Wednesday, December 12, 2018

Staycation at Yotel Singapore

There has been some changes to the flexible benefits policy at my workplace. The number of categories that we could spend on have been restricted to only a select few, with staycations being one of them. After going for my first staycation, it's now safe to say that I've caught the staycation bug! It is good to take a well-deserved break, to empty my mind, and to live in the present. Also, it is fun being a tourist in Singapore.

Recently, I spent some of my flexible benefits at Yotel Singapore. By the way, this is not a sponsored post.

Yotel Singapore is a newly-opened hotel in the heart of Orchard road. Their main draw is their futuristic theme and their guest service robots, Yoshi and Yolanda. Families with kids will definitely enjoy dialing up Mission Control (reception) for either Yoshi or Yolanda to deliver items such as towels and water bottles to your room. No, I did not spam requests, lol; I only tried it out once. Apparently, Yolanda occasionally sings to hotel guests after a delivery request, but I was not lucky enough to hear her sing. :(

Befitting its futuristic theme, you could self check-in at one of the counters in the lobby. Fill in your details, swap your credit card, and you are able to create your own room key on the spot. Kudos to the front desk staff who came to greet and welcome us.

We stayed in the Premium Queen View room which was located on the higher floors with good views of Orchard road. The room was slightly smaller compared to your typical hotel rooms. Despite its small size, the space is efficiently used. The rooms come packed with a fridge, safe, iron, ironing board, and hair dryer. The bed is adjustable and you can adjust the angle to suit your comfort level.

The bedroom area is separated from the wash area by frosted glass.

As we were located on the higher floors, we had a good view of Orchard road. Unless you want your net tangible assets to be in the public's eye, do remember to draw down the blinds while using the wash area.

At level 10, we have the Komyuniti Bar and Restaurant, the gym, and the pool area.

A pity I didn't managed to get good shots of the breakfast spread though. Only one came out "decent."

I enjoyed the KOMpliment (the Yotel signature cocktail) that consists of butterfly pea flower-infused gin, fresh lemon, violet liqueur, egg white, hibiscus perfume & orange bitters.

Until next time folks. My staycation watchlist has been firmed up and I am looking forward to my next adventure. :)

Tuesday, October 30, 2018

Applying the Chowder Rule metric to S-REITs

In today's post, I will not show you where to get the tastiest, most value-for-money Chowder in Singapore. That is.......the responsibility of food bloggers.

....Not today's subject

Instead, I will introduce you to the Chowder Rule, so named after Chowder, a Seeking Alpha contributor. I will be lifting several paragraphs from an article by Sure Dividend on the same topic:

The Chowder Rule is a rule-based system used to identify dividend growth stocks with strong total return potential by combining dividend yield and dividend growth. The Chowder Rule is applied in a differentiated manner depending on the type of stock in question. The criteria can be found below:

Rule 1: If a stock has a dividend yield greater than 3%, its 5-year dividend growth rate plus its dividend yield must be greater than 12%.

Rule 2: If a stock has a dividend yield less than 3%, its 5-year dividend growth rate plus its dividend yield must be greater than 15%.

Rule 3: If a stock is a utility, its 5-year dividend growth rate plus its dividend yield must be greater than 8%.

For those who are interested in the details (its underlying philosophy, when to use it, its limitations, etc), you can read more of the Chowder Rule here.

The first thought that I had when I came across the Chowder Rule a couple of weeks back was to apply the metric to S-REITs. The rationale is to add another tool to my investment toolkit to help me differentiate whether does a particular REIT make the cut.

As you can see, all 3 rules do not make explicit allowances for REITs. Hence, I took the liberty to select Rule 3 and apply it to S-REITs (based on the assumption that REITs and utilities share similarities such as being higher-yielding, lower growth/dividend growth instruments).

I then realized that there might be certain REITs who could "pass" the Chowder Rule 3 of 8% just for being higher-yielding. Perhaps, in our situation, we could use the Chowder Rule not as a binary measure (e.g. above 8% = good; below 8% = bad), but as a a relative measure (e.g. REIT A has a higher score than REIT B).

In the calculations that follow, annual dividends will be defined as the total dividends distributed by any given REIT in their financial year, not the calendar year. Special dividends, if any, will be included in the computation of dividend growth. Data will be taken from the most recent annual report. Current dividend yield will be taken from the REIT Data site at the time of this blog post (30 October 2018).

With d referring to total dividends distributed in the financial year and y referring to the current year, let 5-year dividend growth rate be:

((dy - dy-1)/dy-1+(dy-1 - dy-2)/dy-2+(dy-2 - dy-3)/dy-3+(dy-3 - dy-4)/dy-4+(dy-4 - dy-5)/dy-5)/5

I won't be calculating the Chowder Rule for all the REITs; I will only be looking at a select few REITs.

AIMS AMP Capital Industrial REIT
5-year dividend growth rate: -1.12%
Current dividend yield: 7.741%
Chowder Rule value: 6.62%

Ascendas REIT
5-year dividend growth rate: 3.08%
Current dividend yield: 6.272%
Chowder Rule value: 9.35%

Capitaland Commercial Trust
5-year dividend growth rate: 1.56%
Current dividend yield: 4.767%
Chowder Rule value: 6.33%

Capitaland Mall Trust
5-year dividend growth rate: 3.42%
Current dividend yield: 5.264%
Chowder Rule value: 8.68%

First REIT
5-year dividend growth rate: 3.39%
Current dividend yield: 7.142%
Chowder Rule value: 10.53%

Frasers Centrepoint Trust
5-year dividend growth rate: 3.56%
Current dividend yield: 5.586%
Chowder Rule value: 9.15%

Keppel REIT
5-year dividend growth rate: -5.92%
Current dividend yield: 5.062%
Chowder Rule value: -0.86%

Lippo Mall Trust
5-year dividend growth rate: 3.66%
Current dividend yield: 14.044%
Chowder Rule value: 17.70%

Mapletree Commercial Trust
5-year dividend growth rate: 6.94%
Current dividend yield: 5.644%
Chowder Rule value: 12.58%

Mapletree Industrial Trust
5-year dividend growth rate: 4.94%
Current dividend yield: 6.194%
Chowder Rule value: 11.13%

Mapletree Logistics Trust
5-year dividend growth rate: 2.16%
Current dividend yield: 6.252%
Chowder Rule value: 8.41%

Parkway Life REIT
5-year dividend growth rate: 5.63%
Current dividend yield: 4.773%
Chowder Rule value: 10.40%

Sabana REIT
5-year dividend growth rate: -17.65%
Current dividend yield: 8.329%
Chowder Rule value: -9.32%

Starhill Global REIT
5-year dividend growth rate: 0.99%
Current dividend yield: 6.977%
Chowder Rule value: 7.97%

Make what you will of these figures. Have fun!

Wednesday, October 10, 2018

Q3 2018 Portfolio Update

Another quarter has passed and it is time to review my portfolio again.

Dividend Income

Q3 2018 SGD Dividend Income

Dividends received from my SGD-denominated portfolio in Q3 2018 fell, when compared to the same quarter last year. This trend has persisted for quite some time and it is symptomatic of deeper issues that my portfolio is somehow not quite right. Shouldn't an income investor receive more dividends through the passage of time? With some psychic pain, I persisted in my task of pruning the fundamentally weaker stocks from my portfolio. The drops in dividends received should stabilize in another quarter or two.

Q3 2018 USD Dividend Income

On the other hand, the dividends received from my USD-denominated portfolio is growing steadily, a result from both capital injections into dividend growth stocks and dividend growth from said counters. 

In this quarter, I initiated a new and small entry into OCBC when its price fell from its peak. With this move, my portfolio has some exposure to the financial sector again (after divesting iFAST, Hong Leong Finance, and T Rowe Price previously).

I exited my entire position in Lippo Mall Trust and Accordia Golf Trust in this quarter. Previously, I have taken partial profits for these two counters when they were at their highs. This time round, I exited the remaining stake for both at below my cost price. Overall, these two trades turned out profitable.

An investment blogger friend sounded out to me that there were some flaws in my thinking and I am grateful for that. Specifically, what I intended to do with regards to Lippo Mall Trust was to shrug off any unrealized losses as I got them at a (formerly) very low price of $0.30. Since I have taken partial profits at $0.40 and have received almost 3 years' worth of dividends, I was willing to hold it through a market crash coupled with its deteriorating fundamentals. I was even contemplating to buy more in a market crash. Somehow, the following thought eluded me: some counters go down..........and stay down. Okay, now I know better. Thanks friend!

As for Accordia Golf Trust, the dividend trend is not looking good. 

I added to my position in Hongkong Land. Nothing much to be added here; I like the recurring income from their investment properties and their clean balance sheet. To quote a friend who aptly described my position, I am treating Hongkong land as an un-levered REIT income play.

I also added to my position in JM Smucker. Despite the challenges faced, JM Smucker is still going strong (relative to its consumer staples peers). Looking to scale in further if opportunities present itself. 

Net worth breakdown
There has been minimal changes to my net worth breakdown when compared to the previous quarter.

Net Worth Breakdown

As per before, "the pie chart depicts the breakdown in my net worth across the various asset classes in percentage (pie chart neither includes my CPF nor my emergency fund). To be conservative, I computed my precious metals allocation at spot price even though I am holding everything in physicals."

Emergency Fund
On the ground, things don't really look good. Based on anecdotal evidence, I have heard of contracts not getting renewed and retrenchment exercises taking place.

At my end, I have continued to build up our emergency fund each month. I mentally segregate the emergency fund from investable cash. That way, in a real market crash cum recession, my mind will be free to operate in a cold and clinical fashion.

Strategy moving forward
In the interim, I am exposing myself to opportunities in other markets.

I have created a trading account to trade Hong Kong stocks and another trading account to trade Singapore stocks (in the event that my main Singapore trading account fails when everyone is trying to exit their positions in a market crash).

I will be creating a Malaysia trading account and a Denmark trading account soon.......after I am done with reading up on the rules and regulations.

If this is the calm before the storm, I appreciate all the time I can get to research stocks, re-confirm my choices, build up my emergency fund and my cash levels.

Tuesday, September 11, 2018

The growth of NextEra Energy and Florida population growth

In one of my previous post, I triangulated the growth of Consolidated Edison with New York City, the city that it predominantly serves.

In this post, I will be adopting the same approach in my evaluation of NextEra Energy (NEE), another utility company that I have come across while prospecting for investment opportunities.

NEE might be an unfamiliar name to readers. To help readers get acquainted with the company, I shall lift the following paragraph from their 2017 annual report, "NEE is one of the largest electric power and energy infrastructure companies in North America and a leader in the renewable energy industry. NEE has two principal businesses, Florida Power & Light (FPL) and NextEra Energy Resources (NEER). FPL is the largest electric utility in the state of Florida and one of the largest electric utilities in the U.S. FPL's strategic focus is centered on investing in generation, transmission and distribution facilities to continue to deliver on its value proposition of low bills, high reliability, outstanding customer service and clean energy solutions for the benefit of its nearly five million customers. NEER is the world's largest operator of wind and solar projects. NEER's strategic focus is centered on the development, construction and operation of long-term contracted assets throughout the U.S. and Canada, including renewable generation facilities, natural gas pipelines and battery storage projects."

My focus today is not on the firm as a whole. Instead, I will be delving into FPL only. As of 31 December 2017, FPL had approximately 26,600 MW of net generating capacity, approximately 75,000 circuit miles of transmission and distribution lines and approximately 620 substations. FPL provides service to its customers through an integrated transmission and distribution system that links its generation facilities to its customers. They serve approximately ten million people through nearly five million customer accounts. Their service territory covers most of the east and lower west coasts of Florida (see image below).

NextEra Energy Florida Map

FPL's primary source of operating revenues comes from its retail customer base (see below).

FPL Revenue source breakdown

Similar to what I have shared in my article on Consolidated Edison, there is a limit to the price hikes a utility company could charge. Further growth, like what I have suggested in my previous article, could come from a growth in the Florida population, which the firm operates in.

Let us take a look at Florida's population growth trend by considering data from the Office of Economic & Demographic Research (EDR). Similar to New York City, a census is conducted once every 10 years, with the most recent one being in 2010.

At the state level, the Florida population grew from 15,982,824 to 18,801,310 from year 2000 to 2010. This is an increase of 17.6%. In the "Florida Estimates of Population 2017" report, the population was estimated to be at 20,484,142 at April 2017. This is an increase of 8.9% over the period of 7 years. Population growth has slowed down.

However, current estimates have to be revised downwards. According to the executive summary of the Demographic Estimating Conference held on 9 July 2018, the change in population was magnified due to the effects of Hurricane Maria. To flee the hurricane, people moved from Puerto Rico to Florida. For some, they eventually settled into Florida permanently. This adds another layer of perspective to my understanding of how natural disasters impact human migration and, in turn, impact the companies that operate in the particular region.

The EDR website has plenty of data visualizations that would help us better understand the Florida population. I will be highlighting a few of them here.

The following image illustrates the total population of Florida by its counties in year 2010. If you mentally superimpose the following map on the above map, you will observe that NEE serves counties that are highlighted in green, blue, and red in the map below. These are counties that contain a larger population size in relation to the total population of Florida. Miami-Dade and Broward counties are the two most populous and NEE is serving them (in 2010, at least).

Florida Total population by county

The following map shows a different look at the same data. It considers the population density of each county. Similarly, it paints NEE in a good light; the more population-dense counties were served by NEE when you superimposed the below map with the first map above (for year 2010, at least). Furthermore, quite a few of the counties are reflected in yellow and green. If there is a positive net migration, these counties could still accommodate additional numbers.

Florida population density by county

The maps also reveal that NEE has no presence in Duval, Hillsborough, and Pinellas counties. These 3 counties are reflected in blue in the second map (Total Population by County: 2010) and 2 blues and 1 red in the third map (Population Density by County: 2010), respectively.

Next, let us take a look at the population growth components. The following graph is taken from the "Demographic Overview & Population Trends" presentation, dated 6 November 2013.

Florida Growth Components

Most of the growth in the Florida population could be attributed to net migration instead of a natural increase. Though it was not specified, I infer that natural increase refers to net birth rates - death rates.

In the same presentation slides, we are also informed that Florida has an aging population (see below).

Florida Population by Age Group

Hold on to those thoughts.

In various articles, Florida occupies one of the top few spots for retirement (see here, here, and here). It is plausible that Florida's population growth could see further growth as a retirement destination; the growth components, population by age group, and retirement destination trends support it. Furthermore, it overtook New York and became the third most populous state in the US (see here and here). NextEra Energy seems poised to benefit from these trends.

Not vested in NextEra Energy. NextEra Energy is in my watchlist.

Friday, August 17, 2018

To Sleepydevil: Making good use of your time in NS

This post is dedicated to Sleepydevil, who is enlisting soon.

During this period, you may find it more comfortable to follow the herd and allow your mind to stagnate. In this piece, I hope to encourage you to focus on maintaining or, even better still, to improve and allow your mind to flourish.

There will be pockets of free time here and there. There will be weekends for you to pursue your interests. The point is to incorporate bits and pieces of self-improvement into these pockets of free time. Push yourself a little each day and, over the 2 years, your hard work will surely compound. The key is moderation, so that you will develop into a well-rounded person. I am sure this is not new to you, so let me share a few examples to get you all fired up.

I have a friend in army. Let us call him "A." "A" is from Raffles JC with very good 'A' level grades. One critique that is often leveled against the JC system by poly students is that JC students do not have advanced standing which they could use in the university level. Not for "A" though. During his 2 years of NS, he signed up for a University of London diploma programme. With this, he effectively had both good 'A' level grades and a diploma (which confers advanced standing) to boot.

After NS, he only had 2 more years of education to go before he got his degree. He flew to LSE and completed his degree. Today, he is rising up the ranks in the corporate world (based on what I found on his LinkedIn page).

Next, we have yours truly Unintelligent Nerd. For context, I am a Polytechnic student. During my 2 years of NS, I accumulated plenty of module credits for a particular post-graduate programme in humanities which I was interested in. At the same year I got my degree, I got my graduate diploma as well (the prerequisite for graduation is that I have to have a degree first). With the benefit of hindsight, while I did make good use of my time in NS, my prioritization was way off the mark. Studying for interest should not come before studying for practical reasons such as earning a living.

When I went for the graduation ceremony for my graduate diploma in humanities, I came to know one other chap who did the same thing. Let us call him "B." Similar to myself, he took up the programme for personal interest. This is where the similarity ends. He majored in law, a profession that could well support any of his interests. Based on a search of his LinkedIn page, he is currently upgrading his graduate diploma in humanities to a masters in humanities.

I do not directly know the next person in my sharing. According to one of my friends who spams specialist diplomas in the local polytechnics, he had the pleasure of getting to know a polytechnic graduate who took a specialist diploma while still serving NS. While in polytechnic, this young fellow already had good grades. The specialist diploma, along with some personal projects he is involved in, is the icing on the cake.

Not all tales end happily ever after right? Finally, there was another guy I know from camp who commenced on his studies. Halfway through his studies, he was posted out to another unit. There, he had less flexible superiors who disallowed him to continue his studies.

I hope these examples will motivate and encourage you. I know that they revolve around getting a certificate from a brick-and-mortar educational institute. Focus not on the examples, but on the underlying principles of personal agency and self-improvement.

Also, know who and when to ask for permission. There is a season for everything. Asking when the stars are aligned yields a more favourable outcome.

Hope this helps!