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There is a new kid on the block for the local ETF scene – the Phillip SING Income ETF (Phillip SING). Hot from the oven, it was launched by Phillip Capital on 1 Oct Monday.
I will share some pertinent points worth noting about this ETF, to aid you in your decision whether to subscribe for it.
Details on the Income ETF
Phillip SING Income ETF tracks the Morningstar Singapore Yield Focus Index (The Index) that comprises a basket of stocks selected using Morningstar’s proprietary quality income strategy and factors.
The 30 stocks were identified based on a composite score derived from following factors:
- Quality – quantitative moat score
- Financial Health – distance to default score
- Dividend – trailing 12 month dividend yield
I attended an insider briefing for Phillip in-house remisiers and learnt that since 2005, The Index has attained annualised return of 9.6%, comprising capital gain of 5.2% and dividend returns of 4.4%.
More details can be found under Fund Info in this website.
Smart Beta ETF
Phillip SING is a Smart Beta ETF. Contrary to traditional Market Cap Weighed ETF, it employs rules based selection criteria to construct the index portfolio. The rules are centred around the concept of factor investing, where certain company characteristics or attributes are shown to give higher returns or lower risks.
As mentioned earlier, the factors pertaining to this ETF are quality, financial health and dividend yield.
While selection of companies is done using rules based approach, the management of ETF is still done passively that brings about greater transparency and lower cost.
Comparison with STI ETF
Phillip SING grants access to 30 high quality Singapore listed stocks with stable income, some shares would inevitably coincide with components of STI ETF. It makes interesting case to compare the key attributes of both ETFs.
With STI ETF, the 3 local banks take up about 41% of the total portfolio. For Phillip SING, the 3 banks would constitute 23.9%.
It is worth noting that The Index caps individual company weightage at 10% of the total pie. This further prevents over concentration in any particular company, a plus point in my opinion.
|Source: Phillip SING Income ETF brochure|
Looking at industry representation, the top two sectors of Phillip Sing are financials and REIT respectively with 31% and 24% weightage.
As for STI ETF, the top two sectors are financials and industrials with 58.3% and 15.3% each. This suggests that Phillip SING has a more balanced sector representation.
|Source: SPDR STI ETF website and Phillip SING Income ETF website|
Lastly, the gross dividend yield for Phillip SING is estimated to be around 5% with semi annual distribution. Accounting for expenses and costs, its dividend yield should be around mid 4%.
In contrast, the annual distribution yield of STI ETF as of 1 Oct is 3.43%, according to its website. Phillip SING seems to have better yield.
Who is this ETF for
Clearly, Phillip SING is suitable for investors who are seeking a viable alternative to STI ETF, due to the latter’s heavy concentration in banks and a rather low dividend yield.
Furthermore, if the Index past return of 5.2% capital gain is anything to go by, it clearly is more superior than STI ETF returns of 4.08% in the past 10 years, without dividends.
I would think the Phillip SING is also suitable for investors who want hassle free investment to 30 high quality stocks with good income in one instruments.
Looking at the ETF make-up, there are some interesting companies there with fairly good yield and stable growth prospects such as Sheng Siong, Raffles Medical and Mapletree Commercial Trust.
The initial offer period is from 9am 1 Oct to 5pm 16 Oct. The issue price is $1 per unit, with expected listing date on 29 Oct.
Do note that this is unlike IPO where you need to ballot for the share, you will be allocated the full quantity that you applied for. Minimum subscription quantity is 1,000 units of $1,000.
Subscription fees will be commission of 0.1% or min $10, and a transfer fee of $10 (subject to GST).
Do contact me if you wish to open a Phillip trading account to buy this Income ETF or have further queries.
Meanwhile. Do you find it difficult analyzing financial statements? Not sure where to start reading annual reports? Do sign up for this seminar where I will break down the financial statements, highlight key segments in annual report that deserve attention, and explain how can one analyse and extract important financial ratios quickly.