Monday, September 30, 2013

Yangzijiang updated - point 3 added

I never like insider sell-down, especially a large stake.But for his case, I think its more like a re-aligment of his investment since 2008Before this:
2008 OCT (Price then: 32-40cents)
From 16.25% to 3.32% Due to the Disposal of 24.04% interest in the share capital of Lido Point Investments Ltd. ("Lido Point"), which holds 510,466,000 shares representing approximately 16.25% of the total number of issued shares (excluding treasury shares) in the Company (the "Shares").

11 Aug 2009 (2.3424% - 2.26%)
Open market sales (Price then $0.965- $0.985)

2 Dec 2009 (2.26% -2.04%)
Open market sales (Price then $1.23)

03/09/2010(1.99%-1.58% thereafter 1.46% due to dilution of dual-listing)
Sale of 20,000,000 shares pursuant to the Companys Taiwan Depository Receipt Issue (price $1.55)

Open market purchase (300 lots at 1.115)

The intention to leave might already start in 2008, when he sell Lido investment, the holding company of the key founders of the company.

Market might sell it down further due to US volality. If it does go back to my initial purchase price, I will buy more if the 3 key personnel, renyuanlin, wang dong, and xiang Jiajun do not sell.

1)10000Teus luanched, 1 operation risk less.

2)Applying for a private banking license

If they succeed, clampdown on shadow banking activties in the future will have no impact whatsoever on them. They can also access more funds too for expansion, but I would like the" banking arm" to be no bigger than 20%

3) New orders win!!

Important to note that orders are higher valued.

They are building capsizes and FINALLY VLCCs now, when previously is mostly panamax

And more 10000 TEUS confirmed .. Yeah!

Random thoughts: looming US shutdown

Since US debt rating is downgraded by S&P, I never fail to marvel in the level of dysfunction at Washington. NO, this post is not about glazing into the crystal ball and how we should time the market, this post is about how I feel about governance at the highest level.

I used to appreciate US diversity and the respect for minority interest and rights. Then two things changed my view for good, and again, became an example of nothing is what it seems.

First, Congress hooligan tactics. I think that is worse than the ah Bengs in Singapore. I believed in detailed debates, and hard fought consensus so that no one get marginalized. But, I also believe in respecting the system. Obama has passed the healthcare law, too bad you don't have a majority in Congress then, fine, go to the supreme court, but the supreme court has already uphold that law.

Please do not take American citizens as fools, if the bill is really without any merits, you can change the law when you make a clean sweep of Congress, Senate, and the white house. If not, stop holding the whole country hostage.

I am fine with negotiating, given that I work in the service sector, I am most of the time obligating to requests. But take a good look at your own behavior. When I am ready to compromise, you push your luck, when I refused, you threatened me that you will burn my house. How to compromise? When Obama is willing to tackle the social security, the republicans refused to compromise, that is a chance lost. Now, they used the debt ceiling to force someone to the table.

I know no politics, I just understand that with the power of politics, one should share some common good with the common people. Forget about that, just be competent enough not to be a laughing stock to the world.

Next, lack of leadership to do the right thing.

The TEA caucus is not actually that big, law can be passed with bipartisan efforts, but it seems stretching over to the other party is a dirty word. The TEA caucus do not mind losing their electoral seat or do not have a good political career. But the leader is afraid of not being able to keep their speaker job? Might as well ask the pupils to teach the teachers, and children to work and parents to go to school. Leaders mean leading, not following.

Also look at how powerful NRA is? Nobody is talking about banning arms, just assault weapons. Who need assault weapons for self-defense? Fine, you need assault weapon, how about more checks? NOthing is passed... After so many children died... sickening

I am really glad I lived in Singapore, I do wish for more deliberation in policy making and consultation, but I for one never believed in ransom politics. If you need anything, ask properly, don't threaten to burn my house and ask me to work with you! I want leaders to work for their country first, then their parties. Just like teachers caring for their kids first before worrying about their colleagues and principal.

Thursday, September 26, 2013

Things to note when investing in Reits

There are thousand and one things to note when investing in Reits, in fact, the most you know, the better it is, but I felt there are a few pointers that not really emphasized.

1) Fees structures

Reits earn three fees; base management fees, performance fees, and acquisition fees. Most reits have similar base management fees, but the performance benchmark and acquistion fees can be quite significantly different. CIT has a benchmark to beat, Soilbuild and Sabana pay performance fees when DPU is higher than preceding year, but Sabana has a additional requirement of 10% better DPU, before performance is given.

We need to understand that many companies spin off their assets into Reits for capital recycling or capital gains. No companies spin off the assets into Reits purely for unitholders. So there might be times when the parent companies' benefits are considered before unit holders. We are not asking parent company to inject assets are firesale price, but I think they should be fair to reits unitholders in terms of yield, and here we come to the second point.

2) Yield of acquisitions.

We always hear the term, yield accretive acquisition, but it is important to know about the actual yield of acquisition.  A 4% yield acquisition will increase DPU in a low-interest environment that we have now, but what happen when the "norm" of 3 percent interest returns? Of course, if the acquisition is financed not by loans but by placements and rights, maybe the drawback of  low yield acquisitions is not so significant, but you will suffer from dilution then.

Size of discounts for rights or placements 

Usually rights or placements are issued at a discount to prevailing price, that is acceptable, as long as the acquisition is yield accretive. But companies with weak sponsors might need a bigger discount, so the strength or the reputation of sponsor play a part too. 

3) Loans (Don't just look at effective interest rate)

Look at the prudence of capital management as a whole and not just effective interest rates, the interest rate just tell part of the story. e.g. The reason why a reits have a low cost of interest could be because the company had a lot of short term, secured, floating rates loans. Also, look at the spread of the loans and the years, usually the wider and more equal the spread over the longer period, the better. Look also at the type of the loans; fixed/floated, tenure, secured/unsecured. When you compare between reits, make sure you are comparing apples with apples.

4) Familiarity of Assets

There are countless reits with overseas assets, I think it is important to read up on the type of lease of assets eg. religare trust has hospital build on land with pending lawsuit. , and since we might not be able to pop by and see for ourselves how the assets are doing, make sure the returns are worth the risk you are taking.

5) rent psf, build-in rental revision 

We usually just look at Gross rent or NPI, but calculating a bit deeper can tell a lot about the pricing power of the properties, or the reit manager, and better for comparisons. If you also tell you about whether to be conservative or aggressive when rental is for for revision. 

Hope these help

Lippomalls reit update

LMIR announced that LMIRT Capital Pte. Ltd. (wholly-owned subsidiary of
Lippo Malls Indonesia Retail Trust) has priced its S$150,000,000 4.25% Notes due 2016 (the

The notes should be used to refinanced the secured bank loans of $147.5 million that is due in 2014.

This new facility is attractive is a few areas.

1) Note rate is 4.25% compared to the interest of 4.29% incurred in 2012 and 4.5% in 2011

2) MTN note is an unsecured loans, usually secured loans fetch a slighly lower interest rate as properties are pledged as an collateral, so this deal is attractive as the free up properties to become unencumbered, and yet attract a lower rate

The tenure of the secured bank loan and the notes are both 3 years, so Lippomalls has gotten a better deal.

But there in insignificant savings in the reduced finance costs. But given the next refinacing will come in 2015, we should have more clarity, and operational numbers, aside, we can quite safetly assumed finace costs will not have a big impact for the next 3 years.



Will provide another update after their quarterly report

Wednesday, September 25, 2013

Holistic investing

I am not sure if there is such a term call holistic investing. I believe such a concept is not new, but can't remember the actual term. Anyway:

When we talk about investing, many would think about stock selection, diversification, asset allocation etc. I think to be even more holistic, one should look at the profile of oneself too.

for example, if I hold a stable job, and I know I can set aside money every month or year for investment. My approach will be different from that someone that has a fix amount of money, or that we know our future income is going to drop or be volatile.

For me, I would not touch my CPF money for investment unless we are in a ultra bear market( more than 50% drop), those money will be like bond investment and is suit for the purpose of accumulation of fund for retirement. So I will not invest in bonds for the same of diversifying.

given the stability of my job, I dun need a very hugh war best, as my income for investment will increase every year. This is not to say we should be trigger happy, but perhaps I don't need a warchest as big as perhaps 50% of my investment income.

also, I have already have my insurance needs covered for me and my family, so I can invest with  a peace of mind

Tuesday, September 24, 2013

Investing- A waiting game

Investing is very much a waiting game, perhaps one that required even more patience than fishing.

You wait for the right price to buy a counter, and the price might not come in weeks, months or even years.

You found a opportunity, a hidden Gem, you bought it. Again, you might need to wait for years for the market to realize its value. Of course, if you are doing penny trading, things could move a lot more faster.

So what can we do when we are waiting.

1) Expand your radar of companies, source for other potential companies.

2) Research into them, identify fair price with some margin of safety.

3) Read up on investment books.

4) Blog =p

There are many a times, when I felt a counter is cheap enough, then I went on to research further, and after some nights of digging up info, I realized a good price to pay will be $X, then when I look at the price chart and to my horror: Hey! It was trading at a price lower than X just months ago, or a year ago, why wasn't it on my radar then. You wait, and the boat never return, perhaps I have missed the cycle.

Get ready, you do not just need a warchest, you need targets too. And the best time to do reading and NOT be trigger happy is when the market is moving favorably.  So that you do not squander away your precious ammo, and when the tide goes out, you need actually which boat to ride on, that will get you furthest without any risk of capsizing. 


Random thoughts: Nothing is what it seems

I went to the clinic recently, and have this feeling: The doctor is running a business, the medicine are its products and we are his clients, he provide a service (consultation) followed by a selling of product (Medicine)

I used to have much more respect for doctors, but there are some doctors whom I visited that do not come across as caring.

I also used to think giving honest feedback and constructive comments should be welcomed, as long as we are not destructive or overly critical. well, I discovered lately, sometimes, we are required just to toe the line, opinion not needed.

Maybe many more things are there for a altruistic reason, but I discovered more and more lip services than genuine services in my line of work, and sometimes, it sickened me. Our job scope may not be what it seems.

Hence, sometimes we may dream about financial freedom, that it would solve most of our problems, but again, that might not be what it seems. Don't get me wrong, we should have a goal in life, and we should work towards that, otherwise, we will be zombies. But when we do attain financial freedom, I believe we will then have another set of problems.

Be thankful for whatever we have, enjoy the present. Nothing is what it seems, picture perfect world do more harm than good, since it doesn't exists...

Sunday, September 22, 2013

Take research report with a pinch of salt - Case study: Suntec Reit

I used to own Suntec Reit, I would still like to own it if the price is right.

But I saw from a investment website that a certain research company has a price target of $2.01 using a DDM (dividend discount method).

I do not know the metrics used in this DDM calculation, but  I think the research is just too optimistic in its assessment. I think investors should take a conservative target price and not a highly aggressive target price.

First, lets do some reverse engineering.

Assume you think 6% yield for Suntec is cool (After all growth are factored in), given its "blue-chip" status. So you need 12 cent DPU, or 3 cents per quarter. So I would need distribution of about 67 million per quarter. Can Suntec achieve that?

Above is the upgrading plan, they expect NLA to increase by 25% and net net get a 33% increase in gross monthly rent. Lets give the retail revenue a 35% boost.

Let assume also 10% positive rental revision to its Suntec office, MBFC and other Jointly-controlled entities.

At such, the contribution from various units for DISTRIBUTION

SUNTEC retail = 18.75 million per Quarter

SUNTEC office = 19.5 million  per Quarter

Jointly-owned entities = 29 million per Quater

Parklane = 3  million

That is about 70 million, giving you a slightly above 6% yield, after 35% boost in retail contribution and 10% positive rental revision in office for all units.

If such liberal/optimistic assumptions do not pan out, you should be looking at 5-6% yield instead.

Do note, I did not take into account:

1) increase in finance costs with increase in interest rate

2) The increase in increase rate will lead to higher yielding bonds, and if the spread of about 4% is maintained, a 5% yield for a Reit instrument is hardly a sound and prudent proposition.

3) That the phase 4 AEI will complete only in 2015, so the full positive impact of retail reversion should come at 2015 earliest.

If you are happy with 5% yield, and is willing to hold it through thick and think, Suntec does look like a decent buy now, but if you are buying now hoping it will hit $2 in the next 12 months, I think the odds are not in your favor. (But you can be a lucky star and win against all odds)

Also, the research report talk about discount to NAV, I wish to highlight Suntec Cap rate is quite aggressive, and at $2, the discount will disappear.

Friday, September 20, 2013

Avoid over-concentration risks

In our research for value companies, we usually do a lot of peer comparison and reading on the sector news. As a result, we might overexposed ourselves in a particular sector or country, or even classification of company.

Under my radar of companies, I have SGX, Singarmas Land, LKH, Acendas Reit, SATS and QAF. With the exception of SGX, SATS and QAF, buying any of the rest will results in over-concentration either in Indonesia or the property sector. SGX look fairly valued at $7, I was hoping to get it below $7, but alas, it was not meant to be, it briefing traded at 6.95 a few months back and the never look back. QAF has a weak pig rearing business segment, and I would need a good margin of safety before I get into this.

In terms of classification of companies, I am hoping to buy into a "slow grower" and find a potential "super grower", but till the fact that the SIngapore Market is so small, it is very difficult to apply Peterlynch method of using local knowledge to find great products that are selling well, but still have low market penetration rate. (If a product is highly successful, it doesn't take long to have a big market presence in SIngapore, then where is the potential growth?)

Of course, we should not diversify for the sake of diversifying, and knowledge & research is still the best hedge against risk, but to reduce risk, I do hope to find a SIngapore Company that is Cyclical, or slow grower. Property prices are at their height, but I am not sure about property cycles for developers. Actually, I believe SATS might fit into the description of a slow grower, but the price is just too high.

Anyone has an SIngapore Company to share?? =p =p

Thursday, September 19, 2013

Yangzijiang- Is there still meat left?- updated

Yangzijiang shares price has risen about 20% in the bast 2 weeks and about 30% from its low of 80 cents. Is there still meat left, or should we start taking profits?

Well, I have no idea if the market will correct tomorrow or YZJ will be sold down over the next few weeks, I know I bought into this company waiting for a turnaround, and the cycle is far from the peak.

A few indicators:

BDI low: 660, Current BDI: 1860, BDI Peak: >11000


Global orderbook is dropping not increasing, although deliveries are still high.

China shipyards consolidation is still going on, building capacity is being controlled.

We are talking about market cycle here, I do not think we are anywhere near the peak, although we might be leaving the bottom behind us. I would definitely not try to get off at the peak, that would be impossible, but maybe when orderbook starts to build up again, and BDI is in the 6000 range perhaps?


Latest news (20-9); China shipbuilding orderbook is actually already increasing, it was "72 million deadweight tonnages (dwt) of orders for new vessels year-to-date, exceeding the 54 million dwt of orders last year."

Lets talk about industry trend, if I have been reading correctly, eco-ships, mega-container ships and LPG carriers are all the "in" things in the industry now. YZJ has been building eco-design bulk carriers for several years now, there are many skeptics about such technology and whether if its value for money. Well, I take comfort in the following quote:

quote from
“At GL we see the EEDI as a powerful driver of innovation within the maritime industry, both in terms of shipyards and designers focusing more on energy efficiency and taking advantage of new computational tools and ship owners who now have a clear guide to rely on in ordering new ships,” said Dr Pierre C. Sames, SVP Research and Rule Development of GL Maritime Services. “Our calculations show that these new vessels are some 30% below the reference EEDI line, which is a reflection of the commitment that Carisbrooke has made to invest in an extremely efficient vessel.”

And YZJ build those ships(Carisbrook is a major customer of YZJ), there are some comments online that chinese yards claim of energy efficiency level are scam, that should put that to rest. There are also views that eco-ships technology will leap and bound in the years ahead, so the ships build currently, might not be as efficient as those in the future, this is one risk, I think I have to bear. As for LPG carriers, YZJ in a interview with The Edge, mentioned about negotiating for such deals, was rather disappointed that the recent update of ship building contracts did not include those.

Now, lets talk about YZJ itself.

I have shared a lot about YZJ numbers, and also the risk and merits of this counter through a guest blog at ASSI, I have a hunch visitors of my humble blog are diverted from there, so I shall not repeat what is said there. Instead, I would like to talk about management.

I learn about 3R approach from Yeoman capital management through the valuebuddies forum, and the concept of right people have stuck in my head since. (

We want executives of the companies to own shares of the company, YZJ's chairman Ren Yuanlin owns 26% of the company. That does not look like a lot or significant at first glace, but if you study YZJ history, the company is not build solely by Ren Yuanlin, it underwent several acquisitions and/ or mergers before it current form. The pioneers of the various shipyards are the executive directors of the company now. The Top 3 stake holders, are Ren Yuanlin, Xiang JIanJun & Wang Dong, and Chang Liang, who combined stake amount to some 45% of the company, are all executives of the company. Another non-executive director Yu Ke Bin holds some 54,876,000 shares, a 1.43% stake of the company and is the 11th largest shareholder

Even lead independent director from SIngapore, Teo Yi-Dar own a small stake of 150,000 shares.

So, YZJ is definitely not a "nobody child"

For the last 4 years, the remuneration of the directors and top executives have remained unchanged. Although details are lacking, but not exceeding 250k for directors and not exceeding 150k for top executives for the past 4 years do not come across to me as exorbitant.

Then how have they been treating shareholders?

They have been giving increasing dividends since IPO, with the only fall in dividends from 5.5 cents to 5 cents in 2012, but payout ratio is consistent at around 30%, 2012 is the highest at 30%. I would say they have been rather fair to shareholders thus far.

Also, when the shares were trading at a low of around 77 cents in 2011, YZJ did rather massive shares buyback.

When I first bought YZJ, many frowns, now there is a flurry of research reports for buy calls. Many now seems to think that YZJ will win a lot more orders and even orders of fatter margins. For me, I do not count the eggs before they are hatched. I will only take confirmed order book as calculation. So, if you are purely looking at existing orderbook and margins of existing contracts, YZJ look fairly valued at this point, and not actually a screaming buy. But if you are patient to wait for the industry to turn, it should sail forward with fatter margins.

But because it is a cyclical, remember to get off the boat before it is too late. But its too early for that, I will sit back and enjoy the ride as long as nothing fundamentally changes.

Monday, September 16, 2013

My fact-finding into Sabana's managment response.

After reading into the IR response, I again questioned the "wisdom" of paying full price for "future" rental collection.

If the 67 million, or 59 million without admin costs is brokered at fire-sale price, or the discounted cash flow method to value the 59 million is based of 50% occupancy, perhaps it is a wise pay. BUT is that so?

I look out data from sq foot research:( ; logged in required)


The 22 august transaction is the Sabana's transaction, hardly look like a sale to me.

Next, I look at the medium rent in the area:


Lets assume the medium rental of $1.5 and AMD rent 50% of the building.


1.5x12 (months in year) x 145000 (Half of NLA) = 2.61 million gross rent.

SInce they are looking for sub-tenant, so its not a triple net lease, so lets give a 0.85 margin for NPI

You will get 2.21 million.

Subtract the management fees, trustee fees and taking 1/4 of the cut (the usual amount left for distribution according to the latest quarter reports)

You will have 1.66 million left for distribution

Gross Rev Yield = 3.9%

NPI yield = 3.3%

Distribution yield = 2.5%

If the building is almost fully leased, I would say its quite a good purchase, if they managed to get it 100% lease in the near future, I would say they clear the mess that they make.

BUT, the fact is, they rushed into this acquisition, which until now, I still find it mind boggling.

1) One, it doesn't look like a sale to me.

2) If NPI yield is 4% onwards for half the building, I might still think its a good deal, as its rather difficult to find 8% yielding investment, so they work hard on their own to achieve this good yield. But at 3.3%, I do not think its such a tall order to find a fully occupy industrial building yielding 6.6%. You pay now, and subject yourself to the risk of finding tenants when industrial supply is increasing over the next few years and if things turn out as you have planned, (roll drums....)you will GET...  6.6% thereabout yield. HUH??

Obviously, I do not know what is on the management mind, but value for money is definitely one of them when rental yield is concerned. Also, I also believed in this: IF there is nothing compelling to buy, DON"T buy! Give a big discount to private investors through placement to fund a non-compelling buy, even more pissing...


I am complaining about the management, not the value of the counter. This is no to say Sabana Reit is Junk Grade, the high yield has lead Sabana price to rebound.

What I am saying, this is a negative in my checklist of assessing a counter, and if another better counter come along, it will not take much for me to jump ship.

Sabana's IR response to my questions

8 Commonwealth Lane

My questions, their response:



Sabana announced not too long ago about a MTN programme,so why do placement? Why not drawn down loans?


  • ·         Tapping the established MTN programme (debt funding) at this point would be too costly. In addition, the MTN programme is feasible only if it involves an amount of at least S$50 million, which is higher than what we required (about S$30 million).

I am fully aware that with the $60 million acquisition, gearing will go above 40%, 40.5% if my calculation is correct. Then my next question, why not a rights issue so that existing shareholders can participate in it without dilution and enjoy a discounted price.


  • ·         The funds (equity) were raised to partially finance the acquisition of 508 Chai Chee Lane.  The vendor of the property is a third-party, unrelated to the sponsor. This therefore means a less flexible timeline to complete the acquisition.
  • ·         We believe that 508 Chai Chee Lane is a good quality asset to be added to our existing portfolio that will help generate attractive and stable DPU for Unitholders over time.
  • ·         We had evaluated relevant funding methods and concluded that for an amount of S$40 million, it would be more practical to raise funds via a share placement (for equity portion) in order to meet the timeline given by the vendor. Fund raising via a rights issue, for example, would take longer than what is acceptable to the third party vendor.
  • ·         The balance of about S$30 million will be funded by debt.
  • ·         We do not expect the overall gearing to reach 40%.


Lastly, why a discount of more than 9% and more than 10% to last traded price of 1.125? Please be mindful that Acendas reit, Ascott reit, and Aim industrial reits recent placements are all at discount of below 5%. If the discount is necessary to attract investors at such unfavorable terms, then back to the first question, why not a rights issue at 5% discount? Or for the case of rights, a 10% discount will be welcomed. Pardon my bluntness, such exercise come across to me as opportunistic and shareholder unfriendly. 


  • ·         The pricing of the share placement reflects the prevailing market sentiment and expectation of investors given the uncertainties in Syria and the upcoming FOMC Meeting scheduled for 17-18 Sep 2013.


Lastly, UOBKayhian mentioned that your proposed acquisition of Chai Chee is a half vacant building. Why buy a half vacant building when URA figure shows supply pressure. If the report is accurate, you purchase yield will be 2.5% - 4.5% using the average of your portfolio rents. Hardly a value purchase or yield accretive one? 


  • ·         The property at 508 Chai Chee Lane is approximately 11.0 years old, with balance land tenure of 46.5 years, longer than Sabana REIT’s existing portfolio of approximately 38.8 years. It is strategically located next to the Pan Island Expressway (PIE) and is about five minutes’ drive from Bedok and Kembangan MRT Stations on the East‐West Line. Long‐term leaseback to the Vendor provides initial income stream and potential access to increasing market rentals for balance of space leased to third party tenants. Given the excellent location and good building specifications of 508 Chai Chee Lane, we are confident of filling up the remaining 50% occupancy.
  • ·         Based on our projected occupancy assumptions, the initial yield is likely to be higher than our estimated wacc (weighted average cost of capital) of sub-7%. Hence, from this perspective, the acquisition is attractive.




My thoughts:

I appreciate the reply from management, but I felt a rushed deal it seldom a good deal.

I am not a industrial property guru, so I reserve comments on how good the buy is, but given new supply coming online in the next 2-3 years, and industrial rent index starting to trend down, why the rush to buy the building and adhered to the harsh timeline?

Drawing down loans to meet the timeline, and explain the rationale for momentarily breach of self-imposed 40% gearing and get rights to bring it down, seems more reasonable. 

Saturday, September 14, 2013

Thoughts after reading "One up on Wall Street"

One of the main takeaways from reading this book are:

1) Using local knowledge

2) After which you need to classify the company into his 6 categories and start developing the  story, each story from each category should have different focuses, perhaps (my interpretation) just  like their are different genres of writing, and hence the stories should rightly be different.

What left a dent in my mind are the following questions:

1) What is my circle of competency of these 6 groups?

I know I bought into a few cyclicals, I know given I am just a retail investor, I do not have local knowledge in these industries, but I do know what I am looking for in a cyclicals, what are the markers that will tell you we are in mid-cycle and perhaps nearing the top.

I also know I am very bad at identifying growers, especially super growers.

I do wish to have some skills at identifying stalwarts at reasonable price, I know we should be looking at Blue-Chips in Singapore, but at what price. I thought SPH makes sense to me, but apparently it does not provide any MOS for some very experienced bloggers.

I am also very bad at turnarounds, and asset plays. I have some experince with property counters, I was vested in CES before and at one point of time have Hiap Hoe, Heeton, Wingtai and LKH in my radar. (After the run starts, I stop looking, LKH is looking attractive again though)

The book mentioned about some diversification into all 6 groups, of course, he advised against diversifying for the sake of diversifying and one must have full confidence in what one is buying.


There is one thing which I think I do not really agree, but at least I think I would not be following in the near future. That is staying full vested through the ups and downs of the markets. He mentioned about switching from one group to another, and even between one company to the next within the next company. However, I felt Singapore bourse is shallow as compared to the US, and when the market sours, all counters will fall, and without a war chest, I might not fully exploit the benefits, but it does answer some questions of actually how much cash to put aside.

Also, those buying a company for income or yield, will properly fall into the Category of Stalwart or Slow growers, but there is no mention of Reits. Hmm...I wonder why?


I do not claim to fully understand what the book is trying to teach, the above is my interpretation only, if you have different view or opinion, or do not agree with what I say, please drop a comment

Thursday, September 12, 2013

Golden agri - impact of pending changes to Indonesia bourse laws

Other commodities may fall under Jakarta's bourse rule

Palm oil will defintely come to mind if they want to extend the restriction to other commodity.

What will be the impact? Well, we need more details, it might be election Sabre-rattling. Indonesia rules sometime flip faster than our prata man flip roti-prata, given elections are near, potential investors of Indonesia plays should be mindful.

Sabana placement - updated!

I am disappointed with the selfish placement, they should have done a rights issue at $1, i will definitely subscript to it.

Below is what I posted at VB forum:

Did a quick calculation.

I use the lower 2.7 million increase in distribution due to acquisition. (Refer to earlier post 274). I use the lower estimated figure.

I account for the acquisition fees of 670k already, performance fees, they are not going to get it as my final calculation of DPU after dilution is 9.5 cents. (As compared to 9.6 cents now, without acquisition.)

So net net, given I cannot participate in this discount YET, (I think market will punish this counter), we are worse off with this deal.

But then, at 1.080, yield will will be 8.7%.

So I willl keep my cool, let the price drop further and accumulate after the placements unit come into play.

At $1, yield will be 9%.

Ok, not sure angry now. BUt what the F***, issue rights la, whats the rush!!

Other numbers:
They are still 27 million short for their acquisition, they do not have 27 m in cash, so most prob still need 20 m loans. But it does not make a big difference to gearing, its within 1% point.

NOTE: Income for distribution increase is from my conservative estimates only. IF they champion and buy a property that is more than 10% vacant, then the figures will be wrong.

I just note that the AMD building is half vacant! So my figures are all wrong, dilution effect will result in 9 cents DPU annually, versus the 9.6 cents now...

I have send an email to management asking some questions, will posted it here if I get a reply

Reminders of things to do before I initiate a position

This is a reminder for myself to do due diligence before initiating a position. Sometimes I like a company from the first review and I might buy something on impulse, or what some will say, be trigger happen.

1) Check latest important metrics.

-Gearing level, assets levels, FCF, earning resilience, and depending on what  is the story of the company and reason for buy, the dividend yield, PE, PB or FCF.

2) Excel list for numbers

-Trend for capex

-Trend for revenue, GP, NP, margins for all segments 

- Quarters inventories, receivables, parables 

3) Read all announcements made by company in the last five years. Look for 

- Shares sale

-Corporate actions

-Acquisitions and disposals

-Renewal of contracts, update of order books

-Management movement; resignations and designations

4) Read the AR and the accompanying footnotes.

- Capital management

- Management pay

- Business review and future plans (Track their track records)

5) Read the prospectus, particularly important if it has history of less than 5 years. 

- Risks

- Major customers

- Reits (Fees structure)


Well, there is no end to it, keep digging and will understand the story better. 

The problem is, I am a lazy person, I usually do all 5 after I buy, motivation to move, muhahaha... Stupid, isn't it

Wednesday, September 11, 2013

Lippomall - Overshooting to the downside

We all know market tends to overshoots, exuberance will cost a company shares price to jump above whatever value any good development might have on the company, and being overly pessimistic above the future will also cause the price to drop beyond any fair justifications.

The fact that Reits has corrected due to impending interest rate hike in the future is justified, in fact, I felt most reits are overvalued during May when most just yield between 5-6%. Thus, it is important to do quantitative analysis to guage the impact on bad news and judge for yourself to see if its overdone.  

Then tapering announcement happens, and many reits experienced a free-fall, I initial a position at 7.5% yield.


This is what I posted at (13th June) then:  

"Was looking closely at lippomall again when yield reach 7.5%. It seems like a reasonable yield and taking into consideration the following.

Pluit village mall settled the messy ligitation with carrefour, I am not sure how the out of court settlement terms are, but the trust is insured against such losses if I read correctly. Carrefour has a floor area of about 13000m2 before the issue starts, and carrefour keep to the same area, the occupancy rate at pluit village will improve to above 90% and contribute 3.8 million NPI in a year, which works out to be 0.001772195 cents. Not significant but the amount is like a buffer to protect against rise in fiance cost as a result of interest hike, which everyone is talking about.

Up till 2014, the only floating rate that LMIR is exposed to is for amount of 75 million at a rate of 4.3% They still have 425 million fund not drawn from their MTN. Assume they use it to retire the 147.5million bank loan, and the interest that have to pay become 6.3% (the highest trance of MTN notes is 5.875% due 2017) , the correspond increase in finance cost is only 3 million. 

seem like the 7.5% yield is "quite safe" till 2015 at least."


Then another experienced and seasoned forumer pointed out to me that I didn't account for currency risk. Well, I did get punished for not doing a detailed research and when capital outflow begin in Indonesia, the currency start to fall, and all Indonesia property counters listed in SIngapore get a heavy selldown.

This time round, I look deeper and currency risk, and realized currency affect finance costs too, since loans are in SGD dollars but revenue is collected rupiah. But I realised a 15% fall in currency will only lead to a 5% dent in distribution,  so forward annual DPU should be around 3.5 cents. So when with this reduced DPU, and I still managed to get a 8.6% yield, I decided to average down. Luckily, price has rebounded, and I now have a small margin of safety

With more investment in this counter, I continue to dig deeper, to see if there is any impact on revenue, and as mentioned in my previous post, there do not seem to be any impact on revenue or NPI during volatile period of 2008 and 2009. In fact, due to the hedging of exchange forward contract, the greater the fall in rupiah, the bigger the unrealized profits in forward exchange contract, and all these are non-cash items that will not affect distribution.

This time round, I play safe and consult the Gurus at valuebuddies again, and ask why is there such an issue with currency depreiciation. Another kind soul point out the pitfalls to me, here is what AlphaQuant says:

"1) interest payment: repayment in SGD will translate into a higher equivalent in IDR
2) debt rollover: given the assets are in indonesia, how likely are they able to secure debt rollover from Singapore based funding sources on favorable terms (at worst, using their malls as collateral) - failure to get good rates means
a) equity raising via rights/placements
b) idr funding sources - note 10y IDR bonds are now at 8.5% vs SGD @ 2.7. This translates into a higher funding costs if SGD funds cannot be secured.
Will the IDR depreciation lead to loss of confidence in Sg banks to lend to them?"

3) Is the foreign capital outflow + raising of FASBI rates going to choke off domestic growth hence domestic consumption demand? Inflation in indonesia is now at 8.8% - is the economy heading into a situation of stagflation? Malls afterall, are only as good as the ability of the locals to spend, and if consumer confidence gets hit, tenant vacancies will rise. Think of the ghost malls during AFC.


Point 1 accounted for as mentioned in the lower DPU.

2a is not a issue, we should always set aside money to participate in rights issue when we invest in reits.

2b is a value issue, I have accounted for a 2% increase in interest rate in 2014, I think that is highly aggressive already, next is the question, will SIngapore banks not lend, since Indonesia properties are of lower value due to currency fall. I believe there is a price for everything and every risk, 68% of LMIRT’s S$1.772 billion asset portfolio remains unencumbered, so that means 1.2 billion can be pledge to secure loans, even at firesale price of 50%, that will be 600 million, how not to get a loan of 147.5 million in 2014 with 600 million?

3) is a valid concern, if 3 is to happen, all bets are off, since with higher vancancy, NPI will fall and valuation of properties will fall too. SO point 3 is indeed a risk you must bear when you buy lippo-malls.

With a average yield of 8% until 2015 at least, do I feel compensated enough? Well, I do, how about you?

I would like to acknowledge the many online forummers or bloggers who have selflessly share their ideas and comment on others, so that we can all get a better picture. NOthing is free, but good advice and comments online come free many a time =P

Tuesday, September 10, 2013

Accounting for risks

Whenever I find a company I like, maybe due to a blogger suggestion, a research report, or a trigger such as constant shares buyback. I will go through some checklists before I do detailed digging. I look for some red flags, or more accurately absence of red flags.


1) High Gearing.

How high is high, well, property and construction sector will likely to see high gearing, but even with these capital intensive businesses, gross gearing of 1 and above is too much for me.

Otherwise, I would look for gross gearing of below 0.5. Why? You have to remember you need to discount for assets, inventories might not sell, receivable might not be collectible, cash is the only King. BUT, you cannot discount liabilities, especially banks loans.

2) FCF

I don't need FCF every year, although I would very much prefer that. But I cannot stand companies burning cash faster than making profits consecutively for years.

3) Red flags

I look for frequent fund raising, if there is a rights/placement exercise, what is the funds used for? It is used as management planned? Is there any big stake sell-off by insiders, especially the directors or business owners? Is there frequent movement of key personnel like the CFO in particular, frequent change of audit company, etc

4) Can I understand their business model?

Most business plans are not that hard to understand, except those in the semi-conductors industry, I really blurred when this one is concerned, I used to own UMS, but sold out after the Founder sell a significant stake for a second time. The price went up after that, but no regrets.

5) Net Margins

I can accept low margins, but not anything lower than 5%. I also will not risk my money with companies that have margins that seems too good to be true or looks like a loser when compared to it competitors. A few percentage difference is fine, but if the difference is in the tens, I would look again carefully.

6) Earning records

I am very bad at identifying strong growers, I usually buy cyclicals or stalwarts,  so profit resilience is very important here. I need to see their profits even during downturns.  Unless I am buying a turnaround, (My record also super bad with this ), I usually is rather unforgiving with losses

If the company pass the above 6 pointers, then I will proceed to dig deeper. I will start reading the prospectus,  learn about their major customers and competitors/peers. Look at the fine prints of their AR, basically there is no end to research. If after some preliminary digging, I still like what I see, I will start with a small stake, and that will usually motivate me to work even harder to find out about the business, both qualitative and quantitative.

Please leave a comment, if you have some other ways of looking at a company



Monday, September 9, 2013

Penny trading



I have sworn off penny trading.

But, when I saw high easy it is for someone to make 100% gain in a single day, a perhaps get a few baggers with days or weeks, I can't help but get envy.

I know Envy is a sin, I am just being honest with myself here.

I know of the pitfalls of penny trading, you win fast and big, and you get go the other direction too. I also know I do not have the knowledge and skills, and perhaps the guts and capital to make penny trading work for me.

So all I can do, is to stick with my own strategies, and wait out my gains.

Delayed gratifications in investment, well, there are some are skillful traders or lucky stars that get very close to instant gratification in shares investment too.

Ok, back to digging and saving up for investment. I realized how envy make me such a terrible person,I secretly have the thoughts of the traders getting their fingers burned when the tide turn for penny traders. Evil me!! I know, I know, its just a flicker of thought, and I chide myself liao


Sunday, September 8, 2013

currency impact on lippo


It seems to me that volatility of Indonesia rupee does not have an big impact on DPU, will post more as I find out more. 2008 Q4 and 2009 Q2 are the 2 periods with the sharpest fall and raise, but realized foreign exchange forward contract are always kept to a minimum.

Sabana REIT

There are a few issues with this REIT, the top two being the renewal of leases and weak sponsor.

Well, there is nothing we can do about the sponsor but I think that has been priced in.

as for renewal of leases, in order not to appear talking in hindsight, I decided to blog about it now. It should not resulted in significant fall in revenue, definitely less than the 7.2 % projected regardless of expiry of leases. There are sub tenants in the leases, so to become multi- tenant are a non issue. It will be an issue if Ye anchor tenant are movin out together with the expiry of master lease, that is highly unlikely too since there is no reason to negotiate till the eleventh hour if this is such the case, there should be confirmation of non-renewal as it takes time to find another tenant.

if negotiation is going on tough, is it going to be bad deal for shareholders or tenants. Half of the leases have no build in positive rent adjustment, while industry rent are beginning to fall, there is no cases of negative renewal of rents from other industry reits, and given the low base of rent 3 years ago, net net sabana should get a better deal.

3 more months and we shall see if I am right

Saturday, September 7, 2013

Reflection on investing

As with life, market goes in cycles, the only difference is in markets, you get a second chance, and maybe even a third chance or fourth.

Wealth is made when one fully exploit the full cycle of a bull and bear market.

What do you need to make the most of markets. Below are what I think are the important ingredients.

1) You need capital, you need to save more than you spend, you need to save more for investment and at a regular basis.

2) You need luck, you need the cycle to arrive not at your most vulnerable period, e.g. Hugh expenses required for hospitalization, kids, or holidays.

3) You need knowledge, you need to buy companies that will survive to see the sun, strong enough to recover from the down cycle.

4) You need a secure job that generate constant income stream that are stable, you never know how long a bear market will last, keep investing, keep piling money into the right instruments.  

5) You need extensive research, you need to look how different is this market cycle from the previous, what are some of the causes of effects?

In order to address the 5,

I need to have a warchest, I need to divert income from investment, or capital gain into that account.

I need to manage my expenses, I already did one round of slimming exercise, cut down unnecessary expenses, but there are expenses that are related to the family that are necessary for harmony, even if excessive. (If you know what I mean)

Slimming exercises include:

1) Getting the most basic smart phone plan

2) Get rid of my mobile data plan

3) Change my credit card to UOB one to earn cashbackImage