A true story about life insurance and grapes.

There are a few big ticket items in life. The biggest is probably the apartment or house we stay in. Another one is a car, for those who choose to have one. 

I know this may not sit well with some of you going by some of the response my blog post on the topic got but children are big ticket items too. 

Another thing that could become a big ticket item for some is the cost of insurance.

In all these, consume because we have to but if we over-consume, we are jeopardizing our finances. Do the necessary research before committing to any big ticket items. 

An apartment, a car, children or insurance. You name it. 

Don't just jump into it and think that things will sort themselves out.

The following is an email from a reader who wants to share with us why it is important to know what we are buying and if we have all the facts before making a decision:



Reader:
It's been a while since I last emailed you - I hope you have been keeping well.

I saw that you were getting a bit of flak in the comments section of your recent ILP blog entry. I just wanted to share with you that I thought it was a well written, informative and balanced post (no matter whoever who keeps challenging you to show figures that ILP investments ain't great).

Just thought i should let you know that i wished that i had read such a post like your four, five years ago as I was just graduating from school and entering the workforce.

You see, the first piece of advice we hear as we are entering the workforce is: you gotta buy some insurance. 

Everyone was doing it, my parents told me to do it. But at that time I was seriously misinformed - I had no idea at all what the difference was between endowment plans, ILPs or term (in fact my agent did not even bring up term insurance!). 

I signed what I believe to be an endowment plan that had some cover on dread diseases, death etc. There were funny things like yearly bonuses (if the market did well cos the plan was linked to some share investments too). 

Well it has been 4 years since and I have no idea how the plan is doing in terms of returns/yields at all. I suppose it is probably hard to distill out a yearly return because there is an element of health insurance to it (see how confusing it is for me).



So what I'm saying is: I wish I had read such a post like yours just as I was starting out. I wish I had been more informed. I would have bought term, invest the rest. Seriously.

But I'm not blaming anyone. We could look back and say that my insurance agent should have laid down the variety of plans for me, but at the end of the day, they work for commissions - so why would they bother to explain more, if not required as such by regulations? I don't blame them either.

And while I cant go back in time and buy term insurance, I'm really glad that somewhere out there a young person entering the workforce will hear about term insurance and the possible downsides of ILPs from your blog post and make an informed decision.

I guess financial sale persons are up in arms when they read postings like that because they feel they are being vilified as agents who put their own interest ahead of their clients. But but but, isn't that true? Don't all salespersons do that? 

That day, on the outskirts of a Japanese village, I chanced on a roadside store selling Kyoho grapes. I selected a bunch of juicy grapes and handed it to the store owner for payment. 

She put down the bunch I selected, motioned to another bunch and said it was better. And she packed it. Initially I was like, "Wah, so honest!", thinking that she was trying to help me select better grapes. 

When I came back home and opened the packaging, turned out that the hidden grapes behind were all rotten and giving out a foul smell. I had to throw half away.





So the moral of the story is: unless it is obvious to the sales person that you are going to be a repeat customer/ going to intro more customers to them, you are better off selecting your own grapes. 

And you best be knowing a thing or two about grapes, before buying grapes.

Related posts:
1. FREE Investment Linked Polices or Term Life Polices?
2. Slaving to stay in a condominium?
3. Sophisticated consumers lease cars, not buy.
4. What is our attitude towards having children?
5. Financially prepared to be married?

OUE Limited: An asset play that could be cheaper?

I have been eyeing OUE Limited since May this year but I haven't bought its stock. What attracted me is the big discount to NAV (NAV/share is $4.04) although its earnings per share is nothing to shout about. In fact, I estimated the PE ratio to be about 30x when I was crunching some numbers.

So, if the NAV is realistic, to me, OUE Limited is an asset play and with asset plays, the question is really whether the value will be unlocked at some point in the future. There is a likelihood that this would happen as OUE Limited hold stakes in OUE H-Trust (43%) and OUE C-REIT (42.5%).



Regular readers know I scribble my research on scrap paper.

A bug bear for OUE Limited now is Twin Peaks. This 99 year leasehold project (from 2010) is a luxury condominium they are developing near Orchard Boulevard in Singapore. They are having a hard time moving unsold units and of the 462 units available, only 20% or so have managed to find buyers.

The condominium is near completion and I think OUE Limited will then have 2 more years to sell all units or face yearly penalties. Already, they have written down the value of Twin Peaks by $105 million in the face of a challenging environment this year.

At an average selling price of about $3,000 psf and a GFA of about 436,000 sq ft (including balconies), I estimate the value of Twin Peaks to be about $1.3 billion, if fully sold. However, I doubt that it is going to happen without a deep price cut if the big discount given by Bukit Sembawang to sell its completed condominium in Cairnhill recently was anything to go by.

To be fair, however, Twin Peaks is just one part of OUE Limited's portfolio. The company owns many commercial properties and if their values are realistic, OUE Limited could turn out to be a very rewarding asset play for investors in time to come when their values are unlocked. When will it happen? Your guess is as good as mine.

Click to enlarge.

Technically, OUE Limited's share price is in a downtrend and it is one that shows no sign of weakening. So, although already trading at a big discount to NAV, I wonder if its share price could sink lower for me to get a dollar for fifty cents.

I wasn't going to blog about OUE Limited until I have initiated a long position, if I do at all. However, reading a blog by Brian Halim gave me a little push to share my thoughts.

Read Brian's blog on OUE Limited: here.

Related posts:
1. OUE H-Trust.
2. OUE C-REIT.