A Review of Investments for 2015

2015 has actually turned out to be a horrendous year, or a wonderful year, depending on how you look at it as an investor. Checking against the STI, I realised it has actually suffered a -14.3% dropped compared to this time last year. Taking into account 3% of dividends which the STI index would not have accounted for, that would actually be -11.3% net in terms of total returns.

So if you're sitting on a 11.3% loss, you're pretty much doing market normal. You're normal. On the other hand, if you've been buying throughout the year when the market dropped, it's probably going to turn out great in the longer run. That is, provided you didn't buy a bunch of junk! You had a lot of guts and I wish you success! You're probably abnormal.

My stock investment has returned an IRR of -1.2% for 2015 inclusive dividends reinvested into the portfolio. So I guess I should take some satisfaction that I have outperformed the market for the 6th year running. Can I gloat somewhat?

However, my long term IRR has continued to slide: from ~20% (2012-13, 4-5 years), to 17.3% (2014, 6 years), and now ~12% (2015, 7 years). A case of reversion to mean? Still, 12% over 7 years is not a bad long term performance. I'm consoling myself.

The shares portfolio is taking on a more global outlook as I've started investing into other regional ETFs (esp. Europe, Asia-Pac and Japan) on top of my current holdings of Singapore and US shares. If this was a fund management company, I should probably use some other global benchmarks. But I'm not, so I will continue to reference STI as my benchmark, because that's what my opportunity cost is. I'm only accountable to myself.

Bought:
  Anheuser Busch (US)

  ARA Asset Mgt
  Aspial (bonds)
  Boustead
  Capitacom Trust
  Capitaland
  CIMB Asiapac Div ETF
  Exxon Mobil (US)
  Global Logistic
  HongKong Land
  JMH
  Keppel
  Lyxor Europe10 ETF
  Lyxor Japan10 ETF
  M1
  OCBC
  Second Chance
  The Hour Glass
  Union Pacific
  YZG
  Zagro Asia

Rights Issues Subscribed:
  ARA Asset Mgt

Sold:
  nothing!

Lots of buying, not much selling. To be precise, I've sold nothing throughout the year. I've been a stooge. Gave nothing away.

Dividend income grew marginally to $11,168 for 2015. This would have been higher of course, except that I chose to accept all options offered in the form of scrip dividends (i.e. additional shares in lieu of cash) as per previous year. I'm too lazy to figure out what the exact dividend amount would have been. But I estimate it would likely be in the region of $14,000 for the shares portfolio. That's not enough to live off my lifestyle on, yet.

But from an overall perspective, the total portfolio of shares, unit trust, investment-linked and cash/bonds has finally breached the 7-figure zone. The journey is progressing well. The point of "inflexion" (a.k.a. financial independence) is coming.

Despite a tumultuous 2015, here's wishing you a wonderful 2016 next. Happy New Year!

A REIT Time, a Dividend Future - ARA

The recent MAS consultation on changes to REIT management has spurred various reactions on its future impact. Most seem to suggest that it would be positive for all parties concerned. 

One area of concern has been the impact on companies that manage REITs, especially ARA. Its management has expressed that while it may result in lower earnings, it could lead to the expansion of its asset under management and would balance off in the long run.

(05/11/2013)	1.940
52 Week Low (SGD) (04/02/2014)	1.635
52 Week Return (%)	-2.010
Average Volume ('mil)	0.2852
Beta	0.85

Financial strength
Current Ratio	1.84
Quick Ratio	-
Long Term Debt to Equity (%)	0.05
Total Debt to Equity (%)	10.98
Interest Coverage Ratio (TTM)	-
Free Cash Flow to Firm (TTM) (SGD 'mln)	68.32

Margin
Gross Margin (TTM) (%)	-
Operating Profit Margin (TTM) (%)	61.88
Net Profit Margin (TTM) (%)	55.66

Dividend §
Annual Dividend per share (SGD)	0.0500
Dividend Yield (TTM) (%)	2.93
Dividend Yield (Annual) (%)	2.93
Payout Ratio (TTM) (%)	28.24
3-Year Growth Rate (%)	4.64

Valuation
Historical P/E Ratio	19.41
P/E Ratio (TTM)	17.83
P/BV (latest interim)	4.93
BVPS (latest interim) (SGD)	0.3462
EPS TTM (SGD)	0.0956

[Source: POEMS, dated 13 Oct 2014]

Its financials appear to be in fairly good shape thus far. Question is, will it be able to absorb the effects of this upcoming change?

Its Distribution Per Share (DPS) grew steadily from 0.0397 to 0.05 (2.93% yield) between FY09 to FY13. A steady dividend payout history is an encouraging sign. Yet, its payout has kept below 30% despite this. Over the same period, its Earnings Per Share (EPS) has grown from 0.0572 to 0.0879. That means that its DPS has stayed below its EPS. I view these as positive and prudent.

Suppose its earnings were to collapse down to its FY09 level of 0.0572, would it still be able to sustain the dividend payout at 0.05 (FY13)? It would likely face increased pressure to reduce its dividends, or face an expansion of its payout ratio. But this is just one scenario.

I have a small holding in this company and will keep things unchanged for now. Happy to continue to collect its dividends meanwhile.