Monthly Review- January 2011

The start of the new year brings new hopes and new goals to all investors, including myself. From the analysis of most analysts, 2011 will be a good year for equities investors as interest rates will remain low, and with the tightening measures aimed at clamping down properties prices in Singapore, equities seemed to be the only avenue for investors to park their money.

At the beginning of the month, STI revisited the high point above 3300 due to improved sentiments on the recovery of the US economy. Things were looking positive and positive sentiments filled the air. It was also at this point of time when any negative news will bring about a correction as investors take profits off the table gained from the rally. Indeed, soon enough China announced its tightening measures again as inflation rose and brought prices of food and commodities to new highs. This announcement gave investors the reason to realize their profits and that cause the market to tank. Things were worsen with the news of social unrest in Egypt which may spread to the rest of Middle East countries.

This month, I sold part of my holdings in UOB Kayhian and all my holdings in Suntec Reit. UOB Kayhian has a great run up in share price, benefited from the buyover bid of Kim Eng by Maybank at a premium price. With this news, the share price of UOB Kayhian shot up by 8.7% in a short period of 3 days. I decided to take some profits off the table to reduce my average holding cost as well as retain some holdings so that I can further benefit from its dividend payments and further possible capital appreciation in the future.

Suntec Reit was a counter that I have held on for more than 1 year. In the year, I have collected a bountiful dividend of about 9.0% based on my buying price. Although the capital appreciation has also reaped in much profits for me, I decided to sell off all my holdings due several reasons stated in my previous post.

In addition to the realized profits from the sale of counters, it is also the quarterly earnings reporting season. Mapletree Logistic Trust has announced a total dividend of $0.0155 per share for the quarter. This is the same as that of previous quarter, showing that their dividend payment is sustainable and there will be room for dividend yield growth with more acquisitions completed in this quarter. Consequently, sister share Mapletree Industrial Trust announced a dividend of $0.0152 per share. This is much higher than the initial proposed dividend payout, signifying the optimism in its future prospects. However, as I am only holding 1 lot from IPO, I will hold on to it to collect dividends until the share price rise to a very high level.

First Ship Lease Trust has also announced a dividend of USD 0.0095 per share. With the proposed exchange rate of US $1: $1.2772, that equates to $0.01213 per share. The sustainable payout is good news to me as the dividend payout is gradually making up for the losses from the drop in share price. However, there seems to exist a trend in the share price of First Ship Lease Trust. Right after the declaration of dividends, its share price will tumble back to the low $0.40, while before the announcement date, there will usually be a run up in share price. This may present an opportunity for me to do further cost averaging down in the near future so that I can possibly benefit more from the share run up.

Furthermore, Parkwaylife Reit has declared a dividend payout of $0.0238 per share for the quarter. This is a huge increase compared to the previous quarter due to the profitable acquisitions of nursing homes in Japan. I believe more acquisitions may be in the pipeline and in the event of any placement, I will definitely increase my holdings further.

Overall, this month has been a rollercoaster ride. At mid of the month, my profits rose steadily, but it took a dive at the second half of the month, wiping out all of my profits and even registering an unrealized loss compared to the previous month. I hope the correction period would be soon over after the lunar new year season. During this period, I will continue to look out for undervalued stocks due to panic sell.

My Current Portfolio:

Lessons learnt: Value investing requires patience and capital. Having the capital but without patience will just end up in buying the right stocks at the wrong time. Have the patience but no capital will result in an opportunity missed. Hence always try to maintain a backup fund and patience for possible value investing.

Suntec REIT (17th Nov 09 to 24th Jan 11)

Suntec Reit always had a strong foothold in Singapore. With its exposure in the retail and office sector, it provided me with the diversification that I need. In addition to that, Suntec Reit also has a good history of above average quarterly dividend payout. All these attractive factors made Suntec Reit an irresistable counter to invest in for the long term for both possible capital appreciation and bountiful dividend payouts.

However, not all was smooth sailing. It all started out due to greed. Having seen the promising rise in the share price of Suntec Reit, I committed the mistake of chasing after the share price and buy at an all time high of $1.35 in 2009. As I thought that the share price has more room to rise, it all turned out to be a wishful thinking of my part. It was proving to me that greed blinds, as at that point of time, all indicators have clearly shown that Suntec Reit was in a seriously overbought situation and a much awaited correction could hit anytime. However, instead of taking notice of all the signals presented, I took the plunge and bought it at the high price. Soon enough, Suntec Reit's share price took a turn, went south and remained below my purchase price for an extended period of time.

At that point of time, I saw much prospects in Suntec Reit due to the faith that the recovering economy will boost the retail and office sectors, which Suntec Reit had a part of the pie. Hence even though I am suffering from paper losses at that point of time, the good prospects and promising dividend payout gave me faith to hold on this counter.

Throughout these fourteen months holding this counter, there were ups and downs in its share price. Opportunities presented themselves for me to average down my purchase price, but I dare not increase my exposure in this counter. Luckily, the efforts and patience paid off as the share price steadily climbed northwards. This is especially encouraging with the announcement of the acquisition of one-third stake in MBFC, which will increase Suntec Reit's foothold in the Grade A office sector.

However, as time passes, risk-reward ratio seemed more and more unfavourable as share price continues to hit new highs since the crisis. This is aggravated by the fact that the quarterly results all these while have been rather disappointing, and its DPU had not improve all these quarters. Consequently, the indicators at this point of time is once again pointing in the direction of the overbought region, which gave me a sell signal. Therefore, all these made me come to the conclusion that it is time for me to realize my gains on this counter as fundamentals of Suntec Reit are becoming unattractive at this point of time.

My thoughts at that time: I was not too hesitant to realise my gains in this counter as its results for Q4 2010 has been rather disappointing. In addition, with the total gains of more than 20% from both capital appreciation and dividend payout, I am contented with the profits.

Lessons learnt: Do not be deluded by greed. Always remember the initial reason for the purchase of the counter. In the event that the fundamentals have changed, do not hesistate to realise the gains and channel the funds to more profitable areas.