Healthy cash flow is most important.

Reader says:

Time flies and I'm glad to have taken your advise previously to do well in studies. 

I am currently reaping what I've sow for my study & career.

Good news is that i have gotten a job that pay me well compared to my first job 3 years ago; i got close to 50% pay increment!

However, my life had been quite a drama due to conflicts at home. 


So, i end up moving out, renting a room to keep myself in peace. 





With that, expenses increased and i am having difficulty sustaining it.

As i am single (28 years old) and I have to wait to reach 35years old to be eligible for a hdb bto 2 room flat (considering the waiting time for BTO or higher price of resale flat). 

I am currently thinking of getting private property (studio) which if possible, i would like to save enough downpayment before committing to own one.

i calcluated at least 3-4 years of saving to reach that goal. 

Do share with me your opinions too to handle my current situation






AK says:

Whether to buy or rent a property, especially if buying a property is going to strain your finances, the Rule of 15 helps you to stay grounded.

http://singaporeanstocksinvestor.blogspot.sg/2017/05/to-rent-or-to-buy-rule-of-15-revisited.html

Think carefully what is the financially most prudent thing to do when it comes to housing for you now.





Reader says:

That is a interesting rule to use as a guide, but does other factors affect the outcome if we factor in the inflation, demand & supply of housing and uncertainty of the house value in future?


AK says:

It is about cash flow.

How can we tell what the demand and supply situation is going to be like in future?

The Japanese didn't know they were going to suffer 2 decades of decline in housing prices.

The Americans didn't know they were going to suffer a huge crash in housing prices that wiped out 10 years worth of wealth.

If cash flow is going to be an issue, forcing ourselves into buying a private property because we fear prices are going up higher in future is silly.

Too many people have too much of their wealth stuck in their homes. 

This is why so many people in a wealthy nation like Singapore must work till the day they die.





Reader says:
I see, thats is a very good insight for me to learn. 
i trust your experience in this.

AK says:
Alamak. 

Don't trust me. 

I don't have a crystal ball. 

I cannot see what the future is going to be like.

I am just saying that we should stay prudent especially if cash flow is tight.

If you have plenty of money lying around and cash flow is not an issue, then, if you want to take a bet on property, go ahead.

Having healthy cash flow is always important.





Related posts:
1. Property market.
2. Slaving to stay in a condominium.
If to stay in a condominium, we are forced to live like paupers, the price is too high.

HWZ says AK "self-victimise himself".

A friend read something in hardware zone and thought I would like to know. He had a good laugh and I had a good laugh. 

I am sharing it here so that maybe many more people would have a good laugh.




Now, read this with an open mind. There could be some truth in what the person says.

Oh, and this video clip is just for dramatic effect.



HWZ forumer, w1rbelw1nd:

I dont think very positively on local bloggers, frankly. Yes, most of them may be altruistic and do it out of interest and passion, but also because of doing it for interest they have a tendency to interact with people of the same mindset (a sinkie tendency, no doubt), rather than challenge their own thinking. 

Just take a look at ASSI facebook page.

Quite recently there was a reader commenting that he should share more on his failures and bad picks. 

ASSI immediately (IMO) self-victimise himself and say things like "yea maybe i should take a break from blogging, since my sharing has adverse impacts on readers" and lol all the ASSI white knights come in and comfort him. 

The point is, under an environment where like-minded people seek each other, and just parrot each other, can these bloggers give a truly learned, informed and balanced view? 
(Source: HWZ)





Well, it is the truth. What? True?

Yes, it is true that I am blogging because I enjoy it.

I am not blogging because I have to. 

I am blogging because I want to. 

So, I don't have to give in to the demands of the audience. I do what I like.

Remember, I am just talking to myself here in my blog. I don't give advice.




If you want to eavesdrop although I don't know why you want to, take whatever I say with a pinch of salt (unless you suffer from high blood pressure).

Alamak! Did I just give some medical advice? 

Die lah. How like that? I blur.

Related post
AK the teacher or the mental blogger?

Investment philosophy and property market.

After my blog about nibbling at Tuan Sing Holdings, a reader commented that I seem to be building up a position in property counters and asked if I am waiting for a rebound in property prices. 

At the same time, a couple of readers shared that DBS is expecting residential property prices in Singapore to recover by up to 10% in the next two years.




Here is what I have to say:

I know some analysts are positive that residential property prices have bottomed and are going to rise next year or the year after. 

Is this going to happen? 

Your guess is as good as mine (or the analysts'). The best anyone could do in such an instance is to make an educated guess. 

When it comes to buying a property, if I am looking at a possible capital gain, I am probably speculating unless I am pretty sure I am buying it undervalued which gives me a margin of safety and probably an arbitrage opportunity. 

The decision should be guided by valuation which should logically be guided by rental yield.




To have an idea of my philosophy when it comes to property investment, recall my relatively large investment in Saizen REIT. 

It was trading at a big discount to valuation although its assets were generating steady and meaningful rental income which, together, offered an attractive yield of about 10% based on my entry price. 

Even if the sale of assets a few years later to another investor at a slight premium to valuation did not happen, it would not have mattered to me. Why? 

Because it was a good investment, not a speculation.





Bombarded by invitations to "invest" in properties, we have to be at least discerning enough to know if these are invitations to "invest" in properties or are they really invitations to "speculate" in properties. 

There is a difference and one that vested interests will not take pains to highlight even if they are aware of it.

I remember a family friend bought a property here during the Gulf War. 

Property prices here plunged back then. 

He went and bought a landed property at a bombed out price. Pardon the pun. 




The observation was that although property prices plunged, rental income was relatively resilient. 

That gave rental yield an uplift. 

For sure, he made a good investment.

Some might remember that I blogged about why I stay in a condo and some might remember that I bought my first condo during SARS. 

Why during SARS? 




Mr. Market was suffering from a severe bout of pessimism and I got a good deal. 

Based on the price I paid, potential rental yield was about 5%. 

This increased to almost 9% by the time I sold. There was a robust growth in rental demand in those years. 

Based on my selling price, however, the rental yield would have been just shy of 4%. 

Prices rose and they rose a bigger percentage than the growth in rental income.

Today, that same property's rental yield is barely 3% based on my selling price but based on the recent selling price of a unit in the same stack, the rental yield is not even 2.7% now. 




Market price of the property is about 10% higher but rental income is more than 20% lower than when I sold the property. 

To any investor for income, this combination should be an alarm bell.

To continue along the same line, I bought my current home during a lull in market activity after all the rounds of cooling measures were implemented a few years ago. 

Back then, the potential rental yield was 6% and I verified this. 




Today, based on my purchase price, the yield has come down to 4.6%. Based on the current market price which is quite a bit higher than my purchase price, it would be less than 4%. 

Again, market price has gone up but rental income has reduced.

So, lowering rental income does not mean that property prices in Singapore could not increase in future. It just means that the property market is simply one that doesn't make sense to the rational investor in me now.

However, Mr. Market can stay irrational for a long time. 

Look at Hong Kong for an example of sky rocketing property prices and miserable rental yields. 

Invest in Hong Kong properties? Not me.





My nibbles in property counters do not represent any belief that property prices will rebound in future.

Instead, they are pretty consistent with my philosophy to buy at bargain prices which make sense to me. 

Being able to own a bit of Tanjong Pagar Centre, OUE Downtown and Robinson Tower at a big discount to valuation is pretty attractive to me.




I emphasize that I will not tell anyone if they should or should not buy anything.

I am only sharing my philosophy and experience in my blog. I am not here to make a decision for you. 

What you do is up to you.

Related posts:
1. Invested in Tuan Sing Holdings.
2. Ask 2 questions before buying.

Invested in Tuan Sing Holdings.

When a reader asked me what I thought about Tuan Sing Holdings as it trades at almost 60% discount to NAV, it got me interested enough to take a closer look because this is something I think I understand.

I approached this in a way that is similar to my approach to investing in Guocoland. 

Substantial shareholders, the Liem family, and also Koh Wee Meng of Fragrance Group together hold a 60% stake in Tuan Sing. 







It is interesting to note that Mr. Koh's purchase price in 2014 was 43c a share and Tuan Sing's NAV per share then was 68c.

Based on its Annual Report for 2016, Tuan Sing's NAV per share grew to 77c and its stock is now trading at a lower price than in 2014. 


On the face of it, therefore, Tuan Sing is worth more today and with a lower share price, it is more undervalued than before.





Why is this so?

Tuan Sing's earnings have been in decline and Mr. Market probably doesn't like that. 

To top it off, Tuan Sing's gearing level is pretty high and interest cover ratio has also weakened from 14x in 2012 to just 2.2x in 2016.

At the current price level, there seems to be plenty of value waiting to be unlocked but it also seems to be thornier an investment.

We must remember that undervalued could stay undervalued for some time. So, it would be good to be paid while we wait. 




Do they pay dividends?

Tuan Sing pays a dividend but it is nothing to shout about. How much? 0.5 cent to 0.6 cent a share. 

Assuming a purchase price of 33c a share, we are looking at a dividend yield of 1.5% to 1.8%. 

Anyone who buys into Tuan Sing for income has to be mental. 





1.5% to 1.8% is lower than the 2.7% dividend yield from Guocoland based on an entry price of $1.83 a share and that was not an ideal investment for income either.

We know that property developers usually have pretty lumpy earnings but I am most interested in the fact that Tuan Sing has a relatively big portfolio of investment properties in Singapore, China and Australia.

Therefore, like Guocoland, Tuan Sing has the potential to become a more attractive investment for income investors if future payouts should increase together with any increase in future cash flow. 




Of course, this is somewhat speculative as it is anyone's guess what the Liems have in mind.

Source: Tuan Sing Holdings Limited.

To continue along this line, Tuan Sing's portfolio of development properties is pretty small at less than 10% of its total portfolio value. This reminds me of OUE Limited which I also have a relatively small investment in.

A big reason probably why Tuan Sing's gearing level is so high, their earnings is much reduced and, consequently, their interest cover ratio is so poor is because quite a big portion of its investment properties are still under development. They have yet to generate any income.




It stands to reason that once Tuan Sing's investment properties are fully completed, once they start generating income, earnings will improve and, significantly, it is worth noting that this will be recurring income which is something investors for income look for.

Of course, Tuan Sing still have development properties to sell but since that business is a relatively small portion of their entire portfolio, if they should sell well, it is the icing on the cake. If they don't sell well, it is not going to be a disaster either. 

Cake without any icing, anyone?




Tuan Sing is another asset play and if the valuation is to be believed, they are a pretty heavily undervalued asset play too. 

Just like my investments in OUE Limited, Wing Tai, PREH and Guocoland, my investment in Tuan Sing is only a nibble because it could be a long wait before value is unlocked.




In the news this year:
Sime Darby Centre purchased
and
Tuan Sing's earnings tumble 64%.
Related posts:
1. Guocoland analysis.
2. PREH analysis.
3. OUE Limited analysis.
4. Wing Tai Holdings analysis.

Accumulating Wilmar on price weakness.

When I revealed my top investments earlier this year (read related post #2 at the end of the blog), some were surprised that I had a relatively large investment in Wilmar International which isn't a typical investment for income.

Of course, long time readers of ASSI would know that not all investments in my portfolio are for income although almost all lean in that direction.




Why Wilmar?

There are not many companies in the world like Wilmar when it comes to agricultural products and their distribution. 

Wilmar has amazing breadth and depth of operations. 

Its distribution network is extensive, established and still growing. 

It is a truly impressive business entity.

Potential investors should note that Wilmar is still a growth story and there continues to be quite a lot of CAPEX. 

This will continue to impact its earnings for some time to come.

In the meantime, however, they are profitable and they do pay dividends.

Since I am quite happy to be paid while I wait to benefit from their future growth, the recent decline in Wilmar's share price is an opportunity for me to accumulate.

Similar to my investment thesis for BreadTalk, I believe that when the CAPEX at Wilmar tapers off which they one day would, Wilmar's fantastic scope and scale of business would send its earnings soaring.

And while BreadTalk's extremely high PE ratio was rather unpalatable at the time when I became an investor (read related post #1 at the end of the blog), although not strictly comparable, Wilmar is currently trading at a much lower PE ratio of about 15x.

To put this in perspective, at its highest, Wilmar closed at S$7.11 a share in January 2010. 

Based on the full year earnings per share in 2009, it represented a PE ratio of above 20x.

It is important to point out that, in 2010, Wilmar's NAV per share was about 22% lower than what it is today. 

Paying S$7.11 a share then would have been a huge premium to NAV (US$1.85 per share) back then. 

Comparatively, there is more value backing each share in Wilmar today. 

This is an important distinction to make. 

Wilmar is a more valuable business entity today than it was in 2010.

Paying $3.30 a share is relatively inexpensive as I am paying a relatively small 2% premium to NAV (US$2.38 per share). US$1.00 = S$1.36.

I am also paying a lower price than what Archer Daniels Midland Co paid about a year ago to hike its stake in Wilmar from 20% to 22%, paying S$3.38 a share. (Reference: Reuters.)

Having said this, Wilmar's share price is currently in a downtrend and it could decline further and, if that should happen, I will be quite happy to accumulate again.

Finally, investors in Wilmar must be of the patient variety. 

When CAPEX tapers off, that is when Wilmar will be able to pay more generous dividends. 

Patience, I believe, will be rewarded.

See Wilmar's AR: HERE.

Related posts:

1. Investing in BreadTalk.
2. My investment portfolio.

An IPO for an IPO in the Philippines?

Reader:
Recently i come across an interesting pre-ipo for Philippines REIT during their roadshow at Raffles place.

This company acquires residential property from Singaporean whom has property in Philippines. In exchange for the property they would issue preference share equivalent to the property price. 

They only acquire those property which is ready and fully paid. Thereafter they will just refurbish and rent/lease out for short term and long term stay.

Short term would be those Air Bnb or tourist type. Long term would be expat or local people who is working near CBD area.

So far they had acquired some 'condotel' means condominium within hotel. And some project will be completed this year and early next year.

They plan to get listed in Philippines in 3 years time and now they are inviting investors to invest in pre-ipo preferred shares. Two type of investment is capital repayment with 6% (2 yr)+5%(3yr). The second type is capital convert to preference share 5% (3yr) and upon listing will be converted to ordinary shares.

They will be conducting a submit with media coverage in manila in sep whereby investors & public can have a feel on how the company works including showing all articles n memorandum of company.

Have you ever come across such investment? Appreciate if you could talk to yourself on this investment.

AK:
Alamak. This food sounds so exotic. I dunwan. I might get food poisoning.

Such products are unregulated and we don't even know if they are what they claim they are.

Related post:
http://singaporeanstocksinvestor.blogspot.sg/2016/07/could-this-be-way-to-financial-freedom.html

Building your personal wealth in Singapore with some help. (AK the blogger or AK the benefactor?)

Reader:
Hey sifu thks so much
U changed my life
I was down to my last 100000
But yr saizen call
Save my life
My family

AK:
You took action. Thank yourself. 😉





Reader:
We will be praying to u
Downloaded yr pic

AK:
........................ :o





Reader:
We will pay tribute to u
Thks sifu
Really
I nearly killed myself
If not for yr call

AK:
I am glad. 🙂





Reader:
U save my life
No chance tell u
Till now
I am a ghost now
If not for u
I will ask my children pai u too
U are the benefactor


AK:
I am happy for you 🙂
Gambatte! 🙂





Reader:
Sifu wat are your latest picks?
Sifu u must help me
I need make enough for my children to study uni

AK:
Neverwinter! ;p
Anyway, I am only sharing my philosophy and experience as an investor in my blog. If it works for others too, I am happy.
I blog because I enjoy it.
If I feel that it has become work or if it has become a responsibility, I might stop blogging. ;)






To my Taoist readers, if you want to pray to AK, remember you must download the correct photo hor.

Jokes aside, to all my readers, remember that my approach to wealth building is a 

1. holistic one (see related post #1) 

and if you do the 

2. right things, don't thank me, thank yourselves in future (see related post #2). 

Gambatte!






Related posts:
1. Holistic approach to wealth building.
2. Don't thank AK but thank yourself.

Price we pay when die die must buy.

Someone told me that the fried mee from a hawker store at a market near my home is very good. 

Die die also must try. 





Every time I go, I see a long queue. 

When I ask how long must I wait for a serving? 

About half an hour or maybe longer. 

Forget it.

See: Comments.

On one of my evening walks, when I walked by the stall, there wasn't much of a queue. 

So, I tried the noodles. 

I didn't have to wait very long.

What does this tell us? 

If we die die must buy, then, there is a price we have to pay and that price might not be monetary in nature.





You want an example that is monetary in nature?

For those of us who buy cars, we would know the "discount" that they offer if we took a loan through the car dealer. 

If we did not, then, the price tag of the car would be higher.

For both my current and previous cars, they did that to me. 





I told the sales staff I would just buy a car elsewhere. 

It was not as if I die, die must buy a car from them. 

Suddenly, I could get the "discount" even though I didn't take a loan.

If we are die die must buy type of consumers, then, we could pay higher prices and it might or might not be in dollar terms.

Is this a story for consumers only or does it apply to investors too? 





Related post:
I could not afford it but...