Monday, January 31, 2022

Ascendas India Trust Update

AIT released disappointing 2021 results, and the stock price dived 9%.  A quick update.

Drop in Income

AIT's 2021 "Income available for distribution" was down 11%, or SGD 12.6m.  

The culprit was Income tax expenses, up SGD 50m, "mainly due to higher deferred tax liabilities arising from acquisition of aVance 6 and annual revaluation; together with lower current income tax resulting from reversal of dividend distribution tax (“DDT”) provision in FY 2020."  In English, 2020's income was artificially inflated by the reversal of a dividend distribution tax provision; now 2021's income is back to normal.  But I don't know how much of the 50m this contributes to, and how much of the remainder is a one-off.

Other than that, their numbers look OK.  98% of rent was collected, though only 11% of the properties were populated.  Rental reversions were 5.5%.


Longer term, the risks I see are:

Cyclical Property Downturn

Here are their properties/areas.  The blue numbers are occupancy rates.  The pink text gives the vacancy rates in each property's micro-market:

Source: 2021 Results, pages 5, 32-33. 

1/3rd of their rent is from ITPB.  This micromarket is under some pressure due to un-absorbed supply added in 2021:

Their Chennai, Pune and Mumbai micro-markets also have high vacancy rates, from the teens to the 30's!  A bit worrying.

Fortunately, they don't have many lease expiries in these oversupplied areas (red, below).  Most upcoming expiries are in the strong hyperabad market (blue):

They've probably planned this, so hopefully they can make it through the downturn without much DPU loss.

Work From Home

This has been in the back of my head bugging me.  Technology or Business parks are just cheap offices with server and equipment rooms attached.  Most workers want to work from home at least a few days a week.  Most IT work can be done remotely.  And most Indian IT professionals are paid enough to hire help to look after the children.  Even working from home one day a week will cut office space demand at the margins, leading to rental drops for the fixed office supply.  We may see this over the next few years of lease renewals.


Their pipeline looks good:

Leverage and Capital Structure

Will they have to raise capital?

They say they only have a gearing ratio of 35%, and debt headroom of nearly SGD 1bn.  I could not calculate 35%, either from their Supplementary Info or Balance Sheet.  I get 40-45%.  I also see different numbers in their 2020 Annual Report.  So I don't know how they calculate their leverage:

Anyway, MAS' 50% leverage limit does not apply to Business Trusts, so its voluntary for AIT.  Their leverage ratio can be whatever they say it is.

Everything depends on their debt headroom.  In 2021, interest and dividends paid equalled CFO.  But CFI outflows were more than CFO, resulting in a large debt increase.

AIT has only raised capital once after their IPO: a small SGD 150m private placement in November 2019.  It was mildly pro-forma DPU accretive (p4).


I like AIT's long term track record of growing DPU.  They have good tenants, long property tenure (or freehold), and an expansion plan in progress.  I expect short term hiccups from the exchange rate and the property cycle as part of doing business.

They will probably have to raise equity soon,  as interest plus dividends paid now equals CFO.  Thats OK, as long as its not dilutive.

I'll keep holding it.

Wednesday, January 26, 2022

Quick Update: Sold all my CNQ, bought more gold

Sold the last of my CNQ tonight.  I think the correction continues and drags oil down.  I hope to buy it back after the correction.

Bought 0.5% more gold tonight, continuing to accumulate.  Now have 5.5%.  Want to get up to 10%.   I hope to sell it during the correction to buy stocks.

I'm now 101% invested.  95% excluding gold (as a type of cash).

Update 27/Jan: Gold down a big 2.5% last night on Powell's insistence that he will raise rates.  Just bought another 2.5%, now holding 7.5%.

Update 28/Jan: Gold down a bit more, bought another 2.5%, reached 10% allocation.

Friday, January 14, 2022

Sold 1/3rd of my CNQ position

 I bought a 2% position in CNQ 3 months ago, in the last month its up 20%.  Its starting to look parabolic:

I like this company and want to hold it for the next few years.

But I expect a correction around 2Q, which would hit oil.  CNQ is a high beta oil stock.   Short term, its way, way overbought.  And 2Q is only 10 weeks away, while the market is forward looking.

Sold 1/3rd of my position, @ CAD 64.44, profit 1.9K CAD or 29%.  Will sell more if it goes higher and my outlook stays the same.

Hope to buy it back cheaper later.

Monday, January 10, 2022

Quick Updates: Mapletree Commercial Trust and Gold

Mapletree Commercial Trust owns a popular mall and 2 business parks in the southern part of Singapore.  I bought a small 2-3% position during the 2020 crisis, but never had a chance to buy more.  Turns out to be lucky.  They recently announced a disastrous merger to bail out their HK based sibling.  I don't like the new properties injected (office and discretionary retail), and its too small a position to investigate all these properties scattered around Asia.  I sold it today, taking a small 18% profit, excluding dividends.

For me, its changed from a "buy-and-hold-forever" stock to a "buy-if-cheap" stock.  The number of good companies on SGX grows smaller day by day.

Bought a 4.5% position in gold when it was oversold the past few days.  Hoping to get up to 10%.

Sunday, January 9, 2022

Quick Update: Kazakhstan

Riots have erupted in Kazakhstan sparked by rising gas prices, but fanned by inequality and corruption.  This is the risk in investing in poor, one-party states.  The situation may be more stable today after Russian troops restored order.

Kazatomprom stock has fallen around 20%.  I believe the unrest will not directly affect Kazatomprom's output.  I think the Russians will take control, and Kazakhstan will become a Russian satellite again.  Back in the USSR.

Peter Zeihan gives a maps and history of the events, with the above prediction, plus some of its affects on oil/gas markets:

My best guess is that hes right.  It is unfortunate for the Kazakhs, but a poor, empty country of 20m people next to Russia can not be free.

This Al Jazeera interview (starting 11:30), suggests that President Tokayev has taken power from the unpopular Nursultan Nazarbayev, who was retired but still influential behind the scenes.

I've kept my Kazatomprom stock, too late to sell now, the bad news is priced in.  Not buying more as I'm already at my max position size.

Sunday, January 2, 2022

Total Energies

Though I've avoided the oil majors so far, Total Energies looks like the best of them.


Excluding 2020, half to 2/3rds of their profits come from oil and gas production:

E&P includes gas production.  The "Gas" in "Gas, Renewables and Power" is midstream/upstream.

As I'm expecting higher oil prices, I want companies with high exposure to oil and gas production.  50-66% is a bit on the low side, but still OK


I want to see reserves not depleting over time.  I also split reserves between oil and gas because oil is worth more (in BOEs):

Source: Total Energies' Universal Registration Documents. Search for "Proved Reserves for"

Looks good.

Geopolitical Risk

Their reserves and production are spread around the world:

Source: 2020 Universal Registration Document p68

30% of their gas in from Russia - there's a risk the Russians kick them out (for whatever reason), or they are forced to stop trading with them from US pressure if Russia invades Ukraine.  Even if France did not obey, Total would lose access to swift, and I don't think thats an option today.

Not much dependence on the Persian Gulf, which is always a potential warzone.

ESG Risk

This is the biggest long-term risk to the Oil Majors, and the hardest to predict.  I liked XOM and Chevron before minority shareholder activists Engine 1 added 3 members to XOM's board (1) (2).  Unfortunately the French Government no longer has a stake or golden share in Total, so I don't know if the same thing could happen to them.  I think the French Government have a lot more control over their corporates than the US does - more like Singapore or Norway.

Although Total has been investing more into renewable energy, 75% of their capex will still go to hydrocarbons with natural gas slowly replacing oil.  By 2030, they aim for a sales mix of 30% oil, 50% gas, 15% electricity and 5% biomass and hydrogen, with petroleum product sales decreasing by at least 30% over the period 2020-30.  

Their numbers seem realistic.  I like that they talk straight and are not pretending to be a non-petroleum company.


At a share price of Euro 45, based on their annualised 9M21 results, its going for 9.4X earnings.  Valuations don't tell us much since they all depends on the oil price anyway.

The dividend yield is 5.8%, which is covered by their 1Q, 2Q and 3Q earnings (payout ratios of 60%, 94% and 41% respectively).  The dividend was maintained throughout 2020 (which I am not so keen on - I do not feel comfortable with a loss-making company paying dividends while pretending to be a bond).  They have no plans to raise dividends.

French witholding tax on dividends is 28% from 2020 onwards.  Singapore residents should pay only 15% (p13), but it depends on your broker and is probably too costly and time consuming.


This company is OK.  Its hard to find good oil producing companies, so I'll keep it on my watchlist.  The witholding tax is a killer.