More income from Ascendas Hospitality Trust expected.

Quite a few readers asked me about investing in hospitality trusts and they usually ask me about FEHT or CDL HT. 

This is not surprising because they have a stronger presence in Singapore.

I don't have a stake in either and with the oversupply of hotel rooms in Singapore, it is probably the case that hospitality trusts with a bigger exposure in Singapore will continue to struggle. 




Beyond this, I don't have anything more specific to say about the trusts.

Having said this, I do have a good size investment in a hospitality trust, namely, Ascendas Hospitality Trust (AHT). 

Newer readers might not know this but I first invested in AHT in 2014. 

I did not invest in AHT during its IPO as I found the financial engineering to boost DPU distasteful. You can read more about this in related post #1 at the end of this blog.

Back in 2014, I thought that Mr. Market offered me a pretty reasonable price to invest in AHT, a price which was about 20% lower than its IPO. 




With the effect of financial engineering expired, it was also clearer what my return on investment realistically was going to be. A distribution yield of 7.64% was attractive enough, I thought.

In August 2015, when AHT's unit price suffered from a severe bout of market pessimism, I was pleased to accept Mr. Market's offer to increase my investment in AHT. 

Purchases in that month grew my nibble of an investment in AHT in 2014 to a much more significant position, large enough to generate enough passive income to replace a month's worth of earned income (when I was still gainfully employed). 

My investment in August 2015 would receive a distribution yield of more than 9.5% based on the numbers I used for my purchase in 2014.




AHT has a portfolio of hotels in Australia, China, Japan and Singapore. However, its exposure to Singapore is limited to one hotel, Park Hotel Clarke Quay which was purchased in 2013. 

So, the effect of oversupply in hotel rooms here will have less negative impact on their results overall.

Most of AHT's assets are in Australia which contribute 56% of Net Property Income (NPI). Japan is the second largest contributor accounting for 24% of NPI. 

The much stronger performance by these assets more than compensate for poorer performance in Singapore.




Year on year, 3Q's DPU improved by 13.1% to 1.64c as a result. 

Gearing is at 33.3%. NAV/share 85c.

In 2014, I said that an appreciation in the A$ would benefit AHT. Together with the stronger JPY, I am hopeful that DPU for 4Q could similarly receive a boost.

The oversupply in hotel rooms in Singapore was already apparent in 2014 and AHT was probably a better choice than FEHT or CDL HT. I was lucky to make the right choice.

Source: SBR, 20 Mar 14.

Despite the oversupply of hotel rooms in Singapore, I expect AHT to be a better passive income generator for me this year.

Unit price declined 16.4% from
$1.645 (15 Sep 14) to $1.375 (10 Feb 17).

Unit price declined 27.6% from
81.5c (15 Sep 14) to 59c (10 Feb 17).

Unit price rose 3.4% from
73c (15 Sep 14) to 75.5c (10 Feb 17).

Download presentation slides: HERE.
Related posts:
1. AHT: A nibble.
2. 9M 2015 income from non-REITs.

$500K in gold and waiting for stock market crash.

Gold is not a productive asset.

Hi boss!

Like to ask you on a topic (precious metals) rarely mentioned on your blog. I love precious metals (gold and silver) and anything in gold I can wear. I liquidated all my shares in 2013 in anticipation of a market crash that didn't happen till date.

If I were to liquidate all my gold today, I will get back 500k. 

I like to ask should I continue to keep the metals waiting for the crash or should I divest (part or all) and return back to the share market. Should I practice patience (since 2013) and continue to wait for precious metals to go up 50-100%? Or return back to the stock market for dividend play?

Hope to hear you speak to yourself. 

Thanks boss!

Hi,

I don't know what is going to happen in the future.

I do know that:

1. Physical gold and silver do not generate income despite what some people might con-veniently claim. However, we can make or lose money trading gold and silver.

http://singaporeanstocksinvestor.blogspot.sg/2012/04/fraud-taking-money-from-some-adults-is.html

2. Physical gold and silver do have value and keeping some as an insurance is not a bad idea. They form a small percentage of my portfolio.
http://singaporeanstocksinvestor.blogspot.sg/2016/07/why-investors-for-income-buy-gold-and.html






If you have decided that you want to invest for income now, I would suggest that you sign up for Dividend Machines and learn the ropes first:
http://singaporeanstocksinvestor.blogspot.sg/2017/02/financial-freedom-through-building.html

It will help shorten your learning curve.
Best wishes,
AK

Sizing my investment in SPH.

When I tell people I am a blogger, some assume that I am IT savvy. 

People who say that are probably not very IT savvy. We only need to know how to use a word processor to blog.

My generation and those who are older would remember that in between typewriters and PCs, we had word processors. Their time on Earth was pretty short, however.

I am really a dinosaur. 

If I were to look for a job today, with my qualifications and skills, I would probably have a hard time getting a job that pays more than $3,000 a month.




From being economically inactive to being unemployed? I shudder at the thought.

I still like hard copies of newspapers, magazines and books. I tried using an e-book reader which someone gave me many years ago. I didn't like it.

I should have sold it when it was still worth $500 but it was a gift. Now, it is just another item collecting dust at home but I can be rather sentimental.

Being sentimental can be a terrible thing for an investor, of course, as we constantly tell ourselves not to fall in love with our investments. Well, I can only try my best as I am only human.

I am lucky that I am also pragmatic. I like to think that being pragmatic helps to temper any sentimentality in me. 




When I spoke with somebody who bought SPH shares recently, I said that I wouldn't buy SPH shares today. It happened so quickly that I surprised myself a little bit.

I have always suspected that there is more than one AK inside me. Spooky!

I have been an SPH shareholder for many years and doing a back of the envelope calculation tells me that, taking in the dividends collected over the years, my earlier investment in SPH is almost free of cost.

However, dividends collected for my later investment in SPH probably managed to do only a bit more than cover the decline in its share price over the same number of years.

Like it or not, media remains the core business of SPH and that business is very much disrupted. 





On hindsight, SPH should have ventured more aggressively into real estate but they didn't. 

I remember Dr. Tony Tan mentioned that selling their land in River Valley was a mistake many years ago. He was right.

Now, we see disruption technology everywhere and our investments could get disrupted one way or another. 

Being rather old fashion could be a problem for an investor like me as I am not always in touch with the changes in technology nor fully aware of the implications of such changes on the ground.




Having said this, until I could find replacement investments for income, I was quite willing to hold on to my investment in SPH. It is still an entity which has a relatively strong balance sheet and is still generating an income for me.

Recently, as things turned out, I added several income producing stocks to my portfolio and I decided to let go of my later investment in SPH.

This effectively reduced one of my larger non-REIT investments by half, boosting my cash level which would allow me to take bigger positions in other income generating investments.




I am retaining my earlier investment in SPH as it is almost free of cost and I still hope to benefit from possibly the sale of Seletar Mall to SPH REIT at a later date.
-----
Added 18 July 2017:

A journey through time with SPH.



Related post:
Fate of my investment in SPH.

My ARA Asset Management fixed deposit adventure.

When I shared my full year results end of last year, I mentioned ARA Asset Management's offer of $1.78 a share and how it translates to 35% to 78% capital gains for me if the offer is to be accepted.

At the time, I had a fixed deposit maturing and ARA Asset Management's share price was at $1.71. So, I decided to plonk the money from the fixed deposit into their stock. 

It looked like it would be a sure win, an arbitrage opportunity, and I would get a 4% "interest rate" so to speak within half a year or so.

At the time, I knew some shareholders thought $1.78 was too low a price and I knew there was a possibility that the offer would not be accepted. No issues, I thought. I could keep the investment and receive 5c dividend year after year which would give me a yield of around 3%. 

However, at the back of my mind, there was a very small voice which asked if I really want a much larger position in ARA Asset Management and with a yield of only 3% to boot in case the offer is rejected by shareholders?

That voice did not go away

Today, I decided to accept a yield of about 2.6% from Mr. Market. After costs, it would be a bit lesser. I closed my "ARA fixed deposit" and received what is very good "interest income" for a 2 months fixed deposit.

I thought of this position as a "fixed deposit". So, like a fixed deposit it should behave.

I still retain my original investment in ARA Asset Management. What I divested was my more recent "investment".

Related post:
2016 FY passive income non-REITs (Part 2).

AIMS AMP Capital Industrial REIT and free money for AK (3Q FY2017).

Many years ago when I decided to reduce my investment in industrial S-REITs, I was faced with the choice of reducing my stake in either Sabana REIT or AIMS AMP Capital Industrial REIT as both were the largest investments in my S-REITs portfolio. 

Yes, they were both about the same size.  

I decided that AIMS AMP Capital Industrial REIT was better run. 

So, Sabana REIT was given the boot.





Today, AIMS AMP Capital Industrial REIT is my largest investment in the S-REITs universe and a rough back of the envelope calculation tells me that with all the distributions collected over the years, my investment in the REIT is going to be free of cost very soon. 

Free? 

Yes, free!

This is massive for me not only because I like free things but because it is such a massive investment in my portfolio.





If an investment is 2% of our portfolio and it has become free of cost (like Sabana REIT is for me), ho hum. 

If an investment is 20% of our portfolio and it is going to become free of cost soon, it isn't ho hum x 10, is it? 

It is like my position in Sabana REIT x 10 being free of cost. 

OK, somehow, using Sabana REIT as an example doesn't seem very appealing but I am sure you get the idea.





Although doing well now, AIMS AMP Capital Industrial REIT is facing headwinds and things might get tougher in the next year or two but it has a competent manager that is focused on improving value for stakeholders. 

That is very comforting.

On hindsight, I am glad I decided to get on board with Mr. George Wang so many years ago and I look forward to receiving soon to be free money every quarter for many more years to come.

·         DPU of 2.77 cents per unit for the quarter (increase of 0.7 per cent from last quarter);

·         Increased gross revenue and net property income for 3Q FY2017 by 1.5 per cent and 2.7 per cent respectively q-o-q;

·         Executed 19 new and renewal leases in 3Q FY2017, representing 82,149.3 sqm (13.1 per cent of net lettable area);

·         Portfolio occupancy of 94.0 per cent, above the industrial average of 89.5 per cent;

·         Achieved TOP of third redevelopment property at 30 Tuas West Road on 27 December 2016, on time and below budget, delivering better financial returns than previously announced. Partial income contribution from the property will commence in March 2017 quarter, with full quarter income contribution in 1Q FY2018;

·         Increased Net Asset Value per Unit to S$1.48 from S$1.47 in the preceding quarter mainly due to recognition of the development profit of 30 Tuas West Road.

·         84.0 per cent of the portfolio’s interest rate is fixed taking into account interest rate swap contracts and fixed rate notes with weighted average debt maturity of 2.1 years;

·         Reduced overall blended funding cost (including funding of the Australian asset with Australian dollar loan) of 3.7 per cent from 4.2 per cent a year ago;

·         Aggregate leverage as at 31 December 2016 is at 34.6 per cent.

Related posts:
1. AA REIT: A private tour.
2. My history with Sabana REIT.

Kingsmen Creatives Ltd added to my portfolio.

With the share prices of many of my investments (including those I recently blogged about) having risen by quite a bit, I decided to nibble at Kingsmen Creatives Ltd, paying 59.5c a share, as its share price remained in the doldrums.

The weakness in Kingsmen's share price today reflects Mr. Market's pessimism. Despite being a leader in the industry, Kingsmen was not insulated from a marked slowing down in the high end retail industry which led to a much lower demand for their services.

Now, 60c seems like the immediate support for its share price. Will the support hold? Of course, I don't know.

However, here are a couple of things I do know which give me some comfort:

1. Company did share buy back in 2015 and 2016, paying 62c to 65c a share. Could they have thought that it was undervalued back then?

2. Dividend per share (DPS) of 3c which means a dividend yield of 5% for me. Although if earnings should weaken, things could change, a net cash position suggests that a DPS of 3c could be maintained.

Some readers might point out that with NAV per share at 54c, I am paying a premium of 11%. 

It might be surprising to hear me say this but it doesn't matter. It would be nice to buy lower than NAV but not a must. Why?

Kingsmen is a services company and not a REIT or property developer which are asset heavy. Apart from cash and its equivalents, Kingsmen's value largely lies in the intangible (i.e. services) they provide.

The softer economy will challenge Kingsmen to bring home the bacon. However, a good track record gives me some confidence that the business would do reasonably well and that, over time, I would have another good income generator in my portfolio.

Finally, I should say that although Mr. Market is pessimistic, I am not being optimistic nor contrarian. I am staying pragmatic and, so, mine is a relatively small investment for now. 

UOB ONE Card cash rebate and the things we do.

I was chatting with a friend and ASSI guest blogger this evening about credit cards. He told me he had to spend $1,000 each month on a credit card recently in order to get a $100 rebate at the end of the quarter. 

OK, I think most of you would have guessed which credit card this is. Yes, it is the UOB ONE card.

Anyway, I have the same card but I make sure I spend only a bit more than $500 a month (together with 3 monthly GIRO payments) to get higher monthly interest income of about $100 on $50,000 deposited in my UOB ONE account. 

$1,200 a year and better than any fixed deposit can offer! 

Of course, I also get a $50 rebate for card spending at the end of each quarter.

Back to the story. 

This friend of mine is actually very frugal. I would say that he is more frugal than I am. 

To spend $500 a month on his credit card is already quite a challenge. Why did he try to spend $1,000 each month not so long ago?

Apparently, there was a month that he spent more than $1,000 on the card due to the purchase of a (once in a very blue moon) big ticket item. 

What he tried to do next was to spend $1,000 per month in the following two months in order to get $100 rebate at the end of the quarter instead of $50.

Pause.

Pause.

Pause.

OMG! 

For $50 more in rebate, my frugal friend forced himself to spend a lot more money! 

Being a frugal person, forcing himself to spend more money, I believe, gave him a lot of stress as he didn't know what to spend money on. 

I wouldn't have done it. I try to avoid stress in life.

Frankly, I don't think it was worth the angst. 

Also, that extra $50 rebate was probably insufficient to cover all the cost of all the stuff he bought which he didn't want or need in the first instance.

Even the smartest people do silly things once in a while. 

We are only human.

UOB ONE card,

Related post:
1. UOB ONE Account or OCBC 360?
2. Stupid AK learns about Y.O.L.O.

Financial freedom through building Dividend Machines!

Many people ask how can they retire from work earlier and be financially comfortable like me? Of course, I tell them investing for income has a big part to play.

Often, the next question is whether I could teach them how to invest for income? No, that sounds like work and I am lazy. Bad AK! Bad AK!

Well, we have Dividend Machines.

I know many are waiting for the next intake and it has been almost a year. Good news! The wait is over! See:

Dividend Machines

Learn how to analyse REITs.
First peek into AK's head.

Investing for income consistently and correctly could help us to achieve financial freedom. 

This is when income received from our investments is enough to replace our earned income or at least meet our expenses in life. 

Then, we have the option to work if we want to and not because we have to. 

Learn how to analyse REITs.
Second peek into AK's head.

I like Dividend Machines because it really helps investors for income shorten their learning curve and it is also great value for money.

You will be surprised by how affordably priced it is. Find out for yourself:

Dividend Machines

Don't wait too long to sign up because once this intake is full, it will be another long wait before the next intake.

Don't say you should have started investing for income earlier. 

The best time to start is always now!

Dividend Machines

If you enjoy listening to AK talking to himself, you will definitely enjoy Dividend Machines. 

If AK can do it, so can you.

Related post:
Dividend Machines for a secure retirement.

"REMOVE SABANA REIT MANAGER" FB PAGE.

This blog is in reply to Jerry Low's comment:

Source: HERE.

Hi Jerry,

Saizen REIT was not a shitty counter. It was just misunderstood and it was thanks to the misunderstanding that I was able to accumulate a sizable position relatively cheaply so many years ago.

In fact, I thought Saizen REIT had a very competent manager who ate their own pudding. 

Of course, the REIT was a fantastic investment, as it turned out, for me and many other investors. I shan't say more since regular readers should be quite familiar with the narrative.

As for Sabana REIT, I did blog about it quite regularly for a few years as it was a big part of my S-REITs portfolio for the same number of years. 

Although I agree that the REIT has a mediocre manager who strikes me as mostly self serving, to be fair, it was a rewarding investment for me. Having said this, I am aware that that there are fellow Sabana REIT investors who are less fortunate. 

As always, I am quite happy to help people to help themselves. If my blog has helped to educate retail investors to some degree, I am glad. 

In the end, however, I must let readers make their own decisions and I won't push them in any direction. I am not allowed to and I don't want to.

Although I am sympathetic to those who have lost money investing in Sabana REIT, I believe that they must take responsibility for their own action or inaction as investors. 

If they happen to form the majority of Sabana REIT's investors and if they choose to be apathetic for whatever reason, then, they have to accept whatever the consequences might be.

By replying to your comment in the form of a blog, I am helping to spread the word about the activism that is taking place now. 

However, please understand that I do this because I believe that more people must be made aware of how investing in REITs for income is not as easy as they might think and they must know that REITs are not risk free investments. 

I am not doing this to be a part of the activist movement against the manager of Sabana REIT.

With best wishes,
AK

If you are a Sabana REIT unitholder and if you are interested, here is the link to the FB page:
https://www.facebook.com/groups/1586399528054150/?qsefr=1

By the way, as requested by some readers, tomorrow, I will be sharing a check list for investing in REITs.

It will be part of an advertorial which was planned weeks before. If this is of interest to you, please visit my blog again tomorrow. 

Investing in REITs for income is simple enough to understand but it might not be as easy to do it well.

Would AK invest in IREIT Global today?

Reader:
"I read your analysis of IREIT and how your strategy turned out in August 2015. You said that you wanted a minimum of 8% yield to invest in IREIT. So, you waited. At today's price, you would get more than 8%. Would you invest in it today?"





The reader was referring to a blog dated 14 August 2015. If anyone is interested in the background which led to this blog, please read: 
How did IREIT Global's rights issue turn out for AK?

AK:
"Wow! You read that recently? You must be combing my blog's archives! Gambatte! 

"Anyway, back then, my average price was about 66c and, estimating a DPU of 6c today is not unrealistic. So, conservatively, I am getting a 9.1% distribution yield for that investment.

"Actually, as things turned out, less than a week after I published that blog, I increased my investment in IREIT a lot more at 66c and 65.5c.





"On hindsight, I didn't have to go through all that trouble to get IREIT at a lower price during its rights issue but who could have known that Mr. Market would go into a mild depression later in August 2015? I am not saying that it was a bad thing, of course.

"I added to my investment in IREIT again in mid-2016 at 71c a unit which was 7.5% higher than 66c. Even though it was a higher price, I still found the REIT attractive as an investment for income. More recently, I added a bit more to my investment last month, paying 72.5c a unit."

Now, would you invest in IREIT Global today? It depends on what you are after and whether IREIT Global does the job for you.

Related posts:
1. FLT and CRCT added.
2. Projected yield of 8% safe?

Take home loan from bank and buy unit trusts!

For fun and laughter only. LOL.
Hi AK,

I'm new to your site, saw quite a few interesting post from you.. Wonder if I can get some advise and directions to investment...

Have $50k spare cash, now searching for what to invest...

I have a $500k HDB housing loan.

Some financial advisors asked me to switch to bank loan. Instead of using my spare cash to clear my housing loan, look for an investment product which is stable and has a good interest rate which is above the bank loan interest like JPMorgan Funds - Asia Pacific Income and First State Dividend Advantage.

Considering the US situation with the new president, USD is likely to rise with the promising policies to come. Then with the increase value of USD and decreasing value of SGD, would USD linked investments be good. Any recommendation?

I am only talking to myself here.

Hi C,
I don't recommend stuff. I am only talking to myself in my blog.

I like to tell myself not to ask barbers if we need a haircut. Switch from HDB loan to bank loan? These financial advisers work for HDB or for the banks har? Interest rates are going up, then, bank loan interest rates will go up or not?

Financial advisers ask me to buy income focused unit trusts which are likely to be more rewarding than using the money to pay down my mortgage? What are the underlying assets of these unit trusts? Bonds, income generating stocks or REITs, probably. Why they never ask me to invest in these directly har?

I don't know what Donald Trump is going to do to the USA or the US$. I am not very good at speculation. I did a few times before and fell into longkang. Shhh...
Best wishes,
AK

Related posts:
1. Fixed rates, SIBOR, FHR18 or HDB Housing Loans.

2. Nobody cares more about our money than we do.

3. Don't do silly things and we can retire smart too.

Frasers L&I Trust and CapitaLand Retail China Trust added in January 2017.

As REITs will always be relevant to the income investor, I have been thinking of how best to increase my investment in REITs again in an environment of increasing interest rates and I decided I should choose REITs which have a better plan or chance to improve their income.

Hedging interest rate risk is very well and good but this only kicks the can down the road because sooner or later, higher interest rates will hit home. 




So, having the ability to increase income is still key as to whether a REIT will do well with interest rates increasing over time.

Very importantly, I also decided that it is probably a good idea to diversify more geographically and to reduce my portfolio's reliance on Singapore. 

Remember I said this in a recent blog post on Sabana REIT?
However, things will get even more challenging for REITs from here on with interest rates expected to rise further. Industrial REITs here are facing an oversupply of space and a malaise in demand.  (Source: History with Sabana REIT and current thoughts.)




So, although I like AIMS AMP Capital Industrial REIT (AA REIT), for example, last month, I decided to initiate a position at 92.5c a unit in Frasers L&I Trust (FLT) which owns logistics and industrial properties in Australia.

The IPO price was 89c a unit and, to be honest, I was waiting for the price to come down from there before buying some. 

This was because although there are many things to like about FLT, the distribution yield was on the low side for an industrial REIT. 

Unfortunately, the decline I had hoped for did not happen.




So, although FLT's distribution yield of  7+% doesn't seem very attractive when compared to AA REIT's 8+%, I decided that there are enough positive factors such as relatively low gearing and a portfolio of mostly freehold properties in Australia for me to invest in the REIT.

(30 November 2016)

Of course, regular readers would know that although AA REIT has been a fantastic investment for income for me and is likely to remain decent, apart from the challenging leasing situation in Singapore, I am also unwilling to add to my already rather significant investment in the REIT.

Other than FLT, I have another new investment in my portfolio. 

Again, this has a portfolio of real estate outside of Singapore.

Some readers might remember that I have been waiting for a chance to get into CapitaMall Trust (CMT). 

I remember I spent quite a bit of time blogging about it once upon a time: here.




However, from then till now, CMT's unit price did not decline enough to be persuasive, I feel. 

Translation: AK is "giam siap" and wants to buy at a much lower price. 

What? 

You need a translation for "giam siap"? 

I blur.

After much consideration, I accepted the offer from Mr. Market to invest in Capita Retail China Trust (CRCT) instead, paying $1.40 a unit. 

Just a few months ago in September 2016, CRCT hit a high of $1.66 a unit. 




Why the big decline in unit price? 

It was probably due to a 10.6% drop in DPU, year on year. 

A new tax in Beijing and a weaker RMB were the reasons. NAV also declined by almost 12% to $1.56 per unit.

Offering a higher yield than CMT even now and having ownership of a portfolio of shopping malls in a market with arguably more room for growth (in terms of organised retail activity) than Singapore's, I decided CRCT is probably worth investing in. 




After all, a 10.6% decline in DPU doesn't warrant an almost 15.6% decline in unit price unless we are expecting a more severe decline in DPU. 

In fact, I think that DPU should recover somewhat as CRCT's non-Beijing malls could pick up the slack over the course of the year.

Having said this, I am reminded of a longer term risk, that land lease in China is typically 50 years and that could explain why Mr. Market demands a higher distribution yield for a retail REIT in China compared to one in Singapore. 




I do not know if, like in Hong Kong, land lease could be renewed easily. This is one risk to bear in mind if we choose to invest in CRCT.

(September 2016.)

Another risk we should be aware of is financial in nature. CRCT's loans are mostly S$ loans but its income and valuations are in RMB. 

This arrangement is similar to Lippo Malls' and I blogged about it before (See blog: here). 

A decline in RMB against the S$ could see both gearing and interest expense affected in a bad way.




Although I have said that CRCT would likely see income increasing over time, this is going to be a gradual process. 

So, to be prudent, I am keeping my investment in CRCT relatively small.

CRCT's 4Q2016 results.

As CRCT distributes income half yearly, I will be receiving DPU of 2.37c (4Q2016) and 2.36c (3Q2016) for a total of 4.73c in March. 

Annualising the DPU gives me a distribution yield of 6.75%.

Again, why did I choose to invest in FLT and CRCT in an environment of rising interest rate which would impact their cost of doing business eventually? 

You blur? 

I also blur.




Xizhimen Beijing. Just next to the train station.

A tale of two HDB flats by Darles Chickens.

Chinese New Year is a time of family bonding, catching up with friends and also gossiping.

What? Gossiping is not a Chinese New Year tradition? Alamak. 

Oh, it is something we do daily? OK lor.

Since this is the Year of the Chicken (What? Not Chicken? Is Rooster? Rooster is not a Chicken meh?), I present to you "A tale of two HDB flats" by Darles Chickens.

Gossip Tale #1

A: Charlie's family sold their 5 room flat. 

B: Aiyoh, why like that? Bad times need money har?

A: They downgraded to a 3 room flat and they no longer have a home loan to worry about. Fully paid.

B: Wah! Quite smart hor?
Gossip Tale #2

X: You know Dickens from our primary school class? I met him recently.

Y: Oh, what happened to him?

X: His family upgraded from 3 room to 5 room flat already, you know?

Y: Wah! Must be doing well!

X: He says now they are stuck with a big loan and he must help to pay.

Y: Why like that?

X: Actually, when they sold their old flat, they could have paid for the new flat in full. Their old flat sold for very good price.

Y: What happened to the money?

X: His parents took a home loan for the new flat and spent the money from selling the old flat.

You think this tale can become classic like Charles Dickens' novel or not?

Alamak! Who threw a shoe at me? Who? Who?

Related post:
How did AK amass so much money?

Good entry price for QAF Limited?

Reader:
"Hi, I found out abt ur blog thru Remove Sabana Mgr fb grp. Thks for sharing CNY video from Gardenia. I din know abt QAF. What is ur ave price? Do u think this $1.41 is gd to enter?"
AK:
"What is my average price for QAF Limited? Is $1.41 a good entry price? Alamak! I am not a guru and I just anyhow do valuation. You have been warned. Er, I anyhow talk to myself in my blog later."

OK, I start talking to myself now.

What is my average price? I don't know. I have never bothered to find out. I could but I just don't bother. AK is lazy. Regular readers know I don't care about average prices.

I do know I have been a QAF shareholder for many years and I first bought some shares at 60+ cents a share donkey years ago because I wanted to eat free bread. Mental? Must be.

Is $1.41 a good price to enter? I don't know about price but I probably can say something about value.

QAF 3Q 2016.

Q2 2016 EPS was 5.1c. 
Q1 2016 EPS was 2.9c.
(Hyperlinked. Click on above links to read quarterly announcements.)

So, for first 9 months of 2016, total EPS was 11.4c. 

To put things in perspective, full year 2015 EPS was 9.4c. 

So, buying more at $1.03 a share in 1H 2016 meant paying a PER of under 11x. Yes, that was the last time I bought more QAF shares.

Now, with only 9 months worth of earnings in 2016 (i.e. 11.4c a share), assuming Q4 does not turn in a loss and we have zero earnings in Q4, 11x PER would give me a price of $1.25 a share or so. 

If Q4 were to turn in pretty decent earnings which I think it would, of course, based on 11x PER, the price should be higher. If Q4 turns in an EPS of 3c, I would get a price of $1.58, for example.

Now, for a dash of excitement, if I remember correctly, when Mr. Market was feeling a bit happier in the past, QAF Limited was valued at about 14x PER which would give us a share price of almost $1.60 a share based on EPS of 11.4c (i.e. with no contribution in Q4). 

What if we were to add EPS from Q4? 3c EPS in Q4 maybe? That would give us $2.02 a share at 14x PER.

OK, I am beginning to talk nonsense. What? Will it happen? Alamak, don't ask me things about the future. I don't know.

I will say that getting in at $1.41 a share with the thought that share price is probably going higher in the next few weeks or months has a strong speculative flavour. There is nothing wrong with a bit of speculation, I always say, if sized properly.

Now, seriously, go read the quarterly reports for yourself and see why earnings went up as much as they did. Don't just eavesdrop. 

AK is mental. Remember?
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Added 7.55PM (31 Jan 17):

Bad AK! Bad AK! 
Related post:
Breadtalk, Old Chang Kee and QAF Limited.

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