Keppel and CitySpring Trusts: An unequal marriage?

I got into K-Green Trust (now renamed Keppel Infrastructure Trust) a few years ago at $1.11 per unit. I was attracted by its zero gearing and relatively decent distribution yield.

Over time, I received a DPU of almost 8c a year from K-Green Trust. So, with a closing price of $1.09 per unit in the last trading session, I have achieved a return of about 7% per annum which is not too bad for an income investment.

With zero gearing, together with other unit holders, I was waiting for K-Green Trust to gear up and acquire some DPU accretive investments but after waiting for 4 years, nothing really happened. Well, that is not until now.

Honestly, I don't have good feelings towards the merger of K-Green Trust and CitySpring Infrastructure Trust. To be honest, again, this probably has to do with the experience I had with CitySpring and I shared my thoughts here in my blog many years ago.

It would have been much cleaner for K-Green Trust, which I believe to be stronger financially than CitySpring, to acquire assets on its own and grow its DPU. The merger complicates things. Well, at least, it does for me. The first thought that came to my mind is that CitySpring's weaker balance sheet will strengthen with the merger.

Granted that K-Green Trust's assets have limited lifespans but it is like a good cup of coffee that is slowly being finished. We just have to top it up with more good coffee. CitySpring, to me, is coffee that is not so good. Now, these two cups of coffee are being mixed up.

It is easy to see that K-Green Trust has had a better track record compared to CitySpring's in the last few years. CitySpring has had two rights issues and seen its DPU reduced by more than 50% in the process over the years. What? They took more money from unit holders and it resulted in less income distribution per unit? Pui!

Now, with the proposed merger, existing unit holders of K-Green Trust will receive 2.106 new CitySpring units for every K-Green Trust unit owned. Oh, my. I am going to be a unit holder of CitySpring's again after so many years?

I lack the inclination to dig into the numbers as I am disappointed and flabbergasted by K-Green Trust's decision to give up its strong balance sheet by merging with CitySpring. There is no need to, in my opinion.

So, although it could be a mistake because I might not be able to see the big picture that more savvy investors are able to see, I will probably be saying good-bye to my investment in K-Green Trust, taking advantage of its higher unit price as a result of somewhat positive sentiments.

Out of sight and out of mind. Zen.

Related posts:
1. CitySpring Infrastructure Trust: Divestment.
2. K-Green Trust: Zzzzzzzzzz.

Retirement adequacy for a senior needing long term care.

This was a recent email exchange with a reader:

Hi AK
My sis is 60 years old, single and stays alone. Recently, she fell very sick and was admitted to hospital for a few weeks. Now she is at home on medical leave.  We got a maid to look after her.  Don't think she will be fit enough to go back and work.

She doesn't earn much as an admin staff, but still managed to save quite a bit through many years of working and saving -  about $150,000 in Cash and $100,000 in CPF.  And she has also paid up fully for her HDB flat, so no debts except for some insurance premiums which she is still paying, her medical expenses and expenses to employ the maid @$720 per mth.  

She knows that her saving will not last her very long. She has asked me to invest her money so that she could collect some dividends and help pay for her daily expenses since she will have no income in future.  I am not a savvy investor.  Most of the times I bought stock based on reading your blog and some other financial blogs.  I have no qualms to invest using my own money but how to invest for her?

I still do not dare to invest for her as I can't afford to lose her hard earned money.

What were you do if you are in my shoes?  How can I help my sis? Safest is to put in FD but the interest rate is so low.

My reply:
If I were in your shoes, I would be very cautious too. Losing some of my money is one thing but losing my sister's money would be something else. I actually gave my sister a capital guaranteed privilege at one time. If the investments should lose money, I would bear the losses. Bad idea, I know.

Anyway, back to your case. What would I do?

If your sister needs $720 a month or $8,640 a year. Obviously, relying on her savings of $150,000, it would take only 17.36 years to be depleted. This is not considering any interest income earned during that time, of course. Add other expenses, maybe $800 a month, and her savings will take half the time to deplete. 9 years, perhaps? So, there seems like a need to invest for income.

However, we must not forget that she is eligible for CPF Life payouts in another 5 years from now at age 65. If she has $100,000 in her CPF retirement account (RA), she could be drawing $800 or so (this is a rough estimate and you should call CPF to check the exact amount) every month for the rest of her life and this would be enough to pay for her medical expenses and the maid.

In my opinion, there isn't any need to take on risk by investing your sister's money in the stock market now. 

Of course, I am not asking you not to invest on her behalf in the stock market. You could keep an eye on the stock market and buy some good dividend paying stocks for her when Mr. Market goes into a depression. In the meantime, your sister has enough financial resources to take care of her needs.
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To have peace of mind, always ask if it is money we can afford to lose. If it is not money we can afford to lose, don't invest it.

Related posts:
1. What happens at 55 and CPF Life?
2. The PM on retirement adequacy.
3. Free e-book: Retiring before 60 is not a dream.