Recent Portfolio Update and Thoughts

Dear All,


I've divested all my units (3500) in HC surgical, with no reasons in particular except to re-balance my portfolio.

Raffles medical has continued to be a poor performer for me, and is the biggest drag as it constitutes the majority of my portfolio. Nonetheless, I will continue watching this counter and will likely average down.

Two other counters I'm closely monitoring is Jumbo Group (which I already own a small parcel of), as well as Comfort Delgro, with both demonstrating recent weakness; Jumbo due to its stagnant results and CDG with its recent taxi-competition. Although CDG is potentially losing revenue due to the various incentives Grab has offered to lure its cabbies, I do believe that CDG may eventually come to an agreement with Uber to counter this. How effective it will be is another question.

Nonetheless, CDG is looking slightly more attractive now that it has reached its 2014 levels, but i do not think that it has bottomed yet. It will be difficult to catch the bottom for sure and if I were to enter, I would have to commit to averaging down in order to get the best out of it. It is worth noting that whilst the taxi business does take up a huge chunk of CDG's operations, they do have other operations including public transport and engineering.

Furthermore, Grab/Uber, whilst snatching market share from CDG, is burning lots of cash in the process. Their model is not without it's downside as well. (Please note that I'm not speaking from personal experience, but based on what I've learnt from some of the Uber and Grab drivers when I tried the app myself); "it is annoying that a percentage of our earnings goes to the company", "Taxis are actually good too, they pay a high base rental, but they do not have to pay a percentage, which then varies with their earnings. Earning more means losing more".


I'd leave things here for now, thanks for reading.

A.

July Updates and Thoughts

The month of July heralded new highs in the stock markets globally, with DOW hitting a new high and the STI reaching its previous peak.

The performance of my personal portfolio has not been great though, with Raffles Medical being the worst performer. That said, I'm not too concern about things yet and I am still confident about its' growth in the long term. Profits are getting squeezed, and with analysts predicting the fall in NPAT due to their expansion and upgrading plans the next 3 years, buyers seem to be rushing out of this counter. As such I have taken the opportunity to acquire a small parcel of another 1500 shares which  brings my total RMG counter number to 4300. I will continue to monitor this counter and I'm currently planning on scooping up more if the weakness continues to persist.

(image credits: Jumbo Group LTD)

I have also acquired 4000 shares in Jumbo (42R), which has retreated back from its previous peak, hence presenting with a decent buying opportunity IMO. Similarly, if this counter continues to present with weakness, I may scoop up more as well. Although this counter has been compared to other services/food-services counters which are cheaper, I believe that this is an unnecessary comparison as they are all intrinsically different. Jumbo has a great product and they are already taking the right steps (I believe) in their overseas venture.

With Regards to my REITs counters, they have all been doing well despite the recent Fed rate hike in June. IMO this is because most of these REIT counters are still fairly valued. Looking back, Parkway REIT has been by far my best performer, with about a 28% gain since I bought (nearly at it's bottom) nearly 2 years ago, with 2 years of dividends to boot on top of it. On hindsight, this highlighted to me that if I strongly believe in the intrinsic value of a counter, I should not be too worried about the general market sentiments, which I was afraid of at that point in time.

That's all for today's update, best wishes to everyone out there!

A

Recent Portfolio Update - Singapore O & G

(source: Singapore O&G Ltd)

Dear all,


As most of you would have read in my previous post, I divested all my holdings (6000 units post-split) in Singapore O & G for an average price of approximately $0.655 per unit. (post-split) about 2 months ago. (NB: this was near to it's peak)

I took advantage of the recent weakness to take a small bite (3500 units) of the company again @ $0.475 per unit. This entry price represents a 27.5% discount as compared to my previous exit-price. In addition a unit price of $0.475 represents a P/E ratio of 25 times earnings (EPS of $0.019), a stark difference to the previous P/E of 35.

Once again, this is a decently risky share. As per most small-cap medical groups, revenue and income are heavily dependent on the key medical practitioners. Furthermore, this is a rather new counter, without a longstanding track record. I'm also uncomfortable with the O&G segment remaining as a significant bulk of the revenue, due to falling birthrates. However this is somewhat offset by their expansion of other specialisations (Derm, Surg etc). In addition, it is worth noting that there was some insider selling (though insignificant) at the start of the year, and the end of last year. The recent sell-down is also questionable due to the large volumes unloaded (and loaded), although there has yet to be any news. There may be a tinge of panic selling amongst this, which I am banking on, but I definitely won't jump to conclusions yet.

To conclude, this is likely to be a short-medium term play rather than a long term one as this is more based on a bit of speculation and a 'value-play'.

Good luck to all holders.

A.

Netlink IPO

This has been the talk of the town for the past month or so, and literally (not really) everyone is applying for it, so it's not surprising that I did as well!

For those of you who do not know yet, the IPO was priced at S$0.81, at the lower end of the expected range.

I balloted for 6000 units and received 2000, as per the pre-decided allocation algorithm for the public offer as shown in the table below.

(source: SGX)

Basically if you are successful in your application ('by luck') you would be allocated a fixed number of units based on which 'range of units applied for' - column 1. E.g. if you applied for say 15,000 units, and your ballot was chosen, you would be issued 3000 shares.

Surprisingly there were 4 successful (and probably more who applied and were unsuccessful) applicants for > 2M units. Also, as shown in the table above, the "mode" - ie the "greatest number of applicants bidding within a range" was for the range of units between 100K - 199.9K units. Bigger players like these bidders may have felt that there was a decent chance of a successful ballot using the "ATM method" due to this IPO being a huge float. After all, the ATM method only costs S$2 as opposed to the placement method which costs 1%.

In addition, the placement shares was 1.8x subscribed (excluding connected persons) and the public offer was 5.1 times subscribed. I think that this is a pretty decent set of results considering the size of this offer.

I shan't bore anyone with the same details that most other bloggers have already covered about the financial statements and the forecasts, but I would just focus on my personal thoughts.


The safe but average yield
The yield is decent at the offer price of $0.81, being 5.43% (FY2017) and 5.73% (FY2018), but not fantastic, as most REITs would have a yield greater than this. However, I like the monopolistic nature of this business. Although one might argue that Netlink's operations are heavily subjected to regulation by the authorities (note: this occurs every 3-5 years), and hence have minimal room for growth, I believe that this is in fact a good thing. Being heavily regulated would mean that there is minimal room for competitors to thrive in, and even more so for potential new-entrants. This is evidenced by the $732 million grant issued by the government to Netlink in 2009 to build Singapore's NBN network.

The opportunity
Unknown to some, though the NBN network in singapore is "public-owned" (via ownership of shares in Singtel previously, and now "nearly-separated" into 2 entities via the IPO), the NBN network in some other countries is "state-owned". An example is Australia, where Singtel's subsidary Optus operates in. In these countries, just like in Singapore, the Telcos have to pay the NBN company (the "equivalent of netlink") the access fees to access the NBN. In my opinion, the chance to own a part of the backbone of a state offers significant safety and stability in this volatile market.

There have been a number of people who has comparing Netlink to Hutchinson Port Trust, which isn't exactly a good comparison except for the size of the IPO and the relatively-similar subscription rate. In my opinion, the previous time such an opportunity existed on the SGX was during the IPO of SMRT in year 2000. Similar to Netlink, SMRT had stability and a good infrastructure, but a low yield and potential for growth. I won't derail further, but in short, SMRT's IPO price was $0.61, and only gained a mere 0.1% (boring wasn't it?) on it's debut, and was later re-purchased by Temasek Holdings for $1.68.

Side note: Expensive but not very
The PE of this is understandably high (due to depreciation being factored in), hence excluding it from your calculations allows would allow you to appreciate it's cash generating ability better. This has already been mentioned in several articles before so I would not be discussing this here, and I've just included this in case any of you have not come across the idea yet.


In summary, there is a reasonable chance that the share price of this may stagnate, and over the next few months/years I would probably be looking out for any opportunities to purchase more units, as I'm prepared to hold it as part of my long term portfolio. (unless there are some unexpected spikes to potentially gain from!)


Good luck everyone.

A.

Diversification - A thought to consider

I've talked previously about how my portfolio was heavily concentrated on the healthcare industry, so what is concentration, or rather the opposite of it; diversification?

Basically to concentrate is to put many, if not all your eggs into a single basket, on the other hand, to diversify is to not put all your eggs into a single basket.

Concentration and diversification can take place on many levels, note that for simplicity sake, I will only be talking about diversification. It is also important to understand that diversification is a term specifically applied to stocks, but can also be applied in other situations as well, but in this post, I will be talking about diversification from an investor's point of view.

(i drew this myself)

"Company" diversification

At a very specific level, an investor can diversify by spreading his investments in several companies from the same sector. For example, instead of buying stocks in a single company in the telecommunications sector (e.g. Singapore telecommunications), an investor can diversify by purchasing stocks in multiple companies in the same sector (e.g. Singapore telecommunications, StarHub and M1).

Why would you do that? 

For various reasons. One reason for diversification which applies nearly in every situation would be to reduce (spread) risks. Hypothetically, if a company were to encounter operational difficulties, chances are, it is LESS likely that another company on TOP of the first also encounters these problems in the same period of time. 

Basically, if you were to invest equally and hold stocks in company A, B and C, if company A's stocks were to plummet, you will be less likely to suffer a lost as significant as if you were to only hold company A's stocks.

Sometimes there is no good and available reason to make such a choice to diversify. Because as you may have probably realised, the converse can happen as well! If you were to spread your investment between company A, B and C, and if A's stocks rockets, whereas company B and C's share price stagnates, you only gain 33% of what you would have gained if you had chosen to concentrate your investment funds in company A. 

Maybe the question we should all be asking ourselves is, how much are we willing to (potentially) lose (or gain?)? Maybe.

Of course our discussion above assumes that all 3 companies are exactly the same (which is an extremely unlikely scenario) in reality there may be a good or appealing reason to diversify; 

For example, the companies in question may each capture different sections of the market. A random example would be Dairy Farm Holdings vs Sheng Siong. The former generally targets the more upscale market with more premium goods whereas the latter targets the value-for dollar market, even though they may both belong to the same sector - supermarket retail. Hence if you were to equally believe in the growth or stability of these companies, it will be prudent to diversify between these companies in the case of unforseen circumstances which are more often than not, uncontrollable. 

One thing you may be thinking about at the moment is; "maybe I should diversify, the company I have invested in (/am thinking of investing in), has bad management, a bad track record, and it also lacks transparency". The question you should be asking yourself is; why even invest in them then? Because the charts show that there is a chance of the share prices rocketing? Well, then you may want to consider whether your goal is to invest for the long term, or gamble for a quick buck. 

Ok, it seems that I have gone slightly off tangent here, so let us continue our original discussion.

"Sector" Diversification

The level of diversification; Sector Diversification is once again something to consider as well, as it also potentially reduces/spreads your risks. One reason is because different factors (or rather exposures) play a huge role in determining the success of companies in certain industries.

Some examples include:

- The banking and finance industry is exposed to a cyclical trend of the economy.

- The transport industry is exposed to regulatory risks

- The private healthcare industry is exposed to competition risks from the public healthcare sector 

This is probably one of the reasons why many gurus constantly highlight the importance of diversifying between sectors and keeping track of % exposure to each sector. Something important to consider as well.

Diversification between modes of investments

(i drew this myself)

Aside from stocks or securities, there are other modes of investments to consider, which include, Bank Savings Accounts (albeit often carrying low interests), Bank Fixed Deposit Accounts, Government Bonds, Company Bonds etc. Please note that there are many others as well and I will not be going into them as I believe these are the most common ones a new/basic investor may be considering. I also would not be going into detail with regards to each specific mode of investment (not in this post), as my point here is that, there are many ways and levels in which an investor can choose to spread his/her risks. 

Some important questions to ask is therefore; what am I seeking to achieve from the investment? (capital gain vs yield) How much am I willing to risk? How much do I need the money I am putting down as an investment?  Have I done sufficient research to ensure that I am not diversifying for the sake of it? 

Perhaps when you are able to answer all of those questions then you have an investment idea that is ideal for your own palate.

My 2cents,

A 😁

Recent Portfolio Update - Singapore O & G

Dear All,

I have divested all my holdings (3000 units) in Singapore O & G at an average price of $1.31. (Current share price of Singapore O & G is $0.665 which would work out to be $1.31 before the 2 for 1 share split).

(Image Credits: Singapore O & G Ltd)

I still agree that Singapore O & G has a lot of potential to grow. It does still have a reasonable share price at the moment based on its earnings, however, with healthcare counters already taking up the majority of my portfolio, I decided that it was in my best interests to rebalance my portfolio. This is so that I will be able to jump on any opportunities in the market that may come in the future.

The reason why Singapore O & G was chosen out of all my healthcare counters, is because I believe that whilst it carries decent value, the other healthcare counters I currently hold are more "undervalued" relative to Singapore O & G at their current prices, and I believe that they would bring about greater value in the short to medium term at least.

I am also slightly troubled by the declining birth rates. Although Singapore O & G has been able to consistently grow its market share, there would eventually be a point in time in which it's ability to grow my acquisitions becomes more and more limited. This is understandable because as more and more suitable practices are being acquired, the "less suitable" ones increase in proportion to the overall market.

That aside, I will however be likely to reinvest in Singapore O & G if its' plans to expand overseas materialize. The demand for medical tourism seems to be plateauing and unlike my other healthcare counters, Singapore O & G does not have overseas exposure. Doing so would decrease concentration risk and provide much greater opportunities to grow.


Thanks for reading everyone!

A.  😁

Growth vs Income Investing - A little snapshot

I was thinking of what to write about today and I chose this topic as I believe that this is one question common to many new investors including myself. 😁

Growth stocks

(image credits: clipartkid.com)

There are many ways to define growth, but in this case let's define growth of a company to be an increase in the company's earnings per share. Which can happen in two broad ways:

1. Increase in earnings per share (Commonly abbreviated as EPS) from their usual operations (this is also called organic growth sometimes)

2. Increase in earnings per share from inorganic (or acquisitive growth); basically growing by buying up other companies*

(* you may be wondering, how can a company increase earnings per share by buying over another company. That is a very good question. Even though sometimes companies buy up smaller companies by paying the owners of the latter companies with shares, causing a dilution in earnings per share, however, by combining forces, companies can sometimes achieve "synergies" (=cost savings), and even perhaps allow greater access to markets they have been eyeing which ultimately increases revenue and profit)

With EPS growth, share price generally follows. This is because the company of interest would appear to be cheaper once its financial statements containing the growth in earning is reported.

This then results in metrics such as P/E (price to earnings ratio) and EV/EBITA (enterprise value to [earnings before interest, tax, depreciation and amortisation]) which measures how cheap a stock is, looking more favourable. Investors then flock to the (literally) cheaper shares, pushing up share prices, until buying and selling equilibrates.

This all sounds great doesn't it? So what are the downsides?

Well for one, growth companies are often relatively smaller (we're talking both about organisation size as well as market capitalisation here). It is arguably more likely that a company with a small market capitalisation (maybe in the Low- mid millions) can grow, or rather increase shareholder value than a large corporation worth billions*.

[*Some reasons why:

- because organic growth is harder to achieve for large companies as there are often already many consumers of their product, and there is market saturation

- Because mergers and acquisitions between large companies are often more tightly regulated by the authorities, to prevent a monopoly which in theory can cause complacency and inefficiency]

The flipside, as you may already have guessed is that small companies often bear higher risks and may more often be speculative in nature. Larger companies tend to have a longer track record, have a better organisational structure, and have more experienced management teams, which more often than not are absent from small companies.

Bear in mind that there are always exceptions to this, for example, a large company (in terms of market capitalisation) could have just experienced a rapid increase in share price due to a sudden event leading to an increase in demand, and in this case, the company as well as its management may not have had a longstanding track record.

Hence, proper and in-depth research is also necessary to determine whether or not a company has a good record, or whether it has purely been benefitting from tailwinds.

Income stocks (often, but not always blue chip shares)

(image credits: clipartfest.com)

Stable-Income paying companies are often not growing as much, relative to the growth companies that is. Most of these companies are industry behemoths and instead of reinvesting earnings for growth to generate value for shareholders, earnings are mainly returned to shareholders, probably because management has decided that it is the better option to do so (due to size and product saturation etc as I've mentioned earlier which limits growth).

This has its pros and cons as well.

Even though history doesn't indicate the future, but it's arguably somewhat suggestive of the future. A 10 billion dollar company with lots of assets and infrastructure and an experienced management team that has been paying dividends consistently in the past 20 years would be more likely than not still be able to continue paying its next/upcoming dividend, right? Which is why I love income stocks; because of its relative stability.

Relative's the word, and the stability is not a given. I'll once again reiterate, they are more likely to be able to remain stable and continue paying dividends, but the converse can possibly happen as well, although the chances are somewhat smaller.

Noble group is one notable example (even though not a great example for picture I've just painted as it does not have a Long and consistent dividend history), and for the benefit of the readers who have not heard of it; basically noble was a blue chip share that was removed from the index this year due to many issues affecting it.

So what's the conclusion?

Before we go to that, lets first go through a hypothetical scenario:

A large income stock with a 6% annual yield would have yielded 60% of your initial investment after 10 years (assuming no reinvestment of dividends in shares).

On the other hand, a small cap growth company with a dividend of just 2% can potentially provide a 5.18% yield on the initial investment amount after 10 years, assuming a 10% annual dividend growth, which is equivalent to the levels of many income paying stocks. With capital gain to boot (which may be more than 60% if income were to grow for >10 years as investors will often push prices up before any financial results if they already expect the company to continue growing), they can potentially overshadow income stocks.

Personally I believe that there is no good reason to fully focus on either small cap growth stocks Nor large income stocks. The mix between them is subjective and also depends on the targets you have set for yourself. I do prefer growth stocks over income stocks as I am investing mainly for the Long term.

Thank you for reading, and I would be happy to hear any opinions on this 😁.

Best Regards,

A 😁

Why I prefer investing in REITs compared to investing directly in property

[It's 3am in the morning and here I am typing away. Thinking about it, I'm really starting to enjoy blogging now, to be able to consolidate my thoughts and to present it in a logical fashion does provide a decent amount of satisfaction 😆] Alright, I'll not carry on and on about this, so here's what I actually want to talk about, REITs:

(i drew this XD)⁠

1. Liquidity

This is probably the main reason why I'm leaning towards REITs. This is also the beauty of the share market in general. If you wake up in the morning feeling like you need some funds for other purposes, you can always simply sell with the click of a button! (Or a few buttons). There are always buyers on the market daily. Of course you may want to find a "better day to sell" as any stock on the stock market does fluctuate a wee bit on a daily basis even though the fundamentals of the company in question may not have changed one bit.

You can't do this when it comes to properties, more often than not, a significant waiting time is involved, whether or not you are buying or selling a property. Listing it on a property-for-sale webpage; recruiting a property agent's help; showing the property to potential buyers who may not even be truly interested is all part of the package as well.

2. The ability to buy and sell off a portion of what you have

You can also sell a portion of your holdings (of course this is limited by the rule that the minimum trading amount is one lot.) which is still fair in my opinion, especially since a hundred shares now constitutes a single lot whereas in the past, one thousand shares constitutes a single lot.

(What's still unreasonable is the minimum commission amount, which I will not be going into in this post, as it's not the point here.)

On the other hand you can't do this with a property, how are you going to divide up a house overnight and put it up for sale? Well unless if you're telling me you own thousands of properties, then this may not apply to you 😁. Furthermore, investors with tight finances, such as students (including myself) are not able to afford buying an entire property directly, and taking a loan to do so is out of the question as well (this point slightly overlaps with my economies of scale points).

3. Economies of scale

Let's be honest, if we, the common folk are interested in say industrial properties or healthcare properties, what are the chances that we can afford it? Do we have the funds to buy a hospital like how Billionaire Mr. Lim bought Thomson Medical? We probably do not.

But by pooling funds together, which is essentially what a REIT does, managers of the REIT are able to buy such properties! This also brings me to my point that aside from having greater bargaining power and economies of scale, us as investors, are also able to select from various types of property trusts that suits your palate! To name a few, we have; Healthcare, Industrials, Retail etc.

This essentially allows us to diversify the little amount of money we have as well. By buying various REIT shares, we are arguably “less at risk” of price fluctuations than if we were to own a single property.

4. Convenience

Owning a property can be a hassle. Or rather collecting rent is. What if the tenant is being uncooperative? Sure, there are legal means of settling the issue, but I’m trying to point out that it is going to be a huge headache and a waste of time. Furthermore, if the tenant for some reason is only able to make cash payment, you’ve got to make a trip down to collect your rent! You also have the issue of them haggling for rent (at before a contract commences that is). 

With REITs all these issues are avoided, or rather managed by someone else, or a team that’s actually professional. All you’ve got to do is sit back and wait for the dividend payouts, which goes directly to your bank account.

Not a free ride

I would like to add in this point in time, that Investing in REITs isn’t a bed of roses though, and there are some downsides: management fees (though generally you can be assured that 90% of the REITs income is distributed as it grants the REIT tax incentives), lack of control and lack of rights (unless you hold a substantial proportion of shares), volatility (just like other stocks on the market, although the prices of REITs are generally less volatile). Just like other stocks, monitoring prices from time to time, reading their financial reports, looking out for any updates/announcements would do good as well.

Although I do already own shares (albeit small parcels) in some listed REITs, there are some which I plan to increase my holdings in, and also a couple of others which I will be talking about in a separate post. (I will be talking about these in a separate post, so stay tuned!)

Till next time!

Best Regards, 

A 😁

Which brokerage should I use?

This is a question I've received from a couple of friends who are new to investing, so I thought that it'll be fantastic if I could write about this directly on my blog for the benefit of everyone else who has the same question. Please also note that this post contains my personal experiences and opinions to a large extent.

(image source: clipartfest.com)

Well to begin with, I cant exactly give anyone an answer as to which brokerage they should use if they were to start investing, but I can certainly tell you what I am using, and why. From there, perhaps you could then explore your options. 😁

Before we begin, the table below is just an overview of a few (not all) brokerages and their fees, which as you can see, are mostly similar, note that different % fees apply for amounts > $50k, but I have left them out of here for simplicity's sake.

Brokerage	Minimum Commission	% Commission Fee (<$50k)
DBS Vickers	$25	0.28%
OCBC Securities	$25	0.275%
Standard Chartered	$10	0.20%
UOB Kay Hian	$25	0.275%
Phillip Securities	$25	0.28%
Maybank Kim Eng	$25	0.275%

Currently, amongst these (and many other brokerages available), I have opted to use OCBC Securities and Standard Chartered Online Trading. Please also note that I have not tried other brokerages, so I am currently unable to give an opinion on them.

I think there are a few things you could potentially weigh over here:

1. Customer Service

I think this is an important factor as you may be handling calls/ be required to make calls to the brokerage at times. However this is also a subjective matter, and should be determined by your own personal experience. Although it is also often hard to determine initially whether or not the customer service suits your preference on your first visit (e.g. to open your account), or by your first call as the staff in charge at their call centres often rotate,  but I believe that eventually, experience will tell you whether or not you should stick with your brokerage, or switch to another.

Here are my personal experiences with the two brokerages I'm using thus far,

Standard Chartered: when I had to open my account at standard chartered, the staff who attended to me was pretty impolite and sounded even a little condescending. However, my experience with the staff members at the call centres have so far been great, they were all very polite and patient, which is one reason why I continued using this brokerage.

OCBC: conversely, the staff who helped me with opening my account was very polite, (well he did want me to fill up a customer satisfaction form subsequently, so I don't know if that played a part, but I'll give him the benefit of the doubt. Follow up was not fantastic though, basically, OCBC has a YIP that gives young investors slightly lower brokerage fees, however, the polite staff member who assisted me with the account opening did not inform me that the nett difference is only refunded subsequently. (I will be talking about this later) But basically, I was wondering if I was actually "registered" under the program, and I had to make multiple calls to their call center as well as write a few emails in an attempt to resolve this issue. Furthermore, the majority of the staff members who attended to my calls did not seem to know how to resolve the issue and often gave me superficial answers. I still use OCBC at times, but am less inclined to for the above reasons.

2. Brokerage Fees

This is very important as well. Especially for those with shallower pockets like mine. Most brokers charge a minimum commission fee. In my opinion this is probably one of the reasons why there hasn't been much interest in the local exchange and also why there hasn't been much trading activity, even though there may be so many decent stocks listed on our exchange; simply because of the high commission fee, and this is so even for online trading. (note that call-trading is still available but seldom used, and is way more expensive)

2.1. OCBC Brokerage Fees

For OCBC securities, the online trading minimum commission fee is $25. That is a lot of money, as this is the minimum cost per trade. 

Basically, if your trade value (the value of the stocks you're purchasing) is lower than $50,000, a 0.275% (of the total value) commission is what you have to pay, however, if the 0.275% falls below $25, then you would have to pay $25.

To put things into context, basically for the 0.275% to be effective over the $25, your trade value needs to be $25/0.00275 = $9090.90. Otherwise you will be paying the minimum commission of $25. Whether you are buying $100, $500, $1000, $5000, or $9000 worth of stocks, you have to pay $25 as the 0.275% percentage commission does not apply to you. As you have probably already noticed, the lower your trade values, the more you are "losing" in terms of the commission paid.

Example Scenario

Investor A - Makes 10 trades with each trade valued at $1000 each

-> minimum commission kicks in  for each trade as each trade value is below $9090.90

-> total commission paid to for the $10000 worth of stocks = 10 x $25 = $250, which is 2.5%

Investor B - Makes 1 trade with the trade valued at $10 000

-> minimum commission does not kick in as the trade value is above $9090.90

-> total commission paid for the $10000 worth of stocks = 0.275/100 x $10000 = $27.5, which is 0.275%, seems cheaper ain't it?

The only problem is that most new investors/ investors with tighter pockets tend to end up like "investor A", resulting in a sizeable proportion of their cash being burnt before they even get started. Don't forget that the same commission applies when you want to sell hence everything in the above scenario should be "doubled" if you are not planning to buy and hold for eternity.

Also it is important to note that all brokerages are approximately the same in this sense, as they all have a minimum commission fee, which varies slightly, and a percentage fee (if the minimum commission amount were to be exceeded) which also varies slightly.

So why did i use OCBC?

Because under the YIP (youth investment program) young investors enjoy $10 off the minimum commission fee, which therefore brings the minimum commission of each trade to $15. It doesn't bring a big difference if you only made a single trade, but it will if you are making several. Also because of the slightly lower minimum commission fee under the program, it puts OCBC's minimum commission fee at a lower price than other brokerages (assuming the other brokerages are not running any special offers/promotions which can sometimes happen).

2.2. Standard Chartered Brokerage Fees

Standard Chartered currently offers a minimum commission fee of only $10, with a brokerage rate of 0.20%, hence applying the same rule, in order for the minimum brokerage fee to not apply, the value of the trade needs to be at $10/0.002 = $5000. You may be thinking now, this makes it cheaper than other brokerages doesn't it? So is there a difference? Well, I will be talking about the difference under the next point.

3. Custodian vs CDP

Basically your shares can either be held under your own CDP (Central Depository) account or a Custodian Account (which occurs in the case of SC bank, as well as in other situations but I don't think that's important to this discussion).

Various other webpages gives an entire list of the differences and disparities but here I will only be writing what I personally experienced thus far, as I believe it will be more useful as a snapshot or rather an overview of things that you will be experiencing very soon if you were to choose between the two.

Basically Standard chartered does not credit your shares to your personal CDP account, rather, they hold the shares for you, as the custodian. Whereas if you were to use OCBC or most other brokerages, the shares will be credited to your personal CDP account when you buy.

So what happens when you want to sell shares?

If a set of shares are in your own CDP account, you can use any other brokerages to trade the said shares. However, if your shares are held by SC, you can only use them to trade the same shares in question.

Any benefits to either?

Well, from my personal experience, if your shares are held in your CDP account, you will receive mailing updates directly from the company, i.e. annual reports, invitations to AGM, dividend notice, dividend reinvestment plan (DRP) notice etc. but if your shares are held under the SC custodian account, SC communicates with you on their behalf. However, you will not be invited to the AGMs, receive the companies' annual reports, although you will still receive notice when there are dividend payouts and of DRPs. Oh it is also important to note that if you were to use SC's custodian account, you would not have any voting rights, as these rights are 'transferred' to SC (the custodian), who can choose to exercise (or not exercise) the voting rights.

Any risks to using the custodian account?

Well using SC's custodian account does not seem to bring about any additional risks, as according to them, it appears that investors' shares in the SC custodian accounts are held separately from the bank's own assets. Which would mean that in the unlikely event that the bank collapses, creditors will not be able to claim ownership of your shares.

On this note, that is all from me today!

I hope you find this post useful, good luck in your own journeys.

Best Regards,
A 😁

3 Potential munchies over the next few months

For those of you who have been following my blog, you would probably know that my current portfolio is heavily concentrated on the healthcare sector. And I had previously planned to keep the proportion of healthcare counters to about 50% of my portfolio. However, with my latest purchase of shares in ISEC healthcare which i blogged about here, healthcare sits at a significant 70% (approximately) of my portfolio. 

I am planning to balance my portfolio and I am currently, and will continue looking at counters from other sectors. Please note that whilst I believe balancing my portfolio is necessary, I will not do so unless I find suitable shares at prices I can swallow.

Here are some counters I am looking at;

Singapore Telecommunications (Z74)

If you had read my portfolio page, you would have realised that I do have a small parcel of Singtel shares already, and if you are interested, I blogged about it here recently. Potentially, I am looking at doubling my holdings in this counter, and my reasons for investing in it remains unchanged from what I previously mentioned. But in short, I believe Singtel remains an excellent defensive play due to its' significant diversification, good management track record, and little free-float. 

Frasers Logistics and Industrial Trust (BUOU)

(image credits: Frasers Logistics Trust)

I have never bought an industrial REIT before, and this is the first one on my watchlist. They have recently exceeded their maiden DPU forecast, and currently sits at approximately 99% portfolio occupancy. They also boast a WALE of about 7.0 years. This is higher than most other industrial REITs listed in Singapore. For those of you who are new to the term, WALE (Weighted Average Lease Expiry) essentially reflects how long the average remaining lease period is, to a tenant of the REIT. This is done by taking into account every tenant's respective contribution to the REIT and their remaining lease period, and aggregating the amount. In short, the greater the WALE, the less risk the REIT faces as tenants aren't going to vacate anytime soon.

The REIT also has sufficient room to acquire more properties, and they have recently made a good acquisition (The Martin Brower Property), which increased their WALE and reduced their average portfolio age.

I also like the fact that the REIT's properties are based in Australia, and collects rent in AUD. Although there is no risk of unfavourable/favourable currency swings at the moment due to hedging, in the next FY (FY18), it may not be the case. I am bullish on the Australian dollar, and its economy, and I believe that its' currency will continue to be on the upswing, which could potentially increase distributions in this REIT. We should also note that Australia has not experienced a single recession in the past 25 years. 

This counter is not that expensive yet, and is currently hovering right between the 52 week low and high. Hence, I am monitoring this counter closely for an opportunity to invest.

ISOTeam

This is probably the least well known counter out of the three. This company specialises in facilities management and upgrading of the public housing estate in Singapore. Sounds defensive already doesn't it? Services they provide range from painting services, pest services to re-roofing and waterproofing. At the same time they do have a number of subsidiary companies which I will not be writing about here as it is not the main point. The problem though is that this may have already been factored into the share price, as you can see in the chart below and it is decently expensive, if not the most expensive for a counter classified under the construction sector: 

(image credits: yahoo finance)

I will probably be just monitoring ISOTeam for now due and will only strike if there's a window of opportunity.

On this note, that will be all from me today, and I'd like to thank you for your support!

Best Regards,
A 😁

Spending Habits

(image credits: clipartfest.com)

I pondered about this as i bought my cup of KOI tea (for those of you who are unfamiliar with this, it is a chain of shops which sells "premium" bubble tea, aka tea with tapioca balls) as per usual today.

I have been drinking a cup of KOI tea nearly every day since they opened their stores on our sunny island. Thinking back, instead of "wow, I loved every cup of KOI tea", my first thought was "wow, I wasted a lot of money". I do know of others who also has bad spending habits, be it a daily cup of overpriced tea or dining daily at expensive restaurants, and I believe this is very common in society nowadays.

Let's now move on to the tangible aspects of the discussion, using my case as an example:

A standard cup costs about $3.50

There are 365 days in a year

If someone were to buy a single drink daily, they would have spent: $3.50 x 365 = $1277.50 by the end of the year.

It is really difficult to include in the discussion intangible benefits and to churn out some value buying the drink would confer; e.g. "increase in productivity", "brings about relaxation" which is arguably true as it is after all something people enjoy. Or they wouldn't buy it right? So we would be assuming no intangible benefits at this point in time.

Lets say we invest the $1277.50 spent yearly into a fixed deposit or savings bond with a coupon rate of 1.2% per annum, with the interests reinvested. And lets also assume that the rate remains unchanged (which is unlikely) but its not the point of this discussion.

After 5 [+1: I've included the duration of the final (5th year) whereby the 5th interest would be paid out for the investment on the 1st year] years we would have:

$1277.50 + $12.78 + $12.90 + $13.03 + $13.16 + $13.29

+ $1277.50 + $12.78 + $12.90 + $13.03 + $13.16

+ $1277.50 + $12.78 + $12.90 + $13.03

+ $1277.50 + $12.78 + $12.90

+ $1277.50 + $12.78

= A hefty sum of money which could have been saved 😟

Now the point of this post or discussion isn't to tell you to quit your hobbies, or to stop what you enjoy doing, nor is it telling you to be extremely thrifty, nor to scrimp and save. The point is that we should all reflect back on our spending habits and ask ourselves; "is it all worth it? Is there anything that I should have/wanted to achieve now, but haven't due to these habits? Would I have done it any differently?"

Perhaps from these questions, you and I will be able to get answers eventually, answers which may guide us towards what to do next, and hopefully, it will be ultimately beneficial in contributing to our financial freedom in the future.

Till next time!

Best Regards,

A 😁