Saturday, April 26, 2014

AR review of Lippomalls and APTT

Lippomalls and APTT are the only 2 leveraged plays (Trusts and Reits) left after I divested HPHT and Sabana Reit.

Here are my thoughts:


Get ready for sub-par performance of DPU in the short term. Management think IDR will continue to be volatile. However, in the medium term, Lippomalls still have a few things going for it. Which I think explain the resilience of its share price.

1) Acquisition: Its parents has only 3 malls that is under the First Right of Refusal arrangement. A check on the parents Lippo Malls website show all three are in the pipeline, and are not operational yet, although the AR mention the word "some" instead. Given its limited room before hitting the debt ceiling, unless Lippomall is buying malls that are out of the first right of refusal arrangement, I do not think it will happen anytime soon. Personally, I would rather Lippo buy a good mall when the IDR is weak.

2) Recovery of IDR. Self explanatory. If IDR is strong, revenue converted to S$ in higher, and valuation of property improve. Management expect IDR to continue to be volatile and will hedge more aggressively. Hope they get the direction of IDR movement right.

3) Favorable demographics and economic growth of indonesia, Indonesia consumption story still intact.


Pluit Village, one of the worst performing mall, and sadly also one of the biggest contributor of revenue to LMRT will no longer need to give rental guarantee in 2014 onwards. The rental guarantee for the whole of 2013 is about 5.4 million (5.6 million in 2012), we will need to subtract about 1.4 million from NPI every quarter assuming the rental collection is Pluit stays status quo, which is very likely the case. The one-off cost of 2.2 million for issuing the MTN notes cannot offset this amount.

IDR improve 6% to 31 march in 2014, according to AR. While this is welcomed news, the fate of IDR for the year of 2014 is just to hard to call.

Personally, I think we need to buckle up for poor performance of LMRT in 2014.


Not much to update, earning story remain intact, the broadband segment will be the key segment to watch for upside in the near term, further into 2015, we will need to see how they captured the market in Greater Taichung.

Most disappointing however, is the projection that a written settlement of tax issues did not materialized in Q1 (which is the timeline proposed by management at Q4). They now expect tax settlement to be reached in 2014. The longer this drags, the less faith I have with this counter. Was thinking of accumulating on weakness, think I will hold my fire for now.

Friday, April 25, 2014

Random thoughts: what's holding me back from further investment

I have divested from Sabana and is looking at putting the money into good use. But couldn't find any comfortable buy.

One important reason is I didn't have the target price I want. One company I really want to get is venture. I wanted to get it below 7, cum Divided maybe a price nearer to 7 would be fine.

But market didn't provide the opportunity. It recovers from sub 3100 to almost 3300. I am not sure why market is so optimistic. Maybe it is just normal buying up for dividends.

I see market weaknesses ahead. Below is the reason why. I hope it provide chances for some counters to have MOS appearing.

1) although I dun think Russia and Ukraine will dip the world into recession. The market is glossing over the potential. It is quite clear there is no way forward. Russia will not give up crimson, the west might not insist on that, but seriously, anyone will some knowledge of history will know crimson will not be the last of Russian adventure . Push too hard, Russia and Europe will both suffer pains although I believe Russia is more willing to suffer pain.

2) STI has never break above 3400 convincing, the room for overall market gain and hence better valuation is low. It should be more of a sideway movements. I know there are talks of US, Europe and Japan all growing. But I think given how strongly US equity is doing, I think a more meaningful correction in US equity is long over-due.

3) end of tapering. It is a yawn.. Yawn. But is the market ready for what comes after that? A period of softness or increase in interest rate?

4) World Cup fever. As usual, the World Cup always make market volume falls, maybe there is opportunity then?

5) XD period follow by a period of correction usually throw up a few companies that overshoot to the downside.

I am crystal ball gazing again, bad investor! I am doing this to keep my itching finger away from trigger.

Saturday, April 19, 2014

Random thoughts: When is it too much?

Not talking about money. Just wonder aloud about my own observation.

I used to feel a bit disturbed when I see elderly picking cardboards or searching through Bins for recyclable tins. I usually buy tissue papers for those who peddle tissue papers. As I increase my frequency of morning breakfast, I saw the same lady peddling tissue, I feel feel sad for her anymore, in fact I stopped buying from her. Dun ask me why, I dun know.

I used to want to do a lot in my job, I want to make a difference, made an impact to the world, however small, now, I still want to make a difference, but the difference is getting smaller and smaller and I dun seem to mind.

A dose of realism? Realism numb people?

However, on the other end, the more I invest, the more I learn about investing, the more I want to do well in this game. Greed is the name of game. How many of u when u exited with a loss, when u conceded u make a wrong call, want to make good your error by jumping into the next company in your radar? I have this impulse.

Too much, nothing good come out of it. More haste, less speed. More efforts, less effective.

Wednesday, April 16, 2014

Sabana Reit: Its time to say goodbye

Sabana release its Q1 results.

Q1 DPU is 1.88 cents is lower than the 2 cents that I projected.

2 cents is already 10% fall of DPU from Q4, and 20% fall in Q3.

Although Gross rent is more or less stable, the costs of converting to multi-tenants is really horrible, and out of control.

When Sabana has 100% Master leases, NPI is about 0.94 time of GPI.

I expect NPI to be 0.8-0.85 times of GPI, since more than half of its leases are still master leases, but it is 0.75 times of GPI

So, the fall is not one-off. The cost of fall is recurring. From QR:

(b) Property expenses increased by 394.4% mainly due to:

(i) Property and lease management fees incurred for the Acquisition Property;
(ii) Higher property tax, maintenance, utilities and applicable land rent expense, in line with the increase
of directly managed multi-tenanted properties from one in 1Q 2013 to six in 1Q 2014;
(iii) Higher property management fees in line with the higher revenue from 151 Lorong Chuan; and
(iv) Lease management fees being charged to the 15 properties acquired during IPO, following the expiry
of the three-year waiver period in 4Q 2013;

In line with the higher property expenses, net property income decreased by 9.2%


With exception of (i), the rest are recurring.

All this is not the worst yet, given how badly they control "costs" of transition from Master tenants to Multi-tenants, they have master leases out for renewal again in 2014 and almost everything up for renewal in 2015.

With its "wonderful" track record, and current low yield as compared to other proven industrial reits (Acendas has yield of about 6.8%), there is nothing left anymore.

Not sure how much school fees I will pay for this, but its time to say goodbye.


Who says management is secondary to business? Industrial space rental business is straight forward business.

I didn't take into consideration:

(iv) Lease management fees being charged to the 15 properties acquired during IPO, following the expiry
of the three-year waiver period in 4Q 2013;

(i) is unnecessary, yes, GPI will fall even further, but NPI for Q3 andQ4 remain the same despite higher GPI from Chai Chee, so Chai Chee from whatever is a highly value destroying venture, which can't even be yield neutral. It is giving negative yield.

Good bye.

I hope readers bought it cheap. I am quite sure the price will fall very badly tomorrow.



Sunday, April 13, 2014

SPH Q2 review

SPH Q2 results was out.

I only want to find out 2 things.

1) Is its media business still  deteriorating?

2) Is property segment able to offset the deterioration?

Here are the numbers.



Operating profits include the recurring media AND property business, property income exclude valuation gains but is before accounting for minority interest.

So, we can see the media business is still deteriorating.

Property income is stable and growing, but after accounting for minority interest, will still be a falling number, not enough to offset the fall in media business.

Display advertisement fees is still very weak, and although Singapore has some quarters of strong GDP from 2Q 2013, it does not show in the advertisement revenue generated. All segments of advertisements show weakness.

Without the one off gain from the partial disposal of 701 stake, Q2 numbers will be horrible.

Well, the only thing to look forward to is the Seletar mall which will be complete in December 2014 and start to contribute in 2015.

SPH should have no problem maintaining the dividends in the short run, but if the deterioration does not stop, even with stronger economic numbers, then either they have to go big in property development, or they need operate even more cost efficiently, or they could raise the ASP of papers. 19 mio annual savings, if you ask me, is not really significant.

The weird thing is: There is a research report saying SPH might test $4.4 in the coming weeks. Hmm... I would start shorting SPH if it does go to $4.4, hahahaha


Saturday, April 12, 2014

Random thoughts: That paper qualification

Was reading SMOL blog about success, and chat about graduate and non graduate. How many times have we heard parents say this: without a degree, how are u going to find a decent job and survive in Singapore? I heard my colleagues telling this to their charges numerous time.

My take: it's the economy that determines the quantity and quality of jobs, not the other way. If the economy is vibrant enough, even people without a diploma can find their footing and perhaps even do very well.

I attended a secondary friend wedding. My secondary school is a notorious school, according to a colleague who didn't know I came from
There, I didn't mind. It is true we had many gangsters there, the toilet was always lined up with smokers and once every fortnight, there will be a police car parked outside the school. I am very proud of my school, I love my 4 years there. Also, I think I am open to all people, I have no Pre-set mind on who are bad guys. In fact, I find ah bengs make great friends. Maybe I am beng myself? Haha!

Back to the dinner, there were many who just like me, went to university, and got a decent job, some became CFO, climbing the ladder successfully. Some, who stop after their O levels, are single parents who do haircut or make up for a living, some own their saloon, some are going to Paris to do make-up for models. Wow. Happening! Who needs a degree? Of course, there are also non glam jobs like hawkers selling carrot cake. But all Of us are happy catching up with one another. So, it's not gospel truth that u need a degree to survive. I am also highly aware that those learning to do haircut, make up, had a tough time during apprentice stage. They made very little and were bullied by their seniors while I and the other more academic inclined ones remained shield in the ivory tower of education and engage in intellectual exercises instead of learning how to engage the customers.

I can understand, nonetheless, why parents want their kids to believe its not possible to survive without a degree. One, it is not a bed of roses out there. Second, if u can climb the academic ladder, and become a doctor and / or lawyer or the likes, the last thing u need to worry is about your pay, although some unenlightened ones might have to worry about spending.

It is however, not a coincidence that those without hard knocks or being through rough patches tend to be yaya about their achievements, while many of my friends, are very restrained when they talk about their achievements.

In a highly competitive Singapore, we compare results, we benchmark against the best, while there is nothing wrong with these, there can be no end to comparison and knowing when comparison yield very little value is wisdom. Happiness is something that cannot be compared, when u compare if u are happier than someone else, u lost that tranquility and part of the happiness.

Pursuit paper, but academic excellence just mean u are taking a mainstream and proven path. It is well and good, but there is no need to be proud that u journey far in this path, I have more respect for those who taken the less traveled path, do u?

I told someone who is very disruptive in lesson and has no interest in study, that we study so that we stay in this safe path as long as possible until we are sure we want another path, or until we have difficulty staying in this main path. I ask, are u sure u want to go a less travelled route now? If not, u are pushing some of the track and they might get lost because of u. Think he woke up after that.

Now, it seems I have something against paper pursuit. Nope, I just make sure I am in a sector that place great emphasis on paper qualifications. Hahaha... Just kidding, I just go for a job that I always wanted, one that I find purposeful, and I am thankful that it turn out well.

Wednesday, April 9, 2014

Random thoughts: Tuition, tuitions

A follow-up from my previous blog. Would like to clarify I have nothing against tuition, many of my friends are in the industry. Anyway, below is an article I posted at valuebuddies sometime back, and still reflect my views on tuition. Views given are of my own and own capacity only.


Let me share my views on tuition:

Tuition centers:
Those tuition centers that accept only As or required entry tests, if we are thinking about the same ones, are doing accelerated programmes, and have track records of producing A*, although I believe many who went to those already are A* calibre, If you do not have the foundation, you might not be able to follow. I am not justifying for anything, but it is there for a reason, and is providing a niche service.

Tuition in general:
Kids with tuition fall broadly into 4 categories.
1) Genuinely needed help, cannot cope with the syllabus 
2) Parents just wanted a study companion, to follow through their kids' work, be a answering machine if possible.
3) Pushing for the top and last mark.
4) Just afraid to be different, when the "whole world" has it, and I don't provide, am I a bad parent?

My personal views only:
2) and 4) are particularly harmful, and counterproductive. There is no clear goal or objective, maybe just for the parents to feel good or less guilt. It very often breeds dependence on tutors and "quick answers", instead of understanding the value of "self-discovery". Self-discovery is important as it is the ingredient for passion for learning and lifelong learning

3) Might overwhelm kids if there are not ready, (slow bloomers perhaps, or foundation that is not as strong). Even if they are academically capable of coping, they might be overwhelmed by the sheer amount of work, think about study-life balance of kids too. We do not want to work till late at night, what makes you think the kids appreciate doing homework till late at night. Even if they can cope with the work and has time for fun, such highly competitive pursuit could easily lead to unbalanced focus of life. 

1) If you get a capable teacher who can customize lessons for your kid, make him improve his grades, you got a gem and keep him/her. Better results lead to better self-esteem and confidence, and away from distraction and despondency. But make sure they still RESPECT the teachers in school and do their work. 

I believe, our system can work without the shadow system of tuition. I know people will say I am just spouting politically correct answers. No, I am not, I am not saying no one fall through the cracks, there might be some, and there may be some valid reasons in 1) 

But Majority of the pupils, perhaps 80% should cope just as well or even better due to reasons i cited in 2), 3) and 4)

All comments are my personal views, speaking in my own personal capacity.

Tuesday, April 8, 2014

Random thoughts: wanting the best for our kids

In upbringing, I believe I am a contrarian compared to modern parents. In my line of work, I meet many parents, and have no lack of advice on what enrichment are effective and good for children. U name it, I heard it.

Some like abacus, and renowned enrichment like RR, ICR, ( I dun want to receive lawyer letters) have mixed reviews, and are overrated by the public. Some like shinchida( hope I get the name right), entry level kumon, people swear by it. Some like LL, used to have super reviews but have since receive less flattery review.

I think my son is coping well in languages but is rather weak in Maths, after he finished his swimming course, I might enrolled him in kumon.

What really shocked me is I see parents queuing overnight or get their maids to queue overnight to get into a particular kindergarten. It's fees are almost as expensive as local university, yet when I get off my car from my carpark, I saw sleeping bags and parents trying to keep awake using iPad. Wow. When I went to the mall whereby LL is located, I though people are queuing for million dollars ToTo, but they are actually signing their kids up for very ex. Tuition courses.Talk about brand loyalty

I used to give tuition, when I converse about the son study habits, I was shot down with:" I just want someone to study with him". This study tuition mum syndrome didn't stop at very young age like P1. Very often, when I call parents voicing concerns about their kids academic progression, very often, they would reply, he already had x number of tuitions, before hearing what I have to offer as solution. Is tuition the magic pill?

I have seen responsible kids, both of the same calibre, one has tuition, the other didn't. The one with tuition, performance tend to be quite volatile but is generally still slightly better than the other guy most of the time. But when the guy without tuition understand a concept, he never forgets it, and the baseline never recede.

My mum-in-law also nag at me for not teaching my son. I say let him learn at his own pace, I am more concerned about his values and social skills as he is the only son.

Guess I will regret it when my son fall behind others in school. But, if my son success is due to my pushing, what will he be without me. I have 2 great mothers who groom scholars calibre sons, telling me that they think they shortchanged their sons as they now expect the mothers to remind them and push them.

As long as my son cope well enough to stay in the mainstream of the education, I think I will not change my mindset. Les hope I dun regret my decision. In fact, I gave up a chance for my son to enrolled in a renowned primary school, my MiL is a bit upset, and some ask me why. I say I didn't mind he getting enrolled, but circumstances change, and I dun see the big deal in getting in a renowned school. There are pros and cons, but since the circumstances have it that it is easier to enroll somewhere else, so be it.

Wisdom or stubbornness or selfishness?

Sunday, April 6, 2014

Annual report review: Yangzijiang, Sabana Reit, Lee metals and Venture

Talk about book review, I will do a annual report review, so there will be no numbers here, just qualitative analysis/thoughts.

When we invest, we have in mind, a story for the company. The annual report confirms the story, unlike a novel, the more predictable the story is, the better it is, I do not like companies that give me surprises. Lets look at a few companies under my portfolio.

Lee Metals:

Story intact. Headwinds expected as competition increased, but construction expected to remain robust for the next few years. Key catalyst will be the TOP of Austville, and key expansion will be in the manufacturing and fabrication arm. MRT construction should demand strong. Only words that surprised me is "leader" position. Didn't know Lee metals is a leader in the supplier of reinforced steel, always thought Tata Steel (Natsteel) is the biggest. Gearing is high due to the management of inventory, if there is no wild swing in Steel prices, given their track records, Lee metals should be able to navigate fine.


Not vested. Again, AR is about the new capabilities (With 3D printing mentioned) and customers' satisfaction.  My story is about that of recovery. The last paragraph confirm my story is that of management too. "I am confident as the global economy returns to growth, the Group efforts over the past several years to broaden its market share and customer base, and to deepen the knowledge and domain technology will pay real dividends."

For the past 2 years, Venture falls more than its dividends when it goes X D. I wanted a bigger margin of safety too. So I wait. Hope I don't miss the boat on this one. It has to go closer to $7 cum dividends or $6.5 X D for me reduce cash holding.


Generally, story intact. Shipbuilding segment continues to do well. 10000 TEUs container delivered with the rest on scheduled. Seaspan exercised more options. The verdict on other segments such as property and HTM are still in the open. Story of conglomerate in the making is intact(Think Keppel). Mentioned injection  of HTM into a full finance company either through an IPO or reverse takeover in the future. Such spinoffs could be catalysts but will not happen anytime soon.

Biggest shocker, although not addressed in the AR is that Ren Yuanlin might be stepping downing in the next 3 years. Story would no longer valid if he leave totally, meaning not serving as executive director, or CEO.

As for the HTM, there is a need for some numbers. They now have a target of 12% yield for their HTM investments, some numbers would be appropriate here (Posted in valuebuddies by me )

The HTM is no longer made up of mostly of 1 year investment. (See note 15)

2013 2012
Within one year 8,343,505 8,047,060
Between one year to two years 4,361,700 3,362,900
Over two years 2,056,740 620,000

A big increase of investment whose maturity is over 2 years (15%). Maybe some "refinancing" behind the doors? It is fine with me as long as there are no surprises.

There also do not break down the HTM by yield anymore (Hope I didn't miss it )

Impairment is minimum
As at 1 January 653,250 554,280
Allowance made 587,220 405,196
Allowance reversed (605,876) (306,226)
As at 31 December 634,594 653,250

Prudence of type of collateral
Collateralised by: 2013 2012
– Listed shares in PRC 877,000 130,000
– Restricted shares of listed companies in PRC 150,000 230,000
– Unlisted shares in PRC 1,781,440 2,646,000
– Properties and land use rights 8,535,505 6,498,960
– Guaranteed by non-related corporations 3,418,000 2,525,000
14,761,945 12,029,960

If you ask me, rightly or wrongly, I think shares are the most useless collateral as the shares will most be probably be worthless when the company go bust. Glad shares as a collateral is reducing even though HTM is increasing.

Renyuanlin mentioned 2014 could well be the "darkest before dawn" as the fat margins of boom years orders are delivered and 2014 will see the lower margins orders being delivered. I see the "darkest moment" manageable (meaning while margin might be affected, it should not result in a loss) due to the following:

1) Tax rebate. From AR: "Newyangzi has recently been accredited as a “High/New Technology Enterprise” by Jiangsu Ministry of
Science and Technology Department. Upon the approval from the tax authority, Newyangzi will be enjoying a preferential corporate income tax rate of 15% for a period of 3 years starting from the fiscal year of 2013 by virtue of a preferential tax policy for accredited enterprises, as opposed to the prevailing corporate income tax rate of 25%. " Since rebate start in 2013, I expect the positive reversion to tax paid in 2013 and the tax savings in 2014 to offset some margin weakness.

2) Steel prices is still at historical low, although we do not know how long it will last, but given the excess supply, it should not be anytime soon.

Sabana Reit:

Sabana reit is one investment that I couldn't appreciate its story. I recently accumulate more when its price hit $1.1 It is a lucky decision since the price improve with the general market. I always believed that the conversion of Master leases to Multi-tenanted leases will not result in an Exodus of tenants as the sub-tenants have been increasing. I also believe the ex-master tenants are still renting. My analysis is correct. From AR:

"The vacant space (by NLA) at the four returned properties totaled 194,634 sq ft (or 5.5% of the total portfolio). That compared positively to 240,635 sq ft (or 7.3% of the total portfolio) of vacant space (by NLA) at the four expiring master-tenanted properties as at 30 June 2013. As at March 2014, the net balance of NLA available for lease was at 184,680 sq ft or 5.2% of the total portfolio."

However, the rent must increase or occupancy improve to offset the higher cost of managing mult-tenant units. As of March 2014, another 10000 square feet of space found tenants. Slow but progressing.

Then the predictability of story ends. Here are the few surprises/shocks I had:

1) You think the recent acquired AMD building occupancy sucks? Well,

200 Pandan is at 54.1%

123 Genting lane is at 62.8%

8 common wealth is at 68.6%

Lor Chuan is at 93.8%

With the exception of Lor Chuan, I was shocked by the high vacancy rate of the other 3 master leases, no wonder they wanted to return the master lease. So is rental income at 123 Genting, 8 commonwealth and 200 Pandan going to fall badly despite better or constant occupancy rate? We will need the Q1 results to figure that out.

2) Introduction of Units Reinvestment Plan.

Please la, manager cash out on their units very quickly after they get their management fees through units, what then will give investor's confidence? Also, given the high yield of the Reit now, and the discount on the units to attract people to subscribe to it, it's dilution to shareholders' ownership will not be insignificant.

3) Management is still " continue to take a selective approach in regards to new acquisitions and will continue to invest across asset types for greater diversification and stability" Please la (x2), fill up your stupid space first!

So, in generally, we have a idiot proof business in terms of industrial property reits, and at rather attractive valuation, but we have management whose interest is not aligned with the shareholders.