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To be richer, be comfortable with being invested.

Saturday, July 28, 2012

I met someone recently who told me he is swearing off the stock market for good. I asked him why. He told me that he lost a lot of money in the global financial crisis but he managed to recover all his losses in the ensuing recovery. That is good news, isn't it? Well, apparently, Mr. Market took back some of the gains in the last one year. So, he is still in a nett loss position.

I asked if his investments paid any dividends and he said yes but very little. He said that with the amount of time and effort he put into the stock market, he might as well just leave the money in a fixed deposit and save himself some headache (and heartache).

This person was not a very close friend but for some reason when I meet people, the conversation would steer towards investments and personal finance matters. Anyway, as I did not know the person very well, I did not want to volunteer too much information because it could come back to haunt me one day.

However, I could not resist asking if he had thought of REITs. He looked at me with frown and said he vaguely remembered reading in the newspapers that REITs were a waste of time. He asked why did I ask. I told him I have some investments in REITs and they have been very good to me. He was curious and asked me for more information. I was in a slight fix.


I believe that for any investor, the most important knowledge is not TA or FA, it is self-knowledge. Know ourselves and we will know if a product is suitable for us. Know ourselves and we will know if a certain something is what we have been looking for. We could have all the financial knowledge in the world but not knowing ourselves, we could end up having sleepless nights as investors.

Why are investors in the stock market? To make money. Why do drivers go on the road? To get from point A to point B. Well, that would be a logical assumption. There are many types of investors in the stock market just like there are many types of drivers on the road. Each type would have a distinct behaviour but they all share one primary reason for doing what they do.

Some drivers are speed demons and they also like weaving in and out of traffic. On more than one occasion, a speeding car which had overtaken my slower Mazda 2 a few minutes before would be waiting for me at the next traffic light a few minutes later. Of course, if the driver had not been stopped by the traffic light, he could have reached his destination a few minutes earlier. Just for a few minutes, why increase the risk of getting into an accident?


Some spend much of their time in the stock market looking for the next big thing. The theme is multi-baggers. Is this wrong? No, of course not. I do it too. If we could find a multi-bagger, we would be rewarded many times over. However, once invested, the waiting is the hardest. What if something were to go wrong? Luck plays a big part in success.

These days, I still do a spot of potential multi-bagger spotting but I am able to do it now with a greater level of comfort. Why? I have a thick cushion of capital gains and dividends received. On top of this, I have a predictable flow of passive income from my investments in selected S-REITs and some high yield stocks. So, it helps to reduce any feeling of anxiety if my spotting becomes spotty. Being comfortable, therefore, would contribute to our success rate and if we are honest with ourselves, we would agree that this rings true.

We have probably heard from gurus that we must be emotionless in the stock market. I am only human. So, try as I may, I am not totally without emotions. I know that we should be greedy when others are fearful but if I do not have a greater level of comfort, I find it hard not to be at least somewhat fearful. It is like a person on a flying trapeze. He would feel less fearful if he had a safety net, wouldn't he?


I am a creature of comfort in more ways than one. I must feel comfortable in anything I do. I believe every human being is the same. Now, when financial advisors ask us what is our risk appetite, they could very well be asking us what is the level of comfort we need before we might want to take the plunge. Why do they not ask it differently? I wonder.

Finally, after such a long winded discourse, I am back to where I started. I asked this person to closely examine what he needs in order to feel comfortable in being invested in the stock market. That answer lies within him and he has to be honest with himself. Once he has the answer, things would fall into place and he would know what to do. Ideally, anyway.

Related posts:
1. Of primates and their diet.
2. Trading to put food on the table.
3. A common piece of advice on saving.
4. To protect our wealth, we have to take risk.
5. Why do I not panic?

What should a Singaporean have by age 35?

Friday, July 27, 2012

I came across an article in Yahoo!Finance: "The 5 things every Singaporean should have by 35."


The 5 things the author listed are:

1.  A time deposit that would be maturing soon. He thinks that people should start by having a reliable investment scheme in their 20s and went on to say that fixed deposits are a good place to look... er...

2.  A relevant degree. He thinks that a degree is the norm these days and people should get a degree as soon as possible. He also thinks that a degree is the key to employability. I wonder if diploma holders might disagree and, also, I guess for those who are more entrepreneurial, a degree might not really be a necessity.

3. A job with a health plan. OK, this sounds kind of strange to me. It is as if one of the reasons for working for company ABC must be because it has comprehensive health benefits for employees... I would rather have a comprehensive personal medical insurance policy. After all, what if company ABC were to retrench me?

4. All rollover debts resolved. This means no credit card debts. I think we should not have any credit card debts no matter our age. It is the most expensive debt anyone could have! 24% interest per annum? Of course, there are balance transfer offers aplenty these days but they aren't exactly free either, are they? So, zero rollover debts from the day we get our credit cards, period.

5. At least one form of side income. He says it doesn't matter if it is forex trading, franchise ownership or a money making hobby. This is to provide for retirement and some extra spending money. I would agree to this but I would try to make it so that this side income is passive in nature. The side income should be such that it continues to flow in even if we should be incapacitated in one way or another.

The author probably means well but I cannot help but feel that the article was hastily written although it is obvious to me that the writer has a flair for writing.

I suppose people in different age groups would have different things to say about what we should have by age 35. What would you say are the things we should have by age 35?

CapitaMalls Asia: Interim dividend of 1.625c per share.

Thursday, July 26, 2012

Hurrah!

CapitaMalls Asia posted profit after tax and minority interests (PATMI) of $232 million for 2Q 2012, an increase of 40.7% from the $164.9 million for 2Q 2011.

Earnings before interest and tax (EBIT) were $283.8 million for 2Q 2012, 33.4% higher than the $212.8 million for 2Q 2011.

CapitaMalls Asia has declared an interim dividend of 1.625 cents each.



Cache Logistics Trust: 2Q 2012's DPU down 5%.

A drop in DPU? Yes, that is right. From 2.086c in the last distribution to 1.981c this time round.


This is due mainly to a private placement of 60 million units in March this year. This is an important reason why I prefer a rights issue to a private placement.

With a rights issue, all unitholders are given a chance to participate in the enlarged capital base of the REIT. With a private placement, retail investors are usually disadvantaged.

Although the DPU might still fall 5% if the REIT had a rights issue instead of a private placement, at least all unitholders would have had a chance to buy new units at a discount which would mean the distribution yields on their investments would be less affected negatively, if at all. Unitholders would also be able to benefit from the price appreciation of the rights units.

Well, it remains to be seen if the management is able to improve DPU in the coming quarters, raising it to the level before the private placement in March.

NAV/unit: 90c.
Gearing: 27.5%.
Interest cover ratio: 7.5x.

With gearing lower at 27.5%, new acquisitions could be in the pipeline.

See presentation slides: here.

Related post:
Cache Logistics Trust: 1Q 2012.

First REIT: 2Q 2012 DPU unchanged.

Wednesday, July 25, 2012

First REIT has delivered another quarterly DPU of 1.93c, unchanged from the last quarter. However, the quarterly DPU of 1.93c would not be repeated as it includes the final payment from the gain from selling of its Adam Road property. This is why I have cautioned more than once that we should use a more conservative quarterly DPU estimate of 1.6c when valuing the REIT.


The REIT goes XD on 30 July 2012 and income distribution is payable to unitholders on 29 August 2012.

NAV/unit: 79.5c
Gearing: 15.9%
Interest cover ratio: 11.8x
Occupancy: 100%

In 2H 2012, the REIT could see marginally higher income once a 5 storey annex is completed in its Lentor Residence later this year. It is also expected to take advantage of its low gearing and acquire more properties from its sponsor, Lippo Karawaci. The REIT has ROFR to several properties in Indonesia in various stages of completion.

Lentor Residence

First REIT's current unit price is definitely on the high side. Mr. Market is not known for patience. So, if the REIT should be tardy in its efforts to improve DPU, we could see its unit price declining over time now that the contribution from the sale of its Adam Road property will cease.

See slides presentation: here.

Related post:
First REIT: 1Q 2012 DPU of 1.93c and a higher fair value?

Ascendas Hospitality Trust: Am I interested?

Monday, July 23, 2012

Over the weekend, a friend asked me if I would be interested in Ascendas Hospitality Trust although he knew that I am generally not interested in IPOs. He was just asking for my thoughts on the Trust.

Ariake Sunroute Hotel, Japan.

Ascendas Hospitality Trust (A-HTrust) will be offering 437.33 million stapled securities at 88 cents each for mainboard listing in its initial public offer (IPO) in Singapore.

(Source: The Business Times, 18 July 2012)

What are stapled securities?

Stapling simply means that two different securities are "stapled" together for the purposes of trading or transfers. Stapled security could comprise two or more of the same or legally different instruments, for example, a share in a company and a unit in a trust.

The trust(s) and the company(ies) can hold assets and operate businesses, but active business, such as asset management and development are typically conducted by the company while passive investments in property or funds are undertaken by the trust. In practice, the trust and the company effectively operate as one entity although the company continues to be a separate legal entity from the trust.

Source: http://www.invested.hk/invested/en/html/section/index.html

For example:

CDL Hospitality Trusts is a stapled group comprising CDL Hospitality Real Estate Investment Trust ("H-REIT"), a real estate investment trust, and CDL Hospitality Business Trust ("HBT"), a business trust.

Well, what do I think of Ascendas Hospitality Trust? I won't do a thorough analysis of the Trust because I don't really have the inclination although I will share why I am not interested in it (now).

ibis Beijing Sanyuan Hotel.

Initially, the Trust will hold 10 hotels in its portfolio. These hotels are in the countries of China, Australia and Japan with Australia contributing to some three quarters of its income. The Trust also projects an 8% distribution yield in the year 2014.

I feel that I need to be conversant in the economies of three countries and the health of their respective tourism sectors to analyse how well they could continue doing. I would also need to take into consideration that income would be collected in three foreign currencies and converted to S$ for distribution to unitholders. Foreign exchange rates would affect income in S$ terms.

So, analysing this Trust and forecasting its future income is somewhat more challenging. It is less straightforward.

Then, what about my investment in Saizen REIT? Isn't that Japanese?

I won't say that I am conversant with the Japanese economy or its housing sector but I am a bit better informed in the area. Also, it is one country, not three and I only have to look at a pair of currencies, not three.

Saizen REIT is also holding residential properties, not hotels. Demand for housing is more inelastic compared to demand for hotels and with the type of properties Saizen REIT owns, there is lesser correlation with the ups and downs of the economy. Demand for hotels, however, is very different.

Ascendas Hospitality Trust is going to demand a lot of time and effort from me if I were to be become a unitholder. An eventual 8% distribution yield? I will need a higher distribution yield to entice me into this one in view of the work I have to do.

Hong Kong Disneyland - Grizzly Gulch!

Where to go during the upcoming school holidays?


Disneyland, where magical moments happen every day!

Hong Kong Disneyland is bringing in new exclusive theme lands to add to all the fun!


Grizzly Gulch - Wild wild west!


Grizzly Gulch is an upcoming theme land set to open at Hong Kong Disneyland, this will be a World Exclusive only for Hong Kong, so you won’t be able to find this in any other Disneyland around the world!

Toy Story Land

Remember the familiar phrase “To infinity & Beyond!” from Buzz Lightyear? Now you can experience the magic at The Asia Exclusive Toy Story Land which opened last November!

Bring out the child at heart and set sail to enjoy the new theme rides and just bask in Disneyland’s magic: Hong Kong Disneyland


Good deal:
4 Days 3 Nights Hong Kong at less than $400 per person. Find your Hong Kong Long Weekend Getaway at the best price with ZUJI.


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