Ever since the CPFB introduced a colorful pie chart of our CPF savings a few years ago, I would look forward to mine every year like a teena...
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He shared that he lost big time on Luna and even on his Bitcoin and Ethereum which he staked for much higher returns than the interest income he could get from our local banks.
Apparently, some of the crypto lending platforms where he staked his coins became insolvent recently.
The comment made for very sad reading but I suppose the reader just needed an outlet.
Something I used to blog about pretty frequently was the subject of fraud.
When something sounds too good to be true, it probably is.
Before investing our money for income, it is important to make sure that it is a bona fide income generating asset.
This is especially true if it promises what seems like an incredibly high return.
Some past blogs which might be interesting especially to newer readers:
Remember, bloggers are just regular folks like you and me.
Don't read blogs thinking that they are always right.
I must say this because the person who left the comment said he was mostly influenced by blogs and YouTube videos to put more and more money in cryptocurrencies.
When I did a search on staking cryptocurrencies, for example, I saw many "experts" telling people how to do it to become rich, focusing only on the high returns but not the high risk.
I have said before that bloggers (and now YouTubers too) who tell people that cryptocurrencies are investments are confused and they are confusing other people.
Cryptocurrencies might be digital assets but to put money in them thinking they would grow our wealth quickly is more speculating than investing.
We can invest in blockchain technology but not cryptocurrencies.
History doesn't repeat but it rhymes.
Anyway, after reading that comment, for many reasons, I just feel that a blog like this is necessary.
I suppose I also need an outlet after all that negativity in the reader's comment.
This post is going to be short but maybe not so sweet.
I was out doing my 10,000 steps last evening and took a break at a public exercise station.
We are so lucky that HDB estates have exercise stations and not just playgrounds for noisy kids.
There was a group of old men on a couple of benches nearby.
Guess what?
They were even noisier than the noisy kids on the playground.
"CPF money cannot take out one lah."
"PAP wants to control our money till we die mah."
"What control? They take and use liao!"
"Our CPF money machiam their money like that lor."
"Cham liao lor. No wonder cannot take out all at 55."
They looked like people in their 70s to me.
Blessed with longevity but not wisdom.
Anyway, it is a fact that we are all living longer and we are fortunate that our government is not only aware of this but decided to act by coming up with CPF LIFE.
Not allowing CPF members to withdraw all their CPF savings at age 55 is the right thing to do because when that withdrawal age was set so many decades ago, longevity was not what it is today.
"When the CPF system was introduced in 1955, the retirement age was 55.
"Life expectancy then, was between 60 and 62.
"Today, for those turning 65, one in two will live beyond 85, and one in three will live beyond 90."
Some people must be wondering why AK has not blogged in so many weeks?
Regular readers of ASSI shouldn't be surprised anymore as AK spends most of his time in other worlds.
I am still spending time in Neverwinter and Genshin Impact.
I had to drop Black Desert Online and Star Wars The Old Republic.
Just don't have enough time especially when I am trying to get back to a healthier way of living by having some physical exercise which is either climbing 80 floors of stairs or walking 10,000 steps a day.
I still stay updated on money matters as much as possible like how Sabana REIT's DPU went up but ESR REIT's DPU went down.
Sabana REIT's gearing level is lower while ESR REIT's gearing level is higher.
Sabana REIT is trading at a 15% discount to NAV while ESR REIT is trading at a 15% premium to NAV.
Just saying.
I like climbing stairs more because it is efficient and it is also safe to read the news when I do it as it is unlikely that there would be anyone else climbing 80 floors at the same time and in the same block which might result in an accident.
I don't always read serious stuff.
I am only human and like gossip from time to time.
Just now, I read about how a couple ran away with $32 million which customers paid them in advance for luxury goods.
There are so many things that I could say about this but a friend told me before to live and let live.
Hanor.
Rich people can afford and if they don't buy luxury goods, they cannot bring their money with them when they die anyway.
Right?
Eh, I don't know.
You say leh?
What?
You say AK is 铁公鸡?
Of course, readers who have been following my blog for a long time would know what AK would have said in the past.
AK changed liao.
Alamak.
Cham lah.
But hor I really couldn't tahan when I read the case which was mentioned at the end of the article.
Some person helped a friend to order an $18,000 Rolex watch from the scammers and said that the friend is very pissed now because that is a big part of his savings.
Of course, I don't know if really is bought on behalf of a friend or too shy to say is for himself.
$18,000 is a big part of his savings?
What percentage would be a "big" part?
It is different from person to person but if $18,000 is a "big" part, why buy a Rolex watch with it and from a dubious source too?
Face palm like that.
It reminds me of what a friend told me before.
Once we are making $5,000 a month or more in employment, we should go and buy a luxury brand watch like a Panerai or Longines to show people that we have arrived.
Who are the people?
AK blur.
People care meh?
I don't care.
Also, arrived where?
Obviously, wherever it is, I have not been before.
AK blur again.
How like that?
Jialat.
I only know that I didn't get to where I am by using a "big" part of my savings to buy luxury goods.
Although my portfolio is not as heavy in REITs as it was a few years ago, it still has a relatively big exposure to REITs.
I have to remind myself not to go back to being overly REIT heavy.
Anyway, I also expect CLCT to continue its transformation by acquiring more new economy assets.
So, I could still increase my investment in CLCT through future rights issues, if they should be offered.
Next, I decided to increase my exposure to the local banking sector to compensate for my relatively large exposure to REITs even further.
I increased my investment in OCBC which I thought offered better value for money when compared to DBS and UOB as it was trading at around book value.
OCBC also offered the highest dividend yield while not having the highest payout ratio which was attractive to me as an income investor as this could also mean higher future dividends if nothing untoward happens.
This is a possibility since OCBC also has a very high CET1 ratio, the highest amongst local banking peers.
Bitcoin is currently 0.5% of my portfolio as I added to my initial less than 0.1% position when its price declined.
Not crazy about Bitcoin but having some in my portfolio makes sense because, unlike the early days or a few years ago, I can see that the coin is gaining wider acceptance and, more importantly, attracting institutional investors.
If I was a Bitcoin bull, I would put at least 20% of my portfolio in Bitcoin and I know some, mostly young people, are 100% into Bitcoin and other virtual coins.
However, I don't think that retirees like AK should be too aggressive on Bitcoin.
I will admit that the case for Bitcoin is growing more persuasive because of the strengthening network effect.
However, Bitcoin's notorious price volatility makes it a poor choice to form a large component of any investment portfolio other than one that is mostly speculative.
OK, lots of buying in 2Q 2022.
Any selling?
I did some selling as well in 2Q 2022 and blogged about it.
Although I will be receiving less passive income from Centurion Corporation in future, reallocating the funds to other income generating investments should give similar or maybe better results.
So, apart from possibly missing out on capital gains if Centurion Corporation eventually unlocks value for shareholders, I doubt that having it as a much smaller investment in my portfolio would lead to a big decline in future passive income for me.
Unlike Saizen REIT, for example, where there was a guarantee more or less that we would be paid while we waited for value to be unlocked, there isn't such a guarantee with Centurion Corporation.
OK, now for the numbers.
In 2Q 2022, total passive income received was:
S$ 63,980.74
The dividends received from DBS, UOB and OCBC formed the bulk of my passive income from non-REITs in 2Q 2022.
Of course, there is the expected and not insignificant quarterly income distribution from AIMS APAC REIT as well.
2Q 2022 passive income increased by an impressive 42% compared to 2Q 2021mostly because the banks were still paying lower dividends in 2Q 2021.
The banks normalized dividend payouts in 3Q 2021, if I remember correctly.
Compared to 1H 2021 which saw total passive income at S$81,425.35, the first 6 months of this year delivered a total of S$104,678.42 in passive income which represents an increase of some 28%, year on year.
Pretty respectable.
Everything else being equal, my passive income in 3Q 2022 should not see much of a difference, year on year.
However, I am expecting a decline in passive income in 3Q 2022 due to the fact that there was a pretty significant one off final distribution from Accordia Golf Trust in 3Q 2021.
Of course, Accordia Golf Trust is no more.
Higher dividends from some investments in my portfolio should be able to cushion the expected decline in 3Q 2022 but I am hazarding a guess that they most probably would not be enough to cancel the decline.
Still, at this stage, I am making a forecast that full year passive income this year should come in higher than the year before, barring unexpected negatives.
On hindsight, I was too active as an investor for income in 2Q 2022 and just thinking about it makes me tired.
I should go back to being lazy for the rest of the year.
On a more serious note, I know that many people are worried but if we have been investing, say, for even just a decade so far, we know that Mr. Market always has mood swings.
As long as we eat crusty bread with ink slowly, we don't really have to worry.
If you are a new reader, read this blog and all the blogs I have hyperlinked within:
I have used some of the funds raised to increase my investment in OCBC even as Mr. Market sinks into depression, making it my largest investment in the local banking sector.
I have also increased my investment in Capitaland China Trust and Frasers Logistics Trust so that they join the list of largest investments in my portfolio.
The current list of largest investments in my portfolio looks like this:
$500,000 or more: CPF
In a bear market, especially a fierce or prolonged one, having a meaningful amount of CPF savings for those of us fortunate enough to be CPF members gives peace of mind.
The CPF is not only risk free and volatility free, it pays fairly good coupons too.
Long time readers of my blog might remember one year when I said my CPF savings outperformed the stock market.
I increased my investment in Wilmar, averaging up in the process, as it seems to fall out of favor with Mr. Market once again.
The last time I increased my investment in Wilmar was in August last year at a similar price level.
Back then, I said I was pretty happy to add to my investment at a price much lower than what Mr. Kuok paid in June in the same year.
Now, I feel the same way, especially when Wilmar has been doing share buybacks constantly even at much higher prices.
Wilmar has been undervalued for a long time and it is still deeply undervalued today.
The case for investing in Wilmar is even more compelling today especially if we believe that heightened inflation is here to stay for a longer time.
If we believe that there is going to be stagflation, then, companies like Wilmar will likely be the ones which do better as they provide essential goods and services.
If you are interested in my little ideas on Wilmar, I will provide links to my past blogs on Wilmar at the end of this blog because I am too lazy to rehash.
However, here are a couple points which I might or might not have mentioned before, off the top of my head:
1. Wilmar's subsidiary in China, Yihai Kerry Arawana Holdings (YKA) in China has a market cap that is about three times that of Wilmar's market cap in Singapore and Wilmar still holds a 90% stake in YKA.
2. Wilmar's 50% joint venture in India, Adani Wilmar Limited, has achieved similar success in its public listing as its market valuation has tripled since listing in February this year.
Wilmar is a profitable business and is reliable when it comes to paying dividends.
Wilmar paid meaningful dividends even during the COVID-19 pandemic bear market.
Wilmar can easily unlock value for shareholders by reducing its stakes in the abovementioned businesses alone.
Undervalued can remain undervalued for a long time, of course, which makes Wilmar a decent choice for investors who are pretty happy to be paid while waiting.
Investing in Wilmar today or at even lower prices, if we are lucky, is to get big chunks of good income producing businesses for free.
Whether it be stocks or socks, we like buying when they are marked down but what about having some pretty cool stuff thrown in for free with our purchase?
Centurion Corp. is now one of my smaller investments because I went on to trim my position further as its share price rose in recent days.
My investment in Centurion Corp. was no longer one that gave me peace of mind and, hence, the decision.
I am just being consistent as I said before that if I keep thinking about an investment and not in a good way which means I am worried, then, I am probably over invested.
I am feeling pretty good now with a smaller investment in Centurion Corp.
My investment thesis of so many years ago is now being brutally challenged.
In a rising interest rate environment, it makes sense to me that highly leveraged entities will find it more challenging to bring home the bacon but if they could increase their income while controlling other costs, it is not too bad.
However, if they have regulatory issues which could impact their income negatively to deal with, then, the picture becomes hazy and I feel that this might be the case with Centurion Corp.
I invested in Centurion Corp. primarily for income but with interest rate going higher and, more importantly, regulatory issues regarding PBWA capacity, it is less certain that the dividends which I expect from the investment are going to be sustainable or even forthcoming.
Already, the number of beds are reduced in certain assets and we could see the same thing happening in other assets in the not too distant future which would also require additional CAPEX when Centurion Corp. is already lacking a strong balance sheet.
As an investor for income, if I could get a dividend yield of 4.5% or so by investing in the local banks which should also enjoy a strong tailwind from rising interest rate, the case for investing in Centurion Corp. for income weakens considerably.
Investing in Centurion Corp. for income now only becomes a superior strategy if it can pull off a Saizen REIT and long time readers of my blog would know what I am talking about.
Saizen REIT was trading at a big discount to NAV too but the REIT was also consistent in distributing meaningful income while Centurion suspended dividends for two years and could do so again.
Saizen REIT was also selling their buildings at a considerable premium to their valuations which confirmed that the REIT was truly undervalued.
Centurion Corp. could unlock value by selling some of their assets just at valuation and that would unlock lots of value since its common stock is trading at such a huge discount to its NAV per share.
As interest rate rises, cap rates should expand and that is when we could see asset valuations declining.
Still, with such a big discount to NAV and if the valuations are credible, value could be unlocked for shareholders through a partial sale of assets even at a slight discount to valuations.
If this were to happen, then, I would have made a mistake by significantly reducing my exposure to Centurion Corp.
This is why I retain a smaller investment in Centurion Corp. so that I would suffer a weaker form of seller's remorse in such an instance.
Well, I am only human and can only do what I feel is right for me.
I got into Chinese tech in the middle of April this year.
I had no interest in Chinese tech for the longest time because I thought they were trading at crazy high prices.
There is also the fact that I am an ignoramus when it comes to tech stocks.
Sigh, the truth hurts.
Anyway, I forced myself to finally take an interest in the middle of April as the rapid and drastic multi months decline in Chinese tech stock prices made them looked like stuff which value investors might be interested in.
I was also fortunate because I could easily get exposure to Chinese tech stocks through an ETF listed in Singapore.
Fortunate because if I had to buy in the Hong Kong or U.S. stock exchanges, I probably wouldn't have bothered.
Sabana REIT was trading at a huge discount to NAV when I increased my investment significantly at the end of 2020 and the start of 2021.
Today, it is still trading at a 13.5% discount to NAV.
If we think a 3.1 cent DPU is sustainable, then, at 45c a unit, we are looking at a distribution yield of 6.89% which isn't too bad.
It isn't too bad because we could see DPU increasing in the not too distant future as Sabana REIT's portfolio is under rented.
Of course, there is a possibility that the portfolio could remain under rented.
However, I have a feeling that things are more likely to improve.
I like to see what insiders are doing and I find it very interesting that Donald Han, Sabana REIT's CEO, bought 100,000 units at 45c a unit in late April.
Being under rented means that Sabana REIT does not have to depend too heavily on acquisitions to grow its income.
From their presentation dated 21 May 2022, this could give income a boost:
AEIs and maxing out plot ratios will be very helpful too:
Sabana REIT's financials are relatively strong and this is important as peace of mind is priceless.
It is very fortunate that Sabana REIT did not fall prey to the low ball offer by ESR REIT.
A gem in the rough that is still in the process of being polished, I hope that Sabana REIT will shine brighter in my portfolio.
Of course, whether Mr. Market agrees or not is something else.
If Mr. Market agrees, then, we should see Sabana REIT trading closer to its NAV of 52 cents per unit in time to come.
My bowling ball that thinks it is a crystal ball says a unit price of 48 cents or even 49 cents would not be unreasonable.
The information shared in this blog is taken from Sabana REIT's latest presentation dated 21 May 2022.
I don't usually like paying a premium to NAV when it comes to REITs.
However, when I first invested in Frasers Logistics Trust in 2017, I paid a premium of around 6% to its NAV then, if I remember correctly.
At that time, I decided that it was a price I was willing to pay for geographical diversification and also to have greater exposure to freehold assets.
So, increasing exposure last week to Frasers Logistics Trust when it was trading very close to or at its NAV was more palatable.
I will keep a lookout for a chance to add to my investment in Frasers Logistics Trust at under $1.20 a unit.
That means roughly a 10% decline in unit price from here.
Technically, it is a definite possibility as the momentum oscillators are not encouraging.
Fundamentally, if risk free rate continues to go up, we could see unit prices of REITs like Frasers Logistics Trust declining as investors might demand from them a high distribution yield.
Although buying at a discount to NAV would make me quite happy, I remind myself that NAV could decline as we could see cap rate expansion taking place if risk free rate continues to go up.
Don't throw in everything including the kitchen sink because peace of mind is priceless.
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