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Why I am against the Mapletree Commercial Trust Merger

Why I am against the Mapletree Commercial Trust merger

Make your vote count

First off, it appears that many unitholders somehow hold the defeatist mentality that voting is futile (sounds familiar?), because this is likely a done deal. But this cannot be further from reality. The Sponsor (which holds 32.61% of units) will have to abstain from voting on the merger, thus the outcome of this will be decided by both institutional and retail investor alike – yes, people like you and me. For Resolutions 1, 2 and 3, only a simple majority (>50%) is required to pass the resolutions, so it is really up in the air and could go either way. Therefore, remember to fill up your voting forms (that you should have received by mail) and vote for what you want! I love direct democracy!

Increased leverage, increased risk

MCT’s current leverage stands at ~33%, which is very safe and reasonable in my view. If the merger goes through, leverage rises up to 39.2%. This potentially increases risk especially going into a rising interest rate environment. MCT unitholders would have to weigh this sizeable increase in leverage against the pro forma benefits of the increased DPU and NAV. Personally, I don’t think this is worth it. I rather MCT stays with lower leverage at the moment.

Growth abroad – is this really necessary?

One of the reasons cited for the merger is that there are more opportunities for growth abroad. While this statement itself is valid, MCT shareholders would have to question whether there are indeed greener pastures overseas. Sticking to a Singapore mandate has its benefits, with best in class assets such as MBC I & II and VivoCity. Singapore has largely been a safe haven for capital amid the pandemic and Singapore real estate is a preferred choice for many of the wealthy. In my view, SG real estate will continue to do well.

Most importantly, MCT has been growing its DPU and NAV steadily over the years, even without overseas exposure. One would have to be aware of potential issues with overseas properties – MNACT’s Festival Walk was damaged by protestors a few years back, and China’s zero covid policy is also a headwind for MNACT’s China based assets.

Huge potential of the Greater Southern Waterfront

MCT is well poised to benefit from the development of the GSW over the next decade – tens of thousands of private condos and HDBs will be developed, and MCT currently has the best in class assets in the area. MBC, mTower and Vivo are all well positioned right beside MRT stations with great connectivity. I cannot imagine Vivo becoming any more crowded than it already is, but that looks like the reality in the future. 

Additionally, the Sponsor still owns more properties along the GSW that MCT can acquire in the future. If MCT does not merge with MNACT, MCT can focus on growth in Singapore with its ample debt headroom, if necessary.

In conclusion, I am against the merger. Don’t get me wrong, MNACT is still a good stock as Quarz Capital had rightly pointed out. But I rather MCT and MNACT be kept separate, as they cater to different profiles of investors – MCT for those seeking stability in Singapore, while MNACT caters to those seeking growth in foreign markets and are willing to potentially take on greater risk. I would rather investors have the choice to invest in either, and not merge them into one.

Remember to make your vote count, and let’s make history!

March 2022 Portfolio Update



Portfolio allocation as of Mar '21.

SG Shares: DBS, SGX, Valuetronics

SG Reits: MCT, Lion-Phillip S-Reit ETF

US Growth: BABA, INMD, PINS, PYPL, SHOP, TDOC, TTD, UPST

Crypto: BTC, ETH, FTM, LINK, SOL

New positions were initiated through February and March. Most of the new US Growth positions were purchased in February. In March, mainly added to HSI and HST ETF positions and a bit of IQLT (2.4% of portfolio, not labelled in chart). There's considerable fear among market participants when it comes China exposure, as evident from Stashaway's reduction in KWEB holdings right before the rebound in Chinses Tech. Personally, I am still comfortable with keeping my exposure to about 20% of portfolio, and have continued to DCA into HSI/HST. 

There's a quote from Ben Graham, that "An Intelligent Investor is one who realises that the stock becomes riskier, not less as their price rises; and less risky, not more, as their prices fall." A caveat I would add is that I believe this should apply more to broad market indices, rather than individual stocks. For example, investors who held Enron or Lehman stock would have found little comfort in this quote; as the stock prices fell drastically at first, then eventually their entire holdings were wiped out. However, I think the quote makes complete sense when applied to ETFs - buying SPY at $420 in March '22 is indeed less risky than buying SPY at $479 in Dec '21 - even if it may not have felt that way. Simply because $420 is lower than $479. Thus, even with the regulatory overhang, I continue to DCA into HSI/HST. For HST, I have bought the Lion-OCBC HST ETF at $1.25, $0.99, $0.92 and most recently at $0.65 a few days before the reversal, with an average price of $0.90. Currently still underwater but I'm indifferent to the short term price fluctuations.

Looking ahead, the macro outlook is rather uncertain with war, inflation and rate hikes contributing to the pessimism. An interesting read I came across was a note by Credit Suisse's Zoltan Pozsar, on the potential longer term implications for the US Dollar as a result of the Russia-Ukraine war. If you're keen to read it, you can search it up on LinkedIn as there are people sharing the actual report. 

Lastly, I'm pleasantly surprised to learn that I'll have a small bonus paid out in April. It's not much but it does give me more dry powder, as I often feel that there are opportunities abound, but capital is the constraint.

Note: Please follow my Instagram page @alpacainvestments for monthly portfolio updates.

Jan 2022 Portfolio Update

First off, wishing everyone a Happy Chinese New Year and a year of good health and wealth ahead.

“Hubris” (a word I learnt watching “War Machine” on Netflix – a great movie by the way) is probably the appropriate word to describe investors’ behavior leading up to this months’ correction. Many were simply overconfident, and it wasn’t uncommon to see people with 90%, 100% of their portfolios in crypto or hypergrowth stocks. Some even claimed that annual returns of 50% or 100% should be the “new normal”, and not the 7% to 10% historically. It all unraveled over the course of the month, inflicting heavy damage on the very people who felt invincible in the recent past. Evidently, everyone appears to be a genius during a bull market, and it takes a sharp correction to differentiate luck from skill.

I myself am not spared – my US positions took a heavy beating as well. But thankfully, my SG positions cushioned the damage, while my HK positions were relatively flat. I think the lesson here is diversification. If your portfolio is fully allocated to a single asset class, a single region or a single factor, it is inevitable that you’d experience a disproportionally large drawdown as compared to a diversified portfolio. Over the long run, a concentrated portfolio may make you higher returns if those bets turn out right. But you’ll have to stomach higher volatility in the short run, and not everyone is prepared for that.

An interesting observation I made over the past year was that when stock prices see a quick and sustained rise, investors tend infer that the company is “good” and “performing well”; conversely, when stock prices of the very same companies decline, investors view the company as “bad” and “finished”. Yet, throughout this process of the stock rising and falling (take many US hyper growth stocks from May ’21 to present as examples), the underlying fundamentals of some companies continued to grow. The takeaway here is not to draw conclusions from the short term movements of stock prices – in the short term, the reasons for stocks rising and falling are more driven by fear and greed rather than the underlying financial performance; whereas in the long term, to would be more reasonable to expect that stock prices are correlated with the fundamental performance of the company.

Regardless of the general somber mood, my overall portfolio has still held relatively steady, down by a low single digit percentage. The recent selloff provides me with the opportunity to accumulate mainly US Stocks/ETFs and SG Reits, which have both been battered by the prospect of more rate hikes than expected.

My strategy is to continue being selective in US Growth, while I am less bothered about my ETF positions and simply continue to dollar cost average. The long term goal is to build up a core portfolio consisting of mainly ETFs, then selecting single stocks to generate alpha. As I’ve mentioned in my previous post, being a humble fresh graduate means that for now, the effect of the monthly inflows from my salary outweighs my investment returns.

For US Growth companies, I mainly screen for fast growing companies that 1) have little to no debt, 2) are profitable or at least cash flow positive, 3) trade at valuations that are reasonable when compared to their historical valuations. I am also taking advantage of the selloff in SG Reits to accumulate positions for my dividend portfolio. For cryptocurrencies, I am still new to the space and am keeping my allocation to this asset class small for now. But I think tokens with actual use cases have great potential and am keen to learn more.

A quick summary of the transactions for this month:

SG Reits: Bought MCT and Lion Phillip S-Reit ETF

US Growth: Bought UPST, PINS, TDOC

US ETF: Started DCA on QUAL

Intl ETF: Started DCA on IQLT

Crypto: Bought SOL

With these additions, the current portfolio allocation looks like this:



SG Reits: MCT, CLR

SG Stocks: DBS, SGX, Valuetronics

US Growth: BABA, PYPL, TTD, UPST, PINS, TDOC

Crypto: BTC, FTM, SOL

US ETFs: QUAL and IQLT are 1% each but I can’t seem to label them on the chart

Still rather overweight on Singapore positions, but at the same time this is the very reason why the portfolio has held up well YTD. Will continue to steadily add to US Growth as I see many opportunities among beaten down stocks, while the DCA process into ETFs is almost second nature to me at this point.

I’ve also recently watched Jeremy Grantham’s interview with Bloomberg; I felt it was a brilliant interview and I generally agree with many of the points that he articulated. The full interview is 37 minutes long, but I would encourage you to watch it. The two main takeaways from the interview were 1) When markets peaked and crashed, there were prolonged periods of negative returns – Great Depression (peaked in 1929, only recovered in 1954), Japan Asset bubble (1989 and yet to recover) and Dot Com bubble (peaked in 2000, only recovered in 2013), 2) US Equities are overvalued relative to the rest of the world.

Personally, I think (1) can be somewhat mitigated by dollar cost averaging, which is what I’ve been doing. For (2), it is really down to diversification and what one is comfortable with.

To end off, the US market had its worst start to a year since 2008, but I think there are opportunities for long term investors to slowly start scaling up our positions. As long as one has emergency funds set aside, practice diversification, and has a proper framework for investing, I don’t think there’s much to fear even in this current climate. As usual, invest prudently, and invest consistently. I’m staying the course.

Going forward, I doubt I'd have the time to write lengthy blog posts, instead, I simply update my monthly portfolio on my Instagram page @alpacainvestments, so please follow me there if you want to keep up to date with my portfolio allocations.