OCBC and Scrip Dividend News

My dad has some OCBC shares and this notice caught my eye. OCBC is offering $10.55 per share when its market price is about $11.01 now. 

Honestly, I am not very inclined to take up the offer as I believe stocks will continue to drop this year due to the continued economic slowdown and trade war.

Will you be taking up OCBC's offer? Let me know in the comments!

Trade War Thoughts

As I am writing this, the US market is slightly red and treasury yields are edging down, signifying some flight to safety assets. The drama ensues where the US decided to ban Huawei from doing business with them, which I think will be further detrimental to the unfolding of the trade war. This is extremely likely to further deteriorate bilateral relations between US and China.

Honestly, I think the trade war is indeed room for worry in the short term, but I take comfort in the fact that Trump will not be in office forever (even if he gets re-elected) and someone who is less protectionist and friendlier towards China may eventually emerge in office (maybe an exit strategy then).

Therefore, I see this as a platform to enter battered stocks with good fundamentals. One of which I identified is Suntec Reit, and its current price stands at 1.81 which is still respectfully below its NAV of 2.09.Another stock which looks battered and hovering near its 52-week low (9.14) is SIA and also below its NAV of 10.36.

A quick glance at its recent financial presentation reveals a drop in operating profit mainly attributed to rising fuel prices. But since fuel prices are hedged to some extent in their presentation, the main point we should be looking at is if the volume of travelers will continue to increase and if the trade war will affect the company.

I also picked up a very insightful article here which I felt that some points here were very relevant. The basic premise here is that a trade war will cause incomes to drop which might lead to decreased air travel. Air cargo flows will also be reduced as the demand of air cargo drops due to increased costs.

These two stocks are worth considering in my opinion, but please let me know if you have any insights and/or comments. Another person's perspective is always very welcome.

Happy Vesak Day!

Suntec Reit Ideas

Amidst the market movement this week, I have been on the hunt for any stocks to buy to add to my portfolio. I am sure the most prominent piece of news that caught everybody's attention was the two Trump tweets which knocked off $1.3 trillion off the global markets this week, where tariffs on USD 200 billion have already been effected. Recently, Trump even said 'a no rush' about the China deal. In the worst scenario, tariffs might lead to a continued slide in Singapore markets (it caused quite a drop this week) but we will see.

One stock which caught my eye was Suntec Reit, which looked cheaper as compared to its peers (it is currently trading at a price of 1.79 as of 10 May 2019.

Here is the performance for this quarter here.

Source: Suntec Reit 1Q 2019 Financial Presentation

Net Property Income dropped from last quarter, where possible reasons could be the depreciation of AUD against SGD and lower NPIs from its constituents (Suntec City and Suntec Singapore). Distribution Per Unit remains constant with about +0.04% y-o-y. Furthermore, office accounts for 66% of NPI and Singapore accounts for 85% of NPI. Net Asset Value stands at $2.09 which gives us a 30 cent discount over its current price. In terms of interest rate matters, average cost of debt is 3.04% and 77% fixed. However, I think this will largely depend on the Federal Reserve interest rates, which has yet to see a standstill with Trump.

Furthermore, looking at the occupancy numbers, Weighted Average Lease Expiry (WALE) is 2.24 years for Singapore and 5.37 years for Australia. Longer WALE might be more predictable and stable but since the bulk of money comes from Singapore (85%), a 2.24 year WALE may be worth zooming in to see if the economy will continue to strengthen beyond 2020 (or weaken).

I will be looking to buy the stock at a favorable price, where its last 52-week low was at 1.63 and I did have the intent to buy. But we will see again.