The Weekly Nibble: A Focus on Singapore Blue-Chip Shares
- Original Post from The Motley Fool Sg

Here are some of the most popular articles that have appeared on The Motley Fool Singapore’s website for the week.

3 Singapore Blue-Chip Shares That Warren Buffett Might Like

Ever wanted to invest in stable companies that are part of the Straits Times Index (SGX: ^STI)? Look no further. In this article, I look at three blue-chips that have wide economic moats and why they could make good investments.

Companies discussed in the article: Singapore Exchange Limited (SGX: S68), DBS Group Holdings Ltd (SGX: D05) and SATS Ltd (SGX: S58).

3 REITS That Have More Than 8% Yield Right Now

Lawrence Nga explores three real estate investment trusts (REITs) that have distribution yields of above 8%. They are not excessively valued in terms of their book values as well.

REITs discussed in the article are Cache Logistics Trust (SGX: K2LU), First Real Estate Investment Trust (SGX: AW9U) and EC World Real Estate Investment Trust (SGX: BWCU).

Which Blue-Chip Property Developer Is The Cheapest Now?

With the additional property cooling measures introduced in July this year, shares of property developers have generally not been doing well. For instance, UOL Group Limited’s (SGX: U14) share price has tumbled close to 20% since the cooling measures were put in place.

Jeremy Chia, in his article, investigates which of the trio of property outfits that are part of the Straits Times Index – UOL, CapitaLand Limited (SGX: C31) and City Developments Limited (SGX: C09) – offer the best value amid the tumbling stock prices.

$STI(^STI.IN) $First Reit(AW9U.SI) $EC World Reit(BWCU.SI) $CityDev(C09.SI) $CapitaLand(C31.SI) $DBS(D05.SI) $Cache Log Trust(K2LU.SI) $SATS(S58.SI) $SGX(S68.SI) $UOL(U14.SI)

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The Week Ahead: CMT, SGX and Venture Corporation
- Original Post from The Motley Fool Sg

The Singapore earnings season will step up a notch with seven Straits Times Index (SGX: ^STI) pencilled in for results.

CapitaLand Mall Trust (SGX:C38U) increased its fourth-quarter distribution by 3.1% in January. The owner of 15 Singapore shopping malls said it was aware of the slowdown in the global economy and uncertainty in the interest-rate environment.

Both revenue and bottom-line profit increased in the second-quarter at Singapore Exchange (SGX:S68). They were driven by a jump in demand for derivatives. It was the second consecutive quarter of record performance for the derivatives business.

Venture Corporation (SGX: V03) posted a slump in fourth-quarter net profit and a drop in revenue. But it said that there has been increased increased interest from businesses looking to relocate production to South-east Asia.

Updates are also expected from Dairy Farm International (SGX: D05), Hongkong Land (SGX: H78), Jardine Cycle & Carriage (SGX: C07) and Hutchison Port Holdings (SGX: NS8U).

On the economic front, growth in the US economy could have slowed from 2.2% in the fourth quarter of 2018 to 2% in the first three months of 2019. The 4% growth rate once touted by the Trump administration now seems like an ellusive dream.

Australian inflation could have moderated to 1.5% in the first quarter from 1.8% last time. That could give the Reserve Bank of Australia some wiggle room to cut rates if needed.

Speaking of interest rates, Bank Indonesia should keep its benchmark reverse repo rate unchanged at 6%. The bank said the rate should maintain the attractiveness of the domestic market for foreign investors.

Elsewhere, the Bank of Japan is expected to keep interest rates on hold at minus 0.1%. The bank is also expected to continue buying Japanese Government Bonds, exchange-traded funds and Japan REITs.

And finally, Singapore’s core consumer prices inflation rate could have increased to 1.7% in March from 1.5% a month earlier.

The Motley Fool’s purpose is to help the world invest, better. Click here nowfor your FREE subscription to Take Stock — Singapore, The Motley Fool’s free investing newsletter. Written by David Kuo, Take Stock — Singapore tells you exactly what’s happening in today’s markets, and shows how you can GROW your wealth in the years ahead.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.

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5 Takeaways from Keppel DC REIT’s 2019 First-Quarter Earnings
- Original Post from The Motley Fool Sg

Keppel DC REIT (SGX: AJBU) released its 2019 first-quarter earnings update yesterday evening. The REIT currently owns 15 data centres across eight countries that are worth a total of S$2 billion as of 31 March 2019.

Here are eight key takeaways from Keppel DC REIT’s latest earnings update:

1. Gross revenue for 2019’s first-quarter continued to show good growth, rising by 26.4% year on year to S$48.0 million. This was due to contributions from the acquisitions of Maincubes Data Centre in Offenbach am Main, Germany, as well as Keppel DC Singapore 5, in 2018. Property expenses rose by 22.5%, resulting in net property income registering growth of 26.8% to S$43.2 million. Distribution income and distribution per unit (DPU) for the reporting quarter rose by 30% and 6.7%, respectively, to S$27.1 million and 1.92 Singapore cents. Keppel DC REIT’s unit price closed at S$1.49 on 15 April 2019; at that price, the REIT has an annualised distribution yield of 5.2%.

2. Keppel DC REIT’s property portfolio is worth S$2 billion at the end of 2019’s first-quarter, of which the bulk, 51%, is in Singapore. Total exposure to Asia is 67.4%, while the remaining 32.6% is in Europe (see the portfolio breakdown below). The REIT’s occupancy rate rose slightly from 93.1% in the previous sequential quarter to 93.2%, but the weighted average lease expiry (WALE) declined from 8.3 years to 8.0 years.

Source: Keppel DC REIT 2019 first-quarter earnings presentation

3. The REIT is performing enhancement works to three of its assets at the moment:

a) At Keppel DC Singapore 3, retrofitting works are under way to cater for a client’s expansion, and completion is expected in mid-2019.

b) At Keppel DC Dublin 1, asset enhancement works are ongoing to improve energy efficiency, and completion is expected in 2020.

c) At Keppel DC Dublin 2, the REIT is carrying out power upgrade and fit-out works for client expansion, and completion is expected in the second half of 2019.

4. Aggregate leverage for the REIT has inched up slightly from 30.8% in the fourth quarter of 2018 to 32.5% in the reporting quarter, due to higher gross borrowings. This still leaves considerable room for the REIT to borrow more for acquisitions as its leverage is below the regulatory gearing-ceiling of 45%. During 2019’s first-quarter, Keppel DC REIT issued €50 million worth of 7-year floating rate notes that will come due in 2026. This debt-issue lowered Keppel DC REIT’s cost of debt from 1.9% in the previous sequential quarter to 1.7%, and increased the average debt tenor from 3 years to 3.3 years. The REIT’s interest coverage ratio also improved from 11.4 times to 12.9 times.

5. Keppel DC REIT shared that total mobile data traffic is expected to increase by 31% annually to reach 136 exabytes per month by the end of 2024. Mordor Intelligence also expects the cloud gaming market to grow at 15% per year between 2018 and 2023. These two trends alone bode well for the demand for data centres to grow steadily over the medium term at least, which will underpin growth for the REIT.

Stop worrying about the uncertain REITs market with our new Complete Guide To Buying The Best Singapore REITs. We give you 3 quick ways to easily value your REITs so you save tons of research time. Value your REITs today so you know exactly when to buy, sell or hold. Simply enter your email here and we will rush the 42-page PDF immediately to your inbox...for FREE!

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The Motley Fool Singapore contributor Royston Yang contributed to this article. Royston owns shares in Keppel DC REIT.

The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. The Motley Fool Singapore writer Chong Ser Jing does not own shares in any of the companies mentioned.

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First Real Estate Investment Trust’s 2019 First-Quarter Earnings: What Investors Should Know
- Original Post from The Motley Fool Sg

First Real Estate Investment Trust (SGX: AW9U) is Singapore’s first healthcare real estate investment trust (REIT). The REIT currently owns 20 properties located in Indonesia, Singapore and South Korea.

On Wednesday, the healthcare REIT announced its financial results for the first quarter ended 31 March 2019. Let’s take a look at its latest performance.

Financial highlights

Gross revenue for the reporting quarter came in at S$28.6 million, a slight fall of 0.2% from S$28.7 million a year ago. The decline was largely due to a lower variable rental component for its Indonesia properties.

Property operating costs ballooned 114.8% to S$623,000 on the back of “higher property expenses incurred for Sarang Hospital and Indonesia properties”. Sarang Hospital is in South Korea and is managed by a private doctor. With the higher property operating expenses, net property income fell 1.4% to S$28.0 million.

The distributable amount, however, inched up by 0.9% to S$17.1 million while distribution per unit (DPU) was flat at 2.15 Singapore cents. The following chart shows distributable amount and DPU changes since the first quarter of 2013:Source: First Real Estate Investment Trust 2019 first-quarter earnings presentation

Balance sheet strength

As of 31 March 2019, First REIT’s gearing was 34.5%, below the regulatory limit of 45%. The REIT’s weighted average debt maturity stood at 2.16 years, with the debt maturity profile well-spread out.Source: First Real Estate Investment Trust 2019 first-quarter earnings presentation

Details of refinancing have been finalised for the S$100 million term loan facility due this year, and First REIT’s manager is awaiting approval from the relevant banks.

The REIT’s net asset value per unit dropped from S$1.0251 at the end of last year to S$1.0227 as of 31 March 2019.

Looking ahead

As for its growth plans, Victor Tan, chief executive of Bowsprit, First REIT’s manager, said:

“Going forward, the Trust will continue to explore opportunities to unlock the value of our existing portfolio through asset enhancement initiatives or strategic divestment of assets for capital gains. With OUE Limited (“OUE”) and OUE Lippo Healthcare Limited (“OUELH”) on board, we will also look at diversifying our income streams by expanding into other geographical markets.”

OUE Lippo Healthcare Ltd (SGX: 5WA) and OUE Ltd (SGX: LJ3) together acquired a 100% stake in Bowsprit. With that, OUE Lippo Healthcare joined PT Lippo Karawaci Tbk as First REIT’s co-sponsor.

First REIT’s units are currently selling at S$0.99 each. At that price, the REIT is going at a price-to-book ratio of 0.97 and a distribution yield of 8.7%.

Maximise dividends on your REITs with our brand-new Complete Guide To Buying The Best Singapore REITs. We reveal everything we think you need to know about finding the best REITs that hands you a fat dividend cheque ...even if you have no REITs experience at all! Get instant access to your 100% FREE, actionable, 42-page PDF guide here.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended units of First Real Estate Investment Trust. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.

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Is the First-Mover Advantage Really Beneficial for a Company?
- Original Post from The Motley Fool Sg

We often hear stories of smart and enterprising entrepreneurs who dip their toes into a new industry or technology. These pioneers spearhead the development of new ways of doing things or solving old problems. Such entrepreneurs are lauded for their vision and bravery in venturing into an untapped domain, and they’re also given lots of credit for stepping into areas where others may have feared to tread.

This got me thinking about a fundamental question in investing: Does the first-mover in any industry always end up being the winner and the dominant player? Or are there cases where a nascent industry has seen other players overtake the initial first-mover in order to gain the upper hand?

The first-mover “disadvantage”

While first-movers normally have a distinct advantage in a new and nascent industry, such companies also face many obstacles. A key problem is often the lack of understanding of its customer base and size of the customer pool if the industry is still new and the product not yet fully embraced by the general public.

Another problem might be the costs and expenses involved in building up infrastructure or systems to standardise processes or protocols within the new industry. Often, the first-mover has to come up with quality standards, rules, and regulations in order for the industry to thrive. Not having any or many competitors is a boon in terms of capturing market share, but it may not always lead to good profitability as there is a lot of spending required for research and development, compliance, and marketing surveys and studies.

The second-mover advantage

Businesses that move in after the first-mover has established itself are often still able to capture a sizeable customer base and attain decent market share, assuming it is a credible player with the knowledge and financial muscle to succeed. The advantage for the No. 2 entrant is that it would have witnessed the mistakes and stumbles the first-mover made and be better equipped to avoid them.

This provides the second-mover with an advantage the first-mover didn’t have: The customer base is now more well-established, there is growing acceptance of the new product or service, and the regulatory and quality standards have been firmed up.

The Foolish takeaway

To summarise, the first-mover may gain a strong advantage by being the first in line to market a product or service, but investors should note that there are also disadvantages to being the first. There are cases where the second (or even third) entrant into a new industry flourishes and goes on to do better than the first company. Therefore, investors might want to adopt a wait-and-see attitude before putting their money down in order to better understand the competitive dynamics of the new industry first.

Click here nowfor yourFREEsubscription toTake StockSingapore, The Motley Fool’s free investing newsletter. Written byDavid Kuo,Take Stock Singaporetells you exactly what’s happening in today’s markets, and shows how you can GROW your wealth in the years ahead.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.

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3 Key Things I Learnt about DBS Group Holdings Ltd’s Business Growth From its 2018 Annual Report
- Original Post from The Motley Fool Sg

DBS Group Holdings Ltd (SGX: D05)achieved another record performance in 2018 as net profit increased 28% from the previous year. Total income was 11% higher, largely due to higher net interest income and fee income. Perhaps the greatest achievement for the bank was generating a return on equity of 12.1% for the year, the highest seen since 2007. The feat is made even more impressive with the stricter capital requirements facing DBS today.

Besides the impressive headline numbers, DBS ‘s annual report for 2018 – released last week – also brought to light many interesting developments in the bank. Here are three factors that could affect the bank’s business growth. charts from the report that really caught my eye.

Trade war risk

One of the major concerns DBS’s shareholders may have is the impact of the ongoing and possibly escalating trade war between the US and China. However, DBS’s CEO, Piyush Gupta appears to be more optimistic than most.

He believes that the impact on China is not as severe as many financial markets commentators have suggested. In DBS’s latest annual report, he shared that the proportion of net trade to GDP (gross domestic product) in China has been shrinking, and within that, trade with the United States accounted for only about 19% of China’s exports in 2017. In addition, he believes that it is difficult to shift many supply chains away from China, in the short term at least.

Gupta said too that he believes that shifts in new investment capacity to alternative locations will most likely remain in the region and such shifts could be at least neutral, if not even positive, for DBS. He explained:

“I also believe that any shifts that eventually happen are likely to be within the region, reflecting the reality that Asia is both a production centre as well as a market place. Our customers frequently cite Thailand, Vietnam, Philippines, and India as potential beneficiaries of longer-term shifts. Such shifts are likely to be at least neutral for DBS’ business, if not somewhat positive.”

Nevertheless, Gupta did warn that there could be potential larger concerns that investors should be wary about. He said:

“However, even if there is an agreement, it would hide a couple of larger concerns.(a) The shift from a multilateral trading regime based on WTO, TPP and such- like is generally not good for a stable rules-based order. Bilateral arrangements create arbitrage windows and are difficult to monitor and execute. This will create ongoing friction in trade flows.(b) The more disconcerting worry is thatUS-China tensions extend beyond trade and are really a manifestation of the Thucydides trap. This would create ongoing geopolitical tensions and a new set of challenges in a region that has benefitted from geopolitical stability over several decades.

In the extreme, one could imagine a technology-led iron curtain between China and the US, forcing smaller Asian countries to choose sides. This would be extremely damaging for the region. We should avoid the possibility of a new cold war at all costs.”

Credit risk

DBS has done well to grow its loans portfolio while being mindful of credit risks. Besides the escalation of the US-China trade war, 2018 also saw China’s ongoing deleveraging of its corporate sector, the increased pace of US interest rate hikes, and the depreciation of some emerging market currencies.The bank’s chief risk officer, Tan Teck Leng, commented:

“As a consequence of the growing headwinds, we heightened vigilance over our credit portfolio. We also conducted thematic portfolio reviews based on the risks that had emerged in the second half of 2018. These included detailed analyses of our China, India and Indonesia exposures.We grew our overall portfolio by 7% during the year and while idiosyncratic risks cannot be completely eliminated, we remain comfortable with its quality. Our portfolio is diversified across industry and business segments, with more than 70% of corporate and institutional exposure to investment-grade borrowers.”

In addition, the real estate market in Singapore saw additional property cooling measures in July 2018 that resulted in weaker market sentiment. However, Tan believes that the quality of DBS’s property-loan portfolio remains strong with an average loan-to-value ratio of less than 60%. In Hong Kong, the bank’s loans remain well collateralised with approximately 90% of loans there having loan-to-value ratios of under 50%.

Growing digital presence

Finally, DBS has been at the forefront of digitalisation for many years now. In July 2018, the bank was crowned World’s Best Digital Bank by Euromoney for the second time in three years. In 2018, the bank made further progress on its digital efforts.

As of end-2018, 80% of DBS’s open systems were cloud-ready as compared to 66% in 2017. DBS’s cloud-native applications have also nearly doubled to more than 60.

In their letter to shareholders, Gupta and DBS’s chairman Peter Seah said:

“With the pervasiveness of digital, tech is business and business is tech. Recognising this, we no longer view technology as a support function. Instead, we have organised ourselves such that business and technology teams are now co-drivers in 33 platforms, and work together to deliver on shared goals and key performance indicators. On the data front, we have established an analytics centre of excellence, trained over 10,000 of our people on a data-driven curriculum, and developed a framework on responsible data usage.”

The Motley Fool's purpose is to make the world smarter, happier, and richer. Click here nowfor your FREE subscription to Take Stock -- Singapore, The Motley Fool's free investing newsletter. Written by David Kuo, Take Stock -- Singapore tells you exactly what's happening in today's markets, and shows how you can GROW your wealth in the years ahead.

Like us on Facebook to keep up to date with our latest news and articles. The Motley Fool's purpose is to help the world invest, better.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has a recommendation on DBS Group Holdings Ltd. Motley Fool Singapore contributor Jeremy Chia owns shares in DBS Group Holdings Ltd.


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