September Buys

For this month, I initiated two small positions ASML and United Hamsphire US REIT.

The former is on my watchlist for a few months. ASML leadership in lithography provides a strong moat with demand outstripping its production and backlog lasting till next year. With the recent pessimism in the market, its price has dropped by about 10% over the past month (more than 20% from its high of $770 in July).

Its Extreme Ultraviolet (EUV) systems have accelerated its growth in recent years and sales have grown at an annualised rate of 21% over the past 3 years and is set to continue to grow by 30% this year.

So why have the price slide recently?

The current concern is the geopolitical tension between US and China which resulted in restriction of selling of their advance machines to China. So there are uncertainties on the impact on ASML going forward.

Will this be a temporary issue or will this be a permanent impact to the growth prospect of ASML?

I do not know but if I look further with a timeframe of more than 3 years, I do think the overall demand for ASML’s systems will compensate it. Hence, I decided to initiate a small stake at $595 (forward PE of 29x vs 5-year average of 37x) to learn more about the company.

I chanced upon United Hampshire REIT (uhreit) when reading the previous issue of The Edge yesterday. I have heard the name before but have never read about it. With the US (office) REITs in the news for the wrong reason in recent time, it was just not in my radar.

However, I like what I read from the article and decided to find out more about its recent performance. The numbers do look quite decent with good occupancy and long WALE. What I like is also that they completed their refinancing for this year and with the exception of US$21.2 mil, refinancing need only be done in 2026. So that gave certainty for interest expenses for at least the next two years.

Gearing at 42.0% is on the high side but should drop slightly with their recent divestment. Interest coverage ratio is on the low side of 2.8 times but should stay relatively stable for at least next two years.

In their press release, manager shared the retention of US$1.5 million capital is meant for asset enhancement and development initiatives such as the new Academy Sports + Outdoors store at Port St. Lucie.

Assuming going forward, DPU can be sustained at US$0.058, then that will give a dividend yield of around 13% which is attractive for what their current performance.

As I have some spare cash in my FSMOne Auto-Sweep account, I decided to take up a small stake.

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