Investing in Japan via REITS

Japan has been a sleeping giant for awhile now. With Abeconimics, there is hope that there may be revival in Japan's fortunes, and hopefully, there is money to be made from this.

I've taken look at 2 popular REITs - (i) Saizen REIT (ii) Croesus REIT

Saizen REIT deals with residential REITs all over Japan and caters mainly to small families or singles. This REIT is also very popular with savvy investors, and AK71 also buys into this REIT.

Croesus REIT deals with retail malls in Japan and is also highly recommended. If Japan consumption increases, then one strong beneficiary of this should be mall owners. More money = more shopping = happy lessee = happy lessor.

Let's look at the finances for Saizen first:

1. PE= 13.49
2. PB= 1.09
3. Revenue = 31.39
4. Revenue / share = 0.11
5. Revenue growth QoQ = -2%
6. Gross Profit = 2.52B
7. Profit growth QoQ = 4.1%
8. Cash = 42.24 M
9. Debt = 142.05 M
10. Debt / Equity = 63.24
11. current ratio = 2.42
12. book value = 0.79
12. diviend yield: 7.2%

issues: negative retained earnings; -ve cash flow.

Let's look at the finances for Croesus:

1. PE= 17.02
2. PB= 1.54
3. Revenue = 50.92
4. Revenue / share = 0.11
5. Revenue growth QoQ = 42.4%
6. Gross Profit = 2.97B
7. Profit growth QoQ = -51.50%
8. Cash = 11.09 M
9. Debt = 377.48 M
10. Debt / Equity = 124.52
11. current ratio = 2.10
12. book value = 0.759
12. diviend yield: 8.2%

issues: -ve cash flow
other information: occupancy rate of 90.9% in 2015 as opposed to 91.8% in 2014
NAV is currently 1.13 for 2015 as opposed to 1.22 for 2014. debt ratio high at 50%

All in all, i am not sure if either reit works for me! i need to carry on reading. for now, not investing. 

ST Engineering Review

ST Engineering brings to mind a good sturdy dividend stock. But is it really? Remember, even blue chips can fail as any one who has bought NOL will attest to (myself included). 

Let's check out the numbers:

P/E ratio is on the high side of 19.58

P/B ratio is 4.72

P//Sales at 1.59

ROA is a paltry 4.02% 

ROE is really pretty good at 22.54%. In fact in 2009, the ROE was at 30%!

Revenue QOQ is -2.6%, with earnings QOQ at -5/3%

EPS is 0.17 

Book value at 0.70 

What's great about the company is the cash on hand. Management has also been making prudent decisions as seen by its decision to bring down the current debt. There was a fall of 15% of cash for 2014, but there was also a drop of 25% in short term debt. 

The cashflow from operations minus capex is 400M. With the current price, the dividend yield is 4.5%. That isn't too bad. 

Verdict: I will keep a close watch on this and look to purchase on dips. This will be a good defensive stock to have in times of downturn. Even during the 2008-2009 crisis, the dividends remained constant. 

SIA Engineering - Now how brown cow?

SIA Engineering was one of the first few shares i bought when i got excited about dividends play.

Of course, I was the novice then and i still then now. Reading my review about the share must me want to laugh as there was absolutely no reference to fundamentals. Instead, the purchase was done because i believed it was a dividend yield share and faith in the airline and travel industry.

Still, with the slide in price from 4.88 to its current price of 3.87, I had better review this share again.

Let's start with the numbers:
1. P/E ratio = 22.82
2. PB = 3.29
3. ROA = 3.22%
4. ROE = 13.53%
5. revenue growth = -11.30%
6. earning yoy = -36.5%
7. cash = 465.46M
8. cash per share = 0.42
9. debt = 33.22 M
10. current ratio = 3.01
11. operating cash flow = 96M
12. free cash flow = 47M
13. dividends = 268M

Well, honestly, I am a bit worried about the fundamentals. The revenue growth is a negative 11%, and the earnings yoy is down -36%! What's happening? out of their three business lines, it seems like the problem is with Airframe maintenance. It has been dragged down so much because the phrasing out of older planes and replacing them with the new ones have resulted in less engine checks being done. That's a huge blow to SIA Engineering.

What does SIA Engineering have going for it then? A really good cash flow. If we check out the net cash flow, it is at 47M, however, the sinker is that they have been overpaying for dividends in 2015. 268M was paid out for dividends, so dividends i more than the free cash flow, and is also more than the operating cash flow. So will the dividends go down? I guess so, since the slide has already begun. It has decreased from 0.24 to 0.145 this year already.

With that, what is the dividend yield now? Taking current prices, dividend yield is 3.74. That's not worth it to put in more monies unless I am confident about the company's future prospects.

So what is the company's future prospect? The joint venture it has with Boeing and Investment Moat has done a very good review here.

Well, I will hold my shares and look to purchasing it when the price is right since i think there is still room to grow for this industry. What is the right price then? If i want at least a 4.5% yield, then this would have to be $3.20.

Well, so much for early mistakes. We pay the price for learning. 

The clash of the telcos

After reading and re-reading the wealth of information out there on telcos, I have condensed this information into the following:

1. for dividends - purchase M1
2. for possible growth outside Singapore - Singtel

Singtel is a mixed bag. They have been splashing cash trying to get into the digital advertising space rather unsuccessfully. Currently, the big boys are the US players and since there are no bounderies in the digital space, its not possible that Singtel has spotted a good deal which hasn't yet attracted these Internet Giants. It doesn't seem likely that Singtel can come up with anything creative either so I am rather wary if Singtel is going to keep splashing cash into acquisition.

Anyway, there are just too much information out there but if i had to pick a telco, then I will go with M1 for dividend play. Amongst the three market players, they seem to have the best cash flow but really, i am not sure how long that will be sustained for.

Enough of this telco research! Had spend a few days amassing just too much information. A wise man would say to leave the information gathering for now and let it crystalise into knowledge. 

Lippo Mall Retail Trust; Capitaland Retail China Trust

I had shortlisted 2 REITS to focus on in my previous post - Lippo Mall Retail Trust and Capitaland Retail China Trust

Let's start with Lippo Mall first. 

The numbers for this year 2015 1Q is pretty good. 

NAV= 0.4164

P/NAV = 0.877 (that's attractive)

P/E = 15.56

Yield = 5.5%

What's there not to like about it?

ROE is at a dismal 3.15%

Current ratio is 0.562%

Indonesia's economy is not forecast to grow much. Less growth, less people spending, less tenants willing to pay for a mall space. 

Currency issues as ruppiah is steadily dropping against the SGD.

The other thing would be its very dismal performance in 2014. If you review the financial reports for 2014, the DPU dropped, the revenue growth was negative. 

The current price was hovered around 0.36 for awhile now. I'm half hearted about this share. This may have to drop a little further in order to make it sweeter for me to bite. 

Capitaland Retail China Trust 

The numbers are from Yahoo Finance which typically takes them from the annual reports. 

PE= 9.19

PB: 0.99 

ROA = 3.28

ROE - 11.14

Book Value = 1.65 

Current ratio = 1.50

What isn't too good? Well, the negative cash flow position is pretty worrying. However, the cash flow from operations is actually increasing year on year, and the net cash flow is positive as well. Overall, the China economy grew 7% this quarter, and this is good since people are more likely to spend more. I also think the chinese culture is quite like singapore, taiwan and hongkong where there is a trend towards shopping in nice malls. Capitaland has a good record in malls and should have the know how of a good tenant mix. 

Well, looks like i am not 100% sold in on either of these two REITS. Got to review more! 

REITS

Ever since I decided that the best route was dividend shares, I have taken a new found interest in REITs. The REIT market in Singapore has also gained a lot of attention and there was this very interesting table compiled in the Straits Times over the weekend.

This would certainly be useful in my assessment of REITs since the gearing ratio and dividend yield is provided for! honestly, i am not too concern about the fee if there is still a good dividend ratio going on. You deserve your fee if you are good at what you do. Gearing ratio is something I certainly need to look at now, in light of the current rising interest rates.

With this in mind, I did a quick sieve method of zero-ing in on Reits which had 1) less than 35% gearing ratio and 2) at least 6% dividend yeld, i had a nice list of the following (in order of the most fee as % of revenue to the least):

Name of Reit	Current Price	PTB	Free Cashflow
Far East Hospitality Trust	0.77	0.7	1.4
First REIT	1.39	1.3	6.4
OUE Hospitality Trust	0.94	1	7.1
Cache Logistic Trust	1.14	1.2	8.2
IReit Global
Keppel DC Reit
CDL Hospitality Trust	1.63	1	7.1
Lippo Mall Retail Trust	0.35	0.6	13.8
Cambridge Industrial REIT	0.68	1	7.3
CapitaLand Mall Trust	2.14	1.1	2.3
Aims AMP Industrial Trust	1.505	1	8
Ascendas REIT	2.4	1.1	5.6
CapitaLand Retail China Trust	1.635	0.8	7
Mapletree Industrial Trust	1.555	1.1	7.1
CapitaLand Commercial Trust	1.535	0.9	5.4

Honestly, the figures may not be the most accurate since i got these off Straits times, and then investment moats dividend screen tracker. But this serves as a useful guide to me to review these shortlisted stocks to see which ones i am keen on, and what is a good buy price. I am quite disappointed that my Ascenda India Trust and Ascendas Hospitality Trust is not in there. So if good opportunities abound, I should consider moving my funds from existing REITS to new REITs. 

Going to step up on my research!

AIMS AMPI REIT

I am loving this sweet REIT. Ever since i picked this 2000 shares last March, it has risen in price and given me good dividends.

Let's do a quick recap on this stock:

1. This is a Singapore commercial REIT with 9 cargo lift warehouse, 2 ramp up warehouses, 7 manufacturing warehouses, 1 Business Park, 1 High Tech Park, 4 Light Industries in Singapore. They also have 1 Business Park in NSW, Australia.
2. The occupancy rate is 95.8%, higher than the industry average of 90.7%
3. DPM = 16.3% increase
4. leverage = 31.4%
5. fixed debt = 86.2%
6. yield = 7.28%
7. NAV = 1.52

Total debt: 457.2 M

The financial statements all seem ok. Good cash flow - i see cash coming in mainly through operational activities. However, there is no development assets in the balance sheet. It could work both ways in the future - this may not be the best time to grow the portfolio, but not growing the porfolio would limit the potential returns to investor eventually. I would also need to review the DRIPS plan to ensure it does not excessively dilute shares.

My take:

Keep an eye on Singapore's economy and any changes to management. i think the management is on a good track currently. I will purchase on dips.