MIIF: Asian Pay Television Trust (APTT).

MIIF is calling for a special general meeting on its plan to spin off its stake in Taiwan Broadband Communications (TBC) through the setting up of a new business trust, Asian Pay Television Trust (APTT).

The idea is that this will further unlock value for unit holders who could either accept new units in APTT or cash in payment. Overseas unit holders can only accept cash in payment. The minimum valuation of MIIF's stake in TBC puts it at S$469.5 million or S$0.408 per unit, net of costs.

This is probably the fund's most valuable asset. In terms of proportion to the fund's NAV, it is approximately 60%. In terms of earnings contribution, it accounts for about 76% of the fund's earnings. So, it is obvious that TBC is the star performer in the fund's portfolio.

Could unit holders profit from this spin off?

1. For a business that is worth at least S$469.5 million, it generates an income of about S$44 million. That gives us a raw yield of 9.37%. What would the final distribution yield be like, after costs? 8%? In a yield hungry world, we could possibly see distribution yield compressing to under 7% which means the market value of unit holders' investment in APTT could then see a gain of approximately 15%.

2. A sell off of MIIF units by Mr. Market could happen, post spin off. Since TBC accounts for some 76% of the fund's earnings, MIIF's unit price could decline proportionally. However, Mr. Market doesn't behave rationally all the time. We could take advantage of drastic mispricing to sell or buy units in MIIF then as there could be some confusion as to the valuation of MIIF, post spin off.

For now, we can only wait to see how things will turn out.

See MIIF's full 2012 results: here.

Related post:
MIIF: Realising value.

POSB HDB loan: Peace of mind (for 10 years).

A friend asked me if he should refinance his HDB housing loan with POSB. He currently has the HDB Concessionary Loan which attracts an interest payment of 2.6% per annum.

Pegged at 0.1% above the CPF-OA interest rate, the HDB Concessionary Loan's interest rate is unlikely to increase, ever.

Having a floating interest rate of 3 months SIBOR + 1.38%, the new POSB HDB loan gives the assurance that interest rate will not go higher than the CPF-OA interest rate for the first 10 years of the loan. CPF-OA interest rate is currently 2.5%.

What happens after the first 10 years? Well, interest rate will be revised to 3 months SIBOR + 1.48% and there will not be any upper limit to the interest rate anymore.

Intuitively, I feel that this is a good deal for anyone who wants to enjoy a lower interest rate on his HDB housing loan which, given the current very low interest rate environment, represents rather substantial savings.

Without the guarantee of an interest rate cap at the prevailing CPF-OA's rate for the first 10 years, however, it would not have been as attractive. So, you can imagine what I am going to say next.

The attractiveness of the offer ends in the 10th year as the interest rate could be higher than the HDB Concessionary Loan's rate by then. Of course, if the low interest rate we see today should still be around 10 years later, no matter how unlikely the case might be, then, this would still be a good deal.

From the 11th year, however, borrowers would be at the mercy of the 3 months SIBOR. They could try to re-finance their loans with other banks but they can never go back to the HDB Concessionary Loan.

Older readers might remember stories of how many HDB home owners switched to bank loans when the market was first liberalised many years ago. Initially, the interest rates on those housing loans offered by the banks were lower but they gradually increased. Those owners were badly affected.

Interest rates will not stay so low forever and anyone who signs up for this new POSB HDB loan should do so only with a contingency plan to pay off the entire loan at the end of the 10th year. It is a contingency plan and this means that the borrower should have the ability to do so but he doesn't have to if circumstances remain benign.

Take the loan, by all means, but put aside some money religiously every month to do partial capital repayments or enough for a full payment of the outstanding loan at the end of the 10th year.

This is what I would do.

Update (25 July 2014): It is 8 years now.
"Save up to S$20,000 in the first 8 years when you switch to the POSB HDB Loan! Plus, get a S$1,800 cash rebate, on top of capped interest rates and more. T&Cs apply."

Update (29 May 2016): It is 5 years now.
POSB HDB Loan is the first HDB Loan to offer interest rates capped at the prevailing CPF Ordinary Account rate* for the first 5 years. Not only will you be protected from interest rate surprises, you could enjoy guaranteed savings too! Guaranteed 0.1% p.a. lower than HDB Concessionary Loan rate for the first 5 years. Enjoy savings from lower interest rates compared to HDB Concessionary Loan rate. No prepayment fee.


PLEASE SEE LATEST UPDATE ON HOME LOANS:
http://singaporeanstocksinvestor.blogspot.sg/2016/08/fixed-rates-sibor-fhr18-or-hdb-housing.html

CPF or SGS?

When I revealed that I did a voluntary contribution to my CPF account earlier today, someone told me he is scared of the CPF and would only contribute what is required by law.

I said that the CPF gives us relatively attractive, risk free returns. He then asked why not consider the 30 years SGS (Singapore Government Securities) with a 2.6% return and have some upside to boot.

Well, the SGS are quite different from the CPF, aren't they?

When we do a voluntary contribution to our CPF account, the contribution is apportioned to the OA, SA and MA. The OA pays 2.5% while the SA and MA pay 4.0%.

CPF money is actually long term savings, a very long term fixed deposit of sorts. The principal sum does not change. We can't actually lose money, so to speak.

When we buy long term SGS, we are buying bonds. We might get 2.6% per annum with the possibility of some upside but the possibility of downside exists as well.

Actually, a quick check over at MAS' website will show that the 30 years SGS which is supposed to pay a 2.75% coupon has fallen in price. See: Daily SGS prices.

As I believe that the very low interest rates we currently see cannot persist for many more years, buying long term bonds is a risky proposition. Why?

For bond prices to rise, interest rates have to continue falling. How likely is this? It is more likely for bond prices to fall in the coming years as interest rates once again start to rise. It is not a matter of "if it happens" but "when it happens".

I have money stored in four war chests. My CPF-OA and CPF-SA are two.

Money in these accounts earn relatively attractive, risk free returns while waiting for possibly more compelling propositions to be offered by Mr. Market.

Money in bonds is like money in equities in that they are not money in a war chest waiting to be deployed. Or am I mistaken?

Related posts:
1. Be cautious even as we accept higher risks.
2. Build a bigger retirement fund with CPF-SA.
3. If we want peace, be prepared for war.

Investing in Singapore banks?

Just read an article in CNA and I am just thinking out loud if it is still a good idea to invest in Singapore banks?

Southeast Asia's biggest bank has said demand for home and car loans in Singapore has plunged this year following government measures to cool inflation.

DBS Group's chief executive, Piyush Gupta, told Channel NewsAsia new home loan demand fell by 50 to 60 per cent last month.

He said lending this year is unlikely to match 2012.

.... Mr Gupta said much of the bank's Singapore operations lose money and Indonesia is the focus for growth this year.

Read full article: here.

Related posts:
1. More cooling measures on the way?
2. Cooling measures for cars.

First REIT: DPU to increase!

First REIT is going to acquire two new hospitals in Indonesia for $190.4 m.

1. Siloam Hospitals Bali.
Purchase price: $97.3 m.
Annual base rent: $9.7m.
Financed by a drawdown of committed debt facility.

2. Siloam Hospitals TB Simatupang (South Jakarta).
Purchase price: $93.1 m.
Annual base rent: $9.3m.
Financed by a combination of a drawdown of committed debt facility and issuance of new units to the REIT's sponsor.

For anyone investing for income, an important question is how would these actions affect the DPU?

Well, even with the issuance of new units to the REIT's sponsor, unitholders will still enjoy a 5.47% increase in DPU on a per annum basis. The estimated full year DPU including these acquisitions is 6.94c.

Mr. Market certainly likes the news as the REIT's unit price rose 3.5c to close at $1.23 per unit. At this price, the projected distribution yield is 5.64%.

Yield has certainly compressed very much compared to those days when I bought at between 42c to 76c per unit.

So, is it still good to buy at current prices? It would depend on what is our definition of "good".

See announcement: here.

Related posts:
1. REITs: When to buy?
2. Do not love unless it is worth the loving.

A bad experience in a local bank.

One would think that after the Lehman Brothers Mini-bonds incident, things would have changed on the banking floors here. However, if my sister's experience yesterday at a reputable local bank was anything to go by, not much has changed on the ground.

I see dark clouds again.

She went to the bank to deposit my niece's savings in a fixed deposit but was approached by a male banker who tried to convince her to put the money in a "bond" which would supposedly give her a 5% return instead.

He told her that there was no lock in period and that the 5% return was better than the 1% which the one year fixed deposit would pay in interest...

Waiting for more information? You would be disappointed. Now, how many aunties and uncles would have taken up the offer right there and then?

Well, my sister asked questions! Good on her!

Bonds? Who am I lending money to?
Answer: XXX (name of the bank she was at) lah.

Is this some kind of unit trust?
Answer: No, no. You are lending money to XXX.

What is the catch?
Answer: The catch is you get 5% per annum lor.

There are no fees?
Answer: You can sell anytime. There are no fees when you sell.

What about fees when I buy?
Answer: There is a 3% fee.

So, before I make any money, I would have lost 3%?
Answer: But you will get 5% per annum.

XXXX offered me a product too. Capital is guaranteed. What about this?
Answer: This won't lose money one. See? I show you the chart. The value keeps going up.

So, nothing is guaranteed?
Answer: The projected returns is very good. See the chart?

HOCUS POCUS! POOF!

If I had been there, the "banker" would have been blasted by me big time! I would have asked to see his branch manager. I would have suggested that this person be sent for corrective training. Indeed, how are these "bankers" trained?

Misrepresentations aplenty!

I get very agitated when I hear of such incidents. Why do people resort to such trickery to close deals? Why can't they be honest?

Related posts:
1. Know what is good for us.
2. Inflation adjusted retirement income plan.

Want to make big money? Must drink this!

I have used the example of how we can save on super atas coffee and to drink less expensive coffee for the masses. Of course, I am assuming that all of us are of the masses.

I went one step further by suggesting not drinking coffee at kopitiams but to bring our own 3in1 coffee mix to work. Wah! Save even more!

Of course, if our workplace has a well-stocked pantry, we get free coffee! Win already lor!

However, with cost of doing business in Singapore rising, we could be seeing office pantries becoming less well stocked or having cheaper alternatives.

Today, I was rather amused that the familiar Nescafe coffee in our pantry has been replaced by:

A must drink for all investors and traders every morning!

Gong Hei Fatt Choi!

Huat ah!

Related post:
A common piece of advice on saving.

Letter from a Brigadier General.

Slightly more than a year ago, I received a letter that had the words "ON GOVERNMENT SERVICE" and our national crest on the envelope. I had palpitations.

Today, it happened again!

This time, I received a letter from BG Tung Yui Fai of the Singapore Armed Forces.

Enclosed with the letter are 8 pieces of $10.00 vouchers which can be used at more than 5,000 outlets in Singapore! They include petrol stations, supermarkets and F&B outlets!

Accepted at Old Chang Kee as well, I guess I will be having free curry puffs for a while. Yummy!

Related posts:
1. AK71 gets recognition from the government.
2. Old Chang Kee: Have my curry puff and eat it too.

Sound Global: Long position at 50c

Sound Global's share price is currently at an important support level. This approximates 49.5c.

I am once again a shareholder of the company with a long position at 50c. I bought some shares towards the end of the day when I saw how the support seemed to be holding up.

Make no mistake, Sound Global's stock is in a downtrend but share prices go down a river of hope and hardly in a straight line. Although no one can say that the stock has bottomed, it could be that it has found a floor.

I see a higher low in the CMF even as share price dipped lower. We see a positive divergence. The MFI does not spot a higher low but it has just dipped into oversold territory. We could be seeing some buying activity as the stock becomes oversold with volume increasing today.

A short white candle with a lower wick formed today. Although not strictly a hammer, after yesterday's black spinning top, this is a promising sign that the downtrend has weakened and possibly coming to a halt. This short white hammer is a reversal signal which would need confirmation tomorrow.

Fundamentally, I like the company's business. I am concerned about its higher financing cost but in spite of this, it is still a very profitable company with very good prospects. The selling down of its stock might have been overdone by Mr. Market.

In fact, EPS is likely to improve in 2013 because of a very strong order book. With China bent on improving water and sewage infrastructure, I expect Sound Global to be a logical beneficiary. Trading at a PE of less than 10x, Sound Global's stock is inexpensive.

With the stock currently in a downtrend, however, for anyone buying on dips, adopting a trading mentality could be more rewarding.

Related post:
Sound Global: Lost 17.2% in a day.

Yongnam: Partial divestment at 31c.

Last month, I commented that I was almost sure that Yongnam's stock would hit 31c per share and this has happened sooner than expected. Today, the stock hit an intra day high of 31.5c.

Technically, I have observed that the share price seems to move in bands of 1.5c. So, overcoming resistance at 31c, we could see share price rising to 32.5c and 34c over time.

Fundamentally, it is not so easy to forecast Yongnam's earnings as it depends on the number and value of projects they might capture in future. There really is no consistent recurring income base which can be used.

However, if we were to accept last year's performance as the worst case scenario and be more conservative, at 31c per share, Yongnam is trading at a PE of almost 9x. It is hardly expensive.

If we accept CIMB's forecast of 5.2c EPS in 2013, then, PE is much lower at almost 6x. Definitely inexpensive.

CIMB thinks 5.2c EPS is attainable because previously delayed projects would be ramped up in 1Q 2013. Various landmark projects are also expected to boost earnings in 2013. (See CIMB's report: here.)

Is share price going higher in the next few sessions? The formation of a long white candle on the back of extremely high volume is very bullish. Share price could indeed move higher but because my initial target price of 31c has been hit, I decided to do another partial divestment today.

After all, to sustain the upward movement in price from here, much higher volume is probably required. Is this likely? I don't know but locking in some gains as price action went parabolic seems like a good idea.

Keep an eye on the momentum oscillators. If lower highs form although share price has moved higher, we would see the formation of negative divergences. This would sound a warning bell although it does not mean that share price would decline right away.

Related post:
Yongnam: Investing in infrastructural developments.

Yongnam: Investing in infrastructural developments.

I like what I read in The Business Times today on how Yongnam is leveraging on its core competencies to diversify into investing in infrastructural developments which would generate recurring earnings in future.

This is an astute step in the right direction since Yongnam is already a leader in the provision of structural steelworks, specialist civil engineering and mechanical engineering services. So, they have an upperhand in undertaking infrastructural developments.

Yongnam has, together with JGC Corporation and Changi Airport Planner and Engineers Pte Ltd, looked into possibly submitting a tender for the construction and management of an international airport in Myanmar.

This new business direction and the burgeoning pipeline of infrastructure projects in Singapore to 2030 hint of more vibrant times ahead. Yongnam is, more likely than not, going to be a steady performer and could surprise with better results in time to come.

Dividend payout remained the same at 1c per share despite a decline in EPS. This suggests to me that Yongnam is commited to paying at least 1c per share in annual dividend in future.

I am rather contented to be paid to wait for Yongnam's results to improve meaningfully over time.

Related post:
Yongnam: Declared 1.0c dividend per share.

Article published in Yahoo! Finance Singapore (3).

An ASSI classic was republished in Yahoo! Finance Singapore on 6 March 2013.

The article has, naturally, attracted comments and some of them are eye openers.

I am a frog in a well and can only see a small patch of the sky.

In case anyone is interested in finding out more, here is the link:

Yahoo! Finance Singapore.

To read the comments, simply scroll down beyond the end of the article. Happy reading!

Related post:
Article published in Yahoo! Finance Singapore (2)

No free lunch but what about breakfast?

Today is National Breakfast Day and I went to McDonald's to receive a free Egg McMuffin!

There were ushers at the door who directed me to join a queue which was rather fast moving. Within 5 minutes, I received my free breakfast!

Yummy!

Learn more about the event: here.

Know what is good for us (UPDATED).

I was reading the weekend edition of The Business Times and read an article which mentioned a survey done by the Monetary Authority of Singapore more than a year ago on banks and insurance companies. 

It was found that:

1. 50% of investors were not asked about their financial objectives or risk tolerance.

2. 48% of investors were not informed of fees and charges.

3. 40% of investors were not asked about their investment experience.

4. 30% of products recommended to investors were not suitable for them.


Have things changed? 

I very much doubt it.







Why do I say this? 

I still receive cold calls from insurance companies and tele-marketers, representing banks, promoting insurance and investment products. 

Usually, these callers would launch right into why a product had good features, good potential returns and was good value for money.





A call I just received last week from an insurance agent whom I don't know from Adam was a good example of this. 

The caller did not even make an effort to understand me as a client. 

He simply made certain assumptions. 






Although I was unusually patient with him, I finally told him that I would tell him what I was looking for in a product and if he had anything which met my requirements, let me know.

To his credit, before he put down the phone, he honestly told me that he put his own money in REITs. 

I guess he realised that there wasn't a chance that I would buy any of the products he proposed to me. 

Revelation!





Before we buy anything, we have to make sure that it is good for us and how do we know if it is good for us? 

We have to ask the right questions because we cannot depend purely on the goodness of others to do this for us.






Related posts:
1. Inflation adjusted retirement income plan.
2. Why a wealthy nation cannot afford to retire?

Do not love unless it is worth the loving.

We often hear that we should not fall in love with stocks.

What does this mean?

"The most important thing to realise is simple: The stock doesn't know you own it. All those marvelous things or those terrible things that you feel about a stock, or a list of stocks... are unreciprocated by the stock or the group of stocks." - Adam Smith

Basically, don't love things which can't love us in return. However, I am only human and cannot avoid loving and hating unappreciative things. 

I have no doubt that I made many decisions before based partially on my emotions. Could I continue to make emotional decisions? As long as I remain human, I could, of course.

Recognizing that we are all emotive is an important step in becoming better investors. The challenge is in how to be more rational in our decision making process.

Remembering that we should not fall in love with our investments, a friend sold his entire investment in an S-REIT which he feared he was falling in love with only to see its unit price rising higher. Now, what can we say about this? There are probably many people out there who love this S-REIT even more. This brings to mind another saying and that is we do not know we have a good thing until we lose it.

Although there is definitely wisdom in saying that we should not fall in love with our investments, I think that it would be less misunderstood if we say we should not blindly love our investments. Being blindly in love with our investments could see us holding on even when there is a deterioration in fundamentals.

Regular readers know that I have reduced my exposure to Singapore real estate by selling my properties. Readers would also know that I cautioned against being too optimistic about real estate and S-REITs as prices have appreciated a lot, yields have compressed significantly and the low interest rate environment is unlikely to last for many more years.

Then, why do I still have significant investments in certain S-REITs? Am I in love with these S-REITs? Perhaps, I am. However, I like to think that I am not blindly in love with them. I like to think that they are still worth loving.

So, what makes them worth loving?

They are still worth loving if they provide me with good recurring income. They are still worth loving if they take care of their health. They are still worth loving if they are growing stronger, day by day. In short, they are still worth loving if they give me joy and not angst.

Here are links to some of my past blog posts on S-REITs which show the way I think:
1. First REIT: This one is for keeps.
2. AIMS AMP Capital Industrial REIT: Making money.
3. Saizen REIT: Why did I buy and would I buy more?
4. LMIR: Divested 42.5% at 52.5c.
5. LMIR: Too cheap to sell.

Want to teach yourself Fundamental and Technical Analyses to be a better investor?
See: Recommended books for FA and TA.