If AK can grow money trees, so can you!

Not too long ago, I revealed that I bought a money tree and a few other plants for my planter at home. I have spent some time re-potting them and I want to show them off:

The money tree is the tallest plant in the pot.

Re-potting the cacti was more daunting a task.

I hope I didn't damage their roots or something in the process. It would be totally inauspicious if the money tree should die on me.

What else do I do from time to time on weekends other than growing a money tree?

Well, I enjoy picking fruits from another money tree which I have been growing for many years. 

Another money tree? It must be quite big to be bearing fruits, you might think.

Surprisingly, I don't need a pot or soil for this money tree. I just need a calculator, a pen and some paper. Got you!

Yes, it involves real money this time.

I am quite happy to spend some quality time with my money tree and my "money tree".

Like what you see? You can do it too. Believe it.

-------
Update (3 January 2016)

How is my money tree doing?

Not too bad. :)

Related posts:
1. Grow some plants that bring wealth?
2. Create Dividend Machines. (Interview with AK.)

Have fun as the whole family improve on financial literacy!

Some people get invited to be beta testers for really cool online games like Diablo III but AK was invited to be a beta tester for a board game! Yes, a board game! Just nice for low tech AK. Roll dice, move a counter, get money, buy stocks, buy properties etc. Sounds like something that would appeal to AK, right? Exactly!

AK also provided feedback on how the game could be improved and when he was invited to play the game again, the kinks were ironed out. The game in AK's opinion is good enough for him to put a little testimonial on the box. In case you are wondering, no, AK was not paid to do all these. Then why did AK do it? I did it because I thought it was fun.

However, the fact that I was the only beta tester not in his 20s was not fun. Old brain in its mid 40s had to try to keep up with much younger brains. Not easy. Oh, I wasn't the winner in the game. ASSI's resident guest blogger, Matthew Seah, won. Brilliant fellow (and really good dice throws too).

Anyway, what is this game?

Fine looking game and proudly Made in Singapore!

This is taken from the official media release by its creators:

ASSET FINESSE™ (AF) is for anyone who hopes to gain a deeper understanding of Singapore’s economy and endeavors to learn more about the world of finance in a fun and interactive manner.

Singapore has adopted unique policies, enabling her to thrive even as a country with limiting circumstances. Through the AF board game, players will be introduced to common Assets in Singapore and the various characteristics of each Asset. Assets under the AF boardgame include Stocks, Bonds, CPF, Properties, Unit Trusts, Insurance and Businesses.

This game also seeks to equip players with investment pointers that can potentially prevent him or her from falling prey to investment scams and find out what constitute illegal practices in Singapore. 

Players can learn basic accounting treatments and will grasp the importance of insurance when making sound financial decisions. In addition, the game will simulate market behaviours and various financial calamities. This serves to shape the mental model of players before they attempt to deal with real-life challenges that arise from the unpredictable nature of economic cycles.

The main objective is for the player to be financially free by accumulating a level of net assets, while fulfilling certain conditions. Ultimately, it aims to evoke a desire in participants to attain financial freedom.

Recommended for ages 13 and up, this could definitely be a fun family game. Remember I said something about making financial freedom a family affair before? This could be a fun way to get everyone in the right frame of mind.

The game usually retails at $118 per set. You can get this cheaper if you use the discount code "AK71". How much cheaper? You get a 10% discount. Aiyoh, so little? I also say.

Want more discount? Easy, scan a student card and email your order to:

onestop@diverselearning.com.sg

If you do this, you will get a 30% discount! Student card more powerful than AK's face.

What is in it for AK? Every set that is sold, he gets an OCK curry puff. Really, I am telling the truth. Don't believe me, when ordering the game, ask the vendor.

Anyway, for those who are more cautious and unwilling to jump into a purchase right away, you might want to try out the game by joining a competition and you might win Apple products and I don't mean those growing on trees. Oh, you know har?

Date: Saturday, 21^stMarch 2015

Time: 0930 to 2000 hrs

Venue: Great Eastern Centre for Excellence, Raffles Place

Registration Fee: $10 per participant

They will also provide a mass training session. So, everyone will be on a level playing field.

A mass training session will also be conducted for all participants one week prior to the actual event day. The details are as follow:

Date: Saturday, 14th March 2015

Time: 0900 to 1200 hrs (Secondary School Category)

          1400 to 1700 hrs (Tertiary/Open Category)

Sign up now by clicking on the link below:

http://goo.gl/forms/11Y2VlllER​

Registration deadline: 12 March 2015, 2359 hrs.

For more updates and details, visit 

https://www.facebook.com/joinNCF​ 
or 
http://ntu-iic.org/ncf/​.

Hope you have fun. I know I did.

Oh, I hope you win that Macbook Air too!

Related post:
Financial freedom is a family affair.

Listen to AK and create your own Dividend Machines.

By now, some of you would have heard an interview I gave quite recently on the topic of Income Investing. I didn't share the interview in my blog earlier because I thought I didn't do such a good job, on hindsight, and I kind of let slip my thoughts on my FB wall.

Well, for many of us, it is very often like this, isn't it? "Aiyoh, I could have done better."

So, who requested for an interview? They are my friends from The Fifth Person and those of you who attended InvestX Congress middle of last year might remember them. I also mention them every so often in my blog. They are good people who are bent on providing quality education at very reasonable prices.

The interview I gave ties in with the latest program by The Fifth Person on Income Investing and, just now, they asked if I would like to be an affiliate to promote the program?

I am too lazy to conduct a course on investing for income and here is a low cost option for anyone who might be interested to learn and need some guidance. So, why not? Of course, I would be happy to promote their program.

So, if you are interested in more structured learning about Income Investing, you might want to consider what is being offered by The Fifth Person. See if you agree with me that it is value for money. I think you will be pleasantly surprised because I was. 

Note: Don't spoil the surprise by scrolling quickly all the way to the bottom of the page after clicking on the link provided below. I think some of you will do it anyway. So, never mind lah. You happy can already.

Dividend Machines by The Fifth Person

Do the right things and the right things will have a higher chance of happening for you!

Remember, if AK can do it, so can you!

Are you thinking of selling or buying a condominium?

I received two emails from readers, one about selling a condominium and one about buying a condominium. Put them together and it could generate some interesting thoughts. Have a read and maybe you will have a comment to share with us.

Hi AK,

I have been following your blog for about a year now, really enjoy reading all your posts, be it on financial related topics or simply what you had for dinner! I'm glad that you blog quite frequently so there are new posts most of the time. :)

This is my first time writing to you,  sparked off by your latest post on a reader's question on 99 year lh vs freehold properties. I have had this same question at the back of my head for some time now but never really bothered to do much about it. In my case, I own a 99 yr lease hold property ( a 2+1 BR condo) which i'm currently living in. As i bought this property sometime back, the current prices are still higher than my purchase price. However, I have been wondering if there is a need to sell this place to buy a freehold property to live in and when would it be the right time to do this? My property TOP in 2010 so it has been 5 years, i suppose its not considered old at this point. Though my preference is to stay at this current place for its location (not near mrt, just relatively convenient for me to get to work), avoid the hassle which comes with shifting, as well as the high property prices, my worry is not being able to sell the place easily in another 5 years time. Should i be looking to sell this place before it gets too old?

What would your advice be for me?

Thanks,

K

AK says:

Hi K,

Welcome to my blog. :)

If you like your home and have never thought of monetising it, then, just stay put. For me, I am never emotionally attached to where I stay. So, it is relatively easy for me to let go. ;)

You place received its TOP in 2010 but you have to remember that its 99 years lease started its countdown from the date the land was acquired by the developer, not from the date the project received its TOP. So, if it took 3 to 4 years to construct, almost 10 years of the lease are gone.

If look at your home just as another asset which you think could make money for you and I think it might be the case since you worry about not being able to sell it easily a few years later, then, I think you might want to start marketing your condo now. Oversupply situation is going to get much worse. I am sure you know.

Having said this, make sure you have somewhere to move to after selling your condo. In my case, I still had my rooms in my parents' place. If you have to rent a place, then, it might not make a lot of sense.

Best wishes,
AK

Hi AK,

I know your position regarding property as an investment, having followed your posts these 2-3 years.

One recurring thought but have had trouble articulating is this: the current soft property market is really largely a result of government intervention. If the ABSD and TDSR were not in place, what would your guess be for the property market today?

I would think that those crazy heady days of people lining up at showrooms (and also, people asking people to queue there) would continue. Which then leads me to think that we would really be in (big) bubble territory. Now, with upcoming oversupply of flats and condos, and a rising SIBOR, it would really make sense to hold out and probably buy an apartment in 2015/2016.

I'm single, 35, and currently living with my folks. At this time, my inclination is buying a HDB resale flat. I'm not sure if it's still worth it to buy a condo and wait for capital appreciation.

Care to share your thoughts with me please?

Cheers,

M

AK says:

Hi M,

If not for the cooling measures the government put in place, I am very sure that prices of real estate in Singapore would have shot through the roof, pardon the pun. However, to be fair, prices have come down due to the ramp up in supply of both public and private housing too.

I am inclined to believe that prices will decline much more before stabilising and it will be many years before prices start moving up again. When will prices bottom? Although we estimated quite accurately when prices would start declining, it is much harder to say when they might bottom.

Something which we might be able to use as a gauge is the ABSD. The day the government removes the ABSD, then, it could be a signal that prices have bottomed. Just an idea. ;)

Best wishes,
AK

Related posts:
1. When to buy (and sell) a private residential property?
2. Disastrous investments in the property market.

Frasers Centrepoint's Perpetual Bonds.

A reader sent me a note in FB today, asking me what I thought of this:

FRASERS Centrepoint on Monday is selling Singapore dollar perpetual bonds, the first perpetual deal in 2015. A term sheet seen said that the SGD subordinated Perp NC 5 has an initial price guidance in the low 5 per cent. NC 5 means that the perpetual bonds will not be recalled before year 5.

Source: The Business Times.

Well, I would generally avoid long term bonds especially since I believe that interest rates are more likely to go up than not from here on. With perpetual bonds, there isn't any maturity date. So, they are more long term than long term bonds. There isn't a date when the bond matures and when the principal is returned to the bond holder. Having a maturity date when the principal is returned to the bond holder is a feature that makes bonds safer.

Reader:
What do you think about this, as compared to CPF minimum sum?

So, can we compare this with the CPF which locks up some of our money for a very long time? The expected coupon of 5% is similar to what is being paid on our funds in the CPF-SA, isn't it?

Well, it isn't an apple with apple comparison, actually. One is a bond backed by a business entity while the other has a built in annuity and is backed by a AAA rated sovereign bond. Definitely, they are quite different animals.

As always, whether something is good or not depends on where we stand. Generally, I think this is a good thing for Frasers Centrepoint's shareholders as the company diversify their sources of funding and a 5% coupon might appear quite cheap several years from now (and they only have to keep paying the coupon and not worry about paying the principal).

However, for the bond holders, they could find themselves holding the shorter end of the stick and it could become more apparent as time goes by.

Related posts:
1. Perpetual bonds: Good or bad?
2. Nobody cares more about our money than we do.
3. Bonds, REITs and the instant gratification of yield.

Yongnam: A bad 2014. Could 2015 be better?

When I first invested in Yongnam, it was beginning to reward shareholders by paying dividends and being the biggest outside of Japan in what they do, I decided that they probably had a competitive advantage over smaller players.

Consistent with Yongnam's new direction to invest in infrastructural projects that would generate recurring income, together with two partners, it submitted a tender for the construction and operation of an international airport in Myanmar. I rather liked this new direction.

However, when Yongnam's share price was driven up on speculation that their consortium would clinch the project in Myanmar, I divested most of my investment in the company. Price had gone up not because of some fundamental improvements. It went up based on speculative pressure. As it turned out, Yongnam et. al. was unsuccessful in clinching the project that time.

Subsequently, Yongnam suffered setbacks in its business and its stock price tumbled. I added to my reduced long position when my initial purchase price was hit. Basically, by then, my long position in Yongnam was funded by capital gains from trading its stock as well as the dividends paid by the company.

I was willing to stay invested because I felt that the setbacks were project based and should be temporary. The weaker results were not due to some destructive force which was more enduring in nature. Given time, things should improve again, I thought.

Well, instead of the improvement in results I was expecting, a bigger loss was announced months later. In a blog post in August last year, I said I would not be adding to my investment as Yongnam's attractiveness as an investment for income and growth was undermined. The stock was trading at 22c a share back then and it didn't look like it would be able to pay a dividend. As expected, no dividend was announced in its full year results.

At that time, I said that I would like to see Yongnam's order book improving and if it did not, I might have to trim my exposure. Businesses like Yongnam's need to constantly replenish their order books. As long as Yongnam has new orders, it will have earnings visibility if nothing goes wrong.

In its latest results, Yongnam announced that, as of end December 2014, its order book stood at $405 million. This is an improvement over end December 2013 which saw order book at $340 million. The improvement is a relief for shareholders.

Although Yongnam with its two partners secured the mega project in Myanmar, this still remains a wild card for now. We might remember how Yongnam's stock price rallied briefly when the announcement was made a few months ago. The rally sputtered and the stock price resumed its slide downwards.

This is probably because it remains to be seen what are the details and terms of the public-private partnership agreement with a 30 year concession for the international airport project in Myanmar. In Yongnam's recent full year statement, it is stated that discussion is still underway.

Naturally, the project will require funding and will take time to complete. The Myanmar government will get a US$700 million low interest rate loan from the Japanese government while the consortium will secure about US$520 million in loans from private lenders as well as use internal resources in the construction of the airport. The airport will take about 4 years to complete construction. This project is likely to make material contributions to Yongnam's performance once it gets off the ground.

So, taking everything into consideration plus the fact that I am already holding on to a much reduced long position in Yongnam compared to the time when I was invested in it for income and growth, I decided to increase my long position in Yongnam today after its stock took a beating and price tested an important support level I identified.

Buying in at 16.1c per share represents a 32% discount to Yongnam's NAV and it also marks my first purchase of its stock in quite a while.

Yongnam had a terrible 2014 but could 2015 and beyond be better?

See financial statement: here.

Related posts:
1. Yongnam: Investing in infrastructural development.
2. Portfolio review: Unexpectedly eventful.
3. Managing exposure in AK's investment portfolio.

Chats with readers on Japan, bonds, properties, GFC etc.

AK is an accredited kay poh and spends quite a bit of time chit chatting with readers online. When I shared with a couple of fellow bloggers and also some friends that I spend at least 3 to 4 hours online answering questions everyday even if I am not blogging, they were amazed!

Here are some recent chats:

Sent to me by Paul who is vacationing in Japan:

Paul: U come japan so often, they name a burger after u?

LOL!

Then, G thought of buying some bonds:

B had some questions on investing in real estate in Singapore:

E discovered that AK is quite good at side stepping questions:

W had questions about war chests and allocation:

P asked about averaging up or averaging down on our purchases:

I forgot to mention that I kept adding to my investment in Hock Lian Seng over the years when I thought Mr. Market offered me more attractive prices at different times.

I enjoyed all the chats. I hope you did too. ;p

Related post:
An evening with AK and friends: Photos.

Hock Lian Seng: Testing 39.5c resistance.

The last time I blogged about Hock Lian Seng was in December last year. Since then, the stock has seen its price rising almost relentlessly. Drawing some Fibo lines shows that share price is now probably testing the resistance at 39.5c. It is a golden ratio and probably quite a strong resistance.

I have readers asking me if they should sell their investment in Hock Lian Seng in the last month or so. I said it is really up to them.

I am not ready to sell because I invested in Hock Lian Seng for income and even at 36c a share, a 1.8c dividend per share (DPS) would still mean a 5% dividend yield and that is based on a 40% pay out ratio. Still a pretty good income generator. So, even at 36c, it wasn't a price I would sell at.

Just now, I was alerted by a reader that Hock Lian Seng is declaring a 4c DPS and although I thought a bumper dividend possible before, it is still a pleasant surprise. This means a dividend yield of as much as 16.67% based on my lowest entry price in October 2011.

Over the years, Hock Lian Seng has been a very rewarding income investment for me and the higher DPS declared today is the icing on the cake.

What about the future?

Hock Lian Seng has been winning projects and their order book is now worth about $457 million. Even without new order wins which I think is unlikely, they will be kept busy for many years. This is in line with my initial investment thesis that Hock Lian Seng is a natural beneficiary of our country's escalating investment in infrastructure projects till the year 2030.

Hock Lian Seng has another industrial development property project which will obtain TOP probably in the next month or so. This will mean recognising more net proceeds as the project is almost 90% sold. An interim dividend, perhaps? Well, we can always hope although given the conservative nature of Hock Lian Seng's management, I doubt that it would happen.

Now, let us look at the burr in Hock Lian Seng's side, the Skywoods. Although the Skywoods condominium is less than half sold, I have written a pretty detailed piece before on how Hock Lian Seng's business is much more than just Skywoods. This residential development project, a joint venture, is expected to obtain its TOP sometime in 2016.

Recent transactions for Skywoods.

I would have been quite contented to stay invested in an income generating business that Mr. Market wasn't paying much attention to as I would have liked to build a bigger long position at lower prices. With the attention that Hock Lian Seng is now getting, I feel that its stock is no longer undervalued but, taking everything into consideration, it isn't expensive either.

See financial statement: here.

Related post:
Hock Lian Seng: Robust order book.

NeraTel: Still a good investment for income?

NeraTel has been a rewarding investment for me. In their latest results presentation, I like their renewed focus on generating recurring income. It appeals to the income investor in me.

On top of their current strategy to grow recurring revenue from lease of POS terminals, they plan to build and lease in building mobile coverage network in Indonesia to strengthen recurring revenue. We should see their efforts bearing fruit in the following years.

In terms of performance, profit after tax fell rather dramatically by about 30%, year on year, but if we were to remove a one off contribution from negative goodwill which bumped up profit in the preceding year, then, the reduction is a more modest 1.2%. So, it would be quite fair to say that NeraTel's results were flat, year on year.

NeraTel has declared a final dividend of 2c per share. Full year DPS is, therefore, 4c. EPS for the full year was 4.48c. So, the payout ratio is about 90%.

At 76c a share, we are looking at a PE ratio of almost 17x. With a DPS of 4c which is undemanding, we have a dividend yield of 5.26%. About a year ago, NeraTel's stock was priced lower at about 71c to 73c a share. Given that profits after tax in FY13 and FY14 are similar (stripping out gains from negative goodwill in FY13), I don't think it is cheaper now to buy into NeraTel compared to 12 months ago.

NeraTel's balance sheet is relatively strong with very little long term borrowings. They do have a debt facility which they can draw upon to grow their business and they have indicated that they might be doing this soon with regards to their plan to build and lease in building mobile coverage network in Indonesia.

So, what am I going to do?

I will stay invested as I feel that a 4c DPS is sustainable. For me to add to my long position, however, Mr. Market would have to offer me a much lower price, all else remaining equal.


See:
1. Financial Statements FY2014.
2. Slides Presentation.


Related posts:
1. NeraTel: Added to my long position.
2. NeraTel: How high could its share price go?

What would I do if I had $750,000 to start investing?

By now, I have almost 2,500 blog posts here in ASSI and most of them are about personal finance and investments although not all of them are related to investing in stocks.

Sometimes, I worry if I am sending the right messages to readers and I am actually quite happy, even grateful, when readers write to me to clarify their doubts. I try to do a good job in communication but there will be times I can do better.

I received a letter recently from a reader which sent alarm bells ringing in my head:

Dear AK

Thank you very much for sharing your knowledge because i am learning a lot from it.

I am considering investing Saizen Reit which yield 7-8% p.a. If i do my mathematics right, i will need 750'000 to yield $5000 per month to support our family household expenses.

Correct me if i am wrong.

If i have $750'000 cash to invest into Saizen Reit, wouldnt it be better investing the money elsewhere. My question is would you invest $750'000 all into Saizen Reit to give you passive income $5000 per month.

Please forgive my ignorance.

Regards
B

My reply:


Hi B,

Welcome to my blog. :)

You will have to understand a couple of things:

1. Investing in a REIT is not like locking money in a fixed deposit. So, you shouldn't be looking at yield and yield only. It is more than that.

2. Putting all your money in a single investment to have the income it generates cover all your household expenses exposes you to concentration risks.

If I had $750,000 to start investing with, I wouldn't put all of it into Saizen REIT or any one single investment. I wouldn't be fully invested either.

Without knowing more, I cannot say what I would do in your shoes but although my own investment in Saizen REIT is a significant part of my investment portfolio, it is not my entire portfolio.

Best wishes,
AK


If you have anything to share, please do so by leaving a comment below. Thank you.

Note: As usual, please, do not advertise your products and services in the comments section.

Related posts:
1. How to have peace of mind investing?
2. Income investing and position sizing.
3. Saizen REIT: Is the DPU sustainable?

Universal Studios Singapore and a lesson in investment.

I spent a whole day in Universal Studios Singapore with my family today. It was my first time there and I was pretty impressed.

We went in at about 10am and left at 8.20pm after watching the fireworks. We got our money's worth, I guess.

One thing we did quite a bit of was waiting for our turns to get on the rides. One particular ride made us wait for more than an hour for our turn. It was the Transformers ride. After the ride, I told my mom that it was worth the wait. I think it was even better than the Jurassic Park ride which we got on after a pretty short wait in the morning.

I told myself that some things are worth waiting for. We just need patience.

Now, some people tell me that they feel silly holding on to cash waiting for a crash. Some people tell me that the opportunity cost is too high to maintain a war chest.

I won't tell them that they have to maintain a war chest. I mean the choice is theirs to make, isn't it? However, I would ask them if they are very sure that the stock market would not experience a crash.

If they think that it is only a matter of time that we see a bad crash, then, what is wrong with having a war chest ready? The opportunity cost of not having a war chest ready could be really high then. Don't you agree?

My souvnenir from Universal Studios Singapore!
I hope you don't get too freaked out by my hairy legs. -.-"

When people ask me how I manage to do so well in the stock market, I usually tell them that most of my big winners were purchased during severe market downturns. I could do this because I had a war chest or two ready.

During the GFC, my war chests were filled to the brim. Friends were amazed as I pushed out war chest after war chest to buy battered down dividend paying counters then.

"If you took our top 15% decisions out, we'd have a pretty average record. It wasn't hyperactivity but a hell of a lot of patience. You stuck to your principles, and when opportunities came along, you pounced on them with vigour." Charlie Munger.

So, be 100% invested now or have a war chest ready? The decision is yours, of course.

"Patience is sometimes the hardest part ..."
Source: Little Book of Value Investing.

Related posts:
1. If we want peace, be prepared for war.
2. Get paid more while waiting for war.
3. Revisiting AK's simple strategy.

If you think I broke the law, why not call the police?

Have you ever been told that you are not allowed to take photos of the facade of a condominium? Well, it happened to me last evening.

I ate too much and decided to go for a walk to work off some calories in the evening. I walked past a condominium with a nice water feature at the entrance. I took out my phone to take a photo of the water feature and suddenly felt a strong beam of white light in my eyes.

Then, I heard someone shouting but I couldn't make out the words. I looked around and saw a fat, Indian lady wearing a security guard uniform in the guard house which was set probably about 20 meters from the entrance. She was shouting something at me and waving a strong light in my direction.

I cupped one of my ears and said loudly, "I can't hear you!"

She walked out of the guard house and came closer. I had the presence of mind not to walk towards her. I wouldn't want to be accused of trespassing on private property, after all. I remained standing on the public pavement. When she was closer to me, she spoke in an authoritative voice, "No photo taking of condo allowed!"

That gave me a shock largely because it was such an outlandish demand. I have never been stopped by anyone from taking photos of a building's facade in Singapore before. Anyway, I recovered quickly and asked her where was the sign to say photo taking was prohibited? She said there was no sign but she was telling me that I was not allowed to take photos.

I told her that the demand was unreasonable and that it would never stand in a court of law. If I felt like it, I could take as many photos as I liked. I was standing on public land taking photo of the condo's facade. I did not trespass on private property.

Then, she warned me that the condo CCTV was recording the encounter. That got to me and I told her that she could call the police, if she felt like it, since she obviously thought I did something wrong. I think she got a surprise when I said that. She challenged me to call the police instead, turned around and walked away.

怪事每年有, 今年特别多!

As I was walking away, I wondered what kind of MCST would issue such an order since I supposed the guards were following instructions? Maybe, I should call my realtor and arrange for a viewing of some of the units which have been put up for sale or rental. A quick check online revealed quite a few units available.

Would the guards stop me from taking photos of the grounds, the facade or even the guardhouse then? I wonder.

Related post:
Can't think of any... -.-"

For good food or car washes, Singaporeans love to queue!

I don't like wasting time in long queues. Someone could tell me that a restaurant served great food and that I should try but I would give it a miss if I were to see a long queue of people waiting to get a table. Wait 30 minutes to an hour to get a table? Mental!

I was in the lift and a couple was talking:

H: The queue was so long. At least 10 cars in front of me. Queue till the road outside.

W: So many cars?

H: Yah. Chinese New Year's eve. Every year is like that. I waited almost 50 minutes to have the car washed.

W: How much?

H: $8.  (Seeing AK in the lift. H smiled and asked.) You got your car washed?

AK: Yes, I washed it myself. 

H: Wah! You have the time to do it?

AK: Haha... Took me 30 minutes. The shampoo and sponge cost me $6.50. Good for at least 20 washes. Way cheaper than going to a car wash too...

I think I said too much. The husband's smile faded but luckily the lift reached their floor and they got off then. I hope I did not step on someone's foot.

Actually, I see rather long queues at car washes all the time. It is not just during festive seasons.

Wait 30 minutes to an hour to pay people to do something that I could easily do? Definitely mental!

GONG XI FA CAI (to the people washing cars too)!

Related posts:
1. Laugh with AK!
2. AK polishes his car!
3. If we are not rich, don't act rich.

Laugh with AK and have a happy Chinese New Year!

As promised, here are some photos taken in the evening of 13 February 2015 (Friday):

I think the flu bug this year is especially virulent!
Remember your mask. Don't leave home without it!
Hey, who is the other fellow seated next to Sean? O_o

AK demonstrating Chinese Kung Fu from Foshan.
What? You don't recognise the famous dragon claw?
Not the left hand. The right hand! -.-"

Group photo with Sean, Ivan, Leong, Paul et. al.
I think everyone had fun that evening.
Gong Xi Fa Cai! :)

福星高照!

AK wishes all readers a very happy and prosperous Chinese New Year! Huat ah!

Lucky number: 8854.

Related post:
Eat bread with ink slowly.

What is the right price to buy into Sabana REIT?

Last Friday, when I met up with some friends, I compared Sabana REIT with AIMS AMP Capital Industrial REIT to exemplify what I thought are some of the characteristics of a REIT whose management's interests are more aligned with minority shareholders'.

I also made the comment that although I substantially reduced my investment in Sabana REIT starting in late 2013, there could be a time to invest in Sabana REIT again. This is because all investments are good at the right price.

I know that many are looking at Sabana REIT and thinking of buying because its unit price has fallen by quite a bit in the last one year and more. I know because many asked me, one way or another, if I am adding to my much reduced long position.

I didn't give much information but I generally said that I was not interested as I thought that the REIT's management was mediocre in ability and self-serving in motivation.

I know that there are some investors in S-REITs who use NAV as a main consideration to decide if an investment is undervalued. Trading at a 12% to 13% discount to its NAV of $1.04 per unit, Sabana REIT would look undervalued to them. 

Well, unless we can reasonably expect the REIT to divest a few properties at valuation or maybe a slight premium (dare I hope?) to valuation, it is more important to consider the REIT's distribution yield now and in the future if we are satisfied that the REIT is going to stay financially healthy.

Well, financially, Sabana REIT looks healthy enough. Gearing is at 38% with 88% of borrowings having fixed interest rates. Interest cover ratio at 4.1x is passable. They have also been active in refinancing their loans ahead of their maturities. All in cost of financing is at 4.1%.

So, what is the distribution yield? With Sabana REIT, it won't be too wrong to annualise the last quarter's DPU of 1.78c as the decline in DPU is not due to any transient reason. This means that, without any improvement in occupancy or positive rental reversions, all else remaining equal, we can expect a DPU of 7.12c in 2015. Buying at 91c a unit would give a distribution yield of some 7.82%. Is this good enough for me? I don't think so.

Hey, current occupancy is only a bit more than 90%. So, there is a lot of room for improvement, isn't there? Well, this was what the management said when they bought a half vacant building from AMD in Chai Chee many moons ago. 

I have not seen any significant improvement in occupancy since then. There is a lot more supply in the market now and asking rents are probably softening. Stiffer competition? Yes, you said it.

Since the prospects of improving occupancy are rather dim, what about retaining the REITs current tenants? We have seen how the REIT had been unable to renew all their expiring master leases in the past. Now, in 2015 this year, the REIT has a total of 11 expiring Master Leases! Take a moment and let this sink in.

What happens if the REIT is unable to renew these master leases or if they are unable to secure new takers? The properties would be converted into multi-tenanted buildings. What does this mean for shareholders? Occupancy would take a hit. Income would take a hit. Management fee would increase. Translation? DPU would probably decline.

In their presentation in January 2015, the management said:

With approximately 10 months to go before the expiry of the 11 master leases, the Manager is working towards renewing or securing new master leases for 7 of them. The remaining 4 properties will likely be converted into multi-tenanted buildings.

Source: FY2014 Presentation.

I try not to be overly optimistic or pessimistic. I try to be pragmatic.

The pragmatist in me says that it is OK to hold on to my remaining investment which I bought at a pretty low price (and are, for a while now, free of cost) during the Fiscal Cliff debacle in the USA a few years ago but to buy now at 91c a unit, it just isn't the same and in more ways than one too.

Related posts:
1. How to have peace of mind as an investor?
2. Overpaid for our investments in business trusts?
3. Sabana REIT: Weaknesses and uncertainties.