SembCorp Industries should invest in Hyflux Ltd

On 22 May 2018, Hyflux rocked the market by announcing that it is seeking High Court’s protection to reorganise their liabilities and businesses. Meanwhile, Hyflux also requested for a voluntary trading suspension of its shares and securities listed on SGX. But the biggest bombshell had to be the non-payment of the distribution on its $500 million 6.00% Perpetual Capital Securities, which will be due on 28 May 2018.

Previously, I have written an article on Hyflux perpetual securities and highlighted its risks. Readers can subscribe as members to access that article for reference. The perpetual securities were selling like hotcakes back in 2016 because investors were lured by the seductively high yield against the backdrop of low bank interest rates. The latest announcement would have left investors in a no-man land as they cannot sell their shares nor the perpetual securities for the next six months.

Given the non-payment of the coupon payment in 28 May 2018, holders of the bond would likely to face some form of impairments on their investments. It is also likely that when the counter reopens in six month time, there might be heavy short-selling or possibility of shareholders dumping their shares, causing the share price to crash.

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Nightmare over for Cache Logistics Trust?

Like many of its peers in the industrial REITs, the past few years had been an absolute nightmare for Cache Logistics Trust which saw the logistics trust facing declining occupancy rates, negative rental reversions and market oversupply issues.

Apart from the challenging operating environment, Cache Logistics Trust was also involved in an intriguing legal battle with Schenker Singapore in relation to an investment property at 51 Alps Avenue. And then there was the huge uncertainties arising from the acquisition of its sponsor, CWT Limited, by debt-laden Chinese conglomerate HNA Group.

But recent data revealed that the industrial REITs may have bottomed out. An amicable resolution had been reached in relation to the legal battle in 2017. The acquisition of CWT Limited had also been completed. So is Cache Logistics Trust currently a value trap or a hidden gem? In this article, the investment merits of Cache Logistics Trust are reviewed.

Cache Logistics Trust

Company profile

Being a small-cap REIT, Cache Logistics Trust stood out among the S-REITs [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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Why I would not invest in Ascendas REIT

Being Singapore’s first and largest listed business space and industrial real estate investment trust, Ascendas REIT has certainly come a long way. From eight properties valued at around $600 million in 2002, the Manager has grown the REIT to a market leader with total assets of about $10.4 billion, comprising 100 properties in Singapore and 31 properties in Australia. With such stellar track record, Ascendas REIT is definitely worth taking a look.

But the abrupt resignation of former CEO Chia Nam Toon in November 2017 had raised eyebrows among investors. After all, Mr Chia had joined Ascendas REIT for less than two years and resigned “for personal reasons”. Although the management had stressed that it would be “business as usual”, we all know the CEO plays an important role and to downplay the significance of the event would be ridiculous. Nevertheless, a new CEO – Mr William Tay Wee Leong – was appointed in February 2018.

Ascendas REIT

But the reason why I would not invest in this REIT supremo is not because of the change in leadership, but because of my concern on its financial health. For FY2017/18, the cash and cash equivalent was a negative $23 million. The REIT needed a bank overdraft amounting to approximately $48.0 million as at 31 March 2018, thus allowing the cash and cash equivalents to be reflected as “$25 million” in the balance sheet.

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Sheng Siong share price surged on surprise $100 million investment

At a time when Dairy Farm is selling its 7-Eleven stores in Singapore, arch rival Sheng Siong’s stunning financial performance attracted $100 million from Mondrian Investment Partners Limited which acquired 99,000,000 ordinary shares of Sheng Siong from the company founders. With a Price/Book Value of 5.3 and P/E of 21.7, is Sheng Siong share price inflated? Apparently, Mondrian doesn’t think so.

Mondrian Investment Partners, founded in 1990, is an independent global investment manager with offices in London and Philadelphia and a value-oriented, defensive investment approach. Given its investment mandate, Mondrian must have felt that Sheng Siong share price was undervalued, thus the explanation for the purchase.

Listed in the SGX mainboard only on 17 August 2011, Sheng Siong share price was trading at merely $0.33. Fast forward seven years later, the share price had shaken off its penny stock status to surge past the $1.00 milestone since 2016. The capital appreciation of Sheng Siong share price have created much wealth for long-time investors indeed.

2018 may prove to be another great year for Sheng Siong as the home-grown supermarket operator achieved increased revenue of 5.1% year-on-year to $228.3 million in 1Q2018, mainly contributed by new stores and comparable same store sales.

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Will SingTel share price be rocked by commercial disputes?

It is an explosive time-bomb waiting to be ignited. Being the largest telecommunication player in Singapore, SingTel enjoys an incredible massive investment moat with 685 million mobile customers spanning across 22 countries. This is an amazing feat which not many telco in the region can replicate.

But its overseas adventure came at a price as the Singaporean telco engages in various commercial disputes with foreign government authorities. Collectively, the commercial disputes involved liabilities amounting to a whopping $4 billion.

I have been a big fan of SingTel and had written a number of investment articles on this great company for several years. But the lurking commercial disputes had deterred me from investing in SingTel. Make no mistake, the amount involved is monstrously huge. So I had preferred to err on the side of caution although that would mean loss opportunities on the dividends and capital appreciation of SingTel share price.

Singtel share price

Financial performance

Notwithstanding the above issue, SingTel share price continues to power ahead in the face of the multi-billion lawsuits and challenging operating environment. Operating revenue for the third quarter of FY2018 increased 4% to $4.60 billion while EBITDA rose 6% to S$1.29 billion. Net profit was down 9% to $890 million while [This is a premium article.

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Should you take up rights offering from REITs?

Managers of Real Estate Investment Trusts (REITs) often have various reasons to raise funds from the capital market. The purposes could be for the purchase of assets, acquisition of another company or simply to pare down debts. To raise capital, the management may choose to issue rights offering, bonds, private placements or even borrow from the banks. In this article, I will share my perspective on rights offering from REITs.

Rights offering

Before proceeding further, it is important to understand the difference between a rights and options. The former is an offer to existing shareholders or unitholders of a REIT to purchase additional shares or units at discounted prices and the shareholders or unitholders may not take up the offer.

On the other hand, you do not need to be an existing shareholder or unitholder in order to buy options, which give you the right but not the obligation to purchase the underlying shares or units at a pre-set price. Nevertheless, if you choose not to exercise the option, you would have forfeited the fee relating to the option cost.

Basically, a rights issue is a form of equity financing for listed companies or REITs. It gives existing shareholders or unitholders the rights to purchase additional shares or units in proportion to their existing holdings, within a given timeframe.

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DBS shares versus OCBC shares

It is the clash of the banking titans as Singapore no.1 and 2 banks slugged it out to achieve stellar first quarter 2018 results. On the basis of the latest financial results, DBS edged past OCBC to smash in a record $1.52 billion. Shareholders must be very pleased with DBS CEO Piyush Gupta’s performance because share price stormed to $30 upon the release of the results.

Notwithstanding the good performances, there are lurking risks from technology disruptions which had impacted SingPost, M1 and ComfortDelgro. To tackle this challenge, DBS CEO is leading the bank on an aggressive digital transformation. After all, Piyush Gupta once famously declared that “people need banking, not banks”. But then again, OCBC has not been resting on its laurels and had been making a series of significant acquisitions in the wealth management realms that may prove to be game-changers in the coming years.

It remains to be seen as who will be the ultimate winner but I firmly believe strategies made by DBS’ Gupta and OCBC’s Samuel Tsien would define the course of the banks’ destinies with the next five years.


DBS share price to reach $50 for 50th anniversary?

Since the $30 mark, the share price of DBS has corrected slightly, presumably because some investors had cashed in on the profits.

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Scary growth project of Mapletree Logistics Trust

Mapletree Logistics Trust was the first of the four REITs to be listed on SGX Mainboard after its sponsor, Mapletree Investments, was established in December 2000 to hold non-port properties transferred from PSA Corporation to Temasek Holdings.

According to SGX Research, this REIT delivered the best total returns among the four since IPO – at an incredible 336%. In my point of view, Mapletree Logistics Trust is at a cross-road as it tried to ride on the exciting wave of e-commerce in China.

Listed in 2005 with an IPO price of $0.68, the unit price had withstood the onslaught of the Great Financial Crisis and went on strength to strength to hit a peak of $1.37 in January 2018. In recent months, the unit price had experienced some form of correction, which I think could be due to the number of on-coming asset acquisitions.

Part of the reason for this article is the compelling growth project of Mapletree Logistics Trust. Its Sponsor, Mapletree Investments Pte Ltd has an incredible pipeline of 45 projects in China that could be injected to Mapletree Logistics Trust in the coming years. Henceforth, the value of its investment properties could potentially double in a couple of years.

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The stunning rise of Micro-Mechanics

Crisis? What crisis? Home-grown Micro-Mechanics shrugged off recent bearish trend in share price to post a set of good quarterly financial results. Of course, investors should not judge a company by one quarterly results. But if you look at the past five year’s performance, Micro-Mechanics’ growth had been consistently good. So the recent correction in share price should be a healthy one.

In retrospect, it is a mystery that Micro-Mechanics went under my radar until recently when a member requested me to do a coverage on this counter. The story of Micro-Mechanics is nothing short of fantastic. Within the span of four years, share price soared four-fold to reach a high of $2.40 in January 2018, creating immense wealth for shareholders.

From a penny stock as recent as 2014, Micro-Mechanics confounded critics to attain the status of mid-size cap in the SGX mainboard. Its meteoric rise was in part due to the sustaining growth in the semiconductor industry as there are ever increasing use of embedded chips.


Company profile

Micro-Mechanics started life in 1983 with a small factory in Singapore. Through the years, the Group [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only.

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Wilmar International share price to rocket upon China IPO?

Will Wilmar International share price soar on the back of its impending IPO of its China unit? Being the largest listed agribusiness group by market capitalization on the Singapore Exchange, it is certainly a fascinating journey for Wilmar. From a start-up, Wilmar has overcome various challenges through the years to become one of the elites in the prestigious Straits Times Index (STI).

Many analysts have debated the need for Wilmar to list its Chinese unit in Shanghai while others had wondered the merits of announcing the plan at its infancy stage. In my point of view, the purpose of the initiative is more of business scaling rather than raising capital.

In recent years, Wilmar has struggled to meet great expectations due to the collapse of palm oil price, which was largely caused by overcapacity in the market. FY2017 results revealed that net cash flow from operating activities dropped significantly to USD 386 million, as compared to USD 1.1 billion in 2016. The terrible net cash flow was due to the huge increase in inventories (USD 1.2 billion in FY2017 as compared to USD 727 million).

Against the backdrop of ailing market demand, can Wilmar fight gravity? Ultimately, is this counter a value trap or potential multi-bagger?

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