When can gambling make more than investing? (Ten Experts On When The Next Recession May Hit. Added on 20 August 2018.)

Reader:
hello AK, just curious and wanting to understand further your thought process on HLS. 

Would knowing about the bumper dividend have changed your decision? 

I assume the announcement wasn't made yet when you sold.



AK:
Alamak. This is like asking me if I can see the future...

Not a meaningful question 😉





Reader:
hahahaha clearly I didn't give a good illustration
put it another way, how would a bumper dividend + increase in price of a stock influence your decision whether to hold/sell/whatever? 

Do you consider how long it takes under normal circumstances for yearly dividends to cover the bumper dividend? 

(eg 4 years of dividends for HLS assuming $0.025 per share, to account for $0.100 bumper dividend)






AK:
it is about what we feel is a fair price to pay... 

some feel that they want to get into HLS even at 60+c and to get the special dividend... I don't think it is a good idea... 

I think 52c was a fairly good exit price... there is no accounting for prices.

If people who buy from me make some money, good for them. I try not to overthink.





I am still holding on to 50% of my original investment in HLS. 

It has become free of cost and I see myself holding on to this investment for many more years to come. 

This is just like my investment in OCK which also became free of cost when I sold half of my investment after its share price doubled a few years ago.

I won't lose sleep over the fact that their share prices went higher after I sold half of my investment. 

I made good money and will probably continue to make money from these investments. 

To me, that is good enough.





If I had a working crystal ball and could see the future accurately, I would not be an investor. 

I would be a full time TOTO gambler. ;)

Anyway, to sleep better at night, we won't be wrong to avoid the phrase:

"If only I had known."

It has no practical purpose.
--------------------------------
Ten Experts On When The Next Recession May Hit, 20 August 2018.






Related posts:
1. Hock Lian Seng returns 100% and more.
2. Breadtalk, Old Chang Kee and QAF.

Take that dream job and take on more risk?

This was my reply to a reader's email:

Hi L,

If you remember, I have a blog that says unless we are rich, be pragmatic, not romantic. Most of us have to work, exchanging our time and energy for pay.

If we are not financially secure, then, we might have to forgo that dream job which does not have a predictable income. Having a predictable income stream provides peace of mind which is priceless.

Your passive income stream just about meets your expenses. I don't see much of a buffer but I am usually conservative. Dream job or not, you decide.

As for taking risks (in the stock market), there is nothing wrong with taking a bit of risk as long as we size our positions properly.

Of course, if you are a speculator, then, sizing is out the window. If you are an investor, then, stay prudent. Which one are you? You decide.

The AK way? 

Be prudent. Be pragmatic. Be patient.

Best wishes,
AK

Always remember, my way might not be your way. What we do depends on what we want to achieve.

Related post:
Three attributes of a wealthy peasant.

Get 14% return on investment per annum.

Reader:
Hi AK,
I am glad to chance upon your blog recently and is currentlu busy reading up on the various blog post which is quite informative.
I recently came across a website which was featured in (a popular personal finance blog) which indicates returns of investment up to 14% through P2P lending to SMEs.
I am in the process of checking if these are guaranteed returns which i highly doubt so.
Like to understand more of your view on this.







AK:
Hi,
You might be interested in this blog:
http://singaporeanstocksinvestor.blogspot.sg/2015/06/to-make-20-per-annum-we-could-lose-our.html





If we say junk bonds must offer higher coupons to attract lenders because they are risky (think risk of default), for example, Swiber offered a coupon in excess of 7%, what could a 14% coupon from a borrower mean?

Aiyoh, headache. 





What to do? 

Don't ask me.

AA REIT, Soilbuild REIT and VIVA Industrial Trust.

Reader:
may I check with you about AIMS AMP. Its DPU for last 2 quarters have been dropping. But you seem very optimistic about it. Do you think things will get better?


AK:
Management is very important.
There is little they can do about headwinds
But you have to compare it against other industrial REITs and you will see it shines


Rather than acquiring more properties to boost DPU, AA REIT focused on extracting maximum value from their assets.


Reader:
Oh. How would it fare against soilbuild?

AK:
Soilbuild had a stroke of bad luck
Very unfortunate

Reader:
The technics offshore company who vacated the place?

AK:
I like the Biz Parks they own
yup

Reader:
Ok, thank you. Will read more on ur posts of aims amp before deciding

AK:
Unlike very short lease biz park owned by VIVA in Chai Chee, Soilbuild's biz park have relatively long leases.

Reader:
Since Keppel D.C. Reit seems unpromising, I might just switch to AA

AK:
If the management sama sama as Keppel REIT, cham

Reader:
Yes.... I think I'm quite clueless as a industrial reit investor. When I read the viva report, I was quite impressed by it

AK:
People tell us good things only

Reader:
Only heard the other side of the story when I saw your post, even though you kena hantum by that one reader. Haha

AK:
I should talk less. 😞

Reader:
Haha no la. Should talk more. For the greater good
May I check if you've written any articles on assessing industrial reits? I mean, I know the usual of NPI, DPU, gearing, occupancy etc. But the short lease part is something that's new (but makes sense) to me

AK
Er... maybe. I cannot remember liao. Too much talking to myself until I blur.

Reader:
Haha. It's ok! Thank you. I'll search through your trains of thought via your articles

Related posts:
1. AA REIT levels up.
2. VIVA Industrial Trust.
3. Soilbuild REIT.

DPU plunged at Keppel DC REIT.

Reader:

Just wondering if you are familiar with Keppel DC Reit?
I bought into it some time ago, lured in by its 'good potential', but as of last dividend payout, it's one of those cases where NPI went up but DPU dropped by 20%.
Not an encouraging sign.
But the company presentation said that things will get better because income from its new acquisition will 'kick in' by next payout. However it's hard for me to gauge if it'll make up the 'shortfall' of 20%.
Extrapolating from the most recent dividends, its annual yield would be only 4.7%. DBS still rates it as a BUY though.

AK:
I don't have this. I avoided.
I must say I have not been following developments though.

Reader:

I really didn't like the part where it's NPI went up but DPU dropped 20%.
AK:
Sounds like another Keppel REIT.


Plain English guide to data centres.

For anyone who might be interested, see my one and only blog on Keppel DC REIT (well, not anymore, I guess) and why I avoided investing in it:

Is Keppel DC REIT an attractive investment?


There were two reasons for me to avoid investing in this REIT. 

Now, there might be a third one.

Online shopping, retail S-REITs and Starhill Global REIT.

Online shopping is gaining strength rapidly and even an IT dinosaur like AK buys stuff online. From my own experience, I would say that online shopping is attractive because of two factors:

1. Convenience. Delivered to my home with either very competitively priced delivery fee or free delivery.

2. Cheaper. For the same item, I have saved as much as 30% buying online than buying in a brick and mortar shop.




So, if a shop in a mall is selling stuff that could be found online, unless the mall is conveniently located and unless they are priced competitively, that shop is going the way of the Dodo. 

It is just a matter of time.

Shopping malls must fill themselves more with shops that offer goods and services which cannot be found online for one reason or another. 

After all, there are things which online shops cannot do or cannot do well.

Therefore, despite the growing reach of online vendors, I believe that some shopping malls will continue to do reasonably well and some readers might remember that I have been waiting to invest in CapitaMall Trust (CMT). 

However, I have not been able to get in at a price which I am comfortable with because Mr. Market likes pedigree and, just like Frasers Centrepoint Trust (FCT), even now, CMT is trading at around its Net Asset Value (NAV) and both are offering very similar distribution yields in the mid 5%.




REITs, unlike companies, pay out most of their cash flow from operations to their investors. 

They do not pay dividends from their earnings. 

They distribute income. 

They do not have retained earnings. 

One way REITs grow, without placing too much demand on shareholders (think rights issue) or diluting minority shareholders (think private placements) is to ensure that there is genuine growth in the value of their assets which would in turn give them more leeway to fund more growth through using debt. 

It is a virtuous cycle, one that hinges on the growing value of assets. I think we can agree that CMT and FCT have done rather well in this area.




However, given the uncertain retail environment for some time now, although well run, I would like to invest in CMT and FCT at a meaningful discount to NAV and if they offered higher distribution yields.

Asset values in good times would appreciate but in bad times they could come under pressure. 

So, buying at a discount to NAV makes sense to me unless we feel that asset values can only go up and never go down.

Although I have been mostly looking at CMT, I have also looked at FCT and Starhill Global REIT (SGR).




I like CMT and FCT. I am more familiar with their malls. However, I am not comfortable with getting in at current prices. 

I am not as familiar with SGR's malls (i.e. Wisma Atria and Ngee Ann City) and not all their malls are in Singapore which, by the way, is a good thing. 

However, trading at a meaningful discount to NAV and offering a distribution yield closer to 7%, to me, SGR is priced more attractively.

There are a few more factors which pushed me towards investing in SGR:

1. More than a third of SGR is owned by the sponsor, YTL Group. 

This helps to ensure a greater degree of alignment of interest with minority unit holders.

2. The management is looking to sell the REIT's Chinese and Japanese assets to concentrate on what they consider the REIT's core markets of Singapore, Australia and Malaysia. 

Now, reducing concentration risk is good but having a handful of assets in China and Japan probably isn't beneficial and would, in fact, add disproportionately to operating costs.

3. The relative weakness in SGR's performance is probably going to be temporary because of redevelopment works in an asset in Australia and a delay in a new tenant moving into its asset in China.




Looking at SGR's DPU for the last quarter, annual DPU, all else remaining equal is about 5c which gives us a 6.85% distribution yield based on 73c per unit. 

However, if there were to be more hiccups, income could be affected negatively and I am knocking off 5% from DPU to 4.75c to take this into consideration. 6.5% distribution yield is good enough for me while I wait for an improvement in performance.

I am not buying into SGR because I think its outlook is fantastic. For sure, they will face challenges.

I am buying into SGR because, taking advantage of its recent price weakness, I feel that there is some margin of safety.




SGR is an investment that is likely to generate a fairly good yield for the price that I paid.

Related posts:
1. CRCT added to my portfolio.
2. CMT and when am I nibbing?

Understated gains from Saizen REIT.

For a while, I have suspected that ASSI has stalkers but the following can only happen because this stalker happens to be a friend. If he were just any other reader, I would freak out.

Reader:

I believe you made in mistake calculating your gains from Saizen. 

Just letting you know. You see if you want to amend.

"How much space is enough?"

AK:

I checked the numbers again. You are right!

Spooky!!!

I think I mixed up my average cost price for Saizen REIT with First REIT's.

So, $245,000 is too low.

It should be $30,000 to $40,000 higher.

So, the returns, in terms of percentage, should be higher. Maybe more than 25% a year.

Too lazy to come up with the exact figures. Of course, this shouldn't surprise you. LOL.

I will publish a blog as an errata. Thanks.

This is a very good reminder to everyone that ASSI is not very reliable. If you have yet to read the ASSI disclaimer, it is at the bottom of the blog.

If you choose to eavesdrop on AK talking to himself, do it at your own risk.

What? You are like AK? Too lazy to scroll to the bottom to read?

I reproduce it here:

"The ideas expressed in this blog should not be construed as an enticement to buy or sell the securities, commodities or assets mentioned. The accuracy or completeness of the information provided cannot be guaranteed. Readers should carry out independent verification of information provided. No warranty whatsoever is given and no liability whatsoever is accepted for any loss howsoever arising whether directly or indirectly as a result of actions taken based on ideas and information found in this blog."

Related post:
How much did AK make from Saizen REIT?

How much did AK make from Saizen REIT?

Reader:

Dear AK,

I just started following your blog this year. So many gems!

Thanks for resharing your Saizen REIT blog post from 2015 on Facebook. It just tells me how much more I have to read in your archives!

I might regret asking this but how much money did you make from your investment in Saizen REIT?






AK:

Don't worry, you can ask. 

I won't bite your head off. 

Whether I give you the desired answer or not is something else.

If I did not reveal the larger investments in my portfolio recently, I would probably have refused your request.

Now, I don't see any harm in sharing the numbers. :)

Income distributions plus capital gains (excluding return of capital) from the sale of all the REIT's assets, roughly,

$ 245,000

Almost a quarter of a million dollars.

The number shouldn't be surprising since Saizen REIT was one of my 3 largest investments in S-REITs and my entry prices were pretty low.

In terms of percentage, the return was probably around 20% per year, give or take a little. 

I am not crazy enough to calculate the exact numbers.

Of course, now, with news that Saizen REIT is to be liquidated, I should be seeing another few thousand dollars coming back but that is really a return of capital.

Related posts:
1. 2016 full year passive income.
2. Saizen REIT: Right prices and luck.
3. My investment porfolio.

See errata (19 Mar 17, 9.25pm):
Understated gains from Saizen REIT.