Accumulating Suntec Reit

 Thought this was interesting to see the counterparties for now- entered again at price 1.46, my second tranche. We shall see again..

Cheers!

Suntec Reit for Now

 Another bullet out to Suntec Reit this time! Revisited my ideas in my post here where I wrote a writeup about it and I am still hopeful for its performance. For now I am just slowly adding stuff which I feel are overvalued, in this case Suntec Reit below NAV of $2+. Fingers crossed!

Coronavirus and Thoughts

I haven't been posting in a while because of my new job, but I think it is always good to take a step back and formulate my thoughts about recent news.

The best incident to fall back on while considering this issue would be the 2002-2003 SARS outbreak because both incidents are largely similar: SARS started around November 2002 and ended around May 2004. A quick look at the STI:

We can see that from the period from November 2002 to May 2003 there was a clear downtrend in the STI before rebounding decently into 2004.

Currently, the STI seems to be in the infant stage of a downtrend which suggests some potential buying opportunities. I came across this article which aptly compares the two outbreaks.

Further points to take note:

1) China's economy is much bigger now than it was during the SARS outbreak period so the impact is gonna be pretty painful as trade between China and Singapore is quite extensive.

2) Banks will be affected as they have exposure to China; OCBC has the highest exposure here.

3) Airlines are affected too as flights are being cancelled here and there. Example: Hong Kong Airlines being on the verge of bankrupt. Note to self- SIA.

4) REITs with China exposure are already feeling the pain - Mapletree NAC, CapitaChina, Sasseur.

5) Generally, retail should continue to deteriorate as everybody will most likely be minimizing their outside movements. (CapitaMall, Suntec, Mapletree Com, Starhill)

But otherwise, I think it would be a good time to look at the market to consider entry points. Cheers!

G20 Today!

Quite meaningful to me, since I just came back from Osaka 2 weeks ago. This article really sums up how I feel about G20, probably another round of photos and talk but no action. Interestingly, the article is inclined towards holding gold and real estate, which may prove to be safe havens during a potential recession.

The debt in the market is so far quite worrying too which further supports the proposition of holding safe haven assets.

Personally, I am still waiting for a downturn which might happen sooner than we think. Singapore might not be spared too, where GDP growth will worsen this year. This can contribute to the downturn.

On a superficial glance, REITs now look very overpriced and I am steering clear of my previous picks of Suntec REIT and Mapletree NAC.

Still waiting while holding bonds!

Tariffs Thoughts

Currently I am in Osaka now but I still have some thoughts about the incessant chain of tariffs by Trump.

But first, a quick snapshot of Osaka Castle!

Now back to my thoughts...

Recently, Trump also labelled Singapore as a currency manipulator which was pretty interesting. It also mentions about high saving rates and low consumption rates in our country. I did some quick research about Singapore policy here and essentially, Singapore uses exchange rate policy to manage the economy instead of interest rates (which is left to the free market) which may explain the huge number of foreign exchange purchases with respect to GDP.

Personally I don't think Singapore will be adversely affected in the short term as we have a trade deficit with the US (momentarily sparing us their wrath) but I think Singapore will continue to be affected by US tariffs on the rest of the world. China is also one of Singapore main trading partners and if poor sentiment ensues, we should continue to see downward pressures on STI.

Going to my previous calls, SIA is at 9.11 and Suntec Reit edged slightly higher at 1.82. Both are still on my watchlist and I am quite tempted to initiate positions.

What do you think?

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.