Ever since the CPFB introduced a colorful pie chart of our CPF savings a few years ago, I would look forward to mine every year like a teena...
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Watch this one! Very funny one! Don't watch will ai one one!
Once again, I peer into my mental bowling ball. Eh, you don't know my bowling ball thinks it is a crystal ball? It is mental. I am not mental, I tell you. My bowling ball is the one that is mental. You believe me? OK, you must be new to my blog. Now, seriously, there was a year when my bowling ball coughed up 4 numbers and some readers had a windfall. Which year was that? I cannot remember. Maybe, somebody will tell us.
What about this year? You asking me? If I say not to ask me what the stock market is going to be like tomorrow, what can I tell you about the 4D results tomorrow? You must be mental. Ahem.
Cough. 8. Cough. 9. Cough. 6. Cough. 3. That was my bowling ball coughing. Not me. Ahem. QAF shareholders must watch the following video. If you are not a QAF shareholder, watch also lah. Maybe, you become shareholder leh. Ahem.
May theYear of the Chicken Phoenixbring good luck to everyone! Huat ah! -------------------------------- Added 10.33 PM (29 Jan 17)
The last time I had a substantial blog on Sabana REIT was in October 2015. It was titled "Sabana REIT: What is a fair price and what could they do?" Actually, I thought I would never have another substantial blog on the REIT again but a rights issue happened. Never say never, as the saying goes.
Despite all the bad stuff that we have heard about Sabana REIT and, yes, I contributed to the noise too, it is reasonable to think that all investments are good at the right price. I try to keep an open mind (and hope that not too much rubbish gets in). Anyway, it is no secret that Sabana REIT was, once upon a time, a very big investment in my portfolio. It was one of my big 5 investments in S-REITs. When I first invested in the REIT, it was in the pink of health and not ailing like it is today. I didn't get in at its IPO because it was priced at $1.05 a unit and its NAV was 99c a unit. I got in a few months later at 11% lower than its IPO price which meant I got in at a discount to NAV and also with a higher distribution yield of about 9.3%. Gearing was a conservative 26.5%. (See related post #1 at the end of this blog.)
I was, honestly, waiting for a chance to accumulate Sabana REIT on further weakness as the numbers were good. That chance came a few months later in the form of the Fiscal Cliff in the USA. I increased my investment in the REIT, paying 88c and lower per unit which meant getting a higher distribution yield and an even bigger discount to NAV. (See related post #2 at the end of this blog.) This was in 2011.
Two years later, I remember UOB KayHian was particularly bullish in 2013 and had a target price of $1.30 for Sabana REIT. By that time, I had turned cautious although I was enjoying a distribution yield on cost of between 10.3% to 11.1%. In fact, at that time, I said this:
(See related post #3)
Months after they bought a half empty building, I reduced my stake in Sabana REIT. This was in late 2013. I was channeling funds into Croesus Retail Trust instead. (See related post #4 at the end of this blog.)
In the next 6 months after that, I reduced my investment in Sabana REIT by more than 90%. Innotek Limited was going to divest 15 million units. Gearing level had shot up. DPU had declined. Interest cover ratio had declined.
These were things that set alarm bells ringing in my head and I published a blog listing a total of 7 weaknesses and uncertainties in Sabana REIT. (See related post #5 at the end of this blog.)
Sabana REIT's condition got worse over time and its unit price drifted lower and lower. It was like watching a patient in a hospice wasting away. As I did not overpay for my investment in Sabana REIT, I enjoyed a double digit distribution yield for about 3 years. I also enjoyed a decent capital gain of about 11% on the units which I sold.
Less than 10% of my original investment remained and it was practically free of cost and still generating an income for me (although a shrinking one). So, you can imagine why I was pretty ZEN when the REIT announced the recent rights issue. 42 rights units for every 100 existing units and at 25.8c per rights unit. That sounds OK, I thought.
Of course, for many other shareholders, it wasn't OK. That was the straw that broke the camel's back for them but that is another story for someone else to tell. (See link to the article in The Straits Times at the end of this blog.)
I took up my entitlement and also applied for excess rights. I figured that, post rights issue and the proposed acquisitions, the REIT would probably be able to offer a DPU of around 3.5c. At 25.8c per unit, that is a distribution yield of 13.5%. Pretty attractive. However, things will get even more challenging for REITs from here on with interest rates expected to rise further. Industrial REITs here are facing an oversupply of space and a malaise in demand. That Sabana REIT is arguably the weakest performing industrial S-REIT does not inspire confidence.
It is natural to wonder if Sabana REIT could see a big decline in DPU again this year, dilution from rights issue not withstanding.
This is, of course, speculative but assuming a decline of about 30% in rental income in the next year or two which is plenty, we could be looking at a DPU of 2.5c then. This does not even consider the increase in finance expense from expected hikes in interest rate. Given this possibly next to worst case scenario, I was not interested in increasing exposure even at 34c a unit when the REIT saw its unit price plunged upon going XR. However, at 25.8c a unit, a reduced DPU of 2.5c would translate into a yield of about 9.7%. Good enough? I think so. At 25.8c a unit, I believe, there is probably sufficient margin of safety to increase my investment in Sabana REIT. I also listened to the more cynical side of me which believed that the rights were probably priced at a level at which the sponsor would not lose money.
Conditions have to be extremely depressing and the management must be more incompetent than incompetent for investors (and the sponsor) to lose money at 25.8c a unit, all else remaining equal.
In terms of value, as a percentage of my total investment portfolio, post rights issue, Sabana REIT remains relatively small at less than 2%, a far cry from the days when it was as big an investment as AIMS AMP Capital Industrial REIT which accounts for about 20% of my investment portfolio today. When we contrast Sabana REIT against AIMS AMP Capital Industrial REIT, the difference in performance is stark. (If you are unfamiliar with AIMS AMP Capital Industrial REIT, see my recent update: here.)
With money made in the past and a significantly smaller exposure even after the recent rights issue, it becomes easier to understand why I am not losing sleep over Sabana REIT's terrible performance. When I was added recently to a Facebook group made up of shareholders who want to remove Sabana REIT's manager, I could feel their anger and pain. Beyond the buzz, however, it would be good to learn something from this. Hence, this blog.
Many readers write to me asking for advice on certain stocks which they hold or are thinking of investing in. They are usually disappointed by my response. Why? I also don't know. Disappointed by my answer? OK, I gave the correct answer. Today, a reader wrote to me about a business which I actually have a stake in but I am sure he was disappointed by my response too.
AK says: I don't have anything constructive to say about International Healthway Corporation (IHC) but I can tell you a story. I have a handful of stocks in my investment portfolio which I don't monitor anymore for various reasons. There is one stock which I did not monitor at all from the day I got it and that stock is IHC. I vaguely remember being given some IHC shares because I am a Healthway Medical shareholder. I vaguely remember that my Healthway Medical shares were free of charge. Bonus shares or something. So, there was little incentive for me to monitor the business performance as, by 2011, I retained a rather tiny investment in Healthway Medical, having sold the bulk of my investment by middle of 2010. (See related post.)
To be honest, I was a more active trader in those days. I got in at about 10c a share and I almost doubled my money as I sold on the way up. From 10c, just a 1c increase was a 10% gain. It went all the way to 21c a share. What is the moral of the story? Is it about position sizing? Is it about knowing our motivations? Is it about knowing when to sell? I blur. Related post: Healthway Medical: Target 20c.
"...online marketplace for jobs." I won't be wrong to say that many workers live in fear of retrenchment because they are not financially prepared.
Many are wage slaves and are utterly dependent on their earned income for daily expenses. The problem is that many are not even aware of this.
I have shared stories from readers who have been retrenched before. Retrenchment is a terrible thing if we are not prepared for it and especially if the period of unemployment that follows lasts a long time.
However, in all the stories I have shared, there was always something positive that came out of a bad situation. The story today is no different.
This is about how a dual income family actually became financially healthier after retrenchment.
I believe that life can be and should be better. Even if bad things should happen, I still believe this.
To be financially healthier, it is not necessary to make a lot of money. Take a hard look at our expenses. Even if we make less money now, if our expenses should reduce a lot more, we could actually be saving more money than ever. It is not how much we make but how much we save that determines if we have money. Bad things happen in life sometimes but like a Phoenix, a beautiful symbol of rebirth, good things can emerge from the ashes.
Reader: I am very interested in your views on Japan. I don't have any investment in Japan because everyone tells me the population is shrinking and the economy is dead. However, you seem to be doing well investing in Japan. I regret not investing in Saizen. I feel like investing in Croesus and Accordia now. Any advice?
AK: Nope, I don't have advice for you. You could search my blog for my views on CRT and AGT if you like. The related post at the end of this blog could be a start. Know that these are investments primarily for income. Know what you want and see if these do the job. Throwing some speculative flavor into the spin here. Bad AK! Bad AK!
A personal finance blog says if a designer bag you want arrived earlier than expected and you haven't saved enough for it, there are some credit cards with benefits which you can consider using. OMG! It doesn't matter what they say after that because that is just so wrong in more ways than one.
Ask why the blogger said something like that? What was that blog trying to do? The blog says "We compare, you save." I find that ironic. I think they are comparing the wrong things lah. I compare for you and you save some money. Why this bag cannot use? This bag $50 only. Why must get a $500 bag? What? $500 is not designer? $500 is mass market? $10,000 then designer? OMG! OK, you might not like this but if you must save money to buy a designer bag, obviously, that bag is not for you. Sorry if it hurts. Often, the truth does. Remember, to someone with $1,000,000 in savings, $10,000 is like $100 to someone with $10,000 in savings. If you only have $10,000 in savings and you spend it on a $10,000 designer bag, you have nothing left. Zilch! That millionaire might no longer be a millionaire after buying the same designer bag but $990,000 is still a lot more money than zero. What? Not enough money, use credit card? Who say one? Oh, that blogger say one.
Saw the video? AK even has the weight of the MAS behind him hor. Which MAS? You say leh? AK got slogan or not?
"AKnags, you save." Alamak! Who threw a shoe at me?
---------------------- From my FB wall:
I have warned against the evil installment plans and their minions. Don't remember? See related post at the end of this blog post. Minions can be in your face or minions can be in disguise. One way or another, they will lead to wealth destruction. What? Pay for a purchase using interest free installment plan offered by your credit card is not wealth destructive? Aiyoh, they will take money from you in another way lor. Don't believe me? Reader: AK, did you blog about how having a lot of credit cards and debit cards will insidiously suck annual fees out from you when you least expect it? Recently i have been hit with quite a number of those and some banks refused to waive the fees. And i couldn't cancel the card as i have a on-going installment payment. Hopefully can warn others reading your blog not to charge those 12 or 36 months payments anyhow to your credit cards, later you kena those banks don't want to waive your annual fees and you can't do anything about it. I'm cancelling all my credit and debit cards save the 365 credit card and two ATM cards. Thoroughly disgusted :( $192 down the drain.
AK Oh, I never use installment plans de. That is consumption debt. I dun like. I buy, I pay one time and that's it. I can cut and paste your experience in my blog. Can?
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