Friday, 15 August 2014

My Portfolio – 2Q14 Post Findings and Views

For the past weeks, my time was swarmed by listed companies’ results announcements. In the main, are companies’ post results reviews within my portfolio. For more information on my portfolio, please refer to my earlier post “Portlio Mid-Year Review”.

Since that article posting, I had made notable changes to my portfolio. I added ARA Asset Management, China Merchant Holdings Pacific, KrisEnergy, accumulated more of Comfort Delgro, and divested completely Swissco and latest divestment being BRC Asia only few days ago, after it reported a set of poor results.

Anyway, the SGX companies’ results announcements all started three weeks ago. I reported Rolf’s views on Mapletree Log Tr, Fraser Com Tr and Suntec REIT results. Last weekend during National Day, I also gave an account on Vallianz and Nam Cheong post results findings. My article on Asian Pay TV Tr few days back was also posted straight after my turnout at the result presentation session. For all these results/findings, please refer to “Related Posts” at the end of this article.  

Companies in the spotlight last week were AIMS AMP Cap REIT, BRC Asia, SGX, ARA Asset Management, Starhub, Chip Eng Seng, China Merchant Pacific and Lippo MIRT.

Companies with results announced this week are Super Group, KSH Holdings, Overseas Education, Courts Asia, Comfort Delgro and Kris Energy. Croesus RTr will announce financial results on 28 Aug.

Next up, I will also write a separate post on Raffles Medical because it is one stock that I had grew affection to. This is also the same company that seen its share price resisting gravity by more than 30% since the start of the year. Raffles Medical already announced its latest quarter results end last month.

Rolf’s Summary

Overall I am happy with results. 

On the offshore side, Vallianz and Nam Cheong continue to outperform, and operating on cruise control mode.

For yield stocks such as Asian Pay TV Tr, AIMS AMP Cap REIT, China Merchant Pacific, Fraser COT, Lippo MIRT, Mapletree Log Tr and Suntec Reit, I had set a conservative target of minimum 5% dividend yield. So far, all are on target. So I am happy.

In the construction and property segment, Chip Eng Seng performs extremely well with bottom line soaring in percentage of hundreds. This is despite an overall softer outlook for the industry it is in. On the contrary, BRC Asia which is also in the construction sector suffered due to competitions. In view of the dimmer sector outlook, and with company weakened fundamentals, I divested BRC with a minor loss offset by dividend paid to me last month.

SGX and Starhub are stocks in my SRS account, investing on a longer horizon up to retirement – maybe?. Their short term results do not bother me too much.

Finally ARA Asset Management is one stock that even if share price tumbles (it did not of course), I can still sleep very well, quite certain that it is only temporary, unless something catastrophic really happens. This belief stems from the confidence I have on its leader John Lim and partners. 

For now, below is the report card of companies who announced their results last week. For companies announcing their results this week, I will follow up with a post later in the week hopefully if time permits.

Results FY Ending Jun 2014


• DPU for quarter up 2% to S$2.5c per unit yoy.
• Gross revenue 1Q15 up 11.6% to S$27.4 million yoy.
• NPI 1Q15 up 23.9% to S$19.5m yoy.
• Distribution to Unitholders in 1Q15 up 26.9% to S$15.8m yoy.
• Gearing 32.0% up from 31.7% in the previous sequential quarter, and a big increase from 25.4% a year ago.
• Weighted average debt maturity of 3.2 yrs.
• WALE 3.76 increased from 3.25 yrs yoy.
• Higher portfolio occupancy rate of 95.5 per cent, compared to the Singapore industrial average of 90.7 per cent.
• A weighted average land lease expiry of 41.8 yrs.

Rolf’s Views

Like: DPU stable. NPI still increasing. Lower property expenses.

Dislike: Dilution by placement and rights issues, adversely affecting DPU despite NPI increase. Leverage increase to 32% vs 25% a year ago.  

Outlook: Growth from Phase 3 of 20 Gul Way and AEI at 26 Tuas Ave 7. Rising interest environment can be dampening.

BRC Asia

• 9M14 & 3Q14 net profits fell 18% & 27% yoy to S$21.6m & S$6.5m resp.
• 9M14 & 3Q14 rev down 7% & 6% yoy to S$296.4m & S$98.5m resp.
• 9M14 & 3Q14 net profit margins yoy, fell from 8.26% to 7.29% and from 8.58% to 6.59% resp.

Rolf’s Views

Dislike: Low barrier of entry leading to high competitions.  Lower profits due to low margins. 

Outlook: Overall property market decline with the exception of office space hurts. Insufficient replenishment of projects in the pipelines. Divest.


• FY Operating profit down 11.4% to $371.7m yoy.
• FY Net profit down 4.8% to $320.4m yoy.
EPS 30.0c down 4.7% from 31.4 cents a yr ago.
Final dividend of 16c per share unchanged. Total dividend of 28c for full year unchanged too.
• This is 4% yield and represents a 93% (89%) pay-out of the FY14 reported net profit.
• FY revenue was 4.1% lower at $686.9m yoy, following lower revenue in our Securities business. All other businesses recorded higher revenues compared to a year earlier.
Cash balances as of 30Jun14 was $606.8m vs $613.0m, from which the FY14 final dividend of $171.2 m will be paid.
• Total equity was $922.1m up 3.8% from $888.6m a year ago.

Rolf’s Views

Like: Strong cash position. Stable dividend of 28c, with a payout ratio of 93%. Revenue increase for all other businesses other than securities. Equity increase yoy.

Dislike: High operating expenses, lack of strategic stimulus to increase profits going forward.

Outlook: Potential increase in volatility in the next twelve months due to rising interest rate and geopolitical risks will increase trading volume. Odd lots trading next year will also have positive boost for retail trading.

ARA Asset Management

• AUM S$25.8b end 1H14 compare to S$25.1b end Dec13.
• 1H14 revenue up 23% to S$78.6m yoy due to management fees increase resulted from various AEI undertaken in the REITs it manage.
• Recurrent management fees up 9% to S$61.0 million.
• 2Q14 net profit up 20% to S$38.7 million.
• Higher revenue from recurrent management fees, acquisition, divestment and performance fees, finance income and other income.
• New contributions from the Korean Real Estate Investment Trusts, private funds MIP and SIP.
• Interim dividend of 2.3c, unchanged yoy.

Rolf’s Views

Like: Revenue, net profits and AUM never stop growing since inception, even during crisis. DPU 2.3c same each yr since 2009. Confidence and trust in CEO John Lim and its partners Straits Trading and Cheung Kong Holdings.

Dislike: High PE of 18 and PB of 5.

Outlook: Continual growth from Suntec REIT and establishment of new funds to invest in Asia (esp Korea) and Australia. Interest rates rise can damp growth though.


• Revenue 1H14 down 2% to S$1,148m yoy.
• EBITDA down 2% to S$365m yoy.
• EBITDA margin as a percentage of service revenue was 34.0% (2Q14) and 33.3% (1H14).
• 1H14 free cash flow up to S$166m from S$156m while cash capex was S$162m up from S$137m a year ago.
• Declare interim cash dividend of 5.0c per share for 2Q14. Intend to maintain annual cash dividend payout of 20.0c per share for FY2014 which approximately 4.9% yield at share price of S$4.10.

Rolf’s Views

Like: Stable yield and stable revenue. The recent 4G Speed Boost fee should drive higher mobile service revenue growth in FY15-16. Expect FY14-15 revenue growth from mobile division between 3.2-4.6%.

Dislike: Increase competition from Singtel and M1 esp on Broadband and Pay TV. The company does not have any particular stimulus or strategy for growth going forward.

Outlook: Pretty neutral in the short term. Analyst does not expect increase in dividend of 20c per share for the next 3 years. In the long term, positive on the telco wireless industry in Singapore, where we see rising data prices and reduction in handset subsidies driving margin improvement. However competition is also intense from Singtel and M1 reducing ARPU.

ARPU : Average revenue per user = total revenue divided by total no. of subscriber.

Chip Eng Seng

• 1H14 Rev up 34.2% to $321.4m
• Mainly due to several on-going projects being at their active stage of construction.
• 1H14 Net profit up 249.9% to $40.2m yoy
• Mainly due to higher profit from all three key divisions.
• Healthy earnings expected to be sustained for the rest of FY2014
• Several projects expected to TOP in 2014, leading to the recognition of revenue and profits.
• Belvia and Alexandra Central are expected to be completed in 3Q2014 and 4Q2014 respectively.
• Alexandra Hotel ready in 2015.
• CES Centre (f.k.a. as San Centre) renovation expected to be completed by end 2014 generating additional source of rental income from 4Q2014.

Rolf’s Views

Like: the company diversification of business from construction to property. The property market is further diversified into regions such as Singapore, Australia and Vietnam, and into sectors of residential, commercial and hospitality. More revenue recognised in the coming 2H14.

Dislike: Softer property outlook and increase labour and material costs may hurt.

Outlook: Various projects TOP up to 2018 should continue to contribute to top and bottom line. Recent acquisition of Fernvale land for residential development provides growth into a longer future.

China Merchant Pacific

• For 2Q14, net profit up 42% to HK$249.3m qoq
• For 1H14, net profit up 31% to HK$397.3 million.
• Interim dividend of 3.50 cents up 27% from 2.75c per share yoy.
• Committed to payout ratio of >50% of underlying net profits.
• Revenue up largely driven by the revenue growth from the Yongtaiwen Expressway which accounted for approximately 79% of total Group revenue and the increase in bank interest income.
• Net profit is higher mainly due to a higher profit contribution from the toll road operations and the recognition of an exceptional gain of HK$66.3 million from the disposal of the Group’s property development business in April 2014.

Rolf’s Views

Like: High dividend yield of 8% in spite of the continual growth potential of the company. The acquisition of the Jiurui Expresway recently also signifies the continual growth ambition of the company.

Dislike: Outstanding convertible preference shares to dilute shareholder interest. Expiry nature of concession of road tolls, leading to constant investment of cash.

Outlook: Positive on the outlook of the overall toll road industry in China, back by one of the largest state owned companies - China Merchant Group. 

Lippo MIRT

• 2Q14 gross rental from property portfolio increased by 4.8% yoy in IDR terms.
• 2Q14 NPI declined in SGD terms by 17.7% yoy, due largely to the depreciation of IDR.
• DPU of 0.68c for 2Q14 same qoq.
• DPU represents a rolling 12-mth yield of 7.0%
Weighted Average Maturity of debt facilities was ~2 years, with no refinancing required until July 2015.
Gearing of 28.3% as at end Jun 14.
Overall occupancy of 95.3% as at 30 Jun14
• Portfolio Occupancy of the shopping malls remained high at 95.3% well above the industry average of 82%.

Rolf’s Views

Like: Continual growth in gross rental. Yield of 7% above most REITs. Low gearing with headroom for growth. Strong sponsor.

Dislike: IDR Currency instability.

Outlook: Growing middle class from Indonesia should continue to trigger the rise of the current low retail rents in Indonesia. Indonesia's economy expected to grow by 5.3% in 2014. Positive about the presidential win from Jokowi from an economical point of view.

Related Posts:


  1. Hi Rolf

    Wow that is a nice piece of summary you have put there.

    For china merchant Pacific, I think the convertibles are accretive at around 1.14 there which is why I suspect the management is trying to boost its share price higher so that the convertibles can be exercised. At current price I think its still a steal. Im thinking of adding them further this month.

    Btw on a separate note are you accountant or finance related by profession?

  2. Hi B,

    Thanks for the compliment. I am not in account/finance, instead I am engineer trained and work in the oil and gas industry started with engineering/project background then sales/management (last 8 yrs).

    For China Merchant Pacific, once the convertibles are exercised, wouldn't it mean dilutive to unitholders? If you do not mind, can I send you a personal message of some queries on this? How can I contact you or if you can drop me a mail at

    Thanks, Rolf.

    1. Hi Rolf

      Here's how I see these convertible bonds play out.

      Back then in 2012 in their acquisition of Beilun Port Expressway, they chose to issue a convertible bonds (with maturity in Nov 2017 and a put option that the bondholders can exercise requiring the company to redeem the bonds after Nov 2015 to maturity) instead of raising equity. This kills two birds at one stone because not only are their cost of financing low at 1.25% but also offers the bondholder to convert into equity should the company continue to do well. So if the price fails to recover beyond the initial conversion price at $0.84 (now at $0.826) anyway, they would treat this as low cost of financing anyway.

      The new conversion price are being dictated every year by its stock price as well as the difference in dividends paid this year vs last year. So back then in FY2013, the new conversion price are being calculated at $0.84 x ($0.935 - (0.07-0.055))/$0.935 = $0.826. Based on this formula, it is in the company's interest to boost its shares as high as possible as the new conversion price would become higher. One way to do so is by dishing out higher dividends to appeal retail investors to notice the stocks and push its price higher.

      Even though there will be dilution to the existing ordinary shareholders if the convertibles are being converted, it is still in the company's interest to push its shares as high as possible. First, the conversion will allow gearing to go down and second the conversion will increase the percentage of free floating by outside the parent group (who now control almost 82%). Anyway, assuming fully diluted, the FCF they generated will still able to cover for its dividends paid out.

      A few days ago, there are about HKD$8million bonds that were converted so I suspect we could see more of this coming out from now until Nov 2015 when the bondholders are in "power"

      Last but not least, the company is currently trading below its NAV which is at around HKD6.26. Taking exchange rate of 6.23, the NAV would be around $1. As long as the shares are trading below its book value, it is quite unlikely that the parents would exercise their RCPS.

      Hope this helps.

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