Monday, 1 June 2020

My Investment Portfolio (End May 2020)

From StocksCafe
May was a boring month. I did not make any transactions and STI is moving sideways. If STI continues to move sideways, I plan to make at least 1 more purchase before waiting to see if the bankruptcy phase comes in, during the 2nd half of the year. If it does, STI will experience another sharp drop, led by banks.

Temask has been doing national service, trying to lessen the impact of COVID19 with their various care packages, including giving face shields, masks and hand sanitizers to different groups of people. Also, trying to help (aka rescue) several companies such as SIA and the latest is Pacific International Lines. But there is a limit to how many companies they can help. 

From StocksCafe (Click to enlarge image)
I received my largest amount of dividends in a month in my investment journey. It was partly due to my recent purchases of DBS and OCBC. I am still expecting my total dividends amount to be lower than last year. Moving forward, most Reits and Trusts will defer dividends payout as they conserve cash and maintain high capital levels. Similarly, other listed companies, even banks, will do likewise. It is just a matter of when.

Dividends received* in May 20: $2,132.84 (DBS, OCBC, Singapore Technologies Engineering, Mapletree North Asia Commercial Trust)

Total dividends received in 2020: $2,748.90

Average dividends per month: $229.08

Total Portfolio Market Value: $199,074.59

*Dividends are recognised after ex-dividend (xd) date.
Average dividends per month is calculated by dividing the dividends received by 12 months regardless of the month.
Portfolio excludes Singapore Savings Bonds.

Monday, 18 May 2020

SIA FY Results: What caused SIA to loss $732m in the 4th quarter?

SIA FY 2019/2020 
SIA reported its first Full Year loss of $212 million. This was mainly due to a loss of $732 million incurred in the 4th quarter (Jan to Mar 20). As expected, there is no dividends declared this time.

SIA Net Asset Value (NAV) is now at $7.86, dropping by more than $3 compared to a year ago. This value will change after the rights issue.

This means that SIA is currently trading at a Price/NAV ratio of less than 0.50! SIA is in a unique position. While other airlines caters to both domestic and international travels, SIA caters to only international travels. When the number of COVID19 cases decrease in other countries, airlines typically are allowed to start operating their domestic flights which helps them to generate some form of revenue. SIA has to depend on our government negotiation with other countries to start international flights between the countries. Hence, its recovery will be slightly slower. 

Lets take a look at what caused such a big loss in the 4th quarter:
From: SIA Press Release
SIA made a loss in the 4th quarter mainly because of (i) fuel hedging loss of $198 million and (ii) fuel hedging ineffectiveness of $710 million. 

Fuel hedging loss occurred because fuel prices plunged in the first quarter. The demand for oil dropped when countries embarked on a lockdown to flatten the COVID19 curve. This was coupled with an oversupply of oil with price wars happening resulting in oil futures contract becoming negative in an unprecedented event. 

Fuel Hedging ineffectiveness happened because SIA over hedged. This was due to the capacity cuts made resulting in a lesser fuel consumption.

While SIA had shared that they expect more fuel hedge in future quarters, they have not share whether they expect fuel hedging ineffectiveness. There were no details on the average duration of the contracts so it is hard to guage.

What about staff cost? 
From: SIA Consolidated P&L
SIA managed to reduce staff cost by more than 60% this quarter to post just $273.6 million. They shared that it was due to the various support schemes given by the government. It is noted that in March, they have also undertaken wage cuts for its management team and compulsory no-pay leave for employees. I hope that they will look after their staff especially those on NPL even during such crisis.

There are other cost that would be incurred during this period like aircraft maintenance, landing, parking, handling costs. But my biggest concern is on fuel hedging ineffectiveness. SIA could have provided some details on this so that investors can make an informed decision especially those who are wondering whether to exercise the rights issue.