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Market gyrations, my portfolio and a sabbatical.

Friday, June 22, 2012

My investments in S-REITs are holding up nicely which gives credence to my strategy to overweight S-REITs in my portfolio. Their relative price stability and high distribution yields provide some solace in a volatile market.

A brief look at some of my larger investments in S-REITs:

1. AIMS AMP Capital Industrial REIT closed at $1.20 per unit. My cost per unit ranges from $0.775 to $1.10.

2. Sabana REIT closed at $0.97 a unit. I first initiated a long position at $0.93 in March 2011. I bought more as its unit price sank below $0.90. I am still holding on to those units I bought at $0.865.

3. First REIT closed at $0.90 a unit. This is an investment I have had for many years. My lowest entry price was $0.42 during the global financial crisis. I took part in its rights issue at $0.50 a unit. I bought more nil-paid rights for a total cost of $0.66 a unit. I also bought more units at $0.70+c.

4. LMIR closed at $0.39 a unit. Like First REIT, this is an investment I have had for many years. My lowest entry price was $0.185 during the global financial crisis. I took part in its rights issue at $0.31 a unit. I also bought more nil-paid rights for total cost of $0.331 to $0.365 a unit.

5. Saizen REIT closed at $0.143 a unit. The history I have had with this REIT is somewhat bumpy. I increased my long position once again with a large purchase as its warrants reached their last day of trading not too long ago. Average price of that purchase $0.129.




I have collected many quarters of income distributions from these investments and my war chest is constantly being refilled. So, I constantly have funds to take advantage of any investment opportunities which might come along.

My strategy is to stay partially invested as we must also have cash to continue investing especially if Mr. Market decides to sell good quality stocks and trusts at bargain basement prices.

Recent efforts to invest in some companies instead of S-REITs have produced below average results. In fact, my poorly timed investments in China Minzhong and Wilmar, although relatively small, are a drag on my portfolio's performance. If I had stuck to my strategy of concentrating on S-REITs in recent times, my porfolio would have fared much better.

Of course, there would be people who disagree. Readers who comb the cyberspace for information would have, no doubt, come across some local blogs which vilify REITs. Well, everyone is entitled to his own opinions.

I have gotten somewhat tired of defending my position. Actually, why do I even need to defend my strategy? If people like it, they are welcome to follow. If they don't like it, don't follow. This is a free world. Just don't be rude.

I was never a savvy person with IT stuff and when I discovered blogging, I was like a child who discovered the sweetness of sugar. I got a sugar high. I have always enjoyed writing. So, I took to blogging like a fish to water. Also, as I age, I have developed an increasingly serious speech impediment. To a rather talkative person, this is an annoyance and makes blogging even more of an outlet of expression.

Making money from blogging was never a first thing on my mind. It came about later on when friends suggested that I could put some ads in my blog. I must say that I have been able to make some pocket money this way. Pocket money? Hey, Nuffnang pays me 20c for every click I get for ads they place on my blog. If my primary motivation for starting this blog is to make money, I must be seriously mental.

If I were to stop blogging tomorrow, what would I lose in monetary rewards?



Well, I have been thinking of taking a break from blogging and I have shared this thought here in my blog as well. There are other aspects of my life I would like to spend more time on. There are also people I would and should spend more time with. It is also quite obvious to regular readers that I have been blogging less frequently too.

We often hear of the saying that "this is the last straw that broke the camel's back". Well, I think I got another catalyst to stop blogging at least for a while earlier this evening.

To my regular readers, you know which blog posts I have here in my blog which would keep you squarely on your goal of financial freedom. Each time you waver, come back to my blog and go down the right sidebar. I would also be doing the same, no doubt. It is not easy to start but start we must. The journey is hard but go on we must. When we see the results of our effort, it would get easier and easier. Remember, if AK71 has done it, you can too.


To new readers, understand that we are all different. Not everyone can be a Warren Buffet or Donald Trump or Robert Kiyosaki. They have all taken their own paths to success. You should find your own. Reading my blog, if you feel that my way is something you would like to emulate, give it a go but know that everyone's circumstances are different. Set for yourself realistic goals. Take baby steps but you have to work towards building up passive income to a level that is equal to or exceeds your earned income. Then, you would have achieved financial freedom and you work because you want to and not because you have to.

In everything we do, there is an element of luck. Even Warren Buffet was wrong before. No one is God and even with Him, there is debate on things He might have done wrong. OK, this is a sign that I should stop. Yes, Father, I have sinned.

----------------
The following was a blog post written on 28 November 2011 after talking to "ao" in LP's infamous cbox (Bully the Bear). It was never published... till now:

A reader asked me recently if I ever get tired of replying to comments in my blog, especially with skeptics aplenty when it comes to my investments in REITs. I told him that I am only human and I do feel tired sometimes.


Recently, I had lunch with the blogmaster of Time to Huat and another long time friend. They asked the same thing, almost. One of them said that some comments were almost repetitive and marvelled at my patience in replying to every comment even so.


To me, I feel that if a job is worth doing, it is worth doing well. How do we measure worth? In the world of blogging, at least to me, it is not measured in dollars and cents. I would be better off giving private tuition with my time, using such a measure.


When I started blogging, I took on certain responsibilities whether I knew it at that point in time or not. I am airing my thoughts in cyberspace. I am sharing ideas. Of course, there will be questions and also disagreements. What is a blogger to do? Face these squarely.


Being a blogger is like being a semi public figure. Semi public? Yes, we can choose to blog without revealing our true identity. I have gotten a taste of what it is like to be a semi public figure and I doubt I would ever want to be a public figure. So, although I have met a handful of readers and fellow bloggers so far, I have decided quite some time back to be more reclusive. I value my privacy too much to ever become a public figure.


Recently, I have been thinking again whether I should stop blogging altogether. My blog posts are usually crafted with care  So, it takes up a lot of time and I only have so much time...

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Wednesday, June 20, 2012

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Wilmar: Not a time to sell.


On 5 June 12, I did a blog post on whether it was time to go long on Wilmar. Yesterday, someone asked me as well if it is now a good time to go long on Wilmar.

To any seasoned market watcher, Wilmar's share price must look quite tantalising as it hit a low of $3.41 on 14 June 12. That was a good 43% lower than its one year high of $5.99 a share.

Now, if we should think of a reason for the decline in price, it is clearly because of the company's disappointing earnings. The company's crushing business is likely to remain very difficult for some time to come. In fact, the CEO said it could take a few years for excess capacity in China to be absorbed. As this business is about 25% of the company's revenue, a decline in its share price is to be expected but the decline has been disproportional. I have no doubt that short sellers made quite a bit of money here as well.


Wilmar's share price has seemingly found a floor and has rebounded somewhat. I see immediate resistance at $3.70 or so. If it should break resistance, we would probably see short sellers covering their positions which would send share price higher to test the next resistance.

If the company's share price should test a new low, everything remaining constant, we should see stronger buying interest returning. Technically, the momentum oscillators are rising and, so, support this thesis. Look out for a higher low in the momentum oscillators then. That would be a clear signal to go long as the share price is set up for a reversal.

Is it time to buy Wilmar's shares? I feel, at least, it is not a time to sell.

Related post:
Wilmar and China Minzhong: Time to go long?

SPH: Better investment than retail S-REITs?

Tuesday, June 19, 2012

SPH is still my largest investment in a Singapore blue chip and it is an important part of my high yield portfolio. CIMB now suggests that investing in SPH is better than investing in retail S-REITs. It would be a happy coincidence for me if CIMB should be right as my only exposure to retail S-REITs is a small long position in Suntec REIT, much smaller than my investment in SPH.



Singapore Press Holdings is becoming increasingly like a retail real estate investment trust (REIT), CIMB Research said, noting its growing retail property arm and stable media business, as well as typical payouts of more than 90%...


The broker also said SPH is a cheaper alternative for investors seeking exposure to retail Singapore REITS after the stock’s underperformance, offering yields of 6.4% versus an average of 6.1% for retail Singapore REITs...


CIMB said revenue compound annual growth rate for SPH’s “gem asset”, Paragon shopping mall in Singapore, stood at 8.3% over 2006-2011, outstripping growth for comparable assets under retail Singapore REITs.


Related post:
SPH: Interim dividend of 7c per share.

Singapore property prices to stay resilient?

If the latest report by Maybank is correct, then, the expected 20 to 30% decline in Singapore property prices over the next couple of years might not transpire. The expectation is now for a mere 10% decline in property prices over the next 18 months. This suggests that any dip in prices could see showflats packed with buyers again.


Related post:
Affordability of housing in Singapore.

Marco Polo Marine: Persistent insider buying.



I find Marco Polo Marine, an offshore and marine company, a rather interesting proposition at current prices of 31.5c to 32.5c a share.

1. PER of about 8x
2. Net profit margin just under 20%
3. NAV per share at 37c
4. Interest cover ratio at 8.3x
5. Gearing at 30%

Marco Polo Marine has the intention of listing an Indonesian subsidiary on the Jakarta Stock Exchange. This could unlock value as Kim Eng estimates the listing could value the company's stake in the Indonesian subsidiary at more than 30% of the company's current market cap.

Perhaps, it is the persistent insider buying over the last 12 months that really nailed it for me here:

Announce Date [Date of Effective Change]Buyer/ Seller Name [Type*]S/ W/ U ** Bought/ (Sold) ('000)Price ($)
After: No. of Shares ('000) ***% Held ***
05/06/12
[05/06/12]
LEE WAN TANG [DIR]S1,095 0.325195,31157.02                
 
05/06/12
[05/06/12]
NAUTICAL INTERNATIONAL HOLDINGS LTD [SSH]S95 0.325191,39956.17
 
01/06/12
[01/06/12]
LEE WAN TANG [DIR]S110 0.335194,21657.00               
01/06/12
[01/06/12]
NAUTICAL INTERNATIONAL HOLDINGS LTD [SSH]S110 0.335191,30456.14
 
16/05/12
[16/05/12]
LEE WAN TANG [DIR]S114 0.340194,10656.96           
16/05/12
[16/05/12]
NAUTICAL INTERNATIONAL HOLDING LTD [SSH]S114 0.340191,19456.11
 
10/05/12
[10/05/12]
LEE WAN TANG [DIR]S100 0.340193,73356.85                
 
10/05/12
[10/05/12]
NAUTICAL INTERNATIONAL HOLDING LTD [SSH]S100 0.340191,08056.08
 
15/12/11
[14/12/11]
LEE WAN TANG [DIR]S159 0.335193,89256.90                
 
14/12/11
[13/12/11]
LEE WAN TANG [DIR]S100 0.335193,73356.85                
05/12/11
[02/12/11]
LEE WAN TANG [DIR]S100 0.341193,63356.83      
05/12/11
[02/12/11]
NAUTICAL INTERNATIONAL HOLDINGS LTD [SSH]S100 0.341190,98056.05
     
02/12/11
[02/12/11]
LEE WAN TANG [DIR]S70 0.345193,53356.80               
02/12/11
[02/12/11]
NAUTICAL INTERNATIONAL HOLDINGS LTD [SSH]S70 0.345190,88056.02
     
28/11/11
[28/11/11]
LEE WAN TANG [DIR]S11 0.330193,46356.77              
28/11/11
[28/11/11]
NAUTICAL INTERNATIONAL HOLDINGS LTD [SSH]S11 0.330190,81056.00
     
28/11/11
[25/11/11]
LEE WAN TANG [DIR]S500 0.330193,45256.77                
28/11/11
[25/11/11]
NAUTICAL INTERNATIONAL HOLDINGS LTD [SSH]S500 0.330190,79955.99
      
07/09/11
[06/09/11]
LAI QIN ZHI [DIR]S71 0.337192,95256.63
    
07/09/11
[06/09/11]
LAI QIN ZHI [DIR]S100 0.343192,88156.60
     
07/09/11
[06/09/11]
LEE WAN TANG [DIR]S71 0.337192,95256.62               
07/09/11
[06/09/11]
LEE WAN TANG [DIR]S100 0.343192,88156.60
     
07/09/11
[06/09/11]
NAUTICAL INTERNATIONAL HOLDINGS LTD [SSH]S100 0.343190,29955.85
     
05/09/11
[02/09/11]
LAI QIN ZHI [DIR]S117 0.350192,78156.58
     
05/09/11
[02/09/11]
LEE WAN TANG [DIR]S117 0.350192,78156.58               
31/08/11
[29/08/11]
LEE WAN TANG [DIR]S100 0.350192,66456.54        
31/08/11
[29/08/11]
NAUTICAL INTERNATIONAL HOLDINGS LTD [SSH]S100 -190,19955.82        

 
29/08/11
[26/08/11]
LEE WAN TANG [DIR]S64 0.345192,56456.51               
25/08/11
[25/08/11]
LEE WAN TANG [DIR]S299 0.338192,50056.49        
25/08/11
[25/08/11]
NAUTICAL INTERNATIONAL HOLDINGS LTD [SSH]S299 -190,09955.79        

 
24/08/11
[23/08/11]
LEE WAN TANG [DIR]S50 0.340192,20156.41        
23/08/11
[22/08/11]
LEE WAN TANG [DIR]S251 0.332192,15156.39        
22/08/11
[19/08/11]
LEE WAN TANG [DIR]S170 0.333191,90056.32        
19/08/11
[18/08/11]
LEE WAN TANG [DIR]S300 0.347191,73056.27        
21/06/11
[20/06/11]
LEE WAN TANG [DIR]S100 0.374191,43056.18       
20/06/11
[17/06/11]
LEE WAN TANG [DIR]S150 0.373191,33056.15    
16/06/11
[15/06/11]
LEE WAN TANG [DIR]S120 0.376191,18056.10       
14/06/11
[13/06/11]
LEE WAN TANG [DIR]S150 0.377191,06056.07        
10/06/11
[09/06/11]
LEE WAN TANG [DIR]S100 0.386190,91056.02        
07/06/11
[06/06/11]
LEE WAN TANG [DIR]S200 0.385190,81056.00

AIMS AMP Capital Industrial REIT and Sabana REIT: Performance fees.

Sunday, June 17, 2012

This issue of The EDGE has a very interesting article by Goola Warden on S-REITs. In a nutshell, it looks at potential conflicts of interest between their external managers and unitholders. To this end, it looks at the layers of fees charged by the managers.

As investors, we want to make sure that the REIT managers are fairly rewarded since no one would work for free. However, we have to safeguard our interests too especially when there is a lack of uniformity in the way the fees are calculated.

On the issue of performance fee, CLSA says that AIMS AMP Capital Industrial REIT and Sabana REIT are amongst S-REITs with the most equitable performance fee structures. The managers are only paid performance fees upon satisfying certain conditions.


The manager of AIMS AMP Capital Industrial REIT gets paid 0.1% of the deposited property value if distribution per unit (DPU) growth exceeds 2.5% per annum. The manager gets paid 0.2% of the deposited property value if DPU growth exceeds 5% per annum.

The manager of Sabana REIT gets paid 0.5% of the net property income (NPI) if the REIT achieves DPU growth of 10% per annum for unitholders.

So, if unitholders get a meaningfully higher DPU, the managers are rewarded with a performance fee. I doubt if anyone would quarrel with this. It appeals to my sense of fair play.

Between the two REITs, however, I believe that Sabana REIT's performance fee structure is fairer. Rewarding the manager with a percentage of the NPI makes sense because a higher DPU is probably due to a higher NPI. 

So, having the REIT manager rewarded a percentage of the NPI makes more sense to me than rewarding them with a percentage of the deposited property value.

Nonetheless, AIMS AMP Capital Industrial REIT's conditional performance fee is still better than those of REITs like Suntec REIT which pays 4.5% of the REIT's NPI as performance fee to its manager regardless of performance. 

Er... Am I missing something here?

Seems like there is more reason to like Sabana REIT now apart from its very high distribution yield. ;)

Reference:
"Growth versus value.", Goola Warden, The EDGE, pages 22 to 24, 18 June 2012.

Related posts:
1. Sabana REIT: 1Q 2012 DPU 2.26c.
2. AIMS AMP Capital Industrial REIT: 4Q FY2011.

Olam: Accumulate now?



A few days ago, I blogged about Olam and how Kim Eng has a SELL recommendation. That got a reader who is invested in Olam sufficiently flustered to send me an email. Hey, I was just sharing an analysis which I thought made sense. Don't shoot the messenger and if it is any consolation, my badly timed initial investment in Wilmar fared worse.

"Olam has been the second worst performing member of the STI this year, with only Wilmar having done worse." (The EDGE, 18 June)

Anyhow, the article by Joan Ng in the same publication went on to report that CIMB Research thinks that present cheap valuations could be a buying opportunity for long term investors.

"The correct investment stratey to follow since 2009 has been to raise market exposure and beta when sentiment enters the panic zone, like now," Ajay Kapur, Deutsche Bank. He notes that there have been three major reflation exercises over the past three years.

"At the start of each of these episodes, investors were incorrectly cynical, consumed by the panic of the moment. We think we are on the verge of another policy reflation in the coming weeks or months. Start buying during this bottoming process rather than over-analysing." (The EDGE, 18 June)

For the numerically inclined, Olam is said to be trading at a price to book value of only 1.2x now compared to its trough of 1.5x during the global financial crisis.

Accumulate? Olam's management seems to think their stock presents great value too.

Related post:
Olam: Share price up on buy backs.


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