This is the quarter that the team faced the brunt of Covid-19 lockdown. A very challenging quarter but there are bright spots with some resilient counters and others that thrived during this period.
There were a few changes to the team during this quarter. With the selling of Vicom and Valuetronics in May, I have brought in Venture and AReit to replace them. CapitaRetail China Trust continues to be on the bench with SGX joining him temporarily as FCT and MCT are still out of action. They are recovering but I think the earliest they will be back is probably next season. Substituted OCBC with Apple in midfield, and with its splendid form currently, IFAST deserves a run at the front. Shopify has been promoted from the youth academy to the main team after its exemplary performances for the past two quarters.
First team made up 65.7% of my portfolio, slightly less than 66.7% in the previous quarter.
Defence
Another boring quarter for Parkwaylife as it continues to report a slight increase in its DPU to 3.36 cents. Annualising its first half’s dividend, parkwaylife is projected to give out 13.36 cents for this financial year. At current price of $3.5, that would provide a yield of 3.8%.
First bought in September 2015, this is my longest holding counter in the portfolio. Stable and reliable, I will continue to hold on to my current holding.
Ascendas Reit reported a resilient set of results for 20201H. DPU dropped by 10.8% to 7.27 cents, largely attributed to a greater unit base. The boost from its acquisition last December was not able to offset the rental rebate, divestment and lower occupancy for this period. Assuming similar DPU for second half, that would provide a yield of 4.2% at current price of $3.54.
Given that I am getting a yield of 4.9% based on my average price of $2.96, I will just hold on to my current stake.
As expected, Micro-Mechanics announced a good set of results. Revenue and net profit are up 17.5% and 45.5% respectively. And if guidance by the world semiconductor body is correct, the demand will continue. Company recommended a 7 cents dividend. Together with the 5 cents interim dividend, that’s a 20% increase from previous year. Payout ratio is about 110% based on both earning and free cashflow, so it is dipping into its balance sheet. Not a big concern as balance sheet is robust with about 15 cents per share. Also, with its US plant receiving customer qualification for a family of ultra-critical parts used in the semiconductor wafer-fabrication process, things look bright for the coming years.
Will add when more fund is available for CPFIS.
Venture posted a weaker quarter YOY but improves QOQ. For 1H, revenue and EPS drop by 26% and 28% respectively. However, free cash flow increases by 21%. With the strong cash flow and balance sheet, interim dividend is increased by 5 cents to 25 cents! If tsame final dividend of 50 cents is declared, current price provides about 4% yield.
Happy with the surprise increase in dividend. Might add a bit more when opportunity arises.
CapitaRetail China Trust‘s 20201H DPU dropped by 40% to 3.02 cents, giving a yield of about 4.9% based on the current price of $1.32. On the other hand, SGX has announced a good set of Q4 results and increases its dividend to 8.0 cents for the quarter.
Will continue to hold on to CRCT and Looking forward for better 2H number. As for SGX, will need to wait for more CPF fund to be available before I can purchase more.
Midfield
Mapletree Industrial Trust’s DPU for 2021Q1 dropped by 7.4% to 2.87 cents due to withholding its cash for flexibility. Without which DPU would be up by 2.9%. MINT continues to morph to have more Data Centre and Hi-Tech Buildings in its portfolio which should allow its DPU to be sustainable.
Will continue to hold on to current stake to participate in its transformation.
Despite the pandemic, Apple announced a good set of Q3 results with both revenue and net profit up by 11% and 18% respectively. The board has also announced a 4-to-1 stock split to broaden the base of investors.
A 2 bagger since my initial purchase in December 2018. Investment thesis on its expansion of services and wearable remains valid. Will continue to participate in its growth.
A good quarter for DBS as its profit before allowance grew by 12%. After setting aside allowance which increases its general provision (GP) by 50% over last, net income drops by 26%. Following the MAS regulation, dividend is cut to 18 cents.
With its strong balance sheet, DBS will withstand the storm and I expect more dividend to be paid out once the crisis is over. Having accumulate quite a bit, I am not in a hurry to add more. So Will wait patiently for cheaper price to buy.
As expected SBUX is badly hit in Q3. With revenue down by 38% and made a loss of US$400 mil. However, Q4 should see a better number though still weaker than previous year. If their guidance is on track, they will end the year profitable. Similarly to DBS, OCBC reported a drop in net profit due to allowance provided, without which it will have gone up by 1%. Following the MAS regulation, dividend is cut to 15.9 cents.
Will continue to hold on to SBUX for its global brand and they should bounce back strongly after the crisis. Despite the cut in dividend, I am still getting a 3% yield based on my average price of $10.55. Still better than CPF-OA and I am confident that I will be getting more return from this investment after the crisis.
Forward
Another solid quarter, IFAST Q2 net revenue was up by 21% and net profit up by 85%. Its net revenue is boosted by its non-recurring revenue, especially in the B2C segment. I am expecting a smaller growth in net profit for second half but should still be around 40-60%, assuming that some people will continue to use its platform after opening a new account in Q1. While percentage of recurring revenue has dropped, it is still above 70%, so that would provide a steady return.
I am not pinning too much hope of it being awarded the digital bank license. What I hope to see is its narrowing of its China loss in the quarters to come now that the revenue is recovering.
Glad to have added more in April. I will just hold on to my current stake.
As expected, Intuitive Surgical reported a weaker Q2 due to significant decline in procedure volume and postponements of system placements. Nonetheless, it has the financial muscle to overcome this temporary setback and should bounce back strongly in time to come.
The price has gone up after Q2 results which beat analysts’ estimates. I am just going to stick with what I currently have.
Arista Networks continues to face pressure in lowering demand with revenue dropping by 11% for the quarter and non-GAAP EPS down by 13%. Things look to improve in the coming quarters but demand might only go back to normal in Q4.
No intention to buy or sell at the moment.
An amazing quarter for Shopify as its revenue almost double for the quarter. Reading through the presentation, you can understand why the counter is priced at a huge premium.
I am definitely looking for opportunity to add a few more shares. But I would wait patiently for a correction to do that.
Similar to other retailers, Ulta continues to be affected by the pandemic. However, it is back in the black this quarter after a red Q1. The positives are 90% of the stores are re-opened and e-commerce sales growth is up by 200%. The group is handling this crisis well and should see further recovery.
I am just going to hold on to my shares and wait for its recovery in coming years.
Final Thoughts
Barring any further deterioration of the situation due to Covid-19 , things seem to be picking up in general. Of course near term, it will not return to pre-covid condition but any improvement is welcome. US technology stocks have rebounded very strongly in the last quarter and there might be a correction soon if earning does not keep up to expectation in the coming quarters.
Scanning through the above list before publishing the post, I am happy with what I have and am confident of their continued good performance in the coming decade.
Towards Financial Independence 
I like you presented it. I agree with you on the choice of strikers. They will make a difference. A bit surprise with Venture and Micro-Mechanics back in defence – maybe you can make them wingers, they can score goals too! I may move Apple up. Its has been scoring a lot of goal at Midfield – maybe time to try him out as a striker. He looks strong! Saw that you choose DBS and OCBC over UOB – any reason => they are all good defensive midfielders. What’s your thought of getting ST Engin to solidify your midfield? He should be a solid guy to hold the ball. 🙂
Bought venture and micromech for their strong balance sheet and cash flow which will support their stable income, hence the defensive nature. They are wing backs like Liverpool’s Trent and Roberston, so they do support the attack.
Like many players, they do play more than one role. So Apple can be attacking midfielder or forward. Being a titan, I do not see its growth rate as high as in the past. I hope I am proven wrong though!
With the transformation brought about by Piyush Gupta, I rate DBS higher than both OCBC and UOB. For its size, it has grown very well for the past decade. I first invested in OCBC because I like that it has an insurance branch (Great Eastern) . Nothing wrong with UOB but relatively a bit too conservative for my liking. Anyway, I am late in buying into banks. Only got into it in these two years.
ST Engineering is in my radar but has not pay too much attention to it. Maybe can start to take a look again.