3Q 2018 passive income (non-REITs): AGT.

Some might remember that I reduced my investment in Accordia Golf Trust many moons ago at slightly more than 70c a share.

Since then, Accordia Golf Trust has seen its unit price gone down a slippery slope.

It finally got to a point where I just had to hit the "accumulate" button.

I remember sharing before but I just cannot remember was it here in my blog or during an "Evening with AK and friends" that my own research (with the help of Google Translate) found that PGM, Japan's second largest golf course operator at that time, made an offer to buy Accordia Golf's assets a couple of years or so before Accordia Golf Trust was listed in Singapore.





PGM's offer back then, roughly, translated to a present day unit price of 56c a share.

The offer was rejected by Accordia as being too low then.

Of course, we know that Accordia Golf Trust listed in Singapore later at a much higher price of 97c a unit.

With this in mind, I simply could not resist buying at a price that Accordia Golf's shareholders rejected as being too low or at more than 30% discount to its NAV.





Putting this figure in perspective, a more recent development was the sale of Accordia Golf Trust's parent to MBK, a Korean private equity firm, in a deal that valued the parent at a whopping 60% premium to NAV!

If we give this a moment to sink in, it would seem that Accordia Golf Trust has been hugely undervalued by Mr. Market.

It reminds me of the time when Saizen REIT was able to sell its assets at a premium to valuation.

It reminds me of the time Croesus Retail Trust was sold at a premium to valuation.

To be sure, income investors should be concerned with the stability of Accordia Golf Trust's income distribution as it still has quite a bit of membership deposits which have yet to be claimed.





By my estimate, if redemption remains elevated as seen in the last financial year, DPU could stay at about 3.8c to 4.0c a year and it could take about 5 years for this to be fully purged from AGT's books, all else being equal.

Of course, if redemption should be even higher in some years, DPU could be even lower and if redemption is lower, DPU could be higher but, eventually, membership deposits should be fully redeemed.

This matter of membership deposits is a legacy issue and once they have been fully redeemed, it will no longer be a drag on AGT's DPU but, realistically, it would take some time before this issue is all in the past.






Some might remember that I put forth one reason for reducing my investment in Accordia Golf Trust late last year as the worrisome uncertainty surrounding its loans.

However, they have since managed to refinance their debt with a new 5 year loan and with a lower interest rate to boot.

This is very good news, of course, and has provided me with the confidence to accumulate as Mr. Market remains pessimistic about AGT.





There is intrinsic value in Accordia Golf Trust and once all the membership deposits have been redeemed, all else remaining equal, we could see DPU at around 6c or higher again.

I think a prospective distribution yield in excess of 10% is pretty attractive, especially when we remember that AGT's gearing is relatively low.

We just have to make sure we pay a low enough unit price for AGT.

Sometimes, I forget but I try to remember what Buffett said before:

"Have the purchase price be so attractive that even a mediocre sale gives good results."





The advantage of being a retail investor and not a fund manager is that we only have to account to ourselves.

Unlike fund managers, we don't have to worry about dealing with investors who might only be interested in seeing their investment increasing in unit price, quarter to quarter.

Our actions are not motivated by a need to appease other investors.

In this respect, retail investors are a fortunate bunch and we should not forget this.

However, remember not to ask barbers if we need a haircut and, of course, nobody cares more about our money than we do.





I remind myself from time to time that all investments are good at the right price.

Once I have identified an undervalued investment, and it should preferably pay a meaningful dividend, I buy some.

So, what did I do?

I bought more Accordia Golf Trust at between 52 to 54 cents a piece recently.

Now, all I have to do is sit back, relax and get paid while I wait.

Well, if Mr. Market makes me even better offers, I would probably be buying more.

3Q 2018 passive income (non-REITs): SingTel and CDG.

Deciding that Mr. Market was probably overly pessimistic, I added to my already very significant investment in SingTel as its share price sank below $3.10 again sometime in 3Q 2018.

The business environment has become more challenging for telcos, no doubt.

However, we have to remind ourselves that telecommunications companies are not all equally vulnerable.






Experience tells me that in any sector that is facing challenging conditions, 

1. entities which are sectoral leaders 

and 

2. entities which have strong balance sheets 

will most likely prevail and SingTel is that entity here.

SingTel's dividend yield expanded as its share price declined.







With a strong balance sheet, SingTel is committed to paying a meaningful dividend.

SingTel is very much aware of the challenges to its businesses and is very much in the process of transformation to stay relevant.

To be quite realistic, however, if the transformation takes longer than two years to make a more significant contribution to earnings, we could see DPS being reduced to 15c.

Whether this makes sense to the income investor in us would depend on the dividend yield we demand from an entity like SingTel.






Of course, this would help us to determine our desired entry prices.

When to buy?

You decide.

Regular readers know that I like being paid while I wait.

While waiting for improvement, I am quite happy to receive a near 5% dividend yield or more.

So, I would be quite happy to accumulate SingTel if Mr. Market should go into another depression.







Next, Mr. Market's pessimism also gave me the opportunity to add to my investment in ComfortDelgro as its share price fell closer to $2.20 again in 3Q 2018.

Regular readers would remember $2.20 as the support I identified in the event of a decline in CDG's share price and how I bought some at that price in 2Q 2018 too.

On the chart, the rising 200 days moving average was also approximating $2.20 and I thought it should strengthen the support I identified.





I like to think that I know ComfortDelgro a bit better than before and simply bought more at a price I would not sell at.

Buy at prices we would not sell at.

Sell at prices we would not buy at.

I believe although we might not get it right all the time, we should get it right most of the time if we bear this in mind.

3Q 2018 passive income (non-REITs): WILMAR.

Another business I increased exposure to in 3Q 2018 was Wilmar.

As its share price went under $3.00, I simply had to buy some.

At that price, I believe Wilmar was very undervalued and based simply on NAV per share, it was.





If the constant buying by insiders as the share price declined was anything to go by, I am in good company.

When the soft commodity cycle turns up again and it is just a matter of time when it does, Wilmar will be a major beneficiary.

Apart from this, I am also waiting for the listing of Wilmar's Chinese business in 2019 which would probably help to unlock some of Wilmar's true value which has gone unappreciated by Mr. Market.





Wilmar has become a more valuable company over the years on a per share basis but its share price has languished.

Still growing, it will become even more valuable in future and any further weakness in its share price is an opportunity to accumulate.

I believe that patient shareholders will be well rewarded with higher dividends in time to come when CAPEX finally tapers off.

Then, capital gains would logically follow.

Of course, I don't know when this is going to happen.

However, being paid while I wait makes patience more affordable.

3Q 2018 passive income (non-REITs): RHT.

In 3Q 2018, I also added to my investment in RHT Health Trust at 72c a unit when Mr. Market got the jitters and the unit price plunged.

The reason for a nervous Mr. Market could be due a cautionary note issued by RHT's external auditors on its weak balance sheet.

I received messages from readers and my reply to each and every one was more or less the same.

"The cautionary note really was not saying anything new nor was it earth shattering."

If we sell simply because the share price is declining and we are fearful, that is probably a bad reason.

Warren Buffett said the dumbest reason to buy something is because the price has gone up.

Probably, the dumbest reason to sell something is because the price has gone down.

If we sell because we think that RHT cannot continue as a going concern just because of the cautionary note from the auditors, that is probably a bad reason too.





However, if we sell because we think that RHT could not reasonably be expected to refinance their debt, that is a good reason.

I didn't happen to think that way.

Anyway, peace of mind is priceless.

So, although we should have mental fortitude and the right attitude as investors, we should do what gives us peace of mind.







In late August, RHT announced that sale of its assets to its parent would go on.

After repayment of external borrowings, estimated net consideration per unit would be 82.5c.

Unitholders expected to receive about 76.6c per unit. (See comments section for more on this.)

The proceeds will help to replenish my war chest.

Watch video: 
"Malaysia's IHH Healthcare Wins Fortis Bid At Rs 170 Per Share."






See:
1. Disposal of entire asset portfolio.
2. Results of EGM held on 26 Sep 18.

3Q 2018 passive income (non-REITs): Centurion.

In 3Q 2018, I decided on many things in the non-REIT space and this will be the first in a series of blogs on my decisions.

Several times in 3Q 2018, I managed to add to my investment in Centurion as its price declined closer to 40c a share.

It is my belief that a dividend of 2c a share is sustainable because it represents a payout ratio of only around 50%.





Centurions's cash flow also remains strong and relatively predictable.

An almost 5% dividend yield from a business run by a savvy management with a good track record is comforting.

Throw in a strong potential to grow further and the investment is even more attractive to me.

Then, plus a big discount to NAV, at closer to 40c a piece, Centurion became a very compelling investment for both income and growth to me.





Centurion's insiders probably agree if the insider buying activity is anything to go by.

Insiders bought more in the months before I decided to increase my investment in the business.

They paid higher prices to add to their stake.

I paid lower prices to add to mine.

That makes me happy.

Should NSF invest $30k savings and pay $4k a year for insurance?

Reader says...

I am a fairly new reader on your blog.

I am thankful that you are sharing your knowledge, and at the same time I have a few questions that I would like to seek your opinion on.

I am currently serving NS.

I have been working part time since 18 and have a saved up 30K which I am planning to use for my university fee (Private).






I am not sure whether I should invest with the amount of money that I currently have or just leave it untouched as it is money that I would require in the coming years (approx.1-2 years).

I am also currently spending $4000 a year on an insurance saving plan (25 year plan, 10 years of paying).

I will have to commit to it for another 8 years before I can stop paying, after reading up I have found out that it is not a wise decision to continue, however cancelling the plan now would only ensure me a value of 1k++ returned.

Thus I am unsure if I should or should not continue with it as the whole plan last for 25 years.

AK says...

Welcome to my blog. 🙂

I will never invest with money which I will need in the near future.

As for insurance, my preference is to buy term and invest the rest.

However, an insurance savings plan can be good for people who do not want to bother with investing themselves but would rather let someone else do it for them.

(Then, you are basically treating it as a pseudo bond component of your investment portfolio.)

You decide. 😉







Related posts:
1. Invest with peace of mind.
2. Financial security plain and simple.

Unhappy with CPF and angry with AK. (Alamak! Why you so like that?)

Whenever I blog about the CPF, I must be prepared for some debate and it happened again last night.

I always welcome debates as long as they are civil and constructive.

Please don't be rude.

Don't tell people to get a rope and hang themselves, for example.

I am so sorry to have caused the reader so much angst. :(

Since following my blog upsets him, I will do him a big favor by blocking him.

I don't usually block or ban readers from my FB page.

If I did it to you, you must have been pretty bad.

Don't follow my blog.

Don't worry. Be happy. :D





I am glad to share an example of a civil debate with another reader here.

Reader says... 
Our CPF removes choice. 

One may suddenly need money for some valid reason eg temporary retrenchment but one will not be allowed to take out even a small sum to meet daily needs. 

Malaysia's EPF and Singapore's CPF have some good aspects. 

EPF is like a bank which allows withdrawal of money when needed but the same bank tells CPF subscriber that no money can be released whatever the need however urgent.

Would you put your hard earned cash in such a bank for it to dole out paltry sums now and then saying its looking after your money for old age?

While CPF is good , it needs a little flexibility in disbursement of funds which after all belong to the subscriber.

What use are better returns when one cannot enjoy them at will and perhaps will only be given to your nominee on your demise?






AK says...

In reply to: "Would you put your hard earned cash in such a bank for it to dole out paltry sums now and then saying its looking after your money for old age?"

Such a comparison is misleading.

I think we have to be clear what the CPF is. 

CPF isn't a bank although we can use it like one when we turn 55 if we have the FRS in the CPF-RA then.

For people who do not even have the FRS (or BRS) in their CPF accounts and wish to draw upon their CPF savings whenever they have a financial bottleneck, they need to do serious financial planning pronto.

Also, CPF LIFE is not a bank that doles out a paltry sum.

The comparison is again misleading.

Once your savings in a bank runs out, you are out but not with the CPF LIFE which pays you for life.





In reply to: "What use are better returns when one cannot enjoy them at will and perhaps will only be given to your nominee on your demise?"

It is precisely this type of thinking that leads to "Return Our CPF" rallies in Hong Lim Park.

Many people who supported the rallies had very little savings and yet they wanted to utilise their CPF (retirement) savings "to send children to study overseas", "to go on a holiday", "to go on a pilgrimage" etc.

The higher interest rates in our CPF-RA is to help us better fund our retirement and not to be depleted at a whim which is what many would do if given a choice.





See the latest comments in the following blogs:
1. Retirement funding assurance for average investors.
2. When to get a private annuity.
3. Food inflation in Singapore and Malaysia.
4. We do better at managing our savings than CPF does.

Related posts:
1. Crazy Rich Asians or Pragmatic Rich Asians?
2. Use CPF as a savings account.

Crazy Rich Asians or Pragmatic Rich Asians?

I know my blog has some reach beyond the shores of our tiny island nation of Singapore.

Remember how I received a not too glamorous award from a forum in China recently?

See:
Once upon a time in China, Weibo says 铁公鸡AK 还好没结婚!






I would like to share a conversation I had with a reader from Hong Kong some time ago:

Reader says...
Hope you don't mind a guy from H.K. dropping a line.

Indeed I used to stay in Singapore for a few years back 20 years ago.

As far as I know Singaporeans at that time liked luxury items, and home as well of course.

It is kind of having face, isn't it?

Glad to find AK's blog which share a different view from the majority (Forgive me, if this sounds offensive, on my poor English).

Personally I do agree with your mentality but I think You would appear a bit odd in the main stream?






AK says...
I think having face is more important in Asian societies compared to western societies.

I could be wrong but this is from my own observation and Hong Kong is probably the same as Singapore in this respect.

Me? 

I am crazy. ;p

(But not a Crazy Rich Asian hor.)







Reader says...
You are right that face matters in Asian community so does it in H.K. as well.

I am not sure if I still understand Singaporean correctly now but as far as Honkies, I think they are more pragmatic than their counterparts.

I don't say they don't care face but when it comes to money, they prefer money more than face.

People on the street don't put many luxury branded things on them.

I think they like the (saved) money better.





I did find that you guys discussed a lot on financial freedom but don't you guys have the CPF which is supposed to support the post retirement living?

Is it not adequate for the purpose or you guys just want a better than standard living, apart from the possible and unpredictable retrenchment?

Guys, here in H.K. also has a growing concern about financial freedom because our MPF, a copycat of CPF but much less effective, is just a joke.

We really need to be on our own feet after retirement.

No la, you are not crazy at all but just pragmatic and rational.






AK says...
Thank goodness we have the CPF! :)

However, not every CPF member knows how to make good use of it.

For those who know, who are able and willing to, they could have a million dollars in their CPF by the time they retire from active employment.

Enough or not?

That depends on the individual. ;)

A problem with our CPF system is that the government allows members to use their CPF savings for too many things and people forget the primary purpose of the CPF.

More and more CPF members who have used their CPF savings to pay for their homes might find out as they grow older that they might not have enough CPF savings to fund their retirement.






Is it true that Hong Kong people are more pragmatic than Singaporeans?

Do they care more about having money than having face?

I don't know but I know that housing cost is through the roof in Hong Kong and I know that unlike our CPF system, their MPF does not provide a relatively reasonable risk free return.

So, perhaps, this is why they are more worried than Singaporeans about their personal financial health.





I was once told that if we can climb the corporate ladder in Hong Kong successfully, we can do well anywhere in the world because it is that stressful.

I am very fortunate to be a Singaporean and this is one blessing I count all the time.

My fellow Singaporeans, we might not be Crazy Rich Asians but if we do the right things, we will be Pragmatic Rich Asians.

If AK can do it, so can you!






Related posts:
1. If we are not rich, don't act rich.
2. Almost 55, worried about CPF.
3. FRS by age 35 and $1M in CPF.

CPF interest is passive income and real money.

Reader says...
We were talking about the CPF during lunch and I said it is good passive income.

It is like investing in bonds and getting interest income.

Who said that? 

Who? Who? Ha ha.






My colleague said he would not refer to CPF interest as passive income especially interest in MA.

He said anyone who says CPF interest is passive income must be twisting logic. 

He insisted normal people will not think of CPF interest as passive income.

AK, you blur or not?

I very blur.






AK says...

You very blur?

I more blur than very blur.

However, that colleague of yours is the most blur of us all.

So, your colleague is normal and we are abnormal?

Ouch.

Alamak, I fell off my chair.






Interest income is income that is passive.

Interest income is passive income and it doesn't matter if it is paid on our savings in our bank accounts or in our CPF accounts.

Just like money in our bank accounts, money in our CPF accounts is real.






If it is not real, we would not be able to use the money in our MA to pay for H&S insurance.

If it is not real, we would not be able to use the money in our OA to pay for our homes.

Would insurers and property developers accept Monopoly money in payment?

You tell me.

I blur.





Related post:
A cornerstone in retirement funding.

Reduce volatility by having fixed income as we age?

Reader says...
Morning AK, as you get older, will you consider to be more defensive in your portfolio?

Means shifting more to SSB, CPF etc instead of blue chip stocks for example?

Just in case touch wood financial crisis then your portfolio less time to recover.

Appreciate your thoughts as always. 😉







AK says...
I guess your question is about reducing volatility in our investment portfolio.

Well, for most of us, that should be the job of our CPF savings. 😉

Why do I say "for most of us"?

Remember my blog on "unless we are very rich"?






Too defensive an investment portfolio and the returns would be compromised too much and might not be meaningful enough for us to have a comfortable retirement.

Again, this is "for most of us".

For those who have plenty of money sloshing around, they don't have to be as particular. 😉






I am investing for income mostly.

Volatility which could result in plunging share prices doesn't bother me.

I am more concerned with receiving dividends from my investments, during good and bad times.

In fact, I welcome plunging prices as that means I could buy more on the cheap. 😉






Related post:
CPF is all we need unless very rich.

How to maintain lifestyle in retirement?

Reader says...

My friend each month spends about $2k on tuition for her only child! 😮

4 tuition each cost about $500!! 😱







Money is a scarce resource for the vast majority of us.

What do we do when a resource is scarce?

We try to conserve it.

That is what the government keeps telling us when it comes to the use of water in Singapore.








We should have the same attitude towards money.

Of course, if you are very rich and have money sloshing around, ignore this blog.

I believe that for the rest of us, we can easily strengthen our balance sheet just by reducing unnecessary expenses.






A reader in his 40s who makes more than $8,000 a month told me that he used to save about $500 a month of his take home pay but now he saves $2,000 a month.

What motivated him to save more money was my blog on how we can save 100% of our take home pay.

$2,000 is not 50% of his take home pay but it is already a vast improvement from $500.








Some of the changes he made:

1. He downgraded his car and although not what I would advocate, has a much smaller car loan to service.

2. His family eat out less often and he was very impressed by how much money they could save by not going to restaurants.

3. Extra classes for their two children were reduced to only what they thought were essential.

He also decided not to upgrade to a condominium but will continue to stay in their HDB flat.

Becoming a better saver is the first step towards a financially secure retirement for him and his wife.






What kind of lifestyle we can have in our golden years, to a large extent, depends on the kind of lifestyle we have today.

Don't want to downgrade our lifestyle in retirement?

Don't upgrade our lifestyle too much before our retirement.

Quite simple, really.






Related post:
Saving 100% of our take home pay.

"Should I give up on my husband?" (Warren Buffett's late wife saw him as a challenge.)

Reader says...

I simply LOVE your blog!

However, reading your blog makes me a bit regretful.

I got married a year ago to a very kind and loving man.

He is very obliging and we never had an argument, ever.

I decided he was the one after a short courtship.

He is not rich and doesn't make a lot of money at work but it doesn't bother me because I earn my keep.

I did not think that it could be a problem until a few months into the marriage.





He is very caring and sweet but he doesn't seem to know much of anything and doesn't seem interested in learning.

A big problem is his inability to understand basic money management.

I thought he understood budgeting but had trouble with impulse buying but by now I don't think he understands.

I feel bad for flaring up but he would literally spend the very last dollar of his salary by end of each month.

When I tried to show him how bad his financial situation was, he would hug me and said I was worrying too much.

I love him but I am also thinking of giving up.







AK says...

Welcome to my blog. :)

First, I must say that I mostly blog about personal finance matters.

I am definitely not an expert on relationship matters and I am definitely not an expert on marriage.

So, based on this, I know if I were in your shoes, instinctively, I would dump that guy like a sack of rocks.

Too heavy a burden to be carrying around for even a moment, I would not dream of dragging the sack around for life.

Yikes!

Who threw a shoe at me?

Who? Who?





Let me continue.

However, there is a Chinese saying:

爱屋及乌
"Love the house and love the crows on the roof."

It is about taking the good with the bad.

So, although, instinctively, I would dump that guy, rationally, I would urge you to consider the big picture.





If not being financially prudent is his only shortcoming, maybe, you shouldn't give up.

"Love the house and love the crows on the roof."

As long as the number of crows are not too many, it isn't too bad unless you care about appearances.

However, if the crows are so numerous that the roof might collapse under their weight, you should run for the hills.





I always tell people that investing in stocks is a little like getting married.

We could also say that getting married is a little like investing in stocks.

There is bound to be some rough patches.

For example, Warren Buffett's late wife, by his own admission, saw him as a challenge. ;)

I am just borrowing someone else's wisdom here.

I don't have any in this area.





Related post:
Scolded by wife!

1H 2018 passive income exceeded $96k.

Reader says...

I just started reading your blog last week and I am already a fan!

Your passive income is amazing!

Totaling first two quarters for REITs and non-REITs, you have already exceeded $96k!

How old are you now?






AK says...

Welcome to my blog. :)

I am 47 this year.



Reader says...

Oh, I see.

I thought you might be a retiree in your 60s or 70s.

A bit difficult for me to reach your level by 47.






AK says...

When you say you are my fan, it follows that I am your idol.

Honestly, I don't want to be your idol.

Seriously, you should not be my fan.

Don't compare what you have with what I have.

Don't focus on what I have achieved.

Instead, focus on what you can achieve.





Whenever I say,

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

I am referring to achieving financial freedom.

I am not referring to an early retirement from employment.

I am not asking readers to have the same amount of passive income that I have or more.






AK's 1H 2018 passive income exceeded $96K?

So what?

You don't be "kiasu", ok?

Alamak!

Who threw a packet of tissue paper at me?

Who? Who?

In Singapore, a packet of tissue paper is not just a packet of tissue paper hor.





Related posts:
1. 1Q 2018 income non-REITs.
2. 1Q 2018 income S-REITs.
3. 2Q 2018 income non-REITs.
4. 2Q 2018 income S-REITs.