This time, we’re keeping the question is simple: what is good to trade and in which direction?
Using a combination of market structure, momentum, fibonacci confluence and oscillators – Desmond will share sustainable trading ideas and identify where the trends are, in the SG & HK stock market.
Desmond runs the award winning research firm, Everest Fortune Group. They are finalists for the Best FX Research & Equity Research for 2019, 2020 and 2021. His team of CFA, CMT, CFTe accredited traders regularly advises the largest banks, brokers and treasury departments.
Marcus Ng is the Vice President of Cross Asset Listed Distribution, Asia Pacific at Societe Generale. He is responsible for the product management, sales and marketing of the Daily Leverage Certificates in Singapore, together with Warrants and Callable Bull/Bear Contracts (CBBCs) in Hong Kong.Prior to this role, Marcus spent over seven years at SGX, managing the range of structured products listed on the securities market and driving the distribution of research content after graduating from the SGX Management Associate programme.
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CapitalandInvest will begin trading on Monday, 20th of September. It should be introduced at around 1 p/book, or $2.82 per share according to Capitaland’s documents. The question that on everyone’s mind now is: what’s its market worth?
This post was originally posted here. The writer is a veteran community member and blogger on InvestingNote, with a username known as @tantan88.
The value proposition
Capitaland strongly implies it’s worth more than this “introductory price” at book value. To support their argument, they’re showing that pure listed property manager trade at higher P/E multiples and above book value as compared to property developers which typically trade lower.
In their basket of manager, they picked Charter Hall, Goodman, Lendlease and ESR Cayman. It’s fair, but they omitted some which do not support their view. The best example is Cromwell Property Group, which trades under book value and with P/E ratio under 10.
For their developers, they included CityDev and Frasers Property. These two alone would strongly weight down on the average. CityDev as it struggles to get out of their China blunder and Frasers as they face very strong headwinds to their hospitality businesses.
Lastly, for REIMS and Developers they did not pick the same companies between their p/nav and Forward P/E charts. After double checking though there is nothing nefarious here. Companies that they did not include into one graph or another would have supported their thesis either way so it just comes off as odd.
For P/NAV, If CLI trades like their counterparts the implied fair value is 2.82 * 2.9 = $8.18.
Realistically though, CLI isn’t a REIT and isn’t a property developer with heavy assets so price to book is probably not the best way to evaluate its worth. CLI is likely to be better evaluated with its price to earnings ratio.
For P/E, it’s a little bit trickier because the company has never existed yet.
Capitaland did provide numbers though:
In 2019, EPS was 54.4 cents, -19.9 cents in 2020 and 6.8 cents in 1Q2021. A simple linear calculation would give you an estimate of 27.2cents for 2021.
If CLI trades at 20 p/e, fair value is 0.272* 20 = $5.44.
If CLI recovers to 2019 levels, fair value is 0.544 * 20 = $10.88!
My point of view
No matter how you look at it, the “unlock value” of this operation seems to be there and CLI seems to be incredible value. But there are two words of caution:
1. Capitaland closed at $4.
Considering CICT closed at $2, this implies that market priced CLI at $4 – $0.951 (the cash consideration) – 0.155 * 2 (the CICT shares as part of the deal) = $2.74.
That’s right, market has decided that CLI isn’t even worse its book value on closure.
2. Examples given are not comparable
To derive its value thesis, Capitaland has used REIMs listed in Hong Kong and Australia. There is no apple-to-apple comparison simply because there are no other listed REIM on the SGX. There is a good proxy to ARA through Straits Trading but they trade below book value and under 10 p/e.
As for Mapletree Investments, it’s a private company. I believe if they could raise billions through an IPO they would do so, but Mapletree’s management has decided that isn’t worth it for now. Would it be because they’re afraid of a low valuation?
I believe the market value of CLI will largely depend on their dividend policy.
THIS IS NOT INVESMENT ADVICE. MY PERSONAL OPINION ONLY. I AM NOT A FINANCIAL ADVISOR. DO YOUR DUE DILIGENCE.
Once again, this article is a guest post and was originally posted on tantan88‘s profile on InvestingNote.
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Delta COVID cases surge. SGX gets approval for SPAC listings. MAS clamps down on Binance. China’s ‘common prosperity’ drive further impacts Chinese companies. Federal Reserve starts tapering.
What’s the latest developments in the markets that you as an investor, should definitely know of?
Join us in this upcoming webinar where we get a sense of what’s happening in the markets right now and where the trends are. Register Now, Come Later: https://bit.ly/mktcomm1…
Date: 15 Sep, Wed Time: 7PM – 8PM
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With more than 19 years of experiences in equity investments, Dan Chang is well-equipped with a good understanding of the market mechanism and the technical know-how to assist investors and traders to navigate the turbulent market. Dan is also a veteran community member in InvestingNote. @dAn_chang
Marcus Ng is the Vice President of Cross Asset Listed Distribution, Asia Pacific at Societe Generale. He is responsible for the product management, sales and marketing of the Daily Leverage Certificates in Singapore, together with Warrants and Callable Bull/Bear Contracts (CBBCs) in Hong Kong.Prior to this role, Marcus spent over seven years at SGX, managing the range of structured products listed on the securities market and driving the distribution of research content after graduating from the SGX Management Associate programme.
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The comparison made by @Vince including IREIT Global got me thinking: if sponsor holds a 50% stake in the REIT, why did they tank it so hard by making highly dilutive equity fund raising for their Spanish and French properties?
Let’s dig through the past 5 years financial reports and try to find and answer and see where IREIT Global is headed.
This post was originally posted here. The writer is a veteran community member and blogger on InvestingNote, with a username known as @tantan88.
First, here’s the TTM DPU chart for IREIT Global, the one that is raising this investigation:
Since 2016, this translates to -6.32% DPU CAGR. DPU has lost close to 28% since 1H2016. Some people might invoke “COVID” but I would like to remind you that other REITs have been doing great and the Eurozone economy lives pretty much restriction free and rebounded over 10% in 1H2021.
Now, let’s look at the growth of management fees:
Management fees were stable until they exploded by 2H2020, due to the acquisition of the Spanish properties. The structure of IREIT management fees is determined as 10.0% distributable income. It doesn’t matter if they make dilutive acquisitions for them. If they grow, they collect more.
IREIT Global’s management fees increased by 8.59% and 10.90% CAGR over 2H2020 and 1H2021 respectively.
Another interesting chart to consider is the total cost of running the REIT. This includes the management fees, but also the trustee’s fees and operational expenses.
In that case it is more nuanced but still show the trend. In 2H2016 the trust awarded itself a huge performance bonus and this is what you see here. Since then, they have kept cost under control until they didn’t.
In 2H2018, trust expenses were 17% of management fees. In 1H2021, trust expenses were 36% of management fees. In fact, these expenses have close to doubled between 1H2016 and 1H2021. So not only IREIT’s management fees are growing at an alarming rate while the DPU is shrinking, but their expenses are also growing relative to the fees they collect.
With the expansion into other countries and the cost associated with it (setting up a local entity, hiring new employees, etc. etc.) this isn’t surprising, but this wouldn’t be an issue if the REIT was returning money to unit holders at the same rate of growth.
Finally, let’s see IREIT Global TTM yield vs the 10 years US treasure notes. The yield is computed using the TTM DPU and the VWAP of IREIT Global over the half year timespans.
What’s interesting to me is that the spread was more compressed in 2018 than it is now. This means that despite the poor performance, the REIT could still see its share price appreciate. That being said we now have a good idea of the DPU “long term growth” based on all this information, we can now attempt plug these numbers in a DDM model:
THIS IS NOT A BUY OR SELL CALL. MY OWN RESEARCH ONLY. I AM NOT A FINANCIAL ADVISOR. DO YOUR OWN DUE DILIGENCE.
Once again, this article is a guest post and was originally posted on tantan88‘s profile on InvestingNote.
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We are heading towards the end of August which means that a new month is soon ahead of us.
In the past few weeks, we have seen many companies reported their quarterly earnings and it was a good time for us as investors to relook into the fundamentals of their business to see how they were doing and where they are heading over the next few quarters.
This post was originally posted here. The writer, Brian Halim is a veteran community member and blogger on InvestingNote, with a username known as @3Fs and has 2414 followers.
If there is any one thing that stands out, a proposed increase in dividend is likely a better sentiments towards encouraging results and the outlook ahead. It also signals that the company is recognizing and rewarding shareholders for their long term belief in the company.
In this article, I’ll share the 3 stocks that increase their proposed dividends after announcing the latest earnings.
1. Micro-Mechanics (Holdings) Ltd (SGX: 5DD):
Micro-Mechanics announced its Q4 and full year earnings on the weekend which beats expectations.
The leading manufacturer for high precision tools and parts used in process-critical applications for the semiconductor industry delivered a stellar performance for the year ending 30 June 2021 (FY2021) by reporting a 14.8% growth in topline revenue year on year to $73.7m and 23.3% growth in net profit to $18.1m.
This is also the highest ever quarterly results performance the company has ever reported in terms of both sales revenue and net profit so it does look like the company is in a good stead to break that record going forward.
With a record year, the Group is also rewarding its shareholders well with a bump up increase in proposing a final dividend of 6 cents per share and a special dividend of 2 cents per share. This raises the Group total dividend payout for FY2021 to be at 14 cents per share (increase from the previous year of 12 cents per share in FY2020).
Based on the guided outlook, you can see just how confident the management sounded and I think they are poised to benefit from the multi-year semi-conductor growth outlook ahead.
“The Group believes the semi-conductor industry is poised for a prolonged period of solid growth as chips become increasingly embedded in almost every aspect of modern life.”
2. Ping An Insurance (Group) Company (HKG: 2318):
Ping An had quite a disappointing year falling by as much as 33% year to date as compared to the benchmark of the SZH and HSI index.
Last Thursday, they reported their half year results ending 30 June 2021 which gives investors some comfort in contrast to the recent falling price action.
Predominantly in the traditional insurance industry, Ping An has stepped up to actively respond to the China’s 14th Five-Year Plan by transitioning its business model to be a “Finance + Technology” in order to serve their customers better in their entire eco-system.
In this quarterly earnings, Ping An achieved a 21% annualized operating ROE, with operating profit attributable to shareholder up 10.1% year on year to RMB 81.8m for the 1H of 2021. As a result of this, management has proposed an increase in the interim dividend of RMB 0.88 per share, which is up 10% year on year.
The one thing which investors might want to also take note is that their retail customers and technology patent applications have also increased year on year so investors with a patient mindset will be well rewarded in due time.
” Ping An Life advanced the transformation toward high-quality teams and tiered, refined management, promoting 1 standard + 3 tiers + 4 tools – vigorously developing Diamond Agents. By doing so, the life agent’s channel per capita productivity steadily increased. Annualized operating ROE for the Life & Health is at 35% and the company believes it will pay off with healthy growth and development within the next decade.”
3. Micron Technology (Nasdaq: MU):
Memory Chip maker Micron Technology has not had an active dividend policy until the last recent earnings when they announced a quarterly dividend.
The payout is small at only the proposed $0.10 per share, but this could work to grow at a decent level over the longer run who is looking for some income play in this sector. At the current price, this works out to be at only ~ 0.5% annualized yield ($0.10 x 4), which will cost Micron around $450m in dividend payout.
This is a reasonable amount of payout given that this will be paid from the free cash flow they are generating.
In the recent earnings, the company grew its free cash flow to $1.5b and the strong 5G demand drives the higher DRAM and NAND, both for smartphone and data centres.
In the call, CFO David said that the dividend policy is a good start to reward shareholders and they will grow over time, while maintaining their flexibility and preference over a buyback strategy which creates longer term value for shareholders.
“We’re still seeing robust demand in cloud. As we migrate through this year and into next year with CPU architectures, we’d also expect good content improvement in cloud.”
Thanks for reading.
Once again, this article is a guest post and was originally posted on Brian Halim‘s profile on InvestingNote.
Become a part of our community and also see what other investors are saying about the current market right now: (click on the view now button)
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