What to buy when times are good

Source: Bloomberg

The STI index shot up from 3200 to 3350, about 4% in 1 week. Stocks on the STI Index became more expensive in a week.

When the graph is up, downside risks get higher. Stocks like Jardine Cycle and Carriage, DBS, OCBC, UOB have gone up quite a bit.

However, even if these high cap stocks going up, buyers can still look for bargains in the market, especially low cap stocks.

A sector to look at is the property sector. Property stocks have gone down since the cooling measures implemented by the government to slow down or prevent a property bubble in a low interest rate environment.

As Singapore dollar strengthened against the Aussie dollar, a lot of property companies in Singapore have moved their focus to Australia.

Below is a list of some of the low cap property/construction stocks.

• Heeton Holdings (Market Cap:155.8 million PE Ratio:11 Book Value:0.5)
• Hong Fok (Market Cap:660.87 million PE Ratio:2 Book Value:0.4) 
• Centurion (Market Cap:386 million PE Ratio:6 Book Value:1.2)
• Wee Hur (Market Cap:344.72 million PE Ratio:3 Book Value:1.5)

Is it a good time for REITs now?

A very small portion of my portfolio consists of REITs, which can be a stable asset to hold on to. A typical REIT can give you returns of up to 10% a year as dividends, which comparing to bank rate of 1% is pretty attractive. However, if you buy REITs when interest rates are high, you probably got a good discount for it. But as interest rates had remained low for a while, the price of REITs has inflated a bit. Risk of interest rates hike remains. Therefore now should be a time to wait at the sidelines for the media to blow up an interest rate hike issue for REITs to be attractive again.

Strong indicators of a buy in Keppel Corp

Keppel Corp's share buy back today valued at close to $8 million. 3 days ago, its share buyback valued at about $3 million.

On 11 Dec 14, it made 2 consecutive share buy back programs valued at close to $10 million. To date, it had spent about $21 million in total on buying back its shares.

Loh Chin Hua, an unknown investor increased his/her stake today from 0.44% to 0.99%.

I am not exactly bullish on the crude oil price now but i think $8 could be one of the lowest buying points Keppel Corp can go.

Portfolio Diversification

Portfolio diversification is a good way to measure the risks of your investments in stocks. For example, having more exposure to the oil and gas sector may be affected by low oil and gas prices because this will cause a slowdown in the sector.

The portfolio below shows the type of portfolio below demonstrates high risks to the oil and gas sectors.

If your portfolio have a higher exposure to property for example, then if property prices nosedive, your portfolio value will nosedive too.

Therefore, it is important to have a strategic asset allocation that will allow your portfolio to endure hard times in an even of a slowdown on a particular sector.

The portfolio example below is an example of how to diversify your portfolio.

Property	30%	Betting on long term increase of property prices
Healthcare	30%	Buffer against Crisis
Finance	30%	Center of Growth
Oil and Gas	5%	Potential for growth
Technology	5%	Potential for growth

Keppel Land

Property market has been suffering from government's cooling measures. But Keppel Land is a stock worth looking at.

It has a PE ratio of 6 while DBS, one of Asia's biggest bank, has a PE ratio of 11. It means that Keppel Land stock is still priced at a discount as compared to a blue chip stock.

Keppel Land recently sold 2 of its data centre assets to Keppel DC REIT and realised a net gain of S$65.9 million. 

Source: http://www.businesstimes.com.sg/companies-markets/keppel-tt-proposes-listing-of-keppel-dc-reit

This net amount could translate to better earnings for the next quarter results as it had reported a 10.6 percent drop in net profit in its previous quarter results.

Keppel Land, on 3 Dec 14, announced that it had entered a JV with a Myanmar company to develop a 23-storey office tower in Yangon. The office tower is located in the central business district in Yangon. The development is estimated to be at S$61.6 million, which is coincidentally close to the net gains on the sale of 2 data centers to Keppel DC Reit.

Source: http://sbr.com.sg/commercial-property/news/keppel-land-inks-616m-jv-office-tower-in-yangon

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Falcon Energy makes an offer for CH Offshore

Falcon energy owns about 29% of CH Offshore and wants to increase to 50%. As part of their expansion plan, CH Offshore provides them with a more diversified fleet of vessels to cater to more customers. Currently, CH Offshore has a fleet size of 15 AHTS vessels.

Crude Oil prices to stabilise in 2015

According to bloomberg, Rosneft has a $14 billion debt due in 2014 and Novatek has $46 million of debt to be repaid before Apr 2015.

Vnesheconombank also had $1.3b in public debt due in 2015. Russian companies face $3.93b of dollar-bond maturities by year-end.

Source: http://www.bloomberg.com/news/2014-07-17/rosneft-bonds-sink-most-on-record-as-sanctions-shut-debt-markets.html

These bond maturity dates could be factors of why crude prices fall because of an economic attack by US. Since US started flooding the markets with oversupply of oil, oil prices had been in the decline from $100 a barrel to $60-70 a barrel.

As Russia's economy largely depend on the export of crude oil and gas products, the reduction in these commodity prices may weight down on their profitability and thus, affecting their ability to settle their debts.

Drop in oil price, good for global economy in the long run

The U.S is very successful with this strategy of bringing down oil price from $110 to about $70 a barrel.

The US dollar strengthened with the halting of quantitative easing, and with the shale gas bloom, they started flooding the market with more crude oil.

The oversupply of the crude market caused the oil price to drop and at the same time dealing a huge blow to countries like Russia, Iran, ISIS. They export oil for profit and ISIS used the money to fund to expand its war chest and expanding its global terrorism threats.

Russia had been aggressive on the Crimea war against Ukraine, which were globally criticized. The MH17 incident made the situation worst.

Iran's issue about nuclear energy is clearly not in their favor with the dropping of oil prices. The low profitability issue may reduce their negotiating power on the table.

However, with the weakening of currencies in countries like Japan, Malaysia, EU, Australia. Global economies is set to pick up even faster with more exports as US is starting to exercise its strong USD.

In general, the economy is slowing down because of certain political factors, but in the long run is set to enjoy higher growth in 2015 and 2016.