Starhub is one of the best perfomers in my portfolio, and I continue to like the counter. I bought the counter again last Friday as it was down around 4% from the week's high but my belief is the long-term uptrend is still intact.
Bought into Starhub when it was in the low $2s, and with dividend of 5 cents a quarter, or 20 cents a year, dividend yield was as high as 9% per annum! A lot of people have expressed skepticism that Starhub is unable to sustain dividends at that level; however if they were to cut dividends it would still be at least 16 cents per year (previous dividends were 18 cents a year) and at current prices it is still a respectable 6% every year, much higher than the inflation rate.
The stock would go ex-dividend on 23 Nov, which means I will get my 5 cents a share for the new lots that I purchased; of course the stock may drop below the price of the dividend (i.e. by more than 5 cents per share due to general weak market sentiment), and if so I may look to adding to my holdings by buying more shares (I guess I have to thank Fundsupermart for this, for making me realise my losses in my fund investments so as to make money in stocks!).
Is dividends of 20 cents a year sustainable for Starhub?
This is anybody's guess, but we can make an educated guess here by referring to the financial statements. The share capital for Starhub is 1.724 million ordinary shares.
So you ask - for 3Q 2010, Starhub earned only 4.76 cents (diluted) per share, how come they are able to pay out 5 cents per share to shareholders? Are they borrowing to pay us - if so, this is dangerous. Now this is where there is a difference between accounting earnings and cash earnings - the biggest non-cash expense is depreciation and if I add back to earnings, the cash earnings now become 85 cents per share. The quarterly depreciation is approx. $65 million, while dividends is $86 million, so the depreciation expense is able to pay off about 75% of the dividends.
Another thing you should look at is shareholder's equity - or net assets - which at S$53.6 million (around $31/share) is rather low. Compare this against its net current liabilities position of $499 million - over 9 times its equity position! What this means is if its trade creditors ask for money immediately, or if the banks do not rollover the loans upon maturity, Starhub may run into cashflow issues. The mitigating factor is that the operating cash flows are sufficient to cover off the cash flows required for financing activities (which includes repayment of loans and payment of dividends) so cash flow management seems alright for now.
Analysis of Revenue Drivers
Not sure if anyone realises, but Starhub's 3Q 2010 results were better than expected. Operating revenue has increased 3% y-o-y due to higher service revenue driven by its Mobile business. There is an 8% y-o-y increase in Mobile service revenues which is largely due to higher subscription revenue from post-paid mobile services, perhaps due to the introduction of iPhones to its customers (where people upgrade their plans - I did too!) - and this is in my opinion the bread and butter of telecommunications business so it is fairly stable.
And as widely expected, Pay TV recorded a 8% lower renuve y-o-y due to a reduction in the Sports package subscription price from $25/month to $12/month as they try to retain customers after they lost the EPL broadcasting rights. The good thing is, Mobile contributes to 54% of total service revenue while Pay TV contributes 17% so overall the entire company is better off.
Revenues are of course only one aspect of earnings, and we should look at operating expenses as well. There is a whopping 57% increase for the 9 months to 2010 y-o-y for cost of equipment sold, and total cost of sales increased by 17%. This is due largely to the subsidy they provided on the iPhones and other smartphones. Is this a concern? Well, the results are translated into higher service revenues for Mobile, and overall would expect there to be margin recovery in 2011, so while increases in expenses are not ideal, this should be monitored by looking at the profitability in subsequent quarters. Again this could be an accounting peculiarity where the expenses (e.g. cost of iPhones) are recorded in the quarter, but revenues are only going to be recognised slowly over the term of the contract (e.g. a two-year mobile service contract).
Therefore I think Starhub is still on track to pay 5 cents per quarter for at least the next 2-3 quarters ahead. It also offers one of the fastest payment of dividends from ex-dividend date, and you will see the dividends in your account by 8-9 Dec, just in time for your Christmas shopping!
Conclusion
Expect Starhub to outperform, at least perform in line with the broader market. The closing price on 19 Nov is 61.8% of the Fibonacci line (from the peak of $2.82) and expect the price range to be around $2.64-2.67 ex-dividend. If it falls back to $2.50-$2.60 believe there is a buying opportunity; alternatively if it shoots up to $3, I may look to offload some of the lots to take profit. Uptrend based on moving averages look intact; so this could happen just before year-end. :)
Sunday, November 21, 2010
Sunday, October 24, 2010
Funds and Fundsupermart Platform Fees
Wow. It's been 2.5 years since I've started investing, and over a year since I've updated this blog! I didn't realise it has been this long, and can only say I'm relieved that the worst of the global financial crisis is over us. Well, I cannot be 100% sure, but judging from my portfolio performance, at least my overall portfolio now shows a positive profit :)
In my last post, I mentioned that my portfolio was segmented into funds/unit trusts - what I call 'indirect' - as well as shares (what I term 'direct'). In the depth of the financial crisis, the funds showed a smaller loss vs. the direct part of the portfolio, possibly due to the diversification (there are typically many shares in a fund). However the funds were also the worst performing section of my portfolio as they never managed to reach the highs I've bought them at; it does not help that I have to continue paying the fund managers annual management fees.
My History of Fund Purchases
I started purchasing my funds through an online platform, Fundsupermart.com. These funds have been with me for two years, ever since I entered the workforce. As the initial investment amounts were small, and I wasn't earning a whole lot when I started, I bought into the funds bit by bit, up to when STI was at a level of 3,800. Even as the markets had improved since then, most of my funds are still under water, some to the tune of -40% still!
I never managed to convince myself to sell the funds, perhaps due to their sentimental value, or possibly due to the fact that I didn't want to sell the funds when they were making losses.
Platform Fees at Fundsupermart.com
Today, nonetheless, I sold off ALL of my funds on Fundsupermart.com out of anger. Earlier this year in April, they had sent all unitholders a letter informing that they would start charging platform fees effective May. As expected, there was a huge backlash. A few months later, we were then told that there would be reduced platform fees for longstanding Fundsupermart.com supporters - I'd like to think I was one of them. Well, that happened to be a wrong assumption.
Money market funds constitute approximately 30% of my portfolio and I've maintained this ratio over the past one year, which means I have approximately $100,000 in my Fundsupermart.com holdings. I thought the platform fees were waived till 2011 (due to the public backlash), so I held on to my investments. As the returns on money market funds were relatively low, I didn't expect them to charge platform fees either (especially as the fees for the Cash Fund was waived).
On their website, this is the official reason for applying the platform fees:
I don't know if people realise that they had quoted on a quarterly basis; I'm not sure why Fundsupermart.com did that, it seems there was the intent to mislead people, or to show that the platform fees appear lower than they actually are. For equity funds, which typically return 5-6% p.a. in a good year, 0.5% p.a. goes to Fundsupermart.com. For bond funds, which return 2-3% p.a., 0.2% p.a. goes to the platform. This is in addition to the upfront sales charges payable.
Why was I angry?
I suppose I have to thank Fundsupermart.com for giving me the reason to sell off my holdings.
The main source of my anger was that the charge was taken off silently; no invoice or email or any sort of notification. I had not traded on my portfolio and rarely perform switching between funds, so when my portfolio dropped by $70 for the quarter, just for the platform fees, I was totally flabbergasted! Which means for doing absolutely nothing with my funds, I would have to pay over $300 annually to Fundsupermart.com! So much for being a 'silver investor', huh? Not to mention that I had paid over 2% in upfront sales charges when I first invested (as the market was less competitive then and average sales charges were approx. 2.5% - 3%).
But the real thing that upset me was how this process was unilateral; if I had not discovered a lower portfolio value earlier today, I would not have known.
Oh, well, I've learnt a valuable lesson and it was my fault for thinking that Fundsupermart.com would value loyalty. I do not think the charging of platform fees is sustainable for them, slowly but surely they would be losing their customer base - other online platforms such as POEMS and Dollardex offer a similar number of funds with no such fees. While I must admit that Fundsupermart.com has the best website layout, and stronger research, these resources are provided free to everyone regardless of whether you are their client or not. Naturally I wouldn't want to pay a few hundred in dollars annually for a free service.
Anyway I've been performing much better on my direct investments, and perhaps it is time to redeploy my funds in this area. I'll be updating this blog more regularly, so stay tuned!
In my last post, I mentioned that my portfolio was segmented into funds/unit trusts - what I call 'indirect' - as well as shares (what I term 'direct'). In the depth of the financial crisis, the funds showed a smaller loss vs. the direct part of the portfolio, possibly due to the diversification (there are typically many shares in a fund). However the funds were also the worst performing section of my portfolio as they never managed to reach the highs I've bought them at; it does not help that I have to continue paying the fund managers annual management fees.
My History of Fund Purchases
I started purchasing my funds through an online platform, Fundsupermart.com. These funds have been with me for two years, ever since I entered the workforce. As the initial investment amounts were small, and I wasn't earning a whole lot when I started, I bought into the funds bit by bit, up to when STI was at a level of 3,800. Even as the markets had improved since then, most of my funds are still under water, some to the tune of -40% still!
I never managed to convince myself to sell the funds, perhaps due to their sentimental value, or possibly due to the fact that I didn't want to sell the funds when they were making losses.
Platform Fees at Fundsupermart.com
Today, nonetheless, I sold off ALL of my funds on Fundsupermart.com out of anger. Earlier this year in April, they had sent all unitholders a letter informing that they would start charging platform fees effective May. As expected, there was a huge backlash. A few months later, we were then told that there would be reduced platform fees for longstanding Fundsupermart.com supporters - I'd like to think I was one of them. Well, that happened to be a wrong assumption.
Money market funds constitute approximately 30% of my portfolio and I've maintained this ratio over the past one year, which means I have approximately $100,000 in my Fundsupermart.com holdings. I thought the platform fees were waived till 2011 (due to the public backlash), so I held on to my investments. As the returns on money market funds were relatively low, I didn't expect them to charge platform fees either (especially as the fees for the Cash Fund was waived).
On their website, this is the official reason for applying the platform fees:
Due to anticipated regulatory change, increased number of funds, switches raising our ongoing operational costs, it is no longer possible to subsidise this just from sales charges. Hence, there is a need to have a platform fee which will apply to all cash and SRS unit trust holdings from 1 May 2010. This fee will be accrued daily and auto-deducted from holdings on a quarterly basis at 0.125% on equity fund holdings and 0.05% on fixed income funds.
I don't know if people realise that they had quoted on a quarterly basis; I'm not sure why Fundsupermart.com did that, it seems there was the intent to mislead people, or to show that the platform fees appear lower than they actually are. For equity funds, which typically return 5-6% p.a. in a good year, 0.5% p.a. goes to Fundsupermart.com. For bond funds, which return 2-3% p.a., 0.2% p.a. goes to the platform. This is in addition to the upfront sales charges payable.
Why was I angry?
I suppose I have to thank Fundsupermart.com for giving me the reason to sell off my holdings.
The main source of my anger was that the charge was taken off silently; no invoice or email or any sort of notification. I had not traded on my portfolio and rarely perform switching between funds, so when my portfolio dropped by $70 for the quarter, just for the platform fees, I was totally flabbergasted! Which means for doing absolutely nothing with my funds, I would have to pay over $300 annually to Fundsupermart.com! So much for being a 'silver investor', huh? Not to mention that I had paid over 2% in upfront sales charges when I first invested (as the market was less competitive then and average sales charges were approx. 2.5% - 3%).
But the real thing that upset me was how this process was unilateral; if I had not discovered a lower portfolio value earlier today, I would not have known.
Oh, well, I've learnt a valuable lesson and it was my fault for thinking that Fundsupermart.com would value loyalty. I do not think the charging of platform fees is sustainable for them, slowly but surely they would be losing their customer base - other online platforms such as POEMS and Dollardex offer a similar number of funds with no such fees. While I must admit that Fundsupermart.com has the best website layout, and stronger research, these resources are provided free to everyone regardless of whether you are their client or not. Naturally I wouldn't want to pay a few hundred in dollars annually for a free service.
Anyway I've been performing much better on my direct investments, and perhaps it is time to redeploy my funds in this area. I'll be updating this blog more regularly, so stay tuned!
Sunday, March 22, 2009
Portfolio Updates
I have been acting like an ostrich all this while. When I started seeing how my portfolio dropped over 60%, and how my monthly income was barely sufficient to cover what I was losing in my portfolio daily, I stopped looking at my portfolio.
Similar to every other investor out there, I'm subject to behaviourial biases. The fear of regret. It is this similar fear that makes me hold on to my losses, even up till this day.
So just a week ago, I started re-looking at my portfolio to work out exactly how much I've lost. This year alone, I've taken part in 2 rights issues and increased the capital under investment, of which the first rights issue is under water.
I segmented my portfolio into funds/unit trusts, of which I've lost -24% cumulatively since I started investing 2 years back. For my direct investments portfolio (hand-picking stocks), the cumulative unrealised loss was -50%. The latter is alarming, especially as I started investing directly only about a year ago. But they've paid pretty handsome dividends so far, although dividends are not certain. Taking into account realised dividends and realised trading gains so far, the record is -38.5%.
Where do we go from here?
While I wanted to put in trades to cut my losses, I started asking myself what was my goal for investing. It was intended to be for the medium to long term, with the ultimate goal of financing for my retirement. And one thing is for certain, the market is going to recover - it may take 2 years, 10 years or even 20 years. But we all got out of Great Depression, didn't we? How will this be different?
I decided I could stomach an overall -30% loss in my portfolio. Performance, on absolute terms, is frustrating. But I bought during the highs of 2007 and 2008, and have learnt many lessons since then. So I hope this means it's tuition fees well spent.
My strategy for 2009 is to start saving up as much as I can from my monthly income, as well as my dividends. This is to start accumulating as large a cash pool as possible, to take advantage of any mispriced securities. The way to go in the short-term, is definitely not value investing, but trading. Due to the nature of my job, I might not be able to achieve that, but I will continue to buy more of the stocks I'm vested in and which I have high conviction in, to lower my average cost.
Meanwhile, around 30% of my overall portfolio (in market value) are in money market funds. What is most important for everyone now, I suppose, is to save as much as possible for rainy days, especially as pink slips are in abundance lately. However, do not lose sight of the larger goal - take a small part of the savings to invest when opportunities present themselves. I hope to be able to hand in a favorable report card by the end of 2010. When I'm on track with my goals for retirement :)
Similar to every other investor out there, I'm subject to behaviourial biases. The fear of regret. It is this similar fear that makes me hold on to my losses, even up till this day.
So just a week ago, I started re-looking at my portfolio to work out exactly how much I've lost. This year alone, I've taken part in 2 rights issues and increased the capital under investment, of which the first rights issue is under water.
I segmented my portfolio into funds/unit trusts, of which I've lost -24% cumulatively since I started investing 2 years back. For my direct investments portfolio (hand-picking stocks), the cumulative unrealised loss was -50%. The latter is alarming, especially as I started investing directly only about a year ago. But they've paid pretty handsome dividends so far, although dividends are not certain. Taking into account realised dividends and realised trading gains so far, the record is -38.5%.
Where do we go from here?
While I wanted to put in trades to cut my losses, I started asking myself what was my goal for investing. It was intended to be for the medium to long term, with the ultimate goal of financing for my retirement. And one thing is for certain, the market is going to recover - it may take 2 years, 10 years or even 20 years. But we all got out of Great Depression, didn't we? How will this be different?
I decided I could stomach an overall -30% loss in my portfolio. Performance, on absolute terms, is frustrating. But I bought during the highs of 2007 and 2008, and have learnt many lessons since then. So I hope this means it's tuition fees well spent.
My strategy for 2009 is to start saving up as much as I can from my monthly income, as well as my dividends. This is to start accumulating as large a cash pool as possible, to take advantage of any mispriced securities. The way to go in the short-term, is definitely not value investing, but trading. Due to the nature of my job, I might not be able to achieve that, but I will continue to buy more of the stocks I'm vested in and which I have high conviction in, to lower my average cost.
Meanwhile, around 30% of my overall portfolio (in market value) are in money market funds. What is most important for everyone now, I suppose, is to save as much as possible for rainy days, especially as pink slips are in abundance lately. However, do not lose sight of the larger goal - take a small part of the savings to invest when opportunities present themselves. I hope to be able to hand in a favorable report card by the end of 2010. When I'm on track with my goals for retirement :)
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