SRS portfolio in 2024. What did I do?

SRS was a topic I used to blog about pretty often.

I have not been blogging about it as much since I have not been making contributions in recent years.

Reason is because I no longer pay income tax.

See:
Income Tax payable?

If we are still paying income tax, contributing to our SRS account makes sense to enjoy some tax relief.

Of course, we want to put our SRS money to work or we would get a very miserable interest rate.

For many years, I used the SRS money to buy plain vanilla endowment policies.

They were savings plan with some insurance thrown in.

In fact, I still have one or two of those with NTUC Income using SRS money.

In recent months, I also used the money to buy T-bills with yields being so much higher than a couple of years ago.

Dividends paid by my investments in stocks using SRS money are used for this purpose.

Yes, I also use SRS money to buy stocks of businesses which I think make good investments for income.

I have blogged about this before and shared what kind of stocks I would buy with SRS money.

Basically, the businesses must be good income generators with strong balance sheets; nothing which is likely to do rights issues.

The very practical reason is because we must have the excess funds in our SRS account to take part in rights issues.

This can be difficult to ensure.

I shared my SRS portfolio of stocks before but that is outdated by now.

See:
Win and win again with SRS.

I had SATS in the portfolio.

Of course, regular readers would know that I sold it shortly after it announced the decision to buy WFS.

SATS just didn't have sufficient resources to do what they suggested.

They had to raise funds from shareholders.

It was something unexpected.

So, I took the opportunity to sell when there was a bounce in the stock price.

In place of SATS, there are ComfortDelgro and OCBC in my SRS investment portfolio now.

This is what the portfolio looks like now:

Based on the purchase prices, it is not difficult to guess that DBS and ST Engineering have been in the portfolio for some time now.

So, like what I did?

Paid less income tax and put the money to work to generate more tax free passive income?

We can certainly win and win again with SRS.

If AK can do it, so can you!

Reference:
How AK used his SRS money?

ComfortDelgro to pay 2.9c DPS as profit fell!

A feeling of deja vu?

The title of the blog sounds like the one for Wilmar published recently?

Some people might just take a look at the title and run screaming for the hills.

Not AK the mental investor for income!

AK takes a look at the title and runs towards ComfortDelgro!

I have said for a long time now that, unlike Grab, ComfortDelgro is a profitable company.

So, ComfortDelgro actually has a PE ratio unlike Grab.

I make it sound funny but, of course, it really isn't a joke.

It isn't a secret that I think Grab and friends are just doing green washing and burning investors' money.

So easy to burn money when it is not our own.

Anyway, just like with Wilmar, I just zoom in on what matters to me as an investor for income.

I first look at what's the reason for a 31.9% drop in interim earnings?

Oh, last year, there was a one-off gain.

Then, there is the fact that the British Pound and the Australian Dollar depreciated against the Singapore Dollar over the last one year.

Taking all these points into consideration, ComfortDelgro actually did quite well.

What I really want to see is sequential improvement and I was not disappointed.

1H 2023 saw PATMI or profit attributable to company shareholders increased 35.9% from 2H 2022.

Pretty impressive.

As an investor for income, I am also pleased to see that ComfortDelgro has operating profit improved 18.5% from 2H 2022 to 1H 2023 too.

Not bad.

Why do I look at these numbers?

I am interested in profits generated by its core operations as this is recurring and will determine if the company is able to continue paying a dividend.

Even during the pandemic, ComfortDelgro was still paying dividends despite their businesses taking big hits.

They were able and willing to do it because they had a strong balance sheet and believed shareholders should be rewarded.

Investing in ComfortDelgro is to invest in a company with a very strong balance sheet.

Investing in ComfortDelgro is to invest in a company that is shareholder friendly.

The chairman said, "We believe in rewarding our shareholders."

I said some time ago that I reduced my investment in ComfortDelgro at $1.35 a share and booked a loss.

That was to raise funds to increase my investment in OCBC and UOB.

That was sometime in Q4 last year, if I remember correctly.

Unfortunately, I was pacing my purchases too slowly and their share prices shot up too quickly.

When ComfortDelgro's share price went to $1.15 some time later, I plonked the money on hand back into the business.

At $1.15 a share, I thought it offered fairly good value for money.

ComfortDelgro is still one of my largest investments although I am unlikely to increase exposure.

This is because my war chest is pretty exhausted and I have yet to achieve my goal of making my investments in our local lenders form 40% of my portfolio.

ComfortDelgro continues to bring home the bacon and I am looking forward to it.

As usual, AK is just talking to himself.

If AK can do it, so can you!

FCF positive! $1 billion cash pile! Higher dividends?

For readers who who are not subscribed to my YouTube channel or who simply prefer reading blogs to watching videos, this the transcript of another recent video I produced.

------------

All investments are good investments at the right price.

I like to ask myself this question whenever one of my investments is suffering a paper loss.

"If I was not already invested in this at a higher price, would I buy at the price now?"

If the answer is "yes", then, I could possibly add to my position in the investment.

If the answer is "no", then, I could either hold or sell.

To hold, there must be some redeeming qualities like a strong balance sheet, the ability and the will to pay dividends consistently.

To sell, it could mean that I think the business has weak numbers, would lose money, stop paying me and maybe even struggle to stay afloat.

To be sure, I could also sell some if I must raise cash for another investment which I think could be more rewarding.



For some time now, ComfortDelGro has been getting "BUY" calls from many experts, citing the cheap valuations.

Although ComfortDelgro isn't what it used to be, no thanks to senselessly destructive competition brought on by money burning GRAB, it is trading at a level which is really inexpensive now.

In a recent video, I said that ComfortDelGro was not a basket case and that it still has a place in a diversified portfolio of investments for income.

I elaborated on this in a blog which shared the transcript through my reply to a viewer's question.

Please find link to the blog below.

For people who are more concerned about the future of the business, there are many analyses available but all of them have this one thing in common.

All of them say that ComfortDelGro will see numbers continue to improve.

Here, I will share some points in an analysis by RHB research.



Expect earnings to improve in second half of 2023 "amidst reductions in taxi rental rebates and benefits from the annual indexation of overseas bus contracts."

"Public transport earnings seem to have bottomed, and improvement should be seen in overseas operations during second half of 2023 amidst indexation of higher operating costs in the UK.

"Singapore should continue to see improvement in ridership in rail.

"Reduction in Singapore taxi rental rebate from 15% to 10% and the scope to increase commission rates for taxi bookings.

ComfortDelGro charges only 5% versus 20% charged by GRAB.

I keep saying that ComfortDelGro is still a profitable business unlike money burning GRAB.

In Q1 2023, ComfortDelGro generated free cash flow of almost $90 million.

This brings its cash balance to more than $1 billion.

It is in a net cash position of $715 million.



"Even with our estimate of its CAPEX reaching pre-pandemic levels by 2025, we expect it to continue building on its current strong net cash position."

This supports what I said in my recent video on ComfortDelGro.

That to invest in ComfortDelGro is to invest in a business that is generating a lot of cash while keeping a very strong balance sheet.

It has also shown its ability and will to pay dividends through good and bad times.

RHB research estimates a normalized dividend yield of 4.5% to 5.5% based on a 65% payout ratio.

During "Evening with AK and friends 2023", I mentioned that I sold half of my investment in 

ComfortDelGro at $1.35 a share and bought back some at $1.15 a share last year.

$1.15 a share was a fairly good price.

There is much market pessimism surrounding ComfortDelGro now and according to RHB research, it is trading at minus 1 deviation compared to its historical average which reflects this.

A mean reversion could eventually happen.



ComfortDelGro has shown its willingness to reward shareholders whenever it felt it had more funds than it needed to hold.

With a growing cash pile, we could expect higher dividends too.

Having said this, I remind myself that investing in ComfortDelGro is not to invest for growth.

If we are looking for growth, we should look elsewhere.

If AK can talk to himself, so can you!

Related post: 
ComfortDelGro Q1 profit plunged!

ComfortDelGro's stock price down. Should we BUY now?

This blog is going to be a bit more than just sharing the transcript for the video I made in response to ComfortDelgro's Q1 results.

I will also share my response to a reader's question in my YouTube channel at the end of this blog.

Anyway, to start, for readers who prefer reading to watching videos, here is the transcript of the said YouTube video first.

-------------------

I blogged about how re-allocating resources in an environment of higher inflation and rapidly increasing interest rates would be a prudent move many moons ago.

To that end, I reduced my investments in many investments in my portfolio, some of them drastically, using the freed-up capital to mostly increase my investments in OCBC and UOB.

Basically, if an investment paid very little in dividends or has shown that it could suspend dividends in a crisis, and had a very weak balance sheet, it would be a candidate for a haircut.

In the case of ComfortDelGro, I reduced my investment in the entity, but its strong balance sheet saved it from being reduced drastically to becoming a small investment in my portfolio, which was the case for Centurion Corporation.

I like to remind myself that Peter Lynch said all investments are good at the right price.

Very often, the market misprices stocks.

The common stock of ComfortDelGro has declined rather significantly in price in response to the latest newspaper headline.

Q1 profit falls 56.9%.

Although Q1 is usually seasonally weaker for the business, a 56.9% fall is screaming for attention.
ComfortDelGro mostly blamed higher cost pressure due to heightened inflation.

Labor shortage and a more competitive landscape were also contributory factors.

However, we want to keep things in perspective.

(Before I continue, if you changed your mind and decided you would like to listen to AK talking to himself, here is the video.)
 

ComfortDelGro has emerged from the pandemic with a stronger balance sheet.

In fact, its net cash position continues to grow.

Its net cash position has increased to $714 million from $653 million which we saw at the end of 2022.
ComfortDelGro is still a profitable business, although it saw a decline in profit in Q1.

All its business segments are showing improvement and with life going back to normal, things should continue to improve in all its markets, including China.

Since I brought up what Peter Lynch said, what is a good price to pay for the common stock of ComfortDelGro?

The last time I bought some was at $1.15 a share.

I thought that was a fair price to pay and I still feel that way now.

So, if we want to invest in ComfortDelGro for income, any price lower than $1.15 a share would be a pretty good price to me.

At $1.10, for example, without any special dividend, we would be looking at a dividend yield of about 4.2%.

Wait, didn't I say I reduced my investment in ComfortDelGro to increase my investments in OCBC and UOB last year?

Yes, I did but that does not mean the ComfortDelGro is no longer a decent investment for income, especially if the price is right.

Investing in ComfortDelGro today is to invest in a business that pays a 4% dividend yield even as it grows its cash position over time.

For sure, it doesn't have an exciting story to tell like the Singapore banks do.

Even to me, ComfortDelGro is pretty boring, but it isn't about to give me a heart attack either.

Investing in ComfortDelGro isn't all bad if we can get in at a good enough price, especially if all we want is decent passive income without having to worry about any equity fund raising by our investments.

All investments are good investments at the right price.

However, to be sure, it would also depend on what kind of an investor you are and what you want out of an investment.

Then, you would be able to decide whether ComfortDelGro would be a suitable addition to your investment portfolio.

I am sharing my response to a viewer's comment in my YouTube channel because I think some readers might have similar questions.

Question:

Why should we invest in businesses like ComfortDelGro and also REITs when banks look like better investments now?

My reply:

It would partly depend on a person's situation.

So, for a person who is already substantially invested in the banks and who is looking to diversify, investing in a non-cyclical business which pays a meaningful dividend and which has a strong balance sheet is not a bad idea.

This is especially when we remind ourselves that banking is a cyclical industry.

As for REITs, I also said in my blog that REITs which offer 5% or less in distribution yield are not attractive to me now especially when they are relatively highly leveraged.

Think north of 40% gearing level.

However, if we believe that a Fed pivot will happen by end of the year or in the new year, then, investing in REITs might not be a bad idea.

They will benefit if interest rates decline.

So, having some exposure to REITs isn't a bad thing per se.

Have some banks, some stocks like CDG and some REITs and we should win whichever way the wind blows. 😎

COMING SOON!

A YouTube Video on ST Engineering by AK Production House!

Related posts:
1. ComfortDelGro: Special dividend.

2. Reallocate as interest rate rises.

ComfortDelgro: Special dividend! Earnings jump!

In my blog detailing changes made to my investment portfolio in January 2023, I said that I increased my exposure to ComfortDelgro.

In that blog, I said that ComfortDelgro's fundamentals looked to be stabilizing and, technically, it looked like ComfortDelgro's stock price was bottoming too.

If you missed that blog or need a refresher, see:
Changes to portfolio in Jan 23.

ComfortDelgro has just reported an increase of 63% in 2H earnings, year on year.

Operating costs for the full year increased 6.3% while operating profit increased 35.1% which is pretty impressive, given the many challenges ComfortDelgro is facing.

Higher dividend income from ComfortDelgro is going to be pretty impactful as it is still one of my largest investments.

ComfortDelgro has declared a final dividend of 1.76c per share and a special dividend of 2.46c per share.

ComfortDelgro has a huge cash pile and, if they do not have better use for the money, paying more generous dividends to shareholders cannot be a bad idea.

Technically, ComfortDelgro is now testing immediate resistance at $1.20 which is provided by a declining 50 days moving average.

If this resistance should be broken, there is a chance that the declining 200 days exponential moving average which is currently at $1.30 could be tested next.

There are multiple resistance levels and although analysts covering ComfortDelgro seem to believe that the worst is over with most having mouth watering target prices for ComfortDelgro's common stock, it could take quite a while before we see those levels.

That is from a technical analysis perspective, of course.

Fundamentally, ComfortDelgro should see a gradual improvement in earnings as we continue to see a return to pre COVID-19 pandemic norms.

So, from this perspective, to expect a mean reversion to happen sometime in the future isn't unreasonable.

Still, we want to stay grounded in our expectations.

If we are investing for growth, at this point, it seems that ComfortDelgro is probably a poor choice but as an investment for income, ComfortDelgro is probably still able to pull its own weight in any investment portfolio.

I am not going to hold my breath if I am looking for massive capital gains here, for sure.

Instead, I will celebrate the higher than expected dividend for now.

Reference:
Add CDG or the banks?

Changes to portfolio in January 2023.

I might or might not make this a regular feature and that is to talk to myself what I did to my portfolio (if there should be any activity) in the preceding month.

I guess I will just do it whenever I feel the inclination to do so just like with so many things I do in my retirement.

In middle of January, a fellow blogger asked me:

"ComfortDelgro has fallen quite a bit. I have been slowly accumulating over a period of time. So, are you?"

In reply, I said:

"I don't know if you read in the blog that I reduced my investment in ComfortDelgro in 4Q 2022 or you missed it but it is a smaller investment for me now. 

"When its stock price bounced up to test resistance, I lightened my position. 

"Technically, its stock price looks like it could go lower and I am watching $1.15 at this point. 

"The main reason why I was not as aggressive in reducing my investment in ComfortDelgro compared to Centurion Corp. is its relatively strong balance sheet."

True to my word, I went and increased my investment in ComfortDelgro at $1.15 later on.

Suddenly, I am reminded of some people who went on a diet to lose weight but gave up and gained back all the weight they lost.

Alamak.

Not like that lah.

The increase in size although pretty significant, percentage wise, was on a much smaller investment than it was a year ago.

So, didn't gain back all the weight lah.

Technically, ComfortDelgro's stock price is still in a downtrend but it could be in a bottoming process now.

The moving averages are still in decline.

Could ComfortDelgro's stock retest its low of $1.13?

If it does and if I see a positive divergence which means lower price but higher lows in the momentum oscillators, I would probably buy some.

Will be looking out for a double bottom too.

Fundamentals look to be stabilizing and although I am not expecting an increase, this year's dividends should still be meaningful.

Other than ComfortDelgro, I added more T-bills to my portfolio.

I used cash to get both the 4.2% p.a. and 4.0% p.a. 6 months T-bills in January.

A YouTube video from AK:

I also used most of my CPF-OA money to get the 3.87% p.a. 1 year T-bill in the same month.

Although I would not be including the income from the 1 year T-bill in my quarterly passive income report, I thought I should just make a mention for the sake of completeness. 

I will account for the income from the 1 year T-bill as interest income in my CPF account and rightly so as the money has been credited into my CPF-OA where it will still be making 2.5% p.a.

I know I said I am looking forward to being lazier as an investor in 2023.

Well, there are 11 months left to be lazy.

There is hope!

Another YouTube video from AK: 

Recently published:

Bank and REITs dividend machines? T-bills, SSB and CPF?

References:
1. My CPF account hacked?
2. Largest investments updated.
3. 4Q 2022 passive income.

Add ComfortDelgro or DBS, OCBC and UOB?

Reader says to AK:

Thanks lots for your sharing. 

I just started reading your blog recently after hearing from my brother and sis-in-law. 

May I seek your thoughts on averaging down comfort delgro?

AK replies to reader:

I used to think that ComfortDelgro was a very defensive investment in the transport sector unlike SIA.

See:
ComfortDelgro: Analysis.

That was until the pandemic hit our shores which saw the entire sector impacted badly. 

Small comfort but ComfortDelgro still fared better than SIA during the pandemic.

See:
COVID-19 and ComfortDelgro.

The worst is probably over now for ComfortDelgro unless we are hit by another pandemic or something just as bad. 

However, ComfortDelgro still has headwinds such as the irrational competition from GRAB and also FOREX risks due to a relatively strong Singapore Dollar. 

A pretty significant portion of ComfortDelgro's income is derived from overseas ventures, after all. 

The British Pound Sterling, the Australian Dollar and the Chinese Yuan have all weakened against the Singapore Dollar. 

I would rather add to my investment in our local lenders, mostly OCBC and UOB, which seems like a better idea than investing in ComfortDelgro as their earnings enjoy a strong tailwind with rapidly rising interest rate.

Of course, this is my plan for myself.

All of us need a plan, our own plan.

Just talking to myself, as usual.

Reference:
DBS, OCBC and UOB at 40% of portfolio?

ComfortDelgro or SIA? Special dividend!

 This has been a crazy week in real life while virtual life has been somewhat placid.

Still waiting for Genshin Impact's new nation with the element of Dendro to go live and also waiting for Neverwinter's new mod.

It is partly my fault for going through new gaming content as quickly as I do but I am a full time gamer first and a retiree second.

What to do?

So, I have been playing RISK a lot online recently!

Yes, I was surprised to find that I could play RISK online with people around the world and it has been pretty amazing.

Anyway, with real life matters demanding a lot more attention from me this week, I didn't have a lot of time to read the news.

Catching up.

Today, I am happy to read that ComfortDelgro is recovering nicely as expected.

First half profit is up significantly and even the taxi business reported an increase of 18% in profit.

There was a one off gain from a sale of asset and the company is going to pass the gain from the sale to shareholders.

What I like about this is that it will be a standard practice from now on.

An interim DPS of 2.85c and a special DPS of 1.41c were declared.

ComfortDelGro chairman Lim Jit Poh said: 

"The group is in a fortunate position to have a strong cash flow and be in a net cash position. As such, we do not have any problem funding our dividend payouts internally. 

"With the exceptional gain from the sale of the Alperton property in London, we have decided to pass on the net gain from that sale to our shareholders. This is something we will continue to do going forward when we make extraordinary gains and have no urgent need of the proceeds."

Source: The Straits Times.

This reminds me of the reason why I bought ST Engineering donkey years ago.

ST Engineering, flushed with cash, didn't need to retain any of their earnings and simply paid all their earnings to shareholders as dividends, year after year.

See: 

Mystical art of wealth accumulation.

Some people ask me if I would consider investing in SIA now that air travel is improving and we could see traffic returning to pre pandemic levels in the next couple of years.

It is good to see that things are improving but it is also important to remind ourselves that SIA is heavily in debt and it will take them more time to fully recover.

How much time?

Definitely not out of the woods yet and SIA still has plenty to be concerned about.

Air traffic might return to pre pandemic level in the next couple of years but for SIA to fully recover, I suspect it would take many more years.

Of course, if something untoward happens and the economy plunges again, would we rather be investing in businesses that have strong balance sheets than those that do not?

Peace of mind is priceless.

With past crashes, not many people could tell what would be their triggers.

With all that is going on in the world recently, it is not as hard to see what could trigger the next big crash.

Troubled is the world today.

Still, it would be silly to do a Chicken Little and just sit on cash.

I am staying invested in bona fide income producing businesses and preferably those with strong balance sheets.

I am also keeping some powder dry just in case and, of course, I have an ultimate safety net, my CPF savings.

In my retirement, I am not going to be too adventurous.

Recently published:
Inflation, passive income and budget.
References:
1. SBS Transit and CDG.

2. CDG: AK replies...

3. Investment in CDG is larger now.

SBS Transit and ComfortDelgro.

Towards the end of April, I revealed that I added SBS Transit to my portfolio and I also added to my investment in ComfortDelgro.

I said I would talk a bit more about these in my next quarterly report.

I was just being a lazy fellow, as usual.

Well, I decided that I should talk about it sooner than later because I am a nice person too. ;)

I should not leave a story half told (for too long.)

So, why did I do what I did?

SBS Transit is, of course, mostly owned by ComfortDelgro and in the business of public transportation minus the taxis (and airplanes.)

As I expect ComfortDelgro to do better post pandemic, all else being equal, a major contributor to this improvement should come from SBS Transit as ridership numbers on buses and trains improve.

So, becoming a shareholder of SBS Transit while its stock price languishes at close to pandemic level seems like a fairly good idea.

Fundamentally, SBS Transit is a profitable business with a relatively strong balance sheet too.

Then, if we look at EV/EBITDA, like ComfortDelgro's, SBS Transit's valuation is relatively cheap.

Having said this, I am not going to build a large position in SBS Transit as I already have a relatively large investment in ComfortDelgro.

I am more interested in increasing my investment in ComfortDelgro and I did so again earlier this month when the price of its common stock dipped below $1.40 a share. 

I thought Mr. Market was offering me a bargain given ComfortDelgro's improving prospects.

Although the pandemic revealed a major weakness in the business of public transportation and not being overly optimistic about the improving situation is probably a good idea, neither should we be overly pessimistic.

This is especially the case as we learn to live with COVID-19.

ComfortDelgro, unlike SIA or GRAB, has a relatively strong balance sheet.

ComfortDelgro is also profitable and not burning cash like SIA or GRAB.

What about dividends?

Ahem.

If we compare the free cash flow generating abilities of ComfortDelgro, SIA and GRAB, it is very clear which one is the winner.

Dividends from my investment in SBS Transit should be enough to pay for my mobile phone's subscription every year and still leave enough money to buy a few dozen bars of dark chocolate.

ComfortDelgro should better reward shareholders as earnings improve and with my larger investment, I would be a happy beneficiary in this case.

Of course, remember, this is just mental AK talking to himself again.

Recently published:
Rising interest rate and home loans.

Related post:
Quick update...

Source: The EDGE

Reallocate as interest rate rises in a slowing economy.

Interest rate is rising.

PM Lee recently warned of a possible recession in the quarters ahead.

Put rising interest rate and a slowing economy together, we get a rather gloomy picture.

The evil which is inflation is preferred to the evil which is deflation.

Although inflation is the lesser evil, it isn't as benign when it is heightened which is what we are seeing now in the world.

We can reduce inflationary pressure either by increasing supply of goods and services which are in demand or tempering demand for such goods and services.

As it is difficult to increase supply right away, central banks are trying to tame inflation by increasing interest rate in an effort to reduce demand.

Increasing interest rate increases the cost of debt.

Credit is the lifeblood of commerce and most businesses are leveraged to some degree.

If the economy is healthy, businesses can pass on the higher cost of doing business to their customers and higher finance expense that comes from higher interest rates are naturally a part of such cost.

However, it becomes more difficult for many businesses to pass on such higher costs to customers if the economy is suffering from malaise.

Heightened inflation, rapidly increasing interest rates and low economic growth is not a good mix.

In such a situation, even very strong companies will not be spared a slowdown as most entities would be less ready to part with their money.

Already, we see some big name MNCs both in the old and new economies warning of very difficult quarters ahead.

Only the fittest will survive but even they might not emerge unscathed from such a toxic cocktail.

As an investor for income, I believe that businesses which are able and willing to pay a meaningful dividend should be favored.

To make sure that dividends are sustainable, these businesses should also provide necessary goods and services and have stronger balance sheets.

They too will take a few punches during hard times but they should be able to roll with the punches.

I think staying invested is still the way to go but, like I said, I should mostly be invested in businesses which are able and willing to pay dividends even during hard times.

So, with this in mind, I have taken a hard look at my largest investments since they impact the performance of my portfolio the most.

The strategy to increase my investments in DBS, OCBC and UOB during the COVID-19 induced bear market has turned out well and sticking with this strategy makes sense to me especially with interest rate rising.

I am also interested in increasing my investments in ComfortDelgro and CLCT on weakness as they seemed to have lagged in price recovery while their businesses look more attractive to me in recent times but for different reasons.

I am leaning more towards ComfortDelgro which has a stronger balance sheet and also because looking at the numbers which have improved, there is a fairly good chance that future dividends will be higher and could even go back to pre-pandemic levels.

CLCT's plan is to increase the proportion of new economy assets in their portfolio and I foresee more fund raising in the future.

So, I will increase my investment in CLCT slowly and not bulk up in a hurry.

REITs are required to pay out at least 90% of their operating cash flow to investors to enjoy tax benefits and this is a source of comfort to me.

The REITs in my portfolio are rather conservative when it comes to debt and in the case of IREIT Global, some of their rental income is linked to the German consumer price index and higher inflation could see a greater increase in income.

In my list of largest investments, the only entity which did not pay a dividend during the last bear market was Centurion Corporation.

Amongst my largest investments, Centurion Corporation also has the weakest balance sheet apart from Wilmar International.

However, Wilmar International is in the business of food production and distribution which, in my opinion, is recession proof. 

Given their size and market dominance, they should be able to charge higher prices.

Wilmar also has good options available to unlock value for shareholders and they were paying dividends even during the pandemic.

I increased my investment in Centurion Corporation as Singapore decided to live with COVID-19.

For those who are interested in my thoughts on the matter, read:

1Q 2022 passive income.

In an environment of rapidly increasing interest rate and slowing economy, however, with a rather weak balance sheet, it could be harder for Centurion Corporation to bring home the bacon.

In my original blog on why I invested in Centurion Corporation, I crunched some numbers on how rising interest rate could impact Centurion Corporation's interest cover ratio.

For those who are interested, read:

Added Centurion Corp to portfolio.

Of course, if they are able to increase asking price per bed meaningfully to balance the increase in the cost of debt, then, they should be OK.

Although they would be able to do so easily in a healthy economy, it might not be so easy during times of economic malaise.

Wait, didn't Centurion Corporation do quite well even when the economy was unhealthy?

Yes, they did but they didn't have to deal with rapidly increasing interest rates.

I don't know everything and I might be missing a few things here.

So, I have decided to only reduce my exposure to Centurion Corporation and not go to zero.

As my total passive income held up quite well during the two years when Centurion Corporation suspended dividend payouts, I doubt reducing my investment would have any meaningful impact in terms of passive income generation which makes this decision an easier one for me.

Although Centurion Corporation still looks undervalued to me as it trades at a huge discount to NAV, to be honest, this discount could reduce as valuation of their assets could take a hit.

It would be interesting to see how the management navigates the challenges ahead and how they might unlock value for shareholders.

They are trying to sell some assets in the USA now which if successful should help in reducing leverage and unlocking value.

To this end, I believe they should ramp up their effort and sell more assets.

Like Phua Chu Kang said at the onset of the COVID-19 pandemic, "Things different already."

In the grand scheme of things, this is a relatively minor shift of resources but because I am more inactive than active as an investor for income, it might seem like a big event.

Remember, mentally unstable AK is just talking to himself, as usual.

Have a plan, your own plan.

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ComfortDelgro: AK replies to comments.

After getting two comments from readers on ComfortDelgro, I feel that it might be a good idea to publish my second reply as a short blog. 

To read the comments as well as my reply to the first comment, please check the comments section of this blog: 

Daiwa House Logistics Trust: Good or not? 

This is my reply to the second comment: 

For sure, ComfortDelgro is facing headwinds. 

To stay invested or not, we will have to ask if the problems they are facing now are temporary or are they here to stay? 

I am inclined to believe that the problems will not be permanent. 

However, now we have the Omicron variant of COVID-19 that recently popped up. 

So, it could take longer before a sustained recovery happens.


In my analysis done a few years ago, I said that even if ComfortDelgro were to shut down its taxi business, it would still be able to pay an attractive dividend. 

That was partly how I made the decision to invest in ComfortDelgro as an investor for income. 

Shutting down a business if it is no longer viable is not a bad thing, generally speaking. 

I like to think that we will eventually conquer the COVID-19 virus. 

However, the slow rate of vaccination in many parts of the world as well as irresponsible behavior such as vaccine hesitancy is allowing the virus to mutate. 

These are some root causes for uneven recovery and a delay in sustained recovery. 

Still, I am staying invested in ComfortDelgro and getting paid while I wait for the eventual recovery. 

Selling now feels like it could be a mistake. 

Of course, I could be mistaken. 

Reference: 

An incomplete analysis of ComfortDelgro.

Investment in ComfortDelgro is larger now.

On 1 June, I wrote a piece on the new normal and how I was less sanguine about ComfortDelgro's near term fundamentals then.

From a technical analysis perspective, at that time, ComfortDelgro was also trading firmly beneath the declining 50 days moving average (50dMA).

The MACD, a momentum oscillator, was also in negative territory, forming a lower high and a lower low.

With COVID-19 vaccines on the horizon, things are set to improve although, realistically, numbers might not return to pre COVID-19 levels soon.

Having said this, I believe that the worst is over for ComfortDelgro.

There is still that competition from Grab, of course, but Grab is facing the same difficult environment right now.

Anyway, when I invested in ComfortDelgro, I did it with the worst case scenario of a complete write off of its taxi business in mind.

At the time, basically, even without its taxi business, ComfortDelgro would still be able to maintain its dividend to shareholders.

ComfortDelgro is mostly a public transportation company and the entire sector is under immense pressure due to the COVID-19 pandemic.

However, is ComfortDelgro going the way of Singapore Airlines (SIA)?

As things are now, it is highly unlikely.

Apart from my feeling that SIA is less essential compared to ComfortDelgro when it comes to the day to day operation of Singapore (and I could be wrong about this), SIA had a much weaker balance sheet in comparison going into this crisis.

ComfortDelgro's balance sheet is relatively stronger and they should be able to weather the crisis without having to raise funds.

ComfortDelgro was also prudent in not declaring an interim dividend earlier in the year although its balance sheet could support a payout to shareholders.

As investors for income, if ComfortDelgro was a major passive income generator for us, the loss of dividend from ComfortDelgro could be a big hole to fill.

Although there is reason for optimism now, we have to be prepared for more of the same especially if the COVID-19 pandemic drags on.

As an investor for income, this was a major reason for my strategy during this crisis to concentrate my firepower on the accumulation of banking stocks.

The local banks have stronger balance sheets and the ability to pay dividends with relative ease.

Dividend visibility always gives income investors peace of mind while waiting for things to improve.

Still, in my blog of 1 June 20, I said that although I was less sanguine about ComfortDelgro, I would still add to my investment in the business.

At the time, I was thinking of adding to my investment if Mr. Market offered me a price similar to the NAV per share of ComfortDelgro.

However, as things are surely looking up for ComfortDelgro now, this is no longer a realistic expectation.

As ComfortDelgro's share price shot up and broke long term resistance on high volume a few days ago, I bought some.

However, as the stock became quickly overbought, I decided to wait for Mr. Market to take a breather and a possible retracement to support to happen before adding more to my investment.

Prices don't usually move up or down in a straight line for an extended period of time.

Having said this, the COVID-19 pandemic has reminded me of a major weakness in the business of public transportation. 

As passive income generators, these essential businesses might not be as dependable as I thought them to be.

I hope that ComfortDelgro will become a meaningful income generator in my investment portfolio again soon.

If Mr Market were to offer me lower prices from here, everything else being equal, I would probably add to my investment in ComfortDelgro again.

Related post:
COVID-19, ComfortDelgro and the new normal.