Selling Singtel SDS Shares: Smart Move or Value Trap?

Understanding the Singtel SDS Share Exercise Now open for business on CNA 938. Speaker 2 So Ella, I don't know if you or your parents or probably not you, but perhaps your parents and relatives may have received this letter from Singtel about how they will know, will they'll allow you access now to sell your Singtel special discounted shares. I forget I have to say where this letter comes from. It's either from CPF or from Singtel. But basically the gist of the topic is the Singtel discounted shares that a lot of Singaporeans, we're talking over 600,000 Singaporeans we had had invested in, they are now open to be sold or to be traded in a new or separate CDP account. This is thanks to Parliament which passed the CPF Amendment Bill, which now clears the way for SDS holders to have their shares transferred from CPF board to their own CDP accounts. Now they can also choose to sell the shares for cash depending on how long you've been invested in it, how, what your age is as well. And during our chat previously with Hosseini Saifi from Maybank Securities, he told us whether shareholders should view this as a windfall it. Speaker 3 Does feel like a windfall but it is not free money appearing all night. This value are already there essentially. So the trade off is simple. Once you sell, you give you give up future dividends in any future upside in single share price. So the decision should depend on cash needs, income needs and investment horizon. Speaker 2 OK. So that was the advice or rather the viewpoint of Hosseini Saifi from Maybank Securities. Yeah, but. Speaker 4 While some may see this as a really a chance to cash out, recent reports have shown that some elderly shareholders are still really unsure about the process, the fees or whether they should sell at all. You know, and that brings us to the broader money question today. When should ordinary investors really sell a stock or take profit? And how do you avoid selling out of confusion, pressure or fear? Identifying Selling Triggers: The Singtel SDS Case Study Let's discuss this with Chunting Weber, CEO and Chief Investment Officer at Money Owl. Chunting the when I can I assume that you also received one of these letters? Speaker 5 No, actually, I'm happy to report that I am not. Speaker 2 Old enough? That's good news. I suppose so. Speaker 5 Just a few months short. Speaker 2 Ah, what a shame, what a shame. Well, my parents received the letter so I, I had to go and do my homework. So I'm glad I'm talking to you about this. We are talking to you about this. So the, the Singtel share exercise we're talking about, it has pushed many long term holders. I think it's something over 600,000 people they are now thinking about selling because it's money in sitting in there. They're not sure what to do. So, more broadly speaking, right, when should an investor consider taking profit on a stock? Speaker 5 I think selling should be considered when the thesis behind your investments turns out not to be correct or may have overrun. So let's say you're invested in a global stock index ETF that wraps A globally diversified portfolio stocks my favorite kind of investment. Your thesis is founded on the logic of enduring human enterprise that drives broad business growth all the time and the benefit of diversification. So that thesis is an Evergreen 1. So you should ignore ups and downs, stay invested, let compounding do its for as long as possible, don't interrupt it. So taking profit doesn't, and so shouldn't apply in that case. But if you're invested in a single stock, it's more complicated because you're taking or you have taken unsystematic specific risk. So whether that particular company does well over the long run and the share price continues goes up, it's not at all assured. So you have to do more work and more analysis about whether your thesis continues to hold up. Speaker 4 Well, you know chinting, if a stock has really done well over many, many years, how do you know whether to cash out profit or really to just continue holding? Speaker 5 Yeah, it's not actually not so easy when you're with these individual stocks and even professional fund managers can get them wrong. So a few buckets of considerations. First, there's the fundamentals of the company, not just whether it's a company that can survive, but whether it can keep growing value and also the macro environment that affects the overall market, such as big destructive technologies like AI. And some of these are unknown, unknowns until they happen. The second market considerations is valuation. So this company may have great growth potential, but has that been actually priced in or priced reflection? So analysts will look at and argue amongst themselves on things like price, earnings ratios, price to book. But a lot of these are themselves based on forecast and predictions and certain assumptions. So finally, you should also look at this stock relative to the market. When you say this stock has done well, has it really done extra well and therefore demand that that potential holding on to, right? Are you going to take the bet? So take Singtel for example, if you take this from the IPO of October 93 to today, the discounted Singtel shareholders with the impact of the discounts and the dividends were multiplied and money about 6 times. So this is quite neat, right? Sounds very good. It decomposes to a very decent annualized growth rate of about 5 plus almost 6% return somewhat around the broad Singapore market as measured by the Msci's return. But that's because of the discount. The discount was quite substantial. So you bought it cheaper than the market. Yeah. So if you just take the IPO to now including the total return is closer to around four 4.2 and that's actually lower than the broad single fall market by one plus percentage points. Then if you take even the global index for this period in same dollars, they actually return you 12 times instead of even 6 times. So this is not to say all these were investable 30 years ago. You know it, it wasn't that that's one of the reasons why I had this selling exercise because during that time you had to do it throughout CPA because the capital markets are not so legal and all that. And it's also not to say that past returns will be repeated and the relatives performance will be repeated, but it's a sign to think about that thesis behind your investing signal really that good stock or is it because of some of these technical things? And what are your other alternatives out there? Speaker 2 Yeah, very important caveats to note there. Thanks very much, Chun Ting. Recognizing Good Exit Points and Market Psychology So what are the signs that a share price might be a good exit point rather than the temporary high? And you talk briefly about the two buckets earlier, right, Because things like fundamentals can change any time. The macro environment, obviously, Needless to say that can change anytime. It's a company's performance can also change and therefore affecting its valuation as well. So things can change. How do we know when that moment is? It's pivotal for us to, OK, take a step back. I think I need to make that exit. Speaker 5 Actually, for the stock market as a whole, I have no issue, you know, if you're, that's why I say if you're globally invested, because we know the stock market always recovers from all its downturns and goes up in the long run. But when I say this, sometimes people get very excited because they say also I shouldn't hold all my stocks. Actually, it doesn't apply to individual stocks, only apply to things that are very good. And talking about this story about whether a share price is a good point. I've got a friend whose birthday is today and he hates me reminding him of how he still envy 90% and the equivalent of $500 today. So it was 50 before the, the reverse street, right? And then it went up further, of course, by a lot. And he hosted against me because he asked me at the time whether he, he should he, he, it's OK for him to say why not? And the reason is because he, he's, it's just pay money for him, right? And that's really the point you, you don't know, you don't know whether you're with NVIDIA. And that's, that's the nature of investing. It's called, it's called risk. And so when you're doing individual stocks. So I was saying just move on. I think when you're taking a profit, it's a profit. It's a profit, right? Especially if you're trading or it's just for fun. It's not for like your retirement or whatever, you know, just don't look back whether it's probably a loss. You can never catch the bottom and you can never catch the top. And yeah, you can of course, if it's something like remember GameStop, yes, you know, the memory stock, is it something like that that pushes or I mean, especially I wouldn't even get into it in the first place if possible, then I think it's it's very likely to be a temporary. Speaker 2 Yeah. I mean, you know what they say. They say you you. They say you can't beat the market and you shouldn't try. Speaker 5 Yeah, that's right. So I think just, I think 30% is a decent thing for a trade, a quick trade, right? Yeah. So, yeah. Or if it doesn't matter to you, then hold it. You know, it's just like if it goes up, it's a windfall. If it comes down, if you lose it, then it's all right. You know, as long as is not the core of what you're depending on. Retirement Income, Dividend Strategies, and Inheritance You know for retirees, right? How should they really balance taking profit now against keeping a stock for dividend income? Speaker 5 Yeah. So high dividend stocks are very common and preferred and favoured way of generating retirement income. But really it's really not the only way. There are various ways of what we call D cumulating, meaning you draw down income, draw down a bit of income and also a bit of the principal while remaining invested for total return, but in a way that stretches the asset to last. So in fact if we depend only on new dividends or coupons from bonds and refuse to D cumulate, meaning to consume at least powerful principal over a long time, there are a few risks that people get into the the first risk is insufficiency. So just do the math. If the dividend is 4% and every month you need 1005 or 18,000 a year, you mean a unique 450,000 of capital And, and there's risk to this. So by the way, CPS requires half of that for the same income from serious life, right? So first it's insufficiency. The second is concentration risk because there may only be a handful of good companies that provide dividends on, on their stocks. And companies do go up and down dividends. Even a blue chip stocks can be cut and bonds, high quality loan can have credit risk. So good names can have risk. Remember, high flux perpetual bonds, Credit Suisse, you know, so if if you down 250,000 in your Credit Suisse out of 500,000 of your investment and assets, you have been in in, in trouble. But by a dividend fund, which is another favorite, favorite kind of solution might not be the way either. Because the focus on that view, that percentage, right, whether it's 456 can lead you to take on a lot of risk. So I see this very often in investment linked policies and income funds, they produce five 7%. But once I hear these numbers, there's anything above 4, I suspect and I always find out that it's true that the underlying doesn't actually either doesn't return that all your assets are getting, which means that assets can get depleted halfway into retirement or it's too risky or they're buying junk bonds. So the there are all kinds of risk. So we don't have time to go into detail about CPS, but when it comes to retirement income, the very foundation is CPS life. So if you need that first 5001 thousand 5 to 2000 also just use that CPS life for that basic nu T that that will not run out no matter how long you. Speaker 2 Yeah, that's a good tip. Thanks. Chun Ting, we have a listener here asking a question. If I hold the thing tells shares, what will happen when I die? Will the shares be automatically be transferred to the person I've nominated in CPF? Chun Ting, I'm not sure if this is in your wheelhouse. Wondering if you have any thoughts on this. Speaker 5 Okay, there is a technical answer to this. Obviously I don't, I don't have it on the top of my head because obviously if you transfer it to GDP, then you had to deal with it in the same way that you deal with or your other. Speaker 2 So it has to be willed, right? Speaker 5 Yes, that's right. Yeah. So that's, but I, I think that that I, I would need to consult, I, I advise you to consult ACP on the details of what happens after the transfer. Yeah. Speaker 2 OK, fair enough. Thank you listener for this question. Key Takeaways and Financial Disclaimer Chinting will leave it there for now. It has begive given us the clarity, especially when it comes to deciding whether or not to sell or hold. There are lots of questions and caveats to ask oneself and we really appreciate those that checklist coming from you. So thanks very much for spending time with us this morning. Speaker 5 Yeah, thanks. Speaker 2 Adrian, that's chanting Weber, CEO and chief investment officer at Money Owl. Speaker 1 Before making any decisions based on the information in our program, please consult your own financial advisors to take into account your investment objectives, financial situation and individual needs.