NeraTel: 6 points to note.

An investor since the middle of 2012, I shared my reasons for increasing my investment in NeraTel by 10x in June 2013 and it is currently one of my most substantial investments in a non-REIT. This is an investment primarily for income but it also has a nice growth story.

Victor Chng from The Fifth Person attended NeraTel's AGM last month and he made the following observations:

1. NeraTel is a high dividend paying company.

2. NeraTel's payment solutions business is growing.

3. NeraTel is increasing its CAPEX.

4. NeraTel's payment solutions are easy to scale.

5. NeraTel's POS terminals accept EZ-Link and NETS.

6. Capital restructuring is highly unlikely as of now.

For the details, please read Victor's article:
6 Quick Things I Learned From NeraTel's AGM 2014.

With already a substantial investment in NeraTel, I am in no hurry to add to my position. I will instead wait for some weakness in NeraTel's share price before deciding whether to buy more.

Related posts:
1. Which stocks have I been accumulating in June 2013?
2. Helping our parents invest their money.

Invest X Congress: Q&A.

A feedback which I received from readers is that they wished I had given them some Q&A time after my presentation. I ran out of time and I think I took some of Rusmin's time too. My bad.


Courtesy of Audrey S. who had one of the front row seats.

Well, good thing I have a blog, right? I received quite a few emails, comments and PMs from old and new readers (mostly old as I think the new ones are still too shy) after the event and you might want to think of this blog post as the Q&A session that we didn't have time for at the event:

Q1. On the importance of an emergency fund.

A1. I said that it is important to have an emergency fund that will cover at least a year or two of living expenses and that if people who were at the event didn't have an emergency fund, they should go home and build an emergency fund first and not be investing now. If the economy should go into a recession, chances are the stock market would see prices tumbling too.

Now, imagine if we should be jobless but did not have an emergency fund. We might be forced to liquidate our investments at low prices. Not a pretty picture, is it? This is especially so when that should be the time to pick up good bargains offered by Mr. Market. It would be quite depressing.

Have an emergency fund and also a war chest. Two different funds. Not to be confused with each other.

Q2. On tipping AK.

A2. In the early days, I used to have a tip button in my blog. I installed it after seeing some bloggers having one in their blogs. I removed it after receiving that $100 tip I spoke about at the event. I don't want to feel obligated to anyone to provide advice because I receive tips from them.

I am not allowed to give advice, anyway. So, that was when I started saying I am only talking to myself in my blog. People who eavesdrop do so at their own risk. ;p

Q3. On income producing assets.

A3. Stocks, bonds and real estate. Actually, there are some very interesting assets which people invest in for income. I read that people actually invest in parking lots as well as taxis in Hong Kong to generate passive income, for examples. We can also find business trusts in Singapore which invest in assets such as infrastructure, ships, ports and cable television network.

No matter what assets we decide to invest in, if it should be for income, we want to be clear that the income is generated by the assets and we want to be sure that income distributions are sustainable. The time period could vary. The reason why I sold my investment in PCRT was because I decided that the income distributions were unsustainable.

Q4. On pyramids and percentages.

A4. I spent quite a bit of time talking about the graphic that looked like a pyramid because I felt that it is something important that income investors like myself should have in mind. Being able to compartmentalise investments is helpful in guiding our behaviour towards each investment, actual or potential. The question which I have been asked has to do with percentages since I mentioned that I would not have more than 2 or 3% of my money at the top of the pyramid which represents "aggressive" or "speculative" positions. So, what about the other layers in the pyramid? What are the percentages? I would say that it depends on the individual and his motivations.

Like I said during my presentation, if he is more of a speculator, then, the graphic for him could be an inverted pyramid. For someone who is more into growth stocks but who still believe in having plenty of cash to take advantage of opportunities, then, his graphic could look like an hourglass. Remember the population pyramids we learned in Geography classes in secondary school? You get the idea.

Q5. On Marco Polo Marine.

A5. I had an investment thesis. A sound one too, I believe. If all things had remained the same, the thesis would still be valid today. Of course, things changed over time and with only a schizophrenic bowling ball, I was not able to see the changes before they happened.

For anything positive that has a greater degree of predictability or certainty, I would allow a greater exposure to it in my portfolio. If there is a stronger element of uncertainty, then, I would trim my exposure. It is one way I manage risk. So, this was why I moved my investment in Marco Polo Marine from the "growth and income" section of my pyramid upwards to the narrower "growth" section. We could even suggest that it has a speculative element with its purchase of a jack up rig scheduled for delivery in December 2015. So, logically, it had to become a smaller investment for me.

Q6. On Starbucks, Bangkok and bras.

A6. I was told by a female reader who flashed the "V" sign at me that she was not flashing a victory sign at all. I misunderstood her. She was trying to tell me that I made an inappropriate comment about saving money. Which comment was that?

I made a joke about using money saved from not buying Starbucks coffee to fly to Bangkok to buy cheap and good bras. To all the ladies who were wounded by this joke which was apparently in very bad taste, my most sincere apology.

You can tell that I am truly remorseful because I have not sent out an email to the media stating that I had sacrificed myself to raise awareness of how we could save money and how ladies could use the money saved to buy cheap bras in Bangkok to save more money. Sounds Royt? ;p

Q7. On CMT.

A7. CMT is very well run. There is no question about it. At $1.97 per unit, we are looking at an annualised yield of 5.2%. It is also trading at a premium of 15% to its NAV of $1.71. "I would sooner buy a great business at a fair price than a fair business at a great price." Warren Buffett. To me, buying REITs is almost like buying real estate. I won't want to pay more than the NAV. At NAV, perhaps, it would be good to get some, everything else remaining the same.

Finally, if you went for the event and if you want to find out about the stuff that I could have shared if I had more time, contact me to ask for my presentation slides. I will tell you how to get the slides. Then, use the slides as a guide and search for the relevant blog posts in my blog. It will probably be similar to reading an e-book but with a bit more work required on your part. ;p

More Q&A found in the comments section of this related post: Invest X Congress: Closing thoughts.