tag:blogger.com,1999:blog-88540833098250627522024-03-08T04:08:58.246-08:00Passive LossAll things finance from the lens of a Singaporean Youth.Passive Loss SGhttp://www.blogger.com/profile/15231705917017776583noreply@blogger.comBlogger31125tag:blogger.com,1999:blog-8854083309825062752.post-24766250039001094282024-02-25T05:14:00.000-08:002024-02-25T05:14:59.670-08:00United Hampshire US REIT 2H DPU Drops 27.9%! Should You Be Concerned?<h2 style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Introduction</span></h2><p> It's no secret that the US Retail REIT comprises the majority of my portfolio. It could even be said that my portfolio IS UHREIT, and I can safely say that this will continue to be the case. If you're a regular reader of my blog, then you may recall in a previous post that I mentioned the fact that I would <a href="https://passiveloss.blogspot.com/2024/01/2023-portfolio-performance-thoughts.html" target="_blank">cut my UHREIT holdings if it reached 0.60 USD per unit</a>. Obviously, that never materialised and instead of shooting up to 0.6, it has recently fallen to 0.44. Hence, in the spirit of doing things in an "opposite" sense, I believe this calls for a time of accumulation, foolish as it may initially seem. </p><p><br /></p><p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEhvb6x0aHiwoUi1adSfK48wttd-qLHvjUWPycAnSyR3U5D6qhHQe1X_ksMwnoC2oxfNlCps8mMl-JDpoTVBNyXnyZIZ3Uz_IbA0a5bdoeE_f4MTbWLXWHZXUFnMGjRuLJ8zjy3W_Ts8HSP8INhatsQbBt8XsDo0dEa_0MddxYH-HkF2cynUFxTApQo0MyZI" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="200" data-original-width="200" src="https://blogger.googleusercontent.com/img/a/AVvXsEhvb6x0aHiwoUi1adSfK48wttd-qLHvjUWPycAnSyR3U5D6qhHQe1X_ksMwnoC2oxfNlCps8mMl-JDpoTVBNyXnyZIZ3Uz_IbA0a5bdoeE_f4MTbWLXWHZXUFnMGjRuLJ8zjy3W_Ts8HSP8INhatsQbBt8XsDo0dEa_0MddxYH-HkF2cynUFxTApQo0MyZI=s16000" /></a></div><i><div style="text-align: center;"><i>United Hampshire US REIT's Logo (Source: <a href="https://www.google.com/url?sa=i&url=https%3A%2F%2Fsg.linkedin.com%2Fcompany%2Fuhreit&psig=AOvVaw2XP4lHUWqAAQuYfdgK6jMG&ust=1708916592381000&source=images&cd=vfe&opi=89978449&ved=0CBMQjRxqFwoTCKigk8bAxYQDFQAAAAAdAAAAABAE" target="_blank">UHREIT's LinkedIn Page</a>)</i></div><div style="text-align: center;"><i><br /></i></div></i><p></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">The headline of UHREIT's 2H DPU drop of 27.9% is </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">scary</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">. I mean, it's understandable. Living on $60,000 per year of income is extremely different from living on $45,000 per year, so investors are naturally spooked by the seemingly dire results posted by the REIT. However, in this blog post, I'll hopefully be able to convince you that fundamentally, the REIT has actually posted rather average results, one could even say they're good going by certain yardsticks. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><h2 style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Review of Balance Sheet</span></h2><div><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></div><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">One would most definitely be forgiven for categorising UHREIT in the same group as other SGX-Listed US REITs such as the likes of Keppel Pacific Oak US REIT (KORE), Prime US REIT, and even Manulife US REIT. I mean, UHREIT literally has the word </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">"US" </em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">in the name. But it's important to differentiate the </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">crème de la crème </em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">from the</span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> bourgeoisie. </em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Do note however that with the state of US Commercial Real Estate nowadays, I use the term </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">"crème de la crème" </em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">rather loosely, but we'll take what we can get.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">With US CRE, the main concern within the context of Singapore REITs is the fact that many US CRE property valuations are on a free fall, reducing the REIT's overall portfolio valuation, which is the denominator in the formula for the gearing ratio. Naturally, this would mean that the overall leverage of US REITs may breach the 45% gearing limit imposed by the Monetary Authority of Singapore, alongside various bank loan covenants that may have been imposed on the REIT, leading to insolvency. In fact, certain REITs have already suffered this fate, and the results have been only what could be described as </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">disastrous</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">. </span></p><div><br /></div><div><br /></div><div><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjTy22QdLDHZblOW0n2rlkNbfQJna5-XKHpnF9mXCExce__L1FGlC0WZaK062VEGNAUWR2oEPYG6eJPKBpJhO1cRBg5Qw_otq_6Yo1iV3ghHWuR2PbECxd04eGo0LwoXd4D6f2yIfVUX_1vEuhyk6gAy3q4yj71xtgvylx9WIcA2v97O2olUxbL1pWsjq0B/s1152/Screenshot%202024-02-25%20at%2011.42.00%20AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1152" data-original-width="934" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjTy22QdLDHZblOW0n2rlkNbfQJna5-XKHpnF9mXCExce__L1FGlC0WZaK062VEGNAUWR2oEPYG6eJPKBpJhO1cRBg5Qw_otq_6Yo1iV3ghHWuR2PbECxd04eGo0LwoXd4D6f2yIfVUX_1vEuhyk6gAy3q4yj71xtgvylx9WIcA2v97O2olUxbL1pWsjq0B/s16000/Screenshot%202024-02-25%20at%2011.42.00%20AM.png" /></a></div><i><div style="text-align: center;"><i>UHREIT's Balance Sheet FY2023 (Source: <a href="https://investor.uhreit.com/newsroom/20240222_073356_ODBU_R3GOR6L9VLSJZK2E.2.pdf" target="_blank">UHREIT FY2023 Financial Results</a>)</i></div></i><div><br /></div><div><br /></div><div>Taking a quick cursory glance at the balance sheet, we can see that leverage ratio concerns can immediately be dismissed. Although NAV per unit has slightly decreased from 0.75 to 0.74 USD, it's mainly due to dilution from management fees paid in units alongside the DRIP programme. </div><div><br /></div><div><br /></div><div><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj4D7mQBx1uz11U2epoMyzz68Bze4hRWoRfOhqG7FqtAZamlC0pKn-aU6bgAJuvDmNbJ9z4DDyXAdpwIwg8sw_yptU9u8jBcgPjjSWwyArg4rB7O2wmIZRPkysKrorddbZNyKgFAbp0C9ZygVZtQDF9fzJIcZzqgYC2po184ojIeFqzUgRQ3GB15sTXD8Y5/s1770/Screenshot%202024-02-25%20at%206.35.53%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1016" data-original-width="1770" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj4D7mQBx1uz11U2epoMyzz68Bze4hRWoRfOhqG7FqtAZamlC0pKn-aU6bgAJuvDmNbJ9z4DDyXAdpwIwg8sw_yptU9u8jBcgPjjSWwyArg4rB7O2wmIZRPkysKrorddbZNyKgFAbp0C9ZygVZtQDF9fzJIcZzqgYC2po184ojIeFqzUgRQ3GB15sTXD8Y5/s16000/Screenshot%202024-02-25%20at%206.35.53%20PM.png" /></a></div><br /><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh1ri2Vfsut3hQx2tQiK-2r_h_B-vrDT8wg0DLdnNHf_5k8MaUALE1UrVPXkmQxOW2ehQbXVcT9kbrhyphenhyphen2_XJLxgOU9i2u79i9-b6OPRj_exv26sc_XSkifUnBgVcMONjPlWR_2c05j68ANX80NKMYib7Xtk1n_EYxIk6YJBJQ43CrO5N8Kc_ysir55BrYlp/s1780/Screenshot%202024-02-25%20at%207.08.09%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1034" data-original-width="1780" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh1ri2Vfsut3hQx2tQiK-2r_h_B-vrDT8wg0DLdnNHf_5k8MaUALE1UrVPXkmQxOW2ehQbXVcT9kbrhyphenhyphen2_XJLxgOU9i2u79i9-b6OPRj_exv26sc_XSkifUnBgVcMONjPlWR_2c05j68ANX80NKMYib7Xtk1n_EYxIk6YJBJQ43CrO5N8Kc_ysir55BrYlp/s16000/Screenshot%202024-02-25%20at%207.08.09%20PM.png" /></a></div><div style="text-align: center;"><i>UHREIT's FY2023 Aggregate Leverage (Source: <a href="https://investor.uhreit.com/newsroom/20240222_073356_ODBU_R3GOR6L9VLSJZK2E.1.pdf" target="_blank">UHREIT FY2023 Investor Presentation</a>)</i></div><div style="text-align: right;"><br /></div><div style="text-align: right;"><br /></div><div style="text-align: left;"><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">We can see that in a time when US office property valuations are free-falling, UHREIT's property valuations instead continue to climb, reducing overall leverage. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">This tells us two things:</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">1. There's not too much to worry about regarding property valuations revising downwards due to higher interest rates. These increased property valuations are </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">already</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> conducted in an environment of high-interest rates, so </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">ceteris parabus, </em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">as long as management doesn't decide to take on any more debt, we're most likely safe from any covenant or regulatory breach.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">2. The asset class UHREIT specialises in is expected by financial institutions to do well in the coming years</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">I don't know about you, but I believe both are plus points for the REIT. </span></p></div><div style="text-align: left;"><br /></div><div style="text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjknB6o3-afPVzGrSVSygRdPoCpfeI67XyibW7JySg_AeHh844EDQZNRNXolbpYMXwzWxpxn7gP74R1WpmFFTFJiGg34x5GxGk3i5fenD6ReeWCTSR6zP7HzuesBG1YmNZuUCKgPPByWL0OTmoIQOM31YAynPAz7ARqSplb28oYVCmkfUkIqeAOXAh0IQsR/s796/Screenshot%202024-02-25%20at%208.02.00%20PM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="748" data-original-width="796" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjknB6o3-afPVzGrSVSygRdPoCpfeI67XyibW7JySg_AeHh844EDQZNRNXolbpYMXwzWxpxn7gP74R1WpmFFTFJiGg34x5GxGk3i5fenD6ReeWCTSR6zP7HzuesBG1YmNZuUCKgPPByWL0OTmoIQOM31YAynPAz7ARqSplb28oYVCmkfUkIqeAOXAh0IQsR/s16000/Screenshot%202024-02-25%20at%208.02.00%20PM.png" /></a></div><div style="text-align: center;">UHREIT's FY2023 Debt Maturity Profile (Source: <a href="https://investor.uhreit.com/newsroom/20240222_073356_ODBU_R3GOR6L9VLSJZK2E.1.pdf" target="_blank">UHREIT FY2023 Investor Presentation</a>)</div><div style="text-align: center;"><br /></div><div style="text-align: right;"><br /></div><div style="text-align: left;">If you're concerned about refinancing into higher rates, then you'll be happy to know that not only is the next refinancing cycle taking place in 2025, but the company also has the option to exercise a delay in their loan repayment to 2026, with the common consensus being that interest rates would have lowered and normalised a great deal by then. </div><div style="text-align: left;"><br /></div><div style="text-align: left;">Overall, I believe we can say that UHREIT's balance sheet continues to remain fundamentally sound so any risk of insolvency can be brushed off for now.</div><div style="text-align: left;"><br /></div><div style="text-align: left;"><h2>Review of FY2023 Performance</h2><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhZoCPuxDO_DVmylddJ-v5gACOmawzBMkOANBm4icz-B_YCUQ61_bnjGE3ji2MKa2DathmyJqHXBwu7x46IKPankOAfxxKSWCWNcaHlBevrCDueouyMiWau8v1JTNT50WzFy0snHb7TxAkwBBNrLkLUe8TGmKuil4jAqAEyOScM4kmKUfRZt9l00fJlHNvY/s1300/Screenshot%202024-02-25%20at%208.23.43%20PM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="698" data-original-width="1300" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhZoCPuxDO_DVmylddJ-v5gACOmawzBMkOANBm4icz-B_YCUQ61_bnjGE3ji2MKa2DathmyJqHXBwu7x46IKPankOAfxxKSWCWNcaHlBevrCDueouyMiWau8v1JTNT50WzFy0snHb7TxAkwBBNrLkLUe8TGmKuil4jAqAEyOScM4kmKUfRZt9l00fJlHNvY/s16000/Screenshot%202024-02-25%20at%208.23.43%20PM.png" /></a></div><br /><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj2bqwJOVrgkqZK6gkMutMJFcqMGQOMvKsSLpZIOD2QNR0ZQB48KZ8oYbyJijZpwImkZrNbKJ4Mfs0QI9PTrdlOQk4zZgFkndBGnwz9fsiqkIA1GiVeK8ywtjLRl0O54pWg3TsRS1gSjerwYEchSyHQluVyBkAk_zg6RmlHeRPv2oW3ZkTsPM1oHFyK_WZX/s1928/Screenshot%202024-02-25%20at%208.26.13%20PM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1090" data-original-width="1928" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj2bqwJOVrgkqZK6gkMutMJFcqMGQOMvKsSLpZIOD2QNR0ZQB48KZ8oYbyJijZpwImkZrNbKJ4Mfs0QI9PTrdlOQk4zZgFkndBGnwz9fsiqkIA1GiVeK8ywtjLRl0O54pWg3TsRS1gSjerwYEchSyHQluVyBkAk_zg6RmlHeRPv2oW3ZkTsPM1oHFyK_WZX/s16000/Screenshot%202024-02-25%20at%208.26.13%20PM.png" /></a></div><div style="text-align: center;">UHREIT's FY2023 Performance (Source: <a href="https://investor.uhreit.com/newsroom/20240222_073356_ODBU_R3GOR6L9VLSJZK2E.2.pdf" target="_blank">UHREIT FY2023 Financial Results</a>)</div><div class="separator" style="clear: both; text-align: center;"><br /></div><div><br /></div><div>In terms of actual financial performance, we can say that occupancy rates have slightly moderated for both Self-Storage and Grocery-Anchored Retail asset classes, with self-storage being hit harder. This makes sense since self-storage is more of a luxury as opposed to being an actual necessity. Despite this moderated occupancy, we see that net property income continues to climb, implying much further upside in DPU is in store for us in the near future when the economy recovers from the recent interest rate hikes. </div><div><h2>So Why Did DPU Drop So Much?</h2></div><div><div>Firstly, the management has opted to take its fees entirely in cash as opposed to cash, which was previously around the 10% mark in terms of distributable income. </div><div><br /></div><div>Another reason is the fact that the management has retained $1.3 million USD for capital expenditure for Asset Enhancement & Development initiatives, further enhancing its portfolio's competitiveness, such as the recent St. Lucie Academy + Outdoors expansion. In fact, since the expansion was only completed in November, the full increased rental hasn't been captured by the accounting period of FY2023, so we'll continue to see the upside contributed by that. </div><div><br /></div><div>Lastly, the distributable income (and conversely DPU) fell due to higher financing costs which has plagued the highly leveraged REIT sector as a whole. Adjusted DPU which excludes the other above two reasons would result in only a total of 5.8% decrease between FY23 and FY22, which I believe is fairly reasonable given the fact that rates have skyrocketed so fast in such a short period of time. In a sense, one could say that investors are currently facing short-term "pain" for long-term gain as the DPU reductions reduce dilution by management alongside further bolstering the REIT's portfolio valuation and potential future NPI via AEIs. </div></div><div><h2>Overall Conclusion</h2></div><div>Even at the artificially reduced annualised DPU of 4.28 US cents per unit per year, at an 8% dividend yield which I believe is fairly reasonable for an overseas robust REIT, that would indicate a valuation of 0.535 USD per unit, which far exceeds the current valuation the market is pricing the REIT at, not to mention how conservative this valuation already is. The market has severely underpriced this ticker as a result of it being misunderstood as simply just another US CRE REIT when it clearly sets itself apart from the rest in terms of the resiliency of its cashflows coupled with its unique asset class. </div><div><br /></div><div>Overall, I believe that the REIT has actually delivered a rather good result for the year, and will now pivot to contributing more funds into the battered-down ticker. </div></div><div style="text-align: left;"><br /></div><div style="text-align: left;"><b><i>Author's Note: Sorry if this is a rather short and sparse post, simply wanted to articulate some of my thoughts and see if my investment thesis still made sense. Recently started a job which is why I haven't had much time to post, still hope you guys still enjoyed it though!</i></b></div><div style="text-align: left;"><p style="background-color: white; color: #4e4e4e; font-family: Roboto, sans-serif; font-size: 15px; text-align: justify;"><i style="color: #222222;"><b style="font-style: normal;">Think this article is something you'd want more of? Subscribe <a href="https://follow.it/passive-loss?leanpub" style="background: transparent; color: #d90c0c; text-decoration-line: none;" target="_blank">here</a> using your email to get notified about my latest blog articles, I'd truly be grateful!</b></i></p><p style="background: rgb(255, 255, 255); color: #0e101a; font-family: Roboto, sans-serif; font-size: 15px; margin-bottom: 0pt; margin-top: 0pt;"><i><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">I have no plans to initiate any additional positions in the stocks I have mentioned within the next 72 hours. </strong><b>All content published by me should not be construed as any sort of financial or investment advice and is simply for informational purposes. Although all research and figures are accurate and calculated to the best of my ability, I am not liable for any decisions made based on inaccurate information.</b></i></p></div>Passive Loss SGhttp://www.blogger.com/profile/15231705917017776583noreply@blogger.com2tag:blogger.com,1999:blog-8854083309825062752.post-87892481149977015142024-02-01T03:05:00.000-08:002024-02-01T03:05:53.055-08:00Keppel FY23 Results! Keppel Valuation & Performance Review<h2><b>Introduction</b></h2><p><b>Keppel Limited (SGX: BN4) </b>is a stock ticker I hold dearly to me. I <a href="https://passiveloss.blogspot.com/2023/02/throwing-diversification-out-of-window.html" target="_blank">went all in</a> on the counter just around the time when the Seatrium spin-off was announced and I must say it's been an extremely rewarding journey. I've been looking forward to whatever updates the conglomerate has provided and since it's been a while since the last time I took a look at Keppel, I wanted to see if it's still a <b>BUY</b>. </p><p>In this brief article, I'll cover Keppel's FY23 Financial Performance and how it holds up against previous years, Balance Sheet health, and find an approximate fair intrinsic value of Keppel. </p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEglGUyNgAXo8pYrYOtN2oVdFcRk79BSqzvnZhrLTE2IY2dyllPPK8JtigclVwcUp-_Lr7EL2k5GvGaLDg6370UI6hc28oyZekX9xX48eFV4EQpvlAry5G8bAaSnjI9peZXvliqiJpUoZXajLMcT56UNEYlN04GiSHOBpxFVStTn84L9TJ_9XkwYn7VKlP_a/s900/Keppel.jpeg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="900" data-original-width="900" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEglGUyNgAXo8pYrYOtN2oVdFcRk79BSqzvnZhrLTE2IY2dyllPPK8JtigclVwcUp-_Lr7EL2k5GvGaLDg6370UI6hc28oyZekX9xX48eFV4EQpvlAry5G8bAaSnjI9peZXvliqiJpUoZXajLMcT56UNEYlN04GiSHOBpxFVStTn84L9TJ_9XkwYn7VKlP_a/s16000/Keppel.jpeg" /></a></div><i><div style="text-align: center;"><i>Keppel Limited's Logo (Source: <a href="https://www.youtube.com/KeppelCorporationLtd" target="_blank">Keppel Youtube</a>)</i></div></i><h2 style="text-align: left;"><b><br /></b></h2><h2 style="text-align: left;"><b>Overview of FY23</b></h2><div><b><br /></b></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjmhqWfeStSJ1qUo4sp4jJ_n7wcE6OAwhn-f26cBj9pCTyc_Be1C8-KRXS96BJB-q03OKe3Yw9oGVTXn-VbXp2zZ6byX__ju9vgGrSab0vlEHF3PSKTwhvlqiAc5aAW1zZqwMJDV_K-PpiWIx9SBI2-FunumpGnRphAVrvFQ7e4dTtSGJpES8fVE7_TAWaq/s1766/Screenshot%202024-02-01%20at%2010.00.05%20AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="912" data-original-width="1766" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjmhqWfeStSJ1qUo4sp4jJ_n7wcE6OAwhn-f26cBj9pCTyc_Be1C8-KRXS96BJB-q03OKe3Yw9oGVTXn-VbXp2zZ6byX__ju9vgGrSab0vlEHF3PSKTwhvlqiAc5aAW1zZqwMJDV_K-PpiWIx9SBI2-FunumpGnRphAVrvFQ7e4dTtSGJpES8fVE7_TAWaq/s16000/Screenshot%202024-02-01%20at%2010.00.05%20AM.png" /></a></div><br /><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiIBmqgevGrhvMN1JXM9v58ETB9aml_DVFNHAhk9eLBWGsUWXWg4rajEDlT1GJAdigFBck-5Sf6dSEUqf9v-kwgy_aQFeFEtolkJxk1IMPrTtZdbX67Aa0_sfIqdVAeBkBN_GwK1ufwGmHvxtIxMojxOg2TvRweOqw6FbUgKftfNgA1uCyXu22n9VwTFCe3/s1918/Screenshot%202024-02-01%20at%2010.00.28%20AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1076" data-original-width="1918" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiIBmqgevGrhvMN1JXM9v58ETB9aml_DVFNHAhk9eLBWGsUWXWg4rajEDlT1GJAdigFBck-5Sf6dSEUqf9v-kwgy_aQFeFEtolkJxk1IMPrTtZdbX67Aa0_sfIqdVAeBkBN_GwK1ufwGmHvxtIxMojxOg2TvRweOqw6FbUgKftfNgA1uCyXu22n9VwTFCe3/s16000/Screenshot%202024-02-01%20at%2010.00.28%20AM.png" /></a></div><i><div style="text-align: center;"><i>Keppel FY23 Financial Results (Source: <a href="https://links.sgx.com/FileOpen/2.%20Keppel%20Ltd.%202H23%20_%20FY23%20Presentation%20Slides.ashx?App=Announcement&FileID=785522" target="_blank">Keppel FY23 Investor Presentation Slides</a>)</i></div></i><div><br /></div><div><i><b>To sum it up:</b></i></div><div><br /></div><div><i>- Keppel Corp's 2H23 Dividend increased by 5.5% to $0.19 as opposed to last year's $0.18</i></div><div><i><br /></i></div><div>-<i> 2H23 Net Profit from continuing operations was $440 million, 9% higher YoY.</i></div><div><i><br /></i></div><div><i>- Excluding discontinued operations and DIS loss, ROE improved to 9.3% in FY23 from 7.3% in FY22. </i></div><div><br /></div><div>- <i>54% Growth in recurring income YoY, with 88% of FY23 net profit from continuing operations being recurring in nature from 60% in FY22.</i></div><p>Overall, it's been a rather rewarding fiscal year for Keppel shareholders. However, it's important to note that although Keppel's net profit from continuing operations has increased, not all business segments have experienced a corresponding increase. </p><p>Net profit attributed to the Real Estate segment decreased to $426 million in FY23 from FY22's $464 million, <i>thanks</i> to the extensive leveraging and quick successive deleveraging in the China Real Estate space. I believe the problem China's economy is facing is a deep-rooted structural one, and consequently would take at least a few years for the global superpower to sort itself out. </p><p><br /></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiqSNTZQD1hnVUaj_Rm_231bkHv6qWE6obtrH35ShYfOpHXzO5T_mGSclyd10r4N4x_6i7lbIDmHD8RgsiTzyZJvi4J8OnhkjEUbZv3U_ltxlmjL_juOkHhcI-l7URbKdRJI_y2qE4rd1VnOtzJN5a3DbsuqUUB9-oGa2BQOyb-g8N3FIcCFi_pRbL6EKxN/s1840/Screenshot%202024-02-01%20at%2010.50.23%20AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1022" data-original-width="1840" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiqSNTZQD1hnVUaj_Rm_231bkHv6qWE6obtrH35ShYfOpHXzO5T_mGSclyd10r4N4x_6i7lbIDmHD8RgsiTzyZJvi4J8OnhkjEUbZv3U_ltxlmjL_juOkHhcI-l7URbKdRJI_y2qE4rd1VnOtzJN5a3DbsuqUUB9-oGa2BQOyb-g8N3FIcCFi_pRbL6EKxN/s16000/Screenshot%202024-02-01%20at%2010.50.23%20AM.png" /></a></div><div class="separator" style="clear: both; text-align: center;"><i>Keppel's Infrastructure Segment FY23 vs FY22 Performance (Source: <a href="https://links.sgx.com/FileOpen/2.%20Keppel%20Ltd.%202H23%20_%20FY23%20Presentation%20Slides.ashx?App=Announcement&FileID=785522" target="_blank">Keppel FY23 Investor Presentation Slides</a>)</i></div><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Keppel's Infrastructure Business Segment stood out with a 135% YoY increase in net profit. Given that this huge increase is mainly attributed to Asset Management fees and Operating Income, both recurring in nature, I believe we can continue to see a similarly high performance for the segment in the near future. It's also interesting to note that Keppel has managed to increase the gross margin for its Infrastructure & Connectivity arising from higher contract spreads. In fact, materials, subcontracts, and other costs </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">decreased </strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">in FY23. In such an inflationary environment that we live in today, it is comforting as a Keppel investor to see that the company has made proactive strides in increasing cost efficiency. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">In terms of overall outlook, as the world transitions to a greater reliance on clean, renewable energy, Keppel's Infrastructure Segment seems to be poised to benefit greatly. The connectivity segment will also most likely experience a surge in growth for the coming years ahead given the recent Artificial Intelligence Tech boom, increasing the demand for data center spaces. Asset Management will also help the company build up its recurring income base via an asset-light business model. Although the heavily China-centric Real Estate segment may be languishing, the recent nose-dive in China investor sentiment may represent a nadir of the economic crisis, with a potential turn-around coming in the next few years. </span></p><h2 style="text-align: left;">Balance Sheet Health</h2><div><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEipcXuOafDEsuMQiUg6zTquilfvDQ3vPz36YRH2y7e1b9aTlBtpVOz-k3724kTd_LMxp_CN56F6ZgDiwDj7pLyIVYrcRMbBHI2d2QY8I5XPi0tQxIon0mkANKkF3HFt2k8GlaMutzJ4yehXEG4dXhHBmMS1eEA6402LyBGun95Uwt1gKlJUj0MQjHXoo9UH/s1044/Screenshot%202024-02-01%20at%201.34.22%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1044" data-original-width="754" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEipcXuOafDEsuMQiUg6zTquilfvDQ3vPz36YRH2y7e1b9aTlBtpVOz-k3724kTd_LMxp_CN56F6ZgDiwDj7pLyIVYrcRMbBHI2d2QY8I5XPi0tQxIon0mkANKkF3HFt2k8GlaMutzJ4yehXEG4dXhHBmMS1eEA6402LyBGun95Uwt1gKlJUj0MQjHXoo9UH/s16000/Screenshot%202024-02-01%20at%201.34.22%20PM.png" /></a></div><i><div style="text-align: center;"><i>Keppel Limited's FY23 Balance Sheet (Source: <a href="https://links.sgx.com/FileOpen/MREL_1.%20Keppel%20Ltd.%202H23%20_%20FY23%20Financial%20Statements.ashx?App=Announcement&FileID=785521" target="_blank">Keppel Limited FY23 Financial Report</a>)</i></div></i><div style="text-align: center;"><br /></div><div style="text-align: left;"><div>Total assets have more or less stayed the same, with liabilities in contrast greatly increasing due to a higher amount of non-current term loan liabilities. Gearing has crept up rather highly to a net gearing ratio of x0.90 as opposed to x0.78 the previous fiscal year. </div><div><br /></div><div>With a current ratio of x1.04, which is greater than 1, Keppel shouldn't see any issues when it comes to short-term debt obligations, but I must confess that the gearing slowly climbing year by year is something of concern to me. Although the figure of x0.9 itself isn't too worrying, I'm more unsettled by the trend of increasing leverage. </div></div><div style="text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjqSU_xxlCgpkqjOZLIAeYDK-qoonpMkO3Pd4S8gSkepCHf_Uacrvkv-5MiJEJyUooi_7qabYltSromAO3FQXZATseilQcAr_M0xpklBiNy7PwgZEi-MG_H-cWp0xnBn2POm9MAN2hvJbiG90yPmhbbnOLr9RLe_P7h2wF00hHVnh6D3kpmdfiELG8-_g9z/s958/Screenshot%202024-02-01%20at%202.17.01%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="958" data-original-width="686" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjqSU_xxlCgpkqjOZLIAeYDK-qoonpMkO3Pd4S8gSkepCHf_Uacrvkv-5MiJEJyUooi_7qabYltSromAO3FQXZATseilQcAr_M0xpklBiNy7PwgZEi-MG_H-cWp0xnBn2POm9MAN2hvJbiG90yPmhbbnOLr9RLe_P7h2wF00hHVnh6D3kpmdfiELG8-_g9z/s16000/Screenshot%202024-02-01%20at%202.17.01%20PM.png" /></a></div><br /><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhSXWcLdXXWNApKMn7W2XphFBW_CHs_sIMNthbxXv7aQGy0dP_U0T4qZaGJBnpzhwGKMC5nr39BytFL2YAYxNi5lVyYKQ5vZjkn60lOnKnbizjuMhH2BlJxyN6KWjXHnqVLGiT54wPHww2EGuZ6vTR7YyUTqBV63dsbTXpHSNtGFxioEDeSvT23654mfL-6/s652/Screenshot%202024-02-01%20at%202.17.08%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="356" data-original-width="652" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhSXWcLdXXWNApKMn7W2XphFBW_CHs_sIMNthbxXv7aQGy0dP_U0T4qZaGJBnpzhwGKMC5nr39BytFL2YAYxNi5lVyYKQ5vZjkn60lOnKnbizjuMhH2BlJxyN6KWjXHnqVLGiT54wPHww2EGuZ6vTR7YyUTqBV63dsbTXpHSNtGFxioEDeSvT23654mfL-6/s16000/Screenshot%202024-02-01%20at%202.17.08%20PM.png" /></a></div><br /><div style="text-align: center;"><i>Keppel FY23 Cashflow Statement (Source: <span style="text-align: center;"><a href="https://links.sgx.com/FileOpen/MREL_1.%20Keppel%20Ltd.%202H23%20_%20FY23%20Financial%20Statements.ashx?App=Announcement&FileID=785521" target="_blank">Keppel Limited FY23 Financial Report</a>)</span></i></div><div class="separator" style="clear: both; text-align: center;"><i><br /></i></div><div style="text-align: left;"><div>If I'm interpreting this correctly, I believe that since Keppel requires ample amounts of cash to repay debt obligations, not much Free Cash Flow to Equity is generated, so I believe dividends are funded by debt. Additionally, Keppel has been growing its business via a spree of acquisitions to enhance inorganic growth, resulting in higher investment CAPEX. Although I do not like the fact that Keppel requires debt to fund its dividend policy, its net profit should cover the policy once CAPEX normalises. After all, the conglomerate's businesses are fundamentally cashflow-rich. </div><div><br /></div><div>Overall, Keppel's FY23 Financial Health is a bit iffy to me albeit manageable, so I'll continue to closely monitor it and take action should unexpected developments occur.</div></div><h2 style="text-align: left;">Valuation</h2><div>Due to Keppel's unpredictable cashflows due to highly variable investing CAPEX and Net Working Capital, a Discounted Cash Flow (DCF) valuation model would be unfeasible with too many assumptions, defeating the point. Hence, I have opted for a simple historic multiple valuation.</div><div><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh61TjoASQuhLDyaANhTTxT7CkDRglJWostKlzpPwTSBHl5G-u9HgV0ww7PmcXUQucknvZ-PxAZcFiCuMG8QaXB2vfc-hZhUnAnbdZa63QCQx9wO_jQUDzkimkfIz_YM7jBV5WgUb_eoDyZN5iYyBeUYE7blBerHwdForsMK3SSsD3pLuBzuiFuM4KvXe0b/s1156/Screenshot%202024-02-01%20at%202.44.36%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="982" data-original-width="1156" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh61TjoASQuhLDyaANhTTxT7CkDRglJWostKlzpPwTSBHl5G-u9HgV0ww7PmcXUQucknvZ-PxAZcFiCuMG8QaXB2vfc-hZhUnAnbdZa63QCQx9wO_jQUDzkimkfIz_YM7jBV5WgUb_eoDyZN5iYyBeUYE7blBerHwdForsMK3SSsD3pLuBzuiFuM4KvXe0b/s16000/Screenshot%202024-02-01%20at%202.44.36%20PM.png" /></a></div><div style="font-style: italic; text-align: center;"><i>Keppel's Historic PE Ratio (Source: <a href="https://growbeansprout.com/quote/BN4.SI/valuation" target="_blank">GrowBeanSprout</a>)</i></div><div style="font-style: italic; text-align: center;"><i><br /></i></div><div style="text-align: left;"><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">With valuation pegged to the historic average of x14.1 P/E using diluted earnings from continuing operations per share of 49.1 cents</span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">, </em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">the value derived would be $6.91. Although the current price is higher than the derived figure, I believe Keppel is still an attractive buy. One may argue that by using the Graham & Dodd Sustainable Earnings Power formula with 10% approximate WACC as the discount rate for a "medium-risk", flat, non-growing company should by default command a P/E of 10. However, with Keppel's transition to an asset-light, recurring income business with high growth prospects, a P/E ratio similar to CapitaLand Investment, which can be considered a comparable company of approximately 20 may be warranted. Another thing to consider is the fact that Keppel was historically in "unsexy", cyclical industries that commanded low PE valuations, which may have resulted in a deflated historical PE ratio. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><h2 style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: left;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Conclusion</span></h2><div><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></div><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Overall, I believe Keppel is a high-quality business with great potential to become a "dividend compounder", with management steering the company in a direction of higher quality, predictable earnings. $6.91 per share is simply a "minimum" and conservative value. I believe that should the group continue to be on track for its 2030 vision, immense upside can continue to be captured. However, I am being cautiously optimistic, since I find the cash flow strain and leveraging to be a tad too high for my liking. I will continue to stay vested in the company for the long term and perhaps add my stakes in it along the way should the price dip below $6.91, granted I have sufficient liquidity. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><div><p style="text-align: justify;"><i style="color: #222222;"><b style="font-style: normal;">Think this article is something you'd want more of? Subscribe <a href="https://follow.it/passive-loss?leanpub" target="_blank">here</a> using your email to get notified about my latest blog articles, I'd truly be grateful!</b></i></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><i><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">I have a stock position in the company I have mentioned, but have no plans to add, reduce or initiate any such positions within the next 72 hours. </strong><b>All content published by me should not be construed as any sort of financial or investment advice and is simply for informational purposes. Although all research and figures are accurate and calculated to the best of my ability, I am not liable for any decisions made based on inaccurate information.</b></i></p></div><div><br /></div><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"></p></div><p><br /></p>Passive Loss SGhttp://www.blogger.com/profile/15231705917017776583noreply@blogger.com2tag:blogger.com,1999:blog-8854083309825062752.post-54007305060492189122024-01-05T01:33:00.000-08:002024-01-05T03:20:27.942-08:002023 Portfolio Performance & Thoughts<p><b>Author's Notice: Hello everyone! Before I begin this post, I would just like to point out that I recently started a <a href="https://www.youtube.com/channel/UCiOXEEsSrLhZ6IAkU7VJfUA" target="_blank">Youtube Channel</a>, rebranding myself as "The Incipient Investor", and have posted a rather comprehensive analysis & valuation of <a href="https://www.youtube.com/watch?v=cGLDyzXKXcQ" target="_blank">Raffles Medical</a> on there so do check it out if you've missed that! I'll be creating videos to accompany every blog post now moving forward, even this <a href="2023 Portfolio Review || My Thoughts Regarding 2024 Investing! https://youtu.be/427ywa9EA5U" target="_blank">one</a>! Thanks for the support!</b></p><p>To start off this post, I'd just like to say that I know I'm rather late when it comes to analysing my portfolio performance for 2023. </p><p>I'd first like to commemorate an important milestone that my portfolio has crossed, which is the <b>20K </b>figure, only achieving it just recently during the final days of December when equities significantly rallied due to the Federal Reserve singing more dovish tones, resulting in the market starting to price in multiple interest rate cuts starting as early as 2H FY24. </p><p><br /></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjroMNk5HIFHB73Umb1Go3FGwxhmMTlmXxnOsQHw7E70LWcKF1Wzmnzm8OA9GhYOQX07OwTLaFsh_FD0quhlBa3FTSnkm-XE5PaoeiWkRbEjmq-dFR28ODXrP5_S3CaNN2gqjSqRD2pKWdcNsLFItH2FPCjEWxPbeLwfolVPXnDll4dChk9ThVvrWevBb1z/s1086/IMG_3524.jpg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1037" data-original-width="1086" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjroMNk5HIFHB73Umb1Go3FGwxhmMTlmXxnOsQHw7E70LWcKF1Wzmnzm8OA9GhYOQX07OwTLaFsh_FD0quhlBa3FTSnkm-XE5PaoeiWkRbEjmq-dFR28ODXrP5_S3CaNN2gqjSqRD2pKWdcNsLFItH2FPCjEWxPbeLwfolVPXnDll4dChk9ThVvrWevBb1z/s16000/IMG_3524.jpg" /></a></div><div style="text-align: center;"><i>My Portfolio Holdings End of 2023 </i></div><div style="text-align: center;"><i><br /></i></div><div style="text-align: left;">Before you come at me, yes, I know my portfolio is extremely over-concentrated. It's basically only two stocks, with about 2k SGD being parked in <b>Fullerton SGD Cash Fund "A" </b>to accumulate interest at elevated rates while interest rates remain high. I would also like to mention that I did a trade by buying 300 units of CICT at $1.71 per unit back in October when REITs experienced a pullback, then later selling it in December for $2.02. My rationale for doing this is that I believe we will see relatively higher interests as the new normal, so assuming that blue-chip REITs will return to pre-hike prices is at least to me, not the best to make. Since investors would naturally demand higher dividend yields, I opine that if we were to maintain the historic dividend yield spread, the new standard dividend yield for blue chips should be around a mid 5% to 6+%. Of course, this is just my gut feeling. </div><div style="text-align: left;"><br /></div><div style="text-align: left;">United Hampshire US REIT has run up quite significantly in recent times, and given the fact that it already makes up the majority of my portfolio, I don't think I will add much to it, assuming I do. In fact, should prices near the 0.6 USD per unit mark, I will begin to slightly trim the position. </div><div style="text-align: left;"><br /></div><div style="text-align: left;">Keppel Corp has also maintained a great performance, breaching the $7 per unit mark. Personally, I find no need to trim stakes in my Keppel Corp position given the fact that I believe it is a solid long term-hold with great growth prospects should it be on track regarding the management's 2030 vision.</div><div style="text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEihrsmbwaxcqnhiYtjodV685SdqG7ms-byxa4byS3gvrtAtaS05AM8ErrWAVpfJJ4SpoaxqhS1AfB41yx2ggMIYp_MhkVlKboUVB8ZVPPqod-fHYMS6J3SSiV8m5NsFbVGEtdO_4fER7d2j1WyyWYsr0gfczjMYEWCZtCEF6cc-LZEa91jsd__Bq85wN0m8/s1282/Screenshot%202024-01-03%20at%208.12.40%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="152" data-original-width="1282" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEihrsmbwaxcqnhiYtjodV685SdqG7ms-byxa4byS3gvrtAtaS05AM8ErrWAVpfJJ4SpoaxqhS1AfB41yx2ggMIYp_MhkVlKboUVB8ZVPPqod-fHYMS6J3SSiV8m5NsFbVGEtdO_4fER7d2j1WyyWYsr0gfczjMYEWCZtCEF6cc-LZEa91jsd__Bq85wN0m8/s16000/Screenshot%202024-01-03%20at%208.12.40%20PM.png" /></a></div><i><div style="text-align: center;"><i>Portfolio Performance According To Tiger Brokers</i></div></i><div style="text-align: left;"><br /></div><div style="text-align: left;"><div>My portfolio performance has been satisfactory in my opinion, generating alpha and higher risk-adjusted returns, which justifies the massive under-diversification I have practiced. </div><div><br /></div><div>In addition, I have been receiving rewards from Tiger Brokers due to being a captain in the 2023-2024 Elite Team Trading Competition, with my team typically ranking 25-40th in the monthly rankings. So far, I have received $100 in cash vouchers which I am thankful for, since that basically means Tiger has paid me more than I've paid them in fees. </div><div><br /></div><div>As of right now, I find myself being petrified by the recent run-up in the stock market. I understand that you must divorce intrinsic value and the entry price, but it seems like I am paralysed by fear when the stock market rises, which is a rather critical flaw in my investing mindset since the stock market more often than not goes up. It's quite odd that I'm fearful when markets go up isn't it haha! I simply cannot find much quality bargains in the current market climate. </div><div><br /></div><div>In terms of my 2024 outlook, I definitely want to diversify my portfolio. I'm reaching a critical point in terms of portfolio value where I don't think I can feel at ease letting the fate of my savings be solely dictated by 1 or 2 stocks. Consequently, I aim to initiate substantial positions in at least 3-4 new stocks with differing industry sectors, probably consisting of the larger cap stocks that I've covered in this blog. I believe the SG banks are currently still undervalued and despite interest rates potentially dropping, I believe loan volume increase will more than compensate for the drop in Net Interest Margins. My gut feeling is that we'll have a mild recession in 2024 but that's simply felt and unfounded, without any facts backing it up, so perhaps I might initiate a position in a defensive stock. Overall, I'm simply at a loss with what to invest in for 2024. Perhaps I will maintain a higher cash allocation or simply force myself to be comfortable investing further. Who knows? I may unexpectedly find some undervalued gems. </div></div><div style="text-align: left;"><br /></div><div style="text-align: left;"><div><p style="text-align: justify;"><i style="color: #222222;"><b style="font-style: normal;">Think this article is something you'd want more of? Subscribe <a href="https://follow.it/passive-loss?leanpub" target="_blank">here</a> using your email to get notified about my latest blog articles, I'd truly be grateful!</b></i></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><i><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">I have no stock, option or similar derivative position in any of the companies I have mentioned, and no plans to initiate any such positions within the next 72 hours. </strong><b>All content published by me should not be construed as any sort of financial or investment advice and is simply for informational purposes. Although all research and figures are accurate and calculated to the best of my ability, I am not liable for any decisions made based on inaccurate information.</b></i></p></div><div><br /></div></div><div style="text-align: left;"><br /></div><div style="text-align: left;"><br /></div><div style="text-align: left;"><br /></div><div style="text-align: left;"><br /></div><p><br /></p>Passive Loss SGhttp://www.blogger.com/profile/15231705917017776583noreply@blogger.com4tag:blogger.com,1999:blog-8854083309825062752.post-11181815568886295142023-12-31T01:59:00.000-08:002024-01-01T02:43:16.190-08:00Raffles Medical - Health For You And Me, What About For Our Portfolios?<h2><b>Introduction</b></h2><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; font-weight: normal; margin-bottom: 0pt; margin-top: 0pt; text-align: left;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">In recent times, we've seen the rather fierce comeback of REITs, evident from the fact that the iEdge S-REIT index rebounded by approximately 14% from its recent October 26 lows. If you ask the average Singaporean investor, they'll tell you that the Singapore stock market is only renowned for two assets: The trio of banks, alongside S-REITs. However, with the recent run S-REITs' prices have undergone, I can't help but wonder if there are any other quality stocks our little red dot can offer. After all, we don't want our portfolio to simply consist of real estate and financials now, do we?</span></p><p><br /></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhQyE03cH36lhJdPQugN6JIQdqbbPgI0Q__0hhlnq_J_v8nUgrDBTFiyD-X7FGdYWFjH_WSLyWtV1RP3bwF2cKsAcTwh_I283wktFVnctQLi3K14WlAUmJl1c16RT04Zjq8RGAfjWbFUq4dmqPsAUApxz1fVI3BrDdzu5R_7RjxA4qqSMTpSL4tpmMKc9Jm/s982/rafflesmedical.jpeg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="818" data-original-width="982" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhQyE03cH36lhJdPQugN6JIQdqbbPgI0Q__0hhlnq_J_v8nUgrDBTFiyD-X7FGdYWFjH_WSLyWtV1RP3bwF2cKsAcTwh_I283wktFVnctQLi3K14WlAUmJl1c16RT04Zjq8RGAfjWbFUq4dmqPsAUApxz1fVI3BrDdzu5R_7RjxA4qqSMTpSL4tpmMKc9Jm/s16000/rafflesmedical.jpeg" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><p style="text-align: center;"><i>Raffles Medical Logo (Source: <a href="https://www.capitaland.com/sg/malls/rafflescity/en/stores/raffles-medical.html" target="_blank">Capitaland Mall Website</a>)</i></p><p>Now, I'd like to implore you to take a moment and consider <b>Raffles Medical</b>, a healthcare stock that is more likely than not, no stranger to you. The company has numerous outlets offering a variety of different medical services, all dotted across the island. It is certainly not uncommon to see a Raffles Medical outlet located right at your local mall or even below HDB void decks, and I'm sure a good number of Singaporeans have patronised their services. </p><p>So what exactly does the company do? All this talk about healthcare and medical services, but those are terms so broad that they encompass such a wide array of different services. </p><p><br /></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh7BHLNKB4rpICPXGNCugT86XDGtpPzSyQ8YNsJJbFkj-FQo7sOIJPk2ExCUuROf7OKKkW2Nw1ViGtcFJindREV_BjanBh1ChF6VoJEhRwKJ8sJh0TfiotxAo7ovhVngGn6ayprRoz24KX3vjgvF2dBIDRRuLRCXvkUCVs5gnEFf71NegJ3PzH3Is9wFGKn/s696/Screenshot%202023-12-28%20at%209.11.49%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="504" data-original-width="696" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh7BHLNKB4rpICPXGNCugT86XDGtpPzSyQ8YNsJJbFkj-FQo7sOIJPk2ExCUuROf7OKKkW2Nw1ViGtcFJindREV_BjanBh1ChF6VoJEhRwKJ8sJh0TfiotxAo7ovhVngGn6ayprRoz24KX3vjgvF2dBIDRRuLRCXvkUCVs5gnEFf71NegJ3PzH3Is9wFGKn/s16000/Screenshot%202023-12-28%20at%209.11.49%20PM.png" /></a></div><br /><p style="text-align: center;"><i></i></p><div class="separator" style="clear: both; text-align: center;"><i><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg2xkVkYV28tjyHigTorqVCKr50-SpM04hAd4lPWUj4x-9ouSTJ2hqBgHf1Yh0eSpQ_CedPjwPStmiMgVQZ6VfGxH4EHZLxYdUlD6NZkKCs9HxmLrTe8k96x7pKSre3c9Xg0ckLhjZqezvOBImpYFh457xuq3wYfcIgD0O0F1jRPdKWKaPCw9P-TobPXbPi/s1404/Screenshot%202023-12-28%20at%209.23.09%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="244" data-original-width="1404" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg2xkVkYV28tjyHigTorqVCKr50-SpM04hAd4lPWUj4x-9ouSTJ2hqBgHf1Yh0eSpQ_CedPjwPStmiMgVQZ6VfGxH4EHZLxYdUlD6NZkKCs9HxmLrTe8k96x7pKSre3c9Xg0ckLhjZqezvOBImpYFh457xuq3wYfcIgD0O0F1jRPdKWKaPCw9P-TobPXbPi/s16000/Screenshot%202023-12-28%20at%209.23.09%20PM.png" /></a></i></div><i><div style="text-align: center;"><i>Raffles Medical Business Segment Breakdown & Definitions by Revenue (Source: <a href="https://www.rafflesmedicalgroup.com/wp-content/uploads/2023/04/RMG-Annual-Report-2022.pdf" target="_blank">Raffles Medical FY22 Report</a>)</i></div><div style="text-align: center;"><i><br /></i></div><div style="text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjqqa3YuFdT_LFinXRxUF9zFzhn5zQkEzytDKW_TwJwu9GMykWp7QYm3xmV9IJImMcClDdpUj1na4D_uzmfG1I1prYZivdJ6vYQlhRqDHm_GNWqAE8SlYq2BlXaPnR0fNYZQliy0SZcZXsWJUGh3aE26dINfQ4e4ftZRxssegiOxbavwEQVJzm4NrFC72Mu/s1306/Screenshot%202023-12-29%20at%209.20.49%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="622" data-original-width="1306" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjqqa3YuFdT_LFinXRxUF9zFzhn5zQkEzytDKW_TwJwu9GMykWp7QYm3xmV9IJImMcClDdpUj1na4D_uzmfG1I1prYZivdJ6vYQlhRqDHm_GNWqAE8SlYq2BlXaPnR0fNYZQliy0SZcZXsWJUGh3aE26dINfQ4e4ftZRxssegiOxbavwEQVJzm4NrFC72Mu/s16000/Screenshot%202023-12-29%20at%209.20.49%20PM.png" /></a></div><br /><div class="separator" style="clear: both; text-align: center;"><i style="text-align: left;"><div style="text-align: center;"><i>Raffles Medical Geographical Segment Breakdown by Revenue & Assets (Source: <a href="https://www.rafflesmedicalgroup.com/wp-content/uploads/2023/04/RMG-Annual-Report-2022.pdf" target="_blank">Raffles Medical FY22 Report</a>)</i></div></i></div></div></i><p></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">I was only able to obtain figures from the annual reports put out by the company, so for now, the data we have is rather outdated, but I do believe it is sufficient to gain a grasp on the business composition of the company, given that from what I've observed, the numbers do not deviate much.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">It is rather interesting to note that by revenue, Singapore is the largest market for the company, whereas, in terms of assets, Greater China consists of approximately 50% as much as Singapore. I will touch on this later down the line. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">To help you better unpack some of the terms within the above images, let me break down some of the terminologies used:</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Nutraceutical products are essentially your supplements, such as Vitamin C tablets or Iron pills. Pharmaceutical products encompass drugs to address symptoms arising from your illness or treatment such as Panadeine or Esomeprazole. Diagnostic equipment would be your imaging systems such as MRI scans, CT scans, and PET scans, and can even range to physical tools such as scopes. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">The way I see it, you can boil down Raffles Medical's core business segments into two groups: </strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">1. General medical care that is suitable for the majority of situations that require surface-level attention, mild injuries, falling sick due to the flu, headaches, etc. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">2. Infrastructure and personnel used when you need to go to a specialist, checking and subsequently treating the underlying, potentially long-term condition. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Additionally, it seems that Raffles Medical has created a decent talent acquisition pipeline for itself, evident from the presence of its </strong><a class="editor-rtfLink" href="https://www.rafflesmedicalgroup.com/healthcare-institute/partnership-accreditation/partnerships/" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #4a6ee0; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">graduate programs</strong></a><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">.</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></strong></p><h2 style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; font-weight: normal; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">What I Like About The Business Model</strong></h2><div><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></strong></div><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">One thing I like about Raffles Medical's business model is the fact that the company has a very large patient funneling network arising from its numerous partnerships and contracts with third-party organisations. The Raffles Medical Group owns a subsidiary, Raffles Health Insurance that partners with well-established parties such as NTUC Income, Bupa Global, and China Life Healthcare Investment Company to provide health insurance solutions across the world. Naturally, with a higher population of insured individuals, more patients will be "locked in" with Raffles Medical to be able to reap the benefits of their insurance plans. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">An additional point I'd like to mention is the existence of the </span><a class="editor-rtfLink" href="https://www.blogger.com/blog/post/edit/8854083309825062752/1118181556888629514#" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #4a6ee0; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">Emergency Care Collaboration (ECC)</strong></a><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> which is a partnership between the Ministry of Health (MOH) and Raffles Medical where emergency cases sent in by SCDF Ambulances are sent to Raffles Medical's Emergency Care facilities to be rendered medical care. That's right, dialling 995 might land you in a Raffle Medical facility. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEicXG9GYKRy5MNtP2ScpvqWm0kn2cz1rJtUrfDtKNPPpljScTijZISwpwrpVV7CXKqRTi3maS1CYeV-1B4owg031QI7xMnJQ9rGNBq-_QBF5GPEiyL-_9XEKWK19vdKIWzGgtnDbOrGXxbavY9CFVI39IDmnv9-50upSRboL9k_VX0Xt7MR6oBGD9GIhoaB/s1620/Screenshot%202023-12-29%20at%207.40.10%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="858" data-original-width="1620" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEicXG9GYKRy5MNtP2ScpvqWm0kn2cz1rJtUrfDtKNPPpljScTijZISwpwrpVV7CXKqRTi3maS1CYeV-1B4owg031QI7xMnJQ9rGNBq-_QBF5GPEiyL-_9XEKWK19vdKIWzGgtnDbOrGXxbavY9CFVI39IDmnv9-50upSRboL9k_VX0Xt7MR6oBGD9GIhoaB/s16000/Screenshot%202023-12-29%20at%207.40.10%20PM.png" /></a></div><i><div style="text-align: center;"><i>Raffles Medical's Wide Range of Services Provided, Allowing For Consumer Retention During The Entire Treatment Process (Source: <a href="https://www.rafflesmedicalgroup.com/services/hospital/patients-visitors/emergency-care-collaboration-ecc/" target="_blank">Raffles Medical's Website</a>)</i></div><div style="text-align: center;"><i><br /></i></div></i><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Typically, this is how the conversion process would work: An insured person (or perhaps someone who simply prefers the conveniences of a private healthcare institution) visits a GP/Specialist under Raffles Medical. The GP may become that person's regular go-to doctor given that patients tend to prefer to stick to a regular doctor. If any long-term illnesses are discovered during their trip to the specialist, the patient will most likely stick to the same healthcare institution for the entire process of diagnosing, consulting, and treating their respective ailment. The same goes for the general populace that gets sent due to an emergency. Overall, the potential consumer stickiness of the business is extremely attractive, with the regular medication patients purchase yielding higher-than-average margins.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">If you're worried about whether the government will aim to replace/outcompete Raffles Medical, I think that as of now, that fear is rather unfounded. According to Mr. Chan Chun Sing, Minister of Public Service, he has stated that </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">"The public sector generally outsources specific services or functions when the private sector is better placed to provide these, due to its deeper expertise or greater efficiency" </em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">At the very least, I believe we can expect the government to work in conjunction with the private sector to tailor individualised health care solutions to all. </strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></strong></p><h2 style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; font-weight: normal; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Raffles Medical's Balance Sheet Health</strong></h2><div><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></strong></div><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">We don't want a company we invest in to overleverage themselves and go insolvent, so I will be doing some analysis regarding Raffle Medical's Balance Sheet.</span></p></div><div><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi7BnuG2TOQCjB6SUURXLooGY7jqa_Od32thgoRQ9mIPwgBa__ZYxmZ0QcA7Oe4UKcrq6gNQXwHrmwKsz4YVjZ79tiOpgZ2saHjzQMN9jH4s3Q_NS1tuhL-9I93do8pBhKnhWgKw1UDIPGsezfDDb0JtcqzHWcfR1T7Vg0BV5xPyyL4Yfezh6V-KZb6n7P6/s846/Screenshot%202023-12-29%20at%208.44.23%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="846" data-original-width="766" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi7BnuG2TOQCjB6SUURXLooGY7jqa_Od32thgoRQ9mIPwgBa__ZYxmZ0QcA7Oe4UKcrq6gNQXwHrmwKsz4YVjZ79tiOpgZ2saHjzQMN9jH4s3Q_NS1tuhL-9I93do8pBhKnhWgKw1UDIPGsezfDDb0JtcqzHWcfR1T7Vg0BV5xPyyL4Yfezh6V-KZb6n7P6/s16000/Screenshot%202023-12-29%20at%208.44.23%20PM.png" /></a></div><div class="separator" style="clear: both; text-align: center;"><i>Raffle Medical's 1H FY23 Balance Sheet Position (Source: <a href="https://www.rafflesmedicalgroup.com/wp-content/uploads/2023/07/RafflesMedicalGroup_Results1H2023_31Jul2023-1.pdf" target="_blank">Raffle Medical's 1H FY23 Business Update</a>)</i></div><div style="text-align: right;"><div style="text-align: left;"><br /></div><div style="text-align: left;">From a quick cursory glance at the company's balance sheet, it is evident that the group has a strong balance sheet, with current assets exceeding the total amount of current liabilities. </div></div><div style="text-align: left;"><span style="text-align: center;"><br /></span></div><div style="text-align: left;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj5SSvBN5UvvF_H50M65fppYkqWZpFnnEGN_5XVZd3CWo58r02hkltFrL6VwsFMRymKVyjN07hbgWjleQMYxN3AObr3rzpfsr1T0BD8fLwKtPud78p01zMGeNw9xrw8K-APlNYMeweeAFuJujmBanrNsOwKuNfrIHVtf-Roo0qAlv-9fwx1TuykibJjna0j/s1282/Screenshot%202023-12-29%20at%209.03.01%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="208" data-original-width="1282" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj5SSvBN5UvvF_H50M65fppYkqWZpFnnEGN_5XVZd3CWo58r02hkltFrL6VwsFMRymKVyjN07hbgWjleQMYxN3AObr3rzpfsr1T0BD8fLwKtPud78p01zMGeNw9xrw8K-APlNYMeweeAFuJujmBanrNsOwKuNfrIHVtf-Roo0qAlv-9fwx1TuykibJjna0j/s16000/Screenshot%202023-12-29%20at%209.03.01%20PM.png" /></a></div><i style="text-align: center;"><div style="text-align: center;"><i>Raffle Medical's 1H FY23 Balance Sheet Health Metrics</i></div></i><span style="text-align: center;"><br /></span></div><div style="text-align: left;"><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">I was rather surprised when I reviewed the metrics calculated for Raffles Medical, given the fact that the Non-Cash Working Capital is </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">negative</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">. This implies that Raffles Medical benefits from having a negative cash conversion cycle (Suppliers finance the operations of the business) which is rather desirable. I understand that this is not typical for a healthcare stock so I'm not sure if this number has arisen due to accounting "magic" or if Raffles Medical genuinely has a superior cash conversion cycle to other companies. Nevertheless, I will take it at face value. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Current, Quick, and Debt-To-Equity Ratios are all in a good range, with Raffles Medical having little to no problem meeting its short-term debt obligations. I would consider the Debt-To-Equity ratio to be rather low, exemplifying the management's conservative nature. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">In conclusion, Raffles Medical's balance sheet is healthy and shows no red flags. </strong></p></div><div style="text-align: left;"><h2><b>Raffles Medical's Business Performance</b></h2><div><b><br /></b></div><div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjUvKCoPDf96600NBvZ533qC5NSaL_CZUD7BYpa-awwhs5AYk3d6t0I-t4VDUBdSV-ijx1s9Tki-qEOBlwCdz8lrnf9wko-VEV0UfNARFXlXadII2bIeWRXXhNfGfzlBGbZvG-iv-CnS_7GqqMtSvRZtUT12cHsm2Fe-kJ05LCtMdrIs35z74z7K6POYL92/s1398/Screenshot%202023-12-29%20at%209.36.54%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="626" data-original-width="1398" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjUvKCoPDf96600NBvZ533qC5NSaL_CZUD7BYpa-awwhs5AYk3d6t0I-t4VDUBdSV-ijx1s9Tki-qEOBlwCdz8lrnf9wko-VEV0UfNARFXlXadII2bIeWRXXhNfGfzlBGbZvG-iv-CnS_7GqqMtSvRZtUT12cHsm2Fe-kJ05LCtMdrIs35z74z7K6POYL92/s16000/Screenshot%202023-12-29%20at%209.36.54%20PM.png" /></a></div><br /><div style="text-align: center;"><i>Raffles Medical's Business Performance FY18-FY22 (Source: <a href="https://www.rafflesmedicalgroup.com/wp-content/uploads/2023/04/RMG-Annual-Report-2022.pdf" target="_blank">Raffle Medical's FY22 Annual Report</a>)</i></div></div><div style="text-align: center;"><br /></div><div style="text-align: center;"><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj7C-sDf-KR61Qkm2c2Fjjji5xI-V7trsGhzmRIc-RHqI4ocwC7ipzx362NhzqL5_3NNIa71fNWmrtc-r0HO4pIzDKNM66qq5DSpsP6lOF-NIlTYg5Z3KKWz-qmVTdorf1AnboECHjP_p_a33kxBP7LVFgq1JrGnXnAK4fJN5wl-U69kSZtX0YmBZFiL9ak/s702/Screenshot%202023-12-30%20at%2010.04.21%20AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="702" data-original-width="690" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj7C-sDf-KR61Qkm2c2Fjjji5xI-V7trsGhzmRIc-RHqI4ocwC7ipzx362NhzqL5_3NNIa71fNWmrtc-r0HO4pIzDKNM66qq5DSpsP6lOF-NIlTYg5Z3KKWz-qmVTdorf1AnboECHjP_p_a33kxBP7LVFgq1JrGnXnAK4fJN5wl-U69kSZtX0YmBZFiL9ak/s16000/Screenshot%202023-12-30%20at%2010.04.21%20AM.png" /></a></div><br /><i>Raffles Medical's Consolidated Statement of Profit or Loss (Source: <a href="https://www.rafflesmedicalgroup.com/wp-content/uploads/2023/04/RMG-Annual-Report-2022.pdf" target="_blank">Raffles Medical FY22 Annual Report</a>)</i></div></div></div><div style="text-align: center;"><br /></div><div style="text-align: left;"><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Raffles Medical's business has benefitted substantially from the COVID-19 pandemic, as evidenced by the fact that revenue drastically shot up from 2020 to 2021, and subsequently 2022. Interestingly, ROE shot up from 8.8 to 14.1% from FY21 to FY22. This could be explained by the fact that the transition from FY21 to FY22 regarding COVID-19 projects to organic core business growth resulted in higher margin services being rendered, alongside the reduced manning requirements for the COVID-19 projects (PCR, Swabbing, and Vaccination Services). </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Moving forward, I believe that we will continue to see Raffles Medical's growth performance normalise to that of pre-COVID era levels, reaffirmed by the fact that Singapore is increasingly adopting a "normalisation" stance which means that COVID will simply be treated like any other virus or bug passed around within the population. </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">If you extrapolate the growth rate of Raffles Medical's revenue from FY18 to FY20, we should start to see the company's revenue resume growing by FY24. </strong></p></div><div style="text-align: left;"><br /></div><div style="text-align: left;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj3HzocD878HFToWfW-wZ4X5monLu-i9LZvLDie7Ik3gfePUdsm5MEbWvYPh1FEDDpb5vCgVWIsGaqu3fvkf-W6ANI_awUn_RL9gpdeqJXnsWv2POTSgP4qBoBMuDrfBgpr1MJ5ENC51x_sP7rOrSxKLWA3DhAIM-yK2slzqmiP6lJnU9kN-jxw4NAF7J6k/s1282/Screenshot%202023-12-31%20at%2011.37.58%20AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="646" data-original-width="1282" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj3HzocD878HFToWfW-wZ4X5monLu-i9LZvLDie7Ik3gfePUdsm5MEbWvYPh1FEDDpb5vCgVWIsGaqu3fvkf-W6ANI_awUn_RL9gpdeqJXnsWv2POTSgP4qBoBMuDrfBgpr1MJ5ENC51x_sP7rOrSxKLWA3DhAIM-yK2slzqmiP6lJnU9kN-jxw4NAF7J6k/s16000/Screenshot%202023-12-31%20at%2011.37.58%20AM.png" /></a></div><div class="separator" style="clear: both; text-align: center;"><i>Calculation of Raffles Medical WACC</i></div><div style="font-style: italic; text-align: center;"><br /></div><div style="text-align: left;"><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Just as a quick growth check, I calculated Raffles Medical's WACC using the following assumptions:</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">1a. Risk Free Rate used was the 10Y Singapore Treasury Yield of 2.710%</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">1b. Equity Risk Premium was calculated using S&P500 10Y CAGR of 12.04%</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">1c. Corporate Tax Rate of Flat 17%</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">1d. Beta of 0.800</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">2. ROIC of FY19 was used since I felt there was a significant artificial increase in ROIC brought about by the COVID-19 pandemic. (Note: ROIC is extremely high from FY20 onwards, the ROIC was roughly stable before this)</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Since the WACC calculated is actually below ROIC, we can conclude that the company is generating sufficient value for its shareholders. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><h2 style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; font-weight: normal; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Key Growth Drivers & Catalysts</span></h2><div><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></div><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Upon reading the company's annual reports over the years, it is rather clear to see that the company is placing its bets on China being the key growth driver moving forward. Currently, Raffles Medical has a total of 8 healthcare facilities in China, being located in cities ranging from Shanghai, and Chongqing to Shenzhen. Currently, the majority of the company's China facilities are suffering operational losses because they have not transitioned away from their gestational period and are still in an early stage of development. It is important to note however, that the company's facility in Beijing is operationally profitable, and hence, it should not be a concern whether the business model in China is a sustainable one. Raffles Medical's bet on China will continue to be the main key driver in terms of growth, with shorter-than-expected gestational periods serving as a catalyst. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">In terms of organic growth for the company's Singapore business segment, I think it is rather mature at this point. A quick Google Maps search would straight away lead to the conclusion that there's not much room left in Singapore for productive outlet expansion. Organic growth will be driven by the increasing necessity of healthcare services. Hence, I believe we can more or less project the revenue growth in a conservative manner using the formula below:</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Revenue Growth = (Elderly Proportion of Population x Elderly Projected Growth Rate) x (Non-Elderly Proportion of Population x Singapore Population Growth Rate) x (Projected Core Inflation Rate) </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Using this formula, and after eyeballing some numbers, I believe the projected revenue growth would be around a 7% CAGR, which I believe is a reasonable growth rate. I don't believe that margins will experience compression due to the high barrier of entry for such a business in Singapore. I simply feel that there is no space for new competitors to just pop up. Besides, healthcare services are of high necessity which results in low price elasticity of demand. In terms of catalysts, I suppose it would be a higher degree of partnership with the Singapore government, which I do believe is likely given the good reputation of the company. Another point to note is that an increase in the amount of medical tourists from China may also serve as an impetus for the company to fare better, given the fact that China tourists visiting Singapore have not recovered to pre-pandemic levels. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><h2 style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; font-weight: normal; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Key Risks & Headwinds</span></h2><div><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></div><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">The supposedly bright future of the company hinges on the fact that the company can grow its China business and generate enough profit to make the venture worthwhile.</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> As I alluded to in the introduction of this post, over 30% of the company's non-current assets have been allocated to the China segment of the business, albeit only generating 6% of the revenue. If the China business fails, then all those invested assets would have been for naught, which may result in the company writing off a significant portion of its assets. Even if the business manages to barely cling to profitability, then the money would have been better off distributed to shareholders, coupled with the share price crashing due to actual performance not being able to meet the lofty growth expectations set by investors. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">In terms of the Singapore business segment, I believe its main headwinds would simply be higher staff cost/competition and consequently eroding profit margins. It is no secret that doctors, being the main providers of Raffles Medical's services, are extremely well-paid in Singapore. The company's competitors, such as IHH Healthcare, Thomson Medical and perhaps even the government itself, may offer higher salaries, resulting in either talent being poached, alongside the consumer base the doctor has built or simply rising staff costs, increasing COGS and reducing overall profitability.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><h2 style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; font-weight: normal; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Management</strong></h2><div><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></strong></div><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">The Chief Executive Officer, Dr Loo Choon Yong, cofounded Raffles Medical back in 1976, studying both Law and Medicine, sticking with the company the entire way. I couldn't find any concise biography about the man I believe the results speak for themselves. Dr Loo Choon Yong built Raffles Medical into the huge healthcare conglomerate that it is today, all from a humble duo of clinics. If he can scale a humble business to the massive billion-dollar corporate entity that it is today, then I believe he can continue to take the company to further heights using his ample experience of being a doctor himself. Additionally, I find the China growth strategy implemented to be a logical one, since the economic engine that is China has the largest total addressable markets in the APAC region with a rather affluent population capable of easily affording Raffle Medical's services. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Both Dr. Lu Liangjian and Dr Sarah Lu Qinghui, executive managers of Raffles Medical, are the children of Dr Loo Choon Yong and are both rather accomplished in their own right. I assume that Dr Loo Choon Yong has groomed them from childhood to take over and manage the company, which bodes well for future management should Dr Loo ever step down. I am not aware of either being Dr Loo's appointed successor, but I'm not sure whether it would cause any internal strife within the company. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">It is to be noted that the average tenure of the management team is 3.5 years, which is considered experienced. However, this may signify the fact that a significant proportion of the management is used to benefitting from a COVID environment, which seems to not be the case for the foreseeable future. </span></p></div></div><div><div class="separator" style="clear: both; text-align: center;"><div style="text-align: left;"><br /></div><div style="text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj2I7XJMgcH5qi5d3eIDdZuqMgCXUu3St1qtGsmVTzi_CnA3I6LlQoo8e6OiqAmk9NqC9-9QM_qMhHEUf2UZBHrKbw7fA4F6bE_I8fo4rXWHMjlruszBnx5r2GfQMYdGSxNKagICrzfoXDyVZtTKZ7o_L-0aM5skWNbPzXNwqu2GRPwQZoOI3Syn4yaqrtG/s2298/Screenshot%202023-12-30%20at%2010.05.19%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1064" data-original-width="2298" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj2I7XJMgcH5qi5d3eIDdZuqMgCXUu3St1qtGsmVTzi_CnA3I6LlQoo8e6OiqAmk9NqC9-9QM_qMhHEUf2UZBHrKbw7fA4F6bE_I8fo4rXWHMjlruszBnx5r2GfQMYdGSxNKagICrzfoXDyVZtTKZ7o_L-0aM5skWNbPzXNwqu2GRPwQZoOI3Syn4yaqrtG/s16000/Screenshot%202023-12-30%20at%2010.05.19%20PM.png" /></a></div><i>Raffles Medical's Dividend History (Source: <a href="https://www.rafflesmedicalgroup.com/investor-relations/share-information/dividend-information/" target="_blank">Raffles Medical Investor Relations Website</a>)</i><br /><div style="text-align: left;"><br /></div><div style="text-align: left;">In terms of dividend policy, I find it to be in fact rather excessive. It is apparent that the company aims to pay out approximately 70% of its annual core earnings to shareholders, which shows that the management is willing to distribute value back to shareholders. I hope the company retains more earnings to quickly gain a strong foothold in the China market. Share buybacks are also occasionally conducted when the company finds its shares being undervalued by the market, improving the per share metrics of the company. </div><div style="text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjTJ1FhrfHOjCalCoFXh6rKEz94PNwwyrZzFm-Mf7CgDgYZJZ1t0YQEBQWX3-pVxFITaxRgrwY5plQwev1z8ux2P-Qjq7BshFXyJ62FVw3tRIhqPP-87RgOlNijuxb9sHXQMUAPUmgHn4nTuhbLihoe_7UMh-WDQAPZ_Upvk9UUS-_AlsNxCY4pW9wJT5cr/s1286/Screenshot%202023-12-31%20at%2011.58.45%20AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="158" data-original-width="1286" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjTJ1FhrfHOjCalCoFXh6rKEz94PNwwyrZzFm-Mf7CgDgYZJZ1t0YQEBQWX3-pVxFITaxRgrwY5plQwev1z8ux2P-Qjq7BshFXyJ62FVw3tRIhqPP-87RgOlNijuxb9sHXQMUAPUmgHn4nTuhbLihoe_7UMh-WDQAPZ_Upvk9UUS-_AlsNxCY4pW9wJT5cr/s16000/Screenshot%202023-12-31%20at%2011.58.45%20AM.png" /></a></div><i>SGX Healthcare Industry ROA Comparison </i><br /><div style="text-align: left;"><br /></div><div style="text-align: left;"><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Despite being in the same industry/competitors, Raffles Medical is ahead of the curve with a ROA of almost double its peers. I have used ROA since it is a capital structure-neutral metric. Hence, we can conclude that the management is utilising funds more efficiently. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><h2 style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; font-weight: normal; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Valuation</strong></h2><div><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></strong></div><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Given the fact that Raffles Medical is a growth company, it is only appropriate that we use a Discounted Cash Flow model to arrive at an intrinsic value of the company. </span></p></div><div style="text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div><br /><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjdDJlePk_wx9bBhauiqdQvAfE2g-1c4lrK5zzHhkfZPoSDTPxdtHNYYaubYznf6G9zU4R6mmvZGZDf_VbzNtb9ytxLvZVass4BD0qrU41Q3XX3koLOTS7j7-HZndAaDDa6w3MEU4xrxGLOZLZVomDJpFRk_jPku-QQ3lhMlbsAsHQcgFq95j_FPDeLVSNd/s1486/Screenshot%202023-12-31%20at%203.12.28%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="660" data-original-width="1486" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjdDJlePk_wx9bBhauiqdQvAfE2g-1c4lrK5zzHhkfZPoSDTPxdtHNYYaubYznf6G9zU4R6mmvZGZDf_VbzNtb9ytxLvZVass4BD0qrU41Q3XX3koLOTS7j7-HZndAaDDa6w3MEU4xrxGLOZLZVomDJpFRk_jPku-QQ3lhMlbsAsHQcgFq95j_FPDeLVSNd/s16000/Screenshot%202023-12-31%20at%203.12.28%20PM.png" /></a></div><div class="separator" style="clear: both; text-align: center;"><i>Discounted Cash Flow Exercise for Raffles Medical Arriving At $1.35 Per Share</i></div></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><div style="text-align: left;"><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Oh boy</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">, this was a rather large undertaking for me so I'll begin to unpack the assumptions I used for this model. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">1a. For EBIT, I used a projected growth rate for FY24 - FY28 of 10%. I believe that a growth rate of 10% is rather reasonable given the fact that the Singapore business segment would already yield 7% growth (assuming margins remain constant) coupled with the fact that the China arm of the business would experience high levels of growth due to transitioning from the gestational period to operating at full capacity after absorbing the initial capital expenditure used to open the facilities. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">1b. The Tax rate used is a flat corporate tax rate of 17% (Singapore's tax rate). This is just to simplify calculations although I acknowledge that China imposes a 25% corporate tax rate. Since I cannot project the EBIT mix by geographical segment accurately, I used a 17% tax rate coupled with the conservative aforementioned projection of 10% EBIT growth per year in hopes of balancing the two out. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">1c. For D&A and Change in Non-Cash Working Capital, I used the following Google Sheets formula: </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"></p></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgiUrb-Z2kQUsuTggLlhCzn8enPXQI6YNgSNa99l80taMuOtjwIjSNIAopEoOJf1LQe1GDMYxNazlKbamwaaq-VPfK2oTW3xY3FIpqP2t619-G6nXUKjtSzv9P6LfNOwvrDjkahb5klF0CHMgQQnAZvdynhI1tMMV4St3fvCA28iSycPqrBz_y3i6_w4wHK/s544/Screenshot%202023-12-31%20at%2012.17.24%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="36" data-original-width="544" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgiUrb-Z2kQUsuTggLlhCzn8enPXQI6YNgSNa99l80taMuOtjwIjSNIAopEoOJf1LQe1GDMYxNazlKbamwaaq-VPfK2oTW3xY3FIpqP2t619-G6nXUKjtSzv9P6LfNOwvrDjkahb5klF0CHMgQQnAZvdynhI1tMMV4St3fvCA28iSycPqrBz_y3i6_w4wHK/s16000/Screenshot%202023-12-31%20at%2012.17.24%20PM.png" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><br /><div style="text-align: left;"><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">I used a random function that uses the historic low of the metric (B17) multiplied by the compounded growth rate of 10% in EBIT times the period as a base. Subsequently, the random function adds a number within the range of the highest and the lowest historical metric. This formula takes into account the variability of the metric, the overall range of the metric, and additional funds needed to sustain the EBIT growth rate, albeit perhaps a bit archaic since there is no "single" set value achieved.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">1d. For CAPEX, I simply increased CAPEX by the same rate as the EBIT growth rate of 10%. The reason why I use such a low projected CAPEX as compared to FY17 - FY20 is because it includes capitalised expenditures for the construction of the company's new China properties. Since the overall construction period is approximately 5 years, coinciding with the forecasted period, and there are no indications of building a new facility, I find it reasonable to assume no additional CAPEX to fund further facilities. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">1e. Terminal Growth Rate was set at 2.6% pegged to Singapore's historic inflation rate.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">2. For FY23 figures, the variables have been annualised using different financial reports. It is simply a guide to help me grasp the overall historical figures of the company. For the sake of clarity, I used Q3 FY23 results to annualise EBIT and D&A since I believe that Q3 takes into account the normalisation of EBIT without COVID-19 to a greater degree whereas CAPEX & Change in Non-Cash Working Capital was annualised using 1H FY23 figures since they would more or less be constant regardless of the normalisation of the business. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">3. The number of Shares Outstanding was calculated by using the given historical CAGR with the assumption of there being no equity fundraising, which I think is a rather reasonable assumption to make due to the company's history of having no rights issue. Hence, any fluctuation in shares outstanding would be due to stock-based compensation and share buybacks.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">In terms of extrinsic valuation, I believe using historical Prices / Sales and Price / Earnings ratios would be useful given the fact that Raffles Medical is regarded as a growth stock.</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">At the time of writing, Raffles Medical is currently trading at a P/E of 14, at a price of $1.08 with a TTM EPS of $0.08. With a median P/E of 28.05, it doesn't necessarily mean the stock price should be double. This year's P/E ratio is artificially high due to the abnormally good TTM net profit from FY22, if we normalise earnings using FY20 EPS of 3.97 cents, a P/E ratio of 28.05 would yield a stock price of $1.11. If we use the median P/S of 4.19 using TTM Revenue per share of 0.39, that would yield a stock price of $1.63. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">If we were to use all of the information above, a blended value of $1.36 per share would be obtained, which is rather close to the DCF Intrinsic Value of $1.35 per share.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">There is actually a rather interesting fact I would like to point out regarding the staff's view on the current share price:</span></p></div><div style="text-align: left;"><br /></div><div style="text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjY0eJquDZyjs8Fph9KbYVlaAsYtAuPPwVjY3jemLvKAoNbeCmM8k-kitKEFkeu0F9xVnunZ6yueFBDnsKGBsU3D3Qc5lJDqnQrP0ibwgfUStzRNkbBFhLQDt_Tp7oDTaoS6CRHxlGrBLnRa4uv8_DFhcRFM_Z9IpBHidWCQh-srceUk0HeMP1oVu4hHsi3/s1118/Screenshot%202023-12-31%20at%205.15.16%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="444" data-original-width="1118" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjY0eJquDZyjs8Fph9KbYVlaAsYtAuPPwVjY3jemLvKAoNbeCmM8k-kitKEFkeu0F9xVnunZ6yueFBDnsKGBsU3D3Qc5lJDqnQrP0ibwgfUStzRNkbBFhLQDt_Tp7oDTaoS6CRHxlGrBLnRa4uv8_DFhcRFM_Z9IpBHidWCQh-srceUk0HeMP1oVu4hHsi3/s16000/Screenshot%202023-12-31%20at%205.15.16%20PM.png" /></a></div><div style="text-align: center;"><i>Exercised Options' Share Prices (Source: <a href="https://www.rafflesmedicalgroup.com/wp-content/uploads/2023/07/RafflesMedicalGroup_Results1H2023_31Jul2023-1.pdf" target="_blank">1H FY23 Raffles Medical Financial Statement</a>)</i></div><div style="text-align: left;"><br /></div><div style="text-align: left;"><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">The majority of options were exercised at the $1.09 mark, with some even being exercised at $1.31 and $1.42. Although share options may be exercised for a multitude of reasons, I believe the insiders of the company have the greatest idea of the company's outlook. Investing is a war of information, every time you buy, there's another investor on the other side thinking it's a good price to sell. If the insiders think it's a decent price, then it may be something worth noting. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><b><br /></b></span></p><h2 style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Overall Conclusion</span></h2><div><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></div><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">I believe Raffles Medical is overall the best healthcare stock in the SGX market. It has an integrated healthcare business that covers all bases, creating an extremely powerful "funneling" effect. Sure, it's not as big as IHH Healthcare, but I opine that Raffles Medical is the better-managed and overall less bloated company in the long run. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Raffles Medical's current 3+% dividend is also a nice bonus, not leaving your returns entirely to the market. But I must confess that the execution risk for Raffles Medical is extremely high. If the China business fails, then be prepared for the share price to languish. Not to mention the fact that if the China business does indeed succeed and becomes a core part of the business, then Forex risk is indeed a concern in the future. Personally, if I initiate a position in Raffles Medical, it would be a mid-sized one with a long investment horizon. This stock is the type where you'll have to slowly accumulate while waiting painstakingly for your investment to bear fruit. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Using the blended target price of $1.36 per share and with a margin of safety of 30% due to the stock being of higher risk, I believe 95.2 cents per share is approximately where I'll consider entering. </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">All in all, initiate a BUY for Raffles Medical at $0.95 per share and HOLD at $1.36 per share. </strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></strong></p><p style="text-align: justify;"><strong>Author's Note: </strong>This has been a massive article for me, coupled with the fact that I found Raffles Medical to have a very hard business to evaluate. Please forgive me if there's certain methods or approach I have used that you find problematic, and do let me know your thoughts in the comments, thank you!</p><p style="text-align: justify;"><i style="color: #222222;"><b style="font-style: normal;">Think this article is something you'd want more of? Subscribe <a href="https://follow.it/passive-loss?leanpub" target="_blank">here</a> using your email to get notified about my latest blog articles, I'd truly be grateful!</b></i></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><i><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">I have no stock, option or similar derivative position in any of the companies I have mentioned, and no plans to initiate any such positions within the next 72 hours. </strong><b>All content published by me should not be construed as any sort of financial or investment advice and is simply for informational purposes. Although all research and figures are accurate and calculated to the best of my ability, I am not liable for any decisions made based on inaccurate information.</b></i></p></div><div style="text-align: left;"><br /></div><div style="text-align: left;"><br /></div><div style="text-align: left;"><br /></div></div><br /></div>Passive Loss SGhttp://www.blogger.com/profile/15231705917017776583noreply@blogger.com4tag:blogger.com,1999:blog-8854083309825062752.post-20285289360801909532023-12-08T04:43:00.000-08:002023-12-08T04:43:25.093-08:00Daiwa House Logistics Trust - Japanese Logistics REIT Trading At Discounted Valuations?<h2 style="text-align: left;"><b>Introduction</b></h2><div><span style="text-align: justify;">With interest rates rocketing to decade highs, it's no wonder dividend stocks, especially REITs, have taken a huge beating. The Singapore Stock Market has widely been known for its REITs, filled with large cap firms backed by corporate giants. But have the smaller, newer REITs been overshadowed and neglected? More importantly, can investors make money from them? Well, that's what we're here for.</span> </div><div><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjH7bz22l5sE64RaDGTtdZsRVq99JHOWlQ_j24fCgMGWh-xLNUOHnV1OITi185bOLe7_fF709yalO1pCxmwk_lyf-SE_8Bqr92Mr3a79Dmam-q5ezl14Y81R2aX5nlpNQ1mJuKBwlvEGxsFZOpeErvLN5Ir32OPj9YU8g37vS3itNtRaDDroZdtKxc_WG26/s119/daiwapupu.jpeg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="119" data-original-width="119" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjH7bz22l5sE64RaDGTtdZsRVq99JHOWlQ_j24fCgMGWh-xLNUOHnV1OITi185bOLe7_fF709yalO1pCxmwk_lyf-SE_8Bqr92Mr3a79Dmam-q5ezl14Y81R2aX5nlpNQ1mJuKBwlvEGxsFZOpeErvLN5Ir32OPj9YU8g37vS3itNtRaDDroZdtKxc_WG26/w400-h400/daiwapupu.jpeg" width="400" /></a></div><p style="text-align: center;"><i>Daiwa House Logistics Trust Logo (Source: <a href="https://www.daiwahouse-logisticstrust.com/" target="_blank">DHLT Website</a>)</i></p><p style="text-align: justify;"><span style="font-family: inherit;">Daiwa House Logistics Trust, hereby abbreviated as "DHLT", is sponsored by Daiwa House Industry, and is an industrials and logistics SGX-Listed REIT with 16 modern logistics properties located in Japan, which translates to 444,728 square meters of Net Lettable Area (NLA) and a total appraised value of 87,531 million JPY. Do take note that the REIT's investment mandate does permit the company to acquire industrial assets outside of Japan but located within the ASEAN region. </span></p><p></p><h2 style="text-align: justify;"><strong>DHLT's Balance Sheet Health</strong></h2><div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjgCsKR6UppuWT4dQ0MY0nrW4N2Cymg6msejdbD5shR9X-KLTB2Ac9rpMPX8M4vSln4BbcIYP4SXKcFhUxdDxoNn-3eZGwiSMAXPjab5HSx8W9rVV-3BDuKab5gMDTqwhoWTOk8sr8Oie_jmwqjkNgVaD1bg-qiAAvsZ2TuKPRjI2CwKcnjVKupW8kf93jm/s1284/Screenshot%202023-12-08%20at%207.11.22%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="510" data-original-width="1284" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjgCsKR6UppuWT4dQ0MY0nrW4N2Cymg6msejdbD5shR9X-KLTB2Ac9rpMPX8M4vSln4BbcIYP4SXKcFhUxdDxoNn-3eZGwiSMAXPjab5HSx8W9rVV-3BDuKab5gMDTqwhoWTOk8sr8Oie_jmwqjkNgVaD1bg-qiAAvsZ2TuKPRjI2CwKcnjVKupW8kf93jm/s16000/Screenshot%202023-12-08%20at%207.11.22%20PM.png" /></a></div><em style="text-align: justify;"><div style="text-align: center;"><em>DHLT's Asset Metrics as of Q3FY23</em></div></em></div><p></p><p style="text-align: justify;">A simple glance at DHLT's balance sheet easily lets one surmise that the company has a healthy financial position, at a safe Gearing Ratio of 36.2% and an extremely high ICR of 11.8x. In terms of borrowing, there is a high margin of safety when you consider the fact that the Monetary Authority of Singapore (MAS) only imposes a gearing limit of 50% when ICR is a minimum of 2.5x and a limit of 45% when the minimum ICR has been breached. Suffice to say, the REIT won't be forced to liquidate assets any time soon, even <em>if</em> the Bank of Japan (BoJ) decides to hike rates, the fact that 100% of loans are fixed will still offer some leeway for the REIT's financial position.</p><p style="text-align: justify;"><br /></p><figure class="regular-img-figure a-c" data-mce-contenteditable="false"><div style="text-align: justify;"><a data-height="682" data-width="902" href="https://static.seekingalpha.com/uploads/2023/12/4/57424138-17016720055415547_origin.png" rel="lightbox"><img alt="DHLT's Debt is spread out from 2024-2027, with bulk of debt expiring in 2024 to 2026." data-height="484" data-mce-contenteditable="false" data-width="640" height="484" src="https://static.seekingalpha.com/uploads/2023/12/4/57424138-17016720055415547.png" width="640" /></a></div><a data-height="682" data-width="902" href="https://static.seekingalpha.com/uploads/2023/12/4/57424138-17016720055415547_origin.png" rel="lightbox"></a><figcaption><p class="item-caption" style="text-align: justify;"><i>DHLT's Debt Maturity Profile Q3 FY2023 (Source: DHLT Q3FY23 Investor Presentation)</i></p></figcaption></figure><p></p><p style="text-align: justify;">In terms of the debt maturity timeline, I must confess that the REIT's maturity ladder does not appeal to me. Roughly 30% of total debt expires each year from 2024 to 2026, which typically increases refinancing risk, but I understand where the management is coming from.</p><p style="text-align: justify;">Historically, Japan has had an extremely weak economy due to low domestic demand potentially arising from the conservative nature of the country's population. To spur economic growth, the Bank of Japan (BoJ) has maintained negative interest rates, although this is poised to end by 2024 January. Nevertheless, it can be rather safely assumed that interest rates will remain low, and since this has been the case for quite some time, I presume that the management does not foresee any refinancing or higher interest rate risk. Hence, any additional lengthening of fixed loan terms would simply be seen as unnecessary finance costs incurred.</p><p style="text-align: justify;">The maturity ladder isn't <em>exactly</em> what I'd find ideal, but the decision is definitely understandable, despite the potential risks. Overall, I'm neutral on this part of the balance sheet.</p><p></p><h2 style="text-align: justify;"><strong>DHLT's Portfolio Performance</strong></h2><p style="text-align: justify;">Due to DHLT's short tenure as a listed entity, we don't have enough data to compare DHLT's historical financial performance. Nevertheless, we can use certain metrics to obtain a rough gauge of the REIT's asset quality and performance.</p><p style="text-align: justify;"><br /></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiTV2ECIbG3Fl8jY0MAZmeVw_p-BUQxJxSdaowCfspiKAs6LGInA10R9_18bBqQ6ESKGlMl8DRhUwwgzp24nwDOj8KIksvxT5RtN-Qp4hbMHCoRs-j5koQonpMoPkA-zyG_N2R-wiJwsYSH6Ok0g65ECUY33jcXzS0dh9Cze-sXulF7x_gO4Z13nRqzHih_/s1282/Screenshot%202023-12-08%20at%208.11.39%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="564" data-original-width="1282" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiTV2ECIbG3Fl8jY0MAZmeVw_p-BUQxJxSdaowCfspiKAs6LGInA10R9_18bBqQ6ESKGlMl8DRhUwwgzp24nwDOj8KIksvxT5RtN-Qp4hbMHCoRs-j5koQonpMoPkA-zyG_N2R-wiJwsYSH6Ok0g65ECUY33jcXzS0dh9Cze-sXulF7x_gO4Z13nRqzHih_/s16000/Screenshot%202023-12-08%20at%208.11.39%20PM.png" /></a><em>DHLT's Financial Performance 9M FY2023 vs 9M FY2022</em></div><p></p><p style="text-align: justify;">In terms of JPY, DHLT's performance improved YoY in Revenue and NPI, while Distributable Income improved in terms of SGD despite the weakening of the JPY throughout the year against SGD. This can be mainly attributed to the currency hedges set in place by the management. Additionally, portfolio occupancy increased from 98.6% to a remarkable 100%.</p><p style="text-align: justify;"><br /></p><p></p><div style="margin-left: 1em; margin-right: 1em; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjNNuiLt6FxXzWJoeDdm7IuQ9VHXh2XjZmpl6zh8SxHFirWvpEzVNXb4CBSPmYn49jqaUSsYiteOss4EbTMlT545ZuuZy-NIzJLgmvgH3hOYC_HwFmZm52T8eyKS7LssY_46jZ-VOyWlSAQMRL1sdzftUPzHAi4kw57tFc2Qeh6LF4eIesqokuMkMdtrQfV/s1282/Screenshot%202023-12-08%20at%208.12.41%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="222" data-original-width="1282" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjNNuiLt6FxXzWJoeDdm7IuQ9VHXh2XjZmpl6zh8SxHFirWvpEzVNXb4CBSPmYn49jqaUSsYiteOss4EbTMlT545ZuuZy-NIzJLgmvgH3hOYC_HwFmZm52T8eyKS7LssY_46jZ-VOyWlSAQMRL1sdzftUPzHAi4kw57tFc2Qeh6LF4eIesqokuMkMdtrQfV/s16000/Screenshot%202023-12-08%20at%208.12.41%20PM.png" /></a></div><p style="text-align: center;"><em>DHLT's Financial Performance Cont.</em></p><p style="text-align: justify;">WALE is an impressive 6.3 years, ensuring the stability of DLHT's cash flows for years to come, whereas rental reversion for FY2022 was 3%. The high Q3 FY2023 occupancy of 100% was above average when compared to Tokyo's average of 91.1% in the same period according to CBRE. The above-average occupancy rate, coupled with the fact that rental reversions for Tokyo Logistics properties more or less fluctuated between a band of positive and negative 1% is a testament to the quality and desirability of DHLT's properties. This does make sense when you're considering the fact that DHLT's portfolio consists of multiple Built-to-Suit(BtS) properties with a sole tenant, giving the REIT higher negotiation power and WALE given that close substitutes are probably not abundant in the overall market with the specifications required by the tenant.</p><p style="text-align: justify;"><br /></p><figure class="regular-img-figure a-c" data-mce-contenteditable="false"><div style="text-align: justify;"><a data-height="1092" data-width="1452" href="https://static.seekingalpha.com/uploads/2023/12/4/57424138-17016813665449777_origin.png" rel="lightbox"><img alt="DHLT's Top 10 Tenants contribute a whopping 65.3% as of FY22" data-height="481" data-mce-contenteditable="false" data-width="640" height="481" src="https://static.seekingalpha.com/uploads/2023/12/4/57424138-17016813665449777.png" width="640" /></a></div><a data-height="1092" data-width="1452" href="https://static.seekingalpha.com/uploads/2023/12/4/57424138-17016813665449777_origin.png" rel="lightbox"></a><figcaption><p class="item-caption" style="text-align: center;"><i>DHLT FY22 Top 10 Tenant Contribution (DHLT FY22 Investor Presentation)</i></p></figcaption></figure><p style="text-align: justify;">That being said, I do have an issue with DHLT's top ten tenant contributions. I understand that the company reassures investors by stating that 79.3% of tenants are involved in growth sectors, but that simply means there could potentially be room for negotiations regarding higher rents, not whether the tenants would do well during times of economic crisis. As a corollary of this, a REIT must always try to diversify its tenant base as much as possible, although I concede that this is most likely due to the REIT's small size and high concentration of BtS properties. Although, understandably, such a situation may arise, it is still nevertheless a drawback that cannot be ignored.</p><h2 style="text-align: justify;">DHLT's Qualitative Aspects</h2><p style="text-align: justify;"><strong>Daiwa House </strong><strong>Industry,</strong> being DHLT's sponsor, should be scrutinised heavily, since there's not much of a track record for DHLT itself. If you didn't know, Daiwa House Industry is one behemoth of a real estate construction and development company, being listed on the Tokyo Stock Exchange (TSE) with a Market Capitalisation of 2.82 Trillion JPY, or over 25 billion SGD. A massive company like that can certainly aid its' REITs in terms of securing better financing terms, or perhaps even provide financing during times of credit crunch. The sponsor's management would most likely have the experience and expertise necessary to guide the REIT in trying times as well, positioning it for ample growth.</p><p style="text-align: justify;"><strong>To add on, a reputable, strong sponsor can also inject high-quality assets into its REIT's portfolio.</strong></p><p style="text-align: justify;"><strong><br /></strong></p><p></p><figure class="regular-img-figure a-c" data-mce-contenteditable="false"><div style="text-align: justify;"><a data-height="1152" data-width="1534" href="https://static.seekingalpha.com/uploads/2023/12/4/57424138-17016863129344504_origin.png" rel="lightbox"><img alt="DHLT Non Exhaustive ROFR List" data-mce-contenteditable="false" src="https://static.seekingalpha.com/uploads/2023/12/4/57424138-17016863129344504.png" /></a></div><a data-height="1152" data-width="1534" href="https://static.seekingalpha.com/uploads/2023/12/4/57424138-17016863129344504_origin.png" rel="lightbox"></a><figcaption><p class="item-caption" style="text-align: center;"><i>DHLT 2H FY23 Investor Presentation</i></p></figcaption></figure><p></p><figure class="regular-img-figure" data-mce-contenteditable="false"><div style="text-align: justify;"><a data-height="1154" data-width="1540" href="https://static.seekingalpha.com/uploads/2023/12/4/57424138-17016862234766667_origin.png" rel="lightbox"><img alt="A non exhaustive list of DHLT's ROFR Assets" data-mce-contenteditable="false" src="https://static.seekingalpha.com/uploads/2023/12/4/57424138-17016862234766667.png" /></a></div><a data-height="1154" data-width="1540" href="https://static.seekingalpha.com/uploads/2023/12/4/57424138-17016862234766667_origin.png" rel="lightbox"></a><figcaption><p class="item-caption" style="text-align: center;"><i>DHLT's ROFR Asset Examples (DHLT 2H FY23 Investor Presentation)</i></p></figcaption></figure><p></p><p style="text-align: justify;">A non-exhaustive list of potential assets acquired by DHLT from the sponsor via the ROFR pipeline already exceeds the current NLA of the REIT, showing ample room for future growth. The numerous freehold, multi-tenanted assets are also a welcome sight to see, given that they can help the REIT diversify away from the current extremely high Top Ten Tenant Contribution.</p><p style="text-align: justify;"><strong>DHLT's Management and Fees should also be assessed to ensure maximising shareholder value is the main objective of the firm.</strong></p><p style="text-align: justify;">The management fee for DHLT is rather simple, with the management fee consisting of 10% of the annual distributable income paired with a performance fee of 25% of the increase in DPU multiplied by the weighted average number of units issued compared to the financial year preceding it, ensuring management does not simply lay on their laurels and stagnate the growth of the REIT. The fee can be elected to be received by the management purely in cash, units, or a mixture of the two. Such a fee structure incentivises DPU growth and thus aligns with shareholder interest since it takes into account potential dilution and discourages dilutive acquisitions.</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgNglj6YzS4tlg-k3hp4lyIhFQK1FV6tzoJ7i7JdPoGll1GEVqwrkekCP65BeRpLlbx7k8y5T7VepwsptOGSLUdh-2kbt8-aVpGRkqlf5X2Y_ohUJYgGV4NHscJFepLXaaXhE0JeNXT1qnyaUJU2dWLix-SypRJYjqdBurjbSfsyUIdhOJKpQIFPPdwlAg-/s1282/Screenshot%202023-12-08%20at%208.16.54%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="150" data-original-width="1282" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgNglj6YzS4tlg-k3hp4lyIhFQK1FV6tzoJ7i7JdPoGll1GEVqwrkekCP65BeRpLlbx7k8y5T7VepwsptOGSLUdh-2kbt8-aVpGRkqlf5X2Y_ohUJYgGV4NHscJFepLXaaXhE0JeNXT1qnyaUJU2dWLix-SypRJYjqdBurjbSfsyUIdhOJKpQIFPPdwlAg-/s16000/Screenshot%202023-12-08%20at%208.16.54%20PM.png" /></a></div><p style="text-align: center;"><em>DHLT's Total Outstanding Units FY22 vs 2H FY23</em></p><p style="text-align: justify;">There has been minimal unit dilution incurred from management fees in the short term.</p><h2 style="text-align: justify;">Investment Thesis for DHLT</h2><p style="text-align: justify;">Ever since the United States Federal Reserve hiked interest rates by approximately 5%, REIT prices have languished due to two main factors:</p><p style="text-align: justify;">1. REITs, mainly perceived as dividend instruments, are a closer substitute to bonds than growth or conventional stocks since there is a mandate to distribute at least 90% of taxable income. Hence, investors demand a premium to the initial dividend yield, resulting in prices dropping.</p><p style="text-align: justify;">2. REITs are typically highly leveraged entities, with debt being an integral part of their capital structure. REITs are disproportionately affected given their propensity to take on higher proportions of debt compared to other firms. Hence, a rise in interest cost reduces the distributable income rather significantly, assuming the entity's loans are not fixed.</p><p style="text-align: justify;">From the perspective of a Singaporean investor, it may seem initially that DHLT is only affected by reason 1 given the already low cost of debt, and hence would not benefit substantially relative to other REITs when interest rates eventually fall. <strong>However, one may neglect a certain key factor when assessing DHLT;</strong></p><p></p><figure class="sa-widget sa-ycharts"><div style="text-align: justify;"><img alt="Chart" class="sa-ycharts-img" data-height="366" data-width="635" height="366" src="https://static.seekingalpha.com/uploads/2023/12/4/saupload_110cfeadd406c5c7326f4d189b7b5b4b.png" width="635" /></div><figcaption style="text-align: center;"><i>Data by <a href="https://ycharts.com/" rel="nofollow">YCharts</a></i></figcaption></figure><p></p><figure class="regular-img-figure a-c" data-mce-contenteditable="false"><div style="text-align: justify;"><a data-height="352" data-width="994" href="https://static.seekingalpha.com/uploads/2023/12/4/57424138-1701692107693533_origin.png" rel="lightbox"><img alt="DHLT's Share Price has fallen in tandem with the JPY/SGD chart." data-height="227" data-mce-contenteditable="false" data-width="640" height="227" src="https://static.seekingalpha.com/uploads/2023/12/4/57424138-1701692107693533.png" width="640" /></a></div><a data-height="352" data-width="994" href="https://static.seekingalpha.com/uploads/2023/12/4/57424138-1701692107693533_origin.png" rel="lightbox"></a><figcaption><p class="item-caption" style="text-align: center;"><i>DHLT's Share Price Falling in Tandem with JPY/SGD (Source: <a href="https://www.stockopedia.com/share-prices/daiwa-house-logistics-trust-SGX:DHLU/" target="_blank">Stockopedia</a>)</i></p></figcaption></figure><p></p><p style="text-align: justify;">DHLT's share price has fallen for a third reason, which would be the depreciation of JPY against SGD due to Singapore's interest rates catching up with The United States' whereas the BoJ has remained firm on its negative interest rate stance for the time being. Due to the concept of hot money, foreign investors would naturally incur an outflow of JPY into other currencies like SGD, temporarily depreciating the JPY. Given that the BoJ aims to increase Japan's interest rate next year, and with analysts concurring that a rate reversal will occur in the US, we may see the JPY strengthening against the SGD sometime within the next year, which may pull DHLT's share price in tandem.</p><p style="text-align: justify;"><strong>Furthermore, there has been a growth in demand for logistic properties all across the board.</strong></p><p style="text-align: justify;"><strong><br /></strong></p><p></p><figure class="regular-img-figure a-c" data-mce-contenteditable="false"><div style="text-align: justify;"><a data-height="970" data-width="1624" href="https://static.seekingalpha.com/uploads/2023/12/4/57424138-17016924322344134_origin.png" rel="lightbox"><img alt="Downwards trend in logistics property vacancy space" data-mce-contenteditable="false" src="https://static.seekingalpha.com/uploads/2023/12/4/57424138-17016924322344134.png" /></a></div><a data-height="970" data-width="1624" href="https://static.seekingalpha.com/uploads/2023/12/4/57424138-17016924322344134_origin.png" rel="lightbox"></a><figcaption><p class="item-caption" style="text-align: center;"><i>Growth in Logistic Space Demand Illustrated by Lower Vacancy (Source: <a href="https://www.cbre.co.jp/en/insights/figures/japan-logistics-marketview-q3-2023" target="_blank">CBRE</a>)</i></p></figcaption></figure><p style="text-align: justify;">With the global E-Commerce business being projected to grow at an approximately <a href="https://www.statista.com/outlook/emo/ecommerce/worldwide#:~:text=Revenue%20in%20the%20eCommerce%20Market,US%244%2C991.00bn%20by%202028." rel="nofollow">10% CAGR</a> for the next five years, it's no wonder why the logistics space industry is experiencing a growth in demand. E-commerce businesses need logistic properties to consolidate and store their products while they're in transit or being sold, and REITs like DHLT will continue to benefit from the market trend.</p><p style="text-align: justify;">BtS properties may also act as a moat for the REIT, given the fact that such buildings are built with extremely tailored specifications in mind that are required by the tenant for their operations. This increases the negotiation power the REIT has when it comes to rental reversions since tenants are more or less locked in.</p><h2 style="text-align: justify;">Key Risks & Headwinds for DHLT</h2><p style="text-align: justify;"><strong>Logic dictates that if interest rates can come down, they can also go up.</strong> Should we see a change in government stance regarding Japan's interest rates, the all-in financing cost of DHLT's debt may balloon, leaving shareholders stranded with little to no distributable income, especially when the majority of the REIT's debts require refinancing within the next 3 years. Likewise, countries outside of Japan may continue to maintain and even further hike their interest rates, further depreciating the JPY, and dragging DHLT's price along with it.</p><p style="text-align: justify;">It was only about a month ago when the BoJ adjusted its Yield Curve Control (YCC) policy, allowing for 10-year yields to cap out from 0.5% to a new 1.0% limit, paving the way for possibly higher interest rates. Although Japan indeed maintains a target of 2% annual inflation, it is currently suffering from disproportionately high cost-push inflation, as opposed to inflation brought about by higher aggregate demand. Should the BoJ turn hawkish, the REIT may refinance into much higher rates in the short term, especially due to its weak debt maturity profile.</p><p style="text-align: justify;">BtS properties are not all sunshine and rainbows however, should a tenant leave or be unable to meet its payment obligations, there could arise a long downtime period when the REIT is unable to collect any income from its properties, exacerbated by the fact it must still maintain the highly troublesome and specific vacant property. Not to mention the fact that such highly specific properties might struggle to find new tenants due to incompatibility between the property's specifications and the tenant's requirements.</p><p style="text-align: justify;">Lastly, DHLT is a new REIT. There is insufficient data or history we can draw from to conclude certain aspects about the REIT. Hence, there is inherently more risk incurred.</p><p></p><h2 style="text-align: justify;">Valuation of DHLT</h2><p style="text-align: justify;">To properly assess the true intrinsic value of DHLT, I found a Gordon Growth Model(GGM) to be the most suitable method, since REITs <em>are</em> mandated to distribute 90% of taxable income, the dividend payout ratio should remain more or less the same throughout the forecasted period.</p><p></p><figure class="regular-img-figure a-c" data-mce-contenteditable="false"><div style="text-align: justify;"><a data-height="600" data-width="1724" href="https://static.seekingalpha.com/uploads/2023/12/5/57424138-17017595070501287_origin.png" rel="lightbox"><img alt="A spreadsheet calculating the net present value of all of DHLT's future dividends." data-height="223" data-mce-contenteditable="true" data-width="640" height="223" src="https://static.seekingalpha.com/uploads/2023/12/5/57424138-17017595070501287.png" width="640" /></a></div><a data-height="600" data-width="1724" href="https://static.seekingalpha.com/uploads/2023/12/5/57424138-17017595070501287_origin.png" rel="lightbox"></a><figcaption><p class="item-caption" style="text-align: center;"><i>GGM of DHLT</i></p></figcaption></figure><p style="text-align: justify;">Here are the following assumptions and their corresponding rationale:</p><p style="text-align: justify;">1a. To calculate the Capital Asset Pricing Model (CAPM) value, the 10Y return of the Straits Times Index (STI) of 9.00% CAGR with dividends reinvested, was used since it is widely accepted as the SGX benchmark index.</p><p style="text-align: justify;">1b. The 10Y Singapore Treasury Yield of 2.935% was used as the risk-free rate, coupled with a beta of 0.83.</p><p></p><figure class="regular-img-figure a-c" data-mce-contenteditable="false"><div style="text-align: justify;"><a data-height="188" data-width="660" href="https://static.seekingalpha.com/uploads/2023/12/5/57424138-1701837996026634_origin.jpeg" rel="lightbox"><img alt="Table with various values for CAPM and Terminal Growth Rate." data-height="182" data-mce-contenteditable="false" data-width="640" height="182" src="https://static.seekingalpha.com/uploads/2023/12/5/57424138-1701837996026634.jpeg" width="640" /></a></div><a data-height="188" data-width="660" href="https://static.seekingalpha.com/uploads/2023/12/5/57424138-1701837996026634_origin.jpeg" rel="lightbox"></a><figcaption><p class="item-caption" style="text-align: center;"><i>DHLT GGM Sensitivity Analysis</i></p></figcaption></figure><p style="text-align: justify;">1c. A terminal growth rate of 1.5% was decided as an arbitrary number, but more or less tracks Japan's recent annual GDP growth. Hence, to account for potential variance, I have varied terminal growth by substituting Japan's GDP CAGRs with slight alterations. CAPM was varied as well should STI CAGR be different than expected.</p><p style="text-align: justify;">2. FY2023's Total Distributable Income was annualised based on 9M FY23's performance, to be able to use up-to-date figures for the analysis.</p><p style="text-align: justify;">3. The Foreign Exchange Rate for JPY/SGD was presumed to be constant since any further depreciation would be offset by currency hedges, combined with the fact that even if hedges expired, it would most likely be in an era of relatively higher interest rates for Japan.</p><p style="text-align: justify;">4. The growth in Total Outstanding Units was obtained by assuming that management took approximately all management fees in units, increasing to 0.8% from the second year to take into account performance fees, and that no equity fund raising takes place.</p><p style="text-align: justify;">5. Distributable Income was projected to grow 0% for the first year to factor in any possible recession or interest rates remaining higher, whereas the figure of 1.38% was derived by taking the proportion of the variance between 9M FY23 and 9M FY22's Revenue translated into Distributable Income. By assuming the forecasted growth in revenue is equal to FY22 rental reversion (3%), the figure of 1.38% was obtained.</p><p style="text-align: justify;">Overall, the base case intrinsic value derived from the GGM is approximately 76.1 Singapore Cents, with a valuation of 132.4 Singapore Cents and 52.3 Singapore Cents being the bull and bear cases respectively. I must confess though that assumptions 3 and 5 would be in my opinion, the weakest links. However, I've tried to make the overall calculation rather conservative by the nature of its assumptions.</p><p style="text-align: justify;"><strong>When DHLT first IPOed in 2021 just before the interest rate hikes, it was x4.9 oversubscribed at a valuation of Price to Book 1.05 and Dividend Yield at 6.5%.</strong></p><p style="text-align: justify;">Currently trading at a P/B ratio of 0.80 and a dividend yield of 8.85%, I believe it's a fairly decent interest rate cut play. The yield spread between the 10Y Singapore Treasury Bond and DHLT has remained roughly the same, signifying that the ticker is trading at fair valuations. Should interest rates come down, that may prove to be uplifting news for the JPY, increasing the REIT's DPU and NAV in SGD terms.</p><p></p><h2 style="text-align: justify;">Overall Conclusion</h2><p style="text-align: justify;">All in all, DHLT has shown to be a promising up-and-coming Singapore REIT, with great quality assets in its current portfolio and with many more to potentially come from its huge sponsor. I don't foresee much risk in its balance sheet, with future cash flows most likely being stable. Hence, I believe there is an opportunity being presented here with asymmetrical risk-reward.</p><p style="text-align: justify;">Dividend Investors, who wish to get paid during a market downturn while waiting for prices to recover will most definitely appreciate the high single-digit yield the REIT currently offers.</p><p style="text-align: justify;">When I buy stocks, I highly appreciate a margin of safety of at least 20% (60.9 cents), which roughly coincides with the current price of 0.59 SGD per unit.</p><p style="text-align: justify;"><strong>Initiate BUY for DHLT at 60.9 Singapore Cents per unit, and a hold rating for DHLT at 76.1 Singapore Cents per unit.</strong></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><strong>Author's Note: </strong>I initially wanted to try my hand at writing for Seeking Alpha, but this article was rejected due to it not being a US exchange stock :(, which is why you see some stylistic changes in terms of writing and formatting!</p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><i style="color: #222222;"><b style="font-style: normal;">Think this article is something you'd want more of? Subscribe <a href="https://follow.it/passive-loss?leanpub" target="_blank">here</a> using your email to get notified about my latest blog articles, I'd truly be grateful!</b></i></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><i style="color: #222222;"><b style="font-style: normal;"><br /></b></i></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><i style="color: #222222;">The author is currently not vested in any equities discussed in the article. </i></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"></p><div style="text-align: justify;"><span style="color: #0e101a; font-style: italic;"><br /></span></div><div style="text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Disclaimer: Please take everything published within this blog with a pinch of salt. Nothing I say here should be misconstrued as any form of financial advice whatsoever. In fact, I am probably the absolute last person you should approach for any sort of advice. All self-computed figures are calculated to the best of my ability, but I cannot guarantee they are 100% accurate, and I am not liable for any investment decisions made based on my content. </em></div><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"></span></p><p style="text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: left;"></em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Thank you for reading my blog, and I hope you have learnt something, no matter how seemingly minuscule, ciao!</em></p><p></p><div class="separator" style="clear: both; text-align: center;"><br /></div><br /><div class="separator" style="clear: both; text-align: center;"><br /></div>Passive Loss SGhttp://www.blogger.com/profile/15231705917017776583noreply@blogger.com5tag:blogger.com,1999:blog-8854083309825062752.post-43320180685936631672023-11-04T18:15:00.000-07:002023-11-04T18:15:59.555-07:00Market Downturn! Here Are My Thoughts & Reflections...<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">I think it's rather apt to say that the market has been an absolute bloodbath in recent times, with REITs as an asset class taking an especially heavy beating. Today's post will be a short one, in which I will discuss what are my personal views when it comes market downturns and how I respond to them.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"></p><div class="separator" style="clear: both; text-align: center;"><img alt="" border="0" class="placeholder" id="f514e141cb099" src="https://www.blogger.com/img/transparent.gif" style="background-color: #d8d8d8; background-image: url('https://fonts.gstatic.com/s/i/materialiconsextended/insert_photo/v6/grey600-24dp/1x/baseline_insert_photo_grey600_24dp.png'); background-position: 50% 50%; background-repeat: no-repeat; opacity: 0.6;" /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiBEI8bumTia_nzvpTjLEQork8zgadWOuRS3xgqb0_Fi78b-t-5hqibA3C9K2Lz089Dnqc0ejMPKtQbgjGduGuFTMPSJTjHE95LqgqRXtYijldjxSEt6K4q-zmfbeY6TRjPtkc1hJ1HwiTmIV6IvLuUiiWB772rJsumFEAbF3zqt2Rv-0QRB561lHQ7FesC/s1200/7-Things-to-do-if-stock-markets-crash_1200x499.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="499" data-original-width="1200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiBEI8bumTia_nzvpTjLEQork8zgadWOuRS3xgqb0_Fi78b-t-5hqibA3C9K2Lz089Dnqc0ejMPKtQbgjGduGuFTMPSJTjHE95LqgqRXtYijldjxSEt6K4q-zmfbeY6TRjPtkc1hJ1HwiTmIV6IvLuUiiWB772rJsumFEAbF3zqt2Rv-0QRB561lHQ7FesC/s16000/7-Things-to-do-if-stock-markets-crash_1200x499.png" /></a></div><div class="separator" style="clear: both; text-align: center;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt; text-align: left;">Source: <a href="https://www.etmoney.com/learn/stocks/7-things-to-do-when-stock-markets-crash/" target="_blank">ET Money</a></em></div><p></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Firstly, I just want to outline how I've personally been affected by the onslaught on REIT prices. It's no secret that my portfolio is heavily concentrated in United Hampshire US REIT, with the sole ticker having a whopping 65% weightage in my portfolio. The security's price has dipped to levels down to 0.345 USD per unit which is rather far from its previously relatively stable price of 0.42USD per unit. Hence, almost all my portfolio gains were wiped from the start of the year, and I'm now sitting on only a meagre profit YTD. However, my convictions in the REIT are still strong and I firmly believe the fundamentals are still sound. Hence, I am remaining steadfast and holding onto my units, and aim to further increase my stakes up to a certain degree using my monthly NSF pay. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Next, I'll talk about what I've done with regards to the lower REIT prices. I've deployed the bulk of my war chest into accumulating units of Capitaland Integrated Commercial Trust (CICT) for 1.71SGD per unit which has so far proved to be a great decision. I believe accumulating SG blue chips at a forward dividend yield of 6% will be a good entry point in the long run. However, I must admit that I've been deploying capital too aggressively, which placed me in an undesirable position as I'm not able to very effectively capitalise on the recent market weakness, therefore, I will make it a personal rule to always leave more capital for deployment in the future. Not to mention that the current yields that Money Market Funds are currently providing are rather attractive at an approximate 3.75% P.A. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">I see a lot of friends panicking when they're portfolio dipped which is why I once again advocate for dividend stocks. When I analyse a company, I concentrate on their capacity to support and grow their dividend payments. Dividends represent a tangible return on investment to the investor, which is not controlled by market forces. If you focus entirely on capital gain, you are subjecting your returns to the whims and fancies of Mr Market, where the disconnect between intrinsic value and actual price can persist for extended periods. This is why I treat buying stocks as buying their underlying cashflow, since I can confidently say that no matter what the market thinks the value of the stock is, I can be safely assured that the underlying yield has been researched and ascertained to be safe by me. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">To conclude, I believe REITs are currently at very attractive valuations. Even if the Fed raises interest rates higher for longer, I am willing to get paid in dividends while waiting for a turnaround in market sentiment. I have also noticed that many institutional players have been rotating out of their REIT positions, which is a strong buy signal for me. You don't want to buy counters when the big boys have already had their fill, since that's when they'll offload.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Author's Note: This has been a rather short post which I think is more sustainable than writing lengthy fundamental analysis articles, so you may see me post more often! The reason I have not been posting much lately was previously due to the lack of time due to National Service, but I have only just recently completed treatment for a critical illness, so here's hoping for the best.</em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></em></p><div><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><i style="color: #222222;"><b style="font-style: normal;">Think this article is something you'd want more of? Subscribe <a href="https://follow.it/passive-loss?leanpub" target="_blank">here</a> using your email to get notified about my latest blog articles, I'd truly be grateful!</b></i></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><div style="text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Disclaimer: Please take everything published within this blog with a pinch of salt. Nothing I say here should be misconstrued as any form of financial advice whatsoever. In fact, I am probably the absolute last person you should approach for any sort of advice. All self-computed figures are calculated to the best of my ability, but I cannot guarantee they are 100% accurate, and I am not liable for any investment decisions made based on my content. </em></div><div style="text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></em></div></em><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Thank you for reading my blog, and I hope you have learnt something, no matter how seemingly minuscule, ciao!</em></p></div><div><br /></div><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"></em></p><div><p><br /></p><p><br /></p><p><br /></p><p><br /></p><p><br /></p><div><br /></div></div><p></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"></p><p></p><p style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p>Passive Loss SGhttp://www.blogger.com/profile/15231705917017776583noreply@blogger.com2tag:blogger.com,1999:blog-8854083309825062752.post-77840447585711796992023-09-25T19:02:00.003-07:002023-09-28T19:19:09.630-07:00LHN Limited: Unique Real Estate Equity Play?<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Since time immemorial, there have been two rather straightforward business models when it comes to real estate: Rental and Development. For the case of rental specifically, you have tenants locked into lease contracts which more or less guarantees a steady cash flow from your rental properties, and that's exactly what </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">LHN Limited (SGX: 41O) </strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">has been doing, dipping its fingers into some pretty </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">special</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> pies. </span></p><p></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"></p><p></p><p style="background: transparent; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background: transparent; margin-bottom: 0pt; margin-top: 0pt;">Over time, I must admit that I've developed quite an inclination towards high recurring income and cash flow businesses, which naturally led </span><strong style="background: transparent; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background: transparent; margin-bottom: 0pt; margin-top: 0pt;">LHN Limited</span></strong><span data-preserver-spaces="true" style="background: transparent; margin-bottom: 0pt; margin-top: 0pt;"> to pique my curiousity. I'm always on the lookout for good deals in the market, and when I noticed the stock's price had plummeted a drastic 15% from a recent high of 0.4SGD to 0.34SGD as of writing this article, I just </span><em style="background: transparent; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background: transparent; margin-bottom: 0pt; margin-top: 0pt;">had </span></em><span data-preserver-spaces="true" style="background: transparent; margin-bottom: 0pt; margin-top: 0pt;">to take an in-depth look to see if it's the next bargain buy in the Singapore market. </span></p><p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjw89qnSSwEoSzOxxhSzLm7NAQrHxblJIjWCj8PXJK8uNh9JNhVgonX9Xa-Fe57EWJWo_QCwdf-9cSnxuRZ6RtrHYlo_JRsJsFBtrbe-pY57r-80Oq067VmPgjcv9AyG0z5C_OCwDsl7ADVIFK3LfI4DicA1hITalzwKs8X4Bdr1U_93fv11ruFFzcU9b4-/s225/lhn.png" style="margin-left: 1em; margin-right: 1em;"><span style="color: black;"><img border="0" data-original-height="225" data-original-width="225" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjw89qnSSwEoSzOxxhSzLm7NAQrHxblJIjWCj8PXJK8uNh9JNhVgonX9Xa-Fe57EWJWo_QCwdf-9cSnxuRZ6RtrHYlo_JRsJsFBtrbe-pY57r-80Oq067VmPgjcv9AyG0z5C_OCwDsl7ADVIFK3LfI4DicA1hITalzwKs8X4Bdr1U_93fv11ruFFzcU9b4-/w400-h400/lhn.png" width="400" /></span></a></div><div class="separator" style="clear: both; text-align: center;"><i>Source: <a href="https://www.facebook.com/LHNLimited/" target="_blank">LHN Group Facebook</a></i></div><br /><p></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Moving on, to give you some better insight regarding this relatively unknown SGX-Listed company, I'll let the management themselves give you its introduction:</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Established in 1991, LHN Group is a real estate management services group with the distinguishing ability to generate value for our space owners and space users through our expertise in Space Optimisation. With Facilities Management Services and Energy Resources complementing our core Space Optimisation business, our space users can look towards our wide range of business solutions to meet the growth of their businesses.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Personally, I think you'll come to find that this company's various segments seem to possess rather compelling business models, which begs the question: </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">What exactly do these segments entail?</strong></p><p></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"></p><p></p><p style="background: transparent; margin-bottom: 0pt; margin-top: 0pt;"><em style="background: transparent; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background: transparent; margin-bottom: 0pt; margin-top: 0pt;">Space Optimisation</span></em><span data-preserver-spaces="true" style="background: transparent; margin-bottom: 0pt; margin-top: 0pt;"> is rather straightforward. Essentially, they identify undervalued properties ranging from Commercial and industrial to Residential and pour in funds to spruce them up, increasing potential rental yield and collecting that sweet, sweet cash flow. Their subsidiaries under this segment include Coliwoo (A Co-Living Apartment Space Concept), Work + Space, and Greenhub. As someone who's had experience looking for a place to store my things while doubling as a productive space, I've heard of Work+Space, and can safely say that they are one of the biggest players in this specific niche. If I'm not wrong, I've heard of Greenhub as well, which offers a virtual office service. </span></p><p style="background: transparent; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background: transparent; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background: transparent; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background: transparent; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjDnPgPYQ4HynBQiK3b2wrLVeJ_mjQVWAT3M7M-TEnkc_YKq7_Zw_w1Q6JW09bHx3h7EePHAr2ENfDAt4BGjW68tA67T1T67nH5d-o0Qcjz7ASk6LRB6Q_BEQGEkQoGZFkTtGNDCyOrcarBBlccg1jkZnVUDvHA-gGGXNl8PJ3y4m3vrpjXGZyUaFFU7K__/s2560/coliwoo.jpeg" style="margin-left: 1em; margin-right: 1em;"><span style="color: black;"><img border="0" data-original-height="1625" data-original-width="2560" height="254" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjDnPgPYQ4HynBQiK3b2wrLVeJ_mjQVWAT3M7M-TEnkc_YKq7_Zw_w1Q6JW09bHx3h7EePHAr2ENfDAt4BGjW68tA67T1T67nH5d-o0Qcjz7ASk6LRB6Q_BEQGEkQoGZFkTtGNDCyOrcarBBlccg1jkZnVUDvHA-gGGXNl8PJ3y4m3vrpjXGZyUaFFU7K__/w400-h254/coliwoo.jpeg" width="400" /></span></a></div><div class="separator" style="clear: both; text-align: center;"><i>Coliwoo's Balestier 320 Property (Source: <a href="https://coliwoo.com/studio-apartment-rental/" target="_blank">Coliwoo's Website</a>)</i></div><div class="separator" style="clear: both; text-align: center;"><br /></div><p></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Facilities Management Services </em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">refers to LHN providing various services ranging from cleaning, building maintenance, and even carpark operation. These all seem like great businesses since it's very likely that the company has secured long-term contracts with their customers, not to mention the carpark operation being sort of a </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">rentalesque </em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">business itself. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Lastly, </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Energy Resources </em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">refers to their sole subsidiary LHN Energy which is a provider of solar energy solutions for buildings. I think this is the weakest part of the business given that I would presume profits are lumpy and highly project dependent. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">If you look at the company as a whole, these three core business segments complement each other. LHN can potentially upsell its various services to its existing consumer base, such as locating its carparks near its investment properties or even incorporating the energy segment's solar systems into its buildings to reduce overhead. Overall, the company undeniably has the potential to make some headway in regards to creating a service ecosystem and improving earning quality. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Of course, let's start reviewing the balance sheet to see whether this company can weather the high interest rate storm businesses are facing in today's climate. </strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></strong></p><div><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjw5wkeudyaRiakJ3zN2drrHQv3xFm6m1C3orAlArkhb8sM3qW3p1h0Ug1IeJd546TVpL4JIwNTDo7AA7Tpw-cz0NKvQX3QN1zkxejRKjRZWGsVaIl78TnQ-WtWfhSfoJ1Ux6Eiv5j9nFZgOm-wRHAZyKkcKRtkuVD8_lv1mnWTg6IF1xT-Tq45XpMMbYUw/s1086/Screenshot%202023-09-04%20at%201.14.27%20PM.png" style="margin-left: 1em; margin-right: 1em;"><span style="color: black;"><img border="0" data-original-height="1086" data-original-width="784" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjw5wkeudyaRiakJ3zN2drrHQv3xFm6m1C3orAlArkhb8sM3qW3p1h0Ug1IeJd546TVpL4JIwNTDo7AA7Tpw-cz0NKvQX3QN1zkxejRKjRZWGsVaIl78TnQ-WtWfhSfoJ1Ux6Eiv5j9nFZgOm-wRHAZyKkcKRtkuVD8_lv1mnWTg6IF1xT-Tq45XpMMbYUw/s16000/Screenshot%202023-09-04%20at%201.14.27%20PM.png" /></span></a></div><br /><div style="text-align: center;"><i>Source: <a href="https://lhngroup.listedcompany.com/newsroom/20230512_233504_41O_QCSFLXZ5MINFW1L8.1.pdf" target="_blank">FY23 1H Annual Report</a> </i></div><div style="text-align: center;"><i><br /></i></div><div><br /></div><div><div>Straightaway, you can see that the majority of the company's assets are tied up to its investment properties, which represents approximately 56% in weightage. Not to mention, significant appreciation has been attributed to these properties, which was the main reason why the company's overall assets increased during the period. Worryingly though, is the fact that lease liabilities and bank borrowings have significantly shot up by 39.2% as a whole within this short span of 6 months. </div><div><br /></div><div>Gearing is at 63.5% which is concerning since assets have only recently shot up due to property valuations increasing. Should property values normalise, this may result in an excessively high gearing ratio which may suggest that the company has overleveraged. </div><div><br /></div><div>Current assets, which for liquidity purposes I will only take into account cash and equivalents, fixed deposits, and financial receivables, are only able to cover 55% of current liabilities, let alone total liabilities. The company is certainly being aggressive in its expansion. I cannot help but feel that the company was only able to enter into various loan agreements via its higher-than-previously valued properties as collateral, but this company isn't classified as a REIT so in terms of gearing, there's not much restriction.</div><div><br /></div><div>Despite this, it is fair to acknowledge that the interest coverage ratio is still healthy as it is hovering around x6-7, which should mean that the company has no issues in maintaining its current debt obligations. </div></div><div><br /></div><div><b>Overall, the balance sheet gives me some mixed feelings. </b></div><div><b><br /></b></div><div><b><br /></b></div><div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgEWjSVOql-MZfCb1-R4e9SzRR36UMatfNVC-leesOUQJ5QpneeNvUUlkpug8H8JKzxPTsG4-RJKQm-NIiXBaOUoAfIEYX0Nj5ZyASopRh6e5XHKb9n05yKVD2qd3-dkejkXXFG1glOyBxvplGMT1udMpGYNxAeNDNWNGezN-e3i_0nw_PWtsFfHX0q05_P/s886/Screenshot%202023-09-04%20at%202.03.17%20PM.png" style="margin-left: 1em; margin-right: 1em;"><span style="color: black;"><img border="0" data-original-height="886" data-original-width="744" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgEWjSVOql-MZfCb1-R4e9SzRR36UMatfNVC-leesOUQJ5QpneeNvUUlkpug8H8JKzxPTsG4-RJKQm-NIiXBaOUoAfIEYX0Nj5ZyASopRh6e5XHKb9n05yKVD2qd3-dkejkXXFG1glOyBxvplGMT1udMpGYNxAeNDNWNGezN-e3i_0nw_PWtsFfHX0q05_P/s16000/Screenshot%202023-09-04%20at%202.03.17%20PM.png" /></span></a></div><br /></div><div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiGD-5JaGgqo0xvpp-QEodF7vvWfgqJ_sL6oZJsASqfsh-xRQBRHjYywLdHj4lOrGmlyA4sf5h4af09989jfEIko7zwKYzTRN0zd-MTAbvMl0G0S2zQEV6wCeObOTqrvUpB_o-nQeROjiEjy0ZNOnoNxU68VGZ5tsqugTzpr574FsO05pqgShbSepf5grJ5/s1336/Screenshot%202023-09-04%20at%201.55.59%20PM.png" style="margin-left: 1em; margin-right: 1em;"><span style="color: black;"><img border="0" data-original-height="1168" data-original-width="1336" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiGD-5JaGgqo0xvpp-QEodF7vvWfgqJ_sL6oZJsASqfsh-xRQBRHjYywLdHj4lOrGmlyA4sf5h4af09989jfEIko7zwKYzTRN0zd-MTAbvMl0G0S2zQEV6wCeObOTqrvUpB_o-nQeROjiEjy0ZNOnoNxU68VGZ5tsqugTzpr574FsO05pqgShbSepf5grJ5/s16000/Screenshot%202023-09-04%20at%201.55.59%20PM.png" /></span></a></div><i style="text-align: center;"><div style="text-align: center;"><i>Source: <a href="https://lhngroup.listedcompany.com/newsroom/20230512_233504_41O_QCSFLXZ5MINFW1L8.1.pdf" target="_blank">FY23 1H Annual Report</a> </i></div></i><b><br /></b></div><div><b><br /></b></div><div><div>The company's financial performance is rather hard to evaluate as a whole because, on one hand, you have segments such as real estate which you would rather use financial metrics such as AFFO whereas metrics such as gross profit are more suited for its services business. Hence, we'll have to dive deeper into the segments' performances to gain a better understanding of the financial performance of the company.</div><div><br /></div><div>Hence, in terms of adjusted segment results, I've created this pie chart for LHN's real estate businesses by excluding gains/losses from their property valuations. </div></div><div><br /></div><div><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjgpustz8Ff0NImMQP5NFOLjIEnmQSUcSg0Lo_m_F7mTqlkvHI2NXTyp4VY2s64Qq8FZMwfpofwf1eYjbkUW0yIwVr9kHw70631ZduLKJK1dx7mi4Rfk13831_2XEWXdWnSDUQn3yJ4vBOtdqQnaeJIfbQbYe0oWN6-dwYrzOeFP70ILDZeQinY0w8Rx-it/s812/Screenshot%202023-09-04%20at%202.16.11%20PM.png" style="margin-left: 1em; margin-right: 1em;"><span style="color: black;"><img border="0" data-original-height="582" data-original-width="812" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjgpustz8Ff0NImMQP5NFOLjIEnmQSUcSg0Lo_m_F7mTqlkvHI2NXTyp4VY2s64Qq8FZMwfpofwf1eYjbkUW0yIwVr9kHw70631ZduLKJK1dx7mi4Rfk13831_2XEWXdWnSDUQn3yJ4vBOtdqQnaeJIfbQbYe0oWN6-dwYrzOeFP70ILDZeQinY0w8Rx-it/s16000/Screenshot%202023-09-04%20at%202.16.11%20PM.png" /></span></a></div><div style="text-align: center;"><i>Source: Passive Loss SG</i></div><div><div><br /></div><div><br /></div><div>Looking at this, it's quite clear that the majority of the real estate business is attributed to the industrial segment. Even if you solely adjust for valuation loss in the industrials segment because industrial properties in Singapore suffer greatly from shorter leases and thus lease decay, the segment is still the majority of the real estate business. </div></div><div><br /></div><div><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhQcybeD_7g5oQ6_aXB1IWxmnyGyivf9FJyamD5B2v1S7HWuWnF7YisoNQh-Sdu_dxZ_e-IQzn3hxj2DETwUhl-_dkfUYLDDw9kw74B2zTw_HR04MZkwzbEcD6RhBj3ptQUcyjOKvCt1u01RsUr1RaxXeO2ctPOD4KpgJ9Xvd7NB5GlbDwRO5BLaoEejPr1/s1340/Screenshot%202023-09-25%20at%2010.02.16%20PM.png" style="margin-left: 1em; margin-right: 1em;"><span style="color: black;"><img border="0" data-original-height="632" data-original-width="1340" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhQcybeD_7g5oQ6_aXB1IWxmnyGyivf9FJyamD5B2v1S7HWuWnF7YisoNQh-Sdu_dxZ_e-IQzn3hxj2DETwUhl-_dkfUYLDDw9kw74B2zTw_HR04MZkwzbEcD6RhBj3ptQUcyjOKvCt1u01RsUr1RaxXeO2ctPOD4KpgJ9Xvd7NB5GlbDwRO5BLaoEejPr1/s16000/Screenshot%202023-09-25%20at%2010.02.16%20PM.png" /></span></a></div><i><div style="text-align: center;"><i>Source: <a href="https://lhngroup.listedcompany.com/misc/ar2022en/LHNLimited-AnnualReportFY22(e).pdf" target="_blank">LHN Limited FY2022 Annual Report</a></i></div><div style="text-align: center;"><br /></div></i><div><br /></div><div><div>The company also has its fingers in multiple geographical pies, although the majority of its operations are set in Singapore.</div><div><br /></div><div>Now, let's talk about the residential segment of LHN. Do me a favour and picture this: When you want to invest in good ole' Singapore property, I bet the first thing that comes to mind (at least to the average Joe) is residential. Yet, it's inaccessible. It requires too much of an upfront investment and too much effort to filter out tenants, and deal with maintenance and is just overall rather unpleasant. Then, you hear about REITs, how they're managed for you, distribute dividends regularly, and require much less capital. However, you come to a startling realisation; there's no Singapore Residential REIT! This is exactly why LHN's Coliwoo segment is so intriguing to me. It indirectly gives you access to the Residential market. </div></div><div><br /></div><div><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEileW6IOtg-JdIn371rWMQAB2urTpPbhtMDUkifjUclJXCOzITncfP60rUhC_gMIAfZjxjqS7fJJVB7k1ft4UsyYPA9FUqBh2FSbw-wQ5ztCIaoWLIO5PU9j-wT4LZN80P8bUlkK7xSe6wqe_dzONXN8LxEA3KONWLipIYJ6p2vRqs7qpk9k53aDycGb9x1/s1174/Screenshot%202023-09-19%20at%204.39.53%20PM.png" style="margin-left: 1em; margin-right: 1em;"><span style="color: black;"><img border="0" data-original-height="834" data-original-width="1174" height="455" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEileW6IOtg-JdIn371rWMQAB2urTpPbhtMDUkifjUclJXCOzITncfP60rUhC_gMIAfZjxjqS7fJJVB7k1ft4UsyYPA9FUqBh2FSbw-wQ5ztCIaoWLIO5PU9j-wT4LZN80P8bUlkK7xSe6wqe_dzONXN8LxEA3KONWLipIYJ6p2vRqs7qpk9k53aDycGb9x1/w640-h455/Screenshot%202023-09-19%20at%204.39.53%20PM.png" width="640" /></span></a></div><div style="text-align: center;"><i>Source: <a href="https://www.edgeprop.sg/property-news/singapore%E2%80%99s-maturing-co-living-sector-draws-more-investor-interest" target="_blank">Edgeprop Singapore</a></i></div><div><div><br /></div><div><br /></div><div>Many of Coliwoo's properties are located in the Core Central Region (CCR) as well, which is typically poised to capture the bulk of Singapore's ample property market growth. Communal spaces offer flexible, relatively affordable, and lavish living arrangements, coupled with the encouragement of fostering that "kampung spirit" many of the youth today yearn for. </div></div><div><br /></div><div><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjFuYO4Vt04pBx4_lh20hSylc_DmgVEcHbWh12Qy1TP856b7aSOCOkS8y8rxhOrakrhHju8D2QGaYc4WuE-ZtWxkB2KeT7ie_V49-4LMN7HJT4pLNSmpvWJHXgmOOfpHtnJBlAKB-nrVRVsz_TH_9iIrZ7vvQ84Q5bPDha5z2BpMUzC9W__VohpjRwd9TgO/s1530/Screenshot%202023-09-19%20at%204.50.25%20PM.png" style="margin-left: 1em; margin-right: 1em;"><span style="color: black;"><img border="0" data-original-height="242" data-original-width="1530" height="102" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjFuYO4Vt04pBx4_lh20hSylc_DmgVEcHbWh12Qy1TP856b7aSOCOkS8y8rxhOrakrhHju8D2QGaYc4WuE-ZtWxkB2KeT7ie_V49-4LMN7HJT4pLNSmpvWJHXgmOOfpHtnJBlAKB-nrVRVsz_TH_9iIrZ7vvQ84Q5bPDha5z2BpMUzC9W__VohpjRwd9TgO/w640-h102/Screenshot%202023-09-19%20at%204.50.25%20PM.png" width="640" /></span></a></div><div style="text-align: center;"><i>Source: <a href="https://www.mom.gov.sg/documents-and-publications/foreign-workforce-numbers" target="_blank">Ministry of Manpower Singapore</a></i></div><div><br /></div><div><br /></div><div><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Employment Pass holders, who must at least earn $5000 SGD per month and are only reserved for skilled foreign talent, are on an uptrend. It's quite evident that the nation is encouraging more and more professionals to combat the ongoing brain drain. Seems great for Coliwoo. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Of course, the Co-Living space isn't </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">all</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> sunshine and rainbows. Like with any business, you have your pros and then your cons. You're dealing with individuals each with different circumstances and profiles, which may lead to certain problems. Yes, you're able to command a higher premium, but there's much less security in terms of WALE as compared to renting a property to some large organisation. In other words, more risk for a higher reward. Your tenant turnover is going to be rather high since professionals are easily able to leave Singapore as opposed to families who would have to "uproot" which leads to higher potential administrative expenses as well such as marketing to fill in and lost potential income from vacancies. You're also counting on Singapore's desirability as well, though this is less of an idiosyncratic risk. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Now that we've got the qualitative aspects of the business out of the way, let's review the company's financial performance over the years!</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"></p></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj8vccPiDmM4uEhBNplkmCvcLmq4IY0IZBgCHkna0cd8iHJx-4kA1VoeTDlqK_x86Jy0son7kO9WOq0tKoGidqQJ1ZMtotELBr-TpTBVeNt0MRihUQu8CPIRtT-q5vxohEw3YxhlkCdDYi2bgis17lLmUu-JdsyghSuHcFi4ogh6BbtX46pI8GOBZuwjY4P/s1098/Screenshot%202023-09-25%20at%208.18.11%20PM.png" style="margin-left: 1em; margin-right: 1em;"><span style="color: black;"><img border="0" data-original-height="446" data-original-width="1098" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj8vccPiDmM4uEhBNplkmCvcLmq4IY0IZBgCHkna0cd8iHJx-4kA1VoeTDlqK_x86Jy0son7kO9WOq0tKoGidqQJ1ZMtotELBr-TpTBVeNt0MRihUQu8CPIRtT-q5vxohEw3YxhlkCdDYi2bgis17lLmUu-JdsyghSuHcFi4ogh6BbtX46pI8GOBZuwjY4P/s16000/Screenshot%202023-09-25%20at%208.18.11%20PM.png" /></span></a></div><div style="text-align: center;"><i>Information Source: <a href="https://www.gurufocus.com/stock/SGX:41O/" target="_blank">Gurufocus</a></i></div><div><br /></div><div><br /></div><div><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Overall, the company has seen a mixed financial performance for the last five years in terms of revenue, with a minor uptrend. EPS has been growing quite steadily but I mainly attribute this to the rapid appreciation of their investment properties, likewise with NAV. Since I view LHN more like a REIT, I have also included the Free Cash Flow (FCF) statistics which paint a similar picture to EPS, attributed to higher contributions from their real estate segment. Although the dividend seems inconsistent, there seems to be a nice uptrend with the payout ratio staying roughly the same. I have taken the liberty to run the numbers when using FCF and EPS and it seems that the company does not have a set dividend policy besides setting the payout ratio quite low. Overall, the company seems to be growing quite decently when considering all metrics. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">The next I would like to evaluate is the overall management of the company.</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">"</em></strong><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">In addition, our Directors intend to recommend and distribute dividends of not less than 40.0% of our Group's profit attributable to equity holders of our Company excluding non-recurring, one-off and exceptional items, whether as an annual dividend or an interim dividend for the subsequent two financial years comprising FY2023 and FY2024 as we wish to reward Shareholders for participating in our Group's growth." - </em><a class="editor-rtfLink" href="https://www.blogger.com/blog/post/edit/8854083309825062752/7784044758571179699#" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">LHN Logistic's Dividend Policy</span></a></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">I was able to find the above snippet of information on LHN Logistic's website with regards to a temporary dividend policy (or more so guidance) for the next two years or so. </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Please take note that LHN Logistics is simply a subsidiary of LHN Limited and hence may not necessarily reflect the main company's stance on dividends.</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> Instead, I am simply trying to extrapolate out what could the main company's potential stance be. I find the policy to be quite reasonable since the company is essentially saying that they'll be paying out their earnings excluding disposal gains, investment gains, etc., or the underlying profits from the business operations. I would just like you to take note of the last sentence, in which they state the policy is to reward shareholders. This seems to imply that 40% is actually above the norm, and I speculate that it would return to an approximately 20-30% payout ratio. In terms of rewarding shareholders, I think it is quite fair given that the company seems to be rather aggressive in growth, coupled with the fact that it is heartening to see that the management does indeed take into consideration the shareholders.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><b><br /></b></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><b>For the sake of simplicity for the evaluation, I will simply review the CEO's profile.</b></em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">"Mr Lim Lung Tieng (also known as Lin Longtian) (林隆田) (“Kelvin”), age 45, is a controlling shareholder of the Company and was first appointed to the Board on 10 July 2014 and was last re-elected on 29 January 2021. He is currently the Executive Chairman, the Executive Director, the Group Managing Director, and a member of the Nominating Committee. Kelvin is also a director of all of the subsidiaries of the Group other than Hean Nerng Facilities Management Pte. Ltd.</em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Kelvin brings over 20 years of experience in the property leasing, logistics services, and facilities management business. He is primarily responsible for the Group’s business development and overall management, including investment activities, operations, and marketing efforts."</em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">The company's CEO seems to be rather experienced in the field with ample amounts of experience, and since he is 45 years old, I don't think succession is up on the table just yet. It should be noted that the executive director of the company is the sister of the CEO with a controlling interest, and hence the company is classified as a family business in my books. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Moving forward, the group states that they intend to maximise cost-efficiency by digitalising their operations when possible and expanding their services offered by leveraging their experience in space optimisation. Furthermore, they claim that they will continue to pursue active capital recycling, which I do indeed see based on the news recently.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">With regard to growth strategy, I find it relevant to discuss the group's recent disposal of LHN Logistics</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Earlier in August, an offer made by Milkway Chemical was published to purchase all shares of LHN Logistics, which would represent a 28.8 Million dollar cash infusion into the company. When taking into account the number of LHN Limited shares available, this represents a 7 cents per share cash infusion and a 4.4 cents gain per share after the disposal. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"></p></div><div><br /></div><div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiwIMrbH2Sma5x4c20VTyWPTPd6cZcvUpT_qAe6jvlBnrPBmsIWpV_hQKu6LjnF8jsyfOaXVvd_PvtnZCW_IfzEQl0evDajhM714TyrsO82Spf-f10itZax2BKKS_rP6Zc2eWB67OldtP_hkVYgUmOU-Dq2_P7rCkiQBVBKnDUN9QvbznMxpJnXxP33OFop/s233/lhngrp.png" style="margin-left: 1em; margin-right: 1em;"><span style="color: black;"><img border="0" data-original-height="162" data-original-width="233" height="445" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiwIMrbH2Sma5x4c20VTyWPTPd6cZcvUpT_qAe6jvlBnrPBmsIWpV_hQKu6LjnF8jsyfOaXVvd_PvtnZCW_IfzEQl0evDajhM714TyrsO82Spf-f10itZax2BKKS_rP6Zc2eWB67OldtP_hkVYgUmOU-Dq2_P7rCkiQBVBKnDUN9QvbznMxpJnXxP33OFop/w640-h445/lhngrp.png" width="640" /></span></a></div><div class="separator" style="clear: both; text-align: center;"><i>Source: <a href="https://www.google.com/url?sa=i&url=https%3A%2F%2Fwww.lhnlogistics.com%2Fcareer%2F&psig=AOvVaw2K5JZ4_CX3g8T0eaaycAar&ust=1695735005825000&source=images&cd=vfe&opi=89978449&ved=0CBIQjhxqFwoTCJirxafvxYEDFQAAAAAdAAAAABAE" target="_blank">LHN Logistics Website</a></i></div><div><br /></div><br /><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">To give an idea of what the business sold was, I'll bring up this excerpt from the </span><a class="editor-rtfLink" href="https://www.blogger.com/blog/post/edit/8854083309825062752/7784044758571179699#" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">company website</span></a><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">"Established in 2003, LHN Logistics is a Singapore-based logistics services group with two principal business segments, namely, </em><a class="editor-rtfLink" href="https://www.lhnlogistics.com/our-services/transportation/" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Transportation Business</em></a><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> and </em><a class="editor-rtfLink" href="https://www.lhnlogistics.com/our-services/container-depot-services/" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Container Depot Services Business</em></a><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">. Offering transportation services, container depot management services, and container depot services, the company transports mainly ISO tanks, containers, bulk cargo, petrochemical products, base oils, and bitumen; and provides a wide range of container depot-related services which include container storage, container surveying, container cleaning, container repair and maintenance services for general purpose and refrigerated containers (reefer)."</em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">The impact of the disposal would actually increase EPS by a whopping 5.21 cents and increase NAV per share by 4.31 cents assuming the worst-case scenario of the company bearing 100% of the payment to JTC Corporation due to the transaction when calculating the pro forma financial effects based on FY2022 of the company. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">The reason for the EPS increase is actually due to the fact that from my understanding, after skimming LHN Logistics's recent annual reports, is the fact that the company is actually loss-making. Hence, I find this decision to be quite good on the management's part since it unlocks value by offloading the lagging segment of the business at a premium. LHN Limited has stated that it will use the additional cash to further enhance its core businesses and general working capital purposes.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><b>In conclusion, I view the management favourably.</b> They are streamlining their business segments and expanding on their strengths and what is familiar to them. There is a clear growth strategy set in place by the management with business models that are proven to at least be profitable, <i>unlike</i> Fu Yu Corporation's recent failures in the supply chain management business. The dividend policy is rather reasonable and shows the shareholders are not an afterthought. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">I also find it rather interesting that the company is actually dual-listed, with shares trading on the </em><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Hong Kong Stock Exchange (HKEX)</em></strong><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">. To be very honest I am not sure what this serves to accomplish as from my understanding the company only manages two carparks in Hong Kong. Additionally, I noticed from the Hong Kong IPO that the company used the proceeds to purchase Singapore properties, so I'm not seeing the use of the HKD there. This is just something I find good to take note of. </em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Pushing on, let's now discuss the stock from a valuation perspective.</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">I will be analysing LHN Limited's current stock price based on a few different perspectives, which would be comparing the overall valuation to peers, historic multiple valuations, and a Sum of The Parts (SOTP) analysis first to hopefully be able to derive an intrinsic value for the stock. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">I will first tackle the SOTP-based valuation for the company based on results for FY2022, excluding its logistics segment. I will then add the cash and further equivalents to the total price. </strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Please take note I am unable to find the net profit for each segment and hence will be using the metric "Profit Before Taxation". Hence, I will try to adjust for this calculation by applying a 17% flat tax rate as per </em><a class="editor-rtfLink" href="https://www.blogger.com/blog/post/edit/8854083309825062752/7784044758571179699#" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">IRAS' policy</em></a><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">. Do keep in mind that this would result in oversight with regard to things like tax reliefs/deductions and other corporate actions, but I would think that I am calculating the "worst case scenario" to give a margin of safety for the intrinsic value assessment.</em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></p></div><div><i><br /></i></div><div><i><br /></i></div><div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg7EZDz8Fs7aysiscOGtVCfap2_chfHsZGBTQXExY868_B5nsYjuI0kk7SFkBAcRRbhyLUie7Tc1_uHj1aZGhPoanVUV5GOd5gq2w6SujE10IpzQNWxxa41rYimUdA4LXqgx0XfrLn15GJSlX8Nyw0P4LKfyBIlSupvZrvcw50UkvwzZX9_yRQWvI1O9m6w/s690/Screenshot%202023-09-25%20at%2010.44.57%20PM.png" style="margin-left: 1em; margin-right: 1em;"><span style="color: black;"><img border="0" data-original-height="690" data-original-width="640" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg7EZDz8Fs7aysiscOGtVCfap2_chfHsZGBTQXExY868_B5nsYjuI0kk7SFkBAcRRbhyLUie7Tc1_uHj1aZGhPoanVUV5GOd5gq2w6SujE10IpzQNWxxa41rYimUdA4LXqgx0XfrLn15GJSlX8Nyw0P4LKfyBIlSupvZrvcw50UkvwzZX9_yRQWvI1O9m6w/s16000/Screenshot%202023-09-25%20at%2010.44.57%20PM.png" /></span></a></div><div style="text-align: center;"><i>Source: PassiveLoss</i></div></div><div><b><br /></b></div><div><div><br /></div><div>I will now explain the thought process behind my methodology in calculating the intrinsic value per share. Essentially, I adjusted earnings for the real estate segment of the business by using the figures I calculated beforehand where I added back things like depreciation and interest expense. Next, I found similar listed businesses to the corresponding segments and used the current relevant metric. For example, for the real estate segments I used the current Price/FFO for the corresponding peer company whereas I used the P/E ratio of the other segments.</div><div><br /></div><div>To eliminate intersegment sales, I had to use the corporate figure provided in LHN Limited's annual reports and multiply it by the highest metric multiple I am using so that there is some allowance and hence gives some margin of safety to the calculation. Next, it can be argued that the peer companies I have used are big companies with solid track records, and hence command a higher premium. To take into account this fact, I have applied an arbitrary 30% discount to the figure. To be very honest, there is no solid basis on which I apply the 30% discount, I simply think it is a justified figure that provides some safety in terms of calculations. </div><div><br /></div><div>Lastly, I simply add the amount of liquid cash equivalents the company possesses to the total value of the company and then divide the entire figure by the total number of shares outstanding, which results in the figure of $1.38 being achieved. I must admit that this figure seems a bit inflated despite my efforts to try to manage it, which is why it would be useful to compare it to a historical valuation analysis and peer valuation analysis.</div></div><div><br /></div><div><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgP4tRi369Q63drtv5u-rKrZA0WiOF4thFfsJKfmuObD_SHNSN1gAYJmESfTXiRK4XnbWP7SKRYefZXUZ69pFtnAiqCSn2M7TjQBjI3nhlUulddaa94fcGCsWBiNtIr6Ws7px4nkEOVfCKgIINyfyGCvQc2LKR-OrscpsvrkIYYsmffozyB1-hQWnn9KXyV/s1002/Screenshot%202023-09-25%20at%2010.59.04%20PM.png" style="margin-left: 1em; margin-right: 1em;"><span style="color: black;"><img border="0" data-original-height="264" data-original-width="1002" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgP4tRi369Q63drtv5u-rKrZA0WiOF4thFfsJKfmuObD_SHNSN1gAYJmESfTXiRK4XnbWP7SKRYefZXUZ69pFtnAiqCSn2M7TjQBjI3nhlUulddaa94fcGCsWBiNtIr6Ws7px4nkEOVfCKgIINyfyGCvQc2LKR-OrscpsvrkIYYsmffozyB1-hQWnn9KXyV/s16000/Screenshot%202023-09-25%20at%2010.59.04%20PM.png" /></span></a></div><br /><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEifxGYtkTQi91C5h5347ZYFNF5XiTeYCpfyJTd8OopOZQsivw_Uv5ZPWI881wpFXSvIwMVpb2ptLBoXzKXXIawoGQdv6DKU5uG87j9ZSVod6vS0uVlN9Q8FB87KLU8UwRqr8VWbUJTfHZEANiDFBIqUmtLiWYJREQI-ZakeugmDKgSaQFTTaste9TrfCxEU/s1006/Screenshot%202023-09-25%20at%2010.59.21%20PM.png" style="margin-left: 1em; margin-right: 1em;"><span style="color: black;"><img border="0" data-original-height="266" data-original-width="1006" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEifxGYtkTQi91C5h5347ZYFNF5XiTeYCpfyJTd8OopOZQsivw_Uv5ZPWI881wpFXSvIwMVpb2ptLBoXzKXXIawoGQdv6DKU5uG87j9ZSVod6vS0uVlN9Q8FB87KLU8UwRqr8VWbUJTfHZEANiDFBIqUmtLiWYJREQI-ZakeugmDKgSaQFTTaste9TrfCxEU/s16000/Screenshot%202023-09-25%20at%2010.59.21%20PM.png" /></span></a></div><br /><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh4dXT7XjHKvmXcUFtsf7fPuk2Qz7B6n-XQooQc_ut0xxqRxzfpWrcgyafuRxSKYmfGSPAmeYIzpHC22DHJNEOtAXEsubuMkdJ1PORZ_OKpeTuS32FGx7KeMolYb0u7Sc9rWmOTMcStufb3mT3PcgeWbHcWawx4rT859WcZezktzp50IDtyUsGfueMXYrt3/s1002/Screenshot%202023-09-25%20at%2011.00.09%20PM.png" style="margin-left: 1em; margin-right: 1em;"><span style="color: black;"><img border="0" data-original-height="262" data-original-width="1002" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh4dXT7XjHKvmXcUFtsf7fPuk2Qz7B6n-XQooQc_ut0xxqRxzfpWrcgyafuRxSKYmfGSPAmeYIzpHC22DHJNEOtAXEsubuMkdJ1PORZ_OKpeTuS32FGx7KeMolYb0u7Sc9rWmOTMcStufb3mT3PcgeWbHcWawx4rT859WcZezktzp50IDtyUsGfueMXYrt3/s16000/Screenshot%202023-09-25%20at%2011.00.09%20PM.png" /></span></a></div><div style="text-align: center;"><i>Source: <a href="https://www.gurufocus.com/term/pfcf/SGX:41O/Price-to-Free-Cash-Flow/LHN" target="_blank">Gurufocus</a></i></div><div style="text-align: center;"><br /></div><div style="text-align: center;"><br /></div><div>We can see that by all metrics available, LHN Limited is currently trading at a discount compared to its historic median. </div><div><br /></div><div><b><br /></b></div><div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgJhxJG1IvTOfz0SVZrfshWCBKjjEeXvhmFWcdAy_IvD2mXQVlupy8se0irVSUC607q62tm_W4440HnHwu15EVbJLecdky5729rKfhnsIfeY07xyBsI1Uszz2J3rkb8JdR6roWqqFWNwhtHPvvzzlIhe7Xx6LO8eJCzsTNhVTaKG1zwKiKGlS_wsGfZpfD7/s274/Screenshot%202023-09-26%20at%208.52.08%20AM.png" style="margin-left: 1em; margin-right: 1em;"><span style="color: black;"><img border="0" data-original-height="152" data-original-width="274" height="355" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgJhxJG1IvTOfz0SVZrfshWCBKjjEeXvhmFWcdAy_IvD2mXQVlupy8se0irVSUC607q62tm_W4440HnHwu15EVbJLecdky5729rKfhnsIfeY07xyBsI1Uszz2J3rkb8JdR6roWqqFWNwhtHPvvzzlIhe7Xx6LO8eJCzsTNhVTaKG1zwKiKGlS_wsGfZpfD7/w640-h355/Screenshot%202023-09-26%20at%208.52.08%20AM.png" width="640" /></span></a></div><i><div style="text-align: center;"><i>Source: PassiveLoss</i></div></i><b><br /></b></div><div><b><br /></b></div><div><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">If we were to use the following median ratios and multiply them by FY2022 results, we can derive the above values. To better visualise the impact of the LHN Logistics disposal, I have used the proforma NAV per unit to calculate the intrinsic value should we use the same median P/B. I have excluded P/CF and P/E calculations for the post-disposal column as that would result in the one-off transaction inflating the results.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Next, for peer-to-peer comparison with regards to multiples valuation, I must admit that it is actually rather hard to find a suitable company to evaluate with a similar business model.</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">The only company I could think of that would fit LHN Limited's profile is Centurion Corp, which is highly debatable given the fact that it is a company that deals with the worker dormitory business. Hence, I would take this method with a grain of salt, but will still include it for the sake of covering all grounds. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></p></div><div><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj8UD4lzOA06R-Mv-F2_SAsAQr7jb7LeEBySRGVfMOOJTH5XtLbuuHQslMSehN-yfWRQIgVT_DtsN-Bn0Cjs7jrG6NZqab557yFfTC772eqwZBzD5aFUx20TV00hF-tu_J6AB34GjYhoRK0iLw-h3OPFYTMeaIhn8BdZ9CfnfSBjYpQghIUU1ZXbkU1evef/s280/Screenshot%202023-09-26%20at%209.10.03%20AM.png" style="margin-left: 1em; margin-right: 1em;"><span style="color: black;"><img border="0" data-original-height="144" data-original-width="280" height="329" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj8UD4lzOA06R-Mv-F2_SAsAQr7jb7LeEBySRGVfMOOJTH5XtLbuuHQslMSehN-yfWRQIgVT_DtsN-Bn0Cjs7jrG6NZqab557yFfTC772eqwZBzD5aFUx20TV00hF-tu_J6AB34GjYhoRK0iLw-h3OPFYTMeaIhn8BdZ9CfnfSBjYpQghIUU1ZXbkU1evef/w640-h329/Screenshot%202023-09-26%20at%209.10.03%20AM.png" width="640" /></span></a></div><i><div style="text-align: center;"><i>Source: PassiveLoss</i></div></i><b><div><b><br /></b></div><br /></b><div><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Surprisingly, the valuation is similar, albeit on a lower end. If you take the average of the above-calculated values, we get the IV of 56.5 cents, which seems rather grounded in reality. However, I believe that the IV of the company can be higher than this derived figure as the company has been highly proactive in capital recycling and shifting into more predictable, proven businesses. Consequently, multiples expansion may be a real possibility in the future. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"></p><p></p><p style="background: transparent; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background: transparent; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background: transparent; margin-bottom: 0pt; margin-top: 0pt;">Overall, I'll be keeping the company on my watchlist. </span></strong><span data-preserver-spaces="true" style="background: transparent; margin-bottom: 0pt; margin-top: 0pt;">As a value investor, I like to give myself a margin of safety of 20%, which means in theory, my entry price would be anything equal or below to 45.2 cents. Personally, I'm fond of the company's active capital recycling and the fact that it has the largest market share of the co-living business in Singapore is something you won't find anywhere else in the SGX market. Nevertheless, after monitoring small-cap stocks in Singapore, I don't have a very high confidence in such companies maintaining a solid track record of stable earnings. Hence, if I do ever enter, it'll be as a punt. </span></p></div><div><br /></div><div><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><i style="color: #222222;"><b style="font-style: normal;">Think this article is something you'd want more of? Subscribe <a href="https://follow.it/passive-loss?leanpub" target="_blank">here</a> using your email to get notified about my latest blog articles, I'd truly be grateful!</b></i></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><i style="color: #222222;"><b style="font-style: normal;"><br /></b></i></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><i style="color: #222222;">The author is currently not vested in any equities discussed in the article. </i></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"></p><div style="text-align: justify;"><span style="color: #0e101a; font-style: italic;"><br /></span></div><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><div style="text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Disclaimer: Please take everything published within this blog with a pinch of salt. Nothing I say here should be misconstrued as any form of financial advice whatsoever. In fact, I am probably the absolute last person you should approach for any sort of advice. All self-computed figures are calculated to the best of my ability, but I cannot guarantee they are 100% accurate, and I am not liable for any investment decisions made based on my content. </em></div><div style="text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></em></div></em><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Thank you for reading my blog, and I hope you have learnt something, no matter how seemingly minuscule, ciao!</em></p></div><div><br /></div><div><p><br /></p><p><br /></p><p><br /></p><p><br /></p><p><br /></p><div><br /></div><p><br /></p></div>Passive Loss SGhttp://www.blogger.com/profile/15231705917017776583noreply@blogger.com2tag:blogger.com,1999:blog-8854083309825062752.post-42501879764707629272023-06-17T04:35:00.000-07:002023-06-17T04:35:00.544-07:0017/6/23 Portfolio Update<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> Hello everyone! PL here with just a short portfolio update to rid the radio silence of my blog! I'm currently undergoing my vocational training and hence still don't have too much free time to continue writing detailed blog posts regularly. Nevertheless, here are just some updates on my portfolio :)</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhihF4jdyZBbqMPN_Oio_iSF5XKzsmwI51qJAYhRuhJSh0g8KdM4-CYbm_bWBg6lTuDIDQhIkihQlIiomckbbc12GnEkGonWRzJ55bYm0N3mkFISSOHac-MtZRMLC5ms5B7KJKj8RUncrH-xPsO5Cc1JqqUJVuVHONNB0LTE6uB5dJObHThy034ZkxXQg/s1024/WhatsApp%20Image%202023-06-17%20at%2019.23.14.jpeg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="867" data-original-width="1024" height="542" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhihF4jdyZBbqMPN_Oio_iSF5XKzsmwI51qJAYhRuhJSh0g8KdM4-CYbm_bWBg6lTuDIDQhIkihQlIiomckbbc12GnEkGonWRzJ55bYm0N3mkFISSOHac-MtZRMLC5ms5B7KJKj8RUncrH-xPsO5Cc1JqqUJVuVHONNB0LTE6uB5dJObHThy034ZkxXQg/w640-h542/WhatsApp%20Image%202023-06-17%20at%2019.23.14.jpeg" width="640" /></a></div><br /><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: center;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: center;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Screenshot of my Tiger Brokers Portfolio</em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: center;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Initially, my portfolio had Keppel Corp in 100% weightage, but I took profit on half of the proceedings when Keppel neared the $6.50 range and put the available cash into United Hampshire US REIT, which is a counter I've covered in the past.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Overall, the total profit for the account is SGD 1.9k, yielding a forward dividend income of SGD 1.3k per year.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">I will continue to hold my remaining stake in Keppel as I believe that the current plan to recycle capital into recurring income is coming to fruition quite nicely, potentially cementing Keppel's status as a solid Blue Chip company that will provide me with cash flow for years to come. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">In terms of UHREIT, I believe it will ride on the upcoming REIT rally should interest rates start to plateau and be lowered. However, should inflation remain untamed, the resilient asset class of UHREIT should benefit. Overall, UHREIT, with high amounts of fixed borrowings, will remain strong in the face of any headwind, be it a weak economy, high inflation, or dropping or increasing interest rates. Not to mention the fact that SGD has been quite strong against the USD recently, making it an opportune time to accumulate foreign US assets.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Moving forward, I believe I will continue to be overweight REITs, looking at various counters such as AIMS APAC REIT, Mapletree Logistics/Industrial Trust, and Capitaland Ascendas REIT. I will also consider accumulating banks for a long-term portfolio should they show increased weakness.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><b style="color: #222222;">Think this article is something you'd want more of? Subscribe <a href="https://follow.it/passive-loss?leanpub" target="_blank">here</a> using your email to get notified about my latest blog articles, I'd truly be grateful!</b></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><div style="text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Disclaimer: Please take everything published within this blog with a pinch of salt. Nothing I say here should be misconstrued as any form of financial advice whatsoever. In fact, I am probably the absolute last person you should approach for any sort of advice. All self-computed figures are calculated to the best of my ability, but I cannot guarantee they are 100% accurate, and I am not liable for any investment decisions made based on my content. </em></div><div style="text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></em></div><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"></em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Thank you for reading my blog, and I hope you have learnt something, no matter how seemingly minuscule, ciao!</em></p>Passive Loss SGhttp://www.blogger.com/profile/15231705917017776583noreply@blogger.com2tag:blogger.com,1999:blog-8854083309825062752.post-25460768523470306762023-03-31T04:11:00.002-07:002023-03-31T04:11:21.952-07:00Is DBS Bank A Long-Term "Must Buy?"<p style="text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> What do you first think of when I utter the name "</span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">DBS Bank</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">"? Do you think of it as Singapore's Government-Backed Banking Institution? Do you think of your personal financial services provider? Perhaps, you may even think of the company's shares first, frequently touted as a solid pick for one's portfolio. In fact, DBS Bank is the highest-weighted constituent of the Straits Times Index, which is widely regarded as the Singapore Stock Market's benchmark index, weighing at a whopping </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">19.9%</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> of the entire index. Chances are, you're a DBS client, and since DBS acquired POSB in 1998, POSB clients are DBS ones too. </span></p><p style="text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgnFp_pf2K_uYGOgCLZedDh0KC04q60PrqY0_C5wzx6bL4J6ViUVrO1bPOox7frTw3mydwEf1uaBiGKi5sHP0Si9sy9gCws6Qk5KcsXnbVc7yuPWMUruOJ5kDeKGOpvcnfDoHXB3GRCS7F-cA2x7Ibqkby10g01vZHA4DBgTsQviyG441kpbBna4GtvsA/s410/brand-left.webp" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="136" data-original-width="410" height="212" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgnFp_pf2K_uYGOgCLZedDh0KC04q60PrqY0_C5wzx6bL4J6ViUVrO1bPOox7frTw3mydwEf1uaBiGKi5sHP0Si9sy9gCws6Qk5KcsXnbVc7yuPWMUruOJ5kDeKGOpvcnfDoHXB3GRCS7F-cA2x7Ibqkby10g01vZHA4DBgTsQviyG441kpbBna4GtvsA/w640-h212/brand-left.webp" width="640" /></a></div><i><div style="text-align: center;"><i>Source: <a href="https://www.dbs.com.sg/index/default.page" target="_blank">DBS Website</a></i></div><div style="text-align: justify;"><br /></div></i><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">This may be going off on a tangent, but I recently opened an account with DBS Bank. I have to admit that the entire process was </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">not</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> pleasant at all... For some reason, after acquiring POSB, my local banking branch was shut down despite catering to a rather large population. I'm not sure what's the rationale behind the decision, but I feel it wasn't a great one. Due to the branch closure, many elderly folk were redirected to another already-overworked bank branch, dramatically increasing customer inflow. The corollary of this is that no queue numbers could be given out after </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">12 pm</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">, with wait times going up to 4-5 hours. This was all on a Tuesday by the way. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">On the off-chance that you </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">don't </strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">know what DBS does, then here's a summary from their website.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">"DBS provides a full range of services in consumer, SME, and corporate banking. As a bank born and bred in Asia, DBS understands the intricacies of doing business in the region's most dynamic markets. DBS is committed to building lasting relationships with customers, as it banks the Asian way."</em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Doesn't say that much.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Okay, let's come back to the main topic at hand: </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Is DBS Bank a Long-Term "Must Buy?" </strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">It's very tricky to analyse banks in my opinion, especially big ones. Banks' services are seriously diverse, with many industry-specific financial metrics, which I will incorporate in today's analysis. Nevertheless, it's time for me to </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">attempt</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> to delve deep into the inner workings of Singapore's biggest bank, DBS! </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Like all companies, it's best to gain a deeper understanding of the company's balance sheet.</strong></p><p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj945K-Ve9JCxB29aMPvpnBy1Y529RJhes6YmmJCb4OtscP-15_Dzfpe-Wi-qnikWAF1fY3nrwCAHtME3EBKeHgxRxcA6JVsP3hTrWIUV3_lF0ZW-QmZZnLw4JkugLCnzWkf-RR_UxFREGpLRj0D_pOWvkEWe5CZGW-J7LBUmZ-B_OTkcpGZ0RvU-t0dg/s1078/Screenshot%202023-03-21%20at%203.30.32%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="924" data-original-width="1078" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj945K-Ve9JCxB29aMPvpnBy1Y529RJhes6YmmJCb4OtscP-15_Dzfpe-Wi-qnikWAF1fY3nrwCAHtME3EBKeHgxRxcA6JVsP3hTrWIUV3_lF0ZW-QmZZnLw4JkugLCnzWkf-RR_UxFREGpLRj0D_pOWvkEWe5CZGW-J7LBUmZ-B_OTkcpGZ0RvU-t0dg/s16000/Screenshot%202023-03-21%20at%203.30.32%20PM.png" /></a></div><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhTaZ2MLqfRWHV9oUA944x7lCpB1INORiWktksNA3YjqMdRt36piRA_j5HtHIZE3nkS-8rIomeRL7wdpRDR5YjbEvyebuH6_SqZSlzLhaF08O8-pSep4247ujIS-NTw0HtrsSOuF7cuep4BxcEwsKGU1EexPmIifbmP_gYqT5HzYWS_hyrVOreaKTpUKQ/s1258/Screenshot%202023-03-21%20at%203.37.46%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1094" data-original-width="1258" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhTaZ2MLqfRWHV9oUA944x7lCpB1INORiWktksNA3YjqMdRt36piRA_j5HtHIZE3nkS-8rIomeRL7wdpRDR5YjbEvyebuH6_SqZSlzLhaF08O8-pSep4247ujIS-NTw0HtrsSOuF7cuep4BxcEwsKGU1EexPmIifbmP_gYqT5HzYWS_hyrVOreaKTpUKQ/s16000/Screenshot%202023-03-21%20at%203.37.46%20PM.png" /></a></div><div style="text-align: center;"><i>Source: <a href="https://links.sgx.com/FileOpen/DBS%20Annual%20Report%202022.ashx?App=Announcement&FileID=749338" target="_blank">DBS FY2022 Annual Report</a></i></div><div style="text-align: justify;"><span style="font-weight: 700;"><br /></span></div><p></p><p style="text-align: justify;">Unsurprisingly, DBS has had a great fiscal year due to the large increase in Interest income to the tune of 60%, attributed to the large interest rate hikes made by Central Banks in recent times, increasing net interest margin from 1.63% to 2.11%, vastly increasing profitability. Interestingly, net fee and commission income fell drastically, being offset slightly by the increase in net trading income. Overall, non-interest income fell marginally. According to DBS, the lower fee and commission income can be attributed to weaker market sentiment resulting in lower investment product sales, which does make sense. I don't see any structural weakening in DBS' core business model since it seems like most fluctuations are due to cyclical factors outside of the company's control. </p><p style="text-align: justify;">On the other hand, I find the increase in DBS' employee benefits from $3.9 Billion to $4.4 Billion to be rather intriguing. I suspect that it could be due to the higher interest income experienced, resulting in higher bonuses for employees, which was confirmed when DBS confirmed a special monetary award presented to all staff for the fourth quarter. When I checked the historic employee benefits of DBS' annual reports, it seems that rising employee benefit is rather often, so it could perhaps also be attributed to high pay progression. Allowances for credit and other losses are almost x5, which I presume is due to the sharp increase in loan interest rates which would increase default risk. I would say allowances are still rather low and hence shows that DBS' consumer base is low-risk, although we should take this with a grain of salt due to allowances simply being an estimate. </p><p style="text-align: justify;">In terms of comprehensive income, the translation differences for foreign operations could be attributed to the substantial depreciation of Japan, India, Vietnam, Taiwan, and Indonesia's currency against SGD, which resulted in the $950 million unrealised loss. I am not sure about the losses on cash flow hedges and debt instrument arrangements put in place by DBS, but one has to feel that they are rather severe for this year. </p><p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgYN3gHX0uQF0uEYROleDXjvANI9lY_Rg673T4W_iFCzQE5z9keryZsWUIQ54ePa6PJGiGjJtEQL740SDpYf15VbG-0SuZJA8N7uXJ2gvPnUrbikq0kYEsQ8pOU1vWDq_EW98MNS9heaSbdCXp2146Mez6TVGfWRMuIn6ck2MTmBaUlrJVqZeYakK3Ayw/s1400/Screenshot%202023-03-21%20at%205.11.57%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="880" data-original-width="1400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgYN3gHX0uQF0uEYROleDXjvANI9lY_Rg673T4W_iFCzQE5z9keryZsWUIQ54ePa6PJGiGjJtEQL740SDpYf15VbG-0SuZJA8N7uXJ2gvPnUrbikq0kYEsQ8pOU1vWDq_EW98MNS9heaSbdCXp2146Mez6TVGfWRMuIn6ck2MTmBaUlrJVqZeYakK3Ayw/s16000/Screenshot%202023-03-21%20at%205.11.57%20PM.png" /></a><i>Source: <a href="https://links.sgx.com/FileOpen/DBS%20Annual%20Report%202022.ashx?App=Announcement&FileID=749338" target="_blank">DBS FY2022 Annual Report</a></i></div><p style="text-align: justify;">In terms of DBS' balance sheet, there is not much to take note of besides an increase in consumer deposits. </p><p style="text-align: justify;"><b>Of course, DBS, being a bank, should be evaluated using metrics suited for banks...</b></p><p style="text-align: justify;">I have compiled a few calculated metrics pertinent to this issue in the Google Sheet below:</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEif3erUIAYetQTq7WuVQq3Wje8LeNLXI_sZeW_S3Fdgp2F9kN_Vp-uhD_gH67ZhjOsTrX6mlg8c6CWb9g-NywScNNdDDam_twx1fn1F8jVDqsJvkuogsw6H_ZZXdwkQBCusMgLANtNAjlhigAHvZN0uYttkayEaJq_degayAxOFS0lyoekPPN9HDNSicw/s1834/Screenshot%202023-03-22%20at%202.31.38%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="172" data-original-width="1834" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEif3erUIAYetQTq7WuVQq3Wje8LeNLXI_sZeW_S3Fdgp2F9kN_Vp-uhD_gH67ZhjOsTrX6mlg8c6CWb9g-NywScNNdDDam_twx1fn1F8jVDqsJvkuogsw6H_ZZXdwkQBCusMgLANtNAjlhigAHvZN0uYttkayEaJq_degayAxOFS0lyoekPPN9HDNSicw/s16000/Screenshot%202023-03-22%20at%202.31.38%20PM.png" /></a></div><i><div style="text-align: center;"><i>Source: FY22 Reports of Each Respective Bank </i></div><div style="text-align: justify;"><i><br /></i></div></i><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">We've all seen how much damage a bank run could potentially cause as illustrated by the recent <a href="https://passiveloss.blogspot.com/2023/03/silicon-valley-bank-deposit-guarantee.html" target="_blank">Silicon Valley Bank</a> collapse... So I thought certain financial metrics would be </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">especially</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> relevant.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Firstly, let's take a look at the CET1 ratio for DBS Bank, which is the highest out of the three local banks. If you're a layman just like me, then you probably have no idea what CET1 is. Well, it's short for Common Equity Tier 1 ratio, which is the ratio of "Tier 1" Capital compared to a Bank's risk-weighted assets. In short, it measures the bank's ability to withstand financial stress for whatever reason without affecting operations. To contextualise the banks' financials, the Monetary Authority of Singapore </span><a class="editor-rtfLink" href="https://www.blogger.com/blog/post/edit/8854083309825062752/2546076852347030676#" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #4a6ee0; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">mandates</span></a><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> that banks have a CET1 ratio of 6.5%, and a total Capital Adequacy Ratio of 10%, which is a metric that takes into account additional grades of capital. In short, the CET1 of all banks </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">already</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> surpasses the CAR requirement, which means that we can say that the banks will most likely not suffer any insolvency or liquidity issues. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">We can see that DBS has the highest CET1 ratio of all the banks, coming in at 14.6%, which </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">should</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> mean that DBS is the most capable among the three local banks to withstand any shocks. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Typically, we can see how efficiently management is using their capital by reviewing their Return on Equity (ROE). A higher ROE would mean that more profits are being generated with the same amount of equity. DBS is leading the pack with the highest ROE of 14.17%, approximately 30% higher than OCBC and UOB.</span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> There may be a few reasons to explain this ROE...</em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Firstly, we can see the DBS has the highest CASA (Current Account Savings Account) ratio, which means that most of the bank's total deposits are in current and savings accounts. If you didn't know this already, then do keep in mind that banks don't </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">exactly</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> pay you much for holding your funds with them. When a higher proportion of their deposits are in such accounts, they incur fewer costs when lending out funds as opposed to things such as Fixed Deposits. Hence, this would naturally result in a higher return on equity.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">We can also see that DBS has the lowest percentage of Non-Performing Loans (NPL) of 1.1% out of the three banks, which may be indicative of DBS' loan selection process being of a higher quality. A lower NPL means fewer loans are being defaulted on, which means less opportunity cost incurred for the bank, resulting in a higher ROE.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">However, it is interesting to note that the Cost to Income ratio of DBS is actually the highest among the three banks, despite the highest ROE. </strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">This could mean that DBS spends more on operating expenses such as rental leases, marketing, and employee benefits. Nevertheless, I would say that the much higher ROE supersedes the relatively higher cost-to-income ratio of DBS.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Can DBS continue to expand its business then?</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">"DBS as a bank has six core markets: Singapore, Indonesia, India, China, Hong Kong, and Taiwan. We are also present in other markets like Malaysia, Thailand, Vietnam, and Japan, where we recently received our securities trading licence, so we have a presence in practically every Asian country." - DBS Website</em></p><p></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"></p><p></p><p style="background-color: transparent; background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-color: transparent; background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">Many shareholders have vocally expressed their discontent with DBS's expansion in India, which is understandable, given that it's an emerging economy, and an investment in India may not necessarily pay off.</span></p><p><span style="background-color: white; font-family: inherit;"></span></p><div class="separator" style="clear: both; text-align: center;"><span style="background-color: white; font-family: inherit;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi7mAwJJpr_n8oB6E3JHVMTC10QtMQnVrxrsCADXtkRpgbpqwcfe-ghrl6gD66ULBQs1jZpj6koMj7CN18je7uR529Fd4R1a2TGbQC5R3p6YRzuqL2PaAbnPtau99KPkohLafapQwVIpJIOF5NPivSqiX7HJildWZZW65CnCphB50kn7LQUY4cpZIVQug/s938/IMAGE_1671270451.webp" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="527" data-original-width="938" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi7mAwJJpr_n8oB6E3JHVMTC10QtMQnVrxrsCADXtkRpgbpqwcfe-ghrl6gD66ULBQs1jZpj6koMj7CN18je7uR529Fd4R1a2TGbQC5R3p6YRzuqL2PaAbnPtau99KPkohLafapQwVIpJIOF5NPivSqiX7HJildWZZW65CnCphB50kn7LQUY4cpZIVQug/s16000/IMAGE_1671270451.webp" /></a></span></div><span style="background-color: white; font-family: inherit;"><i><div style="text-align: center;"><i style="font-family: inherit;">Source: <a href="https://startup.outlookindia.com/sector/e-commerce/dbs-bank-india-partners-with-esamudaay-to-propel-local-commerce-in-small-towns-through-ondc-news-7572" target="_blank">Outlook India</a></i></div></i><div class="separator" style="clear: both; text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: justify;">With a population of 1.408 billion, it can certainly be argued that India may be a huge untapped market for DBS, with an elevated GDP growth rate of an average of 6% during the last 10 years. </div><div class="separator" style="clear: both; text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhwa18wricmkz8JhTMwekTq-EeqqluHVpyEL470DuZ1EioDd3g_n9_QCExIQvdEkTexWtXZPiw1Rylw7Pv5MbuGPRFw1Q0iGwK61rf2kEKhrSu-UR7Zj3BhDNn2YBMTcsqyPK9cZzLfukAtWgx352b6cWRU2RodNpkXVqCHcuV9tWGij40Cya0gcq2QYw/s1092/Screenshot%202023-03-22%20at%204.28.20%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="950" data-original-width="1092" height="556" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhwa18wricmkz8JhTMwekTq-EeqqluHVpyEL470DuZ1EioDd3g_n9_QCExIQvdEkTexWtXZPiw1Rylw7Pv5MbuGPRFw1Q0iGwK61rf2kEKhrSu-UR7Zj3BhDNn2YBMTcsqyPK9cZzLfukAtWgx352b6cWRU2RodNpkXVqCHcuV9tWGij40Cya0gcq2QYw/w640-h556/Screenshot%202023-03-22%20at%204.28.20%20PM.png" width="640" /></a></div><div style="text-align: center;"><span style="font-family: inherit;"><i>Source: <a href="https://www.studyiq.com/articles/indias-gdp-growth-rate/#:~:text=India's%20GDP%20Growth%20rate%20in%20the%20last%2010%20years%20has,the%20world's%20fifth%2Dlargest%20economy." target="_blank">StudyIQ</a></i></span></div><div class="separator" style="clear: both; text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi0TxqigepWXYySxc8DQYi08UvUrnApLTpzl2jFXFtufUWhjKJ53RUfst0VkyVubmUYCSoKGzcR-fg4ucx4fI-1kYajtn21_bUqpG24U3HiaJOB3aBOSA9qZ8FPJim5AAi0gASoCDRFDDUDvZCrHvz_WmyG-ZyzNuhOU8u3LbyM4Y4LWXqlh6y_AX-K8A/s1968/Screenshot%202023-03-22%20at%204.29.45%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="454" data-original-width="1968" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi0TxqigepWXYySxc8DQYi08UvUrnApLTpzl2jFXFtufUWhjKJ53RUfst0VkyVubmUYCSoKGzcR-fg4ucx4fI-1kYajtn21_bUqpG24U3HiaJOB3aBOSA9qZ8FPJim5AAi0gASoCDRFDDUDvZCrHvz_WmyG-ZyzNuhOU8u3LbyM4Y4LWXqlh6y_AX-K8A/s16000/Screenshot%202023-03-22%20at%204.29.45%20PM.png" /></a></div><div style="text-align: center;"><span style="font-family: inherit;"><i>Percentage of Indian Population with Digital Bank Account (Source: <a href="https://www.finder.com/in/digital-banking-statistics" target="_blank">Finder</a>)</i></span></div><div class="separator" style="clear: both; text-align: left;"><p style="background-color: transparent; background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-color: transparent; background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-color: transparent; background: transparent; margin-bottom: 0pt; margin-top: 0pt;">In today's Volatile, Uncertain, Complex, and Ambiguous (VUCA) world, rapid digitalisation has taken place, which </span><em style="background-color: transparent; background: transparent; margin-bottom: 0pt; margin-top: 0pt;">could</em><span data-preserver-spaces="true" style="background-color: transparent; background: transparent; margin-bottom: 0pt; margin-top: 0pt;"> poise DBS for accelerated growth in their India division. I subscribe to the ideology that one should not go against progress, but be a part of it, and that applies to this case as well. </span></p><p style="background-color: transparent; background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-color: transparent; background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-color: transparent; background: transparent; margin-bottom: 0pt; margin-top: 0pt;">However, I would be a fool to ignore some of the obvious cons that accompany this expansion as well. Look no further than the precipitous drop in the Indian Rupee's value relative to the Singapore Dollar, and you'll understand what I mean. It's certainly not a pretty chart, and should it continue, we'll see the risk/reward ratio of DBS' venture into India increase. </span></p></div><div class="separator" style="clear: both; text-align: justify;"><br /></div></span><p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiiZPjINHoVl8n8Cfg1cX5pEgZDV4KQG8OTU5eVJJZ7pbGof9D-vyEUZq9E9l6qNqYswmFyTNQtYOV1OiiCWHz0ZmS1R4F1MpmtZ-cSkvMPud7kPAwC94ueHk41d51esahCbsvDAn6fzYcJic9d5rVu4a3r2sHOLKLelUnE9qGh28ahbhghf1M8luXsIQ/s664/Screenshot%202023-03-22%20at%204.37.09%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="324" data-original-width="664" height="312" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiiZPjINHoVl8n8Cfg1cX5pEgZDV4KQG8OTU5eVJJZ7pbGof9D-vyEUZq9E9l6qNqYswmFyTNQtYOV1OiiCWHz0ZmS1R4F1MpmtZ-cSkvMPud7kPAwC94ueHk41d51esahCbsvDAn6fzYcJic9d5rVu4a3r2sHOLKLelUnE9qGh28ahbhghf1M8luXsIQ/w640-h312/Screenshot%202023-03-22%20at%204.37.09%20PM.png" width="640" /></a></div><i><div style="text-align: center;"><i>Indian Rupee to SGD Chart (Source: <a href="https://www.google.com/finance/quote/INR-SGD?sa=X&ved=2ahUKEwi9lLTOkO_9AhXIUGwGHcoyCkIQmY0JegQIBhAd" target="_blank">Google Finance</a>)</i></div><div style="text-align: justify;"><i><br /></i></div></i><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">However, there are some less obvious upsides to this as well. One could view the various foreign currencies as a hedge against the Singapore Dollar, stabilising DBS' yearly profits should our reputation as Asia's Financial Hub start to fade. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Not to mention, according to </span><a class="editor-rtfLink" href="https://www.blogger.com/blog/post/edit/8854083309825062752/2546076852347030676#" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #4a6ee0; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Singapore Business Review</span></a><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">, 5 in 10 Singaporeans have invested in the stock market, with 18% of Singaporeans indicating their interest in 2021. Yes, the fact that </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">you</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> are reading this probably means that investing is no longer a mystical, unknown phenomenon. Could we see more fees being earned by DBS from commissions and brokerage charges? </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Now, it's best to get a better idea of how the management has performed so that we can be assured that our funds are in safe hands.</strong></p><p style="text-align: justify;">Currently, Piyush Gupta has been serving as the Chief Executive Officer of DBS since 2009. </p><p dir="ltr" style="line-height: 1.2; margin-bottom: 12pt; margin-top: 12pt; text-align: justify;"><span style="background-color: white; color: black; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><i><span style="font-family: inherit;">"DBS is a leading financial services group in Asia, headquartered in Singapore. Recognised for its global leadership, DBS has been named "World’s Best Bank" by several global publications like Euromoney and Global Finance. The bank is at the forefront of leveraging digital technology to shape the future of banking, and was also named “World’s Best Digital Bank” by Euromoney. In addition, in 2019, DBS was listed among the top ten most transformative organisations of the decade by Harvard Business Review.</span></i></span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 12pt; margin-top: 0pt; text-align: justify;"><span style="background-color: white; color: black; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><i><span style="font-family: inherit;">Prior to joining DBS, Piyush had a 27 year career at Citigroup, where his last position was Chief Executive Officer for South East Asia, Australia and New Zealand.</span></i></span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 12pt; margin-top: 0pt; text-align: justify;"><span style="background-color: white; color: black; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><i><span style="font-family: inherit;">Piyush is currently the Chairman of the Board of Trustees of Singapore Management University, Vice-Chairman of the Institute of International Finance, Washington, and Vice-Chairman of the World Business Council for Sustainable Development (WBCSD) Executive Committee. In addition, he is a member of Singapore’s Advisory Council on the Ethical Use of AI and Data, and Bretton Woods Committee - Advisory Council. He sits on the boards of Singapore’s National Research Foundation, and the Singapore’s Council for Board Diversity. Piyush is a term trustee of the Singapore Indian Development Association (SINDA). Previously, he has been a member of the Singapore Emerging Stronger Taskforce, aimed at defining Singapore’s future in a post-Covid world, the UN Secretary General’s Task Force on Digital Financing of the Sustainable Development Goals, and the McKinsey Advisory Council.</span></i></span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 12pt; margin-top: 0pt; text-align: justify;"><span style="background-color: white; color: black; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><i><span style="font-family: inherit;">Piyush has a Bachelor of Arts (Honours) Degree in Economics from St. Stephen's College, Delhi University, India and a Post Graduate Diploma in Management from IIM, Ahmedabad.</span></i></span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 12pt; margin-top: 0pt; text-align: justify;"><span style="background-color: white; color: black; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><i><span style="font-family: inherit;">Piyush was awarded the Public Service Star by the President of Singapore for his meritorious services to the nation in 2020. He is a recipient of the 2023 Pravasi Bharatiya Samman Award, the highest honour conferred by the Indian Government on the country’s diaspora.</span></i></span></p><p dir="ltr" style="line-height: 1.2; margin-bottom: 12pt; margin-top: 0pt; text-align: justify;"><span style="background-color: white; color: black; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><i><span style="font-family: inherit;">Piyush was named one of the world’s top 100 best-performing chief executives in Harvard Business Review - 2019 edition of "The CEO 100". He was named Global Indian of the Year by the Economic Times in 2021, Singapore Business Awards' Outstanding Chief Executive of the Year in 2016, and Singapore Business Leader of the Year by CNBC in 2014."</span></i></span></p><p style="text-align: justify;">Certainly an extremely extensive CV. With a brief glance, it is evident that he is an extremely experienced individual familiar with technology. Not to mention the fact that DBS has been flourishing under his leadership. Sadly, he was instated as CEO in 2009, which was just after the Global Financial Crisis, which means that I am unable to accurately assess his performance when it came to risk management...</p><p style="text-align: justify;"><br /></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjxpyujkXMAVbpWIpGwZRPq0pPiPt1T94Z5YyIl0B6o5LkypM_9B1vU6gHiKwX_v-na8xV8KR5LPUc7oYdubfvuBhi9USQ8f20ORWP1btV2OFZ4Hl7XY10MbZR-mlelyDBsCFRu9aDesVP0i4xBo3YD_Y-qaOjBZPYVy48INHQqQQUVsaHEF776lENwvg/s1088/Screenshot%202023-03-22%20at%204.54.46%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1088" data-original-width="898" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjxpyujkXMAVbpWIpGwZRPq0pPiPt1T94Z5YyIl0B6o5LkypM_9B1vU6gHiKwX_v-na8xV8KR5LPUc7oYdubfvuBhi9USQ8f20ORWP1btV2OFZ4Hl7XY10MbZR-mlelyDBsCFRu9aDesVP0i4xBo3YD_Y-qaOjBZPYVy48INHQqQQUVsaHEF776lENwvg/s16000/Screenshot%202023-03-22%20at%204.54.46%20PM.png" /></a></div><i><div style="text-align: center;"><i>Source: <a href="https://www.dbs.com/annualreports/2009/DBS_AR_2009.pdf" target="_blank">DBS FY2009 Annual Report</a></i></div><div style="text-align: justify;"><br /></div></i><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Back in 2008, I was merely 4 years old, so it's not all too surprising that I wasn't able to recall the absolute devastation caused by the GFC. Hence, I wanted to see how was DBS impacted during the GFC so as to see how the management fared during such dire times. Shockingly, I would say that the bank did pretty well. Yes, EPS was substantially impacted, but it was certainly not the end. In fact, it could be seen as being merely set back by 5 years to 2005 levels of earnings. Besides, the bank still did maintain its asset value despite the GFC. Overall, I would say that the bank's performance was commendable amidst the uncertain economic conditions.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Now, is the management of DBS aligned with shareholders' interests?</strong></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgn5djFy6y8TaNFg2StrapNmtyc256m_aaegJ8HhIpjXxk8TtejqDti9VuU3lXRcYG9jjl6wQOC0UJuid_MbBctMc9_o4U1zj1lPdrxWXYiLpOh0HHX4ylnHeJx7-Mn8UnkA-40xBDIyGXsM2CJiowK7dnr9RbLt4746_ibw6455CauYY4Aleta-Gilrw/s1126/Screenshot%202023-03-23%20at%2010.53.40%20AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="486" data-original-width="1126" height="276" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgn5djFy6y8TaNFg2StrapNmtyc256m_aaegJ8HhIpjXxk8TtejqDti9VuU3lXRcYG9jjl6wQOC0UJuid_MbBctMc9_o4U1zj1lPdrxWXYiLpOh0HHX4ylnHeJx7-Mn8UnkA-40xBDIyGXsM2CJiowK7dnr9RbLt4746_ibw6455CauYY4Aleta-Gilrw/w640-h276/Screenshot%202023-03-23%20at%2010.53.40%20AM.png" width="640" /></a></div><i><div style="text-align: center;"><i>Source: <a href="https://www.gurufocus.com/stock/SGX:D05/financials" target="_blank">GuruFocus</a></i></div></i><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">From the chart above, we can see that DBS has rarely made dividend cuts, only doing so notably in the years FY2009, 2010, and 2020. Personally, I feel that DBS has made a valiant effort in being committed to maintaining their dividend, only doing so when it was prudent or mandatory to do so. In retrospect, I would say that it is understandable for DBS to cut their dividends in 2009 and 2010, given the fact that the global economy was still reeling from the effects of the GFC, hence, conserving cash would have been a wise move. Moreover, the 2020 dividend cut was literally mandated by the Monetary Authority of Singapore (MAS). </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">It may also be worth noting that the bank </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">did </em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">do a rights issue back in 2009 so as to conserve capital to guard against any unknown GFC ramifications. Overall, shareholders are not significantly/needlessly diluted and have been receiving stable and rising dividends historically. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Okay, so Piyush Gupta has been a rather competent CEO, but he's already 63, is there anyone to take his place? </strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Thankfully, I was able to gather some information regarding this subject matter from a </span><a class="editor-rtfLink" href="https://www.blogger.com/blog/post/edit/8854083309825062752/2546076852347030676#" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #4a6ee0; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">2019 Euromoney Interview</span></a><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">. In the interview, he elaborated on his plans regarding his successor as the bank's CEO, having around 5 successors in mind. Furthermore, he stated that he prefers generalists, being able to handle all matters related to the bank with at least some degree of competency.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">So far, he has name-dropped three potential candidates: Tan Su Shan, Shee Tse Koon, and Han Kwee Juan. From what I can see, they all seem to have rather clean records and are competent in what they do. Hence, I believe that when the time comes, Piyush Gupta would be able to properly groom his selected candidate into a competent CEO. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Personally, I am betting on either Tan Su Shan or Han Kwee Juan succeeding. Piyush Gupta has commonly expressed his interest in transforming DBS into a revolutionary bank that incorporates heavy digitalisation into its services. Hence, it is no surprise that DBS has ventured into providing </span><a class="editor-rtfLink" href="https://www.blogger.com/blog/post/edit/8854083309825062752/2546076852347030676#" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #4a6ee0; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Cryptocurrency-related services</span></a><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">, and has even been described as a "tech company" by Piyush himself. Naturally, I would assume that he would want someone that has the necessary vision to help DBS continue to innovate and tap into potential markets, which is exactly what Head of Strategy & Planning Han Kwee Juan is doing. However, Han Kwee Juan has only joined the group recently, and if Piyush values experience and company loyalty, then Tan Su Shan would most likely be his pick, given that she has the most experience at the company of the three, and can be seen as a 'generalist' given that she is the head of Institutional Banking. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Overall, I am relatively confident that DBS will be in good hands for the foreseeable future, given that it has no shortage of talents. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Now, it's time to review DBS Bank's historical performance, so as to see whether it can be seen as a long-term investment!</strong></p><p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjOQsdbwp6Ntay_OqNK5oPp7ZxsgSn3sbWEmcljgz2aQsLhxb7wXs4bGwR5jWPaBsQ6C_WIyqcLfpdM1ett8qrwnl_FCswI0UR8WF8pBwRrW8yiTGBLm4QV0W8tbOh_rabb63M-lIk6tVnDmoQlrl-_bjqyMkGaGNEHA3LQ3i-WcwPQD2b6o9NA9WzJpg/s1220/Screenshot%202023-03-23%20at%2012.01.25%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="448" data-original-width="1220" height="236" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjOQsdbwp6Ntay_OqNK5oPp7ZxsgSn3sbWEmcljgz2aQsLhxb7wXs4bGwR5jWPaBsQ6C_WIyqcLfpdM1ett8qrwnl_FCswI0UR8WF8pBwRrW8yiTGBLm4QV0W8tbOh_rabb63M-lIk6tVnDmoQlrl-_bjqyMkGaGNEHA3LQ3i-WcwPQD2b6o9NA9WzJpg/w640-h236/Screenshot%202023-03-23%20at%2012.01.25%20PM.png" width="640" /></a></div><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj-FIcPwcivJCx22KHDYrhS2Y9W45NZ2p6_I1Q20kdtBllIPS38WimJfhFhRyqKSZ0-WpYJXEb1RVCxRYpN8XJXi3cMnlxOTErXeROn2EUqRPLVEYjv8rRetyyX1Wj0x2Vv5q2SLor1IRuQzuiZR4WeNTTJRhaQVKrvLG2BISLtxa3gPzMMAp1gk3zJrQ/s1136/Screenshot%202023-03-23%20at%2012.02.15%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="468" data-original-width="1136" height="264" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj-FIcPwcivJCx22KHDYrhS2Y9W45NZ2p6_I1Q20kdtBllIPS38WimJfhFhRyqKSZ0-WpYJXEb1RVCxRYpN8XJXi3cMnlxOTErXeROn2EUqRPLVEYjv8rRetyyX1Wj0x2Vv5q2SLor1IRuQzuiZR4WeNTTJRhaQVKrvLG2BISLtxa3gPzMMAp1gk3zJrQ/w640-h264/Screenshot%202023-03-23%20at%2012.02.15%20PM.png" width="640" /></a></div><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiitufTGx_9wlkB55JhPMie5Ly9hfkKVZ4NOmmqtDaVvCroOXSov5QxD9u1UXnYNFvUOk95dzqNAFaN3q3BKpeQ288Lu49YEPsynCxiOlXvLkSxOJv-wXWUaVVtxD5W092ALCXXmZ77zyd4zbwi-ZBoHLHOj9vOd0icWN-FQZNi0W0LrzxGcghej_cyGQ/s1126/Screenshot%202023-03-23%20at%2012.02.23%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="480" data-original-width="1126" height="272" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiitufTGx_9wlkB55JhPMie5Ly9hfkKVZ4NOmmqtDaVvCroOXSov5QxD9u1UXnYNFvUOk95dzqNAFaN3q3BKpeQ288Lu49YEPsynCxiOlXvLkSxOJv-wXWUaVVtxD5W092ALCXXmZ77zyd4zbwi-ZBoHLHOj9vOd0icWN-FQZNi0W0LrzxGcghej_cyGQ/w640-h272/Screenshot%202023-03-23%20at%2012.02.23%20PM.png" width="640" /></a></div><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgjH01_ciE27Kxn4DN87sQ4uP20r3eFwM_IU8a7qcMxMf6H0rAlCpw_nGFvV6GmASPplV33czt5WPiPEuTRg1cWsGKsunzwKUvY1VUQEBdvN55REuj023p-BjGP27sd_dnWYYIl8v9K4rmOVaGiiTzL40_76lLSEHCI3yJW3RERCFF_Z--Qk5MTHbo6Ew/s1120/Screenshot%202023-03-23%20at%2012.02.39%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="468" data-original-width="1120" height="268" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgjH01_ciE27Kxn4DN87sQ4uP20r3eFwM_IU8a7qcMxMf6H0rAlCpw_nGFvV6GmASPplV33czt5WPiPEuTRg1cWsGKsunzwKUvY1VUQEBdvN55REuj023p-BjGP27sd_dnWYYIl8v9K4rmOVaGiiTzL40_76lLSEHCI3yJW3RERCFF_Z--Qk5MTHbo6Ew/w640-h268/Screenshot%202023-03-23%20at%2012.02.39%20PM.png" width="640" /></a></div><i style="text-align: center;"><div style="text-align: center;"><i>Source: <a href="https://www.gurufocus.com/stock/SGX:D05/financials" target="_blank">GuruFocus</a></i></div><div style="text-align: justify;"><br /></div></i><div><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">It's very evident that by all accounts, revenue, EPS, NAV and dividends have all steadily increased throughout the years, with DBS constantly making sustainable dividends that hover along the 50% payout ratio mark. It seems like EPS and Revenue were slightly affected during the COVID-19 pandemic though, which is reasonable. Moreover, DBS has always been known as a reliable, stable bank that is widely considered to be "Too big to fail", which is further backed up by the fact that 29% of DBS is owned by Temasek Holdings, the government's investing arm that would never allow for such a huge bank to fail.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Is DBS cheap at current prices?</strong></p><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjSLq8l5tek_KPdiCmG3IMb3XAhpoTDSSJTAkQPbN8Rl6llYG8PUR959N2EbEFZq3go0DX-hP16y1wi8AHV_YU1_ue_GbdMfGc3c86JG9E318kVjtLXIE4_yEgsJBOBvwLQ2HC5bShOb2UAML17hp-Lgvf1u-yBtbCi7e__8t0i2eWJ8okItgOHjvKVKg/s1612/Screenshot%202023-03-23%20at%201.00.41%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="592" data-original-width="1612" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjSLq8l5tek_KPdiCmG3IMb3XAhpoTDSSJTAkQPbN8Rl6llYG8PUR959N2EbEFZq3go0DX-hP16y1wi8AHV_YU1_ue_GbdMfGc3c86JG9E318kVjtLXIE4_yEgsJBOBvwLQ2HC5bShOb2UAML17hp-Lgvf1u-yBtbCi7e__8t0i2eWJ8okItgOHjvKVKg/s16000/Screenshot%202023-03-23%20at%201.00.41%20PM.png" /></a></div><i><div style="text-align: center;"><i>Source: <a href="https://ycharts.com/companies/DBSDY/price_to_book_value" target="_blank">YCharts</a></i></div><div style="text-align: justify;"><br /></div></i><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">According to YCharts, the average 5 Year Price to Book ratio for DBS is 1.332, which is a far cry from the current price of 1.514 price to book. The reason why I use Price to Book as opposed to PE is due to the fact that banks' assets are typically static as opposed to a bank's earnings which may be affected by cyclical macroeconomic factors. Is it fair to be paying such a high book value for DBS? Personally, I find that hard to justify when OCBC and UOB are trading at 1 and 1.1 Price to Book value respectively. I think 1.3 is justified, given that DBS' ROE is approximately 30% higher than its peers, but this is just too much.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">DBS may also simply be trading at an extraordinary premium due to the recent interest rate hikes which have elevated NIM. However, as rates continue to rise, NPL may continue to increase, while Loan Volume may decrease. Moreover, an economic recession may occur soon as the high-interest rates snuff out businesses, resulting in higher unemployment and further exacerbating the aforementioned problems. As more things start to break from the interest rate hikes, we </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">could</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> see interest rate cuts sooner than I expected, although I think that's slightly less probable. Overall, I stand firm on the position that Banks' earnings will plateau and normalise shortly, which would make the current premium placed on DBS unsustainable.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">That being said, I still do believe DBS is a great long-term hold.</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> There's nothing else like investing in Singapore's financial future by channeling our funds into bank stocks. With seemingly competent management, it is probable that DBS will continue to enjoy sustained, high growth. Just give DBS some time and I'm confident that your yield on cost will be extremely high in the long term. I would be </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">more than willing </em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">to revisit DBS at 1.3 PB, and if it goes near 1, then it most definitely would be a "Must Buy", assuming the overall fundamentals remain intact. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Author's Note: </strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">I have to admit that DBS' core business model and industry is something I find extremely challenging to analyse since the company is so large and complex. There are a lot of accounting terms that I had to research, and which I admit I may not have fully got a grasp on. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Additionally, this will be my final post before going on hiatus due to currently serving my NS in Tekong, which I elaborated on in my latest previous post. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><i style="color: #222222;"><br /></i></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><i style="color: #222222;"><b style="font-style: normal;">Think this article is something you'd want more of? Subscribe <a href="https://follow.it/passive-loss?leanpub" target="_blank">here</a> using your email to get notified about my latest blog articles, I'd truly be grateful!</b></i></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><i style="color: #222222;"><b style="font-style: normal;"><br /></b></i></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><i style="color: #222222;"><b style="font-style: normal;"><i style="font-weight: 400;">The author is currently not vested in any equities discussed in the article. </i></b></i></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"></p><div style="text-align: justify;"><span style="color: #0e101a; font-style: italic;"><br /></span></div><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><div style="text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Disclaimer: Please take everything published within this blog with a pinch of salt. Nothing I say here should be misconstrued as any form of financial advice whatsoever. In fact, I am probably the absolute last person you should approach for any sort of advice. All self-computed figures are calculated to the best of my ability, but I cannot guarantee they are 100% accurate, and I am not liable for any investment decisions made based on my content. </em></div><div style="text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></em></div></em><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Thank you for reading my blog, and I hope you have learnt something, no matter how seemingly minuscule, ciao!</em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"></p><p style="text-align: justify;"><br /></p></div>Passive Loss SGhttp://www.blogger.com/profile/15231705917017776583noreply@blogger.com2tag:blogger.com,1999:blog-8854083309825062752.post-73448890746557118552023-03-28T02:33:00.000-07:002023-03-28T02:33:55.146-07:00I'm About to Serve National Service! + Blog Moving Forward<p> If you've clicked the archive tab of my blog, you would have noticed a rather <i>sharp uptick </i>in writing activity from me in March. Moreover, if you've read my "About Me" page, it's no secret that I'm enlisting for National Service soon. I think it's a no-brainer that my free time will be greatly reduced, and that means I'll have less time to write, which is why I compensated by writing so much. That's right, I'm enlisting tomorrow to complete every Singaporean man's rite of passage.</p><p><br /></p><p></p><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjM2tTVb_xyGMQqlH9DkHqo0efxTq8k-DJTuYYOtcVdxcgvhk4jkgUVHs6XG44FoXwv4Jh9MQojKfzi8S73Oja6u6jeEPuxIPZ8Iz3NoNJQJFgb-uo7M1wTYuvjJtb0zgYCqreyPWWWXrqGXgAVC1FIBFy_EDD0q45-svyXijZCn9uTRoz0xul9_PD35g/s600/NS2.jpeg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="400" data-original-width="600" height="426" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjM2tTVb_xyGMQqlH9DkHqo0efxTq8k-DJTuYYOtcVdxcgvhk4jkgUVHs6XG44FoXwv4Jh9MQojKfzi8S73Oja6u6jeEPuxIPZ8Iz3NoNJQJFgb-uo7M1wTYuvjJtb0zgYCqreyPWWWXrqGXgAVC1FIBFy_EDD0q45-svyXijZCn9uTRoz0xul9_PD35g/w640-h426/NS2.jpeg" width="640" /></a></div><i>Source: <a href="https://theindependent.sg/why-national-service-is-necessary/" target="_blank">The Independent SG</a></i><br /><div class="separator" style="clear: both; text-align: center;"><br /></div><div style="text-align: left;">Quite frankly, I'm rather scared about embarking on my NS journey... but I'm excited about certain aspects as well. For example, I'm <i>absolutely zealous</i> about my impending eligibility to purchase the NS SAF Singlife Group Insurance. It's great to just get it over with anyways, and resume my education. Not to mention the fact that there will be many novel experiences and opportunities waiting for me, coupled with the prospect of forging lifelong friendships! </div></div><p></p><p><b>The bottomline is: Posts won't be as frequent...</b></p><p>To be able to reach as many people as possible, and to provide a consistent posting schedule, I'll be posting every week on Friday evening/Saturday. Additionally, it is highly probable that I won't be able to put out as many Fundamental Analysis posts, especially the "High Effort" ones, so it is most likely I will concentrate on Quick Bites, Current Affairs and Earnings Updates. Nevertheless, post topics will still greatly vary, but I'm receptive to feedback. Feel free to vote on the below survey to help me know where my audience's interest lies in. </p><p>Additionally, I've been applying to Google Adsense so as to be able to monetise the blog. Sadly, I was rejected recently after a whole <b>two weeks wait... </b>I've reapplied though. It may be predictable, but you bet I'll invest those earnings into my portfolio. Hence, you may start seeing ads on this blog soon going forward. Don't worry, I'll try to make the ads unobtrusive. </p><p><i><b>Overall, that's more or less it... and hey, if you've been enjoying the posts I've been putting out so far, why not <a href="https://follow.it/passive-loss?leanpub">subscribe</a> to my email feed? You'll get notified of my most recent posts, and I'd seriously appreciate it :)</b></i></p>
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Passive Loss SGhttp://www.blogger.com/profile/15231705917017776583noreply@blogger.com2tag:blogger.com,1999:blog-8854083309825062752.post-45046471322717969682023-03-24T01:31:00.000-07:002023-03-24T01:31:40.503-07:00How I Would Invest $200,000 Today As A Singaporean Youth<p style="text-align: justify;"> Recently, I've had a lot of friends ask me for some good stock picks, with no idea on how to invest their funds. Of course, like I said earlier, I'm <b>not</b> an investment guru or certified financial planner. Hell, I don't think I'm even generating alpha or creating better risk-adjusted returns. Nevertheless, I figured that it would be fun for me to try to create a $200K SGD portfolio and briefly justify my picks. Do take note that this is from a 3-5+ year investing time frame view, although there are still some picks which would be good long-term holds. It's more of a mixed bag really with a focus on value investing. </p><p style="text-align: justify;"><b>Enough chit chat then, let's get straight to the point with some brief description / rationale for each stock!</b></p><p style="text-align: justify;"><b>Here's how I would Invest $200,000 Today as a Singaporean Youth... (If I was Responsible)</b></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEja-sJu0l2hT9cOjqFJZZ294T8fP1W1q4rud_cxwPIaMYqz85EQwiGFJATvgV_3VCTstzmvOW-Adpj0DASmiDWg1AOtOqOQQV4D7J_4viZWcRlstLvPI_h2wD5xmZ-AaAy1K6vYA9Svi07YolO5cCxpJimshN9CJAuYuufJcMUUtubKkxyMGKiBAzpang/s2260/Screenshot%202023-03-17%20at%201.36.56%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="592" data-original-width="2260" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEja-sJu0l2hT9cOjqFJZZ294T8fP1W1q4rud_cxwPIaMYqz85EQwiGFJATvgV_3VCTstzmvOW-Adpj0DASmiDWg1AOtOqOQQV4D7J_4viZWcRlstLvPI_h2wD5xmZ-AaAy1K6vYA9Svi07YolO5cCxpJimshN9CJAuYuufJcMUUtubKkxyMGKiBAzpang/s16000/Screenshot%202023-03-17%20at%201.36.56%20PM.png" /></a></div><i><div style="text-align: center;"><i>*Information accurate as of 17/3/2022 derived from (Source: <a href="https://investors.sgx.com/stock-screener" target="_blank">SGX Stock Screener</a>)</i></div></i><div class="separator" style="clear: both; text-align: justify;"><br /></div><div style="text-align: justify;"><br /></div><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">In descending order from highest weightage to lowest weightage:</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">VWRA</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">(35%) -</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> Vanguard FTSE All-World UCITS ETF USD Acc</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">This is an Ireland-domiciled ETF that encompasses stocks from the entire global market. It is rather cost-efficient in terms of fees since dividends are automatically reinvested, the expense ratio is reasonable at 0.22%, coupled with the fact that it only suffers from a lower 15% dividend withholding tax as compared to the 30% if I were to invest directly into US equities. This growth-focused ETF is my highest weightage since I am a young person with a long investing time horizon, and I am able to weather volatility. Now, you may be thinking: Why not the S&P500? </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Well, there are two many reasons: Firstly, the S&P500 pays out a dividend which would suffer from the aforementioned drawbacks, diminishing my compounded potential returns in the future. Secondly, as outlined in my S&P500 </span><a class="editor-rtfLink" href="https://www.blogger.com/blog/post/edit/8854083309825062752/4504647132271796968#" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #4a6ee0; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">post</span></a><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">, I believe we may experience less growth in the US equities market in the future. Obviously, I cannot predict the future, but I believe it will occur sometime during my investing lifespan (40 years or so). </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">VWRA has also performed admirably in the past, only slightly underperforming the S&P500 index. Hence, even if my thesis doesn't pan out exactly the way I want it to, I shouldn't miss out on much. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Keppel Corporation (12.5%)</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">A Singapore Conglomerate that operates in 4 Key Segments: Energy & Environment, Urban Development, Logistics, and Asset Management. I have done a </span><a class="editor-rtfLink" href="https://www.blogger.com/blog/post/edit/8854083309825062752/4504647132271796968#" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #4a6ee0; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">post</span></a><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> in a past regarding my firm conviction in Keppel Corp. With the 2030 Vision, there has been significant effort committed by the management to transform Keppel's cashflows into recurring ones. With the recent Offshore&Marine spinoff, I believe the counter has been significantly mispriced by the market. Not to mention, a large-cap blue chip company trading at 6% trailing dividend yield facing significant tailwinds from China reopening simply does not make sense. Growing, recurring cash flows coupled with management dedication to maintaining a 50-60% payout ratio means stable, enlarging dividends. Significant price appreciation should come along in the mid-term.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Sheng Siong Corporation (10%)</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Sheng Siong Corporation operates a vast chain of supermarket locations and is known for its "value for money" items. With the harsh, uncertain macroeconomic condition we are facing today (and potentially for years to come), I think it is wise to allocate some capital to a defensive consumer staples industry. Not to mention the amount of pressure put on Singapore to increase public housing supply, Sheng Siong is poised to grow the number of locations they have, increasing profits and potentially dividends. You can find my analysis of the company </span><a class="editor-rtfLink" href="https://www.blogger.com/blog/post/edit/8854083309825062752/4504647132271796968#" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #4a6ee0; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">here</span></a><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">DBS Group (10%)</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">The largest Singapore bank, it is no wonder why it has experienced significant price appreciation and dividend growth over the years, given the fact that the bank has experienced the highest Return on Equity (ROE). With efficient capital management alongside aggressive expansion plans, it does indeed seem that DBS Bank is under good management. I am of the opinion that shareholders will continue to see further price appreciation and dividend growth in the long term. With the recent SVB collapse, banks are also now priced slightly more reasonably. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">United Hampshire US REIT (7.5%)</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">A rather small-cap supermarket REIT based in the United States. At a high dividend yield of 12.25% and few fundamental issues, it seems like it is certainly a bargain in the realm of Singapore REITs. Anchor tenants are all cycle agnostic with long leases locked in, which should prove useful in an economic recession. Furthermore, the management has already fixed 81.4% of debt in anticipation of rising interest rates, which should limit any further downside arising from interest rate hikes. You can read my initial </span><a class="editor-rtfLink" href="https://www.blogger.com/blog/post/edit/8854083309825062752/4504647132271796968#" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #4a6ee0; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">investment thesis</span></a><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> on the company, coupled with their latest earnings report </span><a class="editor-rtfLink" href="https://www.blogger.com/blog/post/edit/8854083309825062752/4504647132271796968#" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #4a6ee0; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">here</span></a><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Mapletree Industrial Trust (5%)</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Backed by a behemoth of a sponsor, Mapletree Industrial Trust's portfolio mainly consists of Data Centers. Due to the REIT's defensive industry, coupled with a reasonable yield of 5.1%, it should be a good long-term hold. After all, the REIT hasn't exactly disappointed anyone so far, with a historic uptrend of dividends and price appreciation. In terms of fundamentals, I would consider it in the upper echelon of S-REITs. You can view my use of Mapletree Industrial Trust as an example of my REIT evaluation criteria </span><a class="editor-rtfLink" href="https://www.blogger.com/blog/post/edit/8854083309825062752/4504647132271796968#" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #4a6ee0; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">here</span></a><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Haw Par Corporation (5%)</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Haw Par Corporation is currently trading at a heavy discount to book value, with most of its assets consisting of investments in UOB, another Singapore bank. I view Haw Par as a way to get discounted UOB shares, coupled with the bonus of owning a stake in the property game and high-margin pharmaceutical business which will benefit from the world recovering from COVID-19. In the long term, Haw Par should be able to increase its dividends in tandem with the banks, as well as benefitting from more sports events. I have also done a </span><a class="editor-rtfLink" href="https://www.blogger.com/blog/post/edit/8854083309825062752/4504647132271796968#" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #4a6ee0; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">fundamental analysis</span></a><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> of the conglomerate recently. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Fu Yu Corporation (5%)</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">A cash-rich, high dividend-yielding small-cap industrials manufacturing company. Relatively high margins compared to its competitors which shows production processes are rather optimised. Management has shown extreme willingness to distribute capital back to shareholders in the form of high dividends, I simply believe that this company is a value buy. Interest rate hikes should not affect this company at all, barring an economic crisis that may affect sales. Fun fact: This counter was my</span><a class="editor-rtfLink" href="https://www.blogger.com/blog/post/edit/8854083309825062752/4504647132271796968#" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #4a6ee0; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> first ever fundamental analysis</span></a><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> on my blog!</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Astrea 7 Class B Bonds (5%)</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">I know people are going to lambast me for this, but I think bonds have a good place in a young person’s portfolio, as long as exposure is limited, of course. With a whopping 6% yield which is a fair bit higher than the current risk-free rate due to many investors fleeing into government bonds in fear of SVB contagion, the risk-to-reward ratio is fairly reasonable. The 5-year call option to increase yield by 1% is extremely useful as well. It should also be noted that risk is spread out due to the fact that the bonds involve a large basket of corporations, achieving an investment-grade credit rating of BBB. This should provide some stable income for the portfolio.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">PSC Corporation (2.5%)</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">A small-cap company that specialises in the distribution of common household items to supermarket chains operating in the consumer staple industry. Yet again, it is rather cash rich and is so far expanding its line of products via company acquisitions. It seems relatively undervalued for such a defensive stock, albeit with a low dividend yield. However, the growing prevalence of in-house brands may threaten market share. You can view my analysis of it </span><a class="editor-rtfLink" href="https://www.blogger.com/blog/post/edit/8854083309825062752/4504647132271796968#" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #4a6ee0; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">here</span></a><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">RE&S Holdings (2.5%)</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">A company that owns and operates a vast network of F&B restaurants with a focus on Japanese Cuisine and Quick Service Restaurants. I view this company as consumer discretionary since a thriving economy would naturally result in more people willing to splurge on luxury food items. The high dividend yield is icing on the cake as well. With more and more branches opening, we could see a period of high growth for the company. Like always, you can read my detailed thoughts </span><a class="editor-rtfLink" href="https://www.blogger.com/blog/post/edit/8854083309825062752/4504647132271796968#" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #4a6ee0; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">here</span></a><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Overall Portfolio:</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">I must admit that this portfolio could probably be classified as rather defensive. However, I believe this portfolio consists of many value stocks, with a good mix of decent dividend yield at 3.8% and capital appreciation. With the way each company operates, the overall portfolio should do great in both good and bad times. You may also be asking why there are no commodities. It is simply because I believe I have not gotten a firm grasp on how commodities work, which is why I did not include them. As far as I know, gold has not significantly appreciated in value as well, despite supposedly acting as an inflation hedge. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><b style="color: #222222;">Think this article is something you'd want more of? Subscribe <a href="https://follow.it/passive-loss?leanpub" target="_blank">here</a> using your email to get notified about my latest blog articles, I'd truly be grateful!</b></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><b style="color: #222222;"><br /></b></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span style="color: #222222;"><i>The author is currently vested in Keppel Corp. </i></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"></p><div style="text-align: justify;"><span style="color: #0e101a; font-style: italic;"><br /></span></div><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><div style="text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Disclaimer: Please take everything published within this blog with a pinch of salt. Nothing I say here should be misconstrued as any form of financial advice whatsoever. In fact, I am probably the absolute last person you should approach for any sort of advice. All self-computed figures are calculated to the best of my ability, but I cannot guarantee they are 100% accurate, and I am not liable for any investment decisions made based on my content. </em></div></em><p></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Thank you for reading my blog, and I hope you have learnt something, no matter how seemingly minuscule, ciao!</em></p>Passive Loss SGhttp://www.blogger.com/profile/15231705917017776583noreply@blogger.com5tag:blogger.com,1999:blog-8854083309825062752.post-26257920745557813762023-03-17T01:29:00.002-07:002023-03-23T06:56:17.341-07:00What You Need to Know About Bonds!<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Lately, I've received some questions regarding finance from some close friends that got me thinking, with one of them revolving around </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">bonds </strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">which you also may know as "</span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Fixed Income</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">". Prior to this, I'll be the first to admit that I always thought of bonds as rather boring; I had this preconceived notion that bonds were simply less volatile with less reward compared to equities, which I've come to realise isn't necessarily true. With this article, I hope to present the compiled information I've managed to gather about bonds in an easy-to-understand way! </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Firstly, what exactly </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">are</span></em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> bonds? </span></strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"></span></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhC_jDsgMlZdAJ0Hghzv3Zsf_dIDk_4U5P0b5hRhW_44XPdyli5JAA33LnaHaw6NqtFFjfmE1l8AT2MokzX2c3YxetV4f8frTYel1_pofhchH-v1fObLthza70PmAehsBJvIIeZvRks0N8Jiyu0ZFipF9_-PIBjKYeqG7hsm0q_RK9F9BVKk6FDmasxGw/s804/Screenshot%202023-03-12%20at%209.33.51%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="480" data-original-width="804" height="382" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhC_jDsgMlZdAJ0Hghzv3Zsf_dIDk_4U5P0b5hRhW_44XPdyli5JAA33LnaHaw6NqtFFjfmE1l8AT2MokzX2c3YxetV4f8frTYel1_pofhchH-v1fObLthza70PmAehsBJvIIeZvRks0N8Jiyu0ZFipF9_-PIBjKYeqG7hsm0q_RK9F9BVKk6FDmasxGw/w640-h382/Screenshot%202023-03-12%20at%209.33.51%20PM.png" width="640" /></a></div><i><div style="text-align: center;"><i>Go easy on the design critique, please.</i></div></i><p></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Bonds are a financial instrument that represents a loan made by a creditor to a debtor. Most bonds have a specified maturity, which is when the </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">principa</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">l (The Original) amount gets repaid from the date when it was issued, typically paying out </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">coupons </strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">(Interest Payments) semi-annually to bondholders. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">For example, let's say you invest a total of $1000 into an </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">average</em></strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> 3% </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Singapore Savings Bond </strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">which has a ten-year maturity. From the date of </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">subscription</em></strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">, you will receive approximately $15 per year half till the end of your tenth year, which is when you will receive back your principal sum of $1000. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Notice how I say "</span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">average</em></strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">" and "</span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">subscription</em></strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">". The reason why I use "average" is that for certain bonds like the Singapore Savings Bond, coupon rates are not flat throughout the lifespan of the bond. Instead, it operates in a "ladder"-like structure. </span></p><p style="text-align: justify;"><br /></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg1qwuo42SWiV2oZ5HNj52kkZaosNYtr4sMw6Gp6ibiNhdSXMxP3sRKC88wp6zulYj3bloDdilb6Ej_FmGqJ_pfrVEF6qqtdSxdz2LhnP_VwZbuTX6uolXATkt310MiiCAeW11maFC9-8sHNYwY4ER8c1IwkWGHurgDSw6qujqdF5wtgmqVMLK_T0AcFw/s2384/Screenshot%202023-03-11%20at%2010.44.57%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="472" data-original-width="2384" height="126" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg1qwuo42SWiV2oZ5HNj52kkZaosNYtr4sMw6Gp6ibiNhdSXMxP3sRKC88wp6zulYj3bloDdilb6Ej_FmGqJ_pfrVEF6qqtdSxdz2LhnP_VwZbuTX6uolXATkt310MiiCAeW11maFC9-8sHNYwY4ER8c1IwkWGHurgDSw6qujqdF5wtgmqVMLK_T0AcFw/w640-h126/Screenshot%202023-03-11%20at%2010.44.57%20PM.png" width="640" /></a></div><i><div style="text-align: center;"><i>Singapore Savings Bond Issued on April Structure (Source: <a href="https://www.mas.gov.sg/bonds-and-bills/auctions-and-issuance-calendar/issuance-singapore-savings-bond?issue_code=GX23040S&issue_date=2023-04-03" target="_blank">Monetary Authority of Singapore</a>)</i></div></i><p style="text-align: justify;">Hence, although the average coupon yield is 3.15%, you receive more interest rates the longer you hold till maturity. As for why I used "subscription", well, I'll cover that in a later segment elaborating on the risks of bonds. </p><p style="text-align: justify;">You also might find understanding the bond yield curve to be helpful. The yield curve is a graph of yield against maturity duration. Usually, the longer the maturity duration, the higher the average yield is supposed to be, assuming that the credit rating is the same. This reflects the additional risk the lender takes when lending out their funds for a longer period of time, since there is a higher probability that anything can go awry the longer the lending duration. Makes sense, right?</p><p style="text-align: justify;"><br /></p><p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhJFnnxVqDQ8HbTzff8BiqHZvBSuPcpslnAOoo3y-V3AdsYBAK4skjOvDnTr4jIExR_iI4XKcy2vST92-Sx8D8bA_r52PRYy3YDOhowKpqd8QEwdCxTKbVYwJU9vZnNR02Ffd42BEwr6jdjpcZONl3Xw2YFOsmFwbZVZHA_fcxxN2sH6X5BXAhC6PYdvA/s2177/Yield-Curve-2.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1610" data-original-width="2177" height="474" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhJFnnxVqDQ8HbTzff8BiqHZvBSuPcpslnAOoo3y-V3AdsYBAK4skjOvDnTr4jIExR_iI4XKcy2vST92-Sx8D8bA_r52PRYy3YDOhowKpqd8QEwdCxTKbVYwJU9vZnNR02Ffd42BEwr6jdjpcZONl3Xw2YFOsmFwbZVZHA_fcxxN2sH6X5BXAhC6PYdvA/w640-h474/Yield-Curve-2.png" width="640" /></a></div><div class="separator" style="clear: both; text-align: center;"><i>Source: <a href="https://corporatefinanceinstitute.com/resources/fixed-income/yield-curve/" target="_blank">Corporate Finance Institute</a></i></div><div class="separator" style="clear: both; text-align: justify;"><br /></div><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Sometimes it </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">can</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> become inverted though, which you can find out what it means by clicking </span><a class="editor-rtfLink" href="https://www.blogger.com/blog/post/edit/8854083309825062752/2625792074555781376#" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #4a6ee0; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">here</strong></a><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Now that you understand how bonds more or less work, I think it would be useful to learn about some of the more common bond types as well...</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">You might have heard of </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">perpetual</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> or </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">convertible </strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">bonds, and are perhaps pondering the distinction between them.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">To put it simply, </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">perpetual bonds</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> have no maturity date, and instead, pay coupons in "perpetuity". As long as you hold such a bond, you'll be earning coupons forever! Sounds great right? Well, be prepared to not receive back your principal payment, since, well, there's no maturity date... Of course, you </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">may</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> be able to sell bonds on the </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">secondary market</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">. Although you theoretically </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">are</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> getting coupon payments indefinitely, do take note that the real value of money diminishes over time. If you use the inflation rate and plug it into a geometric progression, you'll more or less be able to obtain the value of that bond.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Convertible bonds</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> are a bit more complicated. They act like normal bonds but confer the </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">right, not the obligation </strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">to the bondholder to convert the bond into </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">equity (stocks) </strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">of the organisation by using the bond's face value at pre-specified dates. However, it is worth mentioning that the share price used for the conversion is typically higher than the market price. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Now, you may realise I haven't elaborated on why I highlighted "subscription", which is what I'll get into now.</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">There are two main ways to get bonds (at least that I'm aware of). </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi6Yvtr1UwU4n1177yjgLtw7iZ84-5PdE6jL0piFoEWB30hOk3Q5Hi6tOhfpISbtxrQGreV-gYKbVdS45yDHXXoxrQUvuZc_1p9s0YyZSjX9VXGVmXxEaP2tU5pTRQC14g_Gj5pwl5qq3ypi2-0zG1Y6VM03wu9O-VnBSpT2xDpOeYac8WlRbLy9jb0GQ/s878/Screenshot%202023-03-12%20at%209.32.47%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="396" data-original-width="878" height="288" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi6Yvtr1UwU4n1177yjgLtw7iZ84-5PdE6jL0piFoEWB30hOk3Q5Hi6tOhfpISbtxrQGreV-gYKbVdS45yDHXXoxrQUvuZc_1p9s0YyZSjX9VXGVmXxEaP2tU5pTRQC14g_Gj5pwl5qq3ypi2-0zG1Y6VM03wu9O-VnBSpT2xDpOeYac8WlRbLy9jb0GQ/w640-h288/Screenshot%202023-03-12%20at%209.32.47%20PM.png" width="640" /></a></div><div style="text-align: center;"><span style="color: #0e101a;"><i>Source: Passive Loss</i></span></div><div style="text-align: justify;"><span style="color: #0e101a;"><i><br /></i></span></div><p></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Firstly, you subscribe to the initial bond issuing, which is when you purchase the bond (</span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Subscribe) </strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">from the organisation </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">directly</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> at the stipulated terms.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">The second way is to purchase bonds on the </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">secondary market</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">, which is where people like you and I buy and sell bonds to each other. Of course, not all bonds are available through this method, so it would be wise for you to do your due diligence. This comes with a few implications. For example, if someone subscribed to a 10-year bond offering in 2020, and decided to sell their bond in 2022, the bond's maturity would be eight years, which affects the total return over the bond's lifespan. There are also some </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">risks</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> you may need to take note of that comes with the secondary market, </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">which I'll further expound on now</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">You may be under the impression that your money is 100% guaranteed when it comes to bonds. But of course, we don't live in a perfect world. There is a myriad of risks one should take into consideration when investing in bonds.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Firstly, be wary of the interest rate set by the Central Banks</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">. You see, the interest rates set by the central banks all around the world certainly influence the bond market. By increasing interest rates, the coupon yield of government bonds typically increases, which is often known as the </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">risk-free rate</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">. Hence, bond buyers may demand a higher yield on other bonds to reflect the increased opportunity cost of not buying those government bonds. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">For example, a 5% yielding corporate bond seems more attractive when the risk-free rate is 1% as compared to 4%, doesn't it? This goes for some previously issued government bonds as well. Buyers aren't going to purchase a 2020 1% government bond over a 2022 4% government bond. If there is no option to redeem the principal amount at your whim and fancy like the </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Singapore Savings Bond</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">, your only choice is to sell your bond at the secondary market if it's possible. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Let's compare two hypothetical bonds, assuming that they have the same credit rating. We have a $1000 face value bond maturing in one year at a 1% coupon rate. Hence, by maturity, the bondholder will receive a total of $1010 over the bond's lifetime. However, let's say that suddenly, bonds with a 2% coupon rate flood the market due to a rise in interest rates. Well, a one-year $1000 bond with a 2% coupon rate would result in a total of $1020 at the end of the bond's lifetime. Hence, to sell the initial 1% yielding bond, the price must drop from $1000 to $990. At $990, the bondholder will receive a total of $1010, which is equivalent to the $20 offered by the $1000 2% yielding bond. This is just one example of how rising interest rates may affect bonds. Of course, the opposite holds should interest rates drop. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Next, inflation affects bonds in the same way as well.</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> Bonds are typically used for wealth preservation, and maybe a bit of wealth accumulation. You're not exactly preserving your wealth if inflation erodes the purchasing power of your funds, are you? Bondholders want to see </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">real</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> returns, which means that they expect coupon rates to exceed inflation. If inflation rises, then the real returns of bonds will be eroded. Hence, by the same aforementioned mechanism, bond prices will reduce to maintain their real return. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEidvHFVRvubeOQS7KHtYEyhJ0islqaOR_Oyfy9fScNupbkKwPTFRts3oo2SWX5wcIU6xgQ4ZqujSUNz-ioJwvCiTR8FyZV-ge_Svv7YAsurh5V04Pdsp3_Sat17KSxLfu2cSTish89ialG90tuK9HX0-blte3ZZsoyifVwUmDJ6Bw3Vdj-tl5C8bW0OMg" style="margin-left: 1em; margin-right: 1em; text-align: center;"><img alt="" data-original-height="532" data-original-width="800" height="426" src="https://blogger.googleusercontent.com/img/a/AVvXsEidvHFVRvubeOQS7KHtYEyhJ0islqaOR_Oyfy9fScNupbkKwPTFRts3oo2SWX5wcIU6xgQ4ZqujSUNz-ioJwvCiTR8FyZV-ge_Svv7YAsurh5V04Pdsp3_Sat17KSxLfu2cSTish89ialG90tuK9HX0-blte3ZZsoyifVwUmDJ6Bw3Vdj-tl5C8bW0OMg=w640-h426" width="640" /></a></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: center;"><i>Source: <a href="https://www.dreamstime.com/photos-images/insolvency.html" target="_blank">Dreams Time</a></i></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><i><br /></i></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><i><br /></i></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Issues of insolvency are a probable cause of concern for bondholders as well. </strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">When you purchase a bond, you typically expect to receive back your principal amount. However, the organisation can't pay you back if they have no cash to begin with. Hence, you </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">might</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> see your bond's value plummet to zero if the bond's organisation is unable to meet its debt obligations... This only serves to further highlight the importance of conducting your own research regarding the company's balance sheet health. You may have also seen </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">credit ratings </strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">being mentioned. Credit rating is a "score" issued by credit rating agencies that indicate the corresponding company's ability to repay debts, with AAA typically being the highest. Of course, credit rating agencies are not infallible and are susceptible to a whole host of issues such as oversight and corruption. We mustn't take everything at face value!</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Lastly, be wary of a bond's liquidity</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">. If you overextend yourself or purchase bonds from a small company, you might face liquidity issues. Imagine that you have $10,000 in bonds locked up, and urgently need the cash for emergency expenses such as medical bills. Since you can't redeem them immediately, your only choice is the secondary market. If there are not many buyers, you could find yourself lowering the price drastically to receive your funds fast, so always make sure to not lock up more than what you would need! As a Singaporean, you could consider the </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Singapore Savings Bond</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">, which allows you to redeem your principal within one month's notice. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><b>To sum it up, bonds can gain or lose value in the secondary market, but losses won't be realised unless you sell them, or if the company is unable to pay back the money.</b></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Of course, it isn't </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">all </span></em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">doom and gloom for bonds. Bonds as a financial instrument have their own merits too!</span></strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">In the (hopefully unlikely) case of insolvency, you'll receive priority as a bondholder over shareholders to receive the value of liquidated assets. Naturally, bondholders can rest well knowing that in case the company goes bust, they'll be one of the first ones to receive their fair share of the pie. In this sense, bonds are less risky as opposed to stocks from a bankruptcy standpoint.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Additionally, you can feel rest assured that you'll receive a steady stream of income from your bond coupons, as opposed to dividends which are subject to managerial decision-making. Not to mention, your principal is more or less protected. If bond prices go against your favour, simply hold on to your bond to receive back your principal, whereas if bond prices rise, you may use the opportunity to lock in some sweet capital gains!</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">After saying all this, how should you allocate your funds?</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Of course, every investor has their risk tolerance, and it's absolutely paramount that you find out yours. Personally, as a young investor, I think an allocation of 0-15% bonds is okay. Since I have a high-risk tolerance, I would go for highly rated companies and not settle for the lower risk-free rate, such as the </span><a class="editor-rtfLink" href="https://www.blogger.com/blog/post/edit/8854083309825062752/2625792074555781376#" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #4a6ee0; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">6% Astrea 7 Class B Bonds</span></a><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> currently available. As you age, your objective will slowly move from wealth accumulation to wealth preservation, and consequently, your percentage allocation of bonds should be increased to reflect this. </span></p><div class="separator" style="clear: both; text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: left;"><div style="color: #222222; text-align: justify;"><b>Think this article is something you'd want more of? Subscribe <a href="https://follow.it/passive-loss?leanpub" target="_blank">here</a> using your email to get notified about my latest blog articles, I'd truly be grateful!</b></div><div style="color: #222222; text-align: justify;"><br /></div><div style="color: #222222; text-align: justify;"><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Disclaimer: Please take everything published within this blog with a pinch of salt. Nothing I say here should be misconstrued as any form of financial advice whatsoever. In fact, I am probably the absolute last person you should approach for any sort of advice. All self-computed figures are calculated to the best of my ability, but I cannot guarantee they are 100% accurate, and I am not liable for any investment decisions made based on my content. </em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Thank you for reading my blog, and I hope you have learnt something, no matter how seemingly minuscule, ciao!</em></p></div></div><div class="separator" style="clear: both; text-align: justify;"><br /></div>Passive Loss SGhttp://www.blogger.com/profile/15231705917017776583noreply@blogger.com4tag:blogger.com,1999:blog-8854083309825062752.post-61355817336562346372023-03-15T05:35:00.001-07:002023-03-15T05:35:26.892-07:00Has United Hampshire US REIT Done Well In FY2022?<p style="text-align: justify;"> It's been a while since I wrote my <a href="https://passiveloss.blogspot.com/2023/02/united-hampshire-us-reit-mistakenly.html" target="_blank">initial investment thesis</a> on UHREIT, and I think it's about time that I reviewed their recent FY2022 performance and see if it still falls in line with my original idea, albeit I do admit that I'm quite late to the party. Nevertheless, let us delve deep and see how did UHREIT perform!</p><p style="text-align: justify;"><b>Brief Overview of FY2022 Income Sheet:</b></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhG1CYteUgUlzwhLGjrNQvIG6y-_hk7bDdn7i6e29plg3tZB6KUzco0Kit_wtvpdMKLktuY-w-snIZbJCJdwjrtIo9sLe3x1jU6ZAbiuP40k96TBoMsHCHx0ChZ2eWBz0QuNlaj05eAkLszN8qHspq2vsg2s_QQjSdbRmaWP0EELF1_Uh5J521vYOxQxg/s1324/Screenshot%202023-03-15%20at%207.12.32%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="718" data-original-width="1324" height="348" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhG1CYteUgUlzwhLGjrNQvIG6y-_hk7bDdn7i6e29plg3tZB6KUzco0Kit_wtvpdMKLktuY-w-snIZbJCJdwjrtIo9sLe3x1jU6ZAbiuP40k96TBoMsHCHx0ChZ2eWBz0QuNlaj05eAkLszN8qHspq2vsg2s_QQjSdbRmaWP0EELF1_Uh5J521vYOxQxg/w640-h348/Screenshot%202023-03-15%20at%207.12.32%20PM.png" width="640" /></a></div><i><div style="text-align: center;"><i>Source: <a href="https://links.sgx.com/FileOpen/2.%20UHREIT%202022%20Financial%20Statements.ashx?App=Announcement&FileID=747363" target="_blank">SGX UHREIT Announcements</a></i></div></i><p style="text-align: justify;">For simplicity's sake, we will be comparing the financial performance of the REIT on a YoY basis. At a glance, it seems like property expenses have outpaced gross revenue percentage-wise with a 26.4% increase as opposed to 22.2%. Nevertheless, Net Property Income still increased a significant 12.2%, with adjusted distribution per unit (DPU) increasing from 5.35 US cents to 5.85 US cents. You may be wondering why is there a section regarding DPU with Top-Ups and Stipulated Damages. This is due to the absence of income support for UHREIT's Self Storage properties, coupled with the absence of compensation regarding "damages" to one of its properties, Perth Amboy Self-Storage, due to a delay in construction completion. </p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh4o0cvux-va-Mh4l2vCrYAsrqbbcwjAu_W4cJlJuQ-6ii0LtuKqraWHd5MNamR3gXOyt6CBCQ3euNWaXR6GWL6hSEeTor4bACZRNd_j6J-fa5swR345csh-SVE2mIm_Vm9M2E4vtZd4WzeYMlRUxCT2IsFHdURCp0lo98WR0wnWfBPXSGmZUPg1Tlyzg/s1364/Screenshot%202023-03-15%20at%207.34.25%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="384" data-original-width="1364" height="180" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh4o0cvux-va-Mh4l2vCrYAsrqbbcwjAu_W4cJlJuQ-6ii0LtuKqraWHd5MNamR3gXOyt6CBCQ3euNWaXR6GWL6hSEeTor4bACZRNd_j6J-fa5swR345csh-SVE2mIm_Vm9M2E4vtZd4WzeYMlRUxCT2IsFHdURCp0lo98WR0wnWfBPXSGmZUPg1Tlyzg/w640-h180/Screenshot%202023-03-15%20at%207.34.25%20PM.png" width="640" /></a></div><i style="text-align: center;"><div style="text-align: center;"><i>Top Up & Damages Overview Source: <a href="https://links.sgx.com/FileOpen/2.%20UHREIT%202022%20Financial%20Statements.ashx?App=Announcement&FileID=747363" target="_blank">SGX UHREIT Announcements</a></i></div></i><p style="text-align: center;">Additionally, the reason why gross revenue and property expenses have seemingly ballooned so high is due to the new inclusion of Upland Square Shopping Centre. </p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhXQAeUSlVbS2gqQRXbCkKzgN7jb7QdIM1-7EVJ-5_WHQY2ysJ4r-LMWt2ltBAm3ZKFHPARG35OiGs3gNRX34yereGTI-phDL6l-vianEg-I95fpik5OBwurKLqAZXh6qLRBNvFK0NI7AR1ZiVTM0a5jVJoozTN-Z5w2S97wtVfsldIbnaogX0yDPRPTg/s948/Screenshot%202023-03-15%20at%207.40.10%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="948" data-original-width="558" height="640" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhXQAeUSlVbS2gqQRXbCkKzgN7jb7QdIM1-7EVJ-5_WHQY2ysJ4r-LMWt2ltBAm3ZKFHPARG35OiGs3gNRX34yereGTI-phDL6l-vianEg-I95fpik5OBwurKLqAZXh6qLRBNvFK0NI7AR1ZiVTM0a5jVJoozTN-Z5w2S97wtVfsldIbnaogX0yDPRPTg/w376-h640/Screenshot%202023-03-15%20at%207.40.10%20PM.png" width="376" /></a></div><i style="text-align: center;"><div style="text-align: center;"><i>Balance Sheet Overview Source: <a href="https://links.sgx.com/FileOpen/2.%20UHREIT%202022%20Financial%20Statements.ashx?App=Announcement&FileID=747363" target="_blank">SGX UHREIT Announcements</a></i></div><div style="text-align: justify;"><br /></div></i><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Net assets inched up from $419 Million USD to $428 Million USD, with NAV per Unit remaining stagnant at 0.75 US Cents due to an increase in the number of units issued arising from management fees and SCRIP dividends. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">One may also have noticed the declaration of an increase in the valuation of UHREIT's properties, which is in stark contrast to the recent Manulife REIT's sharp asset devaluation.</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Of course, we should examine this claim a bit more in-depth before jumping for joy at this reassuring news.</span></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEht19yYJvmX_eU2YDYhQ2gOIkwXMXOhYZ9cZQD7nHktfvidSbwsL_lWVGpdux7URjWLRCGlA86-LDRd781eNqTUDb4R3ghjrztftN8YsbVmL0TEvYL4DJkb-VgcMoBpgJfaXnDPLmZnPVMuXl3NiOMpMqnJTdParSBiStAsA8HFq4bPlbgRxVo24-fwcw/s1180/Screenshot%202023-03-15%20at%207.45.31%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1056" data-original-width="1180" height="572" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEht19yYJvmX_eU2YDYhQ2gOIkwXMXOhYZ9cZQD7nHktfvidSbwsL_lWVGpdux7URjWLRCGlA86-LDRd781eNqTUDb4R3ghjrztftN8YsbVmL0TEvYL4DJkb-VgcMoBpgJfaXnDPLmZnPVMuXl3NiOMpMqnJTdParSBiStAsA8HFq4bPlbgRxVo24-fwcw/w640-h572/Screenshot%202023-03-15%20at%207.45.31%20PM.png" width="640" /></a></div><i style="text-align: center;"><div style="text-align: center;"><i>Property Valuation Overview Source: <a href="https://links.sgx.com/FileOpen/2.%20UHREIT%202022%20Financial%20Statements.ashx?App=Announcement&FileID=747363" target="_blank">SGX UHREIT Announcements</a></i></div></i><p style="text-align: justify;">Notably, there has been a decrease in valuation for Hudson Valley Plaza, Fairhaven Plaza, Wallington Shoprite, Wallkill Price Chopper, BJ's Quincy, Arundel Plaza Lawnside Commons, Colonial Square, and Penrose Plaza. Instead, these decreases were more or less offset by the relatively high increase in Self-Storage property valuations. It is understandable that Wallington Shoprite has experienced a decrease in valuation due to the fact that only approximately 17 more years are left for its lease. Doing some brief research, I am unable to find any specific reason for the decrease in valuations for the shopping centres and hence will assume that it is simply due to increasing interest rates depressing the property market. </p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgvH8PT5XNIGwGxh6ESrOlM4yhSm03b2hPnCjhRUCDYxNSkG3G4egR098fibFvGLf56Y0qWmhkKI2Djge1BVEzDDx9fJpfAI91Z5jsH9RqA7dju_6GwlpxuFhqISAbCvSBAQM_iItYsoGSUSteTN4zYJsYg61uTCnfLW6-ecYcVX-y_r0ixr6xumRKmuQ/s820/Screenshot%202023-03-15%20at%208.02.37%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="820" data-original-width="688" height="640" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgvH8PT5XNIGwGxh6ESrOlM4yhSm03b2hPnCjhRUCDYxNSkG3G4egR098fibFvGLf56Y0qWmhkKI2Djge1BVEzDDx9fJpfAI91Z5jsH9RqA7dju_6GwlpxuFhqISAbCvSBAQM_iItYsoGSUSteTN4zYJsYg61uTCnfLW6-ecYcVX-y_r0ixr6xumRKmuQ/w536-h640/Screenshot%202023-03-15%20at%208.02.37%20PM.png" width="536" /></a></div><div class="separator" style="clear: both; text-align: center;"><i>Source: <a href="https://investor.uhreit.com/newsroom/20230302_075201_ODBU_N7ZCB4UC0VZMX1LS.1.pdf" target="_blank">UHREIT FY2022 Presentation</a></i></div><p style="text-align: justify;">You may be wondering to yourself why Millburn Self-Storage recorded such a high increase in valuation as compared to Carteret Self Storage... Well, we can see that the average quarterly net rental rate of both properties has increased and been maintained at a similar rate/level. So why is there such a large discrepancy?</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjkY0Iam3uAk8rXYpBA42RSTUpqPJyjaeErGDWlLSIHdlB3Z5D1fmaSp8q-gPgRsZzMOTmfdl_GTnKz0Xl1LLl9aKbVYrjTrlr1DPWRH7QGeI4Hj2SvgFli0qMFLRrdo0SJnDKm3jBgZyyGoADhFqTb8WwuEqCJIvglG--E13xSe6Rz-TDGYbDqCDYYbQ/s1556/Screenshot%202023-03-15%20at%208.03.43%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="542" data-original-width="1556" height="222" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjkY0Iam3uAk8rXYpBA42RSTUpqPJyjaeErGDWlLSIHdlB3Z5D1fmaSp8q-gPgRsZzMOTmfdl_GTnKz0Xl1LLl9aKbVYrjTrlr1DPWRH7QGeI4Hj2SvgFli0qMFLRrdo0SJnDKm3jBgZyyGoADhFqTb8WwuEqCJIvglG--E13xSe6Rz-TDGYbDqCDYYbQ/w640-h222/Screenshot%202023-03-15%20at%208.03.43%20PM.png" width="640" /></a></div><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgaehoj9uR2B5mycb-XdgCb_1L4lEw5s10x8NrK4k-kdPNbQkeLWuvQGR4t4zSHGI8DRbp3WuPui3-kZnVzmxzTy78u8SaYyU0X7pzNRr9hRCXYrxVydEkQTfeYZJ4440K2vzZWKWOuBTQLlsA9xEE7u6rsg2YyzNphX4Efgh6-KMI_eCzuaDxZ8Bg5bw/s1626/Screenshot%202023-03-15%20at%208.03.49%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="548" data-original-width="1626" height="216" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgaehoj9uR2B5mycb-XdgCb_1L4lEw5s10x8NrK4k-kdPNbQkeLWuvQGR4t4zSHGI8DRbp3WuPui3-kZnVzmxzTy78u8SaYyU0X7pzNRr9hRCXYrxVydEkQTfeYZJ4440K2vzZWKWOuBTQLlsA9xEE7u6rsg2YyzNphX4Efgh6-KMI_eCzuaDxZ8Bg5bw/w640-h216/Screenshot%202023-03-15%20at%208.03.49%20PM.png" width="640" /></a></div><i><div style="text-align: center;"><i>Source: <a href="https://www.uhreit.com/our-portfolio.html" target="_blank">UHREIT Website</a></i></div></i><p style="text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">My answer to that was that Millburn Self-Storage was simply undervalued previously. Both self-storage properties are located in New Jersey, but Millburn Self-Storage has a much higher Net Leasable Area (NLA) of 81K Square Feet as compared to Carteret's 74K Square Feet. If we incorporate a premium in Millburn's valuation due to the higher occupancy rate and price per square foot for rental, we can come to the conclusion that the increase in property valuation is most likely not inflated, which means it </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">should</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> not decrease drastically suddenly due to a correction.</span></p><p style="text-align: justify;"><b>In terms of debt profile, UHREIT has admittedly grown slightly weaker.</b></p><p style="text-align: left;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhtscaggWZyOu0uK14e1iB9fuYdQPcAioyHNiJO1ronyFIxzp4c2KDaOxc7jesjVN46lzP3HbR3QWkyyd1IJMKTX0G8rr8MxKe3OJguMp03txegaoAD7Z30C5yVGxizTF4npXOdwVFiIxQ0NAdXbLXHl1nCPPEp4B4p3bTCDrxrkq-y3PsbklGo9HqQiQ/s1090/Screenshot%202023-03-15%20at%208.10.54%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1090" data-original-width="900" height="640" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhtscaggWZyOu0uK14e1iB9fuYdQPcAioyHNiJO1ronyFIxzp4c2KDaOxc7jesjVN46lzP3HbR3QWkyyd1IJMKTX0G8rr8MxKe3OJguMp03txegaoAD7Z30C5yVGxizTF4npXOdwVFiIxQ0NAdXbLXHl1nCPPEp4B4p3bTCDrxrkq-y3PsbklGo9HqQiQ/w528-h640/Screenshot%202023-03-15%20at%208.10.54%20PM.png" width="528" /></a></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjKbVMVypFZ_qyBqjxLhVVlbayiBzaAgfK5FdyyC1xMW5Jyrv2wFZM7friQYEGCs0Az7NUWSqRw7x1dE1aOeYNVJ5_qaE7di_bFrl-A5Vx3sb8KiwsEMrRBpa9D5LamTYJuIRvy4MXCs30yqkaXLDeuyAdGrWvTO-xxQDNUfb1jLFoY7SIlaOM_7jvr2Q/s1188/Screenshot%202023-03-15%20at%208.15.26%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="556" data-original-width="1188" height="300" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjKbVMVypFZ_qyBqjxLhVVlbayiBzaAgfK5FdyyC1xMW5Jyrv2wFZM7friQYEGCs0Az7NUWSqRw7x1dE1aOeYNVJ5_qaE7di_bFrl-A5Vx3sb8KiwsEMrRBpa9D5LamTYJuIRvy4MXCs30yqkaXLDeuyAdGrWvTO-xxQDNUfb1jLFoY7SIlaOM_7jvr2Q/w640-h300/Screenshot%202023-03-15%20at%208.15.26%20PM.png" width="640" /></a></div><div class="separator" style="clear: both; text-align: center;"><i> Source: <a href="https://links.sgx.com/FileOpen/2.%20UHREIT%202022%20Financial%20Statements.ashx?App=Announcement&FileID=747363" target="_blank">SGX UHREIT Announcements</a></i></div><div style="text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgr5dT1SaABX-AjgKTh1j4BekZE9TaEY-dpoMkP1GF71pqUwEUwEPrMxKQ--pN4NN4OlyWhwpTQV5xZ69Qu2IVWw-Q6xPLXwhQjzL4e5zWE5_WIUFSfoiIYLDgLHDlffiq7LYJV5uZrMfIwxK7ivKDf3TEP2uQ7ASPMAqGJp6IVZV96R-mJ7q3GdEK9TA/s670/Screenshot%202023-03-15%20at%208.12.31%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="670" data-original-width="600" height="640" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgr5dT1SaABX-AjgKTh1j4BekZE9TaEY-dpoMkP1GF71pqUwEUwEPrMxKQ--pN4NN4OlyWhwpTQV5xZ69Qu2IVWw-Q6xPLXwhQjzL4e5zWE5_WIUFSfoiIYLDgLHDlffiq7LYJV5uZrMfIwxK7ivKDf3TEP2uQ7ASPMAqGJp6IVZV96R-mJ7q3GdEK9TA/w574-h640/Screenshot%202023-03-15%20at%208.12.31%20PM.png" width="574" /></a></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEga8RHMdawDDlJsvWoEVe5VFAGDdY7MXM8mZpkd2TzYaGls-waoFRvNGv5X7ObieGGlBrwWu1YwSk8Dpal9tJwWAM6E1_ZPD_aE37TkXTNidsPsnS0HU7mK0b6Prna6k_slR7bZulX0_RE7BQhHM8z4qUdwLg2bCeavKZDXMcwbzNJtrN2h4jjMTpk7Bw/s1686/Screenshot%202023-03-15%20at%208.19.32%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="964" data-original-width="1686" height="366" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEga8RHMdawDDlJsvWoEVe5VFAGDdY7MXM8mZpkd2TzYaGls-waoFRvNGv5X7ObieGGlBrwWu1YwSk8Dpal9tJwWAM6E1_ZPD_aE37TkXTNidsPsnS0HU7mK0b6Prna6k_slR7bZulX0_RE7BQhHM8z4qUdwLg2bCeavKZDXMcwbzNJtrN2h4jjMTpk7Bw/w640-h366/Screenshot%202023-03-15%20at%208.19.32%20PM.png" width="640" /></a></div><i style="text-align: center;"><div style="text-align: center;"><i>Source: <a href="https://investor.uhreit.com/newsroom/20230302_075201_ODBU_N7ZCB4UC0VZMX1LS.1.pdf" target="_blank">UHREIT FY2022 Presentation</a></i></div></i><p></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Although Gearing Ratio has slightly decreased from approximately 43% to 41.8%, Interest Coverage Ratio has slightly worsened, no thanks to the average interest rate of current loans being approximately </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">3.88%. </strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Although 81.4% is fixed, the remaining 19% still has room to increase, which might lead to an average interest rate of 4%, drastically decreasing ICR. In my opinion, this is creeping up to dangerous levels, which I dislike. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Interestingly, I have more or less predicted the overall interest rate and debt maturity profile of UHREIT correctly in my previous post. The fact that UHREIT has the option to exercise a 1-year extension option for a 50 million dollar loan is rather intriguing to me, although I do not fully understand the implications of this. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Overall, I do like how UHREIT's debt maturity is spaced out, although I dislike the absurdly high-interest rate. Hopefully, the management can become a bit less aggressive when it comes to asset acquisitions. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Closing Thoughts:</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">I am rather pleased with UHREIT's performance this financial year, given that it has performed in line with my expectations, coupled with management being able to properly recycle assets into higher-yielding, undervalued properties. I must also add that I am delighted by the proof provided by the Self-Storage properties that they can provide sufficient levels of cash flow in the absence of income support. However, I am saddened by the sky-high interest rates of UHREIT's debt profile. Should the option to extend the revolving credit facility be exercised, 2026 may prove to be a dangerous year for the REIT given the exceptionally high amount of debt maturing. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><b style="color: #222222;"><br class="Apple-interchange-newline" />Think this article is something you'd want more of? Subscribe <a href="https://follow.it/passive-loss?leanpub" target="_blank">here</a> using your email to get notified about my latest blog articles, I'd truly be grateful!</b></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br class="Apple-interchange-newline" />Disclaimer: Please take everything published within this blog with a pinch of salt. Nothing I say here should be misconstrued as any form of financial advice whatsoever. In fact, I am probably the absolute last person you should approach for any sort of advice. All self-computed figures are calculated to the best of my ability, but I cannot guarantee they are 100% accurate, and I am not liable for any investment decisions made based on my content. </em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Thank you for reading my blog, and I hope you have learnt something, no matter how seemingly minuscule, ciao!</em></p><p style="text-align: justify;"><br /></p>Passive Loss SGhttp://www.blogger.com/profile/15231705917017776583noreply@blogger.com2tag:blogger.com,1999:blog-8854083309825062752.post-66220621403242824652023-03-13T00:19:00.006-07:002023-03-14T20:52:09.087-07:00Silicon Valley Bank Deposit Guarantee & Ramifications<p style="text-align: justify;"> I'm sure we've all recently seen the myriad of news article headlines highlighting the <b>Silicon Valley Bank (SVB) Collapse</b> that arisen from a bank run, with many people drawing comparison between it and the 2008 Lehman Brother's collapse. Additionally, if you're into Cryptocurrency, I'm sure you've realised the sharp drop of the crypto market recently, along with USDC (Celsius) losing its peg, which is rather natural given the fact that it has a large amount of collateral with SVB. </p><div class="separator" style="clear: both; text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhPNjoca2S-Kwu1QTOMFLsg5sKJnvloYCYnj4Qmh9PFClFBn5bOsE7vqPWB9BS6fTVf8v3-DkmU7nRE-d9tFFrbrbCUOhILfOEyprirjpZLvmMcuo6f2--MpxVRwqwAwBtXZECY8ObJUVS7PWwmHEO626-iocF3daE0gQnWAjols8AYzKVkI-qEjt_Jsw/s500/001d86b0-500.webp" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="281" data-original-width="500" height="360" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhPNjoca2S-Kwu1QTOMFLsg5sKJnvloYCYnj4Qmh9PFClFBn5bOsE7vqPWB9BS6fTVf8v3-DkmU7nRE-d9tFFrbrbCUOhILfOEyprirjpZLvmMcuo6f2--MpxVRwqwAwBtXZECY8ObJUVS7PWwmHEO626-iocF3daE0gQnWAjols8AYzKVkI-qEjt_Jsw/w640-h360/001d86b0-500.webp" width="640" /></a></div><i><div style="text-align: center;"><i>Source: <a href="https://www.rte.ie/news/2023/0311/1361703-irish-companies-svp/" target="_blank">RTE News</a></i></div><div style="text-align: center;"><br /></div></i><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">In this short article, I'm not here to explain what happened that led to the collapse, since <a href="https://www.euronews.com/next/2023/03/11/inside-the-silicon-valley-bank-failure-a-tech-industry-in-shock-as-it-awaits-a-government-#:~:text=The%20bank%20was%20backed%20by,cash%20over%20the%20past%20year." target="_blank">many articles</a> have already done a great job of that. Instead, I'm here to discuss the potential ramifications regarding the recent </span><a class="editor-rtfLink" href="https://www.blogger.com/blog/post/edit/8854083309825062752/6622062140324282465#" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #4a6ee0; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">unprecedented move</span></a><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> by the US Government that ensures all deposits in SVB would be guaranteed by Monday, which is today. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">The reason why it's unprecedented is the fact that the guarantee includes deposits over $250,000 in US Dollars, which was the previous FDIC-insured threshold. The most likely reason behind the government's decision must have been due to the fact that over 97% of SVB's deposits were indeed over $250,000. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Now, you must be thinking: Where will the money come from to cover all this? I initially suspected that the government would simply redeem the government bonds owned by SVB immediately to prevent the paper losses of SVB from being further realised, but apparently, that's not the case. Your next thought must be that taxpayer dollars will be used to cover the losses. Socialise the costs and privatise the benefits, capitalism am I right? Well, that's not the case either. Instead, the FDIC will be charging a "special assessment fee", with the costs being borne by the banks that participate in the FDIC insurance system. Essentially, the cost will be spread out. If you're a shareholder or bondholder, then there's some bad news for you. You won't be covered by this guarantee, unfortunately, so pray that another bank is willing to merge with SVB. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">As for whether there is a contagion risk materialising from this bank run - I'm not too sure. One would stand to reason that since most of SVB's clients were tech start-ups, the risk is limited. Not to mention, fractional reserve banking has gone a far way from $3 per $100 deposited. Now, banks are much less leveraged, albeit still vulnerable to bank runs. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Will this deposit guarantee prevent anything else from breaking? Only time will tell. The reported amount of unsecured deposits with SVB was approximately $151.6 USD Billion, with there being 4,236 FDIC banks in 2021. On average this would mean that each bank will most likely incur a maximum additional cost of $35.7 Million, taking into account the worst-case scenario of SVB's assets going to zero. Hence, I am of the opinion that damages will be minimal. However, the future is still filled with uncertainty. Since the deposits were not insured, banks may dispute the additional charge, given that they did not agree to such measures previously. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Not to mention, there have been some changes made by the US Government to prevent anything like this from happening ever again via the new </span><a class="editor-rtfLink" href="https://www.blogger.com/blog/post/edit/8854083309825062752/6622062140324282465#" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #4a6ee0; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Bank Term Funding Programme</span></a><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">. Essentially, it allows financial institutions to take out a loan at face value against government-backed assets such as government bonds to meet deposit obligations. I'm not too sure about the paperwork regarding this programme, but it </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">may </em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">make the banking system more resilient against bank runs in the future. However, one could also say that it incentivises negligence, allowing banks to reap the rewards of using deposited money to dump into bonds while not needing to take much responsibility. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEiADm8zioZ0DSUuDb-JOTnPY8jcSM_AkxkRXzeAPNktm7K7nRQU8s2SFsvtIegPdO0U3MuHyNbWK2F2CSi1G2GZSocf3tEFt_ooKuxNQIQtkXFtlEfNCYYylPTFJdjf7qPRHlbpMiW1l4_kX3_qE3MvoTB3llrbVF4qS4cT0mOUxCe9f-FewhASRuIB5w" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="523" data-original-width="929" height="360" src="https://blogger.googleusercontent.com/img/a/AVvXsEiADm8zioZ0DSUuDb-JOTnPY8jcSM_AkxkRXzeAPNktm7K7nRQU8s2SFsvtIegPdO0U3MuHyNbWK2F2CSi1G2GZSocf3tEFt_ooKuxNQIQtkXFtlEfNCYYylPTFJdjf7qPRHlbpMiW1l4_kX3_qE3MvoTB3llrbVF4qS4cT0mOUxCe9f-FewhASRuIB5w=w640-h360" width="640" /></a></div><i><div style="text-align: center;"><i>Jerome Powell Source: <a href="https://www.cnbc.com/2023/03/06/fed-chair-powell-heads-to-capitol-hill-and-hes-got-his-hands-full.html" target="_blank">CNBC</a></i></div></i><p></p><p style="text-align: justify;">Also, I just want to talk about the recent hype surrounding the possibility of the Fed stepping in to intervene with the SVB collapse. To put it simply, SVB collapsed due to rising interest rates initiated by the Federal Reserve, resulting in their current assets (Low yielding government bonds) depreciating in value, resulting in paper losses that were forced to be realised when a bank run started. Hence, many people have come to the conclusion that the Fed will slow down its interest rate hikes.</p><p style="text-align: justify;"><br /></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgP32yjGTjA0dr0CaLo4xkuqSNjAgd_Uz6adcD3M2RXfwmCexTD_20Lh9xRfs1TcNFheKTXN15fbW3_ZOq2nFr9I1hC9DEtAAv5iCI83dUJnJ6PY9uynJWlOxASRWBif_vFHD4HJU28vRfZYMhZtowVLjgBYeceva3hTYpcWFQTTtcXEw6o0YsroqlV6w/s1144/Screenshot%202023-03-13%20at%203.02.30%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="622" data-original-width="1144" height="348" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgP32yjGTjA0dr0CaLo4xkuqSNjAgd_Uz6adcD3M2RXfwmCexTD_20Lh9xRfs1TcNFheKTXN15fbW3_ZOq2nFr9I1hC9DEtAAv5iCI83dUJnJ6PY9uynJWlOxASRWBif_vFHD4HJU28vRfZYMhZtowVLjgBYeceva3hTYpcWFQTTtcXEw6o0YsroqlV6w/w640-h348/Screenshot%202023-03-13%20at%203.02.30%20PM.png" width="640" /></a></div><i><div style="text-align: center;"><i>Source: <a href="https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html" target="_blank">CME Group</a></i></div><div style="text-align: center;"><br /></div></i><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">The interest rate hike probability that the markets have priced in has decreased from 50 basis points for the next meeting to 25 basis points as a result (If you're not familiar with this concept, you can visit one of my earlier posts regarding this topic <a href="https://passiveloss.blogspot.com/2023/02/interest-rate-hike-probability-what.html" target="_blank">here</a>).</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Personally, I think investors are being too sanguine. If Jerome Powell starts to falter in his fight against inflation now, he knows that he'll pay the price dearly in the future. I doubt that he will be willing to relinquish his fight at this most critical period when inflation has started to gain momentum once again. Not to mention the fact that SVB's after-effects are rather limited in my opinion. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Overall, I think we'll see a pretty bloody market at the next Fed meeting, and I'm betting my money on a 50 BPS rate hike. Of course, I could definitely be wrong, but this is simply how I see it so far. As interest rates increase, more and more vulnerabilities in our financial system will be revealed. Let's just hope nothing too crazy happens.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Author's Note: </strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Sorry for the short article, since I know that's not my usual style. I was initially going to post a Bond article today, but I felt that posting this while the issue is still new and ongoing was rather important. Do feel free to share your thoughts below as well.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><b style="color: #222222;">Think this article is something you'd want more of? Subscribe <a href="https://follow.it/passive-loss?leanpub" target="_blank">here</a> using your email to get notified about my latest blog articles, I'd truly be grateful!</b></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br class="Apple-interchange-newline" />Disclaimer: Please take everything published within this blog with a pinch of salt. Nothing I say here should be misconstrued as any form of financial advice whatsoever. In fact, I am probably the absolute last person you should approach for any sort of advice. All self-computed figures are calculated to the best of my ability, but I cannot guarantee they are 100% accurate, and I am not liable for any investment decisions made based on my content. </em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Thank you for reading my blog, and I hope you have learnt something, no matter how seemingly minuscule, ciao!</em></p>Passive Loss SGhttp://www.blogger.com/profile/15231705917017776583noreply@blogger.com0tag:blogger.com,1999:blog-8854083309825062752.post-19655470499259918562023-03-10T02:07:00.002-08:002023-03-12T20:01:32.409-07:00Was I Wrong About Sheng Siong...?<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Readers who have been with me since the start of my blogging journey can probably recall this statement I made about </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Sheng Siong</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> in my </span><a class="editor-rtfLink" href="https://www.blogger.com/blog/post/edit/8854083309825062752/1965547049925991856#" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #4a6ee0; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">PSC Corporation</span></a><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> Fundamental Analysis post, which goes as follows:</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">"</em><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">You're telling me that Sheng Siong can blow past its COVID-19 highs during an economic recession, with spending greater than that of the mass panic buying experienced during that time? I find it hard to believe."</em></strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></em></strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">With that statement, I implied that I wouldn't really consider investing in Sheng Siong. But I must say that my perspective has ever so slightly changed, considering that I've reflected and consequently amended my investing strategy in my </span><a class="editor-rtfLink" href="https://www.blogger.com/blog/post/edit/8854083309825062752/1965547049925991856#" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #4a6ee0; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Dividend Growth vs High Yield</span></a><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> post. I must confess that I've lost hours of sleep just </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">thinking</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> about Sheng Siong, so I've decided to write this article today to see whether my gut feeling was correct or not. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">I'm confident Sheng Siong has no need for an introduction. It's a brand that most Singaporeans will most definitely be familiar with, being the supermarket retail giant that it is. In fact, Eight year old me always chanted along the </span><a class="editor-rtfLink" href="https://www.blogger.com/blog/post/edit/8854083309825062752/1965547049925991856#" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #4a6ee0; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">2012 Sheng Siong ad</span></a><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> with that familiar "Sheng Siong all for you..." jingle. Not to mention, ask any uncle, auntie, or any Singaporean adult on the street if they know or watch the Sheng Siong gameshow and I'll bet that 99% of them say yes. </span></p><p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEgrrpCxWeGqc0d7JcxBokZr_ACFaxXwsFo2d4MtBKYEJcOEQ4n3t3GaJZLuarx3wyWO-L8AhYelKUQjErDZ1WmXwFMU4c7jdkZx2zYDMHJKQcbHFTtlvZ3kSo847hiHhqm6Kv2vJeyvYYMTEe5xgOyANHhFQ7Apf74uFbMLDKXKbrU1WJs3ML-OpA3ydA" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="228" data-original-width="1000" height="146" src="https://blogger.googleusercontent.com/img/a/AVvXsEgrrpCxWeGqc0d7JcxBokZr_ACFaxXwsFo2d4MtBKYEJcOEQ4n3t3GaJZLuarx3wyWO-L8AhYelKUQjErDZ1WmXwFMU4c7jdkZx2zYDMHJKQcbHFTtlvZ3kSo847hiHhqm6Kv2vJeyvYYMTEe5xgOyANHhFQ7Apf74uFbMLDKXKbrU1WJs3ML-OpA3ydA" width="640" /></a></div><div style="text-align: center;"><br /></div><div style="text-align: center;"><i>Source: <a href="https://corporate.shengsiong.com.sg/" target="_blank">Sheng Siong Website</a></i></div><div style="text-align: justify;"><br /></div><div style="text-align: left;"><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Just to recap though, here's what Sheng Siong actually does, according to their corporate website.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">"From our humble roots starting as a small provision shop in Ang Mo Kio, Sheng Siong has grown to become one of Singapore’s top retailers, with over 60 stores island-wide today. Sheng Siong is also listed on the Mainboard of the Singapore Exchange since 2011.</em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Our retail stores are primarily located in the heartlands of Singapore.</em></strong><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> They are designed to provide our customers with both “wet and dry” shopping options. These include a wide assortment of </em><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">live, fresh</em></strong><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> and chilled produce, such as seafood, meat, fruits and vegetables, in addition to processed, packaged and preserved food products as well as general merchandise such as toiletries and essential household products."</em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">It would be wise to pay close attention to the highlighted parts, which are what made Sheng Siong the success that it is today. Many Singaporeans live in the heartlands, and it's certainly convenient to be able to fulfill your weekly grocery run just a few minutes walk away from your house. This is also </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">precisely</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> why Singaporeans have associated the Sheng Siong brand with value, as opposed to a chain like Cold Storage; Being located in the heartlands means less overhead from rent, which would naturally pass the cost savings back to the consumer... right? Well, yes, but this is why I also highlighted the second part of the company story, which I'll get into in a bit. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Firstly, let's take a look at Sheng Siong's financials and see if it has a robust balance sheet. </strong></p></div><div style="text-align: left;"><span id="docs-internal-guid-eafc9cd5-7fff-5937-2d1e-29b0fefceb4a"><div style="text-align: justify;"><b><br /></b></div><div><div class="separator" style="clear: both; text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEin4qtVbscls8SshrOOSa1KZwFxDShgpV0HZTN31OCIDYJzKJshX948me7r2ey-I86XDxOYlTYRZL08XvM_XsBuGpYhGF9-HXl-vmri7RGVPnMAp5ObtuNcdwPG92uX-zryuvDu0I18CoPMTuxDQWpsJsSTbhcqGIId_Zh2jeRXRUa4Xvc3-BZjdvrNtw/s1070/Screenshot%202023-03-10%20at%203.52.47%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1070" data-original-width="1036" height="640" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEin4qtVbscls8SshrOOSa1KZwFxDShgpV0HZTN31OCIDYJzKJshX948me7r2ey-I86XDxOYlTYRZL08XvM_XsBuGpYhGF9-HXl-vmri7RGVPnMAp5ObtuNcdwPG92uX-zryuvDu0I18CoPMTuxDQWpsJsSTbhcqGIId_Zh2jeRXRUa4Xvc3-BZjdvrNtw/w620-h640/Screenshot%202023-03-10%20at%203.52.47%20PM.png" width="620" /></a></div><i><div style="text-align: center;"><i>Source: <a href="https://links.sgx.com/FileOpen/SSG%20-%204Q%202H2022%20-%20Results.ashx?App=Announcement&FileID=748040" target="_blank">Sheng Siong Group (SSG) FY2022 Financial Report</a></i></div></i></div><div style="text-align: center;"><br /></div><div style="text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">At the end of FY2022, the group's current assets of $396 Million SGD exceeded the current liabilities of $266 Million SGD. This places the group in a relatively safe position with a low risk of insolvency and default. It is important to note that although Sheng Siong's cash equivalents are also able to pay off all of the current liabilities, the group may continue to push for </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">aggressive expansion of retail stores</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> which I will elaborate on further in a later segment, which may increase the liabilities.</span></div><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEilcOGzNEI8XmzHxARG8siBzXjxg-eiXaNpVEMJhUuyLasHCCeYp2-SZbxxpPRxP9PCxF1d5GLcCoMNElJeXFeQF61W5y19-urIir-d2RF7EEK0fo18b4b94AkQb9RInSpHHTPnq6eSkDl4RX89t8IzNBHUpdoF3iz6WGbXfajJu1DEn7fESGakHMpkyg/s1214/Screenshot%202023-03-10%20at%204.10.50%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="488" data-original-width="1214" height="258" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEilcOGzNEI8XmzHxARG8siBzXjxg-eiXaNpVEMJhUuyLasHCCeYp2-SZbxxpPRxP9PCxF1d5GLcCoMNElJeXFeQF61W5y19-urIir-d2RF7EEK0fo18b4b94AkQb9RInSpHHTPnq6eSkDl4RX89t8IzNBHUpdoF3iz6WGbXfajJu1DEn7fESGakHMpkyg/w640-h258/Screenshot%202023-03-10%20at%204.10.50%20PM.png" width="640" /></a></div><div style="text-align: center;"><i>Sheng Siong's Five Year Performance</i></div><div style="text-align: justify;"><br /></div><div><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">At a glance, Sheng Siong's performance has been extremely commendable. Revenue has been on an increasing trendline, although one should note that the stellar revenue achieved in FY2020 was attributed to the high amount of panic buying due to COVID lockdowns, leading to the hoarding of items such as </span><a class="editor-rtfLink" href="https://www.blogger.com/blog/post/edit/8854083309825062752/1965547049925991856#" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #4a6ee0; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">toilet paper</span></a><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">. Despite the normalisation of revenue, it seems like there has been a sustained increase in grocery purchases, which bodes well for the group. Furthermore, NAV and Gross Profit Margin have also been climbing, thanks to the increased sales of fresh produce which Sheng Siong is renowned for. Another plus is also the stable dividends paid out by the company, which have almost doubled in the five-year time frame. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">So, what are Sheng Siong's growth prospects?</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">It is no secret that Singapore has been dealing with the issue of limited land space. A consumer staples retail business like Sheng Siong </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">counts</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> on population growth to drive its revenue higher. With 72 stores, it may be easy to conclude that Sheng Siong has already grown to its fullest potential. However, with upcoming BTO launches like </span><a class="editor-rtfLink" href="https://www.blogger.com/blog/post/edit/8854083309825062752/1965547049925991856#" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #4a6ee0; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Tengah Estate</span></a><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> along with more projects to come as Singapore develops pockets of undeveloped land, we may see higher store counts and naturally higher revenue for the company.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Additionally, who says Sheng Siong is limited to only Singapore? China may be the panacea to the company's growth prospect woes. In fact, Sheng Siong already has </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">five</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> stores located in the economic giant. </span></p></div><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgswc3S-B1YeHrpZqZ1sDoSJ25JPxuVUsagObIMUIaEXUqdj3M-Wu72RDML6nFg72VVaDwwkBMrgDY5ng9gKWT61JZpNJdY9Fp8nuzAiUCvMDg1433GYcvlq_J6fHCrnhoLi5wjA8n7LrEjxhPwbuYnjd4H-XVlesc68naW1EidKDONYXJ0uOzcFMklGQ/s1260/Screenshot%202023-03-10%20at%204.29.58%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="322" data-original-width="1260" height="164" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgswc3S-B1YeHrpZqZ1sDoSJ25JPxuVUsagObIMUIaEXUqdj3M-Wu72RDML6nFg72VVaDwwkBMrgDY5ng9gKWT61JZpNJdY9Fp8nuzAiUCvMDg1433GYcvlq_J6fHCrnhoLi5wjA8n7LrEjxhPwbuYnjd4H-XVlesc68naW1EidKDONYXJ0uOzcFMklGQ/w640-h164/Screenshot%202023-03-10%20at%204.29.58%20PM.png" width="640" /></a></div><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjPxmiGERmitOJ_IMaAPs_wPqtth2r-V4cL198HOMDdiDwv2aUy27Fa-VvPHVkrKDMMbqkQs1iGSKCB5TT10gUSiceMbMv_W3BF8H2U0Xy9VmqtvJ7juDzkIG3iv80IrXnbxD5w4TuWdHKNLxcNH3XOH9QRdK8_d-Pw0F14nY1WBDNIaCWP9_eVxnuaaw/s1264/Screenshot%202023-03-10%20at%204.30.15%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="178" data-original-width="1264" height="90" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjPxmiGERmitOJ_IMaAPs_wPqtth2r-V4cL198HOMDdiDwv2aUy27Fa-VvPHVkrKDMMbqkQs1iGSKCB5TT10gUSiceMbMv_W3BF8H2U0Xy9VmqtvJ7juDzkIG3iv80IrXnbxD5w4TuWdHKNLxcNH3XOH9QRdK8_d-Pw0F14nY1WBDNIaCWP9_eVxnuaaw/w640-h90/Screenshot%202023-03-10%20at%204.30.15%20PM.png" width="640" /></a></div><div style="text-align: justify;"><br /></div><div style="text-align: center;"><i>Source: <a href="https://shengsiongcontent.s3.ap-southeast-1.amazonaws.com/wp-content/uploads/2023/02/28160359/Q4-2022-Financial-Statement.pdf" target="_blank">Sheng Siong Financial Year 2022 Report</a></i></div><div style="text-align: center;"><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">It goes without saying, however, that one should remain cautiously optimistic about Sheng Siong's growth prospects. China is a whole other beast of a market that contains corporate behemoths in the grocery retail business such as CR Vanguard and RT-Mart. It is no guarantee that Sheng Siong's China outlets can be profitable in the long term, given that they were loss-making in the past. Additionally, further expanding against such giant headwinds as high levels of competition may significantly depress margins. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhfMqm6PpDdMWH4hhAQinf6NEgJzGyMUhBq_2XWc77yt42Rbt86k3gOBskemFFWRGO669wGMpYj-nz8OxRIfj8CPjxd-Vlax_PEwPHCn7__o4exR7HeHk-52NhQC1KEo4X8TaKtYWGr2e8mfC-rXr7-dzIzlsPvPMJlgtsczDpU67q8m9wOhE5QaYUkvw/s1428/Screenshot%202023-03-10%20at%206.00.53%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="672" data-original-width="1428" height="302" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhfMqm6PpDdMWH4hhAQinf6NEgJzGyMUhBq_2XWc77yt42Rbt86k3gOBskemFFWRGO669wGMpYj-nz8OxRIfj8CPjxd-Vlax_PEwPHCn7__o4exR7HeHk-52NhQC1KEo4X8TaKtYWGr2e8mfC-rXr7-dzIzlsPvPMJlgtsczDpU67q8m9wOhE5QaYUkvw/w640-h302/Screenshot%202023-03-10%20at%206.00.53%20PM.png" width="640" /></a></div><i><div style="text-align: center;"><i>Chart of Singapore's Population (Source: <a href="https://tradingeconomics.com/singapore/population" target="_blank">Trading Economics</a>)</i></div></i><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span><p></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">One thing to take note of is that Singapore's population growth has been taking a hit in recent years. Sheng Siong's revenue growth</span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> </em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">is</span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> inexplicably linked </em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">to Singapore's continued prosperity and attractiveness as an emigration location. Should the economy take a hit, we may see margins become slightly depressed due to fewer fresh seafood sales since they would be considered a luxury good in the economic sense, and hence have a positive income elasticity of demand. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Another thing we must note is that Sheng Siong's revenue only decreased negligibly due to the opening of 4 new locations in Singapore. Existing store sales actually dropped rather significantly to the tune of approximately 5 percent. Could this indicate that the opening of new stores is cannibalising sales from nearby locations? Or could there be a fundamental shift in consumers' lifestyles to eat out more as opposed to cooking now? Before COVID, it seems like a</span><a class="editor-rtfLink" href="https://www.blogger.com/blog/post/edit/8854083309825062752/1965547049925991856#" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #4a6ee0; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> higher proportion of Singaporeans were eating out as opposed to cooking</span></a><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">, which leads me to believe that with COVID restrictions being lifted, we could see decreased sales for Sheng Siong.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">In terms of goods sales, Sheng Siong actually has 23 in-house brand labels. If they could further expand their range of products, then it would certainly bode well for their gross profit margin, given that in-house labels are typically more profitable. Hopefully, Sheng Siong can follow in the footsteps of Giant to introduce a flagship house brand such as Meadows.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">To add on, Sheng Siong has also been making efforts to up its game in the online shopping market.</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Why do I say this? Well, I recall visiting Sheng Siong's online website a while back and was simply shocked by the abhorrent user interface, to put it bluntly. </span></p></div><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgzdNl-DlrSJl0WCTtf32i4jt5uvjvlWsiSDTNlHwkjhGeQYt9n9JB-6JaGB2ku-PZv4ameEAnqZfEg8_NdJl3yZvwzR2w4nkSGIGQnuBcoDQKvd-ze9HlwpL56_BFiXft48w1rds53cYU4TgmYcDj59kYQE3PTjTc3lYCUOZsEyR8AILLUlqyALVG44w/s2288/Screenshot%202023-03-10%20at%204.47.17%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1156" data-original-width="2288" height="324" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgzdNl-DlrSJl0WCTtf32i4jt5uvjvlWsiSDTNlHwkjhGeQYt9n9JB-6JaGB2ku-PZv4ameEAnqZfEg8_NdJl3yZvwzR2w4nkSGIGQnuBcoDQKvd-ze9HlwpL56_BFiXft48w1rds53cYU4TgmYcDj59kYQE3PTjTc3lYCUOZsEyR8AILLUlqyALVG44w/w640-h324/Screenshot%202023-03-10%20at%204.47.17%20PM.png" width="640" /></a></div><div style="text-align: center;"><i>Screenshot of Sheng Siong's 2021 Website</i></div><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgDdfKgiQ8qYApZkWoRC4tdyHTR5N4X5LcSj-PNyq6kKvBkNzqiXgHuKmhH6mRorhoQUgU-N2LZ7FQP8D3OnRKwtfRKXUJBSI3FFbGGYI186XaopbSh5s9P47ytSHrtC7A-xmcjCRrr5J8VzGWnFrqPgnfd1POssV0MFqDW51Za7njSd_-b36ldthZ_9w/s2534/Screenshot%202023-03-10%20at%204.48.23%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1294" data-original-width="2534" height="326" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgDdfKgiQ8qYApZkWoRC4tdyHTR5N4X5LcSj-PNyq6kKvBkNzqiXgHuKmhH6mRorhoQUgU-N2LZ7FQP8D3OnRKwtfRKXUJBSI3FFbGGYI186XaopbSh5s9P47ytSHrtC7A-xmcjCRrr5J8VzGWnFrqPgnfd1POssV0MFqDW51Za7njSd_-b36ldthZ_9w/w640-h326/Screenshot%202023-03-10%20at%204.48.23%20PM.png" width="640" /></a></div><div style="text-align: justify;"><br /></div><div style="text-align: center;"><i>Fast forward to 2022, and the website UI has thankfully been updated.</i></div><div style="text-align: left;"><div style="text-align: justify;"><br /></div><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Although the UI still has some way to go before it's comparable to the likes of its peers like NTUC, it highlights the commitment of the management team to boosting its online sales. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">That being said, I suppose now is the perfect time to segue to the review of Sheng Siong's management!</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Sheng Siong has been under the leadership of the Chief Executive Officer, Lim Hock Eng. Here is some background information about him. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">"Mr. Lim Hock Eng is our Executive Chairman and his areas of responsibility include business strategy and planning and business administration. Mr Lim also manages our day-to-day operations, including overseeing the setting-up process for our new stores, supervising the preparation and submission of our bids and tenders for new premises, as well as the renovation works and equipment purchases and installations required to fit out such premises.</em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Mr Lim is one of the founding shareholders of C M M Marketing Management Pte Ltd and Sheng Siong Supermarket Pte Ltd. He has been a director since Sheng Siong Supermarket Pte Ltd was incorporated in 1983, and has been instrumental in our Group’s growth. Mr Lim has more than 36 years of experience in grocery retailing. Prior to founding our Group, Mr Lim was employed in his family’s hog rearing business."</em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">It seems like Mr Lim has been with the company since the beginning, which shows that he would be the best person to run the company, given that he would most likely be someone that knows the ins and outs of the company the most. I know this isn't exactly pertinent to investors, but he has been known to be quite generous, awarding up to a 16-month bonus to all staff in the year 2020. Personally, I think this is a huge plus. Detractors may say that these are unnecessary expenses, but such a move may attract higher-quality talent, and reduce turnover, increasing the operational efficiency of the company. Not to mention, I know a lot of people that feel </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">especially</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> good about patronising Sheng Siong due to the good reputation of the management. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">In terms of alignment with shareholder interests, I find the company's efforts to sustain a stable, increasing dividend commendable. I think the company hoarding a bit of cash is rather reasonable, given that the company is still aggressively expanding its store count. I think the company could afford to take on a bit more debt though, given that the company's margins are rather high. However, I understand that they probably </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">don't </em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">have many else places to expand to. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Let's cut to the chase. Would I buy Sheng Siong at current valuations? </strong></p></div><div style="text-align: left;"><p class="no-br text-center text-md-left" style="background-color: white; box-sizing: border-box; color: #222222; line-height: 26px; margin-bottom: 26px; margin-top: 0px; outline: none; overflow-wrap: break-word;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi88u_0h5ROcQnbbTIvX2XKsbiqLWmyvT03D1SKLKAHJz-x73N38VJ0rcLjOKaFCkikbNMow9gpLV9F21OfojqrzfwVdRwAaa6iiLthzGkTeq0WWHPkyvRmK6tcharg61RHiYTHkl-AnI2KtMACRtmRjzqtLkpirSa21vtd5I3B9VcLEZYw0NRULC_kUA/s1352/Screenshot%202023-03-10%20at%205.36.55%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="928" data-original-width="1352" height="440" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi88u_0h5ROcQnbbTIvX2XKsbiqLWmyvT03D1SKLKAHJz-x73N38VJ0rcLjOKaFCkikbNMow9gpLV9F21OfojqrzfwVdRwAaa6iiLthzGkTeq0WWHPkyvRmK6tcharg61RHiYTHkl-AnI2KtMACRtmRjzqtLkpirSa21vtd5I3B9VcLEZYw0NRULC_kUA/w640-h440/Screenshot%202023-03-10%20at%205.36.55%20PM.png" width="640" /></a></div><div class="separator" style="clear: both; text-align: justify;"><br /></div><p dir="ltr" style="line-height: 1.2; margin-bottom: 0pt; margin-top: 0pt;"></p><div style="text-align: justify;"><span style="color: #222222; white-space: pre-wrap;">Sheng Siong is almost at an all-time high right now, trading at a PE ratio of 18.72. Given that the business is relatively "asset-light", it would be wise to use valuations based on PE. According to GuruFocus, Sheng Siong's historic median PE ratio has been 22.38. Although the current PE ratio is rather low compared to its median, I'll stay on the sidelines for now. The current dividend yield of 3.75% is still not that attractive if you take into account the risk-free rate is approximately 4%.</span></div><span style="color: #222222;"><div style="text-align: justify;"><span style="white-space: pre-wrap;"><br /></span></div><div style="text-align: justify; white-space: pre-wrap;">Overall, I truly do like Sheng Siong's business model. It's a business operating in a cycle agnostic industry with a high level of recurring income and brand loyalty. With a robust balance sheet coupled with a defensive industry, present macroeconomic conditions do not really affect the business. At current valuations, Sheng Siong still does seem fully valued to me. The reason why I'm staying on the sidelines is due to the fact that I'm not sure whether Sheng Siong's current high revenue is sustainable or not. Should there be a change in the winds, it'll be disastrous for the company's share price. Overall, I'll see how Sheng Siong does in FY2023 before jumping the gun. <b>I was wrong to dismiss Sheng Siong, and I think it's a good long term hold, but let's wait and see.</b></div><div style="text-align: justify;"><b><br /></b></div><div style="text-align: justify;"><b>Think this article is something you'd want more of? Subscribe <a href="https://follow.it/passive-loss?leanpub" target="_blank">here</a> using your email to get notified about my latest blog articles, I'd truly be grateful!</b></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: left;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Disclaimer: Please take everything published within this blog with a pinch of salt. Nothing I say here should be misconstrued as any form of financial advice whatsoever. In fact, I am probably the absolute last person you should approach for any sort of advice. All self-computed figures are calculated to the best of my ability, but I cannot guarantee they are 100% accurate, and I am not liable for any investment decisions made based on my content. </em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: left;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: left;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Thank you for reading my blog, and I hope you have learnt something, no matter how seemingly minuscule, ciao!</em></p></div></span><div style="text-align: justify;"><span style="background-color: white; color: #222222; font-family: Arial; font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><br /></span></div><div style="text-align: justify;"><span style="background-color: white; color: #222222; font-family: Arial; font-size: 11pt; font-variant-east-asian: normal; font-variant-numeric: normal; vertical-align: baseline; white-space: pre-wrap;"><br /></span></div><p></p></div></span></div><p style="text-align: left;"></p>Passive Loss SGhttp://www.blogger.com/profile/15231705917017776583noreply@blogger.com0tag:blogger.com,1999:blog-8854083309825062752.post-78182454668719119482023-03-08T00:31:00.008-08:002023-03-12T20:00:21.258-07:00Are We Heading Into a Recession?<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Everyone and their grandma is talking about an imminent economic recession right now, and it does seem </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">frightening</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">. Even as I write this, I can just </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">feel</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> my entrails shivering in a cold sweat. Jokes aside, it would be wise of us to not take everything at face value when we read articles or opinion pieces on the Internet. Yes, we've all seen those sensational headlines that warrant some concern, such as the recent </span><a class="editor-rtfLink" href="https://www.blogger.com/blog/post/edit/8854083309825062752/7818245466871911948#" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #4a6ee0; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">tech sector layoffs</span></a><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> or Prime Minister Lawrence Wong warning that there is a multitude of potential uncertainties faced by the economy in his </span><a class="editor-rtfLink" href="https://www.blogger.com/blog/post/edit/8854083309825062752/7818245466871911948#" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #4a6ee0; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Singapore Budget 2023</span></a><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> speech. In this article, I'll be tackling the big questions that are on everybody's mind:</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Are we seriously heading into an economic recession? Or can everybody's concerns be dismissed as overblown pessimism? </strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></strong></p><p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEija0eanCJqlLDmR0LLfHASa8x2h9bbXZyuDxBw543DdS1fELrx3GR6MGjLkrSyYri0IdX5-sYXHr7W9eOeCKIDnXNOIH15uYkF2oYGEcMTB2mmDffbxeXBqm7GGuozJZQHDG-WECgNEfOLEWhYRQ-OalhjNMLuz14iLzhB7u0Ozi47UJ1ML3F6nlC1XQ" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="403" data-original-width="612" height="421" src="https://blogger.googleusercontent.com/img/a/AVvXsEija0eanCJqlLDmR0LLfHASa8x2h9bbXZyuDxBw543DdS1fELrx3GR6MGjLkrSyYri0IdX5-sYXHr7W9eOeCKIDnXNOIH15uYkF2oYGEcMTB2mmDffbxeXBqm7GGuozJZQHDG-WECgNEfOLEWhYRQ-OalhjNMLuz14iLzhB7u0Ozi47UJ1ML3F6nlC1XQ" width="640" /></a></div><div style="text-align: center;"><i>Source: <a href="https://www.istockphoto.com/photo/recession-ahead-road-sign-warning-concept-gm1129173988-298192347" target="_blank">iStock</a></i></div><p></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Firstly, I just want to point out there's actually no consensus on what constitutes a recession. Yes, that recession definition of having two or more consecutive quarters of negative GDP growth you were taught in H2 Economics class isn't commonly accepted. What a recession means is still widely debated by economists all over the world. However, for simplicity's sake, we'll go with "</span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">A period of decline in economic activity</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">" which I suppose, is basically what you learnt in JC. In terms of the data and points I would like to discuss, I'll be using US statistics. After all, the US </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">does </em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">constitute more or less </span><a class="editor-rtfLink" href="https://www.blogger.com/blog/post/edit/8854083309825062752/7818245466871911948#" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #4a6ee0; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">24.4%</span></a><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> of the global GDP, the largest contributor. Not to mention, US statistics are quite accessible and well-documented on the Internet.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">With all that out of the way, let's address one of the most hyped economic indicators within the investing world: The Inverted Yield Curve</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">If you're a frequent browser on r/WallStreetBets, the notorious online forum infamous for young "investors" fuelling their gambling addictions by YOLOing their life savings, then you may have seen a few posts propping up regarding an inverted yield curve. What does it actually mean?</span></p><p style="text-align: justify;"><br /></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhtXWN1tbQBiQn8GMKt5QNScSnEHiJ_sOEQ9RdPaOAH_ZrzC-RyvZW9Edzv6sdy0xWU4SUyK_JW-gHHTJOTw2-Slk-khzbigQ-L4aIYo1id6C3zBFg3buDXYtVbR-2UdipayFZqAygZK9sKsTNDvvZi_tTDUUVgOEWnafS49gqs_qxczqUVqj7DKcuxzQ/s604/Screenshot%202023-03-08%20at%203.16.44%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="438" data-original-width="604" height="464" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhtXWN1tbQBiQn8GMKt5QNScSnEHiJ_sOEQ9RdPaOAH_ZrzC-RyvZW9Edzv6sdy0xWU4SUyK_JW-gHHTJOTw2-Slk-khzbigQ-L4aIYo1id6C3zBFg3buDXYtVbR-2UdipayFZqAygZK9sKsTNDvvZi_tTDUUVgOEWnafS49gqs_qxczqUVqj7DKcuxzQ/w640-h464/Screenshot%202023-03-08%20at%203.16.44%20PM.png" width="640" /></a></div><div style="text-align: center;"><i>Source: My (Awesome) Drawing Skills. </i></div><div style="text-align: center;"><i><br /></i></div><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">You see, yields are the annual percentage amount of a bond's principal that is paid as a coupon by the borrower to the lender, whereas maturity is the duration till the principal is required to be paid off. </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Usually</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">, if you plot bonds of differing maturity onto a graph, it'll look something like the above green line, ceteris parabus. The higher yield as maturity increases reflects the additional risk taken by the lender as maturity increases, since anything could happen, as time passes, there is a higher likelihood of default/opportunity cost. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">However, an inverted yield curve is when the opposite happens. Investors are placing a premium on long-term bonds. Why did this happen? The fact is, investors are anticipating future interest rates to be lower than that currently, which means everyone is rushing in to lock in these high rates right now. With the prediction that rates will lower, it indicates a prevailing sentiment that the Fed might have to step in with expansionary monetary policy to combat a recession. It could also signify that investors are shifting their funds from riskier equities to less risky bonds. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiVWk9lQWSYq4lKx8qYa37JuSgkEXEnZW2jm3DrK6wF-ARGkIcwYYznvKWpANGKaI4y5pt9ERXA_Ld2JFEZUg14QuFJ5FF67Sg86EVWt15-4_fCpvDjyynrOcUR89wtSja56FJNkSt4AR5_pj_ofkR5sNUOLnvnJK_YusgDlM2U-lYSFZwIPkc6hvtjhQ/s1636/Screenshot%202023-03-08%20at%203.28.27%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1026" data-original-width="1636" height="402" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiVWk9lQWSYq4lKx8qYa37JuSgkEXEnZW2jm3DrK6wF-ARGkIcwYYznvKWpANGKaI4y5pt9ERXA_Ld2JFEZUg14QuFJ5FF67Sg86EVWt15-4_fCpvDjyynrOcUR89wtSja56FJNkSt4AR5_pj_ofkR5sNUOLnvnJK_YusgDlM2U-lYSFZwIPkc6hvtjhQ/w640-h402/Screenshot%202023-03-08%20at%203.28.27%20PM.png" width="640" /></a></div><div class="separator" style="clear: both; text-align: center;"><i>Source: <a href="https://www.bloomberg.com/markets/rates-bonds/government-bonds/us" target="_blank">Bloomberg</a></i></div><p style="text-align: justify;">Typically, we use the difference between the 10 year bonds and short term bonds (3 months, 6 months, 1 year) to see if a yield curve is inverted. As you can see, the 10 year US government bond yields 3.99%, lower than any of the short term government bonds such as the 12 month's 5.16%.</p><p style="text-align: justify;"><br /></p><p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEi_qHH81Vgo66lclxCRZFrAhShGF9IpbybPnR3u1A7Ll6ltX1VnLGJaOuwOpaHfEDMOrs9DFcWK3iyWibq4JN7ClQ0-BpFQBJqgOWi77J-3SzVPvPMUoW3muIobq32asoS3GiiGkfPmAwz44Zz2hkozFrl1U8nJqQSXTUXy4UXwkHyV3nMhJ1YFvuzjkg" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="474" data-original-width="729" height="416" src="https://blogger.googleusercontent.com/img/a/AVvXsEi_qHH81Vgo66lclxCRZFrAhShGF9IpbybPnR3u1A7Ll6ltX1VnLGJaOuwOpaHfEDMOrs9DFcWK3iyWibq4JN7ClQ0-BpFQBJqgOWi77J-3SzVPvPMUoW3muIobq32asoS3GiiGkfPmAwz44Zz2hkozFrl1U8nJqQSXTUXy4UXwkHyV3nMhJ1YFvuzjkg=w640-h416" width="640" /></a></div><div style="text-align: center;"><i>Source: <a href="https://www.reuters.com/business/finance/us-yield-curve-inversion-what-is-it-telling-us-2022-03-29/" target="_blank">Reuters</a></i></div><p></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Typically, an inverted yield curve signals an incoming economic recession, and it's been </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">scarily</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> accurate. Almost every yield curve inversion has preceded a recession by approximately 1 year since the 1960s, except for once. Nevertheless, longer periods of yield curve inversion have been shown to be associated with higher chances of a recession. Just do take note that an inverted yield curve does </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">not</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> cause a recession, and is merely an indicator and represents investor sentiment. I know investors are </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">hardly</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> the most reliable people, but you can't simply dismiss this glaring warning sign. </span></p><p></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"></p><p></p><p style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">Next, we can't ignore the current inflationary environment that we're facing today. </span></strong></p><p style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></strong></p><p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBHIPc5GF8xIqI2sRLcqGRtxZ6EL2EuDGH8uL9YdxlevPAMvQXQts8xmq7W001ye05EPx4mgMyaw_DhIcEEkhJFgILgRqYr3alHYGq2uO1fyzXerUsNtdeggSc3xOhXezPAxkQG1A2qaCNn3-RPYHzrk_mPKE0qhuBdqYWHRiMjWtrQrFQgeFkwvarmg/s1444/Screenshot%202023-03-08%20at%203.57.34%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="626" data-original-width="1444" height="278" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgBHIPc5GF8xIqI2sRLcqGRtxZ6EL2EuDGH8uL9YdxlevPAMvQXQts8xmq7W001ye05EPx4mgMyaw_DhIcEEkhJFgILgRqYr3alHYGq2uO1fyzXerUsNtdeggSc3xOhXezPAxkQG1A2qaCNn3-RPYHzrk_mPKE0qhuBdqYWHRiMjWtrQrFQgeFkwvarmg/w640-h278/Screenshot%202023-03-08%20at%203.57.34%20PM.png" width="640" /></a></div><div style="text-align: center;"><i>US Consumer Price Index (Source: <a href="https://www.bls.gov/charts/consumer-price-index/consumer-price-index-by-category-line-chart.htm" target="_blank">US Bureau of Labour Statistics</a>)</i></div><div style="text-align: justify;"><span style="font-weight: 700;"><br /></span></div><p></p><p style="text-align: justify;">The consumer price index has been skyrocketing, and according to Jerome Powell, it very well may be mainly attributed to a red-hot labour market causing demand-side inflation. The Federal Reserve's main goals are to minimise unemployment and inflation... but if unemployment is getting in the way, then you can bet that Powell will hike rates to cool down the labour market. However, despite the recent slew of rate hikes, US unemployment has remained at historic lows of approximately 3.4%. </p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgIBHAzU18SvL_Fly8ZJfWX8ExrBQpXIl0-ed8SuugwpLCOAzhLPk-XOj17Jttw82Tmddfu3mcm-6UTBAVP6MKsPJlzIV_e9H_ZpNEzex8CXG2M7S6c-shFmfhZ7-aVo9pR0D7UOgKVz7HSJKrL2OhKG6ZzrvcriXLMJ5MgUrpFACl3TJPnIBZJww66ug/s680/Screenshot%202023-03-08%20at%204.03.10%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="428" data-original-width="680" height="402" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgIBHAzU18SvL_Fly8ZJfWX8ExrBQpXIl0-ed8SuugwpLCOAzhLPk-XOj17Jttw82Tmddfu3mcm-6UTBAVP6MKsPJlzIV_e9H_ZpNEzex8CXG2M7S6c-shFmfhZ7-aVo9pR0D7UOgKVz7HSJKrL2OhKG6ZzrvcriXLMJ5MgUrpFACl3TJPnIBZJww66ug/w640-h402/Screenshot%202023-03-08%20at%204.03.10%20PM.png" width="640" /></a></div><span style="text-align: center;"><div style="font-style: italic; text-align: center;"><i>Source: <a href="https://www.bls.gov/news.release/pdf/empsit.pdf" target="_blank">US Bureau of Labour Statistics</a></i></div><div style="font-style: italic; text-align: justify;"><br /></div><div style="text-align: left;"><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">This might result in Powell becoming more aggressive to reign in inflation, raising rate hikes even further. With elevated interest rates, consumers will have less borrowing power and save more due to heightened saving interest. Additionally, companies may find their return on investment with leverage simply not worth it. This further discourages spending, leading to contracting economic activity. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">You may be wondering why consumers are </span><a class="editor-rtfLink" href="https://www.blogger.com/blog/post/edit/8854083309825062752/7818245466871911948#" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #4a6ee0; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">spending more than ever</span></a><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> recently then. The probable reasoning is that consumers expect inflation to further accelerate, eroding their purchasing power. Naturally, consumers spend more to buy more goods in advance, exacerbating inflation. Could this result in the Fed overreacting and raising interest rates by too much in response to this pushback from inflation?</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">It's natural to think: "What do you mean by too much? Isn't inflation worsening?"</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Correct, inflation is indeed worsening, but so is the average consumer's financial health. The common consensus is that the current high inflation is demand-side and can be attributed to excessive consumer spending... but what if the average consumer can no longer spend?</span></p></div><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi_O0R84cccfh2fht92wTy5WVkyMYcSRx-b8wceeDpcizVf15COCs4izAQR5E-QKTiBrwrp3SBk2Jznq-9M1lDRLQC5WOShz_2yZg3pPq71rJQuVE_VFLBAVXhsMJAzXEVQ_GOX7UpfcyFzxRMEbd_HUVfHChfWuS5I8020ErFcG8DlJKqsMzyxlmXfEg/s2340/Screenshot%202023-03-08%20at%204.14.23%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="720" data-original-width="2340" height="196" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi_O0R84cccfh2fht92wTy5WVkyMYcSRx-b8wceeDpcizVf15COCs4izAQR5E-QKTiBrwrp3SBk2Jznq-9M1lDRLQC5WOShz_2yZg3pPq71rJQuVE_VFLBAVXhsMJAzXEVQ_GOX7UpfcyFzxRMEbd_HUVfHChfWuS5I8020ErFcG8DlJKqsMzyxlmXfEg/w640-h196/Screenshot%202023-03-08%20at%204.14.23%20PM.png" width="640" /></a></div><i><div style="text-align: center;"><i>Personal Savings Rate (Source: <a href="https://fred.stlouisfed.org/series/PSAVERT" target="_blank">Saint Louis Fed</a>)</i></div></i><div style="text-align: justify;"><br /></div><div style="text-align: justify;">US Consumers may be overextending themselves, resulting in savings to disposable income ratio falling to historic lows. </div><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjrQFNoo4P-rlf6cmoyduVahnQIZ0esQTweFMEEyvlZjF7HaIU99CUm8y1V1kc3GSgL556hWcM-KccBQjyTPfvxjAn-JQMruz_UmFcwFYEKnaIEzaBYb3LyFEccWZYtQRhzp6WE-pv2eV6eJOE8gY4rvwPce1rdN-9oZsn2-TBSFsFb2zT5L58O5IOajA/s1450/Screenshot%202023-03-08%20at%204.18.10%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="622" data-original-width="1450" height="274" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjrQFNoo4P-rlf6cmoyduVahnQIZ0esQTweFMEEyvlZjF7HaIU99CUm8y1V1kc3GSgL556hWcM-KccBQjyTPfvxjAn-JQMruz_UmFcwFYEKnaIEzaBYb3LyFEccWZYtQRhzp6WE-pv2eV6eJOE8gY4rvwPce1rdN-9oZsn2-TBSFsFb2zT5L58O5IOajA/w640-h274/Screenshot%202023-03-08%20at%204.18.10%20PM.png" width="640" /></a></div><div style="text-align: justify;"><br /></div><div style="text-align: center;"><i>Household Debt to GDP ratio (Source: <a href="https://tradingeconomics.com/united-states/households-debt-to-gdp" target="_blank">Trading Economics</a>)</i></div><div style="text-align: justify;"><i><br /></i></div></span><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Furthermore, Average Household Debt to GDP ratio is rather high. You may be thinking it's not too bad, but don't forget that GDP may be artificially inflated due to the excessive expansionary monetary policy implemented over the past few years, which may indicate that debt may have been insidiously creeping up...</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Let me pose you a question: What would happen when consumer savings run out, and people cut back on spending? Yet, the Fed aggressively hikes interest rates, increasing the unemployment rate and increasing the cost of debt. With reduced average income, coupled with low savings and higher interest rates, consumers will certainly have to cut back on spending.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">So here are my closing thoughts...</strong></p><p></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"></p><p></p><p style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">I think an economic recession will be rather likely sometime in late 2023 to early 2024. In fact, a recession typically occurs</span><a class="editor-rtfLink" href="https://www.blogger.com/blog/post/edit/8854083309825062752/7818245466871911948#" style="background: transparent; color: #4a6ee0; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><span data-preserver-spaces="true" style="background: transparent; color: #4a6ee0; margin-bottom: 0pt; margin-top: 0pt;"> after the Fed pivots</span></a><span data-preserver-spaces="true" style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> in response to dire economic conditions. Overall, a recession may be caused by the confluence of factors discussed in this article (and outside as well). I'm certainly betting on one, although it isn't exactly contrarian. </span></p><p style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><b>Author's Note: </b>I hope you enjoy this macroeconomic analysis. I'm not yet familiar with how I should tackle such issues, but this is my attempt nonetheless. Additionally, blog posts may slow down soon due to my upcoming enlistment, still stay tuned for future posts though!</span></p><p style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><i><br /></i></span></p><p style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><b style="color: #222222;">Think this article is something you'd want more of? Subscribe <a href="https://follow.it/passive-loss?leanpub" target="_blank">here</a> using your email to get notified about my latest blog articles, I'd truly be grateful!</b></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br class="Apple-interchange-newline" />Disclaimer: Please take everything published within this blog with a pinch of salt. Nothing I say here should be misconstrued as any form of financial advice whatsoever. In fact, I am probably the absolute last person you should approach for any sort of advice. All self-computed figures are calculated to the best of my ability, but I cannot guarantee they are 100% accurate, and I am not liable for any investment decisions made based on my content. </em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Thank you for reading my blog, and I hope you have learnt something, no matter how seemingly minuscule, ciao!</em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p>Passive Loss SGhttp://www.blogger.com/profile/15231705917017776583noreply@blogger.com0tag:blogger.com,1999:blog-8854083309825062752.post-7155889348763153512023-03-06T23:41:00.002-08:002023-03-10T02:07:49.087-08:00Dividend Growth vs High Yield - Pick Your Poison<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> I think it's imperative for investors to regularly review their investing strategy, I </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">really</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> do. I believe practicing what you preach is as, or if not more important as well. So... why am I writing this post? Well, call it pretentious, but I was reflecting on my investment journey so far this afternoon, and</span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> I questioned myself: "Why do I invest in/seek high-yielding stocks?" </strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">I instantaneously rationalised: "I'm someone young with a long-term investing horizon, I can afford to take risk what!" But then it instantly hit me. </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Does taking on higher risk by investing in high-yielding stocks actually provide better returns? </strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Perhaps we should unpack things a bit first. Why do I say that I take higher risks by investing in high-yielding stocks? I believe that the market is efficient and that in the long run, share prices reflect the fundamentals of the underlying company. Since dividend yield is simply a calculation of </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Dividend/Share Price</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">, if share prices dip, the dividend yield would naturally rise. Hence, we can naturally conclude that should there be an incredulous decrease in share price, it means that the market has detected a heightened level of risk associated with the stock, such as a high possibility of insolvency, dividend cuts, or inconsistent earnings. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"></p><div class="separator" style="clear: both; color: #0e101a; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjstSzePZqV1VofrnHF3kkG8B5Hc-uawXuE8ugh9WpEvaglLcQa5T-vd6p4AiZRckieE73-VMDVzHPpPB0Gcet8tgmZ0bqHSbhg5tpdghYd1Ee4x23abRNig79oRIHmYf1cZN1FVq1zOYoeQslXGN_-mJcwYkwHvZ5VAM0blz9TDJ_vgavS1eXXNqp8wQ/s1022/Screenshot%202023-03-07%20at%203.39.49%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="452" data-original-width="1022" height="284" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjstSzePZqV1VofrnHF3kkG8B5Hc-uawXuE8ugh9WpEvaglLcQa5T-vd6p4AiZRckieE73-VMDVzHPpPB0Gcet8tgmZ0bqHSbhg5tpdghYd1Ee4x23abRNig79oRIHmYf1cZN1FVq1zOYoeQslXGN_-mJcwYkwHvZ5VAM0blz9TDJ_vgavS1eXXNqp8wQ/w640-h284/Screenshot%202023-03-07%20at%203.39.49%20PM.png" width="640" /></a></div><div style="text-align: center;"><span style="color: #0e101a;"><i>My <b>Bedazzling </b>design skills at play. Amazing, I know. </i></span></div><p></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">On the flip side, we have dividend growth investing. Such an investing strategy focuses on investing in large blue-chip companies that regularly increase their dividend, increasing one's income without any need for reinvestment. Typically, capital appreciation is also associated with this strategy, as increasing dividends may signify consistent, stronger YoY earnings. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Okay, I get that it's hard to compare which is better than just a bunch of words jumbled up, so I'm here to provide a visualisation. </strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Introducing</span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> DBS Bank (SGX: D05)</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">, with a 5-year average dividend yield of 4.249%, and a ten-year compounded annual growth rate (CAGR) of 8.36% and 9.9% for share price and dividend payout respectively. This counter is most definitely familiar with the Singapore investing population, known locally as the Singapore Government's banking arm, it's the poster child for dividend growth investing, with a high return on equity (ROE) and a growing, stable business, it is no wonder why it's commonly touted as a "must have" for a retiree's portfolio. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Next up, we have </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Keppel Infrastructure Trust (SGX: A7RU)</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">, a company that manages core-infrastructure assets that pay a rather stable high dividend yield. Unsurprisingly, it's known as a cash cow by income investors benefitting from those large cash flows. It boasts a 5-year average dividend yield of 6.761%, and a ten-year CAGR of 1.84% and 4.44% for share price and dividend payout respectively.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Let's pin them up against each other and see who actually wins...</span></p><div><br /></div><div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEgft_5ohQg_Km-GxSudDUb7CzGUUyB2-GWbw3fEry2fenLsFmT6FvHrZ8ykF84kY8BA24qPSieokt8-JIqYPdao3wfME_ipe4U-6f_dyjcjv8TLrx4Shn5LjD5drtrJ2W85SoCzL-1DsJ5OBuBjWr83iM8VA00ghA6XVg3delJ_CLjWD1OY0k4rd0XBqQ" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="1082" data-original-width="2404" height="288" src="https://blogger.googleusercontent.com/img/a/AVvXsEgft_5ohQg_Km-GxSudDUb7CzGUUyB2-GWbw3fEry2fenLsFmT6FvHrZ8ykF84kY8BA24qPSieokt8-JIqYPdao3wfME_ipe4U-6f_dyjcjv8TLrx4Shn5LjD5drtrJ2W85SoCzL-1DsJ5OBuBjWr83iM8VA00ghA6XVg3delJ_CLjWD1OY0k4rd0XBqQ=w640-h288" width="640" /></a></div><br /><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEhavZe9Ov_9JKClnCThrz76TaNKEV4cJIYKQHRECjd2wBjqVN1a-6PerRHgXBpGwU30IpnzE221pGotYm2S8uaR7mWh4GWvG-tGv--s4zDIS5wL0LiZZBPOu0IYfiBNliUJFJ219xsVjBMd53B-SH8detSnkxU4BRbyygeMDosPA9aA4AhUCC4YIBWOiw" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="1086" data-original-width="2400" height="290" src="https://blogger.googleusercontent.com/img/a/AVvXsEhavZe9Ov_9JKClnCThrz76TaNKEV4cJIYKQHRECjd2wBjqVN1a-6PerRHgXBpGwU30IpnzE221pGotYm2S8uaR7mWh4GWvG-tGv--s4zDIS5wL0LiZZBPOu0IYfiBNliUJFJ219xsVjBMd53B-SH8detSnkxU4BRbyygeMDosPA9aA4AhUCC4YIBWOiw=w640-h290" width="640" /></a></div><div style="text-align: center;"><i>Keppel Infrastructure Trust's Performance (Without and With Dividend Reinvestment Plan)</i></div><div style="text-align: center;"><i><br /></i></div><div style="text-align: center;"><i><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEi1f8QTnzUcrF5kYj8FbY-mIYwA2Dd2SEhd-quS_z4kxLnQZPtInZTyOV5vBh6_JN2ELWHjG5WMurZr6xwoNKovJ6dxQtZvDme4niOyr_mMwsu2SKG6Nn_6br6jgJvYOSG_GrRdv1tYZ58pYkHMkWAPY2SOMYDTZJuFgtTipsieY3eYMykP1e77owg3kw" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="1088" data-original-width="2402" height="290" src="https://blogger.googleusercontent.com/img/a/AVvXsEi1f8QTnzUcrF5kYj8FbY-mIYwA2Dd2SEhd-quS_z4kxLnQZPtInZTyOV5vBh6_JN2ELWHjG5WMurZr6xwoNKovJ6dxQtZvDme4niOyr_mMwsu2SKG6Nn_6br6jgJvYOSG_GrRdv1tYZ58pYkHMkWAPY2SOMYDTZJuFgtTipsieY3eYMykP1e77owg3kw=w640-h290" width="640" /></a></div><br /><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEgcMJ-3y4uM3k3Prav4YbgsyTjmNuTThOPvRcQepj1BqYcPMnPRLS0KVS4QDTIAGbTSP76q2vRfdU_YZhH17zuEGXJl132dRLoucZHs-S7nFb5QSo0mzKUp9Rya6WNPNQFpQS359lNaLTZHrglQknvbC-NgFNuJxQXgvpT_dUSy-ZHXPVv5YBcXB_Pq0A" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="1092" data-original-width="2406" height="290" src="https://blogger.googleusercontent.com/img/a/AVvXsEgcMJ-3y4uM3k3Prav4YbgsyTjmNuTThOPvRcQepj1BqYcPMnPRLS0KVS4QDTIAGbTSP76q2vRfdU_YZhH17zuEGXJl132dRLoucZHs-S7nFb5QSo0mzKUp9Rya6WNPNQFpQS359lNaLTZHrglQknvbC-NgFNuJxQXgvpT_dUSy-ZHXPVv5YBcXB_Pq0A=w640-h290" width="640" /></a></div></i><i>DBS Bank's Performance (Without and With Dividend Reinvestment Plan)</i></div><div style="text-align: center;"><i><br /></i></div><div style="text-align: center;"><div class="separator" style="clear: both; font-style: italic; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEhd4G9ka2L9V99S8SP47iH7qd3xZ4R7m1b3QU4wJwRW4Iut6zRmxkyiWykEIs61gGyDxMmdbhQiDPHe8eAWmvAXnksk7dOnXCNKtPWY2UhUlbHOCHPaqPMypo1OnRmPRP2Ftptq238omFQbw8YqVO3QKzAMqm6rt_wpGwaFQqm0DDN-R9Q-zSf2KNTNEA" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="164" data-original-width="1056" height="100" src="https://blogger.googleusercontent.com/img/a/AVvXsEhd4G9ka2L9V99S8SP47iH7qd3xZ4R7m1b3QU4wJwRW4Iut6zRmxkyiWykEIs61gGyDxMmdbhQiDPHe8eAWmvAXnksk7dOnXCNKtPWY2UhUlbHOCHPaqPMypo1OnRmPRP2Ftptq238omFQbw8YqVO3QKzAMqm6rt_wpGwaFQqm0DDN-R9Q-zSf2KNTNEA=w640-h100" width="640" /></a></div><i>Overall Results obtained from using </i><b style="font-style: italic;"><a href="https://www.tipranks.com/tools/dividend-calculator" target="_blank">Tipranks</a> </b></div><div style="text-align: center;"><b style="font-style: italic;"><br /></b></div><div style="text-align: center;"><b><i>Note: Share Price/Quantity is irrelevant since we are dealing with percentages only. If I stuck to using actual prices, it would be hard to match the starting capital for both stocks.<br /></i></b><br /><div style="text-align: left;"><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Overall, it's clear to see that DBS Bank is the winner, with and without DRIP. That being said, I would reckon that it would be wise for retirees to move their funds into high-yielding stocks should they need the high yield immediately to live a comfortable life. But it seems too simple, doesn't it? If that's the case, why don't people just invest in dividend-growth stocks?</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Great question, hypothetical reader. I don't claim to know all the answers, but I think I can give a few guesses as to why. </strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Firstly, the stock market isn't so simple. You can't just invest in a counter and know exactly what its CAGR will be in the future. In the example above, we are simply extrapolating past results to derive an expected figure, but it </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">isn't</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> set in stone. You </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">could</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> invest in a dividend growth company, but it doesn't mean that it'll perform better than a high dividend-yielding stock. In fact, if there's a substantial change in management composition or strategy, they might be flushing capital down the drain. Capital that </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">should</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> have been redistributed back to shareholders. On the contrary, high-yielding stocks give a lot of control to shareholders, allowing them to utilise capital as they see fit. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Another possible reason could be that just because a stock is high yielding, doesn't mean it isn't a dividend growth stock. What do I mean? Well, Warren Buffet has frequently been quoted as saying this:</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">"</span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Price is what you pay, and value is what you get."</em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">I wholeheartedly concur. Could the high yield of a stock simply be the market mispricing the counter? Well, you might come to that conclusion if you do your due diligence. </span><a class="editor-rtfLink" href="https://www.blogger.com/blog/post/edit/8854083309825062752/715588934876315351#" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #4a6ee0; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">Fu Yu Corporation</strong></a><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">, despite yielding an insane 7%, has historically risen dividends, albeit not that consistently. Overall, as long as a stock seems undervalued to you, I think it's rather irrelevant whether the ticker is "high yielding" or "dividend growth". Capital gains can be realised in any situation too. Mis-priced, high-yielding stocks could simply experience a price rebound in the short term, providing an opportunity to realise capital appreciation.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Lastly, quintessential dividend growth companies are typically large corporations that have already penetrated most of their respective markets. Imagine if everyone in the world already had an Amazon subscription, I'd take a gander and say that it'll be hard to continue growing. People want substantial rewards and are willing to take on substantial risks to achieve them.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">So, here are some of my closing thoughts regarding my current investment strategy.</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">I think I've conflated risk with reward potential. I used to think that I should focus on high-yielding stocks despite the supposedly high risk since I thought I'd be rewarded for my bravery. Moving forward, I think I'll still dabble in high-yield stocks, but I certainly will pay more attention to the so-called "boring" blue chip companies of Singapore.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Author's Note: </strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">In terms of the calculations, I initially wanted to see if there would be a difference if I reinvested the yield spread between the two tickers while keeping track of the dividends between the two. For example, let's say I have stocks A and B yielding 4% and 9% respectively. Assuming stock A is a dividend growth stock, I would reinvest the yield spread between the two (5%) for stock B and see whether the dividends paid out by stock B would supersede stock A's. I haven't found any software/website to try this idea with, but I </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">may</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> make a follow-up post and calculate such figures manually. No promises though. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><b style="color: #222222; text-align: justify;"><br class="Apple-interchange-newline" />Think this article is something you'd want more of? Subscribe <a href="https://follow.it/passive-loss?leanpub" target="_blank">here</a> using your email to get notified about my latest blog articles, I'd truly be grateful!</b></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><b style="color: #222222; text-align: justify;"><br /></b></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Disclaimer: Please take everything published within this blog with a pinch of salt. Nothing I say here should be misconstrued as any form of financial advice whatsoever. In fact, I am probably the absolute last person you should approach for any sort of advice. All self-computed figures are calculated to the best of my ability, but I cannot guarantee they are 100% accurate, and I am not liable for any investment decisions made based on my content. </em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Thank you for reading my blog, and I hope you have learnt something, no matter how seemingly minuscule. I would greatly appreciate it if you took the time to check in regularly as such posts take a decent chunk of time to dish out, ciao!</em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"></p></div></div></div>Passive Loss SGhttp://www.blogger.com/profile/15231705917017776583noreply@blogger.com0tag:blogger.com,1999:blog-8854083309825062752.post-22564013470864739542023-03-03T18:07:00.009-08:002023-03-12T20:03:40.362-07:00Should You Invest in Haw Par Corporation?<p style="text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">If you didn't know, I've always been a big fan of Urban Exploration (Urbex) in Singapore, and by extension, have gained an appreciation for the history behind Singapore's iconic and forgotten sites. I don't think it'll be too much of a stretch to say that the great majority of Singaporeans have heard of the renowned </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">Haw Par Villa</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">, a theme park revolving around the central theme of Chinese mythology, illustrating various scenes from punishment in hell to certain aspects of Confucianism. Not to mention, it's an all-time favourite haunt (pun absolutely intended) for paranormal investigators, hoping to capture evidence of the notorious legend involving the park acting as the portal to hell. </span></p><p style="text-align: justify;"><br /></p><p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEgyd6aBtkav-xszkvIoGRf1526EMHeLU44LEmDBm37UEpcFfo_GFB3VDLHzFxUDlyIs0eCqs2TQrkOQgbQkRj1k5Y0JuCMbvOHGAm7cBsj2FMtQKHm026u-RFhgmA5aQ2OJxwX5vcEPAk1vC4guDTPNye3rbWsG4v0eXVRD7dVSWahDmOolZ2xCUPvIYA" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="1200" data-original-width="1200" height="640" src="https://blogger.googleusercontent.com/img/a/AVvXsEgyd6aBtkav-xszkvIoGRf1526EMHeLU44LEmDBm37UEpcFfo_GFB3VDLHzFxUDlyIs0eCqs2TQrkOQgbQkRj1k5Y0JuCMbvOHGAm7cBsj2FMtQKHm026u-RFhgmA5aQ2OJxwX5vcEPAk1vC4guDTPNye3rbWsG4v0eXVRD7dVSWahDmOolZ2xCUPvIYA=w640-h640" width="640" /></a></div><div class="separator" style="clear: both; text-align: center;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></div><div class="separator" style="clear: both; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">Have you ever actually wondered how is it funded though? I certainly do not see it being paraded around by the Singapore Tourism Board (STB), and it seems like too much of a niche to have been considered economically viable in the first place since entry to the park is free... Well, to be fair, it </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">is </em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">funded by STB, but it was actually started by the Aw brothers, creators of Tiger Balm. </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">Yes, that wonderful cream found virtually in every Singapore household used to relieve muscle and joint pain. </em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">On that note, I realised back in 2019 that the company behind Tiger Balm, Haw Par Corporation, was to my surprise, a publicly listed company. It's been on my watchlist ever since. </span></div><div class="separator" style="clear: both; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></div><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Today, I thought it would be rather enlightening to conduct some fundamental analysis regarding the two-billion-dollar market-cap conglomerate giant, diving deep into its core business model. </strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">So... what does Haw Par Corporation actually do?</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">"Haw Par Corporation Limited, a Singapore-grown multinational Group, is listed on the Singapore Exchange since 1969. Over the decades, the Group has been disciplined in asset rationalisation, organically growing its core businesses, and making selected acquisitions."</em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">According to the </span><a class="editor-rtfLink" href="https://www.blogger.com/blog/post/edit/8854083309825062752/2256401347086473954#" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #4a6ee0; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">company's website,</span></a><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> they conduct business in Leisure, Healthcare, Property, and Investments. </span></p><p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgQQjzIQzOhA0z1ajfW9mRKJ0HZ6HFam1dR165maSkJrOBe0zCPku6XrFUG33K5GM0ULdMk4wX8yVKhpRW-2ZE9_mnj5Do1l2l0wUF2p0IZfF-TyrLdpXHiKN_YppdfNm7oTWyboOiBZRi20Z9f08jwD7OcdgC0QQvZINsj16vuU3kceh6deI1EYhmOFQ/s1648/Screenshot%202023-02-27%20at%205.55.31%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1004" data-original-width="1648" height="390" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgQQjzIQzOhA0z1ajfW9mRKJ0HZ6HFam1dR165maSkJrOBe0zCPku6XrFUG33K5GM0ULdMk4wX8yVKhpRW-2ZE9_mnj5Do1l2l0wUF2p0IZfF-TyrLdpXHiKN_YppdfNm7oTWyboOiBZRi20Z9f08jwD7OcdgC0QQvZINsj16vuU3kceh6deI1EYhmOFQ/w640-h390/Screenshot%202023-02-27%20at%205.55.31%20PM.png" width="640" /></a></div><div style="text-align: center;"><i>*Before Tax, Unallocated Expenses and Profit Sharing</i></div><div style="text-align: justify;"><i><br /></i></div><div style="text-align: justify;"><i><br /></i></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh1RwlhV6iR2YQlFpB3XT3sisH6mHERMc2BibPCr3Zx8GxZrSzF9Z1ViIIlvfYYKCTmxERYPU19_Dj3hJnzfq4jLRK7vGqyqgDSyeemWO_g3gEjUpYbLSfFMIEQLQZdvmAnA4XnI6tPJ4rq6yhopoU19OY_-82gn5ET8Tt_5iTnJ0wAHmoC4I9dWrZ5dA/s1632/Screenshot%202023-02-27%20at%205.59.14%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1016" data-original-width="1632" height="398" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh1RwlhV6iR2YQlFpB3XT3sisH6mHERMc2BibPCr3Zx8GxZrSzF9Z1ViIIlvfYYKCTmxERYPU19_Dj3hJnzfq4jLRK7vGqyqgDSyeemWO_g3gEjUpYbLSfFMIEQLQZdvmAnA4XnI6tPJ4rq6yhopoU19OY_-82gn5ET8Tt_5iTnJ0wAHmoC4I9dWrZ5dA/w640-h398/Screenshot%202023-02-27%20at%205.59.14%20PM.png" width="640" /></a></div><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: justify;"><br /></div><i><div style="text-align: center;"><i>*Tax Income Liabilities and Expenditures do not have a material effect.</i></div></i><div style="text-align: justify;"><br /></div><div style="text-align: left;"><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">My first thought when compiling all this data from their latest FY2022 report is just wow. I did </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">not</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> know that they have so much funds tied up in investing. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">In light of this information, I think it would be wise for me to start analysing their "core" business model and investments.</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">"Our substantial investments, consisting mainly of strategic holdings in United Overseas Bank Limited, UOL Group Limited, and United Industrial Corporation Limited, have been a stable source of funding – through recurring dividend income – and financial strength – at marked-to-market valuations – over the years."</em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">From the above excerpt from the company's website, it seems like the majority of the company's valuations come from the three aforementioned listed companies. So let's dig a bit deeper. </span></p></div><div style="text-align: left;"><span style="background-color: white; font-family: inherit; text-align: justify;"><br /></span></div><div style="text-align: left;"><span style="background-color: white; font-family: inherit; text-align: justify;"><br /></span></div><div style="text-align: left;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiYW6esxjR0fIocLb0GePDX-rJpjUETe_Wk8dQsx5P9ZNyaCsvqJH1KZiSF8TnGmNn32yqFf5ofJg1maDiAz0C5iapXWKfZj7U_0oTK3T17o7XqU9BOdDwNLVGIGiSkpEsWec5DTHcgDyH7ByFh_42CsqO6_by5vQVBANGc28ZxsGTEPtlahS3QFaEA9A/s1128/Screenshot%202023-02-27%20at%207.54.09%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="756" data-original-width="1128" height="428" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiYW6esxjR0fIocLb0GePDX-rJpjUETe_Wk8dQsx5P9ZNyaCsvqJH1KZiSF8TnGmNn32yqFf5ofJg1maDiAz0C5iapXWKfZj7U_0oTK3T17o7XqU9BOdDwNLVGIGiSkpEsWec5DTHcgDyH7ByFh_42CsqO6_by5vQVBANGc28ZxsGTEPtlahS3QFaEA9A/w640-h428/Screenshot%202023-02-27%20at%207.54.09%20PM.png" width="640" /></a></div><div style="text-align: justify;"><br /></div><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Going by the above excerpt from their FY2022 financial statement, it seems like the bulk of the company's holdings comes from its investment in UOB, followed by UOL Group. I can only assume that Singapore Land Group (SLG) is simply classified as "others". Since SLG does not seem to have a material impact on the company's financials, I will solely discuss Haw Par's investment in UOB and UOL.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">My initial impression upon realising that so much of Haw Par's assets consist of investments can be summed up in one word: "Why?" I simply... don't get it. If you believe that you have a great business, then </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">why</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> wouldn't you reinvest your profits back into it? That is of course, you </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">don't </em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">believe that, which is what I'm inclined to believe in. Call me negative Nancy, but I don't see any benefit in adding yet another layer of management between me and my dividends. Not only do we need to count on UOB's and UOL's management to declare a decent dividend, but we now have to also count on the Haw Par management to distribute that income to us! I don't exactly like relinquishing control over cash, but I acknowledge when it's warranted, which I feel isn't the case here, with Haw Par purchasing </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">publicly</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> listed companies, which any Tom, Dick, or Harry could do. To provide some context, the group has a total of $334 Million in liquid cash equivalents, as opposed to $101 Million in liabilities, more than enough to cover any loans. Furthermore, if the company's asset allocation is anything to go by, I would much rather have a greater degree of control to use my cash however I wish, thank you very much. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">I would also like to point out that since Haw Par’s assets (and income) are inexplicably linked to its investments, then it would be wise to do a brief analysis of the corresponding companies as well.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">For UOB, although I think it's a solid investment given that you can't go wrong with the Singapore banks, I foresee a potential loss in valuation from Haw Par's investment in the short term. Currently, banks are poised to (and have been) doing well due to higher net interest margins arising from higher interest rates. Of course, we've all seen the rather hot CPI data recently, with inflation yet again running rampant. In my opinion, Jerome Powell is going to go </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">ham</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> on future interest rate hikes. He reveres Paul Volcker, and I think we'll see him try to overcompensate for his mistakes by overdoing the rate hikes, leading to an imminent economic recession. Of course, I could be wrong, but exceptionally high-interest rates are definitely not good for banks. We can see that loan volume has dramatically decreased, which may be explained by more people holding off on making large purchases, coupled with higher amounts of early repayments. Not only that, but to exacerbate things further, we can expect more loan defaults to occur as a recession plays out. Nevertheless, although I see a probable significant downside for UOB and the banks in general, I do believe the banks are a good long-term hold.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">I must profess that I'm not all that familiar with UOL though. I think this is the first time I've ever even heard about it, so I'll do my best to understand its business. From what I can gather, UOL (and its subsidiary Singapore Land Group) mainly operate in the property industry. The three main segments are Property Development, Property Investments, and Hospitality. </span></p></div><div style="text-align: justify;"><span style="background-color: white;"><br /></span></div><div style="text-align: justify;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjfjXPTrUgs2h9s1nBdUwUwLm6Sh72QFjRiVLwIvv9LhYBQOXoFVBeox3bT0caAh_TKZWrPreZc6UeecH9ub_HYaiZpW_HFZw7nlfb-2v3gxaqS6ZCSloTB6AofiVjWI5J8y1NszMBS_N0yq8ra8XVFei9YFdhZ10zl7i9pUoKEekETOIP8tfpyrdfk4A/s2244/Screenshot%202023-03-03%20at%209.02.32%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1268" data-original-width="2244" height="362" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjfjXPTrUgs2h9s1nBdUwUwLm6Sh72QFjRiVLwIvv9LhYBQOXoFVBeox3bT0caAh_TKZWrPreZc6UeecH9ub_HYaiZpW_HFZw7nlfb-2v3gxaqS6ZCSloTB6AofiVjWI5J8y1NszMBS_N0yq8ra8XVFei9YFdhZ10zl7i9pUoKEekETOIP8tfpyrdfk4A/w640-h362/Screenshot%202023-03-03%20at%209.02.32%20PM.png" width="640" /></a></div><div style="text-align: center;">Source: <a href="https://www.uol.com.sg/about-uol/uol-core-businesses/" target="_blank">UOL Website</a> </div><span style="background-color: white;"><br /></span></div><div style="text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">Like I said in my recent </span><a class="editor-rtfLink" href="https://www.blogger.com/blog/post/edit/8854083309825062752/2256401347086473954#" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #4a6ee0; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Keppel Corp update</span></a><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">, I </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">really</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> like recurring income. Hence, you could naturally deduce that on the flip side, I </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">hate</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> lumpy profits. That is exactly what property development is. Don't get me wrong, I do believe in property as an asset class. But I think there are just a bit too many variables when it comes to property development for it to be sustainable - Location, design, marketing, etc. Not to mention, with most of UOL's portfolio being comprised of Singapore properties, I foresee some potential headwinds due to recent </span><a class="editor-rtfLink" href="https://www.blogger.com/blog/post/edit/8854083309825062752/2256401347086473954#" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #4a6ee0; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">property cooling measures</span></a><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> undertaken by the government. I would say property is a form of art, and you can't properly evaluate art. It truly is very hit or miss. </span></div><div style="text-align: justify;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiCOJhHesYNGCallx5-eTVE3BzUTFUMwIYD4_Oi-e3h4KhhmL8yIC2VlNVVjEm1beeu4uWnKTnyt8I1s84uRxfugDdI2Lc_ksIk3gAV4s6f_Pe0JcejGsEEp3agf0v5xkxnoQvy0LjjsDx-uFiKjfEdnV3c_VytzK9Fg0tn6fm-qoByQjcG_yyzKmLFzw/s2334/Screenshot%202023-03-03%20at%2010.06.11%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1060" data-original-width="2334" height="290" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiCOJhHesYNGCallx5-eTVE3BzUTFUMwIYD4_Oi-e3h4KhhmL8yIC2VlNVVjEm1beeu4uWnKTnyt8I1s84uRxfugDdI2Lc_ksIk3gAV4s6f_Pe0JcejGsEEp3agf0v5xkxnoQvy0LjjsDx-uFiKjfEdnV3c_VytzK9Fg0tn6fm-qoByQjcG_yyzKmLFzw/w640-h290/Screenshot%202023-03-03%20at%2010.06.11%20PM.png" width="640" /></a></div><div class="separator" style="clear: both; text-align: center;"><i>OCR has recently experienced a drop in prices, could this be a sign of what's to come?</i></div><div class="separator" style="clear: both; text-align: justify;"><br /></div><br /><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEibPNS_ssxw9tSxHzr__GJJ3-UKj0GXAS1CLSUJFuWdNg81abu0wFQRDbYYTNs0j3G05tfHdQQX5LmcMHI_WM22jiLIx7H5b67uf3lVAjBoySn8DXtzXyy7MmfVf2w_4T2kOXRI-7GF0tsjI0cMBxBdWcFzuCvQ9rPEoFvLdMQvxa1FSoWuk-3kYL-C-g/s1478/Screenshot%202023-03-03%20at%2010.04.30%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="590" data-original-width="1478" height="256" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEibPNS_ssxw9tSxHzr__GJJ3-UKj0GXAS1CLSUJFuWdNg81abu0wFQRDbYYTNs0j3G05tfHdQQX5LmcMHI_WM22jiLIx7H5b67uf3lVAjBoySn8DXtzXyy7MmfVf2w_4T2kOXRI-7GF0tsjI0cMBxBdWcFzuCvQ9rPEoFvLdMQvxa1FSoWuk-3kYL-C-g/w640-h256/Screenshot%202023-03-03%20at%2010.04.30%20PM.png" width="640" /></a></div><i><div style="text-align: center;"><i>Both of UOL's newest property developments are located in the CCR and RCR, hence, there is no sign of impending price decrease. UOL could continue to benefit from the property uptrend, especially since the floodgates have opened for affluent foreign investors.</i></div></i><div class="separator" style="clear: both; text-align: justify;"><br /></div></div><div style="text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">Moving on, office properties are fine in my opinion. Many people are concerned about office properties being negatively impacted by a culture change brought about by the Work From Home model, but I think Singapore has been relatively unaffected. If you're a "</span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">peasant"</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> like me, taking public transport will reveal the sheer absurdity regarding how many people are commuting to work every day. Lastly, I don't really like the hospitality segment. Since it's consumer discretionary, there will surely be headwinds faced by UOL when a likely economic recession hits us. Overall, as a company, I don't view UOL all too favourably. I rather buy property companies that specialise in one specific segment of the market so that I'm able to have a greater degree of control. </span></div><div style="text-align: justify;"><span style="background-color: white;"><br /></span></div><div style="text-align: justify;"><div class="separator" style="clear: both; text-align: justify;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhlyeJJ9Y6cvJS87oLIfbbS4UxqnN9tvfY2Z2zKIX2BpC2WLPJdj2ISxBfQWtHv8YotEa0bJoJm3I0eeS4SwWXx7ii9Wqso6XVcEwr6Emb5xVonpEI43TYVR87RYfK08LBZuPoun4w14RRyFfd2_NHkqZ9f0RH9pKo_E2nPe_hR3ZCB6bymi4t6oh66zA/s1770/Screenshot%202023-03-03%20at%209.42.04%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="668" data-original-width="1770" height="242" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhlyeJJ9Y6cvJS87oLIfbbS4UxqnN9tvfY2Z2zKIX2BpC2WLPJdj2ISxBfQWtHv8YotEa0bJoJm3I0eeS4SwWXx7ii9Wqso6XVcEwr6Emb5xVonpEI43TYVR87RYfK08LBZuPoun4w14RRyFfd2_NHkqZ9f0RH9pKo_E2nPe_hR3ZCB6bymi4t6oh66zA/w640-h242/Screenshot%202023-03-03%20at%209.42.04%20PM.png" width="640" /></a></div><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Strangely, Haw Par (H02) has strongly underperformed against its underlying assets, decreasing by 14.43% in share price in the last two years. Could the market potentially have underpriced Haw Par? Let's continue to find out. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Note: </strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">I'd just like to point out that UOB owns 7.88% of Haw Par, whereas Haw Par owns approximately 4.61% of UOB. When two companies have a stake in one another, it is called Reciprocal Cross Holding. To be honest, I don't understand the implications of this. The only thing I can think of is that calculating book value would possibly be affected by double counting. Nevertheless, I found a </span><a class="editor-rtfLink" href="https://www.blogger.com/blog/post/edit/8854083309825062752/2256401347086473954#" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #4a6ee0; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">2021 paper</span></a><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> that contained claims about how such a phenomenon would result in increased profits, prevent corporate takeovers, and reduce transaction risks. I can't really validate or rationalise such claims, but I </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">will</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> update this article if I ever found out. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Review of Haw Par's Leisure & Property Segment:</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Currently, Haw Par only operates one recreational facility, Underwater World Pattaya which was launched in 2003. Since leisure is considered to be rather negligible in terms of earnings contributions, it is very hard to accurately gauge the performance of the asset. However, we could perhaps use figures of the yearly </span><a class="editor-rtfLink" href="https://www.blogger.com/blog/post/edit/8854083309825062752/2256401347086473954#" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #4a6ee0; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">number of tourists</span></a><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> to Thailand as a proxy for the asset's performance. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"></p></div><div style="text-align: left;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEidB_BcQbS-rLDu9oR5-utdfQ6osVLium11yAIhPjzf26UGn_zVmTbncSHk7kv_X0PQv9NygU8LxVT2CHPtuH0AReX1BmO_hLIX9XO4cLYqQRcXZL6IrEsn4IbWkUGHLpZb8mZismypqCU3PKKY3TY3v3Kcqb-j4hhlnpyzCfgd-Q4xoEAwxbap5ybtTQ/s1384/Screenshot%202023-03-03%20at%2010.16.28%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1326" data-original-width="1384" height="614" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEidB_BcQbS-rLDu9oR5-utdfQ6osVLium11yAIhPjzf26UGn_zVmTbncSHk7kv_X0PQv9NygU8LxVT2CHPtuH0AReX1BmO_hLIX9XO4cLYqQRcXZL6IrEsn4IbWkUGHLpZb8mZismypqCU3PKKY3TY3v3Kcqb-j4hhlnpyzCfgd-Q4xoEAwxbap5ybtTQ/w640-h614/Screenshot%202023-03-03%20at%2010.16.28%20PM.png" width="640" /></a></div><i><div style="text-align: center;"><i>Not very pretty at all. </i></div></i><span style="background-color: white; font-family: inherit; text-align: justify;"><br /></span></div><div style="text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">It seems like Thailand has yet to recover to its pre-pandemic figures in terms of Tourist arrivals, which doesn't bode well for the country since Thailand's pandemic measures have more or less eased off. In fact, I've recently visited Phuket with no trouble whatsoever. When taking this into account, I think I am correct to say that perhaps there has been a fundamental shift in Thailand's desirability as a tourist destination. I can only think of one reason to explain this: Due to most people not being able to travel during the pandemic, many have not travelled for at least two years. That means that people </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">should </em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">have "saved" two years' worth of travelling expenses. Thailand isn't exactly known to be a particularly luxurious tourist destination, and hence, trips to Thailand may have been put on the back burner in favour of more expensive locations such as Japan. If this is true, we could see tourism numbers rise to pre-pandemic highs as time passes, which may bode well for Haw Par's leisure segment. </span></div><div style="text-align: left;"><span style="background-color: white; font-family: inherit; text-align: justify;"><br /></span></div><div style="text-align: left;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgOCu8TQahvyR_pTfT8BLAEXjmSAG69tbcM6bkaryP4tBVrhEZub8upkW196sZZxnn1_5NTjHiexiv0xTk3gZAP8mVQtYA1yZdyO4uL_HKqbCEy23sjo8K4zbS7Bsh8MIbIwTYIz6hJlr7WzxIxHJka0m_ay5zNHzOugKEQhQ5o30CemBynwDB0Ru6iRA/s1326/Screenshot%202023-03-03%20at%2010.23.46%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="766" data-original-width="1326" height="370" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgOCu8TQahvyR_pTfT8BLAEXjmSAG69tbcM6bkaryP4tBVrhEZub8upkW196sZZxnn1_5NTjHiexiv0xTk3gZAP8mVQtYA1yZdyO4uL_HKqbCEy23sjo8K4zbS7Bsh8MIbIwTYIz6hJlr7WzxIxHJka0m_ay5zNHzOugKEQhQ5o30CemBynwDB0Ru6iRA/w640-h370/Screenshot%202023-03-03%20at%2010.23.46%20PM.png" width="640" /></a></div><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhgbwYXjdRHgeXTMQ6M1H2InB3cN6ApebkdgLdVwiO4habhIB89M8ls0A060JufeGt1ug-GD6zxaLj-QHMcFCmGRyKrP2E-fjbqsgMnccwjCJZWIj1SZ2cF_nrgA4cydgINgIwupQs8hCxS7nrxOjWXJe7_L5-F658hDhnwPuGHIfLV4yj6njGNfq8UKg/s1306/Screenshot%202023-03-03%20at%2010.24.05%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="728" data-original-width="1306" height="356" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhgbwYXjdRHgeXTMQ6M1H2InB3cN6ApebkdgLdVwiO4habhIB89M8ls0A060JufeGt1ug-GD6zxaLj-QHMcFCmGRyKrP2E-fjbqsgMnccwjCJZWIj1SZ2cF_nrgA4cydgINgIwupQs8hCxS7nrxOjWXJe7_L5-F658hDhnwPuGHIfLV4yj6njGNfq8UKg/w640-h356/Screenshot%202023-03-03%20at%2010.24.05%20PM.png" width="640" /></a></div><span style="background-color: white; font-family: inherit; text-align: justify;"><br /></span></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhfIACO8aFSL9lL-5tSzwxmfppT054V-2uJOk10CBOmRMadgGZet9p0cek0Y2F7EOOnn5toonHwiS5TSfqv_wImPKuzAV7drPijcQfEviZ6PydAVom27gzclXwCWtE4gdRdKeQw4iw3e0uIsgcQZ55zozAoPV7RSmNNLNLfZkp6GFlkYi82viwdwHp1Zg/s1304/Screenshot%202023-03-03%20at%2010.25.46%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="602" data-original-width="1304" height="296" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhfIACO8aFSL9lL-5tSzwxmfppT054V-2uJOk10CBOmRMadgGZet9p0cek0Y2F7EOOnn5toonHwiS5TSfqv_wImPKuzAV7drPijcQfEviZ6PydAVom27gzclXwCWtE4gdRdKeQw4iw3e0uIsgcQZ55zozAoPV7RSmNNLNLfZkp6GFlkYi82viwdwHp1Zg/w640-h296/Screenshot%202023-03-03%20at%2010.25.46%20PM.png" width="640" /></a></div><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgumLPANCsRE-_vfR_ndeiTSwWEiZ3mGxIWd-sCVo_qPwRYCAlxrooCimKRxWB3ezQ5J6cVf20gN1rnaz3qZB7bJKVNIl8egFMWEivxRCikcdAnz6WxaArByjla3lsuD2wdeggyqc1tryZ0LiSL68B_R8MlBt5reLn0echj75dYqcbGzrGEf-s8DL4xCg/s1304/Screenshot%202023-03-03%20at%2010.25.17%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="776" data-original-width="1304" height="380" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgumLPANCsRE-_vfR_ndeiTSwWEiZ3mGxIWd-sCVo_qPwRYCAlxrooCimKRxWB3ezQ5J6cVf20gN1rnaz3qZB7bJKVNIl8egFMWEivxRCikcdAnz6WxaArByjla3lsuD2wdeggyqc1tryZ0LiSL68B_R8MlBt5reLn0echj75dYqcbGzrGEf-s8DL4xCg/w640-h380/Screenshot%202023-03-03%20at%2010.25.17%20PM.png" width="640" /></a></div><div style="text-align: center;"><i>Recent concerning google reviews of Underwater World Pattaya that indicate that the property's conditions have deteriorated. A quick estimate for the recent google review ratings would be an average of 3 stars. Not good.</i></div><div style="text-align: justify;"><i><br /></i></div><div style="text-align: left;"><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">As an avid Google reviewer myself, I </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">do</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> consider reviews before actually heading to the place. If the property has indeed been improperly maintained, it could spell disaster for Underwater World Pattaya's reputation as a tourist destination, leading to lower revenues but the same operating costs. Although the attraction will most likely stand to benefit from the border reopening of Thailand, profit will most likely be dampened by the negative reviews should they continue. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">In terms of property, Haw Par directly owns four buildings: Haw Par Centre, Haw Par Glass Tower, Haw Par Technocenter, and Menara Haw Par (Malaysia). All of them are considered office buildings. </span></p></div><div style="text-align: left;"><span style="background-color: white; font-family: inherit; text-align: justify;"><br /></span></div><div style="text-align: left;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgIUzr6zdO23Fs2vqzwzshG0vA0i9mIS4AzNmhoyLUOrLfz_upO_cu_XSqlEYY0TuKF_hQ8FAFmrjfiMufHc5LYb_e_807t6xE4lJdcO7rDzwK2fYZj8WH-VW63gcq9iH2c6IjqhWvFMYLX4txuaAF7lQ0WyHer6LmliXOrVjkfJEOVgaVSHVlZQPmniA/s1136/Screenshot%202023-03-03%20at%2010.34.17%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="384" data-original-width="1136" height="216" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgIUzr6zdO23Fs2vqzwzshG0vA0i9mIS4AzNmhoyLUOrLfz_upO_cu_XSqlEYY0TuKF_hQ8FAFmrjfiMufHc5LYb_e_807t6xE4lJdcO7rDzwK2fYZj8WH-VW63gcq9iH2c6IjqhWvFMYLX4txuaAF7lQ0WyHer6LmliXOrVjkfJEOVgaVSHVlZQPmniA/w640-h216/Screenshot%202023-03-03%20at%2010.34.17%20PM.png" width="640" /></a></div><div style="text-align: justify;"><br /></div><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Revenue decreased by approximately 5.2% YoY from 2021 to 2022, which is definitely not negligible. I am not entirely sure whether it is due to negative rental reversions or a drop in portfolio occupancy. This puzzles me since as far as I am aware, Work From Home has not especially become popular with Singapore and Malaysia employers, and even if it did, it does not explain such a high drop from 2021 to 2022, since 2022 should have </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">more</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> spending by companies to reintroduce employees back to the physical workplace.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Overall, my outlook on Haw Par's Leisure and Property segment is a muted one. I am skeptical that the business will improve in the foreseeable future.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Review of Haw Par's Pharmaceutical Sector:</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">I think Haw Par's Pharmaceutical sector is the one the company is most famous for. Who </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">hasn't</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> heard of the ubiquitous tiger balm? </span></p></div><div style="text-align: left;"><span style="background-color: white; font-family: inherit; text-align: justify;"><br /></span></div><div style="text-align: left;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgSLiB3ulRssfh0qmuqHWSYthQHaR3XqjnPcezowjywGvbRPEYhPiWXDWVYaD5HYgudjhf2GzNCydRM6eqRw4FtdUYWRJXmFyaQo5n5g5v_RDJCZBqnLaVtk6FMR5pDxzWgMYy5FPN20CKGz5bARNpsi5mEqudxsXKKynqTsJOmm4h6hAHYjWRvOYwvOA/s1628/Screenshot%202023-03-03%20at%2010.48.26%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="788" data-original-width="1628" height="310" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgSLiB3ulRssfh0qmuqHWSYthQHaR3XqjnPcezowjywGvbRPEYhPiWXDWVYaD5HYgudjhf2GzNCydRM6eqRw4FtdUYWRJXmFyaQo5n5g5v_RDJCZBqnLaVtk6FMR5pDxzWgMYy5FPN20CKGz5bARNpsi5mEqudxsXKKynqTsJOmm4h6hAHYjWRvOYwvOA/w640-h310/Screenshot%202023-03-03%20at%2010.48.26%20PM.png" width="640" /></a></div><div style="text-align: justify;"><br /></div><span style="font-family: inherit;"><div style="text-align: center;"><i style="font-family: inherit;"><span style="background-color: white; text-align: justify;">"</span><span style="background-color: white; text-align: justify;">We are the owner of the iconic Tiger Balm Brand. With a unique herbal formulation that has over 100 years of proven success in 100 countries, Tiger Balm’s world renowned ointment is arguably one of the world’s leading and most versatile topical analgesic brand."</span></i></div></span></div><div style="text-align: left;"><span style="background-color: white; font-family: inherit; text-align: justify;"><br /></span></div><div style="text-align: left;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh4kcY0Pw6VdIu7tToYGgZ85aXEQAowPYHxK7MhiR9X_1sPip51On6C1qn9WmWIxwMLMOf4ZphFD5CfXez39FEbMadCYWt-hh2JVGtKCEgEJPaBWIjJlhMm-7E8JsI_LXhIiDSp90nRU1x4rTqPUg0DQlXe2K6qUt0nXW93UDk9FftJIzG47xK-wnGtYQ/s1088/Screenshot%202023-03-03%20at%2010.57.14%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="584" data-original-width="1088" height="344" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh4kcY0Pw6VdIu7tToYGgZ85aXEQAowPYHxK7MhiR9X_1sPip51On6C1qn9WmWIxwMLMOf4ZphFD5CfXez39FEbMadCYWt-hh2JVGtKCEgEJPaBWIjJlhMm-7E8JsI_LXhIiDSp90nRU1x4rTqPUg0DQlXe2K6qUt0nXW93UDk9FftJIzG47xK-wnGtYQ/w640-h344/Screenshot%202023-03-03%20at%2010.57.14%20PM.png" width="640" /></a></div><div style="text-align: justify;"><br /></div><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">According to FY2022 financial results, the Healthcare segment of Haw Par has reported improved earnings, benefitting from economics of scale due to increased sales volume, improving gross margin to a high 54.1%. With countries imposing fewer restrictions on gatherings and relaxing mask requirements such as Singapore, it is no question that a higher number of sporting events will take place. However, I do have some concerns. According to Singapore's </span><a class="editor-rtfLink" href="https://www.blogger.com/blog/post/edit/8854083309825062752/2256401347086473954#" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #4a6ee0; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Ministry of Health</span></a><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> (MOH), the proportion of Singapore residents engaging in leisure-time regular exercise declined from 35.2% in 2019 to 32.5% in 2021. Could this be attributed to the COVID pandemic lockdowns destroying exercising habits? I'm not sure. Could this apply to other countries as well? Again, I'm not too sure, but it is best to take note that humans as a whole could lead increasingly sedentary lifestyles, reducing the need for products such as the Tiger Balm brand. From Tiger Balm Website's Press Room, I estimate that the average new product release is around 6 years apart. Personally, I think that the brand is not conducting enough Research & Development to increase their high margin business, which I think is a shame. Nevertheless, I like the idea of investing in the pharmaceutical segment to further diversify one's portfolio, since such products are typically needed all the time, offering stable profits.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Okay, now that Haw Par's businesses are out of the way, let's take a look at the company's management!</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Currently, </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Mr. Wee Ee Lim </strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">is serving as the company's President and CEO. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">"He joined the Company in 1986 and was appointed to the Board in 1994 and to his current role in 2003. Mr. Wee has been closely involved in the management and growth of the Haw Par Group for more than 30 years. Mr. Wee is also a Director and Deputy Chairman of UOL Group Limited, and a Director of Singapore Land Group Limited, United Overseas Bank Limited, and Wee Foundation. He holds a Bachelor of Arts (Economics) degree from Clark University, USA."</em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">It seems like he has a say in all the companies Haw Par has a stake in. Could this be a possible conflict of interest? I'm not sure. Additionally, the company has so far not made many significant acquisitions under his reign, which indicates that he is rather conservative and prefers saving cash for a rainy day. Although prudence is a great quality to have as a leader, one should not be overly cautious and miss out on opportunities to grow the business further. The company's recent dividend payout ratio of 44.8% further proves my point that the company prefers to hoard cash. To be very honest, I think the management's reluctance to distribute cash or acquire businesses does not reflect too well on them, since it indicates that there are no further plans to reinvest into the business while also not rewarding shareholders substantially, although I do acknowledge it is a family business. To end off, there is not really anything noteworthy regarding the management as well.</span></p></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><b>How has Haw Par Corporation historical performance been like then?</b></div><div style="text-align: justify;"><b><br /></b></div><div style="text-align: justify;"><b><br /></b></div><div style="text-align: justify;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjVfjYzrtPwZeAIR7PVZpdOUEKrOSVAChTtnkpycqQapTR_pw8zRS0AiugB1clwtPo1jMTOd59APs-TFSGBcPrVvvAugDvwSelUPgPzJauFiW9zfQjgZDtfZd2sjfd2i9iQrFcey43edRF5TzlRoPr9Eft28Qr-tGg7NKO4FT8EObkD8ELhiieQ3UHRZg/s1098/Screenshot%202023-03-04%20at%2012.52.41%20AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="380" data-original-width="1098" height="222" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjVfjYzrtPwZeAIR7PVZpdOUEKrOSVAChTtnkpycqQapTR_pw8zRS0AiugB1clwtPo1jMTOd59APs-TFSGBcPrVvvAugDvwSelUPgPzJauFiW9zfQjgZDtfZd2sjfd2i9iQrFcey43edRF5TzlRoPr9Eft28Qr-tGg7NKO4FT8EObkD8ELhiieQ3UHRZg/w640-h222/Screenshot%202023-03-04%20at%2012.52.41%20AM.png" width="640" /></a></div></div><div style="text-align: center;"><i>* Payout Ratio exceptionally high due to special dividend declared</i></div><div style="text-align: center;"><i><br /></i></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">It seems like the company's operations had taken a massive hit during the COVID-19 pandemic, massively decreasing revenue in the pharmaceuticals segment. The company's relationship with UOB becomes even more clear when you see how the NAV of the company fluctuates. Gross margin, as expected, benefits from economies of scale when mass production of pharmaceutical products is higher. In conclusion, we can expect massive improvements in EPS as the pharmaceutical segment of Haw Par rebounds from border re-openings and restriction lifts. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Now, with the current macroeconomic climate of high-interest rates coupled with a possible economic recession, can we predict how Haw Par could fare?</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Due to Haw Par's strong balance sheet with cash on hand </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">greatly </em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">exceeding its current and non-current liabilities, it is safe to say that high-interest rates would not affect the company directly. However, it is important to note that UOL has $3.73 Billion in non-current bank loans, which may be affected by rising rates in the foreseeable future. It is unclear whether these loans are fixed, but given that fixed loans are typically specified in UOL's balance sheet, I think it is a safe assumption to assume that UOL will be materially impacted by rate hikes. Not to mention, should the property market continue to cool down, we could see UOL's performance drop in the near term which may lead to a sharp drop in UOL's price, affecting Haw Par's NAV and dividend income. </span></p></div><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi7ZgLRRaTqRS40sR1OAa0f1alHju1FkQqx9lP_KZHWMG-tg8Qjh1DM2G2wsTMZWuTsMw2a96wjTHy0AKDgMvG2cqkLpw1qUqugfS6hEfiq0759s5oYq2MqcVLf44YncpATubKedqCvu-QsGoINEyWB1Xef8R3yqO7x--gVHMroo94m50zBY-J82QMnyg/s1154/Screenshot%202023-03-04%20at%209.49.14%20AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="490" data-original-width="1154" height="272" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi7ZgLRRaTqRS40sR1OAa0f1alHju1FkQqx9lP_KZHWMG-tg8Qjh1DM2G2wsTMZWuTsMw2a96wjTHy0AKDgMvG2cqkLpw1qUqugfS6hEfiq0759s5oYq2MqcVLf44YncpATubKedqCvu-QsGoINEyWB1Xef8R3yqO7x--gVHMroo94m50zBY-J82QMnyg/w640-h272/Screenshot%202023-03-04%20at%209.49.14%20AM.png" width="640" /></a></div><div style="text-align: justify;"><br /></div><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">As for an economic recession, I am heartened to see that Haw Par's revenue was not significantly impacted during the 2007-2008 Global Financial Crisis. Skimming through Haw Par's financial reports during those times does not yield any specific comment regarding the recession. Other than Haw Par's leisure segment, all its other segments may be relatively cycle agnostic. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Overall, we can more or less predict that Haw Par's performance will remain relatively stable no matter the economic condition.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><div style="text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: left;">With all this coming to light, is Haw Par Corporation a good buy at its current price?</strong><b> </b></div><div style="text-align: justify;"><b><br /></b></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgxlNeiFlZbOU-7UyH_a-oS7c-l6FjAXxuYvTZSRBpLJgncBy8ChXIToCoJMrWuiVITsRtxvbBfTHf6xRD_Fj1E_Bqkwkup1nVbP6KQLEJt6jkbXuPpLpLXZ_Z29ehg9SoVDcd3i9qf7WGbsAQIrc-n5lpS-2lR6RRWMoIo1pjdmz2BLDZDkduP-9-RMg/s1144/Screenshot%202023-03-03%20at%2011.49.10%20PM.png" style="margin-left: 1em; margin-right: 1em; text-align: center;"><img border="0" data-original-height="542" data-original-width="1144" height="304" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgxlNeiFlZbOU-7UyH_a-oS7c-l6FjAXxuYvTZSRBpLJgncBy8ChXIToCoJMrWuiVITsRtxvbBfTHf6xRD_Fj1E_Bqkwkup1nVbP6KQLEJt6jkbXuPpLpLXZ_Z29ehg9SoVDcd3i9qf7WGbsAQIrc-n5lpS-2lR6RRWMoIo1pjdmz2BLDZDkduP-9-RMg/w640-h304/Screenshot%202023-03-03%20at%2011.49.10%20PM.png" width="640" /></a></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjyGhSjehx5f-bPrYVyqNPFDrY2jnBPnyP7WfGOm0AS1_KAUORRkfExvKSe8ZslCnVnIOGuNGeImmlrCdgnwh29YKFG0awIeuiU7bshTB5Dpt1iX8om5HIyNLjb3GWxiH57a-1XSMPi7Bx2NPyoaK7rFMTm0X3FArj8ceXgP7fGTPWx8vk-BBil13nIXA/s1130/Screenshot%202023-03-04%20at%201.02.20%20AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="492" data-original-width="1130" height="278" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjyGhSjehx5f-bPrYVyqNPFDrY2jnBPnyP7WfGOm0AS1_KAUORRkfExvKSe8ZslCnVnIOGuNGeImmlrCdgnwh29YKFG0awIeuiU7bshTB5Dpt1iX8om5HIyNLjb3GWxiH57a-1XSMPi7Bx2NPyoaK7rFMTm0X3FArj8ceXgP7fGTPWx8vk-BBil13nIXA/w640-h278/Screenshot%202023-03-04%20at%201.02.20%20AM.png" width="640" /></a></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi7XgwseL1dkJejGJff9PJ8hjXAHWwbOAxBDi3TabOdStDf6YU1lGR0PPxQInV2dNeqpAeqRYeN4BXfC6tNWwwAcbsxquai4vSrRovrIOjLlHNso_s1d9rjOS9k7e_W70kz7uQx3kyrjNeOBzAZFnBzE_T11tSh7wPXdgrtIByl3-dcnzInM-TrF38RJA/s1118/Screenshot%202023-03-04%20at%201.17.10%20AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="482" data-original-width="1118" height="276" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi7XgwseL1dkJejGJff9PJ8hjXAHWwbOAxBDi3TabOdStDf6YU1lGR0PPxQInV2dNeqpAeqRYeN4BXfC6tNWwwAcbsxquai4vSrRovrIOjLlHNso_s1d9rjOS9k7e_W70kz7uQx3kyrjNeOBzAZFnBzE_T11tSh7wPXdgrtIByl3-dcnzInM-TrF38RJA/w640-h276/Screenshot%202023-03-04%20at%201.17.10%20AM.png" width="640" /></a></div><div class="separator" style="clear: both; text-align: justify;"><br /></div><div style="text-align: justify;"><br /></div><div style="text-align: left;"><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">From some rough calculations, the historic PE valuation of Haw Par seems to be at around x18, with the historic P/B ratio being x0.77. At the current price of exactly $10, with a PE ratio of 15.029 and a P/B ratio of 0.628, Haw Par seems to be a decent buy. Not to mention, the potential increase in EPS with border restrictions being lifted further adds to the argument for buying Haw Par. Also, notice how Haw Par's market capitalisation is 2.21 billion, which is lower than its UOB stake valuation of $2.3 billion! This means that technically, you are getting both its investments in UOL and other segments for free! However, do note that the P/B ratio could rise if book value decreases due to potential headwinds for UOB in the short term. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">My Closing Thoughts:</strong></p></div><div style="text-align: justify;"><b><br /></b></div><div style="text-align: left;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEitiHiyW5gQwDpkOIoZAl45wA2gYmxuW3pgg_R70DThze2rn_kUaauRopRCc_oX0YUM_TmUGqMFe31Hq5SHy7DHGJnPmKAJ89mCBx2mcRyajlsoZho6zR9byce9FicrJ88v_T5hEk7gpi-XSNjQ0biXOEzzqt4__8BFygu1gyQ42RDd_p7nkAlweBwzdA/s1132/Screenshot%202023-03-04%20at%201.12.20%20AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="496" data-original-width="1132" height="280" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEitiHiyW5gQwDpkOIoZAl45wA2gYmxuW3pgg_R70DThze2rn_kUaauRopRCc_oX0YUM_TmUGqMFe31Hq5SHy7DHGJnPmKAJ89mCBx2mcRyajlsoZho6zR9byce9FicrJ88v_T5hEk7gpi-XSNjQ0biXOEzzqt4__8BFygu1gyQ42RDd_p7nkAlweBwzdA/w640-h280/Screenshot%202023-03-04%20at%201.12.20%20AM.png" width="640" /></a></div><div style="text-align: justify;"><span style="font-weight: 700;"><br /></span></div></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">Haw Par Corporation seems to be a decently attractive buy at its current P/B ratio of 0.628. However, it is a boring business, with little growth prospects coupled with low dividends. It seems that the management is unwilling to distribute cash to shareholders despite possessing hefty coffers. Nevertheless, if you are willing to add one more layer of management decisions to your investment, then you will be rewarded with discounted UOB shares and other businesses. I must confess that I </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">really</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> do want to like Haw Par, but after reviewing its business, it seems like it is more of an investment and property business instead of a pharmaceutical one. Personally, I think Haw Par is a "mid" buy for me and will be in the middle of the pack in terms of buying priority. Dividends have been increasing which may be attractive to dividend growth investors looking for a nice blue chip company to park their funds in. </span></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><b style="color: #222222;">Think this article is something you'd want more of? Subscribe <a href="https://follow.it/passive-loss?leanpub" target="_blank">here</a> using your email to get notified about my latest blog articles, I'd truly be grateful!</b></span></div><div style="text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></div><div style="text-align: left;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Disclaimer: Please take everything published within this blog with a pinch of salt. Nothing I say here should be misconstrued as any form of financial advice whatsoever. In fact, I am probably the absolute last person you should approach for any sort of advice. All self-computed figures are calculated to the best of my ability, but I cannot guarantee they are 100% accurate.</em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Thank you for reading my blog, and I hope you have learnt something, no matter how seemingly minuscule. I would greatly appreciate it if you subscribe as such posts take a decent chunk of time to dish out, ciao!</em></p></span></div><div style="text-align: justify;"><br /></div><div style="text-align: left;"><div class="separator" style="clear: both; text-align: justify;"><br /></div></div><p></p><div style="text-align: left;"></div><p style="text-align: justify;"><br /></p>Passive Loss SGhttp://www.blogger.com/profile/15231705917017776583noreply@blogger.com2tag:blogger.com,1999:blog-8854083309825062752.post-629110905829319962023-02-22T21:44:00.006-08:002023-03-13T00:20:09.789-07:00Throwing Diversification Out of the Window - Why I'm Going All In Into Keppel Corp! <p> Apologies if this post seems rushed, but that is mainly due to the fact that this is probably one of the most exciting ongoing stock developments right now in SGX! It is no secret that there has been a spectacular implosion of Keppel Corp's (SGX: BN4) share price from $7.34 to $5.49 in a singular day due to becoming Ex Entitlement! At Sembcorp Marine's current share price of 0.126, it has resulted in new shareholders not being entitled to $2.41 worth of Sembcorp Marine shares per Keppel Corp share. </p><p>Indeed, the price drop does seem scary when I woke up to a loss of almost $600 SGD. In response, I have sold all my other holdings and have gone all in on Keppel Corp! I will be illustrating why I have done so in this brief article today. </p><p>Firstly, with the divestment of the O&M division, there is no denying that there will be a material negative impact on earnings moving forward. </p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi2D-fzEu-Qb1PsaTt28KqfqkkNiXbTCRctrcFw-ACs4DBcuYVpqLUdaUfTOO_r687k-nrMINh7LkRxuX3x0SSvbgsfBreFs8XR6Ii2OTiS1hqC2UGKGSpB1ss1A2CUjIklZAFFQfs5snxJPDlIgL0E1_XJaCg_TvJ0ZNj8XudoPE_-aWrDr_tY1X4uxA/s1126/Screenshot%202023-02-23%20at%201.19.02%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="504" data-original-width="1126" height="286" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi2D-fzEu-Qb1PsaTt28KqfqkkNiXbTCRctrcFw-ACs4DBcuYVpqLUdaUfTOO_r687k-nrMINh7LkRxuX3x0SSvbgsfBreFs8XR6Ii2OTiS1hqC2UGKGSpB1ss1A2CUjIklZAFFQfs5snxJPDlIgL0E1_XJaCg_TvJ0ZNj8XudoPE_-aWrDr_tY1X4uxA/w640-h286/Screenshot%202023-02-23%20at%201.19.02%20PM.png" width="640" /></a></div><p>We can see that after the divestment of Keppel O&M, Pro Forma Diluted EPS will be around 46.7 cents per share. With China lifting COVID restrictions, there are many tailwinds for Keppel's other divisions such as Urban Development, resulting in higher future EPS. In recent times, Keppel has traded at a PE ratio of approximately 15. Even if we discount the fair value PE ratio to 14, that would result in a fair value of $6.53. At a dividend of $0.33 per year, Keppel is trading at a 6% dividend yield. Does that make sense for a blue-chip company like Keppel?</p><p>Additionally, after divesting Keppel Offshore & Marine, Pro Forma Net Tangible Assets (NTA) will be $5.23. Keppel has always traded at around an x1 PB ratio, but with its transition to an Asset Light business model, we could see it trade at a premium in terms of book value in the near future. Keep in mind that NTA does not equal Net Asset Value and that NAV is higher than NTA. However, I believe that the NTA of $5.23 will serve as a price floor in the short and long term. Hence, my target price for Keppel Corp will be approximately $6.70 in the short term, and if that does happen, I will not hesitate to slash my holdings by half so as to reinvest in my previous holdings.</p><p><b>Overall, I believe that Keppel is currently heavily mis-priced. The corollary of this is that I will be going all in! </b></p><p><b style="color: #222222; text-align: justify;">Think this article is something you'd want more of? Subscribe <a href="https://follow.it/passive-loss?leanpub" target="_blank">here</a> using your email to get notified about my latest blog articles, I'd truly be grateful!</b></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Disclaimer: Please take everything published within this blog with a pinch of salt. Nothing I say here should be misconstrued as any form of financial advice whatsoever. In fact, I am probably the absolute last person you should approach for any sort of advice. All self-computed figures are calculated to the best of my ability, but I cannot guarantee they are 100% accurate.</em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Thank you for reading my blog, and I hope you have learnt something, no matter how seemingly minuscule. I would greatly appreciate it if you subscribe as such posts take a decent chunk of time to dish out, ciao!</em></p><div><br /></div><p><br /></p>Passive Loss SGhttp://www.blogger.com/profile/15231705917017776583noreply@blogger.com0tag:blogger.com,1999:blog-8854083309825062752.post-3717033998685098242023-02-22T06:27:00.007-08:002023-03-10T02:08:21.326-08:00Is Clean Energy REALLY the Future? <p><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">As a young investor, it is not out of the norm for me to remain hopeful of the future. After all, for the sake of my psyche, it is imperative to remain optimistic for tomorrow. By working and investing in yourself, there is an assumption that "tomorrow" is a given and that your life will improve. If not, what's the point of putting in the effort? </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">Naturally, in a world afflicted by the disease that is climate change and global warming, many have put their hopes into clean/renewable energy</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">. Indeed, it has become all the rage to invest in clean energy companies, evident from the exponential share price increases in the sector over the last few years. In fact, I fondly recall a period when ten year old me invested in SunPower using the Investopedia Stock Simulator. </span></p><p><br /></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi2_YnkZdkTUCAM3xKAJbi6ZRLMgjW87MLEIeAklBCGcklHev2ZnG6bLyqA3QVXy1892xE3d-GeJNNmqYpC-mxTXf_WAU-J8NPoMQlWpw5tgwxih9DY35ngu4qkZj82sX-aN2rchnrO_FWwLPc5Td7Xj1MCcZ6S60tmZcEGwZB1o8Cl5LxtbpF245dEAw/s962/Screenshot%202023-02-22%20at%2011.57.38%20AM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="544" data-original-width="962" height="362" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi2_YnkZdkTUCAM3xKAJbi6ZRLMgjW87MLEIeAklBCGcklHev2ZnG6bLyqA3QVXy1892xE3d-GeJNNmqYpC-mxTXf_WAU-J8NPoMQlWpw5tgwxih9DY35ngu4qkZj82sX-aN2rchnrO_FWwLPc5Td7Xj1MCcZ6S60tmZcEGwZB1o8Cl5LxtbpF245dEAw/w640-h362/Screenshot%202023-02-22%20at%2011.57.38%20AM.png" width="640" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">As your average layperson, I </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">love </em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">the concept of clean energy. But as an investor, I'm not too sure, which is why I'm writing this article in the first place. After all, profit-motivated companies and shareholders seek free cash flow generation. So if clean energy wants to take off in the investing world, it better show its hand and prove that it's a viable business model. Just so you know, in 2018, air pollution from fossil fuels caused $2.9 trillion in health and economic costs. That's $8 billion a day. It is no wonder that governments have the incentive to promote renewable energy. If we want Earth to continue to be habitable for generations to come, then we best be committed in our effort to reduce our carbon footprint and pollution. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">To start off, is clean energy </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">actually</span></em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> 'clean'? </span></strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">I know it sounds counterintuitive, but does replacing our current method of energy generation with 'clean' energy actually reduce our environmental impact? We must verify this claim since the entire investment thesis lies on the assumption that "clean energy is the future!" I found this article from </span><a class="editor-rtfLink" href="https://www.blogger.com/blog/post/edit/8854083309825062752/371703399868509824#" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #4a6ee0; margin-bottom: 0pt; margin-top: 0pt;" target="_blank"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">"The Conversation"</span></a><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> to be rather enlightening, shedding some light on the potential drawbacks of using renewable energy sources. Just to preface, when I talk about renewable energy, I'm talking about solar, hydro, and wind power. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">The article mentions that solar cells are indeed as efficient as coal plants in terms of land usage, with the entire process of manufacturing, installation, and usage of solar cells being more environmentally friendly than mining and delivering coal to power plants alone in terms of carbon emissions. Fantastic. In fact, Photovoltaics only emit slightly less than one-tenth of carbon emissions compared to natural gas power plants. I think it's important to note that the manufacturing of solar panels does incur waste and uses rare precious materials such as cadmium and gallium. Hence, if we wanted to bet on solar being the future, developments regarding efficient waste treatment and mining operations must be made. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">On the flip side, a slightly less rosy future is presented for wind and hydropower. The article presents the case that significant methane contributions may arise from the decomposition of dead wildlife attributed to death in reservoirs from costly environmental degradation. Not to mention, from an ethical standpoint, the carbon benefits may not outweigh the significant environmental impact caused by habitat destruction and direct death of fauna due to wind turbine and dam construction. This may pose some issues from a legal standpoint as activist groups may continue to push against such electricity generation from becoming normalised and widespread. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Okay, now that we've established our case that solar may be the way to go, is it even economically viable? </strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">I think you would have heard by now that China has a stranglehold on the solar panel market, and I think it's essential that we break down why that is and what that actually means... </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Now, the reason why China solar panels are so prevalent in the market is primarily due to one reason: dumping. No, China didn't break up with any country or anything of the like, instead, </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">heavy</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">, and I do mean heavy subsidies are granted to domestic solar panel manufacturers, allowing them to export products at heavily suppressed prices </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">below cost</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">. It's no wonder solar panel prices have been steadily dumping, decreasing approximately 75% in the last decade, notwithstanding improvements in production processes. In response, countries such as the US have imposed tariffs to combat this artificial depression of solar panel costs, helping their exporters in the process. We cannot deny that such an ever-evolving situation results in investors erring on the side of caution, reducing fund inflows. However, it should be noted that there have been allegations of China using forced labour coupled with inefficient, non-automated processes, which may mean that the low price of solar panels </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">may</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> come to an end, given China's seemingly unsustainable production. Of course, you should take all this with a pinch of salt unless such allegations do indeed come to light. Could this serve as an impetus for solar panel manufacturer stocks to rise? Maybe.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Would I invest in manufacturer stocks? I don't think so, and the reason is the same as why I'm not interested in Electric Vehicle stocks. </strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">The reason is: I </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">adore</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> recurring income. I look favourably upon businesses that generate a steady, growing cash flow. EVs and Manufacturing may require high capital expenditure on Research & Development (R&D) to maintain a competitive edge, which comes with the risk of not bearing any fruit at all. What I'm interested in, is renewable energy generation. I want businesses that operate solar farms to sell electricity. A simple business model indeed. We all know real estate has leases, which leads me to wonder: How long do solar panels last? From simple googling, it turns out that solar panels typically perform at standard capacity for the first 25-30 years, which eventually goes downhill from there. Assuming we want an average of 7% net annualised return, it would mean that an ROE of at least 11% is necessary. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Let's take a look at one of the most massive renewable energy farm operators that are publicly listed: </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Brookfield Renewables</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></strong></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgcM9i3DpOlbcXiPccXk5mgPmuiGPH0_wlVDXfiFTVMnNX-8jxaK_Mw9KoDVMAHpP0BVbSaOOl1Y2MoVPJaI-ulmaCtb1kmnz2nHsdCfzpjQ_Yo8uzXjIfBJypV9vBjubE_0tuJZidY-GmfWHpT2Ydi-cKhIS-Zu2rU7y2Nhd8fuCNzxqFLVwg_O49yqQ/s1588/Screenshot%202023-02-22%20at%209.31.12%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="488" data-original-width="1588" height="196" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgcM9i3DpOlbcXiPccXk5mgPmuiGPH0_wlVDXfiFTVMnNX-8jxaK_Mw9KoDVMAHpP0BVbSaOOl1Y2MoVPJaI-ulmaCtb1kmnz2nHsdCfzpjQ_Yo8uzXjIfBJypV9vBjubE_0tuJZidY-GmfWHpT2Ydi-cKhIS-Zu2rU7y2Nhd8fuCNzxqFLVwg_O49yqQ/w640-h196/Screenshot%202023-02-22%20at%209.31.12%20PM.png" width="640" /></a></div><br /><p>As of right now, ROE for Brookfield Renewables is a staggering -0.66%, brilliant. Furthermore, the fact that its ROE is actually on a downtrend adds further insult to injury. Not exactly a convincing growth story. Of course, I acknowledge that they do distribute dividends based on FFO, but if depreciation of assets exceeds cash flow generation, I don't see the point. All you are doing is paying to lose money again and again in the long run. I don't like it when companies use positive FFO so as to excuse negative profits.</p><p><br /></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgtg5uPtNv0H2qbCfdDiZFbdhVJvlVWURNha29Xczs5HkWSRkILLdXhsxIRPEEcu1KQfXMMApyk8VBkiE8Y10r86vgfTvHxO3gp6GVOVa9_KCT4Ww7-VQQtP3Q9AI0e7gqnU2l4Bbg7ZfB1OH1FrdTCXf76AQtRdZnUmDDLQAQsHC6mfJu2neFDUh9USw/s1644/Screenshot%202023-02-22%20at%209.42.30%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="846" data-original-width="1644" height="330" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgtg5uPtNv0H2qbCfdDiZFbdhVJvlVWURNha29Xczs5HkWSRkILLdXhsxIRPEEcu1KQfXMMApyk8VBkiE8Y10r86vgfTvHxO3gp6GVOVa9_KCT4Ww7-VQQtP3Q9AI0e7gqnU2l4Bbg7ZfB1OH1FrdTCXf76AQtRdZnUmDDLQAQsHC6mfJu2neFDUh9USw/w640-h330/Screenshot%202023-02-22%20at%209.42.30%20PM.png" width="640" /></a></div><br /><p></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">It's not as if energy prices are especially low, so if the company isn't turning a profit right now, then I don't foresee it becoming worth investing in for the near future. Even if such a company is able to serve the entire potential addressable market, I still have doubts that it can reach an ROE of 11%. Even if I were to suddenly pivot to solar panel manufacturers such as Enphase Energy, it is still trading at a PE ratio of 73. As clean energy becomes more prominent, I highly doubt that governments will continue to roll out subsidy after subsidy to support businesses, which may result in a negative material impact on operating expenses. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">To end off this post, I believe that renewable energy at current prices is fully valued, even taking into account optimistic growth scenarios. </strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">I will be staying away from renewable energy as an investor for the foreseeable future unless there is a significant correction of around 40%. I think it is highly doubtful that most hyped-up renewable energy stocks will continue to survive in the long term. Additionally, I believe that the unreliability of renewable energy may serve to discredit its viability as the energy source of tomorrow. Regardless of my case presented here, I am interested to hear alternative opinions! </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><b style="color: #222222; text-align: justify;"><br class="Apple-interchange-newline" />Think this article is something you'd want more of? Subscribe <a href="https://follow.it/passive-loss?leanpub" target="_blank">here</a> using your email to get notified about my latest blog articles, I'd truly be grateful!</b></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><b style="color: #222222; text-align: justify;"><br /></b></span></p><div style="text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Disclaimer: Please take everything published within this blog with a pinch of salt. Nothing I say here should be misconstrued as any form of financial advice whatsoever. In fact, I am probably the absolute last person you should approach for any sort of advice. All self-computed figures are calculated to the best of my ability, but I cannot guarantee they are 100% accurate.</em></div><div style="text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></em></div><p style="-webkit-text-stroke-width: 0px; background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; font-family: Times; font-size: medium; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: 400; letter-spacing: normal; margin-bottom: 0pt; margin-top: 0pt; orphans: 2; text-align: left; text-decoration-color: initial; text-decoration-style: initial; text-decoration-thickness: initial; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"></span></p><p><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: center;"></em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Thank you for reading my blog, and I hope you have learnt something, no matter how seemingly minuscule. I would greatly appreciate it if you subscribe as such posts take a decent chunk of time to dish out, ciao!</em></p><p><br /></p><p><br /></p><p><br /></p><p><b><br /></b></p><p><br /></p>Passive Loss SGhttp://www.blogger.com/profile/15231705917017776583noreply@blogger.com0tag:blogger.com,1999:blog-8854083309825062752.post-23754322632888360412023-02-20T07:59:00.007-08:002023-03-10T02:08:32.201-08:00Is the S&P500 Still Worth Buying?<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> Recently, I've had the </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">unfortunate</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> chance of discussing the S&P500 with one of my good friends, who has become acquainted with the world of investing as of late. Jokes aside, he mentioned that a friend of his said that the S&P500 would generate guaranteed returns in the long term. </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">That thought slightly concerns me. </strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">I think it's not a stretch to say that in recent times, an unprecedented number of retail investors have entered the market, be it from the Reddit GameStop (GME) kerfuffle or simply common advice. Naturally, that results in a whole bunch of people getting thrust into the world of investing without any knowledge whatsoever, and that's okay! But it's important to ensure that common advice is not simply parroted without understanding the rationale behind it in the first place. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">So, why is the S&P500 touted as a wise investment in the first place?</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">For those who are new, the S&P500 stands for The Standard & Poor's 500. It's a basket of the biggest 500 publicly listed US companies in terms of market capitalisation and is widely regarded as the benchmark for stock investing. </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Why</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> these companies, you ask? Essentially, it boils down to the fact that the US is highly regarded as the world's biggest economic superpower, coupled with the rationale that surely, the largest market capitalisation stocks with large inflows of investment on a daily basis should be wise investments. If not, why would they be heavily invested in in the first place? </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Indeed, had I written this article twenty years ago, you would probably be hollering insult after insult at me. </em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Evidently, investors of the S&P500, which can be done via an Exchange Traded Fund (ETF) such as VOO, have been rewarded handsomely for their patience and conviction. From 2002 to 2022, the average compounding annual return of the S&P500 was 8.19%. That's a total return of 422.68%. Not too shabby.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Historically, the S&P500 has certainly performed well, depending on the time frame that you use. If you viewed the index's performance since its conceptualisation - in 1957, you'll find that it has instead returned a staggering compounded 10.15% per year. To put that into perspective, $100 invested in 1957 is now approximately $59,000 in 2022. Yet, if you invested in 2010, you would have gotten a compounded annual return of 12.84%. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><div class="separator" style="clear: both; text-align: justify;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj-FxIj99NPwhB9DuoH9MgZUO_u2SZjIb0g__uSdfwAUdGOPQmFF6aHiZYcvnVmBfp8zqhrO0aENMJfL822C5wQXIjZCPcQCMx6tuc99WEgO9Pq3ZPaZTkS4L_Z_EsDx8UOb4r20vn8yafcfCY60dyDsxCkGOKx35ia1x599A3qm0ClDsvel8YWPjHj3Q/s1334/Screenshot%202023-02-19%20at%2010.33.23%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="798" data-original-width="1334" height="382" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj-FxIj99NPwhB9DuoH9MgZUO_u2SZjIb0g__uSdfwAUdGOPQmFF6aHiZYcvnVmBfp8zqhrO0aENMJfL822C5wQXIjZCPcQCMx6tuc99WEgO9Pq3ZPaZTkS4L_Z_EsDx8UOb4r20vn8yafcfCY60dyDsxCkGOKx35ia1x599A3qm0ClDsvel8YWPjHj3Q/w640-h382/Screenshot%202023-02-19%20at%2010.33.23%20PM.png" width="640" /></a></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><br /></div><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Just take a look at that sexy exponential graph, and you'll begin to see what I mean. It's hard to argue </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">not</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> to invest in the S&P500. In fact, the S&P500 has returned </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">even more</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> in recent times. Would you not sleep soundly knowing that you're vested in Coca-Cola, the world's leading soft drink distributor? What about McDonald's, that ubiquitous fast-food restaurant? Or would Procter & Gamble tickle your fancy, being the company that's probably behind your favourite cleanliness product? The fact is, investors can rest assured knowing that they're investing in successful companies with proven business models. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">"So what? I could easily beat that return! In fact, I invested in Tesla early and generated triple-digit returns!" Just might be what you're saying.</em></strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Fair enough, you've beaten the market. But, could you do it in the long term? Well, statistically, most likely not. After a time frame of ten years, over 85% of large-cap funds underperformed the S&P500. We're talking about behemoth organisations with countless quants ready to trade at any given notice. What makes you think that you'll beat them? Even if you did, could you beat the broader market? </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Okay, the S&P500 has done pretty well. Just funnel your cash and hold long-term, open and shut case right?</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Well, if you read the title of this article, you’ll probably realise it implies that you should perhaps reconsider the above notion. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">When you’re betting on the S&P500, you’re investing in 100% US equities, and that doesn’t sound geographically diversified at all… “Their revenue sources are actually from all parts of the world!” You protest, and I concur, a US-specific economic recession probably wouldn’t hurt business operations too much. But you’re not going to capture specific stock market behaviour. Dumb money </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">does</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> move markets. Take the recent AI craze or the previous clean energy trend. Institutional money definitely didn’t only invest just right there and then. Additionally, to add to my previous point of US equities' revenues being tied to the US, there </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">is</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> some research that shows a positive correlation between S&P500 returns and US Real GDP. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><div><div class="separator" style="clear: both; text-align: justify;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiThjOwyAKuRydLimp6J69xYpy7li9rBK7EdFyDrOX66H3DmvarUWdZql5UDkwimYegySLSDun92XI9TU9Gboo64Q7JSHg8wkTZWzDBUZSYaxof2W3yRAmo63vO_nnYocJDcxoazDd4E7s_ggUp39u6f32fYWvn_5O9-W9m8yqjw9NnFyFA2xwUdFMYjQ/s1322/Screenshot%202023-02-20%20at%2011.21.30%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1000" data-original-width="1322" height="484" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiThjOwyAKuRydLimp6J69xYpy7li9rBK7EdFyDrOX66H3DmvarUWdZql5UDkwimYegySLSDun92XI9TU9Gboo64Q7JSHg8wkTZWzDBUZSYaxof2W3yRAmo63vO_nnYocJDcxoazDd4E7s_ggUp39u6f32fYWvn_5O9-W9m8yqjw9NnFyFA2xwUdFMYjQ/w640-h484/Screenshot%202023-02-20%20at%2011.21.30%20PM.png" width="640" /></a></div><p style="text-align: center;"><i>Source: <a href="https://digitalcommons.unl.edu/cgi/viewcontent.cgi?article=1293&context=honorstheses" target="_blank">University of Nebraska</a></i></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Now, I'm not here to argue correlation equates to causation or whatnot, but you have to admit that an R-squared value of 0.92 is on the high side. That's some serious correlation... Ask yourself this question: </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Will the US continue to outperform the global economy? </strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">I'll use this analogy that I previously raised to my friend earlier: Consider this student, who's always achieved a mix of As and Cs throughout their years. They started with As in Primary 1, Cs in Primary 2, and so on. They've overall achieved an average grade of a B within their lifetime, but could you safely assume that such a trend will continue into Secondary School? What about Junior College? I'm not sure if this holds true universally, but I sure as hell wasn't getting straight As in JC as I did in primary school. I guess it's different in a way since education increases in difficulty throughout the years, but my point still stands. You have to admit that the US economy saw an early onset of high growth throughout the early inception of the S&P500, benefitting from massive changes to worker and infrastructure efficiency to produce higher quality goods. Could we see the S&P500's growth taper off in the near future? I know the data from 2010 challenges this theory, but it may simply be attributed to the recent tech hype, with investors throwing cash hand over fist into anything with the latest buzzword. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Not to mention, the S&P500 consists purely of mega-cap stocks which could lead to limited room for upside as compared to smaller cap stocks, so investors with a healthy risk appetite may not find that this index is suitable for their investing needs, but I digress. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Now that I've stated my case, what's the conclusion? </strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">In my humble opinion, I don't think I'll be investing in an S&P500 ETF very much. I'd much rather take my chances with VWRA, a global ETF that holds a basket of global stocks. I'm very much comfortable with limiting my exposure to the US and instead allocate my assets to emerging economies such as India instead. Furthermore, it's not like the US has become some sort of a negligible part of VWRA, it's still around 44% in terms of weightage. Also, if you didn't know, the S&P500 offers dividends, which are taxed at around 30% if you're a Singapore resident. It's much more tax efficient to invest in an Ireland-domiciled ETF, reducing your tax to only 15%. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">For those into lump sum investing or short-term trades, is the S&P500 a good buy right now?</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">This will be a simple analysis, but I hope to provide some sort of perspective regarding the S&P500's current valuations. It's no secret that Jerome Powell, head of the Fed, has recently released a slew of interest rate hikes in order to tackle inflation. As of right now, I don't think the rate hikes are enough, and we may see a second onslaught of inflation. It seems like the labour market is still remaining strong, and that's bad news for Powell. If he does indeed go in the footsteps of Volcker, then the interest rate hikes right now are just the beginning. I don't think there'll be a soft landing, which leaves only one of two scenarios to materialise.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">1. Interest rates remain relatively low and inflation runs rampant.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">2. Interest rates become too high, resulting in an economic recession.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Neither seems like a desirable outcome for equities as a whole. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><div class="separator" style="clear: both; text-align: justify;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhepTAAOS-RQiHYNT2klwQQa7f4vNpe5LmFO624_cs96Htb5HVf1ynQypXy2s6TAwR_qaPElCKGGUKrWHrrpP7ZxcbfR41mRIqatrBgCO9K-keaEFLBzpPtc0crgY0-uGG9Q-_L-3qOa-LPqHm6YiHyDUOvcqpYRJn_0_0sy007A65HfP2PM-wj75SbrQ/s1712/Screenshot%202023-02-20%20at%2011.45.07%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="814" data-original-width="1712" height="304" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhepTAAOS-RQiHYNT2klwQQa7f4vNpe5LmFO624_cs96Htb5HVf1ynQypXy2s6TAwR_qaPElCKGGUKrWHrrpP7ZxcbfR41mRIqatrBgCO9K-keaEFLBzpPtc0crgY0-uGG9Q-_L-3qOa-LPqHm6YiHyDUOvcqpYRJn_0_0sy007A65HfP2PM-wj75SbrQ/w640-h304/Screenshot%202023-02-20%20at%2011.45.07%20PM.png" width="640" /></a></div><div style="text-align: center;">Source: <a href="https://www.multpl.com/s-p-500-pe-ratio" target="_blank">Multpl</a></div><div style="text-align: center;"><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: center;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">According to Multpl, the historic PE ratio of the S&P500 is 15.99, a good bit lower than the current 21.8. Furthermore, PE ratio is a lagging metric. Should the economy experience a downturn, what do you think will happen when earnings reports come out? </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">A bloodbath will ensue</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">. This hasn't even accounted for the potential higher operating costs from interest payments due to rate hikes.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Hence, I'll be staying away from the S&P500 as of now. I'll take a look when things start to cool down, but I think there are plenty of buying opportunities in the SG market right now, which includes certain counters that I've covered previously. That being said, don't let this article stop you from investing in a well-known index with a proven track record of great returns, just try to understand what you're actually investing in (I'm talking as if I know what I'm investing in).</span></p></div><div style="text-align: justify;"><b style="color: #222222;"><br class="Apple-interchange-newline" />Think this article is something you'd want more of? Subscribe <a href="https://follow.it/passive-loss?leanpub" target="_blank">here</a> using your email to get notified about my latest blog articles, I'd truly be grateful!</b></div><div style="text-align: justify;"><b style="color: #222222;"><br /></b></div><div style="text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: center;"><div style="text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Disclaimer: Please take everything published within this blog with a pinch of salt. Nothing I say here should be misconstrued as any form of financial advice whatsoever. In fact, I am probably the absolute last person you should approach for any sort of advice. All self-computed figures are calculated to the best of my ability, but I cannot guarantee they are 100% accurate.</em></div><div style="text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></em></div></em><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: left;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Thank you for reading my blog, and I hope you have learnt something, no matter how seemingly minuscule. I would greatly appreciate it if you subscribe as such posts take a decent chunk of time to dish out, ciao!</em></p></div><div style="text-align: justify;"><br /></div><p style="text-align: justify;"><br /></p></div>Passive Loss SGhttp://www.blogger.com/profile/15231705917017776583noreply@blogger.com0tag:blogger.com,1999:blog-8854083309825062752.post-42381686113068033772023-02-16T05:53:00.003-08:002023-03-10T02:08:42.370-08:00Interest Rate Hike Probability - What Gives? <p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> Recently, I've come across a lot of internet users claiming that interest rate hikes are priced in. When someone claims that an event is priced in, it means that </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">the market has already adjusted in accordance with the event happening</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">. Just to ensure that everyone is on the same page, an example would be worries about an economic recession. Data may show that a recession may be imminent, but earnings may not necessarily have been impacted yet. Despite this, stocks are still </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">priced</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> as if earnings have already taken a hit. The market is forward-looking, and the phenomenon of being "priced in" is no exception to that. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Of course, if everything was priced in, then the market would simply be a flat line. The market's price is actually a </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">product </em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">of market sentiment, taking into account the perceived probability of events. For example, if a stock was initially $10, and would drop to $9 during a recession, then should a recession have a 50% chance of occurring, then only a slight discount will be applied to reflect the uncertainty regarding the recession materialising, resulting in a price of $9.50. Obviously, this is an oversimplified example, but you get my point. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">It is no secret that the Fed has continually raised interest rates in recent times in an effort to cool the labour market so as to curb demand-side inflation, and stock prices have fallen to reflect that. However, there is no telling how many basis points would the Fed actually raise interest rates by until the commencement of the regular Fed meeting, resulting in uncertainty. </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Hence, this website intrigued me when it claimed to display the according rate hike probabilities priced in by markets:</strong></p><p><a href="https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html?redirect=/trading/interest-rates/countdown-to-fomc.html">https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html?redirect=/trading/interest-rates/countdown-to-fomc.html</a></p><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhPVZB2RJ_K-5ONAoGhUuK4dCTrJk4i8VoZLTdm83KeFeF_3tqL6ZKgKQ0sSRVxOp-pjt773kZg0_qUheVIZ3dBJndNLO6tO7Ik_TSS2h7uTzYfb3-CJZRYEO4ctO2DxeIxGliwlGMWsraQRbgXjHuN8eac1lD4BEyjbHzs_1B7Sc6bDZlslq6bDQNJJw/s856/Screenshot%202023-02-16%20at%209.29.55%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="856" data-original-width="790" height="640" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhPVZB2RJ_K-5ONAoGhUuK4dCTrJk4i8VoZLTdm83KeFeF_3tqL6ZKgKQ0sSRVxOp-pjt773kZg0_qUheVIZ3dBJndNLO6tO7Ik_TSS2h7uTzYfb3-CJZRYEO4ctO2DxeIxGliwlGMWsraQRbgXjHuN8eac1lD4BEyjbHzs_1B7Sc6bDZlslq6bDQNJJw/w590-h640/Screenshot%202023-02-16%20at%209.29.55%20PM.png" width="590" /></a></div><br /><p><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><b>Incredible. Various terminal interest rates sorted by probability priced in coupled with the respective meeting dates presented neatly for your viewing pleasure.</b> </em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">Theoretically, with this information, you </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">could</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> predict where the market would go depending on the actual Fed meeting. If interest rates rise more than expected, then markets go down, and vice versa. My initial thoughts upon seeing this were: </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">How do they </em><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">actually</em></strong><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> calculate the probabilities?</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"> Hence, I promptly visited the website's "methodology" section to see what's their actual rationale. </span></p><div class="separator" style="clear: both; text-align: center;"><br /></div><br /><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiJmI6m4wNTHtwSdjwvSPsRpgr_3sx_EydpPoP3GugwrZu32-ryuNN26lyCgD_0IW3TJd-oPYUPKodgreRIHEUEij6N3gfUICbnxruaEigMRiG5MOCCLOCz1ccOdracqep1klUfDwY0s85IZFa_LTYnhDnvgtYX31SS-aQyjT5PzgbuTlEjzfoqLWhT1g/s1480/Screenshot%202023-02-16%20at%209.39.15%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="588" data-original-width="1480" height="254" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiJmI6m4wNTHtwSdjwvSPsRpgr_3sx_EydpPoP3GugwrZu32-ryuNN26lyCgD_0IW3TJd-oPYUPKodgreRIHEUEij6N3gfUICbnxruaEigMRiG5MOCCLOCz1ccOdracqep1klUfDwY0s85IZFa_LTYnhDnvgtYX31SS-aQyjT5PzgbuTlEjzfoqLWhT1g/w640-h254/Screenshot%202023-02-16%20at%209.39.15%20PM.png" width="640" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div><br /></div>Just to preface, there is more to their methodology, but I concede that I cannot even begin to unpack the copious amounts of jargon and terminology used. However, my base case remains the same. In essence, futures are a tool for betting on certain price movements. In this case, Federal Funds Futures are bets on the interest rate. By using futures and derivatives information, the tool can more or less translate it to a probability table. <div><br /></div><div>In my humble opinion, do take the information presented by this tool with a pinch of salt, as futures traders are not representative of the entire market, and may relatively be more optimistic or pessimistic than the market in its entirety. <b>Treating such a tool's content as gospel may be a dangerous game indeed. </b>Nevertheless, I find this tool an interesting and potentially useful one to roughly gauge market sentiment, despite its inherent limitations. </div><b style="color: #222222; text-align: justify;"><br class="Apple-interchange-newline" />Think this article is something you'd want more of? Subscribe <a href="https://follow.it/passive-loss?leanpub" target="_blank">here</a> using your email to get notified about my latest blog articles, I'd truly be grateful!</b><div><br /></div><div><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: center;"><div style="text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Disclaimer: Please take everything published within this blog with a pinch of salt. Nothing I say here should be misconstrued as any form of financial advice whatsoever. In fact, I am probably the absolute last person you should approach for any sort of advice. All self-computed figures are calculated to the best of my ability, but I cannot guarantee they are 100% accurate.</em></div></em><p style="text-align: center;"></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Thank you for reading my blog, and I hope you have learnt something, no matter how seemingly minuscule. I would greatly appreciate it if you subscribe as such posts take a decent chunk of time to dish out, ciao!</em></p></div><div><br /><p><br /></p><p><br /></p></div>Passive Loss SGhttp://www.blogger.com/profile/15231705917017776583noreply@blogger.com0tag:blogger.com,1999:blog-8854083309825062752.post-18361952342633859892023-02-14T23:50:00.005-08:002023-03-03T18:07:47.093-08:00United Hampshire US REIT - Mistakenly Punished<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">As per my <a href="https://passiveloss.blogspot.com/2023/01/1512023-portfolio-update.html" target="_blank">first portfolio update</a>, </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">United Hampshire US REIT </strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">is currently the smallest holding I have in my portfolio. That doesn't mean my conviction in it is the least though. For those out of the loop, United Hampshire REIT is a retail REIT listed on the SGX Exchange with a trailing yield of a </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">whopping 10.684%</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> at its current price of 0.515 USD per unit. This is a drastic decrease from its initial IPO price of 0.80 USD per unit back in March 2020. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">So.... what gives? What could have possibly resulted in this heavy decline in share price?</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> Well, if you haven't noticed, its IPO date of March 2020 coincided with the period when COVID-19 worries began to balloon. This unfortunate timing certainly did not help with its share price, especially when its portfolio mainly consists of US strip malls, which were an asset class that had arguably </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">the</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> most potential to be affected by the pandemic, with the possibility of the US government forcing malls to shut down in a bid to 'flatten the curve'. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Here's an introduction to the REIT:</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">"Listed on the Main Board of the Singapore Exchange Securities Trading Limited on 12 March 2020, United Hampshire US REIT is a Singapore real estate investment trust ("REIT") established with the principal investment strategy of investing in a diversified portfolio of stabilised income-producing grocery-anchored and necessity-based retail properties ("Grocery & Necessity Properties") and modern, climate-controlled self-storage facilities ("Self-Storage Properties") located in the United States of America ("U.S."). </em><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">United Hampshire US REIT tenants are e-commerce resistant, with majority of their anchor tenants of Grocery & Necessity assets utilising their physical stores for their omni-channel strategies."</em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></em></p><p style="background-color: white; box-sizing: border-box; font-size: 16px; margin: 0px; padding-bottom: 20px; text-align: justify; text-size-adjust: 100%;"></p><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; font-style: italic; text-align: justify;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiJ4rFOdXzRDUGx-QebXeLU8nV0ITbilOyMvpdl1m1KntHt5PxyuSsAxBhJgrxfYQj4d3MTVJ9MbLO6PwCTVNIq_pNVcdrfpZouje6IQ42EFX5i3-Kubl8hjxHwHyqpD6wh1Rb6Rjk7xlsCfAxGgeSeAywjSkBFd9rNm6TWANUYzm5Q3j-4e0xEAGscFg/s2544/Screenshot%202023-02-10%20at%207.44.27%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1254" data-original-width="2544" height="316" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiJ4rFOdXzRDUGx-QebXeLU8nV0ITbilOyMvpdl1m1KntHt5PxyuSsAxBhJgrxfYQj4d3MTVJ9MbLO6PwCTVNIq_pNVcdrfpZouje6IQ42EFX5i3-Kubl8hjxHwHyqpD6wh1Rb6Rjk7xlsCfAxGgeSeAywjSkBFd9rNm6TWANUYzm5Q3j-4e0xEAGscFg/w640-h316/Screenshot%202023-02-10%20at%207.44.27%20PM.png" width="640" /></a></div><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; font-style: italic; text-align: center;">Screen-grab of United Hampshire US REIT's Portfolio Breakdown on their Website</div><div class="separator" style="clear: both; font-style: italic; text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: left;"><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">The above information illustrates one of the unique selling points of UHREIT. The fact that most of its properties are leased to grocery giants such as Publix, which would do well regardless of economic conditions. Not only that, but most of its portfolio is freehold too, a Singaporean's dream come true. I am pleasantly delighted by the fact that most of the REIT's assets will continue to generate free cash flow (presumably) indefinitely. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Okay... All seems well and good KOPL, but why does the market price UHREIT at a discount in the first place? Confirm have some sort of potential insolvency event right?</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Let's take a look at UHREIT's debt profile and see whether it's at risk of insolvency, shall we?</span></p></div><div class="separator" style="clear: both; text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: left;"><div class="separator" style="clear: both; text-align: justify;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgfFlwdfTu4LO10oMqGqHms0v1rSHFf24XeFRJ6kZSXv5kRTbApchtbdahWjiRUBFrtn5bspNR-a6WOuVlyjjKJhePRDXu0LuPODiMZiUeF3w8Z5mw-Op9hjZ-Q0wOCP5zUhMBI_Bn0sARZXcJ28qOIhtoa3HSnbbJ8vO1jGrOeuNL6qbzNdReXLiacNw/s1308/Screenshot%202023-02-10%20at%208.23.35%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="966" data-original-width="1308" height="472" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgfFlwdfTu4LO10oMqGqHms0v1rSHFf24XeFRJ6kZSXv5kRTbApchtbdahWjiRUBFrtn5bspNR-a6WOuVlyjjKJhePRDXu0LuPODiMZiUeF3w8Z5mw-Op9hjZ-Q0wOCP5zUhMBI_Bn0sARZXcJ28qOIhtoa3HSnbbJ8vO1jGrOeuNL6qbzNdReXLiacNw/w640-h472/Screenshot%202023-02-10%20at%208.23.35%20PM.png" width="640" /></a></div><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: justify;"><i><span style="font-family: inherit;">"As at 30 June 2022, the Group has total gross loans and borrowings of US$272.1 million (31 December
2021: US$275.1 million) and US$17 million (31 December 2021: US$14 million) undrawn revolving credit
facility to meet its future obligations. The interest rate on the TL1 and TL2 facilities have been hedged using
floating-for-fixed interest rate swaps. The weighted average interest rate on loans and borrowings as at 30
June 2022 was 3.03% (31 December 2021: 2.63%) (taking into account the interest rate swaps but excluding
commitment fee on the undrawn revolving credit facility).
Aggregate leverage, as defined in the Property Funds Appendix, as at 30 June 2022 was 38.0%. Interest
coverage ratio as at 30 June 2022 was 6.0 times in accordance with the requirements under its loan facilities
and 4.6 times in accordance with the Property Funds Appendix of the CIS Code.
As at 30 June 2022, the Group’s current liabilities exceeded its current assets by US$37.5 million. The Group
is in a net current liability position mainly due to TL1 and RCF, which are maturing in March 2023.
Notwithstanding, the Manager is confident that the outcome of refinancing negotiations with the lenders to
refinance these borrowings will be favourable and will be completed prior to the loan maturity date."</span></i></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">When you take a look at UHREIT's debt profile, it does indeed seem scary. Over 230 USD Million worth of debt maturing in the next two years or so. It's also daunting when you realise that the weighted average interest rate on loans and borrowings is 3.03%. That's rather high for a REIT, albeit expected since it <i>is</i> a small cap. <b>However, all these terms become rather opaque and irrelevant once you consider the relatively new information below:</b></div></div></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><br /></div><span><div class="separator" style="clear: both; font-family: inherit; font-style: italic; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgqWEc39693mZmN8H_FidW3kpoVjzsrtB6oYCbzzbUCwHq0TfZIdlP3QlbLn1WxO2eVLfbNkTrHMbGfnhIxhmJRB07es2Db8Wpt8KbTarYnEEMPVZYIfHRBvjaBL201xOAEKxZA_q-fOtegYCbkAHTLeD3tSu_Vj9FrAY9_l2qhRq-eiVcuPFa2KQhDwA/s1134/IMG_8651%202.jpg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1134" data-original-width="750" height="640" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgqWEc39693mZmN8H_FidW3kpoVjzsrtB6oYCbzzbUCwHq0TfZIdlP3QlbLn1WxO2eVLfbNkTrHMbGfnhIxhmJRB07es2Db8Wpt8KbTarYnEEMPVZYIfHRBvjaBL201xOAEKxZA_q-fOtegYCbkAHTLeD3tSu_Vj9FrAY9_l2qhRq-eiVcuPFa2KQhDwA/w423-h640/IMG_8651%202.jpg" width="423" /></a></div><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">It now seems like the REIT has no outstanding debts until 2024. Hooray! Also, notice how the debt amount for this refinancing exercise is approximately $250 Million USD. Since they didn't give me much information regarding the new refinancing, I can only guess. My theory is that the $250 Million figure includes interest payments </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">(which was can be deduced from the fact that it is the total amount payable should the entire loan be settled in one go which would include the interest from the loan's lifespan)</span></em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">, which would roughly coincide with all of the REIT's loans maturing from 2023 to 2024. I speculate that they have entered into a fixed-rate refinancing agreement with a ladder of loans ranging from 2024 to 2026. Of course, I could be horribly wrong, but we'll know soon enough when the REIT publishes its finance report on </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">February 22</span></strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">If my (educated) guess were to be true, then it would position UHREIT advantageously since I estimate that the Fed will start cutting interest rates by 2025, if not 2024 as long as they can tame inflation soon enough. However, since the REIT refinanced rather late in the game, the borrowing costs are probably rather high, which I estimate to be around the 3.75% range. This has a probable material impact on the DPU of around 5%, although this is just a shot in the dark from me. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Overall, I don't think UHREIT has any material risk of insolvency, evident from the fact that its loans should be relatively well-spaced out. </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Of course, I couldn't make this claim without looking at the performance of UHREIT's assets, which is what I'll be discussing next.</span></strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">To avoid insolvency or forceful liquidation of assets, one should be able to fulfill their contractual debt obligations. To do this, it is imperative that one be able to generate enough cash flow to cover interest payments and amortisation and to have a decent debt profile. We've covered the latter, so let's see how is UHREIT's performance regarding the former. </span></p><div class="separator" style="clear: both; font-family: inherit; text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: left;"><div class="separator" style="clear: both; font-family: inherit; text-align: justify;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiJrKuM4_EVKgfLoDTeuFyXmf_GcYGjbgh4iejPxWufBOJRn7DomqJczcTTBBLV3xfxmCfECO-lARxLAmqBTwdTygEmmtOQlSdBJJ1_sTum1gGxUdLy2Y1WtJcZ86U2FH0ju6zoegbeQnWHwu_2U_j28Gh0C9-wyf56_sx2O3SHyaGLHfG7WBXrHaZgUQ/s996/Screenshot%202023-02-11%20at%208.57.05%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="996" data-original-width="976" height="640" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiJrKuM4_EVKgfLoDTeuFyXmf_GcYGjbgh4iejPxWufBOJRn7DomqJczcTTBBLV3xfxmCfECO-lARxLAmqBTwdTygEmmtOQlSdBJJ1_sTum1gGxUdLy2Y1WtJcZ86U2FH0ju6zoegbeQnWHwu_2U_j28Gh0C9-wyf56_sx2O3SHyaGLHfG7WBXrHaZgUQ/w627-h640/Screenshot%202023-02-11%20at%208.57.05%20PM.png" width="627" /></a></div><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"><div class="separator" style="clear: both; text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: justify;">Net income after tax rose by 21.0% from 13.3 USD Million to 16.1 USD Million from 1H21 to 1H22, with revenue increasing by 18.5% from 26.80 Million USD to 31.75 Million USD, which outpaced operating expenses which rose from 8.45 Million USD to 9.30 Million USD. A commendable performance for 1H22. This leaves the interest coverage ratio at around x4.75. Relatively okay in my opinion, although there still is much to be desired.</div></div></div><div class="separator" style="clear: both; text-align: left;"><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; font-family: inherit; text-align: justify;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi1K1XPuyP80s4lC9TgoMQ1iJnIeqbXIyDkQoYVYLyFXNb5PipeWRIAuH44rZs1vDabZhdPTpGfjUt2Px8B9T-xTns8ViVVgi4g6E9YDX3nia7SxRFD-VG3cCuqPmhZCLCTkJnctIP2eAG327F32-sLH8RksRLs7EFooPfhdgDSEKvCxExzEQ6nR9qK3g/s1328/Screenshot%202023-02-12%20at%204.18.48%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="544" data-original-width="1328" height="262" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi1K1XPuyP80s4lC9TgoMQ1iJnIeqbXIyDkQoYVYLyFXNb5PipeWRIAuH44rZs1vDabZhdPTpGfjUt2Px8B9T-xTns8ViVVgi4g6E9YDX3nia7SxRFD-VG3cCuqPmhZCLCTkJnctIP2eAG327F32-sLH8RksRLs7EFooPfhdgDSEKvCxExzEQ6nR9qK3g/w640-h262/Screenshot%202023-02-12%20at%204.18.48%20PM.png" width="640" /></a></div><div style="text-align: justify;"><br /></div></div><div class="separator" style="clear: both; font-family: inherit; text-align: justify;"><br /></div><div class="separator" style="clear: both; font-family: inherit; text-align: left;"><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">To ensure that UHREIT's cash flow is not easily disrupted, it is wise to check its portfolio diversification via asset type, location, and tenant makeup. </strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">All of UHREIT's assets are located in the United States, so if there's any major negative geopolitical incident that occurs there, then the REIT's share price will surely take a hit. That said, UHREIT's tenants are rather well diversified, ranging from the consumer staples sector to consumer discretionary. </span></p></div><div class="separator" style="clear: both; text-align: left;"><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; font-family: inherit; text-align: justify;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEipjhrgoDYq1UTqoqB9QqZoEnjsI20pkyit2ghPWQ2wbcnPlpT4-5aJx2ulOFAekrc_xL6vDuxnCvlc2bdCOuqb2VmAZo2gKRXZh0B2M9b8hmlaRP6kMrcYvkmcbMaGvf3A-3wfnf9xUdZcTNas01zX06hpk7A286lL4OSSfnLSFNk99etNdcM7bYZy3w/s1216/Screenshot%202023-02-12%20at%206.15.23%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="580" data-original-width="1216" height="306" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEipjhrgoDYq1UTqoqB9QqZoEnjsI20pkyit2ghPWQ2wbcnPlpT4-5aJx2ulOFAekrc_xL6vDuxnCvlc2bdCOuqb2VmAZo2gKRXZh0B2M9b8hmlaRP6kMrcYvkmcbMaGvf3A-3wfnf9xUdZcTNas01zX06hpk7A286lL4OSSfnLSFNk99etNdcM7bYZy3w/w640-h306/Screenshot%202023-02-12%20at%206.15.23%20PM.png" width="640" /></a></div><div class="separator" style="clear: both; font-family: inherit; text-align: justify;"><br /></div><div style="text-align: justify;"><br /></div></div><div class="separator" style="clear: both; font-family: inherit; text-align: left;"><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Besides Self Storage, Discounters, Fitness, and F&B, I think it is safe to say that the majority of tenants will continue to do well in an economic recession or inflationary environment. </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">And hey, if the economy's doing better than expected, then money will surely flow into those aforementioned tenants, everyone wins!</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> If you're worried about the fact that UHREIT's top ten tenants are worth 59.3% of GRI, then don't. After all, most of them are supermarket behemoths that hardly go bust. Self Storage is a sector that I'm keeping a close eye on, given that it is no secret that property prices have been on a roll recently, increasing constantly. Indeed, it seems like the American Dream may soon be renamed to the "Pipe dream" when Americans will no longer be able to cough up cash for extra space. In that aspect, Self Storage may be the panacea to that issue, and consequently, positive rental reversions. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Now that UHREIT's finances are out of the way, let's take a look at its management, shall we?</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Firstly, it'll greatly benefit you to know about the two sponsors of this REIT, namely UOB Global Capital and The Hampshire Companies. Yes, </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">that </em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">UOB, </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">United Overseas Bank. </strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Its outlets are a common sight in both the heartlands and CBD of Singapore and probably need no introduction. Hampshire Companies is probably the sponsor that's designated as the unknown of this equation. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">"The Hampshire Companies, LLC currently owns and operates a diversified portfolio of 150 properties across the U.S. with an AUM in excess of approximately </em><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">US$2.0 billion</em></strong><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> in value and totalling over 11.8 million square feet."</em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Although US $2 Billion is nothing to scoff at, you can't help but admit that that's a </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">really </em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">low number relative to the typical S-REIT sponsors such as Mapletree and Capitaland, which manage 78.7 and 60.0 Billion SGD respectively. This would signify that Hampshire Companies would have significantly less negotiating power when it comes to acquisitions, financing terms, and asset injection capabilities. On the flip side, it is very obvious that this company is under the majority control of the Hanson family, with the appointed CEO being James E. Hanson II. </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Fancy</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">"Presently, his extracurricular activities include: a Council Member of the New Jersey State Investment Council, which oversees $80 Billion New Jersey State Pension Systems; an Executive-In-Residence and Co-Chair of the Board of Advisors for the Center of Real Estate Studies at Rutgers Business School; a Commissioner of the Palisades Interstate Park Commission; and member of the Board of Directors of Lakeland Bancorp, Inc. and Lakeland Bank. Mr. Hanson has a B.A. degree from Hope College and a J.D. degree from Vermont Law School."</em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Clearly, he seems rather well-connected, and I do not doubt his ability to utilise his connections and knowledge to secure advantageous terms and deals for the REIT. Just to further bring home the point, there seems to only be a grand total of 15 positions on the New Jersey State Investment Council, impressive!</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Additionally, it seems like the management fee structure is in a way that aligns with shareholder interests, coinciding with the performance of the REIT.</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">The base fee for the management is 10% of the annual distributable income whereas there is also a performance fee of 25% of YoY distributable income increases. This incentivises the management to perform, given that they'll be entitled to a hefty paycheck should they improve the performance of the REIT. It is also interesting that the management can take their payment in units or cash, and most of them chose units, so make of that what you will. A good thing to note is that they do have acquisition fees of 0.75% from its sponsor and 1.00% from third parties alongside a divestment fee of 0.5%. Overall, I feel that the management fee structure is rather in line with my wants and needs.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">It sounds like a fantasy. Great yield in a defensive sector led by seemingly experienced, professional, and well-connected management. But before you get riled up with the prospect of making fat stacks, I do admit there are some things to take note of. </strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Firstly, I think it's safe to assume that </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">everyone</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> wants growing dividends. Look at most REIT analysis articles or videos and you'll be hard-pressed to find one that </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">doesn't</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> talk about uptrend in DPU. DPU depends on profit, which depends on revenue and operating costs. I don't think you'll find many opportunities to reduce REITs' operating costs, but the world is your oyster when it comes to increasing revenue. Of course, positive rental reversions are one way to increase revenue, but most REITs choose to acquire new properties to boost their rental income. Acquisitions... </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">surprisingly</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">, need capital. UHREIT is currently trading at a price-to-book value of 0.681, which allows it to generate that above 10% dividend yield. It is </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">precisely</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> the fact that the REIT trades at a discounted price that allows it to hit that double-digit yield. You aren't going to find cap rates ranging that high in the market, especially freehold, supermarket-anchored retail buildings. So what does this mean for UHREIT? This means that to acquire new properties, the REIT will just have to slowly bide its time and use the income to reduce gearing, do a rights issue or recycle assets. But none of those options could ever possibly provide a yield accretive result. Hence, it would make much more sense to simply return cash to shareholders directly. The heavily discounted price may also open up talks of privatising the REIT, despite its short lifespan on the SGX market. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Secondly, you may not know this, but UHREIT's gearing ratio is a whopping 42.1%. Just shy of the Monetary Authority of Singapore's (MAS) 50% gearing limit for REITs. Usually, this wouldn't be a problem, but with rising interest rates, we may see US property prices come down soon, which includes UHREIT's assets. Since gearing is calculated by Total Debt/Total Assets, should asset value fall, gearing will inevitably rise. When that gearing ratio rises... it's fire sale time. The REIT will be forced to liquidate assets at huge discounts given that reducing the gearing is of utmost priority. We've seen this play out with Manulife REIT, and we can't rule out the possibility that UHREIT might be next. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Lastly, you'll have to be comfortable with Forex risk. The REIT's price, earnings, and everything else is in USD. You'll spend USD to purchase units, and you'll get USD as your dividends. We live in Singapore, though. Hence, we use Singapore Dollars. Are you confident in the US' ability to be a strong exporter? Do you buy into the American eternal economic powerhouse story? Sure, USD/SGD is high currently due to the high-interest rates, but it won't be like this forever. </span></p></div></span><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhlsJjDIMTvCNN4imRuccF0vzLE8sflBtkITKVe33eqyC8bZbzQZKwFzTwmj06CW6s4_E6jMArhIafTSAynLS9K-Z2396l7Lbhg9jbhhfpkeEW5jasiFnI-yQ3R22c-4bll66g_InSDaqwDm8PJ3clV2n9Mk6uOVCnSNxMtiBOZrpgr2FIRJcuGYMSsXQ/s676/Screenshot%202023-02-15%20at%203.18.28%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="456" data-original-width="676" height="216" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhlsJjDIMTvCNN4imRuccF0vzLE8sflBtkITKVe33eqyC8bZbzQZKwFzTwmj06CW6s4_E6jMArhIafTSAynLS9K-Z2396l7Lbhg9jbhhfpkeEW5jasiFnI-yQ3R22c-4bll66g_InSDaqwDm8PJ3clV2n9Mk6uOVCnSNxMtiBOZrpgr2FIRJcuGYMSsXQ/s320/Screenshot%202023-02-15%20at%203.18.28%20PM.png" width="320" /></a></div><div style="text-align: center;"><i>That USD/SGD chart does <b>not </b>look pretty.</i></div><div style="text-align: left;"><br /></div><div><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: left;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Personally, I think we'll remain at this level for a long time. Nevertheless, you have to accept the risks when thinking about US stocks. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">So, after listing all these points, why do I say that UHREIT is mistakenly punished by the market?</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">It's because, to me, I think most of these risks are rather minimal. Forex risk is pretty much standard for every single stock. Many REITs and stocks listed on the SGX exchange have some sort of exposure to foreign currency. The USD </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">is</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> the world's reserve currency, after all. Additionally, UHREIT's asset valuation still has to drop by around 16% as a whole to breach the gearing ratio limit. That's a pretty high number which I find rather hard to materialise given the defensive and freehold nature of UHREIT's properties. Lastly, I am fine with dividends not growing much. Positive rental reversions are still a thing and reinvesting dividends is possible, even encouraged via the REIT's new scrip dividend scheme, which allows shareholders to receive their dividends in units. I think not many people are familiar with the US REITs, which may result in UHREIT being lumped together with the US Office REITs. I think even factoring the various considerations such as the REIT being a small cap, and other risks, it still has a rather significant upside. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Let's check if it's undervalued then, shall we?</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Sorry to burst your bubble, but there's not much information we can compare with when it comes to UHREIT. It's the first US supermarket-based REIT in Singapore, and it's only been recently listed. But I'm sure you can agree with me when I say that over double-digit yields is a steal given the fact that there are no significant pressing issues afflicting this REIT. The REIT is priced at x6.1 PE ratio, and I don't see it going much lower than current levels. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><div class="separator" style="clear: both; text-align: justify;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjTPQ5Rw0p1g2yK_ISVxw_1HaDPdqHqUZCWGWP7Wqxg6fGVYvhGg5sdMedTTTRb2tLSR5y6vNCJdJi4BplhtHR0XOkv6yktygnwhkcoI2J82FQeZo1Ak4fWHemYUrNO-oECw2xZQp8FwWDFxx0WCpaRwFmNvi5vu-esgsmZUpM7QA6BcTYU1sw3z-6eZA/s1370/Screenshot%202023-02-15%20at%203.42.13%20PM.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="986" data-original-width="1370" height="460" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjTPQ5Rw0p1g2yK_ISVxw_1HaDPdqHqUZCWGWP7Wqxg6fGVYvhGg5sdMedTTTRb2tLSR5y6vNCJdJi4BplhtHR0XOkv6yktygnwhkcoI2J82FQeZo1Ak4fWHemYUrNO-oECw2xZQp8FwWDFxx0WCpaRwFmNvi5vu-esgsmZUpM7QA6BcTYU1sw3z-6eZA/w640-h460/Screenshot%202023-02-15%20at%203.42.13%20PM.png" width="640" /></a></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;">The closest comparison I could find would be Supermarket Income REIT, which has taken a nasty plunge of around 25% after concerns about the UK's debts became widespread. Even after the current discount, it's still trading at a PE ratio of 8.70 and a dividend yield of 6.07%. Previously, notwithstanding UK-related drops, it would have traded a PE ratio of around 12. You can't tell me that the higher market cap warrants almost double the PE valuation. Even if you were to use the current limited data that we <i>do</i> have, it paints UHREIT in a favourable light. Net Property Income and Distributable Income have been rising with efforts being made to reduce gearing. Overall, UHREIT's performance has not declined whereas share price did. This indicates that it is technically historically undervalued.</div><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Overall, here are some of my parting thoughts. </strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">I think UHREIT is one of the best deals you can get in the Singapore market right now. The risk-to-reward ratio is pretty low with significant upside in both price appreciation and dividend yield. I am seriously considering going overweight on this counter and am planning to add more to it in the near future. My conviction in my investment thesis here potentially supersedes my confidence in Keppel Corporation, a blue-chip company. Overall, I think it's a solid buy, but I foresee the short-term price struggling if the Fed becomes more hawkish. Nevertheless, I'll be looking to accumulate if prices remain low. </span></p></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><b>Author's Note:</b></div><div style="text-align: justify;"><b><br /></b></div><div><div style="text-align: justify;">This was definitely my longest article to date, and I must admit that doing that much research demotivated me a bit. I hold a high level of respect for content creators who push out quality articles, videos and podcasts on a regular basis. Do comment if you gained some insights or enjoyed this article, thank you all!</div><div class="separator" style="clear: both; text-align: center;"><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt; text-align: left;"></p><div style="text-align: justify;"><span style="color: #0e101a; font-style: italic;"><br /></span></div><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><div style="text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Disclaimer: Please take everything published within this blog with a pinch of salt. Nothing I say here should be misconstrued as any form of financial advice whatsoever. In fact, I am probably the absolute last person you should approach for any sort of advice. All self-computed figures are calculated to the best of my ability, but I cannot guarantee they are 100% accurate.</em></div></em><p></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: left;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: justify;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Thank you for reading my blog, and I hope you have learnt something, no matter how seemingly minuscule. I would greatly appreciate it if you subscribe as such posts take a decent chunk of time to dish out, ciao!</em></p></div><div class="separator" style="clear: both; text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: justify;"><br /></div><div class="separator" style="clear: both; text-align: justify;"><br /></div><div style="text-align: justify;"><br /></div><div style="text-align: justify;"><br /></div><p></p><p style="background-color: white; box-sizing: border-box; font-size: 16px; margin: 0px; padding-bottom: 20px; text-align: justify; text-size-adjust: 100%;"><br /></p></div>Passive Loss SGhttp://www.blogger.com/profile/15231705917017776583noreply@blogger.com2tag:blogger.com,1999:blog-8854083309825062752.post-43276187932847211312023-02-14T22:28:00.004-08:002023-03-10T02:08:51.360-08:00Portfolio Update 15/2/2023<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> Hello all, KOPL here back with a second portfolio update. It's been one month since my previous portfolio review and I just wanted to provide some updates regarding my portfolio performance and thoughts regarding future purchases. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhV0pnjH2Eq1j-pNZsKfRxdpBuZnOIf1_UJ_Z2ACuHXm7mkYH3JJZCMSjEC7dDVrPfBWduIERXhY2SoIoOgAMKMJvq9M5FXt0R77YP_htBKbzzAYW_DaUd_vX4DuXVTCzAbq4UAOZeaWaovzumCEtfdzgInhsDikllQwt0gV-HfF27XHiR4H2y39s9rmw/s750/IMG_8842.jpg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="610" data-original-width="750" height="260" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhV0pnjH2Eq1j-pNZsKfRxdpBuZnOIf1_UJ_Z2ACuHXm7mkYH3JJZCMSjEC7dDVrPfBWduIERXhY2SoIoOgAMKMJvq9M5FXt0R77YP_htBKbzzAYW_DaUd_vX4DuXVTCzAbq4UAOZeaWaovzumCEtfdzgInhsDikllQwt0gV-HfF27XHiR4H2y39s9rmw/s320/IMG_8842.jpg" width="320" /></a></div><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: center;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Screenshot of my Tiger Account</em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">It is no secret that <a href="https://passiveloss.blogspot.com/2023/02/keppel-corporation-recent-drop.html" target="_blank">Keppel Corporation</a> has been the biggest drag on my portfolio's performance, which is quite a shame given that my conviction in it was the highest, as evident from the fact that it is my largest allocated weightage by far. At one point before the earnings release, I was actually up on it by around $60. Nevertheless, I am still confident in Keppel Corp and am looking forward to the results of tomorrow's Sembcorp Marine vote. This is a long-term hold that I am comfortable with seeing through till the very end lest there is a sudden negative development that would significantly impact the fundamentals. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">As you can also see, I have added 50 lots of Fu Yu Corporation to my portfolio at an average cost basis of 0.23 SGD per stock. It is a shame that I did not trust my gut instinct to purchase Fu Yu when it was lower, hovering around 0.215 SGD per unit. Personally, unless Fu Yu drops a considerable amount, I don't think I will be adding more to my stake any time soon.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">For United Hampshire US REIT, I am thinking of raising my stake in it. I think as of right now, it is probably one of the best deals you can get in the SGX market. A more or less stable REIT offering a high yield that has the potential to outperform the S&P500 performance at the current price. Do be on the lookout as I am currently undertaking a long and arduous process of penning down my investment thesis on UHREIT sometime soon, hopefully before their earnings report on Feb 23. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">In terms of the future of my portfolio, I am thinking of adding PSC Corporation and more UHREIT to my stake. I am just not exactly sure which stock will I acquire first, given that my cash on hand as of current is quite low. I think inflation will slowly creep back up again since I am of the opinion that the Fed is not being aggressive enough with their interest rate hikes. The US Labour Market has not felt the pain yet despite the recent rate hikes, which may leave demand-side inflation running rampant. However, after acquiring more of both stocks, should no interesting investing opportunities arise from the Singapore market, I will be looking into DCAing into VWRA for global exposure, as I believe that the US' outperformance will not last long. </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">Nothing lasts forever</span></em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;">. My slight shift away from dividend investing is due to the fact I feel that as a young investor with a long investment horizon, I should be a bit more aggressive with my investing. However, I believe that global equities will plunge soon attributed to the market's overly rosy outlook, being filled with unwarranted optimism. </span></p><b style="color: #222222; text-align: justify;"><br class="Apple-interchange-newline" />Think this article is something you'd want more of? Subscribe <a href="https://follow.it/passive-loss?leanpub" target="_blank">here</a> using your email to get notified about my latest blog articles, I'd truly be grateful!</b><p style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background: transparent; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Disclaimer: Please take everything published within this blog with a pinch of salt. Nothing I say here should be misconstrued as any form of financial advice whatsoever. In fact, I am probably the absolute last person you should approach for any sort of advice. All self-computed figures are calculated to the best of my ability, but I cannot guarantee they are 100% accurate.</em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Thank you for reading my blog, and I hope you have learnt something, no matter how seemingly minuscule. I would greatly appreciate it if you subscribe as such posts take a decent chunk of time to dish out, ciao!</em></p>Passive Loss SGhttp://www.blogger.com/profile/15231705917017776583noreply@blogger.com0tag:blogger.com,1999:blog-8854083309825062752.post-24141595308658891402023-02-06T05:35:00.002-08:002023-03-10T02:09:00.887-08:00Keppel Corporation Recent Drop - Unfounded or Valid Concerns?<p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Hey all, just wanted to provide my perspective on a recent update of my absolute biggest holding, </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Keppel Corp (SGX: BN4)</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">. If you're anything like me, then you're checking the stock market on a regular basis, hell, perhaps even </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">daily</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">. Now, imagine my surprise when upon opening the SGX tab last Friday, when I was greeted with the scene of Keppel Corp being the top loser, dropping a whopping 5% from 7.65 to 7.27 in a single day. Suffice to say, my portfolio wasn't exactly a pretty sight. Obviously, there's a reason for this; Keppel's earnings report.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">If you've been </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">hanging out at the right places</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">, then you'll be aware that many were expecting Keppel to release stellar earnings accompanied by a fat dividend. Alas, reality usually doesn't pan out the way we want it to. In FY2021 H2, Keppel declared a dividend of 0.21 SGD per security, whereas fast forward to today, that same half's dividend dropped to 0.18 SGD per security. I'm quite sure that the recent price correction can be attributed to the fact that the </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">initial </em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">price rise came about from higher and higher expectations. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">So, let's take a look at Keppel Corporation's recent earnings report, and see if fundamentals are indeed deteriorating. </strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEi0R5wW4KyJY3jLgYynS_xddWVxR90FNfvN2fQ276vFmSbE3Gii4k1ppWXNIg7lyffEzOMq4ixVSEnSaoQUK7mvoElyxT_ezd0B7t33KvtndymGabIPBCj7GIJBG2FLjWKnnFQNuiGIwPx8xxvf_aahjcR81abeHGj97J5P_0o-iDg9HStJAAVv77BLtg" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="784" data-original-width="1274" height="197" src="https://blogger.googleusercontent.com/img/a/AVvXsEi0R5wW4KyJY3jLgYynS_xddWVxR90FNfvN2fQ276vFmSbE3Gii4k1ppWXNIg7lyffEzOMq4ixVSEnSaoQUK7mvoElyxT_ezd0B7t33KvtndymGabIPBCj7GIJBG2FLjWKnnFQNuiGIwPx8xxvf_aahjcR81abeHGj97J5P_0o-iDg9HStJAAVv77BLtg" width="320" /></a></div><br /><p></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt; text-align: center;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Snippet of Keppel Corp's recent annual results document</em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Revenue remained virtually unchanged, hovering at around 6.6 billion SGD, whereas operating profit dropped from 1129 million SGD in FY2021 to 565 FY2022, what gives?</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEjkQYgZ08tnrZNfDOylRjM5X2VAV9CT4lCHlCXGEne_jQTWVXs29RJANttc5GsKpQEDyOlNgFKkafNPX8-ZoxAV5u4Ov8q7oLci1TehQ-0zSahpwdMHEeZe6tLe3ZQu_n-cd7fL_rLOUeDXbXkhtCcmgVmZ-l32ernf5Ew0pCHOfWHsTt7ccj1Sguwg2A" style="margin-left: 1em; margin-right: 1em;"><img alt="" data-original-height="822" data-original-width="1238" height="212" src="https://blogger.googleusercontent.com/img/a/AVvXsEjkQYgZ08tnrZNfDOylRjM5X2VAV9CT4lCHlCXGEne_jQTWVXs29RJANttc5GsKpQEDyOlNgFKkafNPX8-ZoxAV5u4Ov8q7oLci1TehQ-0zSahpwdMHEeZe6tLe3ZQu_n-cd7fL_rLOUeDXbXkhtCcmgVmZ-l32ernf5Ew0pCHOfWHsTt7ccj1Sguwg2A" width="320" /></a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><p></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Materials and staff costs remained roughly constant, whereas Depreciation decreased rather substantially by 29%. Additionally, the expected credit loss also decreased considerably by around 88.6%! By all accounts, one would have expected Keppel to </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">outperform</em><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> </strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">FY2021 due to lower costs. Upon reading further, would one then find the reason for the large discrepancy between FY2021 and FY2022 performance; The "other" operating income section. From $855,476,000 in FY2021 to only $28,343,000 in FY2022. Safe to say, this is probably the reason, but what does it mean? Well, it simply means Keppel received fewer gains from the divestment of assets, which it had done a lot of in FY2021. Hence, the drop in EPS and dividend is rather in line with my expectations. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">When reviewing segment performance, it is no surprise that all four segments: Asset Management, Urban Development, Energy & Environment and Connectivity have all turned a profit. Although Keppel Offshore & Marine, soon to be divested, turned a profit instead of a loss this year, I still find the sale of the division rather desirable. Even with rising oil prices, I believe that the long-term trend of clean/nuclear energy overtaking oil, coupled with the weakening stranglehold OPEC has on oil prices due to members "backstabbing" each other, will result in decreasing margins, assuming oil </span><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">is</em><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> profitable for that year in the first place. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Asset Management, which has been the largest net profit contributor by far, has done relatively well, increasing by around 3% YoY, attributed to higher management fees from new acquisitions and funds raised by its subsidiaries and increased Asset Under Management (AUM). I find Keppel's goal of reaching $200 Billion AUM moving forward to be rather ambitious.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Energy and Environment net profit approximately doubled YoY to $241 million, with a high emphasis on renewable energy. I suspect that this profit may taper off moving forward as I see electricity prices not being able to sustain their current level in the foreseeable future. That being said, I find that Keppel will indeed be able to achieve its goal of 7 GW of renewable energy assets from its current 2.6 GW and that renewable energy will continue to be a valuable segment of Keppel's portfolio in the future. I hope that Keppel continues to invest in utility assets since I am of the view that it will contribute immensely to recurring income. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">For Keppel's connectivity segment, I have nothing much to say. I must admit that the segment's performance has been rather commendable, with M1's contributions to earnings rising by 32% YoY to $75 million and having almost 95% coverage for 5G technology already set in place. However, I must say that I don't really like the telecommunication industry and do not find it worth venturing into, given its high level of competition and consequently cutthroat, slim margins. On the flip side, I find that Keppel DC REIT is an invaluable asset to Keppel since it is rather defensive. No matter what, digital storage </span><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">will</strong><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"> be needed in the future, and companies will continue to use data centers for two reasons: Firstly, the cost of a company setting up its own data center is simply too much to be worth it. Secondly, it is extremely troublesome for companies to switch data centers. This gives Keppel DC Reit a high potential for positive rental reversions and strong occupancy. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Lastly, we have the Urban Development segment, which is probably my least favourite segment. I subscribe to Keppel's 2030 Vision, emphasising an asset-light model and recurring income - Urban Development is none of that. It performed poorly this year attributed to the China COVID lockdown, resulting in lower en-bloc sale gains. I foresee the segment to remain stagnant despite the lifting of the China lockdown, as I feel that the China property market has become oversaturated, resulting in large headwinds for the division.</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">In terms of Keppel's overall performance, I am delighted to see that recurring income has doubled to $560 million. Whether this trend will continue is up for discussion, as I admit that I do not have sufficient accounting knowledge to properly assess and project Keppel's future performance. Notwithstanding this, I do believe that Keppel will continue and grow as an economic powerhouse in the future, and have strong convictions in its 2030 Vision. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><strong style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Brief Overview of Keppel Corp's Share Valuation</strong></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">As per updated SGX calculations, this is the current valuation of Keppel Corp Shares:</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Price/Book of 1.098</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Price/Earnings of 14.038</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Dividend Yield of 4.545%</span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Personally, I find that the market has commensurately punished Keppel Corp's shares due to its latest earnings report. I find that the recent share price climb was simply based on high expectations which may have deviated from reality. However, I still feel that Keppel has a high upside going forward, and am looking forward to my potential dividend in species of Sembcorp Marine Shares. Should Keppel drop below $7, I will do everything in my power to further accumulate. I must add that it seems like analysts have also shared my view, with Keppel earnings being 101% of their earnings forecasted. </span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><b>To answer the question in the title: No, Keppel's fundamentals have not deteriorated in my opinion!</b></span></p><b style="color: #222222; text-align: justify;"><br class="Apple-interchange-newline" />Think this article is something you'd want more of? Subscribe <a href="https://follow.it/passive-loss?leanpub" target="_blank">here</a> using your email to get notified about my latest blog articles, I'd truly be grateful!</b><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><span data-preserver-spaces="true" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;"><br /></span></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Disclaimer: Please take everything published within this blog with a pinch of salt. Nothing I say here should be misconstrued as any form of financial advice whatsoever. In fact, I am probably the absolute last person you should approach for any sort of advice. All self-computed figures are calculated to the best of my ability, but I cannot guarantee they are 100% accurate.</em></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><br /></p><p style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #0e101a; margin-bottom: 0pt; margin-top: 0pt;"><em style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 0pt; margin-top: 0pt;">Thank you for reading my blog, and I hope you have learnt something, no matter how seemingly minuscule. I would greatly appreciate it if you subscribe as such posts take a decent chunk of time to dish out, ciao!</em></p><p></p>Passive Loss SGhttp://www.blogger.com/profile/15231705917017776583noreply@blogger.com0