Happiness in 2012.

The new year is just hours away.

I took this photo in Ueno Park during my recent trip to Japan. The scene has a calming and pleasing effect on me.

Bicycles are important transportation vehicles in Japan. I smiled when I saw this bicycle.

Daibutsu in Kamakura. "If one speaks or acts with pure thoughts, happiness and peace of mind will follow."

This helpful sign outside a shop solicited a hearty laughter from me.

Very often, simple things can make me happy.

May all of us find happiness every single day as we celebrate the simple things in life.

Happy 2012.

Hyflux: Broke resistance.

On 15 Dec, I said, "Right now, $1.065 is immediate support provided by the 123.6% Fibo line. A stronger support would be at $1.015, the 138.2% Fibo line and a golden ratio."

Hyflux's share price touched $1.015 on 23 Dec, forming a white spinning top at the end of that session. A positive divergence was also formed in the process. A lower low in price and a higher low in the MACD. A buy signal. Congratulations to anyone who went in on the long side then! (I think I was visiting museums, temples and shrines in Ueno that day.)

Its share price has overcome the resistance provided by the 20dMA. Any further increase in share price will see resistance at $1.22 (the high in early December) and $1.24 (as provided by the declining 50dMA).

There is, however, no sign of a trend reversal in the weekly chart. So, conventional wisdom would suggest selling into strength instead of holding. If $1.24 could be overcome convincingly, there is a chance that the declining 20wMA which would approximate $1.39 next week could be tested. This would coincide with a natural candlestick support. Whether it would happen would depend on the strength of this rebound.

A partial divestment at immediate resistance could be prudent although the very high volume that accompanied the formation of the long white candle in the weekly chart holds promise for long holders. Good luck to fellow shareholders.

Related post:
Hyflux: Continuing downtrend.

A common piece of advice on saving.

I want to say something about a very common piece of advice dished out by many financial advisors and that is to save at least 10% of our take home pay. 

Now, this is an easy enough one liner but is it easy to put into practice?






For me, however, I have always said that saving even 10% is too little. Of course, everyone's circumstances are different. 

So, for some, 10% is all they can manage. For some, even 5% could be a challenge. I have found out, over the years, that many do not save anything at all.

For people who are saving 5% to 10% of their salary every month, they want to work on increasing that percentage. For those who are not saving anything at all, it is worrisome indeed.




These people should sort out their needs and wants and see if they could start saving some money regularly. 

If they have made all possible reductions to their expenses, they might want to find ways of increasing their incomes. This will power up their savings rate assuming that all additional income earned is saved.

It might sound trite but saving is the very first step in an average person's journey towards financial freedom. Remember, it is always hardest in the beginning. Start and don't stop. As we gather momentum, it gets easier with time.

Remember Newton's first law? Yes, it is the law of inertia. Without exerting a force to make a change in our lives, we will remain where we are and inertia is bad company. Once we force ourselves to move and stay the course, inertia becomes a good friend.

Remember also the POSBank mascot, a squirrel. We were always encouraged to save in our school days. There is no reason why we should stop once we leave school. 

Squirreling away even a small amount each day would definitely add up. The result could be amazing when coupled with prudent investments.





Shall we perhaps start with that drink we always buy in the canteen during lunch? Could we instead drink from the water fountain in the office or make a cup of coffee in the office pantry?

Saving $1 each working day would mean $20 a month or $240 a year. A cup of coffee from Starbucks would cost many times more. Quite unhealthy too, in more ways than one. Seeing stars?

Invest the $240 for a 10% yield and we would have 24 cups of "free" coffee in the following year. If we like Starbucks' coffee, it would work too.




Now, assuming Starbucks' coffee costs five times more, if we should be willing to "downgrade", we could be looking at 120 cups of "free" coffee instead of just 24. Downgrade? Another sacrifice? If we can live with it, why not?

Trust me when I say that frugality has a way of growing on us. Saving $240 this year might yield 24 cups of "free" coffee in the following year but once we are used to not paying for coffee as a working adult, we could have "free" coffee for the rest of our lives when we finally retire. Amazing, isn't it?

Sacrifices made today could transform into huge gains over time. Believe it.




Related posts:
1. Wage slaves should be fearful.
2. Do you want to be richer?
3. Seven steps to making passive income from the stock market.
4. Roads to wealth creation in the stock market.

Berkshire Bak Kwa!

Berkshire Hog are known to produce supreme quality gourmet pork. Also known as (KUROBUTA) (Black-pig) in Japan and recognized as WORLD’S BEST PORK.

No hormone or antibiotics are used in the feeding process and natural pork are minimally processed without use of artificial ingredient.

Fragrance is the first Bak Kwa manufacturer in Singapore to introduce the 100% USA Berkshire Pork Bak Kwa. Also known as Black Pork or Kurobuta Pork, Berkshire pork is prized for juiciness, flavour and tenderness, is pink-hued and heavily marbled. Berkshire Hogs grow at their own pace, with humane farming techniques and without the use of antibiotics or hormones.

Fragrance “Black Pork” Bak-kwa are being marinated in our special recipe including 18 precious herbs without any use of preservatives.

Each piece of our US Berkshire Pork Bak Kwa is individually vacuum sealed for freshness and is 100% made in Singapore with no preservative added

Get some for this Chinese New Year:
http://sg.churpchurp.com/AK71SG/share/fragrance

Tea with AK71: Mechanical car parks.

I am back in Singapore. Got home at 2am and slept at 3am. Woke up at 8am. Unpacked, read the news a bit and replied to comments here in my blog.

Thanks to everyone who sent me well wishes for my trip and apologies to those whom I did not manage to reply to till this morning.

I did not look at the stock market or my blog while I was on holiday in Japan the last 10 days or so. When I looked at my watchlist this morning, nothing has really moved. My portfolio's value has remained almost unchanged.

It is interesting that the HDB is thinking of introducing mechanical car parks for older estates where there is little or no space to build more car parks. I took some photos in Japan of such car parks.

In fact, land shortage is so chronic in Japan that they even have mechnical parking for bicycles!

Some families who own two cars but have only enough space at home to park one car also mechanised the space so that they can park two cars instead of one!

It will take me a while to get back to speed with life in Singapore but it is good to be home. :)

ASSI celebrates second birthday!

In another week, my blog will be two years old. Yes, time flies, doesn't it?

It seems like just a few weeks ago when I started this blog out of curiosity and boredom. Never in my wildest dreams would I have imagined how it would grow into what it is today.

I took this photo almost a year ago with my Samsung camera phone. Still a favourite of mine. Nice blue lights for Christmas!

I will be going away for a couple of weeks on another vacation. I will probably not be looking at the stock market or blogging in the meantime.

So, this is a big "thank you" in advance to everyone who has been encouraging me on my blogging journey thus far. Merry Christmas and Happy New Year!

ASSI is featured in NextInsight.

Today, ASSI is featured in NextInsight.

Two blog posts on my passive income generated from S-REITs this year have been republished. Comments from three readers as well as my replies are also highlighted.

AK71 is happy. :)

To see the article in NextInsight as well as to find out which three readers and their comments are mentioned in the article, click here.

Drum roll, please. ;)

REITs: Leasehold properties.

I have had quite a few exchanges with readers regarding REITs and their properties' land leases, if any. Readers who follow the comments section of my blog would be aware of this.

After a while, I realise we could just be running through the same points again and again. So, I am putting up my thoughts in a proper blog post written as a reply to a comment by a reader, Marti:

Hi Marti,

Yes, land leases should not be looked at in isolation. Like you said, if shorter leases are coupled with very high yields, they could still make great investments.

So, properties with shorter land leases if for any reason should be in great demand could command higher rents while freehold properties if for any reason should be lacking in demand could have lower returns. So, investing in the former might make sense as there is also time value of money to consider especially if the difference in yields is stark. We get back more money in a shorter period of time instead of a dragging out of much smaller payouts (although we could receive them forever).

So, if a property has say 15 years left to its lease but is able to generate a 20% return per annum, it would still make a fairly good investment. In situations where people feel that it makes more sense to rent than to own properties, this could come to pass.

I don't think an argument that REITs with properties with shorter land leases should offer higher yields to make investment sense is a persuasive one unless we assume that the managers do nothing to their portfolio of properties under management from IPO to the time their properties' land leases run out. How likely is that?

REIT managers will very likely divest older, less productive properties and acquire newer, more productive properties. They will very likely, conditions permitting, undertake development of properties and have AEI. Asset renewal keeps overall age of leasehold properties younger while development properties and AEI improve distributable income, all else remaining constant.

The issue of whether REITs have leasehold or freehold properties and their implications is not unimportant but I feel that it could have been given too much prominence in some quarters and by some people at the expense of a more holistic approach in the analysis of REITs.

We want to keep things simple but not simplistic.

Capitaland: Rising MACD in weekly chart.

I look at weekly charts when I am interested in the longer term technicals of a particular stock. I got more shares of Capitaland at $2.35 not too long ago. Its price hit a low of $2.25 so far today.

However, as my motivation for being invested in Capitaland is because of its cheap valuation, I am not too concerned with short term price weakness. Of course, I might do a bit of trading if I could make some extra money on the way.

With this in mind, I looked at the weekly chart earlier. I found that the MACD is rising as price weakens. A positive divergence.

Also, up till now, this week's volume has been relatively low compared to last week's. We need to see how things pan out tomorrow, the final trading day of the week.

Connecting the lows of the weeks of 22 August and 3 October gives me a trendline which suggests that there could be support at $2.16 if the counter should go that low in price this week or next.

Office S-REITs VS. Industrial S-REITs (3).

Earlier this year, I shared some salient points in a research by DTZ.

Update (23 November 2011):

Singapore's office property market has lost its appeal as an investment, according to real estate firm DTZ.

DTZ said demand for office space has declined, and the sector is now considered "cold".

It defines "cold" as property that is more than 5 per cent overpriced, with potential yield below expectations.

"Singapore has traditionally been a volatile market, and our rental outlook has been impacted by the global slowdown, resulting in lower expected returns over the next five years," DTZ said in a statement.

It also lowered its forecast for rental growth in industrial property to 3.1 per cent over the next five years.

Read article here.

I have shared in various blog posts why I am heavily invested in industrial property S-REITs compared to office property S-REITs, believing that prospects for the former are relatively better in the next few years.

At current prices, distribution yields for AIMS AMP Capital Industrial REIT (94c) and Sabana REIT (87c) are in excess of 10%. Income distributions are sustainable given the long leases. The REITs also have many months of rental deposits collected as safeguards against tenants defaulting. Balance sheets are relatively strong with gearing levels at 30+%.

It is hard to say if unit prices of industrial property S-REITs would or would not weaken over the next few months. However, it is safe to assume that they are relatively good investments for income.

Added on 16 Dec 2011:
Rents for Grade A office space to fall by 15 per cent in 2012: Savills
Layoffs in several banks have hurt the office market as firms also turn conservative and hold off expansion to save costs.

Related posts:
1. Industrial rents forecast strongest for Singapore.
2. Office S-REITs VS. Industrial S-REITs (2).

Hyflux: Continuing downtrend.

My recent decision to go long in Hyflux has turned out poorly. It was a decision heavy on TA and almost nothing FA wise. So, should I cut? Regular readers know that I do not like to cut as prices are declining.

Prices go down a river of hope and I would like to cut on rebounds and if prices should test resistance. If the opportunity does not present itself, then, it is another stock for the freezer.

I have always liked Hyflux's business but in the last crisis, I chose to invest in E-pure instead for its less demanding valuation. Some told me that Hyflux would be safer as E-pure was an S-chip. We are probably all affected at the subconscious level in the same way.

In the last crisis, Hyflux touched a low of $1.11 in October 2008. Today, this low has been taken out.  Does this mean that Mr. Market feel that Hyflux will do a lot worse compared to the last crisis? It does seem to be the case.

Despite all the concerns raised regarding Hyflux's debt, its numbers are still pretty good.

Net margin:
13%. This is a good business.

Net gearing:
0.1x. Concerns regarding Hyflux's debt overdone perhaps?

Contributions from Tuaspring Desalination Plant to start in FY2012.

See slides presentation 3Q FY2011: click here.

Technically, Hyflux is in a downtrend. Looking at the chart, the very long term support would be at $1 (a many times tested support back in 2002) and $0.86 (the low of 9 Sep 2002). Would these be tested in time? No one can say but if they should be tested, they would be buying opportunities.

Right now, $1.065 is immediate support provided by the 123.6% Fibo line. A stronger support would be at $1.015, the 138.2% Fibo line and a golden ratio.

AIMS AMP Capital Industrial REIT: Accumulate on weakness.

I bought more units of AIMS AMP Capital Industrial REIT today at 93.5c. 

Price touched a low of 93c on relatively high volume today. In the following days, if selling pressure does not let up, we could see the next support at 92c tested. That would bring us back to price levels not seen since December 2009.

Although the MFI and Stochastics both suggest that the REIT is terribly oversold, in very bearish circumstances, price could continue to drift lower with momentum oscillators remaining in their oversold territories.

If price should go lower to test 92c, I would like to see the MACD forming a higher low. This would hint that downside momentum has weakened. It would also give us a positive divergence.

The redevelopment of 20 Gul Way is NPI yield accretive and because it is funded fully by debt, it is also DPU accretive. It is estimated that contributions from the redevelopment will start from 1Q 2013. 

By early 2014 when both phases of the redevelopment are generating revenue, the management expects a positive DPU impact of +1.465c, everything remaining equal. This would mean a pro forma DPU of 11.465c or a distribution yield of 12.26% based on today's closing price of 93.5c per unit.

We could see continuing weakness in the REIT's unit price if sentiments remain bearish. I would capitalise on further weakness to accumulate as I could find nothing wrong with the REIT's fundamentals.

See slides presentation regarding progress in the redevelopment of 20 Gul Way: click here.

2011 full year passive income from S-REITs.

On 7 Dec, income distribution from AIMS AMP Capital Industrial REIT was received. It was also the final income distribution to be received from my portfolio of S-REITs this year.

Total income distribution received in 4Q 2011:
S$ 29,040.65.

Add this to S$ 75,785.49 received in the first three quarters of 2011, the grand total for the year 2011 is S$ 104,826.14.

I received more income this quarter because I made use of the weakness in the stock market to accumulate more units in selected S-REITs.

I have imperfect knowledge definitely and I can only try to do the best with what I know. I don't spend time asking questions which I cannot reasonably find answers for.

As many may already know, it was after much deliberation that I decided to share in dollar terms the passive income I am receiving from my investments in S-REITs. From the flood of comments I received in my last blog post on the subject, I guess readers do appreciate this candid sharing.

However, I doubt such a blog post serves any other purpose than to show what is achievable if we put our minds to it. The message is really simple and it is meant to inspire.

So, don't be surprised if I do not do another blog post like this in 2012 since I do not believe it would be more useful than this or its predecessors.

Once again, if you need a little encouragement, remember, if AK71 can do it, so can you! Bookmark this page if you think it helps. Add oil!

Related post:
$120k annual passive income from S-REITs next?

Citibank Make A Wish: Win $1,000 weekly!

$1,000 to be won weekly!

6 winners will win $1,000 worth of shopping, driving or dining vouchers each in the next few weeks. Simply make your wish and share the reason for your wish, get as many friends to vote for you as possible, and you could be one of the lucky six!

So quickly, make your wish on the Citibank SG Facebook page by 21 Dec 2011 and tell friends to vote for you!

Find out more here:
http://sg.churpchurp.com/AK71SG/share/citibank

Capitaland: Bought at $2.35.

Property counters continue to be sold down today. Mr. Market is really worried about the aggressive cooling measures announced by the government, it seems.

What do we do when there is lots of fear and prices are battered down? Ask ourselves if there could be some good stocks we might be able to buy on the cheap. I wondered especially if all property counters are going to be affected to the same degree?

Companies which develop luxury residential real estate like SC Global and Ho Bee are likely to be more affected by the new cooling measures as a bigger proportion of buyers of the properties they develop are foreigners. The impression I have is that they are also less diversified and have a bigger chunk of their business in Singapore luxury residential properties.

Fundamentally, in comparison, the more diversified Capitaland is probably less affected and, in fact, with plans to spin off more properties in China into two new REITs, it could see positive interest from the investment community in an otherwise down market. Capitaland is likely to weather the storm pretty well.

Technically, $2.35 looked like it could be a strong support, having been breached only once since April 2009. So, I put in an overnight buy order at $2.35 which was filled this morning.

Well, today marks the second time this support has been breached since April 2009. The counter's price managed to close at $2.35 but not after touching a low of $2.31. Volume, although still relatively high, reduced today as a black spinning top was formed. This is a possible reversal signal but in case of further weakness, next support is at $2.28.

Related post:
Selling a private property just got harder.

Buying a private property as an owner-occupier? Think like an investor!

This blog post is in response to a comment by a reader, Jaime. See it here.



Hi Jaime,

How to buy a private property for self stay? I am most probably considered an amateur when it comes to buying private properties but I am happy to share my thoughts with you.

Just keep visiting showflats if you want to buy new. Or keep viewing apartments (look through the classifieds in the papers or search sites like Property Guru) if you do not mind buying from the resale market.

So, when you finally find a property you like and within your budget, do you just buy? That is a million dollar question, isn't it?

Even as a potential owner occupier, to answer this question, we have to think like an investor. This is the only way we do not end up overpaying for that dream home. We can pay but do we want to overpay? Remember, it is never about affordability, it is always about value.

A property's value is determined by the rent it is able to fetch if it were rented out. The higher the rent, the higher the property's value. Putting it simply, we will always value highly anything that is able to benefit us more, right?

Annualise the potential asking rent and calculate the yield based on the selling price of the property. This gives you a very rough idea if a property is worth buying.

To get a more accurate picture, ask how much is the monthly payment to the MCST, property tax and find out how much would insurance cost. Deduct all these from the annualised rent. What is left is net property income (NPI) or income after all maintenance costs have been accounted for. Calculate the NPI yield based on the selling price of the property.

If a housing loan is taken to finance the purchase, interest rates must be given due consideration. In the current low interest rate environment where housing loans could attract interest rates of 1% or lower, a NPI yield of just 3 to 4% is probably enough to make a property investment worthwhile.

If interest rates should bump up by a percentage point or two, investors would demand higher NPI yields as well. This could be achieved either through higher rents or lower selling prices. In a weak economy, prices across the board would likely take a hit since higher rents are less likely to come by. Lower rents and prices are even more likely when coupled with oversupply.

Some might ask why I say 3 to 4% NPI yield is enough to make a property investment worthwhile if interest rate is low? Isn't inflation in Singapore in excess of 5% now? Shouldn't we be invested in assets that could outperform inflation rate?

Well, theoretically, real estate should see its value at least keeping pace with inflation. So, investing in real estate should give us returns over and above inflation rate. Remember, however, that this is in theory. In reality, this is an imperfect world and there will be times when things go out of sync due to decisions made with imperfect knowledge; and these are times when savvy investors capitalise on the imperfections either as a buyer or a seller.

There will be times when things could go horribly wrong, when things go out of sync for a prolonged period. When something is stretched to an extreme, it does not just return to the mean. It is likely to overshoot to the other extreme as it tries to find equilibrium again. Sounds scientific, does it not?

You might be thinking of buying a home for self stay but think like an investor and look for value. You might one day monetise your home. Who knows?

Oh, yes, it could be lots of legwork but have fun in your search in the next few years. It is going to be a buyers' market. So, sharpen your bargaining skills. ;)


You might also be interested in these blog posts:

1. Making your first million dollars in real estate investment.

2. New or resale property?

Selling a private property just got harder.

The Singapore government has "imposed an Additional Buyer's Stamp Duty (ABSD) for private property of between 3 per cent and 10 per cent for Singaporeans, Permanent Residents and foreigners to moderate investment demand for private residential property and promote a more stable and sustainable market."  Read article here.

This development is likely to hasten the weakening of private residential real estate prices which is something I expect to become really evident in 2014 or 2015.  Weakness in the resale market would probably manifest itself markedly much earlier now.

Anecdotal evidence already shows that it is harder to find buyers in recent weeks. The ABSD which takes effect from tomorrow will likely cause weaker sellers to lower their asking prices.

In real estate investment just like in any investment, price is always a function of who is more enthusiastic, the seller or the buyer. Such enthusiam or the lack of it is the function of many contributory factors. How is the enthusiasm competition stacking up?

If we search Property Guru for listings of recently completed condominium projects, we would be amazed by how many are trying to sell their units. So, let us see The Trevista in Toa Payoh which recently got its TOP.

The Trevista has 664 listings under "units for sale" right now! Granted that many listings are probably repeated, let us say each unit has been advertised by 5 different property agents, it would still mean that 130 units or so are up for sale. There is no question that many bought private real estate as an investment in the last year or two.

Now, the more realistic investors would probably settle for lower selling prices. In the end, those who are unwilling to sell at lower prices must have holding power. What affects holding power? Rental and interest rates. Rental should be as high as possible and interest rates should be as low as possible. Of course, how much financial muscle one has to begin with is an important consideration too for obvious reasons.

The rental market has been softening, from what I hear. So, rents, in time to come, could provide diminishing comfort. With more residential real estate being completed over the next few years, lower rents are a realistic expectation.

Interest rate although widely expected to remain low until 2013 is a wild card from then on. With expectations of oversupply from 2014 onwards, the expiration of low interest rate at the same time would be a double whammy.

Good luck to all who are still heavily invested in private residential real estate in Singapore.


Latest update (CNA, 8 Dec 2011):
CEO of PropNex Realty Mr Mohamed Ismail said he expects a price correction of approximately 15 to 20 per cent in the central core region and a correction of 10 to 15 per cent in the mass market segment in the next six months.  Read article: click here.

Related posts:
1. Money continues to flow into Singapore.
2. Should we be staying invested or in cash?

NOL: Is the worst over?

Despite negative sentiments towards shipping companies, NOL's chart is showing signs of bottoming. If it has not bottomed, it has certainly found a floor and a rather strong one at that.

The long white candle formed today was on the back of relatively high volume. Fibo lines show that $1.175 is a rather strong resistance and if we could overcome this convincingly, next resistance levels are at $1.19 and $1.205.

The MACD has formed a higher low and has once again ventured into positive territory. Momentum has once again turned positive, if only barely so. The MFI is set to form a higher high which suggests a return of demand. Being above the 50% line, we could see some support afforded by this line in case of a retracement in price.

For a longer term picture, look to the weekly chart for clues. The MACD has been rising since the middle of August but it is still in negative territory. The MFI is currently supported by the 50% line. It also looks like we could be seeing the formation of a double bottom.

More importantly, for the first time in a long time, price is above the 20wMA. The week, however, has not ended. So, the situation is still fluid.

A pattern is not formed until it has formed, of course. However, the worst could be over for NOL.

Tea with AK71: Macarons from ZUJI.

Today, I got a treat from ZUJI. They sent me a box of six macarons. What are macarons? I know what is macaroni. ;-p

Very nicely boxed and ribboned.

 
Wikipedia says it is "a sweet confectionery made with egg whites, icing sugar, granulated sugar, almond powder and food coloring. The macaron is commonly filled with buttercream or jam filling sandwiched between two cookies."

Letter says to eat within 3 days but the expiry date on the box says 8 Dec 2011.

According to a colleague, these macarons are quite pricey and they are being sold in atas places like MBS. Price? $3+ each! Oh, my goodness! I could have a very good lunch for $3! Sorry for the exclamations but I am not well informed when it comes to atas food and atas malls.

If I was not told, I would have thought the box of macarons is at most $5 in price. So, this box of 6 macarons is worth more than $18!

I was told that Canele is definitely branded.

Macarons melted and cracked during delivery but the aroma was heavenly. Yummy too.

Oh well, just food to me. It is very nice of ZUJI to send me something sweet for booking hotel rooms and sometimes air tickets through them. I do have a sweet tooth. :)

Planning a trip? Check if ZUJI has a good deal for you! Click here.

LMIR: Too cheap to sell.

Some who managed to get a meaningful number of excess rights might be thinking of selling these rights for a quick gain. After all, selling at 36.5c today would mean a capital gain of 5.5c or 17.7%. This is more than 18 months' worth of income distribution from the REIT if we were to use my estimate of 3.26c in annual DPU, post rights and acquisitions.

Personally, I wouldn't sell my rights units as I am investing for income. I will be getting 10.5% distribution yield on cost. That is pretty good, especially when we consider the fact that its gearing level is below 10%.

However, if I should consider selling, at what price would I sell? Similar to First REIT, I feel that an 8% distribution yield should be fair. 8% distribution yield is still fairly high but looking at First REIT's unit price, it would seem that Mr. Market is not willing to accept a yield lower than 8% for a REIT with an Indonesian focus.

Some might argue that LMIR traded in excess of 60c a unit not too long ago. Even at just 60c, it would mean it had a distribution yield of 7% (based on the estimated annual DPU of 4.2c back then), a full percentage point lower than 8%. A persuasive argument.

So, when would we see fair value for LMIR? When its units are trading with a distribution yield of between 7 to 8% would be my guess. Assuming that its annual DPU does not change from my current estimate, that would mean a unit price of 41c to 46.5c. It is currently still too cheap to sell.

Risks, risks and risks.

This blog post is in response to a comment by a reader, Temperament: click here.

Hi Temperament,

With my limited knowledge of trading, I know that true blue traders must be emotionless. They cannot fall in love with anything. They should not hate anything either. They do what the charts tell them to do, when to long, when to short, when to take profit and when to cut loss. So, I don't think they truly hedge. Hedging to traders could mean having a looser cut loss so as not to be whipsawed, perhaps.

As for risk management, I am a poor example. By conventional wisdom, we should not have more than 10% (some would say 5%) of our money in any one counter. For me, I allow up to 40% of my money in a single counter sometimes.

For sure, we can and should reduce risks in investments but it is impossible to eliminate risks.

It is very interesting how some seasoned investors would tell me that what I do is very risky, having 40% of my money in a single counter but if they only invest in Singapore equities, they are also exposed to a single country risk and a single asset risk to boot. Are they truly diversifying and reducing risk by having only 5% of their money in any one counter?

Apparently, we have to diversify across asset classes and go global to truly manage risk. How many of us mass market retail investors can do that?

So, there are risks on different levels. What about unit trusts? There would be advocates of unit trusts which are supposedly less risky. Perhaps this makes the lower returns justifiable? OK, I am being cheeky here.

Some would then argue that if we know Asia is where growth is and if we believe in Singapore, why bother with other markets? I shall leave that question open.

At the end of the day, how much risk are we able to stomach depends on the individual. We just have to be better at what we do. If we can thrive in a higher risk environment with higher rewards, that is not such a bad thing, is it?

LMIR: Excess rights.

It seems that LMIR's management has the same approach towards excess rights as First REIT's management.

Smaller unitholders would see more of their application filled compared to larger unitholders. I make this statement after exchanging notes with some friends and readers.

For me, excess rights alloted as a percentage of the units I was holding before the rights issue is about 17%. A friend's percentage is closer to 80% and he has much less invested in the REIT than I do.

Although a bit disappointed even though I kind of expected this since LMIR is controlled by Lippo just like First REIT is, I shan't complain since successfully getting excess rights is like getting free money. It's a bonus. :)

Girls, do up your hair!

In my blog post titled "REITs and rights issues: A Singaporean tale", I let my hair down figuratively. Even if I had really wanted to let my hair down, it would have been a challenge since I always cut my hair very short. ;p

For Christmas, there will be Christmas parties to attend, I am sure. Even a reclusive person like me gets invitations. I guess I am not reclusive enough.

Anyway, many would make an effort to look good for such parties. Girls especially would wonder how to make their hair look good. See how a celebrity blogger like Xiaxue does it.

Follow this link: http://sg.churpchurp.com/AK71SG/share/liese

Girls buy new clothes, get nice shoes to wear, but often, they are at a loss as to how to wear their hair. (Hey, that is what they say. I wouldn't know.)

Check out Liese’s Xmas lookbook on their facebook page:
http://www.facebook.com/media/set/?set=a.323820864311101.97856.121455291214327&type=3

CitySpring Infrastructure Trust: Worth another look?

In reply to a reader, Rookie, who asked if I would consider investing in CitySpring Infrastructure Trust now:

Hi Rookie,

CitySpring at 33.5c? With a promised annualised DPU of 3.28c, the expected distribution yield is 9.79%. This annualised DPU is, of course, lower than the 4.2c in the preceding year.

The balance sheet of CitySpring has strengthened after its latest rights issue in September which saw Temasek increasing its share of the Trust substantially (reflecting a lack of confidence in the Trust by investors) from 27.9% to 37.4%.

Borrowings: S$1,324.5m
Total assets: S$2,004.5m
Gearing: 66%.

If we take out the intangibles of S$ 420.8m from total assets, gearing goes to 83.6%.

Yield has improved and gearing has come down somewhat. However, I am concerned that there would be yet another rights issue to further "strengthen its balance sheet". When? I don't know.

Regular readers know that I only like rights issues when they are distribution yield accretive. If they are not, I need some convincing that they would be good for me in some way. Whether I would buy the argument is something else.

So, to ameliorate such a risk, distribution yield has to increase while gearing remains the same before I would consider buying in. After all, I am able to get the same distribution yield or higher from AIMS AMP Capital Industrial REIT, Sabana REIT and even Cambridge Industrial Trust without the same level of gearing. This is purely from the perspective of yield and gearing, of course.

If people like CitySpring Infrastructure Trust's businesses or even its management for some reason and find its current yield and gearing acceptable, it is their call, of course.

See slides here: Presentation 1H FY12

Related post:
CitySpring Infrastructure Trust: Rights issue.

Tea with AK71: Taste of Hong Kong.

Firstly, this has nothing to do with my recent trip to Hong Kong. This happened in Singapore. :)

I was at Illuma and had a new dining experience. Well, it was a new experience to me.

Taste of Hong Kong. Business was good!

Instructions at every table.

Waffle with bonito flakes, luncheon meat and something saucy. I loved it!

Inexpensive comfort food in an air-conditioned environment with no service charge. Burp. I mustn't do this too often. Promise, I'll try.

For photos of my recent trip to Hong Kong, go to my travel blog: click here.

REITs and rights issues: A zero sum game?

There has been a deluge of articles on REITs recently and my own blog posts on the subject have attracted many comments although not as many as the blog post in which I revealed my total passive income from S-REITs for the first nine months of this year. ;p

I received comments from a reader, Chopra, regarding my simplistic analogy given in "REITS and rights issues: A Singaporean tale." Read it here.

Hi Chopra,

I did say my analogy is a simplistic one. It was partly a tongue in cheek blog post in response to the rather simplistic picture of REITs painted by certain critics.

Of course, there are other factors to be considered in rights issues before we could make an informed decision on whether they are good, neutral or bad for the different types of investors involved.

To have a blanket statement that REITs will take back all the income distributed to unitholders through rights issues is not only misinformed, it is misleading. That is the primary reason why the article came under fire.

Saying that rights issues are zero sum games is just another way of saying the same thing. So, I cannot agree with you. Some rights issues are beneficial to unitholders and some are not. Just compare the rights issue of First REIT with that of CitySpring Infrastructure Trust not too long ago. You will see what I mean.

Generalisations are often convenient but they are also often inaccurate.

We must realise that REITs give out at least 90% of their income to unitholders. So, they need to leverage up or raise funds through equities to grow. Whether these activities are carried out sensibly is another question but anyone unhappy with such a model should give REITs a wide berth.

I won't go into how much it would cost an investor to take part in each rights issue or to sell their nil-paid rights. I would also not look at the frequency of rights issues. It is like looking at the trees and not the forest. In fact, I do not mind frequent rights issues if they should be consistently or mostly beneficial for me as a unitholder.

Finally, I won't compare REITs and blue chips. They satisfy different investors with different objectives.

Personally, investing in certain REITs has been very rewarding for me. I am also vested in a few blue chips. Certainly, not all REITs are bad and not all blue chips are good. Would I compare their performance against one another? I could compare apples and oranges but I won't. I enjoy both.

Bought Hyflux and AIMS AMP Capital Industrial REIT.

My overnight buy order for Hyflux at $1.20 was filled. Looking at the daily chart, it is immediately clear why I put in a buy order at that level. It is support. Even with a confirmation of a reversal signal, we want to buy as close to support as possible. Of course, luck plays a part because in very bullish circumstances, price could have gapped up and gone higher.

A white hammer was formed again today as price moved marginally higher on the back of lower volume. It was a weak white candle day. Bulls seemed to be rather cautious as the weekend is always a wild card. If nothing untoward happens this weekend, price could resume its upward climb. Immediate resistance is at $1.28 in such an instance.

It would be interesting to see if price could rise as high as $1.39 which is where the declining 50dMA is approximating. Of course, in another few sessions, the 50dMA would be lower and a gap filling at $1.365 could prove to be a rather strong resistance.

Today, I also bought more AIMS AMP Capital Industrial REIT at 95c. This means a pre-consolidation price of 19c per unit. For long time unitholders, it would immediately look cheap. At that price, we are looking at a distribution yield of 10.5%. The fundamentals of the REIT have not deteriorated. Well, not that I know of. So, the weakness provided me a chance to increase exposure to the REIT.

Regular readers might remember that I divested a significant portion of my investment in this REIT and moved the funds to Sabana REIT to have equal weightage in these two industrial properties S-REITs. The only way to entice me to increase my investment in this REIT once more is to offer a meaningfully higher distribution yield, everything else remaining equal, and that happened today. So, you would see me accumulating on further weakness. 90c next?

Technnically, despite a spike in volume as price gapped down today, all that was formed at the end of the day was a doji. To me, that is an encouraging sign for long holders.

Julius Baer downgrades Hyflux to hold and cut its target price to $1.30 from $2.30. “We believe that Hyflux will face challenges in winning projects to catalyse its share price due to its current stretched balance sheet,” Julius Baer said in a report.

Friday, 02 December 2011

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