First REIT: DPU of 0.7c.

First REIT issued 30,900,000 new units last November at 95c each to help pay for a couple of acquisitions in Indonesia. An advance distribution of 1.02c was paid for the period 1 Oct to 25 Nov.

The DPU of 0.7c announced is for the period 26 Nov to 31 Dec.

The management expressed confidence that contributions from the two new properties would boost the REIT's net property income in 2013. The full impact would be felt from 1Q 2013 which means that we would be able to tell in the next quarterly report if DPU would see a substantial increase.

When I blogged about the private placement in November, I was concerned that we would see a reduction in DPU, post placement, using the pro forma numbers provided by the management then.

Now, it seems that, apart from the maiden contributions from its two recent acquisitions in Indonesia, the REIT enjoyed higher rental income from its existing properties in Indonesia, Singapore and South Korea as well.

If I were to do a quick back of the envelope calculation using the latest DPU of 0.7c as a guide, I would say we could actually see a quarterly DPU of as much as 1.75c in 2013. This would mean an annual DPU of 7c.

Therefore, my fear of a reduction in DPU due to the dilutive effects of the earlier mentioned private placement has been allayed or so it would seem.

Interest cover ratio: 12x

Gearing level: 27.1%

With the management steadfast in its vision for a S$1 billion portfolio over time, although the REIT's balance sheet is strong, we could see more fund raising in future.

With unit price well above NAV/unit, it has become cheaper for the REIT to raise funds by issuing new units now. So, future private placements or rights issues cannot be ruled out.

See presentation slides: here.

Related post:
First REIT: 30,900,000 new units.

If we want peace, be prepared for war!

Next crash to be worse than 2008.

I had an email exchange with a reader who, amongst other things, asked me to elaborate on an often used phrase in my writings. I feel that his questions are pertinent and as there could be other readers who might have similar questions, publishing our exchange is probably a good idea.




Reader:

Hello Mr AK71, .... I am an avid reader of your ASSI blog.

First I want to say a big thank you for the many posts you have written, they have been extremely insightful to so many of us who are still learning about investing. Your guidance and advice is very much appreciated.

I have a question regarding a piece of investing advice you gave us some time ago, I hope you can enlighten us!

In several of your posts earlier this year and last year, you mentioned that we should always have a "war chest" ready should good opportunities come and we can use it generate good returns. ie buying low.

My first question is, what would you say will be a good percentage ( of one's total assets used for investing, ie both cash and stock ) for a person to put aside for such an opportunity ?

My 2nd question is, surely the opportunities you mentioned come once in a blue moon ( ie during times of recession, etc, ), and for small time investors such as myself, putting aside a considerable amount of cash while waiting for such opportunities seems "wasted" when it can be put into actual investments to generate passive income in the meantime.

To paraphrase, I fully understand your idea of a warchest, but I am in a dilemma as I would like to utilize all my available funds I have set aside for investing to maximize my passive income, and setting aside a considerable amount of cash while waiting for such opportunities doesn't seem like the best use of my money.

What is your take on this ?

I have one final question - Would you recommend investing using the extra cash one have in cpf ? ( the money after all, is just sitting there. )

I was thinking of investing it in relatively safe assets like SREITS.
Thank you so much for your time.

Lake Ashi, Hakone, Japan.

My reply:

I am glad you have enjoyed my blog and found the posts insightful. :)

I also have questions for you.

Do you believe in insurance?

When we buy insurance, we are protecting ourselves against bad things which could happen. If we know that bad things would definitely happen, would we buy insurance? More so, we would buy insurance, wouldn't we?

A war chest is like having insurance. Do you think there would be another bear market? If you think there would be, why won't you need to have a war chest?

If you think this through, you would realise the importance of having a war chest (or a few).

How large should your war chest be? This is up to you. It should be large enough to make a difference during bad times but not so large as to make you feel uncomfortable. It is a very personal decision.

I won't recommend you do or not do anything with your CPF-OA. 

I will only say that my CPF-OA money stands ready only to be used when there are compelling investment opportunities. In the meantime, it earns 2.5% per annum risk free.






Reader's reply:

Hello Mr AK, thank you so much for your reply.

I have never thought about my "war chest" as a form of insurance, but more as a liquid asset that I can use for investment. Your advice has indeed given me something to think about. :]

As to investing with my CPF, I will give it more careful thought, and also do some more research and homework first.

Please feel free to publish our exchange if you think it might help fellow readers out there. As you mentioned, I'll feel more comfortable staying anonymous. :]

Once again, thank you so much for time and advice. Your blog continues to be a source of great inspiration and knowledge.




AK's final word on the matter:
We would do well to remember that if we want peace, we must be prepared for war. If we want to be richer, we need a war chest.

Related posts:
1. Be cautious as we accept higher risks.
2. Never lose money in S-REITs?
3. SRS, CPF-OA, CPF-SA. (Note publishing date.)
4. AK71's simple strategy.