EzHuat's take on Viva Industrial Trust Q2 results

Viva Industrial Trust ('VIT') is a Singapore-focused business park and industrial real estate investment trust. Its portfolio focuses predominantly on business parks and industrial properties in Singapore.

Here is a summary of the Q2 report card:
(i) Distribution Per Unit (DPU) achieved a 6.3% hike to 1.861 Singapore cents.
(ii) VIT's gross revenue also grew 18.0% to $27.6m, partly driven by a $2.3m increase in contributions from Viva Business Park (VBP) and a $1.9m contribution from the Chin Bee acquisition.
(iii) Its Net Property Income (NPI) rose 17.5% to $20.2m from a year ago.
(iv) Occupancy at VIT's Jackson Square reported occupancy of 89% with >70 sq ft new leases signed
(v) Completion of Downtown Line interchange at Expo MRT in late Oct 2017 will potentially spur increase in rental reversions.

As a result of VIT's relatively good results, its share price has seen a good upward momentum lately. Now the question is, is it a good time to buy VIT?

While I am vested in VIT, I am of the view that there is nothing spectacular at current juncture. Nonetheless, I like the fact that VIT has positioned itself in pretty good locations. Most of them are strategically located near amenities and accessibility to transportation. With its yield of about 8%, it is indeed quite attractive amongst the reits community.

Some says that its property lease tenure is short as compared to others and likely lead to drop in valuation overtime. They run the risk if the land lease runs out which ultimately will impact their income. Personally, I see positive upside in the short-medium term as long as the Singapore economy remains healthy and VIT successfully renews or sign new land lease tenures.

In industry reit, I typically look at its growing NPI, healthy and rising occupancy rates and manageable gearing ratio. In addition, VIT manages to house a good mix tenant mix such as gym, Decathlon Singapore and a variety of food and beverage outlets. VIT looks stable to me for now and I will continue to monitor further.

What's your take? Feel free to share.

Cheers,
EzHuat


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Ciao 2016, Hola 2017!!

Congratulations, we have finally reached the end of 2016! It was a roller coaster year so let us all give ourselves a pat on our back, before we move on to the next year.

So how have your investments been doing in 2016? For me, it has been relatively smooth as I was very focused in building up my 3rd sector - REITs/TRUSTs in my investment portfolio. This strategy has certainly achieved my aim of anchoring my portfolio with a steady stream of returns this year.

Will REITs/TRUSTs continue to perform its role in 2017 and beyond? Well, I am rather optimistic that the 3 REITs/TRUSTs in my portfolio - MapleTree Logistics Trust, Ascendas Hospitality Trust and Ascott Reit should continue to perform well. Looking ahead, I will be eyeing more REITs/TRUSTs to build up my 3^rd sector; as well as companies that might fit well into my investment criteria. I also aim to spend more time to build up my knowledge in Industrial Reits to prepare for potential opportunities in the next few years.

How will your 2017 be like? Well, I expect my 2017 to be rather busy. My HDB flat is finally coming (Yes!) so my wife and I would need to start thinking about how we should renovate the flat. Our renovation fund has already been set aside in a short-term fixed deposit since mid 2016. We intend to keep our renovation simple. We wish to build a home that is warm, comfortable and easy to maintain; and do not want to spend too excessively in the renovation. We have in fact considered painting the house ourselves as it seemed to be more economical. Well, should not be too difficult to paint “white” on “fresh, white walls” right?

My wife and I are usually practical and pragmatic in our lifestyle choices (ok, I admit that I am just finding words to replace the words “uncle” and “aunty” for ourselves). So we usually source around to buy value-for-money items even during our overseas vacation. We do not believe in buying anything if we feel that the item’s price is much greater than its value. This is exactly the same mindset that I have adopted for my investment in which I will only buy a stock only if it is at the right target price.

Recently, my wife and I were engaged in a series of discussions on how we should use our CPF OA money before it gets flushed away when we take over the HDB flat. The common practise is to just wipe out all our available CPF OA money. Instead of that, do we have any other options? Investing in ETFs, stocks, bonds sounds like a option to secure returns higher than 2.6% Loan interest while preserving my future options to use my OA money. Transferring the OA money into my CPF SA is also very tempting if we look at the “more-or-less guaranteed” 4% return. So HOW!? Wait, wait let me wrap up my 2016 first and we can think about this later on. In the mean time, any suggestions will be greatly appreciated!

For 2016, there are many people whom I really wanted to thank. The first and foremost is my dear wife who has been my key source of inspiration & strength, and my best partner in this investment journey together. I also wanted to thank my co-writers, EzHuat and YoloHuat. It is our wish to come together to share and exchange views of our investment journey that inspired this blog in Oct 2016. Lastly, I also liked to thank all of our TripleHuat readers for being my source of encouragement in spending my late nights blogging down my thoughts. If you have any queries or urge to shout out to us, feel free to drop my co-writers and I an email at triplehuat@gmail.com

I hope that our posts have been useful for your investment consideration. Looking ahead to 2017, I look forward to more interesting discussions with you. So stay tuned at TripleHuat.blogspot.com! :)

Together, let us all Go & Huat ah!

GoHuat

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Using Target Price as a strategy to buy/sell stocks!

It was during a routine sharing among my fellow blog writers - EzHuat and YoloHuat that sparked off the inspiration for this post. I would usually ask or share with them my “Target Price” for the stocks that I am interested to buy/sell. It was only when YoloHuat mentioned that “Target Price” has helped her to stay disciplined; that I realised that this could be a good strategy to share with my readers too.

Motivation for adopting “Target Price” Strategy

At the start of my investment journey, I used to buy/sell whenever I think the price is right which is no different from betting on 4D or Toto. I wanted a more systematic approach in buying & selling my stocks instead of relying on “feeling”. After reading many investment books, my conclusion is that every stock has a value; and a price. Ideally, we should buy a stock with a price less than its value. So the first question is really “How do we assess the company’s value?”

Assessing Company’s Value

There are tons of literature out there to explain how we could assess a company’s value. Hence I would not want to go into the technicalities here. A point to note is that the type of indicator (i.e Price-to-Earnings ratio, Net Asset Value, etc) has certain limitations and might be dependent on the type or nature of the business. For example, Net Asset Value might be more relevant to assess companies which rely on assets as their main business model or income source. Such companies include property developers as their business model is dependent on their asset prices (i.e. land and property prices).

In my previous post, I shared that my current focus is to build up REITs/TRUSTs in my investment portfolio. Hence, over here, I shall share my current list criteria to estimate the value for REITs/TRUSTs: (1) Dividend yield is at least 7% return; (2) PE Ratio of 12 and below (with exception of MapleTree Logistic Trust as I assessed that their recent acquisitions could improve the ratio in future); (3) Net Asset Value at 80% and below; (4) Potential upside to its stock price by at least 10% based on ongoing and upcoming businesses in the coming years.

Setting Target Prices

Based on my above list of criteria, I tend to set target buying prices at around 10% lower than its value price. The current investment outlook is highly volatile and the market has passed the 7^th year bull-run. This is one reason why I am carefully selecting the stocks that I would be willing to hold for the longer term. Regardless of the length of my investment time frame, my aim is still to sell the stocks when their selling price is at least 20% of the buy price, depending on the market outlook.

Beauty of “Target Price” Strategy

The “Target Price” strategy has served me well so far. Nowadays, I will only walk into a deal if the stock price meets my Target Price. In my view, the beauty of this strategy lies in its possibility to build up my own set of target prices based on my defined potential value. This would allow investors, who are more conservative, to set target buying price with greater margin of safety; so that their cash would leave their pockets only when the price is right.

Will the “Target Price” Strategy work for you?

There are just so many investment strategies and school of thoughts. My view is that it is important to see whether this strategy could fit well with your investment profile. Over the years, I have and am still improving on my investment skills as I gained more experience and knowledge.

I would love to hear your views on this too so feel free to share with me here!

Together, let us all Go & Huat ah!

GoHuat

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Looking at REITs/TRUSTs for a change..

At the start of 2016, my investment portfolio was concentrated on the Oil & Gas and Finance sectors. The Oil & Gas stocks were purchased many years ago before their sharp drop in valuation. Still, I am comfortable holding on to them for the long term (Remember to use only your spare cash for investment!). My portfolio of finance companies is made up of banks and financial institutions that was accumulated over the years.

The problem is that the business for both sectors is volatile and this translates to inconsistent annual dividend returns that fluctuates between 2.5-5%. At this stage of my life, I felt that my portfolio should offer some form of stability in its return.

Need for a “3rd Sector” in my portfolio!!

This need led to the build up of a “3rd sector” in my portfolio with the aim of generating relatively consistent annual returns. After evaluating possible options including bonds, highly defensive stocks such as Singtel, SPH, etc, reits/trusts stood out as I believed that they are likely able to support a high and relatively stable dividends return due to their business model. However, not all reits/trusts would fit well into my overall investment strategy. My main concern for reits/trusts lies in their loan structure especially those that pegged their borrowings to floating interest rates. Hence I came up with a set of criteria to shortlist suitable reits/trusts: (1) Hedged against potential interest rate hike risks; (2) Have business exposure in European countries and Asia i.e. Japan; (3) Dividend return of at least 7%; (4) Gearing ratio less than 40%.

Hedged against Potential Interest Rate Hike?

A few years back, I felt that there is a high possibility for U.S./Europe/Japan to raise their interest rates right after their quantitative easing. Since most reits/trusts were still primarily hinging on floating interest rates for their borrowings, they would be well-affected when interest rates rise. The risk is high so I chose to avoid buying them altogether. Over time, my views changed when most reits/trusts began to convert a large part of their loans to fixed interest rates. When assessing reits/trust for investment now, I would usually look out for their % of loans that are in fixed interest rates.

Europe and Japan.. Why?

Over the years, the central banks of Europe and Japan have been buying up their government and/or corporate bonds with the aim of encouraging investors to shift into higher risk and potentially higher return investment products. These central banks also adopted a negative interest rate policy which lead to commercial banks having to pay when they put their excess money with the central bank. This should (hopefully) spur commercial banks to lend more to private companies at low interest rates to support them to expand their regional operations and create more jobs. Another point was that exchange rates have been favourable towards the Singapore dollar against the Euro and Yen. I see this combination of low interest rates and favourable exchange rates to be good business conditions and opportunities for Singapore companies.

Looking at Dividend Return of at least 7%...

Most reits/trusts draw their income from leasing or renting out their facilities. As long as their facilities are rented out, they would continue to receive consistent returns. I set a benchmark of at least 7 % dividend return because any lower would make the reits/trusts less attractive than other investment products such as high dividend companies. In addition, the 7% dividend return caters for a hypothetical 20% reduction in dividend payout; which at 5.6%, would still be acceptable to me.

Gearing Ratio less than 40%!

I prefer companies with low or no debts. Generally, I find reits/trusts with gearing ratio of less than 40% acceptable as there is room for further increase in debt to support loan payments and business expansion, without overly straining their finances.

What have i done so far?

In line with my considerations above, I have recently bought into several reits/trusts such as Ascendas Hospitality Trust, Ascott Reit and MapleTree Logistics Trust. It is crucial to reiterate the importance of performing your own due diligence in evaluating the risks for each of these companies to determine whether they could be suitable for your investment portfolio. Moving forward, I will likely continue to accumulate more reits/trusts. In my next post, I will be sharing more about how I buy and sell stocks by using my “Target Price” strategy.

Together, let us all Go & Huat ah!

GoHuat

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