FY2017 passive income from non-REITs (Part 4).

If you have not read the 3 earlier parts, read them HERE (PART 1), HERE (PART 2) and HERE (PART 3).

Although most of my investments have an emphasis on income, regular readers know that I also have some money in investments which would hopefully give me a mix of income and growth. 

Such investments, some bigger and some smaller, as a whole, form a smaller proportion of my portfolio compared to my investments for income.

This is consistent with the capital allocation pyramid which I have shared many times before.

Keeping this in mind, I added to my investment in Wilmar at under $3.10 a share as Mr. Market turned pessimistic in 4Q 2017.

Buying at a discount to NAV and at a price 10% lower than what Archer Daniels Midland Co paid to increase their stake more than a year ago seems like a good idea to me.

Wilmar is a growth story and I believe that value is still being created.

More valuable than it was in the past, undervalued now, we could see Wilmar's value being unlocked in 2019 if the plan to list in China succeeds.

See related post at the end of this blog for my simple analysis on Wilmar's value.

Wilmar definitely demands quite a bit of patience from investors and with a dividend yield of about 2%, it isn't anything to shout about but it is nice that I am getting some pocket money while I wait.






In the same vein as my investment thesis for Guocoland earlier in the year, I decided to put some money in Ho Bee Land towards the end of 4Q 2017.

After a run up in its share price, I waited for a retreat to a long term support which is the rising 200 days moving average (200d MA) before nibbling.

From a fundamental perspective, with a NAV per share of $4.55, my purchase was at a 47% discount to NAV which is pretty attractive to me.

Of course, there is no point in buying at a large discount to NAV if the investment just sits in our portfolio and looks pretty.






It is only a worthwhile investment if value is unlocked or if it generates an income for us.

Ho Bee Land's major shareholder owns more than 70% of the company but this, in itself, is no guarantee that value would be unlocked. So, it is important to be paid while I wait. 

Looking at the numbers, I feel that Ho Bee Land would be quite comfortable with a higher DPS but to avoid disappointment, I am going with an assumption of a rather undemanding 5c annual DPS.

Although I am quite comfortable with my entry price, I am not crazy about it and I would probably be accumulating only if Mr. Market decides to give me a better offer.







After all that has been said, I am expecting 2018 to be a year of reduced passive income as a result of having a greater proportion of investments with lower dividend yields in my portfolio.

That story to be told next year.

To conclude this final blog of 2017, FY 2017 distributions received from non-REITs:

S$ 481,902.09










So, it all works out to be approximately S$40,158.00 a month.

Without the huge distribution from Croesus Retail Trust, everything else being equal, off the top of my head, I estimate a big decline of more than 80% in my passive income from non-REITs in 2018.

Here is wishing everyone a happy, healthy and prosperous 2018!





Related post:
Accumulating Wilmar.

FY2017 passive income from non-REITs (Part 3).

If you have not read the 2 earlier parts, read them HERE (PART 1) and HERE (PART 2).

To continue from Part 2, in my blog on SingTel earlier in the year, I said that in my retirement, missing a regular earned income, I should be less adventurous and that I should seek greater stability when it comes to passive income generation.

In other words, I should be less speculative and should not leave too much to chance.






Consistent with this desire for a higher level of stability, I decided to reduce my investment in Accordia Golf Trust (AGT) in 4Q 2017 by more than half and to again increase my investment in SingTel.

I will say that this was not a very easy decision emotionally because, overall, with all the dividends received and with some capital gain to boot, AGT has been a pretty good investment for me.

Hesitating for a moment, I had to remind myself that to be consistent with my aim for greater stability in passive income generation, it was a sensible thing to do.






I know there are people who say to avoid AGT at all cost but regular readers know that I like to think that all investments are good at the right price.

This also brings to mind what Warren Buffett said before:

I don't always do a good job of this but with AGT, maybe, I did.

So, you see, ComfortDelgro was not the only stock which I found attractively priced in 4Q 2017 as I also built a larger investment in SingTel.

SingTel is a more valuable company than it was in 2015 and paying a price similar to or lower than what I paid back then to increase my investment in the business now seems like a good deal to me.

Compared to Starhub which I have a very much smaller investment in, SingTel has a much stronger balance sheet and also more resilient earnings.





While Starhub's DPS could suffer another cut after already reducing from 20c to 16c, SingTel is probably able to sustain their current payout as they have been paying out less than 75% of their earnings as dividends.

With this in mind, when SingTel's price plunged after going XD, I bought more and would probably add to my investment if there should be another significant decline in price.

Everything else being equal, the decision to buy more SingTel rather than Starhub on price weakness really isn't a very difficult one.

Coming up next is the last blog of the year and that would complete the update on my FY2017 passive income from non-REITs.

Read Part 4: HERE.







Related posts:
1. Reduced Accordia Golf Trust.
2. SingTel analysis.

FY2017 passive income from non-REITs (Part 2).

If you have not read Part 1, read it: HERE.

To continue, as things turned out, I grew my relatively small initial investment in ComfortDelgro rather significantly.

For weeks following the time I first invested in the business, ComfortDelgro's share price did a rather placid see-saw movement.

Whenever the share price retreated to around $2.00 per share, I nibbled, as I decided after doing more research that $2.00 was a fairly good price and I believe it still is.






Then, informed by the technical analysis which I did a few months ago, I increased my investment again when its stock declined closer to $1.90 a share prior to the proposed deal with Uber to purchase a 51% stake in LCR.

There was a rebound in its share price after the announcement but in the following sessions, it drifted lower to test support found at $1.90 a share.

What to do?

Panic and sell?

No, I pounced on the opportunity to add again to my investment.

See:
ComfortDelgro's 51% stake in LCR.

In a downtrend, supports are more likely to break but, together with the fundamental analysis I did, they gave me an idea of where I might want to add to my investment.






Could the stock decline even more in price? 

I don't know if it would but it could.

In the face of massive disruption by Grab, I decided that ComfortDelgro could continue with a 10c DPS comfortably (pun intended) even without its Singapore taxi business.

In my first blog on ComfortDelgro, if you remember, I assumed what I felt was a very realistic 7c DPS and, so, anything higher than that is a bonus to me.

As long as this remains true, all else remaining equal, I would very likely add to my investment on any future price weakness which coincides with the supports which I have identified.

See technical analysis: HERE.






From an investing for income angle, I am comfortable with ComfortDelgro. 

With rather strong cash flow, the investment risk is very low although its share price could continue to experience volatility.

For income investors, it should be about getting in at a price which makes sense to us and price volatility really should not bother us unless we are investing by using money which we really shouldn't be using.

It is worth being reminded that ComfortDelgro is not just about taxis in Singapore.






Having said this, the fear that ComfortDelgro could see its stock sinking in price is not unreasonable, of course.

Someone asked if ComfortDelgro's share price has bottomed?

I would be very wary of anyone who tells me he knows the answer, either way.

Although I did a bit of technical analysis on ComfortDelgro, I do not know if the stock price has bottomed but it looks like it has at least found a floor and the momentum oscillators are supportive of this.





Everybody fears the unknown.

Now, fear can be a good thing because it stops us from acting recklessly but irrational fear might hold us back from making sensible decisions.

I always tell myself that to fear is human but it is never a good excuse for inaction.

I also remind myself that I probably would not be able to buy at the lowest possible price.

If I did, I was lucky.






In summary, as an investor and not a trader, I decided that since a sustainable and meaningful dividend from a company like ComfortDelgro was attractive for me, the rational thing for me to do was to make it a bigger investment in my portfolio.

So, I did exactly that and it helps to reduce my investment portfolio's at one time heavy reliance on S-REITs for passive income.

At lower prices, all else being equal, dividend yield would expand and make investing in ComfortDelgro for income even more compelling.

Now, you know why I am ready to buy much more if there should be more blood letting in the market.

Roll out the war chests?

That could happen.

See related posts at the end of this blog on why I decided to invest in ComfortDelgro as its share price plunged.










Some might remember why I added substantially to my investment in SingTel earlier in the year.

I will talk about this in Part 3: HERE.

Related posts:
1. Massive short interest.

2. ComfortDelgro analysis.

FY2017 passive income from non-REITs (Part 1).

4Q 2017 has been a relatively active one for me in the non-REITs space and being a rather long blog, I decided to take my time and publish it in 4 parts.

In its final days on the Singapore Stock Exchange, at $1.17 a unit, the total value of Croesus Retail Trust in my portfolio easily trumped First REIT as my second largest investment.

As Croesus Retail Trust was delisted and distributions made to its shareholders, the cash level in my investment portfolio rose significantly due to this reason alone.






I would have been quite happy to sit on a lot more cash and to do nothing if I did not see any compelling offers by Mr. Market.

This is because I look at the capital gain from the sale as receiving income distributions for many years in advance.

So, mostly thanks to Croesus Retail Trust, 4Q 2017 distributions received from non-REITs is a rather impressive figure:

S$ 391,775.11

Of course, I am also sadly aware that much of this would not be repeated.







Having said this, there could be another distribution of a similar nature in the near future although the quantum is going to be smaller as it is a smaller investment for me.

I am, of course, talking about Religare Health Trust, a business trust which owns healthcare assets in India.

Fortunately, I took advantage of a sudden intra day plunge in Religare Health Trust's unit price earlier in the year to increase my investment by 150%.

Pure, dumb luck, I am sure.









So, did I do anything in the non-REITs space in 4Q 2017?

I will continue to talk to myself in the next three parts.

Read part 2: HERE.

Meanwhile, you might be interested in:
FY2017 income from S-REITs.

Related posts:
1. Croesus Retail Trust.
2. Religare Health Trust.

FY2017 passive income from S-REITs.

Time flies and 2017 is coming to an end.

Time for me to take a look at how much income my portfolio of S-REIT has generated for me in the final quarter of the year.







The plan for Saizen REIT to transform into a REIT holding Australian industrial properties failed to materialise.

In the end, it was delisted from the stock exchange and whatever residual value was distributed to its shareholders.

This lifted my total income from S-REITs for the year rather nicely.

Of course, this is definitely the final distribution from Saizen REIT and it will not be repeated.

4Q 2017 distributions from S-REITs:

S$ 31,812.93









Did I change anything in my S-REITs portfolio in 4Q 2017?

I decided to use some of the income received in 4Q 2017 to increase my investment in Starhill Global REIT by more than 50%, paying 74.5c a unit.

This price is, of course, slightly higher than my initial purchase but I believe that even at 74.5c a unit, the REIT is still relatively undervalued.








Now, read this chat I had earlier this month:

In my blog published in March 2017 (see related post #1 at the end of this blog), I said that I was knocking off 5% from the REIT's DPU to be conservative but I did not expect it to take a knock in this manner.

So, everything else being equal, DPU could eventually be 4.75c.

This would give me a distribution yield of 6.37%.

If we would like to remain conservative and knock another 5% off its DPU, it would give us a DPU of 4.5c or a distribution yield of slightly more than 6%.

Being a slightly less compelling offer now, I merely nibbled.

Other than this minor addition, my portfolio of S-REITs is unchanged from the previous quarter.







In case you are too lazy to check my past blogs to calculate FY 2017 distributions received by my portfolio of S-REITs:

S$ 95,142.98

That works out to be approximately S$7,928.00 a month in passive income.

Without a leg up from Saizen REIT's final contribution, I expect my passive income from S-REITs to be some 10% lower in 2018, everything else being equal.

My next few blogs will be about my FY 2017 income from non-REITs and what I did in that space.



Read a message from AK as ASSI turns 8: HERE.

FY2017 passive income from non-REITs (Part 1): HERE.







Related posts:
1. Starhill Global REIT analysis.
2. Saizen REIT's bumper distribution.

A message from AK as ASSI turns 8.

Christmas Eve of 2009.

My blog was born.

Why did I start blogging?

It was out of boredom and curiosity.

On this day, the message I wish to share is more than

"If AK can do it, so can you!"





Instead, take a look at this:

Reader #1 says...
No need to think so much. Just buy, hold and sell when AK does. He's the Oracle.

AK says...
I am no Oracle and I am thinking of retiring or at least semi-retiring from blogging.
So, better do not rely on me. ;)

And I do mean it.





Reader #2 says...
I hope your readers know how not to go in or follow blindly...

AK says...
Everybody should have a plan, their own plan.
It is never a good idea to ride on someone's coat-tail.

We are very lucky that in Singapore financial freedom is not a dream for most of us.

By being prudent, pragmatic and patient, we can achieve financial freedom and we should.

However, it is a dream that AK can do no wrong and that AK will always be here.





Why be prudent, pragmatic and patient?

Read this and be wealthy:
Three attributes of a wealthy peasant.

MERRY CHRISTMAS!

Technical analysis of SingTel.

A reader saw my technical analysis (TA) for ComfortDelgro and asked if I did the same for SingTel?

Translated:

"Please share your TA for SingTel."

OK, I don't do TA on request anymore but since I am in the process of building a larger stake in SingTel, here is a quick TA on SingTel:

Since going XD, SingTel saw its share price plunging but I don't think this has anything to do with its business fundamentals which do not seem to have deteriorated enough to warrant the huge decline in price.

If the fundamentals at $3.79 a share are the same as the fundamentals at $3.58 a share, logically, what should someone who was buying at $3.79 do now?

Having said that, price movement is sentiment driven most of the time and this is what we call "volatility".

There is no accounting for prices and Mr. Market does not care what we think.

For those who bought at a much higher price only to "cut losses" now, I only hope they do not regret later on.

If I were in their shoes, I would ask if I did not buy at those higher prices, would I be buying now?

This question will probably yield a more rational answer.

Well, it has always worked for me.

To be fair and also to be rational, what they do depends on their motivation for buying into SingTel when they did.

Always remember that TA is about probability and not certainty.

It is quite clear to me that there is support at $3.58 a share but it is not a strong support per se.

The Fibo golden ratios are at $3.53, $3.49 and $3.45.

These supports might or might not be tested but if the downtrend should persist, these are the prices which could see me accumulating.

In terms of momentum oscillators, both MFI and CMF are pretty benign which suggests to me that the bears might lack the strength to push the price much lower although the huge gap down in price is bearish and that is what the MACD reflects.

Although I believe that investing in SingTel at $3.58 provides value for money and that money isn't flowing rapidly out of the stock, it might not be a good idea to throw in everything including the kitchen sink at this point either.

I anyhow talk to myself only. I blur.

Related post:
Technical analysis of ComfortDelgro.

Insure against longevity risk but not like this.

Reader says...
Hi need some feedback on annuity plans/rates.

Pay 16k per year for 5 years. 

Payout monthly $800 per mth for 10 yrs. annuity rate is 12% correct?





AK says...
It is not really comparable because this annuity pays only 10 years.

It is more like an endowment than annuity.

So, I think it might be wrong to valuate this like an annuity.

It is more like a savings plan without any insurance component.

An annuity is an insurance against longevity risk.

Reader says...
If like cpflife forever then it is more like wholelife policy?

AK says...
Life insurance is different.

That is more for your dependents.

We don't need life insurance unless we have dependents.

We buy annuity in case we are blessed with long life and it helps to fund our golden years.





Reader says...
U know of any annuity plans that u feel is worth considering?

AK says...
CPF Life 😉

Reader says...
What is the limit for CPF-RA?

AK says...
You will know the limit for your cohort when you turn 55. 😉





Reader says...
Just wondering if its u, wud u buy that plan?

AK says...
Basically, you are just getting back $96K for saving $80K.

That is a $16K gain.

And you are not even getting it in one shot but spread over 10 years.

20% gain and spread over 10 years is 2% per year.

It sounds innocent but it isn't

There is a cost to this.







Instead of paying us 100% all at once (like a regular endowment plan), they hold back and we are paid a very small % monthly over 10 years.

Conservatively, we could be losing another 2% every year because we could have placed the money in a Singapore Savings Bond.

So, what are we making here? Nothing!

They are not giving us more than what we could get from a Singapore Savings Bond.





Add the fact that you actually pay over a 5 year period (i.e. $16K x 5), without considering opportunity cost, you are getting less than 2% a year in return (when the $800 a month payout starts) because the waiting time for the first few $16K payments made is longer (i.e. 1 to 4 years more).

To me, it is rubbish.

We would be better off just placing the money in a Singapore Savings Bond.

This product gives an illusion that it is an annuity when it really isn't and even as a savings plan, it fails miserably.

There, I have said it.





Guess which insurance company is selling this product?

Really, no one cares more about our money than we do.

Don't ask barbers if we need a haircut.





Read another blog on insurance published yesterday:
Life insurance a heavy burden. What to do?

Related posts:
1. Rather have an annuity or not?
2. When to get a private annuity?
3. What is effective annuity rate?

Life insurance a heavy financial burden. What to do?

Reader says...
I would like to seek your self talk on whether a person should continue paying premiums for his whole life insurance policy.

Person A initiated a whole life policy with the premium payment duration for 25 years.

After 4 years, the surrender value is now around 20% of the total premium payment till date.









As the monthly premium is occupying a huge part of his monthly cash flow, he is considering to replace the whole life insurance with a term life insurance to "cut losses".

In addition, he is also considering to terminate his child's whole life policy which was initiated in 2016.

After spending time getting himself educated, he realised there might not a need for his child to have a whole life policy.

In addition, the sum assured may also be not that significant in the future, given the inflation rate.

What self talk would you give yourself if you imagine yourself to be Person A in the given scenario?












AK says...
In a nutshell, we need life insurance if we have dependents.

If we do not have dependents, we don't need life insurance.

We can get adequate life insurance and keep the cost of insurance significantly lower by buying term.

Whole life insurance is relatively expensive life insurance but it has a saving or investment component which might appeal to some people.

However, for people with budgetary considerations, term life is the best option.







We need life insurance because bad things do happen but we do not need whole life insurance.

Before terminating your existing whole life insurance, make sure that you get term life insurance of equivalent coverage first.

Ideally, your term life insurance should be for as many years as you think you would have dependents.

I cannot and would not give specific advice but I hope that talking to myself has helped to throw light on the matter.










Related posts:
1. Holistic approach to financial freedom.
2. Insurance weakened family balance sheet.

QAF's earnings down but cash increased. What is this?

Reader says...
Thanks for talking to yourself!

Really helpful in terms of long term planning for FI.

Just wanted to get some of your thoughts on QAF..






Latest results show much lower earnings (~60% less), and the stock price took a hit..

However, i see that their cash on hand has increased quite a lot.

With all the other news about it i.e. IPO not proceeding..

Could you talk to yourself on this?

AK says...
The weakness in earnings is probably cyclical (due to oversupply of pork in Australia).

So, I am waiting to buy more if Mr. Market should go into a depression.

You might want to read the related posts at the end of this blog.







Reader says...
How would you define a depression for them, and how would you conclude that their mgmt is taking the right steps? Thanks!

AK says...
If we accept that the weakness is cyclical and not structural, then, we understand that earnings will recover. 

It could take months or years but it will recover.


To be able to weather cyclical downturns, a company must have a strong balance sheet. 

This is what Marco Polo Marine has taught me. 

QAF has a strong balance sheet.





A company could become more valuable over the years but due to downturns which could be prolonged, its stock could trade at relatively low prices. 

That would be a good time to accumulate. 

This is what Wilmar has taught me.

QAF is more valuable today than it was a few years ago.

As for the management, I let their track record speak for them. 

Holding a relatively large controlling stake, they are driven to make QAF more and not less valuable.





Reader says...
I'm still young and willing to wait for recovery, just want to be certain of my decisions 🙂

1) Could i ask why you believe the downturn is cyclical?

Thanks for your time!

AK says...
The primary production business is a commodity business.

This is similar to Wilmar's businesses in agriculture.

This is a cyclical business.

I am referring to QAF's pork business in Australia, of course.

Related posts:
1. Plunging earnings at QAF.
2. Wondering about QAF.

ComfortDelgro's 51% stake in LCR good or bad?

I was wondering whether to blog about this but still feeling rather lazy, I just made a few comments in my blog's comments section and on my Facebook wall.

OK, if you don't know about the proposed acquisition, read the article: HERE.

"Taxi giant ComfortDelGro announced on Friday (Dec 8) its intention to acquire a 51 per cent stake in the Uber-owned rental fleet business, Lion City Rentals."

As things turned out, I received an email from a reader on the matter and I decided to do a little bit of "work" to share it in my blog.

Bad AK! Bad AK!

Reader's email:

I like your reply to your reader Lee Jiahui that CDG's deal with Uber will "stem the loss of drivers" and this is already helping CDG.

I also like your reply to your reader Kevin that "car rental business is actually a good business and CDG is an old hand at fleet management and they should be able to do a better job of managing LCR's fleet and reap some benefits." 

I am also glad that CDG did not invest in Uber and I also believe that the CDG's proposed majority stake in LCR is not a bad idea.





I would like to share the following:

1. CDG is paying S$295 million for a 51% stake in LCR.

2. It involves only 12,450 cars out of LCR's fleet of about 14,000 cars.

3. The NAV of the 12,450 cars is about S$642 million.

4. If utilisation rate of the fleet goes up in future, CDG would pay for more cars in the fleet.






So, although it is true that CDG is paying for depreciating assets, they are only paying for productive depreciating assets.

This is nothing new. 

Taxis are depreciating assets too but if they are put to work, they are productive assets.

Hack, 99 years, 60 years, 30 years leasehold properties are all depreciating assets.

Should investors avoid them?







Like you always say,

"All investments are good investments at the right price."

If we understand this, understand that this deal with Uber would lead to an increase in earnings for CDG in their car leasing department.

Also, we should expect CDG's engineering department's earnings to benefit.

So, is this really a bad deal?

(End)

From the comments here in my blog and on my FB wall, it is clear that not everyone is convinced that this is a good deal for ComfortDelgro.

However, to expect a fantastic offer from Uber to give away something precious to ComfortDelgro on a silver platter would be unrealistic.

As an investor, I try not to be overly optimistic or overly pessimistic. 

I try to be pragmatic.

Realistically, we cannot predict what Mr. Market is going to do next week.

However, as investors for income, all we need to do is to determine what is a fair price to pay and wait for offers from Mr. Market.

We can do it for fun but we are not in the business of predicting price movements.

We are in the business of preparing to buy from Mr. Market when he is feeling depressed.

If you just popped by, this is one of those rare days with more than one blog published in ASSI.

Read the blog published earlier today: HERE.

Related post:
Incomplete analysis of ComfortDeglro.