Monday, May 12, 2014

Stalking Some Non-REITs

Honestly, I love REITs. I think the reason is because the business model is so easy to understand. If you own a REIT, you are a landlord and you collect rent, that's it. Simple stuff, I like it. There's a thousand and one ways to analyze REITs, but I like to keep it simple. NAV, leverage, yield and of course, the properties themselves. So far, I've been doing okay, both my buys into Saizen and Croesus has turned out not bad so bad, and I'm just waiting for my first taste of dividends on my lips!

As mentioned in a recent post, I like Singtel as the best play regarding the telcos. It is a well established brand name and it is quite a diversified and sturdy blue-chip company that we all know. There is room to grow in the peripheral countries and the business of telcomms doesn't seem like a redundant industry moving forward. Perhaps, it will be even more important and integrated with our lives.

If you want to make a play on the growth of Singapore as a hub and the gateway to Asia, I think looking towards Changi Airport is quite a good bet. Changi Airport has been consistently proving itself to be a choice stopover for many travellers in the SEA region, and I can continue to see this trend continue, especially with the amount of extra development and focus on the airport terminals. A good play on this is SIA Engineering that provides MRO to many airlines. I think it's a business that will continue to be strong, given the increasing NEED to travel these days. As opposed to directly investing in the airline business and choosing which carriers business model will do well in the future, a better bet is to focus on the maintenance of the aircrafts. There can be budget airlines, but there is no such thing as budget maintenance.

Somewhat related is SATS, the Singapore Airport Terminal Services. While I always thought that these guys were the people connecting the bridges and driving around luggages, it seems that they do a whole lot more behind the scenes work. They are actually quite a diversified business, doing a lot of catering for airlines and institutions, air logistics, security, linen services, and of course, ground handling. This is the much softer side of the airport play, but I think combined with SIA Eng, these 2 stocks can give a very nice and comprehensive play that the airline industry in Singapore will continue to be top-notch.

Next is SPH, Singapore Press Holdings. What's not to like about them? They are engaged in 3 main businesses - Media, Property and Investment. All 3 of those businesses are going to be around for a while, and they are the heavyweights here. I really like how SPH is quite a diversified company, giving you access to plenty of the well known names in Singapore. Probably if I could only pick 1 stock to own, I think SPH would be it. SPH owns 72% of SPH REIT and 15% of M1, making it a stock with stocks!

Comfort Delgro is an interesting case, very similar to SPH. Since it owns 67% of Vicom and 75% of SBS, why not instead own Comfort Delgro and have access to all their other businesses that are transportation related? With a wide range of businesses spread of 7 countries, I think Comfort Delgro is a great buy since the need for transportation and infrastructure will always be there. I believe if there is any substantial shift in the industry, they will be able to react and respond accordingly!

Lastly, Sembcorp Industries would be my final pick. Yet another diversified business, they do utilities, marine and urban development. Again, they own 60% of Sembcorp Marine, making them yet another stock with a stock. Their businesses are not hard to understand, and I like the sturdiness of utilities.

Special mention goes to Keppel, whose stock price is so high that it would set me back by more than $10k for a lot. F&N is also interesting (but not so much since APB and it's properties arm have been divested), while I have a soft spot for Singpost. These 3 stocks are also definitely worth a look, but I feel are not in the same league as the other stocks that I've highlighted.

Perhaps it is all my readings and what I've learnt that have gone to me, but I think that it is quite clear to see that I like business which are diversified with simple and easy business models to understand. Personally, I would rather hold an equal weight of these stocks than buy into the STI, knowing how bloated it is from the 3 big banks.

Of course, I've listed all the stocks above by merely just looking at their scope of business, I've yet to dive into their financials, and I probably won't be until I finish my CFA level 1 soon. Random posts like these will probably be less frequent while I really try and focus on my CFA studies instead of delightfully distracting myself with articles like these!

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