Invested in Guocoland with Mr. Quek Leng Chan.

I am going to pre-empt a response to this blog and say that although I am known more as an investor for income, I also invest in stocks which are not for the purist income investor.

To my regular readers, this would be quite apparent in many instances. So, by revealing that I bought into Guocoland recently would not surprise them.




Guocoland is a developer with businesses in Singapore, Malaysia, China and Vietnam. They also have some exposure to the U.K. and Australia through a 27% stake in Eco World International, helmed by Mr. Liew Kee Sin who left SP Setia after it was bought out in a hostile takeover in 2014.

Business Times dated 21 Feb 17.

Guocoland recently got my attention because of a series of insider buying by Mr. Quek Leng Chan. Of course, I do not know exactly why he was buying but Peter Lynch said if insiders buy, it is usually because they think they will make money from doing so (i.e. the stock is undervalued).

Doing more research into Guocoland gave me a second and bigger push to become a shareholder. Being a developer, earnings are lumpy. Most assets are development properties meant for sale.


However, Guocoland is going to see an increase in recurring income and a big increase too. 

This is in the form of Tanjong Pagar Centre in Singapore and Damansara City in Kuala Lumpur. 

Guocoland is the majority stakeholder in both projects.




Quite possibly, Guocoland is worth more than what its book value of about $3.00 a share suggests. 

At $1.85, the discount to NAV is about 38% but if my guess is correct and the RNAV is higher, then, the discount is more than 40%.

Do take note that I am no expert in this area and these are just my back of the envelope scribbles. OK, if you must know, I really scribbled on this:

Want to own a piece of prime commercial property in Singapore's CBD? 

What about Tanjong Pagar Centre at a discount?

This gives me a feeling of deja vu because it is similar to Saizen REIT's past situation. 

If the sale of certain assets at a premium in China and Malaysia by Guocoland in the recent past were good instances to go by, all the assets they are holding now could be worth more.





I like recurring income.

I like buying good stuff at a big discount.

If Mr. Quek thinks his company stocks are cheap enough for him to buy more at $1.85 a share earlier this year, then, I want in. 

There has been speculation that Guocoland could be taken private because of the big discount to valuation and the very small float. Mr. Quek's stake is almost 70% of the issued shares.





So, to add a bit of speculative flavor:

GuocoLand rated "buy" at target prices of $2.55. UOB notes that GuocoLand is a potential privatisation play due to its stock trading at a deep discount of 45% to its revalued net asset valuation (RNAV). A low public float of 21% and a high majority-sponsor stake of 68% are also contributing factors.

Of course, I don't know if it is going to happen.

Guocoland, like my investments in OUE, Wing Tai and PREH, is more of an asset play with no guarantee that value will be unlocked soon. 




So, I have sized my investment in a way that will make patience more affordable.

What does this mean?

If we are invested in an undervalued business and we are waiting for its value to be realized, it requires patience but we must be able to afford patience.

In general, we would be able to afford patience if 

1. We are not investing with borrowed funds.

2. We are not investing with funds we need in the near future for other purposes.

3. We are not investing an amount of money that might make us lose sleep at night.

Now that I have gotten that reminder out of the way, did I mention that Guocoland has a rather predictable 5c dividend per share every year too?


I like being paid while I wait.





Finally, another word of caution. I did a lot more research into Guocoland than what I am sharing here. 

Knowing what I know, I decided that I want Guocoland in my portfolio. You should do your own research too.

AIMS AMP Capital Industrial REIT is a fine investment for income.

30 & 32 Tuas West Road





This was a recent chat with a reader:

Reader:
http://www.commercialguru.com.sg/property-management-news/2016/9/136176/the-future-of-tuas
30 32 tuas west road and 8 10 tuas ave 20 are so close to the upcoming tuas west road MRT station!

AK:
Yes! I saw it for myself 🙂





Reader:
u took a look during your site visit?

AK:
During the tour they gave me 🙂

Reader:
haha. hard to get the shares cheaply though.






AK:
Now, too many people want in.
It is now a fair price

Today, the price is S$ 1.38 a unit.

In early September 2015, I had a chat with another reader who had reservations about investing in AIMS AMP Capital Industrial REIT (AA REIT) for income.

See the chat:
http://singaporeanstocksinvestor.blogspot.sg/2015/09/a-chit-chat-session-with-ak-on-reits.html

What was the unit price back then? $1.35 a unit.

How much income did AA REIT distribute from then to now?

23 Dec 15: 2.8c

23 Mar 16: 2.85c

22 Jun 16: 2.95c

22 Sep 16: 2.75c

22 Dec 16: 2.75c

23 Mar 17: 2.77c

Total DPU: 16.87c





Now, don't ask me how much have I received over the years. 

I am too lazy to find out.

Some ask me if this is a good time to invest in the REIT. 

Basically, they want to know if the REIT's unit price is going to fall in future. 

They don't want to buy and end up losing money.

I would tell them it depends on what they are after. 





If they want to invest in real estate for a constant stream of income, AA REIT is a good enough choice. 

If they are looking for capital appreciation, then, they might want to look elsewhere.

Related post:
AA REIT levels up.

Income tax payable and donation.

We work hard to earn money and, being good citizens, those of us who earn more money give a portion of our earned income to our country.

This is why IRAS always thanked me for the contribution towards nation building but not anymore.

Many things have changed in my life. This is another change.

I like to think that I am still contributing towards nation building and although I do not get any tax breaks for donations made to National University of Singapore, I continue to make donations.

Of course, the donation is smaller in amount now.

See:
http://singaporeanstocksinvestor.blogspot.sg/2016/07/ak-gets-invited-by-national-university.html

When was the last time I paid income tax?

See:
http://singaporeanstocksinvestor.blogspot.sg/2015/03/the-lowest-income-tax-payable-in-many.html


Related post:
Double our income but not our tax.

Improving retirement funding adequacy for my father.

To have aged parents is our good fortune. However, they could be a drain on our financial resources if they do not have adequate savings to fund their golden years.

Add to this the greater possibility of being stricken by illnesses which require hospitalization or even long term medical care, we could have a very stressful situation on hand.




In recent years, I have been suggesting that we contribute to our parents' CPF accounts. Contributing to their CPF Medisave Accounts (MA) which earns 4% per annum would, in effect, make the government help us grow this contingency fund.

However, my dad's CPF MA has been maxed out. 

So, this year, for his birthday red packet, although I will be doing a voluntary contribution to his CPF Account, the money will go to his OA and SA instead of his MA.




If my dad's MA is not maxed out, the bulk of the voluntary contribution would go to his MA as he is above 65 years of age. 

See table below: 

With the money going into his OA and SA only, he would earn 2.5% to 4% per annum from this voluntary contribution. 





No longer having an earned income means he would be able to withdraw this money anytime he wants although withdrawing only the interest income from his CPF Account, leaving the principal untouched would be a better idea.

Good food and good company = Good celebration.
See how we celebrate birthdays: HERE.

Happy Birthday, 我的老爸!

Related post:
2016 changes to the CPF & SRS.

When can gambling make more than investing? (Ten Experts On When The Next Recession May Hit. Added on 20 August 2018.)

Reader:
hello AK, just curious and wanting to understand further your thought process on HLS. 

Would knowing about the bumper dividend have changed your decision? 

I assume the announcement wasn't made yet when you sold.



AK:
Alamak. This is like asking me if I can see the future...

Not a meaningful question 😉





Reader:
hahahaha clearly I didn't give a good illustration
put it another way, how would a bumper dividend + increase in price of a stock influence your decision whether to hold/sell/whatever? 

Do you consider how long it takes under normal circumstances for yearly dividends to cover the bumper dividend? 

(eg 4 years of dividends for HLS assuming $0.025 per share, to account for $0.100 bumper dividend)






AK:
it is about what we feel is a fair price to pay... 

some feel that they want to get into HLS even at 60+c and to get the special dividend... I don't think it is a good idea... 

I think 52c was a fairly good exit price... there is no accounting for prices.

If people who buy from me make some money, good for them. I try not to overthink.





I am still holding on to 50% of my original investment in HLS. 

It has become free of cost and I see myself holding on to this investment for many more years to come. 

This is just like my investment in OCK which also became free of cost when I sold half of my investment after its share price doubled a few years ago.

I won't lose sleep over the fact that their share prices went higher after I sold half of my investment. 

I made good money and will probably continue to make money from these investments. 

To me, that is good enough.





If I had a working crystal ball and could see the future accurately, I would not be an investor. 

I would be a full time TOTO gambler. ;)

Anyway, to sleep better at night, we won't be wrong to avoid the phrase:

"If only I had known."

It has no practical purpose.
--------------------------------
Ten Experts On When The Next Recession May Hit, 20 August 2018.






Related posts:
1. Hock Lian Seng returns 100% and more.
2. Breadtalk, Old Chang Kee and QAF.

Take that dream job and take on more risk?

This was my reply to a reader's email:

Hi L,

If you remember, I have a blog that says unless we are rich, be pragmatic, not romantic. Most of us have to work, exchanging our time and energy for pay.

If we are not financially secure, then, we might have to forgo that dream job which does not have a predictable income. Having a predictable income stream provides peace of mind which is priceless.

Your passive income stream just about meets your expenses. I don't see much of a buffer but I am usually conservative. Dream job or not, you decide.

As for taking risks (in the stock market), there is nothing wrong with taking a bit of risk as long as we size our positions properly.

Of course, if you are a speculator, then, sizing is out the window. If you are an investor, then, stay prudent. Which one are you? You decide.

The AK way? 

Be prudent. Be pragmatic. Be patient.

Best wishes,
AK

Always remember, my way might not be your way. What we do depends on what we want to achieve.

Related post:
Three attributes of a wealthy peasant.

Get 14% return on investment per annum.

Reader:
Hi AK,
I am glad to chance upon your blog recently and is currentlu busy reading up on the various blog post which is quite informative.
I recently came across a website which was featured in (a popular personal finance blog) which indicates returns of investment up to 14% through P2P lending to SMEs.
I am in the process of checking if these are guaranteed returns which i highly doubt so.
Like to understand more of your view on this.







AK:
Hi,
You might be interested in this blog:
http://singaporeanstocksinvestor.blogspot.sg/2015/06/to-make-20-per-annum-we-could-lose-our.html





If we say junk bonds must offer higher coupons to attract lenders because they are risky (think risk of default), for example, Swiber offered a coupon in excess of 7%, what could a 14% coupon from a borrower mean?

Aiyoh, headache. 





What to do? 

Don't ask me.

AA REIT, Soilbuild REIT and VIVA Industrial Trust.

Reader:
may I check with you about AIMS AMP. Its DPU for last 2 quarters have been dropping. But you seem very optimistic about it. Do you think things will get better?


AK:
Management is very important.
There is little they can do about headwinds
But you have to compare it against other industrial REITs and you will see it shines


Rather than acquiring more properties to boost DPU, AA REIT focused on extracting maximum value from their assets.


Reader:
Oh. How would it fare against soilbuild?

AK:
Soilbuild had a stroke of bad luck
Very unfortunate

Reader:
The technics offshore company who vacated the place?

AK:
I like the Biz Parks they own
yup

Reader:
Ok, thank you. Will read more on ur posts of aims amp before deciding

AK:
Unlike very short lease biz park owned by VIVA in Chai Chee, Soilbuild's biz park have relatively long leases.

Reader:
Since Keppel D.C. Reit seems unpromising, I might just switch to AA

AK:
If the management sama sama as Keppel REIT, cham

Reader:
Yes.... I think I'm quite clueless as a industrial reit investor. When I read the viva report, I was quite impressed by it

AK:
People tell us good things only

Reader:
Only heard the other side of the story when I saw your post, even though you kena hantum by that one reader. Haha

AK:
I should talk less. 😞

Reader:
Haha no la. Should talk more. For the greater good
May I check if you've written any articles on assessing industrial reits? I mean, I know the usual of NPI, DPU, gearing, occupancy etc. But the short lease part is something that's new (but makes sense) to me

AK
Er... maybe. I cannot remember liao. Too much talking to myself until I blur.

Reader:
Haha. It's ok! Thank you. I'll search through your trains of thought via your articles

Related posts:
1. AA REIT levels up.
2. VIVA Industrial Trust.
3. Soilbuild REIT.

DPU plunged at Keppel DC REIT.

Reader:

Just wondering if you are familiar with Keppel DC Reit?
I bought into it some time ago, lured in by its 'good potential', but as of last dividend payout, it's one of those cases where NPI went up but DPU dropped by 20%.
Not an encouraging sign.
But the company presentation said that things will get better because income from its new acquisition will 'kick in' by next payout. However it's hard for me to gauge if it'll make up the 'shortfall' of 20%.
Extrapolating from the most recent dividends, its annual yield would be only 4.7%. DBS still rates it as a BUY though.

AK:
I don't have this. I avoided.
I must say I have not been following developments though.

Reader:

I really didn't like the part where it's NPI went up but DPU dropped 20%.
AK:
Sounds like another Keppel REIT.


Plain English guide to data centres.

For anyone who might be interested, see my one and only blog on Keppel DC REIT (well, not anymore, I guess) and why I avoided investing in it:

Is Keppel DC REIT an attractive investment?


There were two reasons for me to avoid investing in this REIT. 

Now, there might be a third one.

Online shopping, retail S-REITs and Starhill Global REIT.

Online shopping is gaining strength rapidly and even an IT dinosaur like AK buys stuff online. From my own experience, I would say that online shopping is attractive because of two factors:

1. Convenience. Delivered to my home with either very competitively priced delivery fee or free delivery.

2. Cheaper. For the same item, I have saved as much as 30% buying online than buying in a brick and mortar shop.




So, if a shop in a mall is selling stuff that could be found online, unless the mall is conveniently located and unless they are priced competitively, that shop is going the way of the Dodo. 

It is just a matter of time.

Shopping malls must fill themselves more with shops that offer goods and services which cannot be found online for one reason or another. 

After all, there are things which online shops cannot do or cannot do well.

Therefore, despite the growing reach of online vendors, I believe that some shopping malls will continue to do reasonably well and some readers might remember that I have been waiting to invest in CapitaMall Trust (CMT). 

However, I have not been able to get in at a price which I am comfortable with because Mr. Market likes pedigree and, just like Frasers Centrepoint Trust (FCT), even now, CMT is trading at around its Net Asset Value (NAV) and both are offering very similar distribution yields in the mid 5%.




REITs, unlike companies, pay out most of their cash flow from operations to their investors. 

They do not pay dividends from their earnings. 

They distribute income. 

They do not have retained earnings. 

One way REITs grow, without placing too much demand on shareholders (think rights issue) or diluting minority shareholders (think private placements) is to ensure that there is genuine growth in the value of their assets which would in turn give them more leeway to fund more growth through using debt. 

It is a virtuous cycle, one that hinges on the growing value of assets. I think we can agree that CMT and FCT have done rather well in this area.




However, given the uncertain retail environment for some time now, although well run, I would like to invest in CMT and FCT at a meaningful discount to NAV and if they offered higher distribution yields.

Asset values in good times would appreciate but in bad times they could come under pressure. 

So, buying at a discount to NAV makes sense to me unless we feel that asset values can only go up and never go down.

Although I have been mostly looking at CMT, I have also looked at FCT and Starhill Global REIT (SGR).




I like CMT and FCT. I am more familiar with their malls. However, I am not comfortable with getting in at current prices. 

I am not as familiar with SGR's malls (i.e. Wisma Atria and Ngee Ann City) and not all their malls are in Singapore which, by the way, is a good thing. 

However, trading at a meaningful discount to NAV and offering a distribution yield closer to 7%, to me, SGR is priced more attractively.

There are a few more factors which pushed me towards investing in SGR:

1. More than a third of SGR is owned by the sponsor, YTL Group. 

This helps to ensure a greater degree of alignment of interest with minority unit holders.

2. The management is looking to sell the REIT's Chinese and Japanese assets to concentrate on what they consider the REIT's core markets of Singapore, Australia and Malaysia. 

Now, reducing concentration risk is good but having a handful of assets in China and Japan probably isn't beneficial and would, in fact, add disproportionately to operating costs.

3. The relative weakness in SGR's performance is probably going to be temporary because of redevelopment works in an asset in Australia and a delay in a new tenant moving into its asset in China.




Looking at SGR's DPU for the last quarter, annual DPU, all else remaining equal is about 5c which gives us a 6.85% distribution yield based on 73c per unit. 

However, if there were to be more hiccups, income could be affected negatively and I am knocking off 5% from DPU to 4.75c to take this into consideration. 6.5% distribution yield is good enough for me while I wait for an improvement in performance.

I am not buying into SGR because I think its outlook is fantastic. For sure, they will face challenges.

I am buying into SGR because, taking advantage of its recent price weakness, I feel that there is some margin of safety.




SGR is an investment that is likely to generate a fairly good yield for the price that I paid.

Related posts:
1. CRCT added to my portfolio.
2. CMT and when am I nibbing?

Understated gains from Saizen REIT.

For a while, I have suspected that ASSI has stalkers but the following can only happen because this stalker happens to be a friend. If he were just any other reader, I would freak out.

Reader:

I believe you made in mistake calculating your gains from Saizen. 

Just letting you know. You see if you want to amend.

"How much space is enough?"

AK:

I checked the numbers again. You are right!

Spooky!!!

I think I mixed up my average cost price for Saizen REIT with First REIT's.

So, $245,000 is too low.

It should be $30,000 to $40,000 higher.

So, the returns, in terms of percentage, should be higher. Maybe more than 25% a year.

Too lazy to come up with the exact figures. Of course, this shouldn't surprise you. LOL.

I will publish a blog as an errata. Thanks.

This is a very good reminder to everyone that ASSI is not very reliable. If you have yet to read the ASSI disclaimer, it is at the bottom of the blog.

If you choose to eavesdrop on AK talking to himself, do it at your own risk.

What? You are like AK? Too lazy to scroll to the bottom to read?

I reproduce it here:

"The ideas expressed in this blog should not be construed as an enticement to buy or sell the securities, commodities or assets mentioned. The accuracy or completeness of the information provided cannot be guaranteed. Readers should carry out independent verification of information provided. No warranty whatsoever is given and no liability whatsoever is accepted for any loss howsoever arising whether directly or indirectly as a result of actions taken based on ideas and information found in this blog."

Related post:
How much did AK make from Saizen REIT?

How much did AK make from Saizen REIT?

Reader:

Dear AK,

I just started following your blog this year. So many gems!

Thanks for resharing your Saizen REIT blog post from 2015 on Facebook. It just tells me how much more I have to read in your archives!

I might regret asking this but how much money did you make from your investment in Saizen REIT?






AK:

Don't worry, you can ask. 

I won't bite your head off. 

Whether I give you the desired answer or not is something else.

If I did not reveal the larger investments in my portfolio recently, I would probably have refused your request.

Now, I don't see any harm in sharing the numbers. :)

Income distributions plus capital gains (excluding return of capital) from the sale of all the REIT's assets, roughly,

$ 245,000

Almost a quarter of a million dollars.

The number shouldn't be surprising since Saizen REIT was one of my 3 largest investments in S-REITs and my entry prices were pretty low.

In terms of percentage, the return was probably around 20% per year, give or take a little. 

I am not crazy enough to calculate the exact numbers.

Of course, now, with news that Saizen REIT is to be liquidated, I should be seeing another few thousand dollars coming back but that is really a return of capital.

Related posts:
1. 2016 full year passive income.
2. Saizen REIT: Right prices and luck.
3. My investment porfolio.

See errata (19 Mar 17, 9.25pm):
Understated gains from Saizen REIT.

Made $14K a month and struggling at 48 years old.

Reader:
This one worth a share man.
Financial prudence - 14K a mth former banker and struggling at 48yo. Pity him anot?

http://www.straitstimes.com/singapore/out-of-work-and-out-of-luck-in-search-for-full-time-jobs?xtor=CS3-18

AK:
OMG!

Reader: 
14k per mth I think exclude bonus lah

AK:
Sigh. Banker somemore. Should know better.

Reader:
Master in Financial Engineering somemore.
Wasted, if got 14k a mth I think I can retire 5yrs - 10 yrs earlier.

AK: 
I also say. Squandered opportunity.

Reader:
Sayang the chance.

AK:
Don't ever think we are invincible. Plan for the day we meet our kryptonite. LOL



Tragic.

Of course, this is not a new topic in ASSI. See blogs like the following:

1. Don't think and grow rich.

2. From rich to broke.

3. Why some might never be rich?

Missed selling APTT at higher price.

Hi Mr. AK,

I like when you say all investments are good at the right price.

I also follow you to buy APTT when it was 38c. Thank you.






I just found out you sold end of last month. The price now 43c.

I missed the chance to sell at 49.5c. Do you think I should sell at 43c?






I am not blaming you but I only read your blogs on stocks.

I missed the sell on APTT at high price because it was not not in the blog title.








Hi LK,

Welcome to my blog.

If you like Peter Lynch's famous saying, you should first learn to tell the difference between price and value. 

You could start by reading some books: HERE.





Read that blog post of mine again to learn why did I choose to sell and not hold on to APTT for dividends. 

Note that although the investment gave me a very nice 32% capital gain, that was not the main reason for selling.






As for being less than organised in my blog, I am a mental blogger. Sometimes, I confuse even myself. 

A thousand apologies.

Best wishes,
AK

Related post:
The reader was referring to this blog:
My savings accounts, recent money flow and investments.

AIMS AMP Capital Industrial REIT levels up.

UPDATED JULY 2018

DPU of 2.5c declared for quarter ending June 2018 to be paid on 20 Sep 18.

Refinancing in July 2018, weighted average debt maturity lengthened to 3.1 year, with interest savings of about $0.7 million per annum.

88.1% of interest rate fixed with interest rate swaps and fixed rate notes.

Overall blended funding cost of 3.8%





..........
AIMS AMP Capital Industrial REIT (AA REIT) is probably one of the better run REITs in Singapore, creating value for unit holders in a sustainable manner and their recent action reaffirms my view.





Most REITs are leveraged to some degree. Although leverage could magnify gains, in an environment of lacklustre growth and rising interest rates, too much leverage could spell trouble.


I remember putting forth my concern on rising interest rate to AA REIT's CEO when I was invited to tour some of the REIT's properties. 

I wondered if it was possible to issue longer term bonds to lock in lower interest rates.






Mr. Koh Wee Lih told me that issuing longer term bonds could mean paying a higher coupon which made perfect sense, of course. 

So, if AA REIT should be able to issue bonds without shortening their tenors and enjoy paying lower coupons, what does that tell us?





AIMS AMP Capital Industrial REIT (AA REIT) announced it will be issuing S$50 million Fixed Rate Notes as part of its Medium Term Notes (MTN) Programme.

The 5-year Notes will bear interest at a fixed rate of 3.60 per cent per annum payable semi-annually in arrear, until maturity on 22 March 2022. The Notes are expected to be issued on 22 March 2017.

“The net proceeds from the issue will be used to partially repay the revolving credit facility due in November 2017 which was used to fund ongoing developments. This also enables us to diversify our funding sources and free up more undrawn available facilities for potential further growth.”

This is the fourth time the Manager has used its MTN programme to raise debt. 

AA REIT raised S$100 million with the four-year 4.90 per cent Fixed Rate Notes issue in August 2012 , S$30 million with the seven-year 4.35 per cent Fixed Rate Notes issue in December 2012 and S$50 million with the five-year 3.80 per cent Fixed Notes bond issue in May 2014. 

Mr. Market demands higher returns for junk bonds but accepts lower returns from investment grade bonds. 

I like the direction AA REIT is heading. Good job!





Related post:
A tour of AA REIT's properties.

Ascott REIT's mega discounted rights issue.

Hi AK

With the recent rights issue of Ascott reit, i read that the DPU and NAV per unit will most likely drop after this event.

Can you share your thoughts about this(the reason for this rights issue)?

Declining DPU. Source: HERE.

Hi AY,
I don't like Ascott Residence Trust. I don't have this.
They are always raising funds but I don't see performance improving.
If you want to read more about rights issue, here are some of my blogs you might be interested in:
1. http://singaporeanstocksinvestor.blogspot.sg/2011/10/reits-and-rights-issues-dilutive-or-not.html
2. http://singaporeanstocksinvestor.blogspot.sg/2010/09/reits-simply-explained.html
3. http://singaporeanstocksinvestor.blogspot.sg/2011/11/reits-and-rights-issues-singaporean.html

I feel that unit holders would have been better off without the acquisitions and the mega rights issue.

Reference:
"Ascott Reit unit holders will have the option of purchasing up to 481.7 million rights units at a ratio of 29 rights units for every 100 units they own. The rights units will be issued at 91.9 cents - a 21.5 per cent discount to the closing price of $1.17 per unit on Monday. Ascott Reit expects yields of up to 4.5 per cent for the acquisition of AOS and 5.4 per cent for the German properties." Source: The Straits Times, 8 March 2017.