Tea with AK71: A day at MBLM.

What is MBLM? It stands for Marina Bay Link Mall. This is the underground mall at MBFC, the development which K-REIT and Suntec REIT would co-own with each having a 33% stake.

I was wondering where should I spend my vacation which starts today and I decided to stay in Singapore instead of going overseas. I would spend time going places here and help to stimulate the local economy. Singapore's domestic economy has been said to be tiny. So, I am doing my patriotic duty by spending my vacation money here instead of going away to a foreign land. Ahem.

So? I like the mall. Shops on both sides, it has a wide centre aisle with high ceiling. It is defnitely less claustrophobic compared to the Citylink Mall (which I somewhat dislike). In time, with the completion of the Downtown Line for the MRT, I am sure MBLM would be just as busy as Citylink Mall but the generous space allowance should be enough to cope with increased human traffic. MBLM also serves the residents of The Sail and Marina Bay Residences condominiums. In fact, half the shoppers at MBLM I saw today were foreigners, probably expatriates, with kids.

Go visit MBLM before it becomes crowded. Now till end of the year, spend $80 at MBLM and we will get $15 shopping voucher plus 4 hours of parking for free. There is also an instant lucky dip to win iPads and iPhones but that's for weekends only and I was so hoping to win an iPad. :(

So, I got my $15 voucher, free parking, wrapping paper for Christmas and 2 lucky draw chances. Hope that I would win 1st prize which is for $8,000 worth of shopping vouchers! Then, I would go to the Apple retailer in the mall and get my iPad, Macbook Air etc. Wah.... Day dreaming. Nice!

Anyway, with 4 hours of free parking, I had time to burn as MBLM is smallish with a floor plan shaped like the letter "L" and not many shops were ready for business. I walked to Marina Bay Sands (MBS) to explore the shopping mall.  It was my second time at MBS which has a much bigger shopping mall.  This time round, more shops were open and I didn't have to pay an exorbitant $10 per hour for parking my car! That makes me happy.

Apparently, MBS is now giving free parking for the first 3 hours but one would have to spend $200 at the mall to qualify. I won't qualify. Free parking at MBS costs more than MBLM, if you know what I mean. MBS is for the well heeled, obviously. I like MBLM more which might say something about me. ;)

These are some photos I took with my free Samsung mobile phone which comes with a 5.0 megapixel camera built in. Pretty good shots, aren't they? I still remember when digital cameras were 1.3 megapixel in resolution.

After spending almost 4 hours at Marina Bay, fully utilising my free parking privilege, I went back to Tiong Baru and had a bowl of freshly made bean curd (dou hua) for 60c. Where to find? Tiong Baru Market lor.

Now back in my bedroom, with the air-conditioning set at 25 deg celcius and blogging. Time for a nap! I am a happy man. :)

An email from another reader in his early 20s.

This email just came in this morning and is part of a string of email exchanges. It was a happy coincidence seeing how I just put up a blog post earlier regarding another email which I received from a reader in his early 20s too:

Hey AK, anyways i would like to take this opportunity to thank you for ur efforts to keep the blog updated. appreciate the time and i feel your posts are very enriching. Im only 21 this year :) been speculating in shares with my sibling's account.

Most of my friends are spending alot, sometimes i dont feel that im in the same league as them, im thinking stocks, investments, property and most of them are clubbing.. haha..

By the way, what do you do for a living?

Do you think 2011 will have as many investment opportunities than 2010?

My reply to the last question which I would like to share with all my readers was:

There will always be investment opportunities. Will there be more or less? I don't know but I think that is not important. Why? If there are more, could we take advantage of all of them? If I could identify a couple of opportunities and make money of those, it should be enough for me.

A letter from a reader in his early 20s.

I received an email from a reader in his early-20s.  I was very pleased to read it as this is one of the things my blog hopes to do and that is to be a positive influence in the lives of ordinary people, encouraging them to save and invest for a more secure financial future. I am sharing the email here and I hope it would encourage younger readers to plan early and be financially prudent:

:) Read your posts, about financial planning. I realised that in recent months, i have pay for focus on the need to grow my money, even though it may be just 3000/year. I used to spend a lot, sales mean must buy. Now, i focus only on spending for trips to get the experience, and less shopping. Other than that, i did not spend much, and even find reckless spending, and credit buying quite disgusting.
travel means saving on accomodation through hostel or couchsurfing.

Aiming to save 50% of my salary, ex-CPF. 2600 salary, save 1k/month, 500 monthly expenses, 300 to parents, and 200 for whatever bills/medical expenses.

i think the current generations, not a lot of people focus on saving.... with my friends spending on branded stuff. haiz.

AIMS AMP Capital Industrial REIT and Singapore's 5.8% growth in October exports.

Singapore's economy is humming along nicely.  Manufacturing is doing well.

Strong Singapore exports signal inflation - StanChart 
Tuesday, 16 November 2010

© 2010 - The Edge Singapore

A REIT which I like very much is an industrial properties S-REIT, AIMS AMP Capital Industrial REIT.  With the economy chugging along and exports doing well, this REIT is likely to benefit.

At 10.43AM, there was a single transaction buying up 8,652 lots at 22.5c. That's big money.  At the end of the day, 19,221 lots changed hands making AIMS AMP Capital Industrial REIT the top volume REIT today. 15,090 lots were BUY UPs of which 752 lots were BUY UPs at 23c which is the upper limit of the current trading range and the resistance to watch.

My immediate target for this counter is 26c. How did I arrive at this value? Fundamentally, this would mean a yield of 8% with an annualised DPU of 2.08c for 2011. This, I feel, is fair for a smallish REIT with leasehold industrial real estate in Singapore. Technically, 26c would be the upper limit of the next trading band of 23c to 26c, if we believe that the current trading band is 20c to 23c which has been the case since the counter's CR days.

"Singapore's non-oil domestic exports (NODX) surged a better-than-expected 34.5 per cent from a year earlier, in line with a rebound in shipments out of Asia in October."  Read article here.

First REIT: Bought more at 95c.

Last Friday, I mentioned that "I have been waiting the whole day for someone to sell me some First REIT units at 95c but to no avail. Some people are puzzled why am I so interested in getting some at 95c when I am already vested at 40+c and 70+c. Well, with the proposed acquisitions and rights issue, buying more even at 96c could be quite rewarding. With an average price of 70c, post rights, if we were able to buy at 95c now, a yield of 9.1% is not impossible with an estimated full year DPU of 6.4c in 2011. As the XR date is 1 Dec which is almost 3 weeks away, I will continue to wait patiently at 95c. Wish me luck."

To all my readers who wished me luck, thanks! My overnight buy queue at 95c was filled. Now, I will wait to buy at a lower price if there are people who are willing to sell cheaper to me. This is quite possible since the XD date is 1 Dec.  Many things can happen within these two weeks.  When I mentioned this, someone said that he does not think it is probable since the counter is offering deeply discounted rights. I replied that there might be people who cannot afford to pay for the rights and might choose to lock in their capital gains now by selling the units they have. Never say never.

Technically, the doji formed when First REIT's price touched a high of 99c on 9 Nov was a warning of a possible reversal. It also formed lower highs on the MACD, the MFI and the RSI on that day.  This has painted a picture of negative divergence between price and all the momentum oscillators. OBV confirmed the bearish picture as it plunged, suggesting massive distribution.

So, I have suggested that I would be buying more if people are willing to sell to me cheaper. At what price would I buy more of? Using Fibo lines, I see 138.2% at 93.5c and 161.8% at 92.5c.  Assuming that I buy more at 92.5c, I would have an average price of 92.5c x 4 + 50c x 5 /9 =68.9c and a yield of 9.29% with an estimated annualised DPU of 6.4c in 2011.

92.5c, I am waiting.  Once more, wish me luck. ;-)

Related post:
Saizen REIT, First REIT, Golden Agriculture and Genting SP.

Saizen REIT: Insider buying and divestment.

Saizen REIT's co-CEO and director, Mr. Chang Sean Pey, bought 200 lots at 16c per unit on 12 Nov, last Friday. Continual insider buying is what we have come to expect for this deeply undervalued REIT.

Today, Saizen REIT announced the divestment of another property in YK Shintoku's portfolio: Reef Suite. This is for a cash consideration of JPY 123,184,249 (S$1.9 million), a discount of 6.7% to valuation. This property is located in Sapporo, was built in September 2005 and comprises 18 residential units and 15 parking lots. As of 30 June, this property had an occupancy rate of 84% and brought in JPY 13.2m in rental revenue (gross yield of 10.7% at the selling price). After this divestment, the net outstanding loan of YK Shintoku amounts to approximately JPY 4.9 billion (S$76.7 million).

Read announcement here.

The general picture of increased buying interest in Saizen REIT continued today. 16c is still the battle zone between bulls and bears. 16c remains a significant resistance to overcome as that is where we find the flat 200dMA approximating.

With most of the sell queue at 16c bought up, we just need to see a moderately high volume up day to take out the relatively shorter sell queue at 16.5c. I have an immediate target of 19c in case this happens but, before that, expect rather stiff resistance at 18c, the high in January 2010.

Related post:
Saizen REIT: 1Q FY2011 results.

China Hongxing: Testing support.

The last time I blogged about China Hongxing was on 26 Oct. I concluded by saying "The 100dMA has just completed a golden cross with the 200dMA at 16c.  This is likely to be strong support level and would be ideal as an entry to go long on this counter. In the meantime, 17c is immediate support and could be a nice hedge in case price does not test support at 16c." Since then, the rising 100dMA has moved up further and is now providing support at 16.5c which was where price closed today after having touched an intra day low of 16c.

The lowering in price has been accompanied by a lowering in volume. Looking carefully at the MFI and RSI, it seems as if they are forming higher lows of late. A low volume pull back underway? Looking at the OBV, there is no heavy distribution. The overall picture shows that China Hongxing's price might have found a floor. It is hard to say that it has bottomed since the MACD is still declining below the signal line in negative territory.

If 16.5c fails to hold up as immediate support, the next support is at 15.5c as provided by the 200dMA.

Related post:
China Hongxing: Correction.

Courage Marine: 3Q 2010 results.

A good set of  numbers for 3Q 2010:

1. Revenue improved 54% from the same period last year from US$ 5.506m to US$8.474m.

2. For the 9M 2010, the company turned in a total gross profit of US$9.964m compared to a loss of US$3.245m for 9M 2009. If we remember, it was 4Q 2009 which saved the company, allowing it to have a small net profit for the full year.

3. EPS for 9M 2010 is at US0.85c compared to a loss of US0.27c in the same period last year. EPS for the full year would probably be more than US1c.

It would have to take a very bad 4Q 2010 to destroy whatever the company has achieved in positive numbers thus far in 2010.

A reader asked if there would be a sell down tomorrow. Although I do not see any reason why there should be a sell down, the carnage in the SSE last week could affect the STI and Courage Marine's price. After all, a large portion of the company's business is Chinese. The sell down would be due to negative sentiments, however, and not because the company's fundamentals have taken a turn for the worse. In case of a sell down, I would accumulate. Why?

Courage Marine's management has a track record for sharing the the fruits of its labour with shareholders. Last year, despite ending the year with a small net profit of only US$75,000, it declared a dividend of US0.47c per share due to its strong cash position. Net profit for 9M 2010 is already US$ 9.012 m! Even if 4Q 2010 does not turn in any profit which I believe is unlikely, net profit this year is already 120x higher than the whole of 2009!

Dividend payout for 2010 could be quite a bit higher than 2009.

See results here.

Related posts:
Courage Marine: Riding the waves of recovery.
Courage Marine: Steady as she goes.

You might be richer than you think. (How rich is rich?)

Someone asked me how to be rich? 

I asked him what did he mean by rich? 

That got him thinking. 

Is a person rich if he has $1m in cash? 

Is a person rich if he has $1m in cash and a property worth $1m at the same time? 

Or is a person rich if he has a net worth of $5m? 

What am I trying to say? 

To me, rich is a relative concept.






If we keep comparing ourselves with the next richest person, it can never end. 

Of course, if we became the richest man in the world, then, there is no one left to compare with but how many Bill Gates can there be? 

Stop comparing with others.




I think the most important measure of wealth in this world has to be "happiness"!  

Yes, I remember how I shared a moment with my younger sister about how our family was not doing very well when we were in our teens. 

She said "But we were happy."  

That was a simple statement but a very poignant one. 

What is the point of having lots of money but be unhappy?






Having said this, we should not be so blind as to think that we can be happy without money in this modern world as money problems could surface sooner than later. 

So, we still need to make money, to save money and to make our money work harder for us. 

This is so that we do not have to worry about money matters in future. 




The idea is to have enough passive income to take care of our daily needs and some wants.

Of course, what each person needs is different. 

So, how much passive income is required is also different from person to person. 






Just do not forget that being happy is more important than the pursuit of money. 

If we can be happy every day of our lives, we are truly rich.

If your life is a happy one, you are richer than you think.

If AK says so, it must be so!






Related post:
Passive income: A higher purpose.

Healthway Medical: 3Q 2010 results.

Healthway Medical's results came in rather weak, as expected:

1.  Revenue declined 6.2% in Q3 compared to the same period last year.  For the first 9 months, revenue declined 8.3% compared to the same period last year.

2. Staff cost increased 19.2% in Q3 compared to the same period last year.

3. Profit before income tax decreased 87.3% to $568k in Q3 compared to the same period last year.

4. Cash flow from operations is negative for the quarter at -$1.278m.

5. EPS for the quarter is 0.01c, remaining the same as the last quarter but down from 0.29c in the same quarter last year.

See results here.

We are still in the tunnel but do we see a tiny glow at the end of the tunnel?

A. Although revenue declined 6.2% compared to the same period last year, this is a smaller decline compared to Q2's decline of 12.3%. 

B. Staff cost increase of 19.2% is also smaller than Q2's 22.9%. 

C. Profit before income tax in Q2 was only $165k. So, Q3's $568k is an improvement. 

D. Cash flow from operations in Q2 was a negative $2.3m compared to a smaller negative $1.278m in Q3. 

Perhaps, points C and D are the most important indicators that things could be stabilising. However, it is still too early to say for sure.

Having said this, the proposed diversification could throw a spanner in the works. One could only hope that Healthway Medical is not biting off more than it could chew.

On 25 Oct, I suggested that Healthway Medical's share price could have found a floor at 15c. I also mentioned that any rebound would be a good chance for stale bulls to reduce exposure. 17c was never hit as the rebound in price went as high as 16.5c before declining again.

The last session saw Healthway Medical closing at 15.5c. With the MACD, MFI and RSI all in their respective downtrends, a retest of the support at 15c is rather likely. Consolation? Volume has been declining in the last few sessions. So, we could have a soft landing.

Related posts:
Healthway Medical: Second quarter results.
Healthway Medical: Business diversification.
Healthway Medical: A floor at 15c?

Rickmers Maritime: DPU in Q3 down 5%.

Mainboard-listed Rickmers Maritime said the dip is because of lower charter revenue from containership Kaethe C. Rickmers, as well as an increase in interest costs.

Read article here. 


Rickmers Maritime Trust says it will distribute 0.57 US cents (0.74 cents) per unit to unitholders for the third quarter and nine months ended 30 September 2010 (3Q2010), the same DPU as in 2Q2010.

The declared distribution, representing a payout of 13% of income available for distribution, will be paid to unitholders on 15 December 2010.

Rickmers Maritime Trust to distribute 3Q DPU of 0.57 US cents
Friday, 12 November 2010

© 2010 - The Edge Singapore

CapitaMalls Asia: Uptrend broken.

Connecting the lows of 7 May and 25 Aug gives us the uptrend support line of CapitaMalls Asia.  This support was retested on 8 Nov.  Price bounced off and went higher for a couple of days only to decline again. In the last session, the counter traded the whole day below this support line. The uptrend is broken.

The 20dMA, after completing a dead cross with the 50dMA, seems set to form another dead cross with the flat 100dMA.  The longer term 200dMA is still descending.

The MACD has formed a lower high in negative territory as it turned down away from the signal line.  Momentum is negative. MFI and RSI have both formed lower highs, suggesting a lack of demand and buying momentum. The OBV suggests continual distribution. All technicals confirm that the downward trajectory in price has some strength.

In the event of a continuing downward movement in price, stronger supports are at $2.04 and $2.00 thereabouts. Immediate resistance at $2.12.

Saizen REIT, First REIT, Golden Agriculture and Genting SP.

Markets in Asia seemed to have taken the lead from the dismal performance of Wall Street and the STI was no exception as it retreated 1.3%.

STI drops 1.3% to 3,252 at closing
Friday, 12 November 2010

© 2010 - The Edge Singapore

So, is this the beginning of the end? I actually find it re-assuring that such a question was making its rounds amongst local investors. It shows that the memory of the last crash is still fresh in the minds of many. Many are actually holding cash and waiting for the next big crash before moving in to cherry pick beaten down stocks.

The market could be perverse and the more we expect something to happen, the more unlikely it becomes. So, people waiting by the sides with chestfuls of cash could be disappointed.

Indeed, there is massive amount of liquidity in the market if the amazing over-subscriptions of GLP and MIT were anything to go by. Money is going where it is treated best. It is not going to be treated best in US Treasuries, for sure. The investments to be in are Asian assets. Asian countries with strong economies and currencies are the ideal investment destinations.

So, unless we have evidence to the contrary, I would say: Do not fear the selldown!  What are we to do then?  Invest in Asian equities (and inflation is here to stay)!

Personally, my portfolio which is primarily investing for income hardly budged in today's selldown. No roller coaster ride for my weak heart. Just dividend collection on a regular basis for me.

With regards to Saizen REIT, a reader sent me an email asking: "Was it your article in your blog that attracts sudden interest in this stock?  The volume is more than ordinary. I wonder." I doubt that my blog has such influence.  Anyway, there were some sessions in the past in which volume was much higher but the interesting thing about today was the number of trades with large buy ups at 16c. There was a total of 14 transactions with a total of 5,419 lots changing hands, of which 12 transactions were at 16c and 5,204 lots were bought up at 16c. 2 transactions were for 1,000 lots each and 1 transaction was for 2,000 lots. Has Saizen REIT caught the attention of some heavy weight investors? Your guess is as good as mine.
See my last blog post on Saizen REIT here.

I have been waiting the whole day for someone to sell me some First REIT units at 95c but to no avail. Some people are puzzled why am I so interested in getting some at 95c when I am already vested at 40+c and 70+c. Well, with the proposed acquisitions and rights issue, buying more even at 96c could be quite rewarding. With an average price of 70c, post rights, if we were able to buy at 95c now, a yield of 9.1% is not impossible with an estimated full year DPU of 6.4c in 2011. As the XR date is 1 Dec which is almost 3 weeks away, I will continue to wait patiently at 95c. Wish me luck.
Read announcement from First REIT here.
Read my last blog post on First REIT here.

Golden Agriculture suffered a downgrade by OCBC and broke its immediate support at 75c, closing at 73c. Just yesterday, I mentioned that "Although Golden Agriculture reported commendable results today with a 41% year on year increase in net profit to US$99 million (S$127 million) for the third quarter ending 30 Sep (3Q2010), the attempt by price to go higher was half hearted as it touched a high of 78.5c before closing at 76c. The very long upper wick on this short bodied white candle hints of strong selling pressure. Volume is relatively low and the negative divergence between price and volume is still all too visible." We could see 70c support tested sooner than later.
Read my last blog post on Golden Agriculture here.

Golden Agri cut to Hold by OCBC; Limited upside
Friday, 12 November 2010

© 2010 - The Edge Singapore

The counter on my watchlist that suffered the greatest decline in percentage terms is Genting SP, declining 15c or 6.6% to close at $2.13 after touching a low of $2.07. The question on the minds of anxious investors is whether it would go lower?

The price gapped down to start the day at $2.10 but formed a white spinning top after testing the 50dMA at $2.07 which was the low of the day. A spinning top suggests indecision which is a good thing for bulls on a day with massive selling pressure. If the price starts at $2.18 or higher in the next session and manages to break resistance at $2.21 which is the 50% Fibo line as well as the 20dMA, we could have a recovery. Having said this, the MACD has been moving lower as price moved higher, presenting an obvious picture of negative divergence. I would treat any rebound as a chance to reduce exposure.

Genting Singapore slumps as earnings ‘disappoint’.

Genting yesterday posted third-quarter net income of $187.8 million, compared with $396.5 million in the previous three months and a net loss of $93.3 million a year earlier.

Friday, 12 November 2010

© 2010 - The Edge Singapore

Sabana REIT: Shariah compliant.

We have another IPO coming up and it is a Shariah compliant REIT: Sabana REIT.

The REIT will sell about 605.8 million units at $1.00-$1.10 each with a distribution yield of 8.45% for 2011 and 8.48% for 2012 based on the minimum offer price.

Singapore’s Sabana REIT to raise at least $605.8m in IPO. Sabana controls 15 industrial properties in Singapore with an aggregate floor area of about 3.3 million square feet.
Tuesday, 09 November 2010

© 2010 - The Edge Singapore

What does it mean to be Shariah compliant?

Shariah prohibits the payment or acceptance of interest fees for loans of money, for specific terms, as well as investing in businesses that provide goods or services considered contrary to its principle. Source: Wikipedia.

So, we can imagine that businesses which deal in alcohol and pork would not be allowed as tenants, for examples. It would be interesting to see how this REIT performs in time. Something different to enrich the REIT landscape in Singapore.

Golden Agriculture: Negative divergence.

On 8 Nov, I mentioned that "Even though a very long white candle formed today to close at the day's high of 78c, it is worth noting that volume was not as high as 13 Oct. The picture of negative divergence between volume and price is still present. Price moved higher today due to a lack of sellers and not an abundance of buyers. It would take a very brave person to load up to go long at this stage."

Although Golden Agriculture reported commendable results today with a 41% year on year increase in net profit to US$99 million (S$127 million) for the third quarter ending 30 Sep (3Q2010), the attempt by price to go higher was half hearted as it touched a high of 78.5c before closing at 76c. The very long upper wick on this short bodied white candle hints of strong selling pressure. Volume is relatively low and the negative divergence between price and volume is still all too visible.

Immediate support is at 75c and if this breaks, we could see 70c tested. This could well happen as both MFI and RSI are bordering on overbought and could retreat to retest their respective trendline supports. Buying on pullbacks is still the prudent thing to do.

Golden Agri-Resources sees 41% rise in 3Q net profit to $127m. Golden Agri-Resources says demand for palm oil, which is predominantly used for food purposes, is expected to be well-supported into the medium to long term by the growing consumption of edible oils and fats particularly by the growing middle class in highly-populated developing countries such as China, India and Pakistan.
Thursday, 11 November 2010

© 2010 - The Edge Singapore

Kim Eng cautions against palm-oil over-exuberance. “Ultimately, supply shortfalls mean that there is less inventory of CPO for these companies to sell. CPO price increases would simply be offsetting this, and likely revenue-neutral.”
Thursday, 11 November 2010

© 2010 - The Edge Singapore

Related post:
Golden Agriculture: Breaking resistance.

Saizen REIT: 1Q FY2011 results.

Saizen REIT's 1Q FY2011 results did not disappoint. Here are the important points:

1. Gross revenue improved quarter on quarter from S$15,536,000 to S$16,274,000 or a gain of 4.75%.  This is largely due to a strengthening JPY against the S$.

2. Net property income (NPI) improved quarter on quarter from S$10,205,000 to S$11,389,000 or a gain of 11.6%! This is due largely to a reduction in property operating expenses.

3. Taking away fees and expenses shows net income from operations improved quarter on quarter from S$4,998,000 to S$6,012,000 or a gain of 20.29%!

What I find most bracing about the report is on page 6 which details the distributable income from operations for 1Q FY2011.  Distributable income for the period is JPY 204,943,000.  This amount could have been 50% higher if not for the amortising nature of Saizen REIT's loans. JPY113,397,000 was used for loan amortisation.

Loan amortisation will reduce funds used in interest payment for the REIT, going forward. This would translate to more funds available for distribution to unitholders in future, everything else remaining constant. There was also a one-off expense of JPY14,976,000 which was incurred due to the refinancing of GK Choan's loan. This is non-recurring. We could, therefore, expect the distributable income for 2Q FY2011 and subsequent quarters to be higher.

Everything else remaining constant, I estimate the distributable income for 2Q FY2011 to be JPY 220,000,000 or 7.4% higher than 1Q FY2011. Total distributable income for 1H FY2011 is, therefore, estimated to be JPY 424,943,000. Number of units in issue now at 1,111,003,000.  DPU estimated at JPY 0.38. Based on the rate of S$1 = JPY63.3, it means a DPU of 0.6c in March 2011.

Update on YK Shintoku loan

To-date, YK Shintoku has divested a total of 16 properties (5 properties in FY2010, 5 properties in 1Q FY2011 and 6 properties in October and November 2010) as part a deleveraging plan implemented to reduce the absolute amount of the loan of YK Shintoku and the leverage of the corresponding property portfolio, so as to facilitate refinancing efforts.

The loan of YK Shintoku has been reduced from JPY 7.1 billion (S$111.6 million1) as at 30 June 2010 to about JPY 5.6 billion (S$88.1 million) as at the date hereof. Taking into account applicable cash reserves of JPY 0.6 billion (S$9.4 million) maintained by YK Shintoku under the loan agreement, the net outstanding loan of YK Shintoku amounts to approximately JPY 5.0 billion (S$78.6 million). Several divestments of YK Shintoku’s properties are expected in the coming months to reduce the loan amount further.


The amount of S$14.9 million, or approximately JPY 0.9 billion, of warrant proceeds received as at 9 November 2010, have yet to be deployed. Saizen REIT has 328,082,705 warrants which are outstanding and could potentially result in S$29.5 million, or approximately JPY 1.9 billion, of further warrant proceeds being raised1. These warrant proceeds may be applied towards the refinancing of the loan of YK Shintoku (if such refinancing is possible). Saizen REIT also has an aggregate of approximately JPY 12.0 billion (S$188.7 million) of unencumbered properties which can be used as collateral for new loans.

Update on next distribution

Property operations are expected to remain stable, generating steady cash flow to enable Saizen REIT to continue paying out semi-annual distributions. The next distribution payment is expected to take place in March 2011 in respect of distributable cash accumulated in the six months financial period ending 31 December 2010.

Results announcement here.

Related post:
Saizen REIT: AGM on 19 Oct 10.

First REIT: Rights issue.

For a while now, there has been expectation of First REIT doing some acquisitions and in the process would have the need to raise funds. First REIT's management announced on 9 Nov 10 a 5 for 4 rights issue at 50c per unit.

The Mochtar Riady Comprehensive Cancer Centre (“MRCCC”) is being acquired from Wincatch Limited, an unrelated third party, for S$170.5 million, and Siloam Hospitals Lippo Cikarang (“SHLC”) is being acquired from the sponsor of First REIT, PT Lippo Karawaci Tbk, for S$35.0 million.Read announcement here.

Including fees and expenses, MRCCC would cost S$174.6m while SHLC would cost S$35.9m.  Total acquisition cost: S$210.5m. The rights issue would raise gross proceeds of $178.2m. First REIT would take a 4 year term loan facility of S$50m from OCBC to make up the balance.

The rights issue would more than double the number of units in issue to 624,104,000 units. So, although the NAV increases to S$474,200,000, post rights, NAV per unit would decline from 98c to 76c. Gearing level is largely unchanged and remains low as much of the funds required for the acquisitions is obtained through equity and not debt.

Of greater interest to unitholders is the distributable income which would increase 84% post acquisitions from S$20,964,000 to S$38,542,000. The annualised DPU would, however, reduce from 7.62c to 6.18c due to the larger number of units in issue. So, is this rights issue a good deal for existing unitholders? To answer this question, look to distribution yield.

The theoretical ex-rights price (TERP) is calculated to be 70c based on a CR price of 95c.  At 95c, the yield, with an annualised DPU of 7.62c is 8.02%.  At the TERP of 70c and an expected annualised DPU of 6.18c, XR, the yield is 8.83%. So, this acquisition is distribution yield accretive and is good for current unitholders.

Unitholders have the option to sell their nil-paid rights when trading starts if they do not wish to pay for them. Based on the exercise price of 50c and the TERP of 70c, we could see the selling of the nil-paid rights at 20c or so. This could be viewed as a return of capital.

Assuming that a unitholder has 4 lots in First REIT and is entitled 5 lots of rights. By selling the nil-paid rights at 20c per unit, he would get $1,000. This is the difference between the CR price of 95c and the TERP of 70c (i.e. 25c x 4,000). There is no capital gain per se. However, the distribution yield on his existing investment will actually improve from 8.02% to 8.83% without him having to cough up more funds. So, am I saying that we should sell the rights? Well, if we do not have enough funds to pay for the rights, this is not a bad idea.

Personally, I would pay for the rights. This is because the distribution yield would improve 10% from 8.02% to 8.83% with the acquisitions and rights issue. So, the additional funds I am putting in would enjoy a most attractive yield.

Furthermore, from the recent experience with the rights issue of AIMS AMP Capital Industrial REIT in which the TERP was 21c, the XR unit price ended higher and it is currently trading at 22.5c. So, with First REIT, we could see the XR price higher than the TERP of 70c. How much higher? Based on the assumption that units should trade closer to 8.02% yield, the CR yield at 95c, we could see First REIT's unit price going 10% higher to 77c, XR. Accepting and paying for the rights could, therefore, lead to capital gains.

Good luck to fellow unitholders.

See slides here.

Related post:
First REIT: This one is for keeps.

Saizen REIT: Divestment of Jewel Town Suehiro.

Saizen REIT divested another property, Jewel Town Suehiro, which is located in Hakodate. It was built in August 1991 and comprises 30 residential units and 8 car park lots.

The property was sold to an independent private investor for a cash consideration of JPY 146,042,400 (S$2.3 million).  This was at a 2.1% premium to the property's valuation of JPY 143m. Selling at a premium to valuation is good news and supports the argument that there is strengthening demand for Japanese real estate.

Referring to the annual report, as of 30 June 2010, Jewel Town Suehiro was 100% occupied and brought in a total annual rental income of JPY19,327,440. This means a gross yield of 13.2%. A good deal for the buyer.

Following loan repayment from sale proceeds of the Current Divestment, the remaining balance of the YK Shintoku Loan is estimated to be approximately JPY 5.6 billion (S$88.6 million).

Taking into account applicable cash reserves of JPY 0.6 billion (S$9.5 million) maintained by YK Shintoku under the loan agreement, the net outstanding loan of YK Shintoku amounts to approximately JPY 5.0 billion (S$79.1 million). 

Read report here.

Is this the return of the bull market?

On 3 Nov, when I blogged about Macquarie's SiMSCI warrants, a reader, AT, mentioned that "Macquarie runs regular warrant workshops at the SGX, I found the speakers honest and knowledgeable." Seminars are taking place again on 22 and 23 Nov:

Date: 22 Nov 10 (Monday)
Partner: DBS
Location: SGX Auditorium, Level 2, Shenton Way.

Date: 23 Nov 10 (Tuesday)
Partner: Philips Securities
Location: NTUC Auditorium, 1 Marina Boulevard.

Time: 6.30pm to 8.00pm

Light refreshments would be available after each session.

Macquarie's Equity Strategist, Mr. Mark Matthews, will give his view on the market outlook for Singapore and the region in this special presentation. There will also be a short presentation on Singapore warrants.

Admission is FREE. Sign up now as seats are limited.  Register at http://warrants.com.sg/en/home_e.cgi

Related post:
The best way to trade the Singapore Index: SiMSCI warrants.

Advertorial.

Golden Agriculture: Breaking resistance.

CPO hit a 27 month high and this has pushed the prices of CPO counters higher on expectations that they would report better than expected results.  Golden Agriculture is the most levered to CPO prices and could be the biggest beneficiary of higher CPO prices.

On 5 Nov, I mentioned that "On 4 Nov, the following session, this counter traded the whole day at 70c or higher. Closing at 70c seems to have confirmed it as the new support." and that "With improving CPO price now a reality, it seems less risky loading up on CPO counters and that is precisely what market participants have done. Loading up on a pullback would be the prudent thing to do, however."

I still think that loading up on a pullback is more prudent but the rising wedge pattern has failed and price has pushed higher. 70c support is confirmed and should be something to watch out for in case of a pullback in price.

Golden Agriculture will be reporting its results on 11 Nov. If results disappoint, we could see the 70c support tested.  If results are better than expected, we might see its share price go even higher.

Even though a very long white candle formed today to close at the day's high of 78c, it is worth noting that volume was not as high as 13 Oct. The picture of negative divergence between volume and price is still present. Price moved higher today due to a lack of sellers and not an abundance of buyers. It would take a very brave person to load up to go long at this stage.

Saizen REIT: AK71 responds to a forum.

This is almost all of my very long comment in Wealth Buch in response to certain things said in a forum on Saizen REIT:

I have talked about the Japanese debt situation and how this has no impact on Saizen REIT before:

Japan's debt issue and Saizen REIT

As for the S$/JPY exchange rate and how the strong JPY is likely to weaken in time, we have to remember that exchange rate is bilateral in nature. The JPY could also weaken if the S$ strengthens.

MAS is allowing the S$ to strengthen in order to contain inflationary pressures. Will it allow the S$ to strengthen much more? If it does, would it not impact our exporters negatively? MAS is likely to be very cautious.

The residential real estate which Saizen REIT is vested in is below replacement cost. This means that no one in his right mind would construct new buildings. The supply side has stalled. The demand for inexpensive accommodation is strong and I have a blog post on this recently.

Asterisk Realty: Advisory for Japanese real estate

Saizen REIT owns freehold properties. Income distribution is therefore perpetual, ceteris paribus.

As for rental rates lowering 4% in Saizen REIT's latest tenancy renewals, how much of its total tenancy were so affected? Would such a trend continue?

The assumption that rental rates would continue to lower in Japan is just an assumption and is something waved around by people who think that Japan is going to the Land of the Dodos.

Jim Rogers is long JPY and believes that it will remain strong.  Marc Faber believes that people are so bearish on Japan and have written it off that it is a strong contrarian play. The JPY is still viewed as a safe haven.

In recent months, China's purchase of JGBs caused the Japanese government some concerns. The Chinese recognise the safety of JGBs compared to US Treasuries and have been diversifying away from the latter. As long as there remains a strong demand for the JPY for various reasons, the JPY is likely to stay strong. It's simple economics of supply and demand.

The recent revival of interest in Japanese real estate because of the sector's amazing yield is likely to increase demand for the JPY too. People who want to invest in Japanese real estate must pay in JPY.

It is not wrong to say that the high yield is normal for real estate in Japan but such high yield is not normal for real estate in some other countries, countries in which investors would like to get better returns for their money.

Related posts:

Saizen REIT: AGM on 19 Oct 10.
Japanese real estate: Has it bottomed?

REITs lower portfolio risk.

Apart from the attractive combination of income and capital return, REITs also offer diversification advantages. Real estate securities have a low correlation to general equities. This creates significant benefits when it comes to improving the efficiency of investors’ portfolios. It means the increasing of potential returns while at the same time lowering the level of risk, which is the underlying aim of every investor.

Unlike other sectors like tech or commodities, there is also a low correlation between the real estate markets across different countries. While global stock and bond markets tend to move together, real estate is basically determined by local factors and what affects the real estate market in one country will not necessarily affect the markets in other countries.

What is likely to have an impact on all REITs is the interest rate environment. As bond yields rise, the relative attractiveness of REITs tends to fall. This is because many investors, especially institutional ones, value REITs by comparing them with long term interest rates.


Source: UOB Asset Management.

Related post:
High yielding REITs.
Increasing demand for S-REITs.

REITs, depreciation and FFO.

The REIT business model is simple. REITs own real estate and they collect rent. For an investor to determine the investment potential of a REIT, one factor he would need to consider is earnings.

Asset value diminishes over time. Real estate is however a special class of assets because land and buildings are not like machines. Their values do not necessarily decline over time but tend to rise or fall depending on market conditions even if they are leasehold properties.

The concept of 'Funds From Operations' (FFO) gets around this problem. FFO excludes historical depreciation costs from net income. FFO has become the industry standard for measuring a REIT's operating performance.

Source: UOB Asset Management.

FFO is calculated by adding depreciation and amortization expenses to earnings, and sometimes quoted on a per share basis. The FFO-per-share ratio should be used in lieu of EPS when evaluating REITs and other similar investment trusts.

Source: Investopedia.

Related post:
Replies from AK71: REITs and their assets.

Asterisk Realty: Advisory for Japanese real estate.

This is a Japanese real estate brokerage that I came across. Its website provides views of the real estate market in Japan from within.  It is a perspective which I find bracing.  

From the beginning of fiscal year 2010 in April, we expect CMBS and lenders to offer some excellent properties one by one throughout the year. 

With more confident buyers, we may see a gradual rise in market level. In 2009, there were a couple of very attractive properties that were on sale at discount prices in order to take precaution against oncoming financial pressures, however many properties were unsold due to strict financing conditions during recession. 

This year, a number of these properties successfully underwent transactions as a result of optimism that the worst of the recession has passed. Economic recovery is imminent and the overall attitude towards buying seems to be becoming optimistic. 

Many non-Japanese Asian investors are taking initiative to acquire Japanese prime trophy properties. They are expected to have a significant future presence in the Japanese prime asset market. Japan real estate market generates strong demand from global buyers for its maturity, stability and one of a kind trophy assets in all of Asia.


Due to stable and high occupancy rate, residential is still the most popular investment sector for all investors relative to office, retail, and hotel markets


 We are recently seeing less opportunities of residential opportunities of 300 million to 1 billion JPY in Tokyo. Large size  residential properties (above JPY 3 billion) will be available one by one from loan lenders and merged REIT for downsizing debt. 

Middle class residential occupancy remains stable due to sustainable demands and some upper class residential occupancy start recovering due to an overall decrease in rent prices.


Related post:
Saizen REIT's properties: Would I buy?

Tea with AK71: A couple of thoughts.

Thought number 1:

Most of the time, I am so self absorbed that I do not think about socialising. Blogging has given me a means of socialising with many more people than I could ever imagine possible while remaining self absorbed. The internet is truly an amazing place. Virtual reality it might be but it is still a form of reality.

Thought number 2:

I spend a lot of my time thinking about things. I have always been a thinker. I remember those long bus rides between home and school and how I would spend time thinking about stuff. I was not a physically active kid. The ECAs I joined were rather bookish in nature: English LDDS, Chinese Society and the Library in secondary school; Drama Club and Chinese Society in JC.

I have always believed that the pen is mightier than the sword but perhaps I am just hiding my indolence.

Tea with AK71: Envious? Find our own way.

I recently had a conversation with a friend about how a friend of his keeps saying that he is envious of how rich my friend is and so on.

My friend keeps telling his friend that he is not rich and that he is using leverage to improve his cash flow.  My friend got fed up with his friend on one occasion and told him to stop whining and to do something about his life.

Make changes and be richer. 

This calls to mind a recent blog post of mine which asked "Do you want to be richer?"

Apparently, this person in question is in his early 30s and has a comfortable salary of $6K a month.  He is single, stays out and spends quite a bit of money having a good life.

So, to me, for him to become richer, he does not really have to work much harder to increase his income. He should work at reducing his expenses. He should think of planning for the next stages in his life.

For a person like him, if he is willing to listen, I would tell him that there are many roads to Rome and there are many roads to becoming richer. I have a couple of blog posts which were written with this in mind: "Roads to wealth creation in the stock market" and "Seven steps to creating passive income from the stock market".

For sure, there are many more ways to make money and my friend has found his own way to do so and that is to invest in real estate and renting them out for cash flow, taking advantage of the very low interest rate environment. It is something he does well and something he is comfortable with.

For me, a personal experience at a very young age of twelve when my family was on the verge of bankruptcy taught me that banks are fair weather friends and I try my best not to owe the banks large amounts of money if I can help it.

I do understand the need for leverage sometimes in order not to miss out on money making opportunities but I would try to repay my debts in the shortest time possible.

What am I saying? Everyone is different. Certain methods which are comfortable for some might not be so for others.

Finding the most comfortable path which would meet our goals in life is most probably a journey of self-discovery. Having reliable guides on this journey would be most helpful but decisions have to be made ourselves.

Ultimately, we have to find our own way.

NOL: Multi-month uptrend.

On 1 Nov, I suggested that "Taking in the Fibo lines, we could see 138.2%, which coincides with the high of 15 April, retested.  This is at $2.35. This, of course, is based on the assumption that the current bullish momentum follows through."

On 3 Nov, the counter hit a high of $2.32 before closing at $2.30. So, the closing price was just 5c shy of the 138.2% Fibo line. Volume expanded significantly, providing the fuel which created an impressive white candle. With the MACD rising strongly above the signal line in positive territory and the MFI yet to break into overbought territory, it looked as if it would retest resistance at $2.35.

On 4 Nov, price action formed a hangman (a black hammer at a peak) which suggested the presence of selling pressure. However, the relatively low volume suggested that the selling pressure was weak. Indeed the OBV confirms a lack of distribution. With MFI and RSI both in overbought territory, this counter could face some short term resistance in moving up further in price. A pullback to $2.16 would be a good price to accumulate if we believe in the multi-month uptrend.

NOL +5.0%; Fed, liquidity behind rally: DBS Vickers 
Wednesday, 03 November 2010

© 2010 - The Edge Singapore

Related post:
NOL: $2.21 and moving higher?

Japanese real estate: Has it bottomed?

Many asked me if I think the real estate prices in Japan has bottomed. After 20 years of decline, I believe it has.  Why am I so confident? Well, I do not have a PhD in Economics but I understand that price is a function of demand and supply.

The Japanese are fearful of buying any real estate because anyone who bought a piece of real estate in the country within the last 20 years would more likely than not have lost money and this could be as much as 50% of the original purchase price! If the person had taken a bank loan to buy that piece of real estate, including interest on the mortgage, the losses could be even higher.

Little wonder that 40% of the Japanese population rent the roofs over their heads.  Little wonder why Japanese residential real estate's rental rate declined little relative to the decline in real estate prices over the years.

OK, so the rental demand is strong and this means that rental rates would remain resilient but what about the prices of real estate in Japan? Well, the US$ is probably going lower in time. With QE2 (quantitative easing part 2) by Mr. Ben Bernanke, the fate of the US$ is sealed. Anyone who wants to get a better rate of return would be bonkers to put any money in US Treasuries.

So, what are investors to do? They want to invest in assets denominated in currencies which would gain against the US$. They want to invest in assets which would generate cash flow in currencies with relative strength against the US$. Many Asian countries offer opportunities to these ends.

The fact that Saizen REIT managed to sell quite a few of their properties in their YK Shintoku's portfolio is testament to the fact that buyers are back in the Japanese real estate market and they are looking for better returns on their investments. Money will go to where it is treated best.  Borrowing at very low interest rates and getting more than 10% yield in net property income from Japanese residential real estate is a mouth watering deal!

Even if the market has not bottomed in Japan, I believe it nearly has. This could be the next big story.

Related posts:
Saizen REIT's properties: Would I buy?
Japan's debt issue and Saizen REIT.
Invest in Asian equities and inflation is here to stay.
Buy Japanese real estate.

Tea with AK71: Advertlets, owe money, pay money!

One way we bloggers get some income from blogging is through the selling of ad space in our blogs. Advertlets is an online advertising agency based in Malaysia which I signed up with in the early days of my blog. All their ads were metered which means that the higher my blog's traffic, the more they pay.  No clicking on ads required. 

I lost my Glitterati status (aka exclusive status) with Nuffnang, another online advertising agency, by signing up with Advertlets, thinking that it made more sense. The earnings from Advertlets grew quickly and even though I could cash out at every RM100, I chose to wait.  In March this year, I decided to cash out after reading some negative comments regarding Advertlets and how they did not pay.  I waited the requisite 45 to 60 days and did not get any payment.  So, I sent them a ticket (an online enquiry) but did not get any reply, confirming my fears. 

Date          Username Amount   Status

Mar-16-10 AK71        159.42     Unpaid

Removing all ad space for Advertlets, I recovered my Glitterati status with Nuffnang shortly.  Since then, Nuffnang has given me a few metered ads which usually run for 4 days to a week on top of the usual pay per click ads.  Nuffnang also got me to do an advertorial for a financial seminar by an Australian bank a few months ago. I have yet to cash out because every time I cash out, I have to pay a small fee.  Hearing very good things about Nuffnang from fellow bloggers makes me confident that Nuffnang would pay when I choose to cash out. Not worried.

Why did I wait so long before blogging about my negative experience with Advertlets? Honestly, I didn't think of blogging about it. Just another bad experience in life was how I thought of it. However, while chatting in LP's cbox a couple of days ago, I learned that other finance bloggers also didn't get paid by Advertlets! So, I am taking up LP's suggestion to blog about it and tell the world! We should not let Advertlets off so easily! Grrr! 

I found this very creative artwork on WayangTimes.com, another victim of Advertlets

Really apt! Owe money! Pay money! O$P$! Ok, ok, I shall stop here.