Wolf Money(portfolio update for end Jan 2023) Part 2
Continuing from Part 1.....
Lendlease Global Reit
I added new positions in the current month and the end of last. I envisage the opportunities in the reit space. True to my promise, I have added Starhill Global Reit and Lendlease Global Commercial Reit to Lone Wolf Fund. Both reits are my first two purchases of any Reit after a 10 years break. If my memory doesn’t fail, the last reit I bought was Sph Reit or the renamed Paragon Reit. The China reopening is a big theme for this year. The Chinese tourist spend close to 54% of their travel budget on shopping. It will be a major boost to the struggling retail sector thus improving the bargaining power of retail landlords. The Chinese tourists are definitely in town. There are plenty of human traffic at Bugis BHG departmental store over the weekend. The yield on the 10 years Singapore bond is on a downtrend which may signal smart money moving towards risk free instrument in preparation of a recession. If Fed pause the rate hike, yield sensitive instrument like bond and reits will get a boost due to yield compression. Of course all bets are off if Fed fund rate heads towards 6% or even 7%. I will be very surprise if the market can take a rate higher than 5% without feeling giddy. Both reits will be reporting result towards end Jan and early Feb. Share price of both reits are firmer by around 8-9%. I will be reading their footnote for some clues on the health of retail sector and the strength of their rental reversion before deciding the next step. Both positions are relatively small. Starhill reported a small growth in DPU of 2.2%, Wisma Atria was the drag on dpu due to current AEI. The AEI is coming to an end, they are expecting continue recovery in shopper traffic at their malls. Half year DPU is 1.82c. I have decide to take profit on Starhill Global as I see little upside from current level after the spike up in price this month. I made it a point to start the year with some realised profit in the bag for good omen.
Sarine Tech and Bank of China
I added Sarine Tech, a diamond software and machine manufacturer towards the end of last year. As most reader can sense, the recent purchase had a common theme, high yield of at least 7-9%. Bank of China position is a similar high yield play. This year strategy is simple. If the market is flat, I will be better off(minus Boustead Projects which is an undervalued asset play) by 7-9% due to dividend. If the market is slightly down, I probably wouldn’t lose much due to the high dividend giving me a head start. If the market goes up, the extra yield from dividend is going to enhance my overall return from average to good. I coined this year strategy “ Lone Wolf yield planting ”. By investing in some quality high yield stocks gives me an advantage. It is like running a 100m race with one starting at the 92m mark. Although there are no certainty of a winning 2023 but at least there is an advantageous head start. The key is Fed pausing rate and pivoted by 2023. Of course, there is always a chance of a black swan or grey rhino event which can’t be calculated into any forecast. Tail I win, head I win or lose less. Both BOC and Sarine went up 5% and 20% respectively in the month of January.
Boustead Projects
Boustead Projects hasn’t gotten its fair share of credit from the investment community. I can’t ask for a better management to run the company. The purchase of the Bideford property is one classic example of their extraordinary deal making ability. The property was purchased with a discount after a substantial markdown last year. The Bideford property had a sizeable hospitality component(75%). Given the reopening of the Chinese economy, many Chinese tourists will be looking forward to their long awaited holiday. The demand for hotel rooms in Singapore are in great demand. RevPar had recovered to 14 years high of $286. If the Bideford property was to be offered for sale this year by the former owner, the price tag will be much higher. I am looking forward to better earning contribution from their hospitality purchase in FY 2024(March closing). Vietnam business continue to make good progress, just like the Bideford property, BP’s management went into Vietnam more than 9 years ago seeing the potential demand for industrial properties in Vietnam. I am looking forward to Vietnam business contributing more to the bottomline in the 2H 23. Price hasn’t move out of 80c-84c range. Patiently awaits the improvement of the earning and hopefully usher in a higher trading range for the stock. BP had just announced an acquisition of J’Forte building, a high spec food processing industrial building at Tai Seng through 25% ownership of BIF with Metro Holdings and other investors of Boustead Industrial Fund. The building is located at prime Tai Seng area, building has 44 years left on the lease. From my limited understanding of industrial properties, food processing facilities are always limited and in high demand in Singapore. I do think it is a sensible buy with seller leasing it back for 10 years.
Cash
I continue to subscribe SSBs. I am expecting the average yield of SSBs to fall mimicking the fall in Singapore Government 10 years bond which yield stands at just under 3%. My SSBs stacking might be coming to an end soon. I have also did a roll over from past SSBs which had a lower yield to renew the 10 years duration at higher average yield. I continue to value cash highly.
Summary
I am surprised by the better than expected start to the new investment year. It’s goes to show market sentiment doesn’t always reflect on how the actual market performed. Let’s pray for continue overwhelming pessimism by market watchers, so we can all huat bigger and longer till they turned bullish. Bull market built on wall of pessimism. Just before everyone think I am bullish, I am actually quite the opposite, given the recent bullishness of the market, one shouldn’t throw caution to the wind, maybe it just me constantly worry about everything. The number one risk high up on my list is the potential of the Japanese Central Bank jacking up interest rate. The rise in Japanese bond yield and Yen will have a profound implications on world financial market and asset prices given the huge amount of Yen carry trade. I am watching event like a hawk given the dovish BOJ governor, Haruhiko Kuroda is retiring after March this year. It is difficult to predict the policy coming out from Japan after March. I wouldn’t discount any chance of me selling more of my holdings to lock in profit given the extraordinary run up in share price within a short span of time. We shall see. In my end Sept 2022 update, I mention about gold and Yen doing well, magically both categories of investable did pretty well, gold is up close to 20% and Yen is up close to 15% against the USD since Oct last year. Both movement are big against historical trend.
(Yen and Gold rocketed 15-20% within the last 3 months)
Looking at my crystal ball, I think both gold and Yen look strong. I also like yield stocks especially old economy related companies which can provide some stability to the portfolio. I continue to like cash especially short term cash. Some commodities related companies should do well. I like China,HK and Australia market which seem to be having better trade relationship with China. Export base Aussie business should do well. I am unsure if I am going chase every theme but I will try hard to look for suitable candidates to add to LWF. Do email me if you have any stock idea worth exploring together. Thank you.
Wishing all a Happy Lunar New Year and a prosperous year of the Rabbit. Gong Xi Fa Cai! God Bless!
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