Company Prospecting: Cogent

Cogent is a logistic company. I will not describe its operations, but you can read it here

I was first attracted to it due to its high dividend yield which includes a 1-off special dividend due to its disposal of asset.

My first attempt at analyzing the company didn't really excite me, although company is generating FCF most of the time, its short track records as a listed company see a U-shape yoyo in terms of revenue and profits. "Highly cyclical" I thought. Also, debt is not low.

When I read further, I got really interested.

There are 2 catalysts which I like.

1) The LOI for further expansion in Jurong Island. The deal if materialize will increase gross floor area for operation by almost one-third

2) The Contribution from one-stop logistic hub containers operation. (Details here)

But truth be told, what really wow me is really the qualitative story rather than hard numbers.

First, one logistic hub has a patented design, which I thought really value-add to customers in terms of both costs and time.

There is no need to move the empty container to a warehouse somewhere else, it can be stored.

There is also synergy in the 4 business. I investigate what cause the dip in earnings in 2010 and the main factor was increase in rental. Cogent like other players, rent warehouses from JTC and provide the services and earn from the services.

With the new logistic hub, it has "retired" 2 warehouses and might not renew a third in 2016. 

Another reason why I like it is Grandstand. I felt it has turn around a ghost town rather impressively, although I am sure the reason why it got involved is for the Used Car bus Businesses there, which should be providing some business for its automobile segment of business.

It has also start expansion to Malaysia Port Klang although I would rather not count on it. Malaysia is the only overseas operation contributing less than 10% of revenue. I actually prefer local operations which I felt is less volatile in terms of regulations.

Other things I like, the family owned about 80% of the business but liquidity is not too bad. Remuneration is clean and without options. The Family owned 70% of the business when it just IPOed. and there were frequent buying back of shares. Qualitatively, it seemed like a serious family (Son made CEO and Dad Chairman) with a succession plan. It was the son's concept for 1-stop logistic hub.

Since the logistic hub is the main draw, I calculate for the remaining lease of about 25 years, it need to generate 5.5 mio of NP for the next 25 years to get its cost back. Looking at the Q1 and Q2 results as compared to past year, assume results is generally the same for all segments and the steady improvement of 6 mio for both quarters from a year ago is due to contribution from this hub. Return of asset is about 10%. Nothing to shout about if u ask me. 

As for risks, there is plenty of warehouse supply coming in from

Now till 2016. Reading the prospectus, the concentration of a few major shipping customers for their business is a very real risk too. Both might affect earnings 

Now the numbers:

Cogent's Warehouse business numbers is "contaminated" by property development of Grandstand, it makes it Gross Margin of about 30% look super high when compared to peers like Vibrant, PTC and CWT. Margin for transportation services is 10%, comparable to the bread and butter of PTC.

ROE is 15-20%, good enough for me.  

2Q NP is already 11 mio, according to prospectus, containers and warehousing segment usually enjoy higher business activity in Q4. But just annualized the results it will be a improvement from last year 3 running record year of profits (17 mio excluding disposal profit of 7 mio)

At 22 mio, its EPS is close to 5 cents, which gave it a PE of 6-7. Not too bad

Final dividend is 2.58 cents last year. Which gave 7.3% yield. Special dividend will not be repeated.

Assume 2 cents dividend instead, they will need to pay about 9 mio which thought it will be rather sustainable.

What do you think? Being a long time since I had this luxury of time to do prospecting, and I am enjoying it.

(No vested, yet)

 

Random thoughts: Q3 sembcorp industries

Q3 results is bad, but it was expected.

I expected it to get worse going forward. 

Sembmarine will be the biggest drag, the delays just started. Utility biggest drag comes from Singapore and was NOT offset by overseas operations YET. India, ASEAN and Australia market bottom line is improving QoQ but nowhere contributing at level where I expects. I send an enquiry to IR asking about the gestation period of India operations before it contribute to bottom line. There is no reply yet, if they do reply, I will update this post. 

As a random thought series, I am not going into the nitty gritty of the numbers or projects. 

It's my reflections. Some of it based on hindsights.

1) I expect weak numbers from

Marine and Singapore Utility market but expect overseas market to offset some of it. Because I believed Mr market might have been over pessimistic, I bought into it, thinking I got it at a low. 

2) I saw the ability to clinch contracts from Municipal governments as a plus point. 

3) I believed that are catalysts such as injection into reit or selling of mature asset

Am I totally off the mark in my assessments? Not actually, 2015 will be ok given its earlier wise allocation of capital.

Will marine winter lasts longer than 2016? I have no idea. Sembcorp will be in trouble if the marine problems drag beyond 2016. 

4) Vietnam land sales is slower than I expected given how "hot" the media is blowing in its direction.

I am not adding. Am I selling? Most probably also not. I remembered Sembcorp was trading at $3 during its recent low, and I slept well, not thinking of adding or offloading.

My strategy was to collect during down cycle and enjoy the upcycle. But if the down cycle is super far from what I believed it was, think this strategy will fall apart. But it do not think it is going the way of dodo and neither do I think they are suspending dividends ... So I will need to endure in the meantime.

How about people who have not got in?

Well, well... I have no idea myself LOL

Oxley Bonds

One thing that screams at me is the high debt ratio.

Debt is at about 2.4 billion.

Equity is only 650 mio. 

Scary debt to equity ratio if u ask me. 

The cash is 290 mio but current financial liability is 520 mio. Of course, current ratio is rather healthy at 2.5. But personally I  like to think of cash and perhaps receivables as more "current" as compare to development properties.

I took a look at their projects 

And used square foot research to check on sales. I prefer this portal than URA. If u want details let purchase price etc, u need to pay a subscription or do it manually at URA site. But for me, I just wanted to ascertain if they have many unsold units because that would mean even more troubles.

Surprising, their local residential projects are quite well sold. I did not look at their industrial project, but u can do the same at square foot research. Go for tower view, it is easier to get a sense of how how sales are

So, all in all. 

If execution goes well, and no buyers back out, then cash flow should sustain itself and this bond is safe. 

I am not buying bonds as my CPF is like my bonds allocation. 

Another way of calculation margin of safety for bonds is to used Graham method which is demonstrated by "The boring investor"

Cheers.

Do note that bonds are not necessarily safer than equity, it is relative less volatile but volality cannot be view as risk when solvency is ignored 

Random Brag:How About 30% annual Yield for a reit?

For those who click on this post for the first time because of the heading title, you will be disappointed if you are looking for a Gem or detailed analysis. It is just a simple bragging exercise, and most importantly, I am really curious if sensational headings really do increase click counts (I am not hard up for ad rev, but really curious looking at some headings from some bloggers at aggregated site)

The Reit I am talking about here is A-reit.

The annual yield include the trading gains of buying and selling and buying back again plus 1 year of dividends received.

OK, before my "regular readers" get really pissed off. A lesson learnt is really buy for sustainability of yield and not just yield.

I bought Sabana at yield of perceived  9% and was elated when they announced their Chai Chee acquisition! Wow! With growth driver through acquisition available, I am looking at 10% yield even if positive rental revision is not achieved and 1 or 2 tenancy become multi-tenanted and occupation rate slightly increase. It seems like a stock way undervalued with plenty of MOS.

In the end, you know how the story goes, the placement to fund the acquisition is at a rather  hefty discount and Chai Chee is 50% occupied only (Faint!), and they only managed to renew one master lease (The smallest building).

After this saga, I look at track records, and bought into Acendas Reit, one year ago at September, It was trading at a yield of 6.5% only but I bite because I like the prudence in capital management and its predictable track records of placements (at reasonable discount) to fund acquisition and all of it are yield accretive except for 2009.

When I saw the most recent reports of Ascendas and Sabana again, it further reinforced 2 points. Buy track records than perceived good yield. You are paying your own dividend when capital loss happen when market re-rated the counter for it reduced distribution. That Sabana has so many master leases up for renewal and none with a deal yet, the probability for reduced distribution is very high. If a building is close to full occupancy, there is little reason for a master tenant not to renew its lease so close to the expiry unless it has no plans to do so. A valid counter-argument could be Sabana is bargaining very hard for a higher positive renewal rate. But if you look at management quality, pace of occupancy being filled and most importantly track records, you can easily come to a conclusion if the odds are tilt to your favor.

Now, I was having second thoughts on Ascendas due to its large size, and acquisition of  1-2 buildings will hardly make a dent to its distribution. But as luck have it, the recent market volatility allowed me to collect it again, and I am glad I did, since thereafter it made a big buy at Australia. Management has guided that it will be yield accretive and I decide to trust track records. Although there are views in forum that it is the sellers that get a better deal, I am not concerned as long as distribution improve. From what I read about the acquisition, with its blue chip tenants, and locked in positive rental renewal, chances of a nasty surprise is not high in my humble opinon (Barring unfavorable currency movement ), Best of all, they did not use placement to fund this acquisition anymore, and the odds for yield accretive purchase after cost of acquisitions quarter (1-off) is rather high.

The biggest renewal rate came form business park, and the edge newspaper reported that JTC mentioned the fall in occupancy rate is greater in business park today. What good timing if you asked me, but I believed it also mean going forward we can expect little or no more such pleasant surprises. 

Also, least we get carried away by the strength of improvement of distribution, take note that:

"Included in the total amount available for distribution and DPU was a one-off distribution of taxable income from operations of S$6.5 million (DPU impact of 0.271 cents) for 1H FY15/16 in relation to a rollover adjustment from prior years arising from a ruling by IRAS on the non-deductibility of certain upfront fees for certain credit facilities incurred in FY09/10. The table below illustrates the impact of the rollover adjustment on both the amount available for distribution and DPU"

That is also one -off, and if you take that off, operating results is reasonable good but nothing to shout about.

Another quality industrial reit will be Mapletree Industrial Reit with its growth from BTS and funding of acquisition thus far through cash saved from dividends reinvestment by SH. Capital commerical trust has several things going for it too, but I might not want overexposure to reits and trusts

Only problem is the high valuation above NAV will put a cap on its capital gain prospects.

OK. you can throw your eggs now ...

Random thoughts: what is the theme of your reframing

We reframe to see things from a different angle. The advantages of it are numerous, I might not see something as a "problem" as compared to someone else. 

I have been going through this process numerous times, until I realize there generally 3 themes behind all reframing exercises.

1) compare to others who are worse

2) looking into the future 

3) philosophy, or religion learning

However, reframing need something in order to work, whatever theme u use.

Denial or acceptance.

I realize I have been in denial that I hate my current work. I wake up and it became a drag to go to work EVERY morning. 

It is only after comparing myself during the PSLE marking week where i simply move on to "work" and today that I realize it.

It is confusing because I love teaching and how could it be that I hate my work at the same time. That's why the denial stage went on for so long 

It is true. The tell-tale signs are there all along, I am not accepting it, therefore the reframing is just an act of denial. 

Can I do something about it? Of course! Reframing part 2! But I am not ready to.

I think accepting it will allow theme 3 of reframing to work better. 

So, is there a better way to "trick" the mind? LOL. 

Again, I went through the lesson of "what I wanted" with my Graduating class since  they are very free now. Strange no one says they wanted riches. Maybe they want to be politically correct or they have "awaken". In fact, most of them have the same mentality of buy one get one/ more free like adults ( u and me)

"If I have luck, I will have everything, also money etc." the only girl that chose health is the one that had a hole in the heart, but again her answer is like "I have health, then I can do whatever I like and get wisdom" still buy one get one free

I shared with them the serenity prayer and told them I used to want wisdom, but wanted courage to change things now. I told them what we wanted changes with time. 

How fast I change my mind. Now I wanted serenity to accept ... LOL

Random thoughts: what does "done my best" means?

I think we heard the sentence "I have done my best" rather frequently.

What does "best" entails?

Perhaps the opposite of doing best for something is doing something "effortlessly", and most of the time, the domain is in "efforts" not "results"

So, it is not actually a good thing to hear this sentence. It is used either as a explanation or excuse, the difference behind them is The validity of the reason.

So what is best effort?

Usually it means discomfort or even pain has already set in in the pursuit, or something is already sacrificed in that pursuit and a significant tradeoff has taken place.

However, everyone has a different threshold of pain and that boundary can be pushed. So best can be "more best" if one is willing to sacrifice more and endure more "pain"

The problem is it is not easily sustainable but without doing "best" we don't push our boundary and threshold.

And every "best" shot is like a marker, makes us pause and think: should I go on like this, and is the trade-off worth it.

We all have a choice. The choice might not be available to us immediately or in the short term.

But if i think about it, there is no such thing as we have done our best, u less we are talking about the immediate present. 

Have u done your best for the day? I think I did. Have I done my best as a son, or father? I will only know years later. 

Random thoughts: too iron-teeth in my work?

There is plenty of well-intended advices at my work. Being new to my role, many told me I need to be firm and is "too nice". My boss told me I didn't communicate enough.

The weird thing is: 

1) when I am reflecting how I can do my job better, there were many things which I thought I could have do better, but no one said anything about those,except one. He is a officer from my department.

2) those which are my core values, I do not think i will shift anytime, many have a opinion. LOL

The first thing which I find irksome is "calculative". I do not believe in taking someone for a ride, but I do think we can never be "fair" in workload. 

Having to manage that part is rather "bo Liao" and I felt my limited energy can be better served somewhere.

I made some arrangements on my own so that my staff who got less "rest time" will be "compensated" before they start their work in the afternoon. 

I was called in to my bosses "Twice" to explain why I make those arrangements and that I am making things difficult for my fellow colleague who did not make those arrangements. I explained and I said I understand where they are coming from, but seek their understanding in my decision. Inside me, I am screaming " BULLSHIT, that U did not care enough for your people is your bloody business because they are not under my charge, instead of asking me to lower my standards u should bloody reflect yourself"

I realised many, including, myself, seriously need to go to the lake and see their reflections, and if they are ugly, should put their head into the water and cool Themselves off. 

I am guided by this simple principle, I am not dogmatic in my approach as long as I can get past on this simple value.

First,

I am

Most importantly a human, I tried to be kind whatever I could as long as my kindness do not lead to

Negative consequences. And no, that my way of doing makes people compare unrealistically is your bloody problem

Next, I am a teacher, then a HOD. As long as the heart is with teaching and pupils, I can forgive all. And I hope my staff forgive my lack of adminstration competency too. 

Seriously, I am rather iron-teeth when those two principles are concerned. I wondered aloud if one day I am thrusted to the private world, will I survive?

Let's justs allow me to indulge and live with those 2 values I hold dear, and if I cannot survive here, then let me trade those useless values for the next pay cheque.

Don't tried to persuade me now. I find it full of shit when u claim u are trying to teach me when I felt u are hardly really more competent. 

Random thoughts: a old movie snippet moved me to tears

48min to 53 min

2 years ago, I saw the snippets as part of the MTV by 王杰，couldn't controlled my tears...

Today, again just randomly listening to the songs and saw that snippet again, feeling emotional, but this time round, there is the ending to go with it, and I burst out in tears again....

No movie moved me to tears for a decade if I remembered...

For those who might have forgotten how it feels to cry...

Random teaching reflection: Differentiated Instructions

There is this inherent struggle in the pass when I think about differentiated instructions (DI) for kids.

At the end of the day, every pupils sit for the same exam, so how can we "short-changed" our pupils by giving them different materials (differentiation in products)

The reflection was the a base-line need to be established first, and then we allow pupils to learn "more" at their own pace.

Now, after teaching a different profile of pupils for a year, I realised I cannot wait for the "base-line" to be established.

I taught in a boys school, and now in a co-Ed school. Girls, who matured earlier, are generally more focused and hardworking. After 1 year of "drilling", most of them could memorized the "good lines" and is already learning the way to apply them and combine them for writing of a ending etc. some of the pupils have problem remembering how to write the words even at the eve of PSLE.i went through with the weaker pupils one by one, identifying the words they had problem "spelling" and make up stories for them  to remember. 

I wonder the reason I didn't do that earlier was because I knew the girls who already learn the words will be "bored to death" for this lesson. 

I could have ask the girls to complete some tasks while I guide these weaker pupils one by one. 

Differentiation by process, now no longer is a textbook concept but a need in the classroom. 

Pitching it at the middle no longer work when the class has a wide diverse pupils of different abilities. 

We have been looking at differentiation at product since it has been the easier way to go about it. Different worksheets and notes for different pupils. 

The difference should not be just about having "more" or "less" or having a "simplified" version. 

We should allow the Higher progressing pupils to analyze and create and not frame their mind to just write a "good" essay.

----------------------

Back to writing, I wonder why do we write?

The easy answer would Defintely to be able to communicate and interact with others.

Is it just words and grammar that is needed to "interact"

Blogging makes me understand there is Defintely more than that.

Interaction required a "voice" as much as the form. I have been teaching the "form" because the "voice" is not in the syllabus.

It is the "voice" that calm yourself when u are writing a diary, it is the "voice" that allow your readers to "relate" to u. 

Random thoughts: My parents...

I remembered doing a bucket list years ago, more for fun and reflecting on the things I want to do. 

My sister told my mum her conditions and ask if she has anything she wants to do. 

She said she only has 2 wishes.

One, see all her 3 children through university which is already fulfilled.

Two, to die while sleeping.

So simple, isn't it? Hardly a list if u ask me. But the second wish, we will have to leave it to God/ Buddha or Karma... 

I was having a conversation with my sis as I drove her to see her client, she told me that although mum has this condition, it is good that there is still time for us to be with her, and prepare for eventuality. She told my sis she wants a Buddhist send off and my dad chips in that he wants a Taoist send off. 

I couldn't join them for a November vacation as school is still on. I suggested an earlier staycation at Sentosa and my mum ask to see the "free" water fountain musicial, (one of the few childhood mermory of family getaway) I told her it is no longer there and "free" and has become a more elaborated show with pyrotechnics and special effects, but we need a ticket. We will go see that nonetheless. My mum ask what time, I told her we will go relax at sentosa and stay a night there, my dad exclaim hotel rate there is 400 a night. I told Him not to worry, but he said it's expensive. My mum told him off and said "your son wanted a night with us, stop lamenting about money", just 6 months ago, it would be my mum saying it is a waste of money. Yes, my dad is the more outgoing guy. 

Recently, I start to think a lot about my mum than in my entire life. I am

Closer to dad all these while, and find my mum irksome, and "without substance", It remained me on the prose"背影”by 朱自清. Yes, my mum can't really hold a conversation with me even until now, but she is surprising a "woman of steel" in the way she coped with her illness. 

I look up to my father in his way he get on his work to send us through our education, no matter how tough it is, now my mum earned my respect on how to cope with cancer, and how even though the cells might have spread, is still positive about life. 

Life is a struggle. The struggle can be beautiful or a pain. It's the man/ woman behind the struggle that makes a hero or a coward.

My parents are my heroes, no matter how "uneducated" they might be. They only had primary 2 education.