Stocks Commentary
More Gems to find.
Let me boardcast the lastest addition to my porfolio of market Gems, that i bought as at 30th Dec 2008. The Gem's name is FSL Trust... fullname (First Ship Lease Trust). I have been eyeing this stock since sept 08 when the price per share was hovering around $1-$1.20. The reason this company caught my attention was, beacuse of an article on BT (Business Times) under the Broker's Take report, saying that Shipping Trusts are a "BUY", that the dividends were huge and sustainable and so on. So i deligently did up FA on the company and found it rather interesting... high dividend payout, strong cash flow, good history of high margins, diversifed ship rentals, contract value up to $1.78 etc etc. However the reasons why i didn't buy FSL at that time (Sept) was simple, two varibles affecting the company were 1)Shipping Industry cycle 2) Baltic Exchange Dry Index. That was still a high probablility of a potential drop of the dry index which was very possible at that time, what would happen if my prediction was right? what then are its implication on this company and what measures will the company do in light of this event?
To be honest, i was intially afraid that FSL might raise above $1.10 and that i would yet again miss out on getting this gem. But then again, what actually is a market gem to me asking myself once more? A market gem to me, is buying a good fundamentally strong company that is trading at a significantly low price, one that of course gives me 20-30% below its NAV value or in good times , the share is trading below 50-60% of my conservative intrinsic value. FSL's trading share price at that time was $1.10-$1.20, which was deemed quite high in my opinon, no or little discount to NAV per share and 11 times PE ratio. Although i heard from some ppl that NAV not a accurate measure to depic my buying, that its only in theory and so on and so forth, i still strongly believe in NAV per share, beacuse what if the company collapse (i always think this way since June 2008 ,thanks to this crisis) what we investors will eventually get its the NAV what...wrong meh?! Regardless, since the share price already drop to $0.47 on Dec 08, i bought two lots to seal into my portfolio. Was it a wise decision? I certainly hope so..FSL has recently declared that it will lower its payout to 75% as expected from the below conversation that took place on 3rd Dec 2008 with Mr Tan "the IR officer of FSL singapore"
Q: Any expansion to be expected in 2009?
Mr Tan Answer: Not at the moment, we are focusing more on maintain our current ships. But if the opportunity raises, we might go ahead and buy. Likewise , though the policy of the debt equity ratio is 1.16:1, we can change it at will.
Q: Should I expect a change in dividend payouts for 2009?
Answer: All investment, regardless of how safe has risk, we will try our best to maintain our 90/100% dividend payout policy, however with that said, in light of this crisis, the main risk is the defaults of our clients. And if that happens, of course the dividend payout will be less then, as compared to 2007/2008.
Q: You guys can consider, reducing dividend payout, and then use the process of internal funding to buy up ships right?
Answer: Yes, that could be another way, even though our policy states that 90/100% payout via operating cash flow, we can, at our own will, change the policy if that is required for the greater good of the shareholders in the long run. But, a typical ship cost around $US70million on average, thus reducing dividend payout for expansion is not currently discussed.
Q: Are all your boats rented out? How long do you think this is sustainable?
Answer: Yes, we are optimistic about our clients' ability to continue our services.
Q: Regarding the clients that rent your boats, do they find you guys or you find them?
Answer: It works both way, we have a team of experts who have many contacts, marketing strategies to find these clients.
Q: What are the steps taken to ensure your clients are credit worth? I did a short research on some of your clients like Rosneft and Geden, all of whom do not have annual reports stated in their website?
Answer: Before we make any renting deals, our risk management team will consider many facts like, credit worth, history ,solvency test etc to ensure that our clients are able to pay the lease’s fees. As for Rosneft/Geden , they are not listed in any exchange , therefore no need for them to broadcast their reports.
Q:When can I expect the 2008 annual report to come out?
Answer: Our 4th quarter will be released on 21st Dec, AGM in early Jan, probably around mid march should expect the annual report 2008 on our website or SGX.
Well, the next Gem i will be eyeing or buying will be both SunTec Reits and CapitalCommer Trust (CCT), again i get some very negative comments on these stocks regarding their industry and some positive comments on their fundamentals.. so far im done researching (CCT) and this is what decpicts my buying, although not yet bought
1) Want to gain exposure to Singapore’s rental of Office buildings, mainly banking , insurance and financial sector. In addition, a bit of Malaysia’s business rentals.
2) This Trust has formidable reputation with strong backing from parent company CapitaLand
3) This enables the trust to easily obtain loans, like the recent $116million using one building as collateral. Refinancing in this credit crunch environment is supposedly not a problem with the other 8 big buildings to use.
4) Past performance reviews consistent increase in revenue/profit margin and operational cash flow. Note that these are bull years, might be misleading.
5) It is also known that the trust builds good relationships with their clients
6) Their clients’ a.k.a tenants, are well known and respected, like GIC, Starhub, JP Morgon, Standard Charted Bank (Big client with 15.2%)
7) Potential Upside in the future, involves increasing of rent rates for exmaple (theirs is low as compared to market rates $7.18 vs $11.40 psf), growth in further acquisitions in the future via Asia or mainly Malaysia.
8) Consistent in their DPU , even up to now, their DPU increased to $0.11 (2008), debts ratio are kept low from 0.24-0.35
9) At a price of $0.88-0.90, PVB is only 0.29, expected yield to receive in the next ten years is $0.70. NAV per share is $2.90+, Intrinsic will be $2.60.
Now the thing that prevents me from buying this great company trust now is the terrible effects of devaluation, which affects NAV per share (most of their assets are properties..duh!) , their ability to take loans and debt to equity ratio (leverage), the other risks involved are, falling office rental rates and defaults or delaying payments by clients
As for Suntec Reits, im still doing research, hopefully i will be in time to buy a mixture of both and seal these gems , before they get expensive again.
P.s if you noticed, my reasons for buying these company are summarised and not explained in detailed anymore. I don;t go on to explain why CCT's clients are reputable, nor do i explain how i do the intrinsic value and best of all i don't explain much about the risks involved. This is beacuse im just damn lazy to write it all down again.. lol >_<
To be honest, i was intially afraid that FSL might raise above $1.10 and that i would yet again miss out on getting this gem. But then again, what actually is a market gem to me asking myself once more? A market gem to me, is buying a good fundamentally strong company that is trading at a significantly low price, one that of course gives me 20-30% below its NAV value or in good times , the share is trading below 50-60% of my conservative intrinsic value. FSL's trading share price at that time was $1.10-$1.20, which was deemed quite high in my opinon, no or little discount to NAV per share and 11 times PE ratio. Although i heard from some ppl that NAV not a accurate measure to depic my buying, that its only in theory and so on and so forth, i still strongly believe in NAV per share, beacuse what if the company collapse (i always think this way since June 2008 ,thanks to this crisis) what we investors will eventually get its the NAV what...wrong meh?! Regardless, since the share price already drop to $0.47 on Dec 08, i bought two lots to seal into my portfolio. Was it a wise decision? I certainly hope so..FSL has recently declared that it will lower its payout to 75% as expected from the below conversation that took place on 3rd Dec 2008 with Mr Tan "the IR officer of FSL singapore"
Q: Any expansion to be expected in 2009?
Mr Tan Answer: Not at the moment, we are focusing more on maintain our current ships. But if the opportunity raises, we might go ahead and buy. Likewise , though the policy of the debt equity ratio is 1.16:1, we can change it at will.
Q: Should I expect a change in dividend payouts for 2009?
Answer: All investment, regardless of how safe has risk, we will try our best to maintain our 90/100% dividend payout policy, however with that said, in light of this crisis, the main risk is the defaults of our clients. And if that happens, of course the dividend payout will be less then, as compared to 2007/2008.
Q: You guys can consider, reducing dividend payout, and then use the process of internal funding to buy up ships right?
Answer: Yes, that could be another way, even though our policy states that 90/100% payout via operating cash flow, we can, at our own will, change the policy if that is required for the greater good of the shareholders in the long run. But, a typical ship cost around $US70million on average, thus reducing dividend payout for expansion is not currently discussed.
Q: Are all your boats rented out? How long do you think this is sustainable?
Answer: Yes, we are optimistic about our clients' ability to continue our services.
Q: Regarding the clients that rent your boats, do they find you guys or you find them?
Answer: It works both way, we have a team of experts who have many contacts, marketing strategies to find these clients.
Q: What are the steps taken to ensure your clients are credit worth? I did a short research on some of your clients like Rosneft and Geden, all of whom do not have annual reports stated in their website?
Answer: Before we make any renting deals, our risk management team will consider many facts like, credit worth, history ,solvency test etc to ensure that our clients are able to pay the lease’s fees. As for Rosneft/Geden , they are not listed in any exchange , therefore no need for them to broadcast their reports.
Q:When can I expect the 2008 annual report to come out?
Answer: Our 4th quarter will be released on 21st Dec, AGM in early Jan, probably around mid march should expect the annual report 2008 on our website or SGX.
Well, the next Gem i will be eyeing or buying will be both SunTec Reits and CapitalCommer Trust (CCT), again i get some very negative comments on these stocks regarding their industry and some positive comments on their fundamentals.. so far im done researching (CCT) and this is what decpicts my buying, although not yet bought
1) Want to gain exposure to Singapore’s rental of Office buildings, mainly banking , insurance and financial sector. In addition, a bit of Malaysia’s business rentals.
2) This Trust has formidable reputation with strong backing from parent company CapitaLand
3) This enables the trust to easily obtain loans, like the recent $116million using one building as collateral. Refinancing in this credit crunch environment is supposedly not a problem with the other 8 big buildings to use.
4) Past performance reviews consistent increase in revenue/profit margin and operational cash flow. Note that these are bull years, might be misleading.
5) It is also known that the trust builds good relationships with their clients
6) Their clients’ a.k.a tenants, are well known and respected, like GIC, Starhub, JP Morgon, Standard Charted Bank (Big client with 15.2%)
7) Potential Upside in the future, involves increasing of rent rates for exmaple (theirs is low as compared to market rates $7.18 vs $11.40 psf), growth in further acquisitions in the future via Asia or mainly Malaysia.
8) Consistent in their DPU , even up to now, their DPU increased to $0.11 (2008), debts ratio are kept low from 0.24-0.35
9) At a price of $0.88-0.90, PVB is only 0.29, expected yield to receive in the next ten years is $0.70. NAV per share is $2.90+, Intrinsic will be $2.60.
Now the thing that prevents me from buying this great company trust now is the terrible effects of devaluation, which affects NAV per share (most of their assets are properties..duh!) , their ability to take loans and debt to equity ratio (leverage), the other risks involved are, falling office rental rates and defaults or delaying payments by clients
As for Suntec Reits, im still doing research, hopefully i will be in time to buy a mixture of both and seal these gems , before they get expensive again.
P.s if you noticed, my reasons for buying these company are summarised and not explained in detailed anymore. I don;t go on to explain why CCT's clients are reputable, nor do i explain how i do the intrinsic value and best of all i don't explain much about the risks involved. This is beacuse im just damn lazy to write it all down again.. lol >_<
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