Invested in Tuan Sing Holdings.

When a reader asked me what I thought about Tuan Sing Holdings as it trades at almost 60% discount to NAV, it got me interested enough to take a closer look because this is something I think I understand.

I approached this in a way that is similar to my approach to investing in Guocoland. 

Substantial shareholders, the Liem family, and also Koh Wee Meng of Fragrance Group together hold a 60% stake in Tuan Sing. 







It is interesting to note that Mr. Koh's purchase price in 2014 was 43c a share and Tuan Sing's NAV per share then was 68c.

Based on its Annual Report for 2016, Tuan Sing's NAV per share grew to 77c and its stock is now trading at a lower price than in 2014. 


On the face of it, therefore, Tuan Sing is worth more today and with a lower share price, it is more undervalued than before.





Why is this so?

Tuan Sing's earnings have been in decline and Mr. Market probably doesn't like that. 

To top it off, Tuan Sing's gearing level is pretty high and interest cover ratio has also weakened from 14x in 2012 to just 2.2x in 2016.

At the current price level, there seems to be plenty of value waiting to be unlocked but it also seems to be thornier an investment.

We must remember that undervalued could stay undervalued for some time. So, it would be good to be paid while we wait. 




Do they pay dividends?

Tuan Sing pays a dividend but it is nothing to shout about. How much? 0.5 cent to 0.6 cent a share. 

Assuming a purchase price of 33c a share, we are looking at a dividend yield of 1.5% to 1.8%. 

Anyone who buys into Tuan Sing for income has to be mental. 





1.5% to 1.8% is lower than the 2.7% dividend yield from Guocoland based on an entry price of $1.83 a share and that was not an ideal investment for income either.

We know that property developers usually have pretty lumpy earnings but I am most interested in the fact that Tuan Sing has a relatively big portfolio of investment properties in Singapore, China and Australia.

Therefore, like Guocoland, Tuan Sing has the potential to become a more attractive investment for income investors if future payouts should increase together with any increase in future cash flow. 




Of course, this is somewhat speculative as it is anyone's guess what the Liems have in mind.

Source: Tuan Sing Holdings Limited.

To continue along this line, Tuan Sing's portfolio of development properties is pretty small at less than 10% of its total portfolio value. This reminds me of OUE Limited which I also have a relatively small investment in.

A big reason probably why Tuan Sing's gearing level is so high, their earnings is much reduced and, consequently, their interest cover ratio is so poor is because quite a big portion of its investment properties are still under development. They have yet to generate any income.




It stands to reason that once Tuan Sing's investment properties are fully completed, once they start generating income, earnings will improve and, significantly, it is worth noting that this will be recurring income which is something investors for income look for.

Of course, Tuan Sing still have development properties to sell but since that business is a relatively small portion of their entire portfolio, if they should sell well, it is the icing on the cake. If they don't sell well, it is not going to be a disaster either. 

Cake without any icing, anyone?




Tuan Sing is another asset play and if the valuation is to be believed, they are a pretty heavily undervalued asset play too. 

Just like my investments in OUE Limited, Wing Tai, PREH and Guocoland, my investment in Tuan Sing is only a nibble because it could be a long wait before value is unlocked.




In the news this year:
Sime Darby Centre purchased
and
Tuan Sing's earnings tumble 64%.
Related posts:
1. Guocoland analysis.
2. PREH analysis.
3. OUE Limited analysis.
4. Wing Tai Holdings analysis.

Accumulating Wilmar on price weakness.

When I revealed my top investments earlier this year (read related post #2 at the end of the blog), some were surprised that I had a relatively large investment in Wilmar International which isn't a typical investment for income.

Of course, long time readers of ASSI would know that not all investments in my portfolio are for income although almost all lean in that direction.




Why Wilmar?

There are not many companies in the world like Wilmar when it comes to agricultural products and their distribution. 

Wilmar has amazing breadth and depth of operations. 

Its distribution network is extensive, established and still growing. 

It is a truly impressive business entity.

Potential investors should note that Wilmar is still a growth story and there continues to be quite a lot of CAPEX. 

This will continue to impact its earnings for some time to come.

In the meantime, however, they are profitable and they do pay dividends.

Since I am quite happy to be paid while I wait to benefit from their future growth, the recent decline in Wilmar's share price is an opportunity for me to accumulate.

Similar to my investment thesis for BreadTalk, I believe that when the CAPEX at Wilmar tapers off which they one day would, Wilmar's fantastic scope and scale of business would send its earnings soaring.

And while BreadTalk's extremely high PE ratio was rather unpalatable at the time when I became an investor (read related post #1 at the end of the blog), although not strictly comparable, Wilmar is currently trading at a much lower PE ratio of about 15x.

To put this in perspective, at its highest, Wilmar closed at S$7.11 a share in January 2010. 

Based on the full year earnings per share in 2009, it represented a PE ratio of above 20x.

It is important to point out that, in 2010, Wilmar's NAV per share was about 22% lower than what it is today. 

Paying S$7.11 a share then would have been a huge premium to NAV (US$1.85 per share) back then. 

Comparatively, there is more value backing each share in Wilmar today. 

This is an important distinction to make. 

Wilmar is a more valuable business entity today than it was in 2010.

Paying $3.30 a share is relatively inexpensive as I am paying a relatively small 2% premium to NAV (US$2.38 per share). US$1.00 = S$1.36.

I am also paying a lower price than what Archer Daniels Midland Co paid about a year ago to hike its stake in Wilmar from 20% to 22%, paying S$3.38 a share. (Reference: Reuters.)

Having said this, Wilmar's share price is currently in a downtrend and it could decline further and, if that should happen, I will be quite happy to accumulate again.

Finally, investors in Wilmar must be of the patient variety. 

When CAPEX tapers off, that is when Wilmar will be able to pay more generous dividends. 

Patience, I believe, will be rewarded.

See Wilmar's AR: HERE.

Related posts:

1. Investing in BreadTalk.
2. My investment portfolio.

An IPO for an IPO in the Philippines?

Reader:
Recently i come across an interesting pre-ipo for Philippines REIT during their roadshow at Raffles place.

This company acquires residential property from Singaporean whom has property in Philippines. In exchange for the property they would issue preference share equivalent to the property price. 

They only acquire those property which is ready and fully paid. Thereafter they will just refurbish and rent/lease out for short term and long term stay.

Short term would be those Air Bnb or tourist type. Long term would be expat or local people who is working near CBD area.

So far they had acquired some 'condotel' means condominium within hotel. And some project will be completed this year and early next year.

They plan to get listed in Philippines in 3 years time and now they are inviting investors to invest in pre-ipo preferred shares. Two type of investment is capital repayment with 6% (2 yr)+5%(3yr). The second type is capital convert to preference share 5% (3yr) and upon listing will be converted to ordinary shares.

They will be conducting a submit with media coverage in manila in sep whereby investors & public can have a feel on how the company works including showing all articles n memorandum of company.

Have you ever come across such investment? Appreciate if you could talk to yourself on this investment.

AK:
Alamak. This food sounds so exotic. I dunwan. I might get food poisoning.

Such products are unregulated and we don't even know if they are what they claim they are.

Related post:
http://singaporeanstocksinvestor.blogspot.sg/2016/07/could-this-be-way-to-financial-freedom.html

Building your personal wealth in Singapore with some help. (AK the blogger or AK the benefactor?)

Reader:
Hey sifu thks so much
U changed my life
I was down to my last 100000
But yr saizen call
Save my life
My family

AK:
You took action. Thank yourself. 😉





Reader:
We will be praying to u
Downloaded yr pic

AK:
........................ :o





Reader:
We will pay tribute to u
Thks sifu
Really
I nearly killed myself
If not for yr call

AK:
I am glad. 🙂





Reader:
U save my life
No chance tell u
Till now
I am a ghost now
If not for u
I will ask my children pai u too
U are the benefactor


AK:
I am happy for you 🙂
Gambatte! 🙂





Reader:
Sifu wat are your latest picks?
Sifu u must help me
I need make enough for my children to study uni

AK:
Neverwinter! ;p
Anyway, I am only sharing my philosophy and experience as an investor in my blog. If it works for others too, I am happy.
I blog because I enjoy it.
If I feel that it has become work or if it has become a responsibility, I might stop blogging. ;)






To my Taoist readers, if you want to pray to AK, remember you must download the correct photo hor.

Jokes aside, to all my readers, remember that my approach to wealth building is a 

1. holistic one (see related post #1) 

and if you do the 

2. right things, don't thank me, thank yourselves in future (see related post #2). 

Gambatte!






Related posts:
1. Holistic approach to wealth building.
2. Don't thank AK but thank yourself.

Price we pay when die die must buy.

Someone told me that the fried mee from a hawker store at a market near my home is very good. 

Die die also must try. 





Every time I go, I see a long queue. 

When I ask how long must I wait for a serving? 

About half an hour or maybe longer. 

Forget it.

See: Comments.

On one of my evening walks, when I walked by the stall, there wasn't much of a queue. 

So, I tried the noodles. 

I didn't have to wait very long.

What does this tell us? 

If we die die must buy, then, there is a price we have to pay and that price might not be monetary in nature.





You want an example that is monetary in nature?

For those of us who buy cars, we would know the "discount" that they offer if we took a loan through the car dealer. 

If we did not, then, the price tag of the car would be higher.

For both my current and previous cars, they did that to me. 





I told the sales staff I would just buy a car elsewhere. 

It was not as if I die, die must buy a car from them. 

Suddenly, I could get the "discount" even though I didn't take a loan.

If we are die die must buy type of consumers, then, we could pay higher prices and it might or might not be in dollar terms.

Is this a story for consumers only or does it apply to investors too? 





Related post:
I could not afford it but...

AK is egg-static! (Inexpensive and nutritious food.)

Although ASSI is mostly a personal finance and investment blog, I really do blog about anything which I might fancy.

It might sound unbelievable but I do have a small following of readers who are always curious about what I have at mealtimes.

When did this start?





Maybe, it started from all the stuff I wrote about how we could save money by packing lunch to work. Maybe.

AK is a giamsiap fellow.

Dinner today?

Microwaved scrambled eggs with unsalted butter, garlic salt and a dusting of black pepper.

Time to prepare: 
Less than 3 minutes.

Cost:
About 50 cents.

Oishi! 

In more ways than one too.

OK, this is the last blog for the day. In case you just dropped in today, these are the links to the two other blogs published today:

http://singaporeanstocksinvestor.blogspot.sg/2017/07/blog-about-my-increasing-portfolio-value.html

http://singaporeanstocksinvestor.blogspot.sg/2017/07/do-this-to-get-higher-interest-income.html




Myth: High Cholesterol Is Caused by What You Eat
The biggest factor in cholesterol is not diet but genetics or heredity.

If you're still worried about the cholesterol in your diet, take a look at the newly released 2015 U.S. Dietary Guidelines. As recently as 2010, U.S. dietary guidelines described cholesterol-rich foods as "foods and food components to reduce."

They advised people to eat less than 300 milligrams (mg) per day, despite mounting evidence that dietary cholesterol has very little to do with cholesterol levels in your body.

The latest guidelines have finally removed this misguided suggestion, and they even added egg yolks to the list of suggested sources of protein.
Source:
https://articles.mercola.com/sites/articles/archive/2016/04/20/cholesterol-myths.aspx
---------------
Added on 12 August 2017:

Egg curry! Oishi!
--------------
Added on 14 August 2017:

In this version, I added full cream evaporated milk and some meat floss after the mixture (eggs, water, coconut oil and turmeric powder) came out of the microwave oven. Oishi!



--------------
Added on 15 Aug 17:

Sedap! (Don't always oishi lah!)
---------------------------
Added on 16 Aug 17.
Feeling lazy today.

Didn't even bother to scramble the eggs. Bad AK! Bad AK!
-------------------
Added (19 Aug 17):

Yum yum.
--------------------
Added (21 Aug 17):

I like.
-------------------------
Added (2 Sep 17):

So healthy!
-------------------------
Added (30 Sep 17):

-------------------------

Blog about my increasing portfolio value?

Reader:
Many of your stocks have risen in price. Examples are CCL, FLT, SGR, CRT, CRCT, RHT. The actual list is much longer definitely. 

In addition to your quarterly reports on your passive income, would you consider sharing the change in the value of your portfolio as well? 

I am sure many readers are interested and it would be inspiring too.

AK:
I know some investment bloggers do what you said but I won't because it doesn't gel with my motivations both as an investor and also as a blogger. 

My focus is on investing for income and price movements don't really matter to me as long as my investments continue to do what I expect them to do and one of those things is to pay a meaningful dividend. 

So, sharing my passive income numbers is something I am quite willing to do as this is what I feel would inspire readers to invest for income to help them on their journey towards financial freedom.


Do you feel the same way as the reader or do you feel the same way I do?

I think it is probably more useful to see why I invested in some of the businesses the reader highlighted and to understand my decision making process.

If you are interested, here are a few blogs to read:

Added Frasers L&I Trust and CapitaRetail China.

Added Centurion Corporation Limited.

Added Starhill Global REIT.

I assure you that this is more productive than reading about how the value of my investment portfolio has changed.

Related post:
My portfolio or my philosophy?

Do this to get higher interest income with UOB ONE?

Reader:

Understand that you have UOB One Card.

Recently, a UOB Personal Banker approaches me regarding the other usage of One Card to earn higher interest in the One Account.

Instead of spending $500, one can just save that $500 through a Prudential savings plan. This $500 will be deducted from the One Card every month for 5 years. After which, the total amount deducted will be locked for another 10 years. 

At the end of the 15 years, one can earn an effective interest p.a. of about 3.13%. The principal is guaranteed. 

In this way, one does not need to force spend every month to reach the $500 target in order to earn a higher interest on the One Account. Through this method, one can also earn higher interest as this $500 is "spent" on the savings plan, by utilizing the One Card.

What do you think of this? Appreciate if you can talk to yourself...

AK:
I will avoid an insurance cum savings (which is really insurance cum investment) product. I always say buy term and invest the rest. Instinctively, I would say 'no' to this offer.

I believe that 3.13% per annum is the potential interest rate and not guaranteed. I do not know if you would be disappointed 15 years later if you only get back your capital then (if Prudential does not go bust).

If you have trouble spending $500 on your UOB ONE Card each month, it might be better to simply forgo the UOB ONE Account. Forget it.

Doing this, you would be forgoing an additional interest income of about $800 a year (assuming you have $50,000 in the savings account which would have earned a bonus 1.6% in interest with a monthly spend of $500) but it gives you greater financial flexibility and a chance to build a bigger war chest for the next bear market.

Related posts:
1. UOB ONE Account?
2. How many $29,000 do we have?

Bought more VIVA Industrial Trust and worried.

Reader:
I learn of your blog from reading an article you wrote about Viva Industrial Trust for a magazine. 

I am very concerned now because I just bought more after reading research provided by my broker. 

The dividend is expected to increase. 

Is the land lease situation really bad?







60 years land lease from 1961.
Expiring in 2020, no extension is allowed.

AK:
I don't remember writing for any magazine or maybe I did but I just don't remember.

Whether an investment is good or not depends in part on the motivation of the investor. 

If you are invested in Viva Industrial Trust for income, you have to question not only how high the yield is, you have to question how sustainable it is going to be?





Can there be any other motivations for investing in Viva Industrial Trust? 

The belief that, perhaps, the manager could increase asset value and to sell assets to an unsuspecting (or gullible) party at a higher price before the land leases end? 

Of course, this would make the decision more a speculation than an investment.

I know what I have said does not sit well with everybody and I can even prove it. ;p

Hey, I am only a blogger and I anyhow talk to myself in my blog lah. 






Don't care me hor.

Listen to John Lim better. 

Who is John Lim? Who else?

In an interview, John Lim said there is an issue with the structure of the Singapore industrial property market. The land tenures are relatively short and valuations will fall because they are aligned to tenure. 

Not I say. 

John Lim say hor.






This is why Cache Logistics Trust is diversifying into Australia. 

Incidentally, so has AIMS AMP Capital Industrial REIT. 

Of course, we also have a new comer, Frasers Logistics and Industrial Trust which is a pure Australian play.

Related posts:
1. VIVA Industrial Trust's 9% yield.
2. AA, Soilbuild and VIVA REITs. 

AIMS AMP Capital Industrial REIT challenged.

I have said before that AA REIT is not unique in the industrial REIT space. All industrial landlords in Singapore are facing difficulties presented by over supply and weaker demand. 

From the latest results presented by AA REIT, it is obvious that the difficult environment is not letting up anytime soon.

1. New and renewed leases are at a weighted average rental decrease of 4.3%.

2. Portfolio occupancy has declined from 94.6% to 91.0%.

Things are admittedly difficult but they are far from grim.



103 Defu Lane 10.





A competent management has kept gearing manageable at 36.3% and also managed to reduce overall blended funding cost to 3.6%.

Interest cover ratio is healthy at 4.9x and NAV per unit stands at $1.39.

We tend to be a bit less cautious when the stock market is doing better but it pays to go back to the fundamentals. Just two days ago:

http://singaporeanstocksinvestor.blogspot.sg/2017/03/aims-amp-capital-industrial-reit-is.html

Remember, price is what we pay and value is what we get.

Also, try to put things in perspective. This is hardly a crisis.

http://singaporeanstocksinvestor.blogspot.sg/2017/03/aims-amp-capital-industrial-reit-levels.html

Things would probably look up when 2 development projects (51 Marsiling Road and 8 Tuas Ave 20) are completed in 2H 2017.

30 Tuas West Road. Published on 20 July 2017.
Slides presentation: HERE

HDB Lease Buyback Scheme and you.

Reader:

Parents in late 60s considering whether to go for lease buy back on their HDB flat (42 yr old flat) or leave it to children. 

Lease buy back so that parents can increase current monthly pocket money and thus lessen burden. 

Parents are more inclined to stay in flat.

Though selling entire flat can fully monetise the value of the flat, but given that it is already 42 yr old flat, waiting another 10 to 15 year likely will see a drop in property price in the current peak market condition. 

Plus Singapore is a developed n aging economy, gone are the days of more 200% price increase in property prices. 

Lease buy back or wait later to sell? 

Your very honest self talk would be much appreciated here, please. 

Watch this video on Lease Buyback Scheme.

AK:
Most old folks don't like moving house. It is quite normal.

If they need some extra pocket money, selling the tail end of their lease (30 years, perhaps) to HDB is a good idea instead of selling the flat outright and moving out.






Don't do this and keep the flat as a legacy for their children? 

Well, it would mean tightening their belts and burdening their children in the meantime. 

All for leaving behind a property with a very much shorter remaining lease?





If we are cash rich, no issues. 

If we are cash poor, cash comes first. 

Asset? That takes a back seat, especially when it is one that is suffering from accelerated lease decay.





Related post:
My HDB flat is 37 years old.

Home loses $23,000 yearly to house antiques?

Inspired by several past conversations.

From a financial perspective, should a single buy a one bedroom HDB apartment for $100,000 or a three bedroom HDB apartment for $500,000? 

The former seems less demanding financially. However, in the latter, he could rent out two bedrooms and that could conservatively net him around $15,000 a year. 

The apartment could generate $450,000 in 30 years and, in his golden years, his apartment is almost free of charge.

If we are the sociable type and do not mind dealing with tenants, then, buying the bigger apartment which has the option of income generation makes sense. 

For any income investor, having such a temperament is fortunate.

If we are not the sociable type and if we value privacy highly, the one bedroom apartment is probably sufficient unless we are an antique collector and need more room to house our collection.

If we are not prepared to rent out two bedrooms, then, we are not only losing out on $15,000 a year in rental income but we are also paying 5x more for a home. 

Spread $400,000 over 50 years (assuming that is the length of our remaining life on earth) is $8,000 a year. 

OK, if we have a pretty pricey antique collection to house, maybe paying $23,000 a year is peanuts.

If we want our very own place to call home till the day we say farewell to this world, ask how much space do we need and could the price tag be smaller?

What is the topic of this blog?

Well, it is not about affordability.

Related posts:
1. Housing and CPF.
2. A big loan and CPF not enough.
3. Affordability and value for money.

I do not believe in emergency funds.

"It will never happen to me."

What if it should happen one day?

Then, die lah.

OK lor.





Reader:
Don't believe in emergency funds. Better to put money in bank preference shares or perpetuals.

AK:
Well, let's hope you never meet with an emergency which might force you to liquidate your investments at prices not of your own choosing.

Reader:
DBS preference share, at any price, still provides a return many times that of a FD. In a situation where the preference shares cannot maintain a payout, is the FD much safer?

While it sounds logical, how often do people who actually set aside an emergency fund found it useful?

Having an emergency fund in a FD is a big opportunity cost.






AK:
I think you could say that you don't have an emergency fund but to say that you don't believe in having an emergency fund boggles the mind.

It might be a good idea to remind ourselves of the GFC and how stock prices plunged terribly. The stock market was, then, in the doldrums for many, many months. 

Many people also lost their jobs.

Imagine someone without an emergency fund who might have an emergency in those months.

Imagine him liquidating his investments at a massive loss only to see the recovery in the stock market later on. Not a pretty thought.






Similar to buying insurance and how we hope we never have to make a claim, we hope that we do not have to draw on our emergency fund.

Similar to buying insurance, there is a cost involved in maintaining an emergency fund.

Should we say we do not believe in having insurance and money paid for insurance is wasted?

"I would rather see you have money you can get at than to worry about the interest rate." 
- Suze Orman

Related posts:
1. Fixed deposits for emergency fund.
2. PMET took 30% pay cut but thankful."... as I have more than 6 months of emergency funds, I was quite relax about this and could take my time to look for a job." 

SingPost posts sinking dividends.

Reader:
I am a sad shareholder of Singpost. Final dividend is 0.5 cent. Should I continue to hold and wait for improvement?

Suspicious looking package at 

Singapore Post mail processing centre.

AK:
Those who thought they would continue to get 7c a year were delusional. I also said those who were expecting a reduced dividend per share (DPS) of 4.2c to 5.6c a year could be disappointed.

Now, we could see an annual DPS of only 2c. If you are still expecting a 5% dividend yield, it is quite depressing.

In my earlier blog on SingPost where I wondered what price I might pay to be a shareholder, I made some assumptions which gave me what I thought was a more realistic DPS of 3c.

A more than 70% reduction in DPS from 7c to 2c is a tough one to swallow for any investor for income. Imagine a retiree who has SingPost as his largest investment in his portfolio.

How much do I think is a fair price to pay for SingPost now? 

You might want to read the related post below for an idea.

Related post:
An incomplete analysis of SingPost.
"Since SingPost is going to pay at least 60% of earnings as dividend, we would get a 3% yield at $1.00 a share, using the assumption in this blog which gives us a DPS of about 3c."