Searching Compound machine in Singapore

 What drive me to continue investing in Sg market because of SBP, a way to invest in fraction amount in SG stocks instead of  investing in 100 lots; if not, I may not looking at local market. Investors need to know the high transaction fees will compound and eat up capital appreciation/ dividends overtime when Singapore market known for low participation (even though profitable) and high dividend yield (maybe lack of growth). These are the two factors make me rethink my strategy after so many years after trial and errors for . The good thins about the SG market is that it is a place to hone your patience by looking at fundamentals; the US market teaches hot money creates volatility.

Therefore, searching for compounding machines is important in sg context, the characteristic of them is they can morph themselves to stay relevant (example like local banks) and protecting moats from competition, as these kinds of stocks in sg may suffer from stagnant/slow growth in share price for years but income statement tells the opposite and providing growth dividend overall 5 years. 

One of the best lesson that I learnt is that REITs are not compounding machines if we are seeking for growth and a meaningful dividend. REITs are prone to interest hikes, issue rights in order to acquire property to collect, carry leverage and not retain profits yet distribute 90% to investor, are fatal to withstand any crisis. REITs investors happily collect high dividend yield but ignoring the initial investment depreciating. Honestly, I invested in reits at the novice stage by watching ton of YouTubers talking about how good about holding reits as the shares price keep dropping, at one point I even bought right issues thinking is a discounted shares not to be missed. It came to realise reits do not hold much income for free cash flow, it does not shield any crisis without it. As the time goes by the income statement showed opposition result, the reits manager divested properties to increase DPU to keep shareholders holding.

Another lesson that shaped my investing is wearing accounting lens to see sg equity markets. Have we wondering why strong company's profit increases yet shares price facing stagnant or declining its because low market participation, even though share buybacks occur. We can look into how business operations costs may affect expenses/profit, free cash flow helps both injecting innovation or protecting share valuation. 

Here are questions I always keep asking myself:

Importantly, will these companies become obsolete due to the change of demand and supply? 

Some said RTS will bring down the revenue of Sheng Siong once completed so investors need to find out the policy of RTS will create recurring passengers to use it oftens or convenience to Singapore residents, how CW/ SBS tackle upcoming competitors and how Sheng Siong counters these issues. 

In compounding machine views, Sheng Siong distributing 70% profit to shareholders and keeps 30% for future opportunities besides that they have no debt. Sheng Siong's expansion is answering the growing population by giving convenience to the public so it may discourage them to shop in JB.

Is there payout ratio distributed fair to both shareholder and company? 

I have repeatedly said REITs are the best example of a lose lose situation. They have to give 90% income to shareholders, means they do not have sufficient cash for big acquisitions therefore rights issue and renew loans are inevitable for shareholders to buy to prevent dilution of share price. However on the shares price side, it a lackluster compared to the 10-year historical chart. 

As an investor, we should let the company have their war chest ready for bigger market capital.

What are the risks before investing this company?

I think SIA is the best example because many SIA investors because of country pride, but the problem is they are investing in low profit company time after times and they are in mercy of petrol prices. The company reasoning is too weak to believe in their direction.  We should ask ourselves the risk and moats that the companies carry.