Total value = 26,647.73 Current P&L (+Div) = +568.09 (+2.18%) Overall P&L (+Div) = -3,569.09 (-13.68%)
Portfolio breakdown as of 30/09/2020
Yuexiu Transport Infrastructure (1052) is engaged in the development, management, and management of 15 x expressways/bridges (toll roads). Yuexiu has been a favourite amongst dividend investors as the DPU has been on an uptrend for over 2 x decades! Earlier in 2020, the government implemented a toll-free regulation on vehicles for 79 x days in response to the covid-19 crisis. Due to the impact on revenue, the management was forced to cut dividends, and share prices plunged > 40%! Toll collection has resumed to normal from 06/05/2020 - however, share prices have remained depressed.
QUALITY OF ASSETS
I determined the quality of the projects via the average daily toll traffic volume from 2015 - 2019. The vast majority of projects have seen an uptrend in the average daily traffic volume across the years. I paid attention to the top x 3 projects by revenue - GNSR, WEIXU, and SUIYUENAN have kept strong uptrends. The declines in traffic volume for CANGYU, JINXIONG, SHANTOU, and HUMEN were largely due to structural changes. However, I'm not too concerned because these projects don't make significant contributions to revenue. The exception will be HUMEN as it contributes 5-10% of revenue - I will need to keep it in view.
CONCESSION OF ASSETS
POTENTIAL FOR GROWTH
Yuexiu's management has proven to be able to acquire high-quality projects as evident from at least a decade of growing distribution per unit. This has been underpinned by rapid economic growth -> higher car ownership. I believe that China has a growing middle class -> higher car ownership -> organic growth in revenue.
Yuexiu is highly dependant on debt as evident from the gearing ratio > 50%. However, management has been prudent in keeping the ICR at a healthy level across the years > 5. For this reason, it was able to survive the impact of the toll-free regulation on revenue. Despite the impact on revenue, the company was able to make payment on interest expenses.
CapitaLand Retail China Trust (CRCT) is a 100% retail REIT - 12 x shopping malls in China. Due to the covid-19 crisis, CRCT's price has dropped to the lowest in over a decade! In my opinion, CRCT is an ignored gem at the current valuation - I'll explain the key reasons.
From 2015 - 2019, CRCT's diversification profile has been improving - the numbers don't lie. In particular, CRCT's management has recognised the impact of e-commerce and made an effort to reduce the amount of exposure to department stores. As a result, CRCT's largest tenant - BHG Group - has seen a reduced contribution of 4.1% to GRI. These are testament to the sound management of concentration risk.
The fact that the gearing and interest coverage ratios have been consistently at healthy levels is testament to the prudence of CRCT's management. This was reflected in CRCT's latest results too!
I believe that CRCT has potential to grow for a couple of reasons:
Since beginning my F.I.R.E journey in January of 2020, I've devoted myself to income investing - i.e. investing in dividend stocks to fund a lifestyle. I was inspired by the likes of ASSI, dividendsrichwarrior, STE etc. However, I couldn't help but feel like it wasn't suitable for me - an element was missing from it. Earlier this week, I chanced upon an article about an investment strategy - DBS Barbell Strategy. I found it - it's the perfect fit! I've decided to blog about it because I believe that it might be useful for novice investors that are looking for an investment blueprint. Before I begin to ramble, I should give a bit of context: