Monday, 24 July 2017

Netlink Trust Strategy Update



I previously highlighted my strategy on Netlink Trust in my post here where i would like to buy 100,000 shares of Netlink. Here is the update for the trades done last Friday.

•  Mrs IPO managed to be allotted 13,000 shares from her application of 50,000 shares over the ATM. The IPO, as expected, opened weakly and I managed to get an additional 37,000 shares for Mrs. IPO at 80c. The entry price is a tad better than the ATM price

•  I also mentioned that i didn't apply for the Netlink Trust as i would like to use the cash from my SRS account. I managed to buy 25,000 shares at 80.5 cents for my SRS account on Friday but my other buy queue at 80c was not filled (I queued at different times from Mrs IPO). I was hoping that the stabliisation manager would run out of bullets and the price will drop further πŸ˜‚ In any case, i will decide on the balance 25,000 shares later depending on how the share price perform in the coming weeks.

Interestingly, both Daiwa and DB issued buy calls on Netlink NBN Trust in the last few days....


On a related note, since i have utilised around $20k for the Netlink purchase above, I have decided to top up $15,300 into my SRS account today for this year's tax deduction. This will bring my cash balance back up to around $69,000. 

Happy SRSing

Sunday, 16 July 2017

My "Strategy" for Netlink Trust IPO

I gave a one chilli rating for Netlink NBN Trust IPO this week. The write up is here.

Business Trusts haven't done as well as REITs in general in SingaporeπŸ€”  - probably because Business Trust started on a wrong foot and left a bad taste on investors. The first business trust to be listed was First Ship Least Trust and that left a very sour taste on investors as evidenced by the -19% since listing (ouch! see table compiled by Edge below). 


The Edge compiled a list of Business Trusts performance and those that performed well are "real-estate" linked like Croesus and Viva Industrial Trust as well as perhaps, Hospitality and Healthcare Assets. One of the worst performing was Hutchison Port (you just can't bet against LKS!). 

What can you actually glean from the above table? 

Assets that perform well have earnings that are more predictable and sticky. In other words, the cash flows generated are predictable (long term rental leases). Assets that relied on good weather (Accordia to play golf) or on ships visiting the ports (Hutchison) are less predictable and forecasting recurring revenue is challenging, not to mention rival golf courses or ports. Investors at the end of the day, like safe, consistent returns. Whether it is "sexy" or not is another matter altogether πŸ˜‹


How do i see Netlink NBN Trust IPO?

Is the revenue recurring and stable? It is like the gate keeper. All broadband players Singtel, Starhub, M1, MyRepublic (and what have you eventually) will need to pay the gatekeeper a connection fee and a monthly maintenance fee. These are big boys, so the possibility of bad debt is probably low. If consumers switch from one broadband provider to another, Netlink don't really care as long as they continue to use broadband. So i would say yes. Will government lower the regulated fee - the government will adjust the fee from time to time depending on the number of connections etc, but it is unlikely they will "kill this company" as too many local retail investors are vested in this. So net net, i think revenue is pretty stable, consistent and recurring but I am not going to price in any growth here.

Will the technology be replaced? Personally, i think Broadband is the way too go. It is hard to imagine using ADSL or other slower technology as now is the age of IoT (Internet of Things). Will there be a competing technology to replace fibre broadband? Probably one day it is possible but not in the next 20 years (according to the prospectus?). Assuming i invest 100,000 shares ($81,000) which generated 5.5% yield per year ($4,455), it will pay itself back in 18 years. 

Will it form part of my retirement portfolio? If this IPO has been priced at the top end of the range, the answer is a resounding no. Now that it is priced at 81 cents, i will actually consider applying for some. Given the huge public tranche, i give the placement tranche a miss (my broker promised to give me any number of shares i requested. Lol). Over the weekend, I managed to convince Mrs to part with her "secretly stashed away cash" to apply for some shares in the IPO.

How am i adding Netlink Trust IPO in our retirement plan?

I last updated in March this year that the projected passive income for 2017 is around $40,717. The link is here. I recently "re-underwrite" my portfolio due to forex movements etc and I intend to add about 100,000 shares of Netlink Trust IPO in our retirement portfolio, using the assumed yield of 5.43%. This will add about $4,398 to my yearly income, bringing the projected annual income to around $45k (target for the year is $60,000, still a long way to go!). The "pro-forma" monthly income, assuming i managed to add 100,000 shares of Netlink is below (l have also learn how to use pro-forma from all the prospectus i have been reading πŸ˜‚): 


Since Mrs has applied for 50,000 shares and i have no idea how many shares she will be allotted (if it is none than it's fated. hahaha), i will adopt a "wait-and-see" attitude. The reason why i am not applying for the IPO using "cash" is because i have a lot of idle cash (around $74k before this year's contribution) sitting in my SRS account waiting to be deployed. If it opens below IPO price next week, i will use the cash in my SRS account to top up to 100,000 shares. If it opens above, then i will just continue to wait. After all, the next interest is only payable by June next year. I can afford to wait since the pricing is not going to run too far ahead. I will be worried if investors treat Netlink as a growth stock. I look at it more as a Broadband Perps.


Happy SRSing πŸ˜ƒ

Sunday, 9 July 2017

SRS portfolio - Q2 update

It has been a while since i blog about SRS account. Let me see if there are any interesting stuff happening to me in Q2 2017...

Dividend and Interest Income

Received about $8,854 in dividends this quarter
  • Received $2,975 from Hyflux 6% Perps 
  • Received $1,500 dividend income from UMS Holdings
  • Received $356 from Starhill REIT
  • Received $2,319 from Perennial Real Estate Bond
  • Elected to receive 567 units in Fraser Commercial Trust (Scrip Dividend) - Cash equivalent $752
  • Elected to receive 1,131 scrip dividend in Croesus Retail Trust (Scrip Dividend) - Cash equivalent $952
  • Wifey received some cash interest from her Aspial bonds (off my balance sheet - so not included here. lol)
I found that electing to receive scrip dividend is not that bad as it automatically "roll-over" the dividend into new units. It was available for Fraser Commercial Trust and Croesus Retail Trust but not for the rest. I will continue to build up my portfolio of REITs and dividend paying stocks here. 

UMS Holdings and Croesus Retail Trust has done very well for me, appreciating by 92% and 55% respectively and i have held them for years. Blackstone has since made an offer to acquire Croesus Retail Trust at $1.17 per share (see report here). We shall see if GK Goh manages to help increase the price from Blackstone! But if the privatisation is successful, i will have to find other stocks to replace this and it will most likely be dilutive since Croesus is giving me such a good yield.

CPF

I blogged about my intent to pay back CPF the amount drawn for my property in January this year. Well, i have done that in April this year in a "spur of the moment" and repaid CPF the principal plus the interest i owed them in one single cheque. I decided that repaying CPF is probably better than repaying the banks since CPF is charging me 2.5% while the bank is charging me SIBOR + spread.

IPO

I am actually "on-a-roll" here where i managed to get some meaningful placement shares for the last 5 IPOs - Kimly, Sanli, WCG, Shopper360 and Y Ventures! I am still holding on to them but will likely start to reduce some of these positions. I am also likely to turn down the placement for Netlink Trust. I was thinking of applying from the ATM tranche (save the 1% placement fee) or use my SRS account to buy them post listing. Netlink Trust will be more of a retirement portfolio and not for IPO punts.

Going Places

I mentioned that one of my goal in 2017 is to travel to 3 new cities or places - i have met them already! πŸ˜€ I will share with you next time... this is one crazy year of traveling for me

Happy Retirement Planning
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