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Mapletree North Asia Commercial Trust: What do you do when someone burns down your Christmas tree?

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I woke up one fine morning and found my Early Retirement Masterclass students in a high state of alarm. Some students were screaming at me in the FB group. There were many questions regarding what investors should do about their holdings of Mapletree North Asia Commercial Trust.

One faction of students was worried that it would drop further and wanted to know whether they should sell this counter. The other faction wanted to know whether this is a good time to buy more of the counter as it was fairly cheap. 

The alumni of the program were looking to the instructor for wisdom.

They thought I could descend from the mountains from my deep meditation and martial arts practice and tell them what they can do about Mapletree North Asia Commercial Trust.

Sadly, I do not meditate, practice martial arts and definitely do not have much wisdom to dispense to them.

If you look at the copy of The Edge that was published yesterday, the Broker Digests do cover Mapletree North Asia Commercial Trust. DBS had a target price of $1.60. HSBC projected the target price of $1.45 and OCBC $1.41.

The bullish case to buy more MNACT is thus, very strong in the investment community. Reinforcing the bullish case is that at this time of writing, MNACT currently has a 7% dividend yield which is not too bad for local dividend hunters.

Caution, I would not be so eager to stick to the bullish story.

I think the single issue that animates MNACT is the protests in Hong Kong that are still escalating as we speak. Investors are skittish because of that photo with a burning Christmas Tree and protests may get worse before they get better.

At this stage, investors need to be very careful – this looks like political analysis rather than investment analysis. My ERM program is still reeling from our worse investment mistake ever – discarding Ascendas India Trust from our financial models when it was offered at $1.14 because we misread Narendra Modi’s electoral chances only to see BJP sweep into victory in 2019. Ascendias India Trust is currently $1.55, indicating 35% gains left on the table. (along with whatever else could have come via dividends).

This, however, does not make me the All-Seeing Master of the Legend of the Condors.

A dose of humility is in order.

None of us can foresee how events in Hong Kong will unfold over the next few months. If matters improve, MNACT investors are guaranteed decent profits as it is trading below its target price projected by three banks. If protesters start to target Singapore companies and escalate their violence, things will get worse.

The question of how Singapore investors view Hong Kong, however, is something that can be answered. My workshop previews regularly poll the audience for their views on Hong Kong. Answers for the last session can be seen here:

A majority of the audience believes that matters will resolve itself by end-2020. In the meantime, I think a curfew might be imposed in Hong Kong. If you buy MNACT, you need to look beyond 2020 if you believe that things will right itself next year.

Therefore, a question on MNACT and even Hong Kong Land will largely depend on whether you are willing to play the role of a political pundit. As an Early Retirement Masterclass trainer, I am quantitative focused. Not politically focused. So I will be unwilling to play the role of a political pundit for ERM alumni.

So pretending to be a wise guru who descended from the mountains, I stroked my mystical invisible beard and told my students to hold onto MNACT if they have them, but hold back from buying more in case Hong Kong gets worse.

Batch 7 was a $40,000 portfolio that had a small position in MNACT. In what is the worse day for MNACT, the portfolio lost $45. Incoming dividends on that same day amounted to $120.

Maybe my students should take a nap.

I will wake them up when they become millionaires.

3 thoughts on “Mapletree North Asia Commercial Trust: What do you do when someone burns down your Christmas tree?”

  1. Lol! As I’ve mentioned previously … what will knock your students off is not their brains or the process. But their psychology & their stomachs.

    In this instance you can put off a relatively isolated event (in 1 city) that affected 1 holding in the portfolio (and barely 5% hit to that single holding).

    What happens in a systemic recession that hits on a regional or global scale, and all holdings are down 25% or 35%??? They’d be screaming bloody murder at you! LOL! (Note I use an optimistic -25% to -35% as I suspect that next bear market to be not as bad as AFC or GFC.)

    Reply
    • We have warned and continue to warn our students about what to do in a market crash. Psychology and time in the markets are needed to strengthen their willpower. The rest is not up to us but the individual to be emotionally disciplined.

      Reply

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