I’ve boarded the ARK

I have been rather busy lately, no thanks to a side hustle.

Since the start of the year, I found myself less involved in the kids’ school work and so decided that I could help other children in their studies. My kids are taking charge of their own learning, and for that I am very thankful. I don’t have to be too concerned with their progress at school.

By the way, less involvement does not equate no involvement. I am still here for them should they need help in their school work but I’m not as needed as before.

Hence, with the extra free time, I am able to give private tuition and earn some side income, which is a neat $1000++ extra money every month. This additional income goes into my war-chest.

As a result of me being more busy that usual, I didn’t have the time to research into new investing ideas. I was finally able to sit down and do so this week, the Chinese New Year week.

The real source of wealth and capital in this new era is not material things. It is the human mind, the human spirit, the human imagination, and our faith in the future.

Steve Forbes

Just like last year, I have allocated 4K++ of my monthly salary to our family investments, and the goal this year is to grow the investment portfolio to 220K in capital.

Monthly investment plan in 2020:

  1. MoneyOwl (80% developed market equities, 20% developing market equities): $800 per month (RSP)
  2. Syfe Equity 100: $800 per month (RSP)
  3. Stock picking: $2400

Monthly investment plan for 2021:

  1. MoneyOwl: $800 per month (RSP)
  2. Syfe Equity 100: $800 per month (RSP)
  3. Kristal.AI Investment: $1000 per month (RSP)
  4. Stock picking/warchest: $2000

The main difference between this year’s investment plan and last year’s is the inclusion of Kristal.AI as an additional investment platform.

Kristal.AI offers a great number of funds, special portfolios, and curated ETFs to potential investors. My pick was ARK’s Innovation ETF.

Why ARK?

Simply because of its very different and exciting investment strategy, which is to invest in disruptive innovations.

What is a disruptive innovation? If I may attempt to define it, a disruptive innovation is the introduction of a new product or service, usually tech-related, that has the potential to change the way the world functions, for instance, the advent of the mobile phone in 1977, the arrival of the internet in the 1990s, and the discovery of human genome sequence in 2003.

ARK INVEST believes firmly in investing in disruptive innovations and views the current era “as one of unprecedented technological foment”. ARK believes that growth, fuelled by innovation, increases average returns, and that portfolios that are exposed to broad-based benchmarks will see significantly lower growth as traditional businesses are being disrupted or destroyed by transformative technologies.

Catherine Wood, the founder and CIO of ARK INVEST, in a conference on September 17, 2015, asserted that “disruptive innovation is often not priced correctly by traditional investment strategies because people may not understand how big the ultimate opportunities are going to be. They aren’t sizing the opportunity and they aren’t analyzing the disruption.”

With that as the underlying philosophy, ARK seeks out long-term investment opportunities that result from innovation that cuts across sectors (most ETFs out there are sector-centric, for example, semiconductor ETFs, pharmaceutical ETFs, and real estate ETFs, just to name a few). ARK offers a variety of ETFs that are theme-related.

ARK invests in a great number of innovative tech companies that offer huge potential for explosive future growth and that promise massive returns. Often times, these companies are difficult to evaluate or analyse, and I am glad that I can depend on ARK’s managers to look for big stock success stories in cutting edge tech areas and do the necessary evaluation job.

ARK uses an Open Research Ecosystem that leverages multiple data sources, both internal (research and investment team) and external (thought leaders in their fields, social media interactions, and crowd-sourced insights), to produce timely, original analysis, and stock valuation.

We’re all about finding the next big thing … Anyone hewing to the benchmarks, which are backwards looking, they’re not about the future. They are about what has worked. We’re all about what is going to work.”

Catherine Wood, Interview with David Westin (Bloomberg)

What ETFs does ARK offer?

ARK has identified several disruptive innovations (classified under different themes) and each of these has an associated ETF. The main actively managed ETFs are:

1. Innovation ETF (ARKK): Invests in companies that “aim to capture the substantial benefits of new products or services associated with scientific research in DNA technologies, energy storage, the increased use of autonomous technology, next generation internet services, and technologies that make financial services more efficient.”

2. Autonomous Technology & Robotics ETF (ARKQ): Invests in companies that “aim to capture the substantial benefits of new products and services associated with scientific research and technological break-throughs in energy storage, transportation, automation and manufacturing, and materials, among other industries.”

3. New Generation Internet ETF (ARKW): Invests in companies that “aim to capture the substantial benefits of new products and services associated with scientific research and technological break-throughs in internet-based products and services, new payment methods, blockchain technology, big data, the internet of things, mobile, social and streaming media.”

4. Genomic Revolution ETF (ARKG): Invests in companies that “aim to capture the substantial benefits of new products and services associated with technological and scientific developments in DNA sequencing, gene editing, targeted therapeutics, bioinformatics, and agricultural biology.”

5. Fintech Innovation ETF (ARKF): Invests in companies that “are focused on changing the way the financial sector works, removing friction, and increasing accessibility to financial products and services.”

ARK has 2 passively managed index ETFS:

1. 3D Printing ETF (PRNT): Invests in companies that are “engaged in 3D printing related businesses within the following business lines: (i) 3D printing hardware, (ii) computer aided design (“CAD”) and 3D printing simulation software, (iii) 3D printing centers, (iv) scanning and measurement, and (v) 3D printing materials.”

2. Israel Innovative Technology ETF (IZRL): Invests in “exchange-listed Israeli companies whose main business operations are causing disruptive innovation in the areas of genomics, health care, biotechnology, industrials, manufacturing, the Internet or information technology.”

Which ARK ETF do I invest in?

If I had the money, I would invest in all of them. But the reality is I don’t. So I had to pick one to start.

My first choice was ARK’s flagship fund, the Innovation ETF (ARKK) which is the most diversified of all ARK’s actively managed ETFs. This fund of AUM $17.68 billion alone accounts for 59% of ARK Invest’s total assets.

The top 10 holdings in ARKK are also represented, here and there, in the other ARK ETFs. There are a total of 55 holdings in ARKK, and the top 10 holdings in ARKK are:

From ark-funds.com/

Since its inception in 2014, ARKK has delivered a sevenfold gain. ARKK’s performance last year since the March market crash has been spectacular. I bought ARKK in January this year, and to date, my XIRR is 9.04%.

Well, as the legal boilerplate language used in the investment arena goes, past performance is no guarantee of future results. Many holdings in ARK’s ETFs are overvalued and appear to be uncoupled from essential fundamentals. What if the tech stock boom is a bubble waiting to burst? Is the accelerated growth tech stocks have seen in the past year sustainable in 2021? There are different voices and opinions on these questions, and no one is truly the wiser.

Nevertheless, I think that ARKK’s pivot on disruptive innovators, coupled with Catherine Wood’s unusual insight and business acumen, makes ARKK a worthy investment for 2021, the risks notwithstanding. It is interesting to note that Catherine Wood has skin in the game herself, having placed an overwhelming portion of her own net worth in ARK INVEST. If ARK INVEST is good for the founder, then it is definitely fine with me … bet on those who bet on themselves. I am willing to place some of my bets with Catherine Wood who appears to have a real knack for discovering unconventional investment opportunities.

Why did I choose to invest via Kristal.AI?

I like the quantity and quality of ETF offerings that I find on Kristal.AI. The customer service is excellent (I can contact them via WhatsApp directly). But most importantly, I like its fee structure, which is 0 advisory/management fees to individuals with accounts of USD 50,000 or less. Who does not like a free service?

I consider this ARK investment to be a risky one as many of the fund’s holdings are still not profitable. It is common for innovative growth companies to remain unprofitable for considerable lengths of time as they invest heavily to expand in hopes of a larger future payout. These companies could also easily go insolvent when capital dries up, if they simply could not compete, or if economic and industry conditions deteriorate.

Bearing in mind these risks, I don’t intend to grow the ARK portion of my portfolio to beyond 5%. Hence, I will continue to enjoy this zero advisory fee as I keep my investment with Kristal.AI below or up to USD50000.

However, there is a change to their pricing structure recently: Zero Advisory Fee on ETFs up to USD 10,000 and low institutional pricing on trades.

Someone brought this issue up on Seedly.sg, and Kristal.AI’s reply quickly put me at ease:

https://seedly.sg/reviews/robo-advisors/kristal-ai

Since I signed up a while back, I don’t have to pay any management fees for as long as my investment with Kristal.AI stays below or up to USD50000. I am only liable for paying ARKK’s expense fee which is set at 0.75%. The expense ratio is considered high (well, depends on how you look at it) for all of ARK’s ETFs as they are actively managed. I guess there is a trade-off between growth and cost, but as long as ARKK continues to grow impressively, I think I can overlook the expense ratio of 0.75%.

I am recently made aware that Nikko Asset Management has collaborated with ARK INVEST to launch the Nikko AM ARK Disruptive Innovation Fund last year December. One can buy this fund in either USD or SGD via dollarDEX, FSMOne.com. iFAST Central, Navigator, or POEMS.

What I don’t like about this Nikko AM ARK Disruptive Innovation Fund is the cost involved: 1.64% expense ratio + 1.5% management fee, and depending on the platform you use, a possible additional platform fee (for example, FSMOne.com charges an additional 0.0875% per quarter).

So I am good staying put with Kristal.AI for my ARK investments.

Conclusion

Buying ARKK is my wager on human ingenuity and enterprise. The world will keep on changing and disruptive innovations will continue to reorder human lives and alter the way we live. It is true that many selected industries and holdings in ARK’s various ETFs are overvalued, but I think their firepower will last for years to come (just compare Tesla’s current share price in the all-time-high range of $800 to Catherine Wood’s 5-year target price of $7000 … that’s a lot of growth**). There will, of course, be short-term volatility to contend with but I plan on holding my ARK investments for the long haul.

I like ARK’s outstanding investment strategy and I might even add ARKG (Genomic Revolution ETF) and IZRL (Israel Innovative Technology ETF) to the mix. I do need to do more research on these two ETFs before pressing the ‘buy’ button. In the meantime, I will continue to keep faith with ARKK’s fantastic investment theme.

So, investors beware. According to our research, innovation is evolving at such a rapid pace that traditional equity and fixed income benchmarks are being populated increasingly by so-called value traps, stocks and bonds that are “cheap” for a reason. Critical to investment success will be moving to the right side of change, avoiding industries and companies in the crosshairs of “creative destruction” and embracing those creating “disruptive innovation”… and perhaps another shot at the Roaring Twenties.

Catherine Wood, “Investors Beware: Stay On The Right Side Of Change”

* For a succinct read on ARK INVEST: https://www.morningstar.com/articles/1005616/a-risky-but-promising-innovation-etf

** https://www.cnbc.com/2020/02/05/tesla-shares-could-reach-7000-in-next-5-years-catherine-wood-says.html

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A 2-year old Portfolio: End-of-year Review

Today is the last day of 2020. What a year 2020 has been for every one. For some, it has been horrendous; for others it was just challenging but short of being daunting. For me, 2020 has been somewhat rocky, but not particularly disconcerting. I’m still able to keep my head above water career-wise, and in other aspects of life as well. Thank God.

My wife, the capable home captain, runs a tight ship, thanks to her efficient ways and thrifty trait. The kids all did well in school, with only the eldest needing a couple of months of tuition leading to the school’s final exams (the IP curriculum is challenging, to say the least).

I was thus able to concentrate on my work and investing. Here’s a quick summary of the portfolio:

Summary (30.12.2020)

#1 Self-selected Stocks

#2 MoneyOwl

#3 Syfe (Global ARI & Equity100)

Global ARI
Equity100

1. Total Cost of Investment: $179,889.47 (Capital injected for 2020: $76,384.18).

2. Total Current Value of Investment: $187,902.71

3. Total Dividends Received in 2020: $5,788.23 (Average Cost Yield: 4.87%)

4. Total Profit from Closed Positions: $2147.42

I didn’t exactly have a plan or target to grow the portfolio to $200K by the end of 2020. I should cross that mark come the second quarter of the new year. Perhaps a $230K portfolio might be attainable end 2021, assuming I invest an average of $4K-5K per month.

Forever Portfolio

I am still very much a value cum dividend investor.

I am for value investing because I simply like a bargain … who doesn’t, right? Buying stocks at a discount to their intrinsic value appeals very much to me as I love to get good deals.  In addition, I also like dividend investing … mainly for these two reasons: (1) passive income from regular dividend payments; (2) capital appreciation over an extended period of time.

I have formulated my own dividend machine aka my Forever Portfolio that I hope to grow over time:

Only Keppel DC Reit is missing in my Forever Portfolio. Keppel DC is currently overvalued (PB: 2.42). Nevertheless, it might still be worth buying into given that it has plenty of investment merits. I need to sit down to study this stock carefully in order to make an informed decision.

Apart from the absence of Keppel DC Reit, my Forever Portfolio is close to completion and I should be able to sit back, maintain it as my own unique index, keep putting money into this portfolio, collect dividends, and tweak it from time to time. I keep reminding myself that it is time in the market that matters, and not to time the market. Similarly, I will continue to invest monthly in MoneyOwl and Syfe to capture the larger globally diversified investment market.

Conclusion

Going forward, my plan is to invest:

1. $1600 every month for MoneyOwl and Syfe (Equity100): S$800 each.

2. $2000-S$3000 every month for the Forever Portfolio or some growth stocks. I’ve been learning to get my feet wet with growth investing. It’s pretty exciting looking out for stocks that provide a significantly higher average rate of return than the general market. Might parking my money in Kristal with its offering of numerous Ark ETF portfolios be a hassle-free solution? I’ve got quite a lot of homework to do in 2021, don’t I?

2020 has been a problematic year for most investors. However, markets have generally recovered and investment opportunities still abound. I hope and pray 2021 will be a better year for every one looking to grow their portfolio.

Audentes fortuna iuvat! (fortune favours the brave)

A Little Bargain Buy 4: Frasers Logistics and Commercial Trust

When the share prices of REITs retreated in the early days of November, I made a total of 5 purchases.  After buying MapleTree Logistics Trust, Ascendas Reit (2 tranches), and Ascendas India Trust, I entered the market for Frasers Logistics & Commercial Trust.  

Amid the COVID-19 pandemic, Singapore has strengthened its status as a global logistics hub by optimising on its competitive advantages such as the efficiency, reliability and resilience of its network.  

Just how important is the logistics sector to Singapore’s economic growth?  Very important.

The logistics sector contributed SGD6.8b or 1.4% of Singapore’s GDP in 2019.  This sector is set to grow by leaps and bounds in the years ahead, and investing in logistics REITs is a way to ride this growth wave.

Deputy Prime Minister, Mr Chan Chun Sing, wrote thus on his FB after a visit to DB Schenker Singapore’s Red Lion facility on 27 October:

“The logistics sector is critical to Singapore’s position as a global business hub, allowing us to connect key supply chain nodes to facilitate efficient trade flows, both domestically and internationally.  The sector has been undergoing changes caused by the reorganisation of global supply chains and digitalisation.  COVID-19 further exacerbated these trends but our logistics companies have stayed agile and managed to capitalise on new opportunities, resulting in an overall positive outlook for 2020 and beyond … we saw how the logistics sector has transformed and moved towards higher-value products and services, servicing supply chains … So long as we build on our advantages, I am confident that the logistics sector will remain a bright spark in the Singapore economy.”*

In addition, Singapore is also a member of the Regional Comprehensive Economic Partnership (signed 15 November).  Trade openness is a good thing for the movement of goods, the essence of the logistics industry.  As suggested in a Business Times report, “the clear sector winners for Singapore will be linked around the shipping and logistics ecosystem.”**

So, if now is not the time to invest in Singapore logistics REITs, then when?  

Indeed, now is the time and I’m glad to be able to pick up FLCT when its share price showed some weakness the first week of November.  

Here’s the link to Vince’s latest analysis on FLCT: https://www.reit-tirement.com/2020/11/frasers-logistics-commercial-trust.html

Introduction

Following a merger with Frasers Commercial Trust (FCT), Frasers Logistics & Industrial Trust (FLT) was renamed Frasers Logistics & Commercial Trust.  FLCT appeared on the Singapore stock market on 4 May 2020.

This enlarged REIT, sponsored by Frasers Property Limited, is now the 8th largest S-REIT.  FLCT has a market cap of approximately SGD4.4b.

Circular dated 14.02.2020

FLCT’s investment strategy is to invest globally in a diversified portfolio of income-producing properties used predominantly for logistics or industrial purposes located globally, or commercial purposes (comprising primarily CBD office space) or business park purposes (comprising primarily non-CBD office space and/or research and development space) located

Key Highlights

1. A diversified portfolio: Well-diversified footprint in Singapore, Australia, Germany, the UK, and the Netherlands.  100 properties in different asset classes that will help FLCT ride through good and bad times and generate steady returns.

FY 2020 Q4 report

2. Gross revenue: SGD332m for FY 2020 [no meaningful comparison on YoY basis as FLCT was only formed in 2020).  UP 5.69%, SGD109.6m (4Q 2020) vs SGD103.7m (3Q 2020).

3. Net property income (adjusted): SGD258.3m for FY 2020.  UP 6.92%, SGD83.4m (4Q 2020) vs SGD78m (3Q 2020).

4. Occupancy rate: 97.5% (as at 30.09.2002); logistics and industrial portfolio: 100%, commercial portfolio: 94.3%.

5. Interest coverage ratio: 6.4x.

6. Gearing ratio: 37.4%.  FLCT has SGD1651m of debt headroom to utilise for property acquisitions and become more competitive against its peers.

7. WALE: 4.9 years (as at 30.09.2002); logistics and industrial portfolio: 5.5 years; commercial portfolio: 4.2 years.  Lease expiry profile is well spread out with only 7.9% of gross rental income due for renewal in FY2021. 

8. Net Asset Value per unit: UP 5.77%; SGD1.10 (4Q 2020) vs SGD1.04 (3Q 2020).

9. Distribution per unit: CONSISTENT; SGD0.0712 (FY2020) vs SGD 0.07 (FY2019) vs SGD0.0715(FY2018).

10. Current yield distribution: 5.56%. 

11. Rental Reversion: IMPROVED; -0.1 (4Q 2020) vs -3.9 (3Q 2020).

12. Current PB Ratio: 1.16, just slightly overvalued (share price at SGD1.28 on 16 November).  At my entry price of SGD1.24, it was a 17% drop from its peak price at SGD1.49 … just a small bargain. Buying FLCT at its March low at SGD0.67 would have been a tremendous steal!  I calculated, based on DCF, the fair value of FLCT to be between SGD1.22 to SGD1.31.  

13. Weighted average interest cost:  1.9% per annum

14. Debt Maturity Profile: 3.0 years.

15. Free Cash Flow: UPTREND; 214.81m (4Q 2020) vs 181.781m (3Q 2020) vs 149.492m (2Q 2020).

FY 2020 Q4 report

Why did I buy Frasers Logistics & Commercial Trust?

A. Just too good a REIT to Ignore: A prominent investment guru (not revealing name here) has ranked FLCT the top REIT in Singapore (I use his paid service).  And I find myself not disagreeing with that ranking.

By all accounts, from examining the essential metrics, FLCT does look like a worthy REIT to invest in, if one can look beyond the slightly overvalued 1.2 PB.  FLCT’s performance during the pandemic period has been excellent in spite of the challenging business environment and operating conditions across global markets: improved DPU, revenue, NPI etc.  

I really like it that FLCT is well-positioned to face the continuing uncertain global environment with its resilient portfolio, strong balance sheet and financial flexibility.

B. Portfolio Expansion:  FLCT’s predecessor, FLT, has a proven track record in executing value-accretive acquisitions.  Since its IPO in June 2016, FLT has completed SGD4.4b worth of accretive acquisitions.  This track record looks set to be perpetuated by FLCT.  

What has FLCT done to expand its portfolio thus far?

As of August 2020, FLCT has completed the acquisition of 2 properties: a logistics property in Melbourne (IVE Facility) and a business park in the UK (MAXIS), with the respective initial NPI yields being 5.85% and 6.3% respectively.  Both properties together have a property value of approximately SGD143.2m.

  • THE IVE Facility (Melbourne)

1. A modern and prime freehold logistics property.

2. Entrenches FLCT in Melbourne’s South East Industrial suburb which is popular with investors due to strong market fundamentals, low levels of vacancy, limited supply and favourable demographics.  The eastern seaboard cities of Sydney, Melbourne and Brisbane form a lucrative and much sought-after industrial area by both domestic and global players.  The investment volume in this area remained strong despite the COVID-19 pandemic, generating transacted sales amounting to some AUD1.7b during the first half of 2020.  

3. Lettable area: 14,263 sqm.

4. WALE: 4.9 years (as at 30.06.2020).

5. Occupancy: 100%.

6. Only 1 main tenant (Beware of tenant risk here): IVE Group Ltd, Australia’s leading holistic marketing company.  IVE derives revenue from the provision of marketing services and print communications. Rent from IVE is fixed at an increment of 3% per annum.

  • Maxis Business Park (Bracknell, UK)

1. A freehold high quality business park comprising two office buildings.

2. Anchors FLCT in the Thames Valley, the largest regional economy outside London and a high-tech region in the UK.  This business park benefits from excellent connectivity to key motorways and direct train service to Waterloo Station, London.  In spite of the current very exceptional health crisis, the overall UK business park market continues to have active leasing taking place with approximately 63,000 sqm of “take up” in the first half of 2020.  As such, the UK business park sector is expected to remain an attractive and resilient asset class within the commercial space in the long run.

3. Lettable area: 17,859 sqm.

4. WALE: 6.7 years (as at 30.06.2020).

5. Occupancy: 100%

6. 10 tenants such as Panasonic UK, Allegis Group, Blue Yonder, Cadence Design Systems.  More than 60% of the tenants of the UK Property are in the technology and telecommunication sectors, which adds to the resilience of this UK Property.

Both acquisitions are expected to be accretive and will contribute to stable and regular distributions to the unitholders of FLCT.

Earlier in May this year, FLCT completed the acquisition of 50% interest In Farnborough Business Park.

  • Farnborough Business Park (UK)

1. A freehold aware-winning business park that spans 46.5 hectares.  The business park comprises 14 commercial buildings, including 9 office buildings, two car showrooms, an office-cum-industrial building and two cafes.  The business park has approximately 18,000 sqm of development potential.

2. Farnborough business park is also situated in the Thames Valley area.  It is at the heart of connections, strategically situated minutes from the M3 motorway and the vibrant town centre.

3. Lettable area: 51,006 sqm. 

4. WALE: 5.8 years (as at 30.09.2020).

5. Occupancy: 99.3%

6. More than 10 tenants, and is home to British businesses such as Fluor, Aetna, Redhat, National Westminster Bank and the Royal Aeronautical Society.

FY 2020 Q4 report

C. Unlocking value through divestment: In August, FLCT announced the divestment of the remaining 50% stake in the Cold Storage facility in Queensland at a sale consideration amounting to about SGD150.5m (AUD152.5M), a 12.2% premium above its July 2020 book value. FLCT expects to record a net gain of A$8m from this sale. 

D. Diversified ROFT Pipeline from Sponsor:  FLCT has access to a sizeable ROFR pipeline of more than SGD5b granted Frasers Property.  This is by far the largest ROFR pipeline among the major REITS in Singapore.

What is ROFR?  ROFR is short for right of first refusal (also known as first right of refusal) and is a contractual right to enter into a business transaction with a person or company before anyone else can.  So if Frasers Property decides to sell any of its properties, then FLCT holding the ROFR gets the opportunity to buy the for-sale property(ies) on the same terms first.

What is FLCT looking at in this pipeline from Frasers Property?  In this pipeline which comprises about 2m sqm is a good mix of assets in Australia (36.9%), Europe (27.5%), the UK (24.4%), Singapore (6.6%) and the rest of Asia (4.6%).  In this pipeline, approximately 75% (by NLA) is logistics and industrial properties, while the rest is made up of commercial buildings and business parks. As a high portion of the pipeline are logistics/industrial properties and located overseas, their yields are expected to be accretive for FLCT.

FLCT is also able to leverage on the Frasers Property’s integrated development and asset management capabilities 

E. In Spite of Some Concerns:  

  • Trade Tension between China and Australia

In recent months, China has entered a trade dispute with Australia.  This all began when Australia started to sing the same tune as the USA that China, which is on the rise, must be contained. On 17 November, after weeks and months of trading spats, the Chinese Foreign Ministry spokesman Zhao Lijian made it clear that some in Australia “tend to regard China’s development as a threat”, and that this was “the root cause” of the problems between the two countries.  

Considering FLCT has 57.3% of its revenue from Australia alone, any trade dispute between China and Australia is a case for concern.

Here’s what FLCT has to say in the latest quarter report on this matter: “There are also concerns relating to the deterioration of relationships between both the Australian and Chinese governments and any implications that may arise as a result of any trade restrictions implemented by China. In October 2020, the Australian Government reported a record 7.0% decline in GDP for the June quarter, and anticipates national GDP growth for the September quarter to remain subdued. According to Reserve Bank of Australia in August 2020, the full-year 2020 GDP is expected to contract by around 6.0% given the resurgent outbreak of the virus in the state of Victoria in July 2020 and the associated reintroduction of restrictions on activity, as well as the impact that uncertainty and diminished confidence have on household spending and business hiring and investment plans.”

The operating environment in Australia for FLCT is expected to remain challenging in the months and even years ahead in the midst of deteriorating relationship between Australia and China (Australia’s largest trading partner).  

It is hoped that the signing of the RCEP will lead China and Australia towards settling their escalating trade conflict quickly. 

  • The Pandemic.

Let’s also hope that COVID-19 will not surge in Australia or anywhere else in the world.

In general, FLCT’s industrial and commercial properties have experienced little impact from the spread of the pandemic.  Its retail properties, on the other hand, expect some near- to mid-term impact from any infection resurgences.

  • Foreign Currency Volatility.

FLCT faces foreign exchange risks associated with remitting the various currencies to Singapore for distribution.  Singapore only accounts for 12% of FLCT’s total portfolio revenue.  Nevertheless, FLCT manages foreign exchange volatility on its distributable income with hedging instruments and targets to hedge distributions on a rolling six-month basis. 

Conclusion

So this is it, my last purchase of a SG REIT during market weakness which lasted just about 2 days the first week of November.  

FLCT has been impressive this year in spite of the pandemic and I hope it will continue to impress by generating market-beating returns year after year, and adapt and seize opportunities to grow its portfolio in today’s changing and challenging circumstances.

I’m satisfied, for now, that FLCT is a relatively safe investment that pays a steady dividend.  It will be icing on the cake if this bet on FLCT maintains the potential for share price escalation.

I plan on going long on FLCT and thus any price drop is welcome.

Every second, minute you refuse to invest is a second farther away from your greatness.

Sunday Adelaja, No One is Better than You

** https://www.businesstimes.com.sg/government-economy/rcep-a-shot-in-the-arm-for-singapore-asean-economies

___________________

Disclaimer: I am only an amateur investor and nothing you read here on my blog constitutes financial advice.  I write here to detail my investments, strategies, and analyses.  Feel free to read at your own risk.  Should you need financial advice, consult a licensed financial advisor.