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Can Singapore really house 6.9m people?

Saturday, February 2, 2013

I have been careful not to blog about politics but I just need to get this off my chest.

Let me say first that I am neither pro PAP nor WP nor any political party. I will vote for anyone who will do the job right. Although the PAP has a good pedigree, in the last few years, its performance has been wanting and the people spoke with their votes in the last GE.


I feel that 6.9m people would make Singapore really crowded and I don't like crowds for many reasons.

I find driving in Singapore really stressful in the last few years. It used to be a breeze driving here just ten years ago or even just five years ago. I used to tell people that staying in the west and working in the east was better because the jams on the roads were always in the other direction as most people were staying in the east and working in the west. Not anymore. Now, it is jammed in both directions!

So, on some days, I would try to take the MRT instead. Oh, the nightmare! Even our newest Circle Line has problems. I was personally affected by breakdowns twice in the last 6 months and for a person who rarely takes the MRT, I am either very unlucky or the system has some serious issues.

Well, they are doing road and expressway widening on top of buildng new roads and a new expressway. All these should help to make traffic conditions better at least in the near future.

Also, they seem to be spending a lot of time and money on improving the reliability of the MRT system but it is going to take a year or two apparently to complete the upgrades and repairs! Till then, expect more breakdowns.

Overcrowding aside, what I am really concerned about is the cost of living in Singapore.

A friend's dad who is in the real estate development business told him the day Singapore has 6.9m people, everything will become very expensive just like in Tokyo. I shudder at the thought.

The PAP government should not squander away the chance that it has been given to set things right or it could see its majority shrinking again in the next GE. Could we then see a situation in Singapore like what we see in Malaysia now?

Till the next GE, let us see if the PAP government does better. In the meantime, we should do what we can to safeguard our own financial health.

DJIA's above 14,000! What to do?

The Dow Jones ended above 14,000 points for the first time in more than 5 years! Could it go higher? Are retail investors coming back in a big way?

"I would say in the 30 years I've been watching it, this is the least amount of retail interest waiting for a pullback, or waiting to jump in that I've ever seen," said Scott Wren, senior equity strategist at Wells Fargo Advisors, which focuses on retail investors. "Probably and unfortunately for a lot, it's going to be a lot higher before they get in."

Wren said the move to 14,000 is at most psychological and won't be that important to disenfranchised investors. "When you run into people at parties, unless they're in the business ... the stock market isn't even a point of discussion. There's very little conversation. There's very little excitement about the market," he said. "It feels to me like there's a little bit of chasing going on, but not very much at all. I don't expect it any time soon."

Source: Yahoo! Finance.



We are but frogs in wells. We see what we believe to be real.

As long as there are still investors out there who are sceptical of the stock market, who are heavy in bonds and cash for their perceived safety, there is room for stocks to go even higher. When everyone is bullish on stocks, when there is no one left who would stay away from the stock market, then, the fuel is spent.

So, pick out a few good stocks which are still undervalued and hold on to them. However, this does not mean that we should avoid trading for some short term gains in the meantime. After all, share prices climb a wall of worries in an uptrend and do not go up in a straight line.

Related post:
1. Noises, voices and choices.
2. Be comfortable with being invested.
3. Tea with AK71: A frog in a well.

Marco Polo Marine: Negative divergences.

Friday, February 1, 2013

Although the fundamentals of Marco Polo Marine are sound and its future looks bright, Mr. Market is not known to respect fundamentals. Mr. Market is a creature of sentiments.

Technical analysis provides a window into the collective psyche of market participants and when there are negative divergences aplenty, we should exercise caution when thinking of initiating a long position or adding to a long position.


The presence of negative divergences does not mean that the share price will definitely weaken. It does not mean that the share price will not go higher. It just means that the risk of a retracement is now higher.

So, how do we respond to something like this?

Personally, I have not divested any of my shares of Marco Polo Marine. I am that confident of the company's prospects. In fact, if there should be a pullback to supports, I am likely to add to my long position.

So, is buying on pullbacks at supports a sure win strategy? Not at all. Supports could break and price could go lower! If that disturbs you, you might want to hold on to your money. However, if price should rebound and go higher, would you kick yourself if you had held on to your money?


If the fundamentals are sound, lower prices would present greater value. Why wouldn't we buy? The trick is in buying at supports and pacing ourselves as we do so. Don't throw in everything including the kitchen sink at the first support on retracement.

Some would say to wait for clearer signs of an upturn before adding to long positions. That, I feel, would work better in a downtrend. In an uptrend, buying at supports on pullbacks is what I would do. Go back one blog post and you would know what I mean.

Finally, just to add the confusion, technical analysis shows where the supports and resistance are but there is no guarantee that these would be tested at all. This is where hedging comes in. Something to think about over the weekend, perhaps?

Related post:
Marco Polo Marine: Looking into the future.

CapitaMalls Asia: New 12 month high in the making.

The share price of CapitaMalls Asia has been rising and with strong momentum too. Amidst bullish calls by research houses, I would not be surprised if its share price were to go even higher.


Citigroup adds CapitaMalls Asia (JS8.SG) to its Focus List.

"In the next few years, we expect China to be the key driver of CMA's earnings growth, as the company harvests gains from multi-year investments that have expanded its footprint to 36 cities in the country. The majority of the China portfolio is still in the growth stage, or in the process of stabilisation. India, from a low base, also offers significant upside potential," it says, expecting its Singapore exposure offers a visible stream of recurring income.


CMA's competitive advantages in China can't be easily replicated, including a strong brand equity and solid track record as a first-mover, ability to tie up with other local developers and access to a varied, cheaper pool of financing, Citi says.



"Moreover, CMA has an efficient capital recycling model (via three listed REITs and six private real-estate funds) that enables capital to be freed up for future growth opportunities, which offers upside to our earnings estimates." It tips CMA as its preferred pick among China's retail landlords and within Singapore's developers. It raises its target to $2.58 from $2.08 after increasing RNAV on changed China cap-rate assumptions; it keeps a Buy call.

Dow Jones & Co, Inc    
Friday, 01 February 2013


Today's long white candle day formed on the back of heavy volume is a good sign. Overcoming immediate resistance at $2.24 could see price hitting $2.41 next.

Related posts:
1. CapitaMalls Asia: To buy on possible weakness.
2. CapitaMalls Asia: Any correction is a buying oppotunity.
3. CapitaMalls Asia: Buy more at $1.93.

Yongnam: Partial divestment at 27.5c.

Thursday, January 31, 2013

Further weakening could see 25c tested as support. It is also where we find the 50% Fibo retracement line.


I decided to lock in some gains yesterday at 27.5c as price spiked very much higher on the back of heavy volume. I did this as, although Yongnam is a fundamentally sound company, my portfolio is too heavily loaded in the stock.

Related post:
Yongnam: Looking forward to further weakness.

Sound Global and China Minzhong: Retracing.

Sound Global is going through a low volume pull back now but with the CMF negative and forming a lower low, I was probably too hasty in adding to my long position today at 66c.


Let us see if 64.5c is tested next. I have an inkling that a very strong support is at 61.5c, the many times tested resistance in the middle of 2012. 


59.5c would be an even stronger support as that is also where we find the 100w MA. In the short term, there could be further weakness but in the longer term, I see strength.


China Minzhong is taking a breather too. Immediate support is at 96.5c. If that should go, the next support is at 87.5c.

Related posts:
1. Sound Global: Another resistance level broken.
2. China Minzhong: Partial divestment at $1.01.

AIMS AMP Capital Industrial REIT: 3Q FY2013 DPU 2.58c.


The management declared a DPU of 2.58c for 3Q FY2013 as it pays out 100% of taxable income for the quarter. Note that this includes 0.05c from a tax adjustment.

So, removing this, a more accurate DPU from its business is 2.53c for the quarter.

NAV/unit: $1.469
Gearing: 33.6%
Interest cover ratio: 4.6x
No major refinancing needs till FY2016.

Total Assets: $1.048 billion

Occupancy: 98.5%
Average security deposit per property: 6.8 months
Average land lease expiry: 40.4 years

The management impresses with securing lease renewals from its tenants way ahead of expiries and with positive rental reversions to the tune of 23.5% on average to boot.

Currently, only 6.3% of leases are expiring in FY2013 and only 8.3% of leases are expiring in FY2014. Managing to renew these leases and with a corresponding increase in rental could bump up subsequent DPU.

Of course, the completion of phase 2 in the redevelopment of 20 Gul Way by end of this year and the completion of redevelopment of 103 Defu Lane 10 in the middle of next year will bump up DPU more significantly, everything else remaining constant.

In the near term, expect DPU to improve in the next quarter as income from phase 1 of the redevelopment of 20 Gul Way will be recognised then. I would not be surprised if the unit price of the REIT goes higher as the market takes this into consideration.


The REIT has many more properties with under-utilised plot ratio like 103 Defu Lane 10. Selectively re-developing these plots will lead to higher NAV and NPI over time.

Like I said before, this could be another A-REIT in the making and spells good news for loyal unit holders.

The REIT will go XD on 7 February 2013 and the income distribution will take place on 19 March 2013.

At $1.58 a unit, annualising the adjusted DPU of 2.53c, the distribution yield is 6.4%. 

Doing a projection into 2014, however, I expect that this is set to increase, assuming that the unit price remains where it is today.

See presentation slides: here.

Related post:
AIMS AMP Capital Industrial REIT: 103 Defu Lane 10.

Marco Polo Marine: Looking into the future.

Tuesday, January 29, 2013

I think readers have heard enough from me on how I am positive on Marco Polo Marine ever since I started blogging about it after discovering persistent insider buying last year.

See:
Marco Polo Marine: Persistent insider buying.

Let us hear from some other people:

On the financial performance for Q1 FY2013, Mr Sean Lee Yun Feng, CEO:

“We are heartened by the set of results attained for Q1FY2013 amidst subdued market environment. The performance was consistent with our corporate strategies premised on four growth platforms which will continue to underpin our performance moving forward.

“On the shipyard front, our focus in securing projects with increasing sophistication is expected to continue to distinguish ourselves from competition.


“With regard to ship chartering, our deliberate shift in focus towards offshore oil and gas sector is expected to enhance contribution to both our chartering profits and margins. To this end, we have added a new OSV built by our Batam shipyard to our offshore fleet since mid-October 2012 and have had it chartered on a time charter basis.

“The recent successful listing of BBR on Indonesia Stock Exchange augments the Group’s focus to further penetrate into the Indonesian oil and gas sector. Apart from enabling BBR to reach out to a wider base of customers, the listing also makes avail more funding avenues to enhance the growth of BBR. With BBR now being our subsidiary, we will further align the offshore operations more closely as a group for better synergies.

“Last but not the least, our focus to generate profits through strategic alliances is beginning to bear fruits as well. Notably, our recently forged jointly controlled entity which engages in the bunkering logistics business has contributed to the bulk of the 57.1% increase in the share of results from jointly controlled entities”.

See: Media release.

OCBC Invesment Research, 28 Jan 13, on the results:

Marco Polo Marine (MPM) reported a 38% YoY drop in revenue to S$15.2m but saw a 3% rise in net profit to S$4.5m in 1QFY13, such that the latter formed about 20% of our full year net profit estimate, within our expectations. The fall in revenue was mainly due to slower progress in newbuild orders, resulting in lower shipbuilding revenue. This was offset by higher ship repair turnover, which grew 75.5% to S$8.6m in 1QFY13.

Ship chartering revenue fell by 5.2% to $5.5m with the mandatory docking of an offshore vessel. Overall gross profit margin, however, increased from 25% in 1QFY12 to 39% in 1QFY13 with a higher proportion of ship repair revenue (generally commands higher margins compared to ship building). Fair value estimate of S$0.56 under review.



OSK Research, 28 Jan 13, on the results:

Topline fell 38% but profits up 3%. Gross margin jumps from 25.2% to 38.6%. Most of the $9.4m fall in revenue to $15.2m was due to shipbuilding revenues falling 92% to $1.1m, while ship repairs grew 75.5% to $8.6m. The fall in shipbuilding revenue is mostly due to accounting procedures – last year, MPM could recognise 49% of shipbuilding revenues for BBR, but that vessel has been delivered and going forward due to consolidation it no longer can. Nevertheless, with a much greater share of revenue coming from high-margin businesses like ship repair and OSV-chartering, the gross margin jumped from 25.2% to 38.6%, flowing through to the bottom line for a 3% increase in net profit to $4.5m, in line with expectations as 1Q and 4Q are seasonally the weakest quarters.

Financially stable. Net gearing is low at 28.5%, and although net working capital looks negative at -$16.5m, most of it is due to the cheap short-term debt which at $35.7m forms 56% of current liabilities. MPM has no problems refinancing this due to its low gearing and the interest coverage this quarter of 13.5x.

15-20% charter rate premium in Indonesia. Our industry sources inform us that charter rates for OSVs and tugs & barges in Indonesia enjoy a large premium compared to regional rates, due to the massive shortage created by the cabotage law. With only four modern AHTS vessels of >8000bhp in the whole of Indonesia, and MPM effectively owning two, this is MPM’s most promising source of high-margin growth.

Maintain Buy with TP $0.61, MPM valuations look ready for catch-up. We continue to value MPM at 9x FY13F EPS for a TP of $0.61. For the last year, MPM has been trading below book value while it delivered a 23% jump in profits over the year. We expect MPM’s valuation to break out and catch up to the other oil & gas plays. The recent +51% performance of XMH – which similarly draws most of its revenues from Indonesia – gives us confidence that the market is beginning to revalue companies with strong earnings that ride on the growth of Indonesia.

My take?

When Marco Polo Marine's OSV chartering business in Indonesia takes off in a big way, the higher margins enjoyed now will translate into really impressive earnings. Patience will be rewarded.

Although I bought more recently at 40c and 40.5c, if Mr. Market should send share price lower again, I hope I would be brave enough to buy more.

Related post:
Marco Polo Marine: Still cheap.

AIMS AMP Capital Industrial REIT: 103 Defu Lane 10.

Readers might want to do a recapt before continuing:

1. AIMS AMP Capital Industrial REIT: Insights
(dated 30 March 2011)
2. AIMS AMP Capital Industrial REIT: Making money
(dated 3 July 2012)


With phase 1 of 20 Gul Way's re-development completed, the management of AIMS AMP Capital Industrial REIT is going ahead with another re-development. This time it is at 103 Defu Lane 10, a site with a land lease till 2043.

It has been disclosed that the re-development will be fully funded by debt. So, upon completion in mid 2014, we can expect DPU accretion. Not only is this the case, the new property will be some $30m higher in value compared to the current property on site.

I shan't say too much as readers could look at the presentation slides which are self explanatory: here.

The management of the REIT continues to impress under George Wang's leadership, no doubt. This could be another Ascendas REIT in the making and loyal unit holders would be amply rewarded.


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