhill Gallery, Lot 10), Japan (Daikanyama, Ebisu Fort, Harajyuku Secondo, Nakameguro Place).

Occupancy

Occupancy is not an issue for Starhill Global REIT. Given the current economic down cycle, Starhill Global REIT is able to maintain a high occupany of 95.6%.

Recently, Starhill Global REIT secures 5.5% rent increase for the Master Lease with Toshin In Ngee Ann City Property. Japan Food Town which occupies 20,000 square feet has also recently opened at Wisma Atria.

Starhill Global REIT Occupancy

Gross Revenue

Gross Revenue has been increasing year on year for Starhill Global REIT.

Starhill Global REIT Gross Revenue

Singapore, Australia, Malaysia, China and Japan contributes 61.7%, 22.5%, 12.1%, 2.2% and 1.5% of the gross revenue respectively. As you can see, asset from Singapore (Ngee Ann City, Wisma Atria) are the largest revenue contributor.

Starhill Global REIT Revenue By Country

Distribution Per Unit

Distribution Per Unit (DPU) has been increasing year on year. In FY14/15, Starhill Global REIT achieves an all time high DPU of 7.60 cents. This is based on 18th months. Starhill Global REIT decides to change its financial year from 31 December to 30 June, thus DPU is actually 5.11 cents.

Starhill Global REIT DPU

Dividend Yield

Based on the closing price on 30 June 2015 of 88 cents, the dividend yield for Starhill Global REIT will translate to (5.11/88) x 100 = 5.82%.

If we based on 22nd July 2016 closing price of 79 cents, this translates to a dividend yield of (5.11/79) x 100 = 6.47%.

As an income investor, any REIT or stock that yields above 5% is attractive for me. A high dividend yield could mean falling stock prices and low dividend yield could mean the REIT has grown expensive. Starhill Global REIT’s dividend yield of 6.47% strikes a balance between a high yield and low yield. However, we should not purely look at the dividend yield when selecting a REIT.

The annualized dividend will actually be known when Starhill Global REIT announce its 4th quarter and full year financial results on 29th July 2016.

Debt

Gearing ratio stood at 35.4%. The weighted average debt to maturity is 3.3 years. Something I do not like is that only 73% of its assets are unencumbered.

There is little debt expiring in FY16/17 but I noticed majority of its debt are expiring in FY17/18.

Starhill Global REIT Debt Maturity Profile

The Management

Francis Yeoh Sock Ping is executive chairman of Starhill Global REIT. He is a Malaysian businessman and eldest son of billionaire Yeoh Tiong Lay. Mr Francis Yeoh is also the managing director of YTL Corp, one of the largest conglomerates in Malaysia.

Mr Ho Sing is the Chief Executive Officer of Starhill Global REIT. He is said to be the brother of Temasek Chief Executive Ms Ho Ching.

Cheap to Buy Now?

After some research, I came across an article where Gordon Growth Model was used to evaluate if Starhill Global REIT is cheap to buy now.

The Gordon growth model is used to determine the intrinsic value of a stock based on a future series of dividends that grow at a constant rate. – Investopedia

The Gordon Formula is as such:

Share Price = Expected Dividend Per Share One Year From Now / (Discount Rate – Dividend Growth Rate)

Using a discount rate of 8.48% for Starhill Global REIT.

0.79 = 0.0539 / (0.0848 – Dividend Growth Rate)

Dividend Growth Rate = 1.66%

The dividend is expected to grow at 1.66%. annually. I am expecting Starhill Global REIT to grow its dividend at a higher rate than 1.66 because based on historically DPU trend, the growth is at least 2.2%.

Thus, my personal conclusion is Starhill Global REIT is cheap to buy now at $0.79.

Any Alternatives?

Starhill Global REIT owns Ngee Ann City and Wisma Atria whereby both properties are located in Orchard Road area. If I were to do a comparison, Paragon Shopping Center seems to be the closest match and thus I compare the dividend yield of Starhill Global REIT with SPH REIT which owns Paragon Shopping Center.

Based on 4Q2015, the annualised dividend yield for SPH REIT is 5.70%.

My Conclusion

Within my limited knowledge and with all factors considered, I decided it is a buy call for Starhill Global REIT.

Are you vested?

 

Head, Heart and Habit

Head Heart Habit

Recently, I came across an article in SIM University newsletter. SIM University’s education philosophy was mentioned which are three H’s – Head, Heart and Habit.

Head: Professionally competent and job-ready, with strong applied skills

Heart: Socially conscious with a desire to make positive changes in society

Habit: A self-directed learner with strong work ethics and values.

Being a SIM University graduate myself, the education philosophy are really meaningful to me and I reminded myself constantly of the above values in my work and in stock investing.

1. Head

I cannot say I am professionally competent in stock investing because this is not my full time profession. I relate this core value to the knowledge I have accumulated throughout my journey in stock investing. By applying the knowledge I accumulated, I screen for stocks that meet my criteria of a good stock (Growth + Dividend).

2. Heart

We must not become arrogant for our win in selecting the winning stock. I know some investors became arrogant when they make profits in stock trading. At work, we should also not become arrogant when we climb up the corporate ladder. We should lend a helping hand whenever our juniors need help.

By starting this blog My Sweet Retirement, I hope to share my stock investing journey and learning with readers out there. I also pledge to donate to a charity organisation when I am not so financially tied up with all the high cost of living expenses. I am glad that I now donate to a charity organisation through giro monthly. This is my way of contributing back to the society.

3. Habit

When I started my journey in stock investing in 2008, I lost all of my investment which amounts to almost a total of 6K. It was pure speculation. I lost it all. Having learnt my lesson, I started reading books about value investing and attended stock investing courses. I learnt that stock investing needs patient. Today, I have accumulated a stock portfolio  that gives me a return of 5.5% dividends annually.

I am still constantly learning and growing my stock portfolio.