Hin Leong Trading Financial Woes – How Does It Affect You?

Hin Leong Trading Financial Woes - How Does It Affect You?

You would probably read about Hin Leong Trading scandal whereby the company recently revealed US$800 million of undisclosed losses and the company is seeking US$3.85 billion in debt. It was mentioned that Hin Leong Trading owes US$3.85 billion to 20 lenders.

Thinking that it will not affect you? As the saying goes “One problem leads to another”, among the lenders are the local banks DBS (SGX:D05) , UOB (SGX:U11) and OCBC (SGX:O39). They have a combined exposure of at least US$600 million to Hin Leong Trading. OCBC Bank currently makes up 2.53% of my stock portfolio and I am looking at adding more during this COVID-19 crisis.

If you look into the financial statements of the 3 local banks, oil and gas bank loans are classified under “Transport, storage and communication” sector. DBS have the highest exposure. Below are the extracts from each bank’s financial statement where you can find from their respective website.

DBS FY19 Financial Statement

DBS have an exposure of 8.7% (S$31.6 billion) to the transport, storage and communication sector.

Hin Leong Trading Financial Woes - How Does It Affect You?

OCBC FY19 Financial Statement

OCBC have an exposure of 5.0% (S$13.3 billion) to the transport, storage and communication sector.

Hin Leong Trading Financial Woes - How Does It Affect You?

UOB FY19 Financial Statement

UOB have an exposure of 4.1% (S$11.0 billion) to the transport, storage and communication sector.

Hin Leong Trading Financial Woes - How Does It Affect You?

Taken from Hin Leong Trading company website, below are the services that Hin Leong Trading provides. They range from Petroleum Products, Marine Bunker Supply, Storage, Lubricant and Greases, Shipping and Trucking.

Hin Leong Trading Financial Woes - How Does It Affect You?

Impact To SembCorp Industries Ltd (SGX:U96)

Not only banks, SembCorp Industries Ltd was not spared. Sembcorp Cogen Pte. Ltd is a subsidiary of Sembcorp Industries Ltd. There was a gasoil supply and storage agreement between Sembcorp Cogen and Hin Leong Trading whereby Sembcorp Cogen purchased from Hin Leong Trading, and Hin Leong Trading stored and managed on behalf of Sembcorp Cogen, gasoil reserves to fulfil certain regulatory requirements under Sembcorp Cogen’s electricity generation licence.

Sembcorp Cogen had

  • Terminated the Gasoil Supply and Storage Agreement on 22nd April 2020.
  • Commenced legal proceedings in the High Court of the Republic of Singapore (the “Court”) to assert its ownership of the gasoil reserves which are stored in designated tanks at Hin Leong Trading’s affiliate, Universal Terminal (S) Pte Ltd (“Universal Terminal”).
  • Obtained an order from the Court to, amongst other things, restrain Universal Terminal from moving, removing or disposing any of the gasoil reserves claimed by Sembcorp Cogen, and to ensure that such gasoil reserves are stored separately from any other gasoil on 24th April 2020.

Summary

I am not sure how deep the impact of Hin Leong Trading financial woes will impact the local banks and SembCorp. As of today, all 4 stocks are still trading in green. The stock market can really be irrational. Or perhaps the banks are already used to lending money to oil traders and not getting their money back?

Just my few cents worth, trade with caution.

Screening For Dividend Stocks In April 2020

Screening For Dividend Stocks In April 2020

Last month, the stock market had crashed due to the impact of COVID-19. Since then, the stock market has started its recovery when news of government from different countries started to provide stimulus budget to revive the economy. During the crisis, I have picked up OCBC Bank, Singtel, US Manulife REIT and added more of CapitaMall Trust when their stock prices fell. If you didn’t know, I am a dividend investor. Thus, I usually look out for stocks with attractive dividend yield that provides me with endless dividends many years ahead. The stock market crash has provided me with such an opportunity.

I will run the Stocks Café stock screener every month which gives me a list of stocks that fulfill my dividend criteria. I fall into the medium risk type of investor and thus I never looked at stocks with dividend yield more than 10%. Below are the criteria that I used to identify dividend stocks.

  • Current Yield (%) >= 5 and <= 10
  • Price / Earnings <=20
  • Price / Book <= 3
  • Market Capitalization >= 1B

Below are the top dividend yielding stocks as of 10th April 2020. I believe you will see some REITs that you have been eyeing for before the stock market had crashed. Even though the stock prices have started the recovery, the current yield is still attractive.

Name Current Yield % P/E P/B Market Cap
Mapletree NAC Trust 9.981 4.44 0.611 2.8B
OUE Commercial REIT 8.711 13.38 0.618 2B
Ascendas-iTrust 8.644 5.29 1.084 1.4B
DBS 7.837 7.65 0.998 48.7B
Frasers Logistics and Industrial Trust 7.568 9.05 0.974 2.1B
CapitaRetail China Trust 7.557 8.46 0.845 1.6B
Frasers Commercial Trust 7.385 7.91 0.794 1.2B
Suntec REIT 7.37 9.21 0.605 3.6B
CapitaMall Trust 7.125 8.89 0.798 6.2B
Ascendas REIT 7.038 17.7 1.29 10.1B
Yanlord Land 6.733 2.97 0.358 2B
ComfortDelgro 6.527 12.25 1.252 3.2B
Frasers Centrepoint Trust 6.275 9.41 0.87 2.2B
UOB 6.197 7.74 0.849 33.4B
SIA Engineering 6.18 10.44 1.29 2B
CapitaCommercial Trust 6.082 12.77 0.784 5.6B
SPH REIT 6.081 11.84 0.786 2.1B
TCIL HK$ 6.044 17.2 0.329 3.7B
SATS 5.938 15.9 2.211 3.6B
OCBC Bank 5.922 7.91 0.863 39.4B
Jardine Cycle & Carriage 5.833 6.71 0.875 8.1B
Mapletree Commercial Trust 5.595 5.45 0.955 5.6B
Yangzijiang Ship Building 5.435 5.9 0.601 3.6B
Guocoland 5.385 5.72 0.374 1.4B
Olam International 5.208 9.01 0.852 4.6B
SPH 5.195 12.19 0.72 2.5B
Frasers Property 5.128 7.32 0.453 3.4B
Lonza 5.042 5.72 0.659 5.9B

Last, I just want to mention again that the above list is for reference only and we should do our homework before buying into the stock simply for the dividend yield.