Sabana REIT: Internalization pains.

When Sabana REIT's unit holders voted for the internalization of the REIT's manager, some readers asked me what I thought of it.

For the record, I didn't vote for the internalization.

I sat on the fence.

From past experience with Croesus Retail Trust, I guessed that internalizing the manager would be a costly exercise.

I said as much here in reply to readers' comments.

However, if successfully executed, it would result in significant cost savings and greater alignment of interests.

The exercise was smooth sailing in the case of Croesus Retail Trust although it was pretty costly.

That was partially because the REIT's sponsor suggested the internalization themselves.

It was not a demand made by activist investors.

It was suggested partly to unlock value and to address the persistent underperformance of the Trust's unit price.

Later on, Croesus Retail Trust was sold to an institutional investor at a premium to valuation.

I had mixed feelings about the sale.

I lost a reliable passive income generator but I did enjoy an attractive return.

Whether the internalization of the manager played a part or not in the sale of Croesus Retail Trust to the institutional investor is anyone's guess.

Anyway, looking at Sabana REIT, from what has transpired so far and at the recent EGM, it is obvious to me that we are not seeing another Croesus Retail Trust here.

To me, the entire process in Sabana REIT's instance seems to be far more challenging.

It is going to take way longer and cost way more than expected.

Regular readers know that I increased my investment in Sabana REIT significantly in late 2020 and early 2021 after the lowball offer to buy the REIT was rejected.

Sabana REIT was and still is pretty undervalued.

However, I don't like investing in businesses which keep me guessing.

Peace of mind is priceless.

My investment in Sabana REIT has paid me attractive dividends in the last few years.

However, with so much uncertainty now, I have decided to reduce my investment in the REIT significantly while I am still in the money.

Taking back my capital, I will have a stronger war chest to take advantage of other investment opportunities.

So, with this decision, Sabana REIT is no longer one of my largest investments.

I still retain a legacy position from donkey years ago which is free of cost.

Daiwa House Logistics Trust: FX and TA.

The unit price of Daiwa House Logistics Trust has declined 32c or almost 40% in the last 6 months.

This is pretty dramatic.

Although I was unimpressed by Daiwa House Logistics Trust at its IPO and had some concerns, I did not expect its unit price to crash so hard.

At the end of June this year, when a reader asked if I was interested in Daiwa House Logistics Trust as its unit price had declined, I raised a new concern which was the persistent weakness in the Japanese Yen.

Unlike the ECB which is raising interest rate, the Japanese central bank seems determined to keep interest rate low which is depressing the value of the Japanese Yen.

In reply to the reader who asked if the lower unit price made Daiwa House Logistics Trust a BUY back in July, I said that if the Yen was stronger, then, the REIT would be undervalued.

Unfortunately, it wasn't.

I said:

"Since the Yen declined so much, then, a similar decline in unit price doesn't make it (i.e. the REIT) undervalued."

More recently, just a few days ago, the Yen hit a historic low against the U.S. Dollar.

With this recent development, Daiwa House Logistics Trust's unit price has sunk even lower.

I said in my last blog that China was getting very hard to read.

Japan isn't much easier either.

Why is the Japanese central bank so stubborn?

All investments are good investment at the right price.

Unfortunately, at the moment, I do not know if it is the right price but as long as the Japanese central bank is bent on their current course, Mr. Market doesn't know either.

I do not see any positive divergence in the chart as MACD and RSI decline in tandem with the unit price.

I don't have an interest in Daiwa House Logistics Trust.

Just a quick blog sharing my response to a query from someone I know.

Daiwa House Logistics Trust was priced too dearly at IPO and we now have a persistently weakening Yen thrown into the mix.

On hindsight, it might have been a blessing in disguise that Saizen REIT, Croesus Retail Trust and Accordia Golf Trust were forcibly removed from my portfolio.

Recently published:
CLCT: Staying defensive and Chinese banks?

Reference:
Daiwa House Logistics Trust: Good or not?

Short paid by Croesus Retail Trust?

Reader #1 said...
Could I do a check with you regarding Croesus' delisting. I believe all unitholders have received the payout. Did you receive an amount equal to $1.17 x # of shares you owned (which is what i received)?

Cause i thought that the payout should also include the distribution till the effective date of the delisting, but cap at 4.06cents?

Wonder if you know about this?

Thank you very much for reading my email.

Reader #2 said...
Like you, I have bought some Croesus and the cash proceeds of $1.17 per unit has been credited into my account yesterday. As the Croesus' dividend of 4.06 cts was for the 1 Jan to 30 Jun 2017 period, do you know whether dividend will be paid for the 1 Jul to 25 Oct 2017 period? I do recall reading that the latter dividend would be paid.

Btw, I have enjoyed eavesdropping when you talked to yourself about your passive investment in SReits!!! Thank you for allowing the eavesdropping.







AK said...
Croesus Retail Trust completed the sale on time.
They would have had to make a higher distribution to shareholders if they did not.
So, $1.17 per unit is correct.
A DPU of 4.06 cents was made earlier in September, if I remember correctly.

Related post:
Still making money from CRT.

A replacement for Croesus Retail Trust.

Reader:
Just wanna seek ur views with regards to Croesus retail trust as it's most likely soon going to be delisted.

Thereafter, I'm thinking of recycling funds into AimsAMP cap Reit to replace CRT to generate high dividend.

Recently, the share price of AimsAMP went down quite a bit and make it rather attractive to purchase. This dividend income is important to me as I use it to pay for the living expenses n accommodation for my child's overseas uni education for 2 more years. Hope u can talk to yourself

AK:
Er... See my latest blog post





Reader:
Thanks, noted n seen. Due to my needs to find dividend income replacement after CRT, do u think AimsAMP at current P/B at 1.0 and it's NAV is equivalent to current trading price at $1.385/unit provides a fare price to buy in? I'm rather attracted to 7.8% annually and hopefully this is sustainable for the next few years at least.


AK:
Actually, do you really need to hunt for replacement dividend income? The capital gain from the sale of CRT would provide more than 2 years of "dividends" in advance, more than enough to fund your child's expenses. That is the point I am trying to make in my blog.

I don't know if it is a good idea to buy more of AA REIT especially if AA REIT is already a big investment in your portfolio.

Apart from concentration risk, being hasty to deploy the funds might not be a good idea.



Croesus Retail Trust is quite different from AA REIT. So, when we are thinking of replacing one with the other, it shouldn't just be because their yields are comparable.

When I got into Croesus Retail Trust, partly, it was because I was looking to reduce concentration in industrial S-REITs which have most of their assets in Singapore. So, it was to reduce sectoral and also geographical concentration risk.

So, it wasn't a simple case of getting a comparable or higher yield.

Of course, it is about what gives me peace of mind. It could be that I think too much.



Reader:
Wow, AK..very thankful for your fast reply and details 🙏🙏🙏
Noted your pointers and I'll keep them in mind.
Currently my AA REIT is not as large as my CRT investment ( really thank u very much as I read n focus in this Reit). Hopefully if AA REIT price weaken further, then I'll look into it.

AK:
I am sure you will do what is right for you. 🙂
Take your time. I think there is no hurry to redeploy the funds from CRT.

That is the beauty of buying into an income generating asset at below fair value. We could see its value unlocked and while waiting, we get paid. That was the case with Saizen REIT too 😉



Reader:
No lal, AK... definitely u r not thinking too much, 小心驶得万年船!
u r definitely doing the right thing n doing things right 💪🏼👍🏼
It's really great to know you since 7 yrs ago 👍🏼
Even though I missed the Saizen REIT, but there will always be more of other good dividend income stocks along the way, I'm sure 😊 Just continue to read ur blog ✌🏼

Related post:
How to deploy Croesus Retail Trust money?

How to deploy the Croesus Retail Trust money?

Reader:
I understand u have pretty huge stake in CRT so I thought I can eavesdrop how you intend to redistribute the funds. If u could talk to yourself on that, I will be just eavesdropping.

AK:
I am quite happy to hold on to more cash for a while. No hurry. ;)

I do have a relatively large investment in Croesus Retail Trust but I had an even larger investment in Saizen REIT.

I am mostly an investor for income and I view the huge capital gains as having received many years of income in advance.

It means that I could wait for many years without deploying the funds and I would still be quite comfortable. I don't need to grow my wealth constantly.

Now, if you must see positive growth year after year, what I have just said will not sit well with you. You will constantly have to look for ways to make sure you do not "fall behind".

So stressful.




You are hardworking. I am lazy.

For me, well fed, I am quite happy to sit on more money while waiting for new investment opportunities to come along.

Related posts:
1. How much did AK make from Saizen REIT?
2. Croesus Retail Trust, HPH Trust, NBN Trust and SingTel.

Croesus Retail Trust, HPH Trust, NBN Trust and SingTel.

Reader on HPH Trust, its decreasing NAV and distributions:
Thanks for your reply. I knew a lot of readers were asking you to talk to yourself on may things so definitely appreciate your time on this topic.

AK:
HPH Trust's land leases are decaying rapidly. I blogged about the Trust a few times before and why I avoided it.
(They were holding back much needed CAPEX to maintain DPU for a while but CAPEX could not be held back indefinitely.)

Reader:
As u know, we received the CRT scheme document and the suggestion is for us to accept.
At current price, we are looking at yield of 6.6% or slightly higher if the scheme went through. But there isn't any obvious choices (trots or trust) in the market that would match or beat that. Would like to understand what are the top few choices you would have redeploy the capital return.

AK:
If you are looking for 6.6% yield, I think it is not difficult to find but I would say yield isn't everything and it is obvious from the fact that I bought into SingTel instead of NBN Trust recently. 
See: Avoiding the instant gratification of yield.

Wondering to vote for or against the sale of Croesus Retail Trust? See related post #1 below for some of my thoughts.

Related posts:
1. Croesus Retail Trust.
2. HPH Trust.
3. SingTel or NBN Trust?

"Insurance agent helped himself to my money."

Recently, I met up with a friend whom I have not been in touch with for a few years and, inevitably, we also talked about money matters.

Mania over Chinese art. Huh? I blur.
Friend:
So, how is your investment in Japanese apartments now?

Me:
Oh, you mean Saizen REIT?

Friend:
Ya, you asked me to invest in this that time because it pays good dividends.

Me:
Gone already.

Friend:
Gone?

Me:
Ya, they sold all their assets to an institutional investor.

Friend:
Sounds like you made money!

Me:
OK lah.

Friend:
So lucky. That time I should have listened to you. Shouldn't have listened to my brother's insurance agent and bought the investment from him.

Me:
That was many years ago. How is it?

Friend:
I got fed up with it and sold it at a big loss.

Me: 
But you said that guy is very smart and can help you with your money, right?

Friend:
My brother say one, not me. Ya, very smart but not to help me with my money. Smart to help himself to my money. He left his job liao.

Me:
..................

Friend:
Now, you got any other money making lobang?

Me:
I have some investment in Japanese shopping malls.

Friend:
This time, I am going to invest.

Me:
But it is being sold to another institutional investor too. Not confirmed but it could happen in the next few months and the share price has shot up quite a bit by now.

Friend:
...................


The mood was gradually getting a little bit too heavy for my liking. So, I changed the topic.

My friend regrets investing in something and not investing in something else but is he really an investor? I wonder.

Related posts:
1. How many $29,000 do we have?
"Every year put in money. 20 years..."
2. Bought ILP from a friend.
'...if I cancel the plan now, I (lose) the money...'
3. Saizen REIT.
The investment was a good fit for my motivation.
4. Croesus Retail Trust.
Of course, being paid while waiting is not a bad deal.

Vote for or against selling Croesus Retail Trust?

Some might remember that the money I used to invest in Croesus Retail Trust was mostly from selling 90% of my investment in Sabana REIT a few years ago.

Since my investment in Sabana REIT was as big as my investment in AIMS AMP Capital Industrial REIT, the amount of money involved was pretty big for an average retail investor.

For those who have been following my moves over the years, they would know that I got into Sabana REIT at depressed prices, collected dividends over a 3 year period and sold as its unit price retreated from a high on the back of various red flags. 

Off the top of my head, I probably made about 13% per annum from my investment in Sabana REIT, all in.

Getting into Croesus Retail Trust after its price retreated significantly from its post IPO euqhoria and also by taking advantage of the rights issues later, I am probably looking at a total return of between 70% to 100% for the investments made at different times. 

On an annual basis, if I were to accept the offer of $1.17 a unit, the return on investment is probably between 17% to 60% per year. 






OK, please note that all numbers are off the top of my head and are only approximately right.

Now, quite understandably, not everyone is happy with the offer to take over Croesus Retail Trust at $1.17 a unit. We would be losing a good investment for income, after all.

A few readers wrote to me, asking if I would vote against the sale and a couple of readers also asked that I mobilize my army of readers to vote against the sale.

 ------------

------------

Alamak. AK is just another retail investor. AK is no king maker. So stressful.

Seriously, I will not ask anyone to vote for or against the sale but I will share a few points to put things in perspective.

1. With a DPU of about 8c, at 85c a unit, we were looking at a yield of 9.4%. At $1.17, we are looking at 6.8%. Yield has compressed by quite a fair bit.

2. Gearing is almost 50%, if I remember correctly. So, much of the yield we see is leveraged yield. If we should reduce leverage and that is possible through equity fund raising, distribution yield would drop. That makes for a fairer comparison against some retail S-REITs which have less than 40% in gearing.






3. It is not useful to say that $1.17 is X% higher than its price from X months ago. We should be interested in value. $1.17 is about 20% higher than the NAV per unit. 

Now, if we remember, Saizen REIT was bought over at a premium of about 3% above NAV and that was when I thought Saizen REIT's properties were probably worth more than what was carried in the books too. Also, remember, Saizen REIT's gearing was much lower than 50%.

4. It is true that even a compressed distribution yield of 6.8% is higher than comparable J-REITs' yields but we have to remember that the rules governing J-REITs are different which was an important reason why Croesus Retail Trust decided to list in Singapore. If they were to list in Japan, their DPU and, consequently, their distribution yield would have been lower.






Unfortunately, investors of Saizen REIT grew weary of waiting for value to be unlocked and agreed to its sale of assets. 

What about investors of Croesus Retail Trust? Obviously, many have a different attitude and are more willing to wait for a better offer, if any. Of course, being paid while waiting is not a bad deal.

This is interesting to me because Saizen REIT was a big investment for me and Croesus Retail Trust is a big investment for me too. I wonder.

Related post:
History with CRT and current thoughts.
"I like what I see. So, I stay invested."

Still making money in Croesus Retail Trust. Peace.

Hi AK,

I wrote to you a few months ago and told you a prominent blogger sold all his investment in Croesus. I asked you if you would be selling too. You gave me one of your typical AK answers. Now, a few months later, I am kicking myself because I sold half of my investment since I was not sure if I should stay fully invested. It was my biggest investment. If I had your conviction, I would have avoided this loss...

Hi R,

I have the feeling that you might not have understood the investment enough to give you the conviction to hold on to a substantial position in Croesus Retail Trust.

Your position could have been too big and peace of mind eluded you.

Money not made is not the same as money lost. By holding on to half of your original investment, you are still making money. Lesser by half but you are still making money.




Peace of mind is priceless. By reducing your investment by 50% when you did, know it or not, that was what you were after. 

Now, please don't lose something precious like this by saying you should not have sold.

Best wishes,
AK
Related post:
History with Croesus Retail Trust.

Make money from Croesus Retail Trust and no worries?

I said before that if an investment is still doing what we want it to do for us, there is no reason to sell unless we have found a another investment that can do a better job, bearing in mind to compare apples with apples.

Reader:
Hi AK, noticed you mentioned you would prefer not to accept any privatisation of Croesus. Just curious about the reason?

Supposing they pay a 20 percent premium, you'd be getting back effectively 3 years of dividends. Together with the large capital return (which would be more than 120 percent since your average price is much lower than current price), you could easily put that money on some other REIT, which itself would generate income moving forward.

So it seems that it's definitely good to take any deal that comes by. Or am I missing something?

AK:
It is like killing the goose that lays the golden eggs. 😉

Reader:
Haha true
Except with what you get back, you can buy another golden goose 😛
and have some more leftover because of the premium.

AK:
If you can find another golden goose. Not so easy. 😞


Well, sometimes, we don't have a choice and are forced to sell. Will just have to be philosophical about losing the goose then.

Related post:
History with Croesus Retail Trust.

History with Croesus Retail Trust and current thoughts.

When I found out that Croesus Retail Trust could be privatised, I had a feeling of deja vu.

It wasn't too long ago that something similar happened to Saizen REIT and, because of that, I lost a significant income generator.

Now, it seems that I may lose another significant income generator.




As I invest primarily for income, this creates a headache for me, especially when it is a relatively big investment in my portfolio. 

Mallage Saga, a CRT mall in Saga.

Some might remember that Croesus Retail Trust is one of my more significant investments as I shared this in a blog earlier this year.

In any case, the news got me nostalgic. Hence, this blog.





I first blogged about Croesus Retail Trust in July 2012 and, it was obvious, I was not too enthusiastic about it then.

See:
Croesus Retail Trust: IPO planned.


However, all investments are good at the right price and I became an investor in late 2013.

See:
Croesus Retail Trust: Long position.

I like to think that patience will be rewarded and I guess I was in this case.

Then, some readers were worried about Croesus Retail Trust and I wrote a piece titled:
Croesus Retail Trust: Motivations and risks.

When Mr. Market was feeling depressed, I bought more as I believed that an attractive investment just got more attractive. 

When Croesus Retail Trust offered rights units, I bought more because they were going to use the money for reasons which I liked.

See, for example:
22 for 100 rights issue (at 61c each)






Rights issues are not necessarily a bad thing and this is a topic I have blogged about many times in the past.

For example:
REITs and rights issues: Dilutive?

Over time, Croesus Retail Trust became a very significant investment that it is today for me.

I like what I see. 

So, I stay invested.





Oh, if you think this blog title sounds familiar, it should be because it is a play on this blog:
History with Sabana REIT and current thoughts.

Of course, regular readers would know that a big part of my investment in Croesus Retail Trust was funded by the proceeds from selling my investment in Sabana REIT years ago.

See:
Added more Croesus Retail Trust and reduced Sabana REIT.




I made pretty good money from my investment in Sabana REIT and I have made good money so far from investing in Croesus Retail Trust.

Even though I would prefer to continue receiving income from Croesus Retail Trust, if it should be privatised, then, I would probably enjoy (with misgivings) another round of capital gain.

Croesus Retail Asset Management Pte. Ltd. (the “Trustee-Manager”), as trustee-manager of Croesus Retail Trust (“CRT”), wishes to announce that it has been approached in connection with a potential transaction which may or may not lead to an acquisition of all the issued units in CRT (“Units”). 

Related post:
My investment portfolio.

Croesus Retail Trust 1H FY2017 Hong Bao.

This was from a recent conversation:

Reader:
"Croesus Retail Trust reported good results but an investor I know sold all his shares already."

AK;
"We have our reasons for buying or selling. If our facts are right and if our reasoning is sound, we should do OK. We could consider facts and reasons offered by other investors in reviewing our investment thesis but don't be influenced by their buying or selling."

Mallage Shobu, a CRT mall in Saitama.

That Croesus Retail Trust (CRT) has done well is something I should really celebrate twice because it was with the funds that I got from selling my rather big investment in Sabana REIT years ago that I invested in CRT. 

I should celebrate that I was lucky enough to get out of a terribly managed REIT with fairly decent gains and I should celebrate that I was lucky enough to build a good size position in CRT at fairly good prices.

CRT has announced a distribution per unit (DPU) of 3.6c for 1H FY2017. Based on a unit price of 87c, CRT currently offers an annualised distribution yield of 8.28%. 

Gross revenue went up. Net property income (NPI) went up. Distributable income went up. DPU went up. This is what we want to see. All is well.

Now, I want to share a couple of things. If we see distributable income up and DPU is down, how like that? If we see gross revenue down and NPI up, how like that? 

To me, these are a couple of things which might hold me back from making an investment or adding to an investment. I would have to investigate into the reasons and see if something was wrong and if the wrong was enduring.

If you don't understand what I am saying, never mind. I am just talking rubbish, as usual.

Mallage Saga, a CRT mall in Saga.

Anyway, back to CRT. I will make only a few points because the presentation slides are pretty self explanatory:

1. One of the benefits of having an internal manager is cost savings and the savings we saw in 1H FY2017 should be more pronounced in 2H FY2017. This is because the cost savings only started more than halfway into 1Q FY2017. CRT's DPU should have some support from this.

2. I said before that I like AIMS AMP Capital Industrial REIT because they engage in asset enhancement initiatives (AEIs) and redevelopment of existing assets. Doing something with our existing assets to enhance their income generating ability is always preferred and usually less costly compared to simply buying another asset. CRT is pursuing organic growth too. How to say I don't like?

3. The negative interest rates in Japan are not going away anytime soon. This is good news for domestically leveraged entities in Japan like CRT. USA's interest rate hikes will have no direct impact on CRT which is not the case for many S-REITs as Singapore imports her interest rates from the USA.

4. Although CRT's gearing ratio has gone up from 45.3% to 46.1%, the interest cover ratio has also gone up from 3.7x to 4.2x. Higher level of debt is not alarming if debt service ability has strengthened.

I like what I see and I will stay invested.

See press release: HERE.

See presentation slides: HERE.

Buying Croesus Retail Trust and Accordia Golf Trust?

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!

Related post:
(Added CRT at 78c and AGT at 51c.)

2016 full year passive income from non-REITs (Part 2).

UPDATE (20 Jan 17):
When I shared my full year results for non-REITs last year, I wondered if Religare Health Trust (RHT) might be privatised. Then, with Accordia Golf Trust's (AGT) sponsor being bought over by Korean investors, MBK, many asked what is going to happen to AGT? A reader, betta man, shared this with me:

https://www.smartkarma.com/insights/accordia-golf-agt-sp-high-conviction-family-office-favourite

There is nothing wrong with speculation as long as we know we are speculating. Me? I am quite happy to hold on to my investment.
-----------------------------------------------------------------------------

As promised, this is Part 2 of a very long blog post. If you have not done so, read Part 1: HERE.
Let us start this blog post with some gossip. Wah! Is Religare Health Trust going to be delisted?

You say, I say, they say. Hmm. ;p

Anyway, three big things happened in the non-REIT space for me.

1. A big thing was receiving a much larger than usual distribution from Religare Health Trust (RHT) which I initiated a long position in sometime last year at 88c a unit. The special dividend (which gave me a yield of almost 30% based on cost) came from them disposing a share of an income generating asset due to regulatory requirement. Including regular distributions this year, RHT has been a very rewarding investment for me. I am quite happy to continue holding on to my investment in the Trust as it continues to generate income. 
See this chat with a reader:

2. Another big thing that took place in the non-REIT space was the internalisation of Croesus Retail Trust's management. There was a rights issue because of this. I took up my entitlement and also applied for excess rights. The rights units were priced at slightly under 80c a unit (and will enjoy a distribution yield of almost 9%). The size of my investment in the Trust increased by almost 6% as I took advantage of the exercise.

3. The third big thing is the offer to privatise ARA Asset Management at $1.78 a share. This is likely to be concluded by the middle of next year and based on my entry prices, I would get to enjoy reasonably attractive capital gains of 35% to 78% although I would miss the regular dividends.

As I had a fixed deposit maturing and with the much lower interest rates offered by the banks this year for fixed deposits compared to last year (1.1% per annum at UOB for 13 months, for example), I decided to buy more ARA shares at $1.71 a share in late November.

I believe that this is possibly an arbitrage opportunity which could give me an "interest rate" of about 4% over a period of, maybe, half a year. 

It could be higher because ARA pays dividends twice a year and another payout could happen in April or May. If it should happen, I could see a DPS of 2c to 3c if the privatisation process is not completed by then.

Of course, to be realistic, there is a chance that the offer might not be accepted as I know some shareholders feel that the offer of $1.78 a share still undervalues ARA. 

In such an instance, I would be quite contented to hold on to my latest purchase to receive regular dividends (for a 3% dividend yield based on a DPS of 5c or about 50% of EPS) as I also believe ARA is worth more and that its shares should trade at a higher price. 

Delist or stay listed, I am happy with ARA either way.

Total dividend income from non-REITs in 2016: 


S$ 105,641.29


This translates to S$ 8,803.44 per month.

Apart from dividend income, regular readers know that I used to trade stocks more actively. Earlier this month, I revealed on my Facebook wall as well as the comments section here in ASSI:

Source: A wealth building strategy that has worked for AK.

Although I enjoyed some capital gains from a few trades this year (and the most recent trades being in DBS as its share price rose significantly for a few weeks), it is due to an emphasis on investing for income that has ensured further improvement in my financial health.

On this note, I will now say something about APTT because it seems that many readers were attracted to APTT by the relatively high distribution yield of 10% and bought into it. Now, many of them are worried because the unit price plunged.

If we know the value of a stock, we would know if the price makes sense. If we didn't know the value of the stock, we would never know if the price makes sense. If we don't know this, price movements would make us emotional.

I said before that APTT's past DPU of 8c was unsustainable. Although the management reduced DPU to 6.5c, I said that it might be more prudent to have a DPU of 4c which, I felt, was more sustainable. That was because 4c would be closer to APTT's EPS. 

At 37.5c a unit, I decided to add to my investment in APTT recently. I know what some people might ask and here is my answer: 

I don't know if the unit price will decline further but if it should, knowing what I know and all else being equal, I would probably be buying more.

Investing in APTT, we are not investing for growth. We want its income generation ability. If you thought you were investing for growth when you got into APTT, you might have the wrong tool. 

Know what we want to do and use the right tools.

For those of us who invested in APTT for income, ask if anything has happened which has damaged its ability to generate income significantly and, if something has happened, is the damage long lasting? Then, do what you have to do.

Know what am I going to say? 

Yes, if AK can do it, so can you!

HAPPY NEW YEAR!

And I hope you have found my blogs this year to be inspiring and helpful on your own journey towards financial freedom.

Let me know if I should continue talking to myself next year. ;)

LOL. From my FB wall (1 Jan 17).

Related posts:

1. 1H 2016 income from non-REITs.

2. Breadtalk, OCK and QAF.

3. Made $1m investing for income.
4. 2016 FY income from S-REITs.

Outlook for 2017 

(by OCBC Investment Research):

While the overhang from Brexit and the US presidential election is over for now, heading into 2017, we expect continued weakness in oil-related stocks, softness in the property sector and higher impairment charges for banks to be some of the factors that will dent investor confidence in the Singapore market. While interest rates are likely to head higher, we believe the hunt for yield is not completely over and investors are still likely to accumulate quality high-dividend stocks. We expect banks to report low- to mid-single-digit earnings growth, and the outlook for the residential property sector is still soft after numerous quarters of decline and with no clear pickup in demand or selling prices. The oil and gas sector is still saddled with refinancing issues as well as a lack of orders and earnings. The telecommunications sector is also facing the threat of a new player.

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Watch from the 22nd minute for the discussion on Singapore banks:

2016 full year passive income from non-REITs (Part 1).

During an "Evening with AK and friends", someone asked if I was going to sell my stocks as market guru Hu Li Yang was expecting a stock market crash. I said we should stay invested as the market was still awashed in liquidity and money will go to where it is treated best. See: Evening with AK and friends.



So, what did I do in 2H 2016 in the non-REITs space? I made various purchases but, mostly, I was buying DBS shares. Besides DBS, I also bought some shares of OUE Limited, PREH, Wilmar, OCBC, Breadtalk and Starhub.

(I am impressed by DBS' cost management. Their cost to income ratio keeps declining.)

The narrative for investing in OCBC was similar to the one for DBS. Although all three local banks' stocks looked cheap to me, my preference was for DBS because of the perceived cheaper valuation.


The reason for me putting some money in OCBC's stock was mostly because my long position in DBS grew so big (and I do mean BIG) that it was prudent for me to step on the brakes. 




Using a strategy I employ frequently for stocks which I am highly confident in, my relatively large position in DBS included both a core position for income as well as a trading position.

Why not UOB? 


Well, I think UOB has been a bit laid back. I am not saying that it is a bad thing, mind you, but its growth story seems less exciting.

Of course, some might say that DBS and OCBC have been more "adventurous" but I like to think that they are more enterprising.

I feel that growing their wealth management business more aggressively will continue to set them apart from UOB as that business contributes more and more to their earnings.

Next, Wilmar. I continue to like Wilmar's business strategy and their very impressive scale of operations. It is an amazingly complex business and, to be quite honest, I have no way to analyse most of its operations.

However, when Mr. Kuok thinks their shares are cheap and bought more at $3.00 a share, that was a pretty clear signal to me. At that price, we would also be buying at around its NAV which seems conservative.

Source: RHB.

Having accumulated a rather significant long position in Wilmar in recent years, I am quite happy to wait while being paid to do so.

Now, for OUE Limited. I blogged about my rationale for increasing exposure to OUE Limited when I shared my numbers for 1H 2016 (see related post #1). Back then, I added at $1.51 a share. In 2H 2016, I added more at $1.53 a share.

Twin Peaks.

My decision to increase exposure was mostly driven by the even larger discount to NAV from the time I initiated a long position. 

There is much value in OUE Limited but waiting for value to be unlocked requires a lot of patience. Well, remember, a wise man did say before that the big money is in the waiting.

Along similar line of reasoning, I also added to my investment in PREH at 80c a share a few days ago. This is the lowest price I have ever paid for PREH. The last time I bought any PREH shares was more than a year ago. 

It is interesting to me that Mr. Ron Sim, Mr. Pua S.G. and Mr. Kuok K.H. have been increasing their stakes in PREH on price weakness. 

PREH is an asset play but it is also a growth story. It is not for the faint hearted.

PREH

As for Breadtalk, I have a more recent blog post on my decision to initiate a position. I compared it to Old Chang Kee and QAF Limited, both of which I have been a shareholder of for many years. 

If you are interested to know why I had a change of heart and decided to initiate a smallish long position in Breadtalk, go to the related posts at the end of this blog post (see related post #2).

Starhub. In June last year, when I did a technical analysis for Starhub, I said:

"The widening of the Bollinger Bands indicates increased volatility. The OBV shows selling pressure. The MACD is declining and shows no sign of a positive divergence. These are all on the weekly chart which suggests that continuing weakness in the longer term should not surprise us." Read blog post: here.


We saw Starhub's stock price sinking and I nibbled  again in late November. I feel that Mr. Market is right to be concerned but might be overly pessimistic about Starhub's prospects with the introduction of a 4th telco.

There is plenty of speculation now but, to be realistic, it will take time for the new entrant (which is expected to enter the market in 2018) to gain traction and it remains to be seen how successful it will be.




Back in June 2015, I also said that SPH and Starhub were similar:

"They could see earnings come under pressure for different reasons but that makes them similar too as the challenges are very real.... I would like to have some buffer in terms of dividend yield buying into SPH and Starhub because I am investing in them primarily for income and not growth." Read blog post: here.

I believe I am getting a much thicker cushion buying Starhub at under $2.80 a share and that was what I did.

As for SPH, let me share here a recent conversation with a reader:

I have been a SPH shareholder for many years and I am happy enough to be paid while I wait.
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As this turned out to be a very long blog post, I chopped it up into two parts. Read Part 2: HERE.
Related posts:

1. 1H 2016 income from non-REITs.

2. Breadtalk, OCK and QAF.

3. Made $1m investing for income.
4. 2016 FY income from S-REITs.