NAV limitations: A comparison of Golden Agri and First Resources

Using Q3 latest results the NAV of Golden Agri and First Resources are

USD 0.69 and USD 0.66 respectively, and given the Shares price of

$0.42 and $1.865, and using a exchange rate of 1USD : 1.35, the discount and premium to NAV are:

(55%) discount and 110% premium

What a big difference isn't it? There are good reasons for the difference. First, a big part of the asset is from the item Biological assets, which is the plantations that produce the fruit punch used to make CPO.

Look at the two profile of plantations:

50% of Golden Agri plantation is of prime age and and 27% is beyond, whereas First resources has a 30% of planatation at prime age and only 13% beyond it. Also, First resources is still actively investing and growing the plantation size.

The growth for Golden Agri is relatively muted. However, Golden Agri has a wild card, it has a  Verdant Fund LP, which has concession for 220,000 ha in 201, with an additional 40,000 ha for small holder (out-grower) plantations. GAR is the worlds second-largest palm-oil plantation company, with a total planted area of 464,600 ha in Indonesia. The terms of the contract, which are valid for 65 years (with an option to extend an additional 33) are for palm oil plantations, out-grower schemes, and the construction of a new port.

There is little updates from Golden Agri since 2012, so if we were to take reference from this source:

http://ejatlas.org/conflict/golden-agri-resources-veroleum-palm-oil-plantations-sinoe-liberia

"The company advertizes it will produce over 1 million tons of palm oil, directly employ 40,000 people, and develop infrastructure. 220,000 ha are leased to GVL, plus an additional 40,000 ha for out-growers to produce palm oil, but as of April 2013 only 6,000 ha were planted. The surrounding 100 ha around the port is also the property of GVL. 5% by volume was to be sold domestically at local market rates – therefore allowing 95% of the product to be exported. "

When there is no official presentation from golden agri, we can relate only on third parties website like this. The website contain GVL response to the complaint, while progress is made, I would only think it is one big mess before the fund/ project become positive to Golden Agri

http://www.rspo.org/file/RSPO_Grievance_Panel_Report_June2013.pdf

Next Assumption of valuation:

Golden Agri 2013 AR:

Significant assumptions made in determining the fair values of the oil palm plantations are as follows:

(a) No new planting or re-planting activities are assumed;

(b) Oil palm trees have an average life of 25 years, with the first three years as immature and remaining

years as mature;

(c) Yield per hectare, based on average historical performance;

(d) Discount rate of 8.5% (2012: 9.4%) per annum; and

(e) Average market price of CPO of US$966 (2012: US$923) per tonne.

First Resources:

First Resources has higher discount rate and lower projected selling price of CPO, is using Level 3 fair value measurement whereas golden agri is using Level 2 fair value measurement. 

The difference:

Fair Value Hierarchy

The following table presents financial assets and financial liabilities measured at fair value and classified by

level of the following fair value measurement hierarchy:

(a) Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

(b) Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or

liability, either directly (that is as prices) or indirectly (i.e. derived from prices); and

(c) Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)

You understand the above? I don't, I just know First resource computation is more conservative. I do not know the equation of computation, otherwise I could do a sensitivity test.

Conclusion:

Now is the tough part.

It is established that First resources should definitely command a premium over golden agri in terms of NAV, but the gap is really super BIG.

Is is a 55% discount over 109% premium, and we did not go into other qualitative aspect of Golden Agri as a Vertically integrated player of CPO.

If I would exposure to CPO recovery, I would still choose Golden Agri over First Resources, what about you?

Portfolio update

Here is my latest portfolio update:

Basically in the last 2 months, the only NEW addition is MIT.

I have however accumulate ST engineering, Sembcorp Industries, Lee Metals and Lippo Malls Reit.

I think I can still sleep well with these additions except Lippo Mall. I do think it is attractively valued, but I would like Lippomall to form a smaller part of my portfolio. I will readjust it when the price is right.

In fact, depending on the earning results, I might take some money off the table too.

I am heavily vested in Industrial Reit too. I am actually bullish on Industrial Reits. Ok, you might think I am bullshitting, but I like to buy when they are not at the peak of the cycle when everything look rosy. If you look at my previous analysis on MIT, I think Industrial property cycle is far from the peak, although I have no idea what is the bottom, and such investing style usually makes me swim deeper into the red.

I average down on Sembcorp and ST engineering. I like the diversity of their business when looking at them combined, you have SIngapore INc without banking

I also double Lee metals, granted the iron ore price is breaking new low quite frequently, I believed Q4 to turn in EPS of 1 cent. If my hypothesis is correct, then I think my base value of 4 cents EPS is a downcycle is safe. If profits fall more drastically or worse, Q4 become loss making, then I make a wrong call. I am expecting 1.5 cents to 2.5 cents dividends for its FY.

So, am I looking to add anything. I did look at Keppel When it went nearer to $8, but I think no need to see anything now la.

If anything, I will be selling some shares to locked in profits.

Will update more when the earning results are out, just super in a blogging mood. So 4 posts in a day! This must be my record!

Cheers,
Sillyinvestor

Random thoughts: Another high for my one week at work

Another happy thing that happened during my one week at work, I think I finally successfully facilitated a discussion session.

I have been to those many meetings and tiring discussion sessions. Some of the things that dishearten me in the past:

1) NATO
2) Staff dozing off
3) Lack of purpose, more of wayang than helping pupils.

Those in my line, or used to be in my line, know we have many professional learning community, sharing etc, I am speaking for myself only, but I find only 20% of these to be useful, 5% game changing, 30% harmless, and close to half the time, just plain WOT (waste of time)

I am very happy when I managed to avoid all 3 pitfalls, and I managed to stick to the time, no overrun.

I did the most thorough analysis in my 10 years of service. Usually, either I am so hard-pressed to do other distractions or I do not have enough ownership to do it. This time round, I burn several weekends nights to do it properly. I did it all by myself. I find it a waste of time for everyone to sit around the table and look at excel tables and give reasons why they didn't hit targets. WOT. I am more interested in what we can do.

So I show the team the analysis, identified the weakest areas back by data, and provide the focus and objectives of what I hope to see improve, both qualitatively and  quantitatively.

I did it all in 15 minutes, and I already see some disconnected.

Then I ask them the "how". I admitted I am very apprehensive when  I decided to split the team into 2 groups to do brainstorming, with the element of competition and reward of chocolate for every contribution. (I got the chocolate cheap at NTUC warehouse, see here), the group with more contributions get extra chocolates. One staff lamented that she does not want chocolate, I told her to give it to her pupil. Surprisingly, when I start, many had fun brainstorming, even the very senior teacher looked like a little girl when I reward her with chocolate. I told the team, all suggestions are welcomed, we do not need to consider if we have the resources to do it, there is also no need to debate on the validity of suggestions.

The senior teacher did point out some reservations, but it did not affect the mood of participation.

I told them it is brainstorming, and tapping on collective wisdom, the three final committees will finally decide what to adopt and what to do, aligned with objectives and targets, they can choose not to adopt any suggestions at all.

Many ideas did surfaced, and even before we go into details, I already seem to have a rough idea what can be done. So, when we finally split into the specific committee to come up with the action plan (yea, its a dirty word in the past), we did it within 30 minutes with the roles and timeline all decided. What really gave me the "Kick" is when a staff turn around and said very nonchalantly:" Thank you for this, I found this very purposeful, and really helping the pupils."

Shoik!!  My KPI for myself is for teachers to find their passion in teaching. It sound very vague, but with this simple remark, it really made my day and gave me the energy for the whole week.

..................

Ya...This is my third post for the day. I very lor sor, cannot meh... not happy arh... call police la

Cheers
Sillyinvestor

Random thoughts: Tired but happy teacher

I will start to blog a bit more about my teaching, if you are not interested, once you see the word teach, you can stop reading.

I have been having Flu for 2 weeks now, it made me tired easily. But the new school environment is really invigorating.

I never like to teach civics and moral as a subject, not that I do not believe in values, but I never believed it can be taught like any other subjects. I do not believe in doing the activities in the workbook, I always like at the theme, of the value behind the exercises, and design activities for them, and really hope that they will "feel" the lesson. Although, having explicit time allocated for this is good and sound, I usually rubbished the exercises.

I have always buy into the hand, heart, mind concept of learning CME, or CCE which they called it now. But I think I have been always exposed to the mind type of training, which hint of propaganda to me. I had wanted to do the "hands" thing, but it has been very ad hoc.

I took part in the flea market charity drive, and another event of the same concept. Using these 2 as platforms to teach, is really better. I ask the class to paint and decorate the kites meant for sale, and I used it to teach the value of "pride in work", and ask them if there is no pride in decorating the kite, would it sell? The point was made clearly than just talking about it over a workbool exercise.

Also, I finally feel I am a more holistic teacher now, as compared to just a language teacher. I am enjoying myself.

Puzzling price movements of counters in my radar

Answers might abound soon with the release of Q4 results.

ST engineering is doing share-buy backs almost daily, substantial shareholder increased stake, but price is range bound and having pressure to the downside. Aerospace is weak, but compare to O and G, you get my point. Think in terms of percentage of revenue and further break it down, ST has problem mainly in Europe which company had restructured.  It look like a good deal compared to SCI. SCI is bouncing off its low, and hit a high of above $4.4, whereas ST remain sluggish. Weird. At least to me. The external factors are also more favorable to ST. Weak currency of Sing dollars while ST has a strong and not insignificant US market. 

Next, Venture. Aberdeen has been constantly selling, yet it is moving north. 

Of course, I owned all three counters, and I am not complaining, it just showed in the short term, nothing is predictable.

The weaker Sing Dollars might help LMIR whose revenue is in IDR, IDR will be relatively stronger, hedge cost will be the same, but revenue conversion will be better. That's why it finally broke out of the range of 33.5 cents to 34.5 cents. 

But, I always thought the catalyst will have to be in earnings. But it is the reining in of Sing dollars that is providing the boast now. But if that is the case, why is ST not benefiting? 

Maybe more answers will be forthcoming with the earning reports. 

Reits are also surprising strong, from just a month ago, definitely more than what I would expect given the impending hike in interest rate be it in June or later. 

Maybe, time for me to take some

Profits off the table with the run up of price when dividends is announced ( hopefully)

Are you scratching your head recently?

Random stories: 3 wishes

3 men found a jinn.

"I will grant each of you a wish." Said the Jinn.

"I want 3 wishes granted instead of 1" said the first.

"You think I stupid meh, on your third wish, you will ask for  3 or 30 wishes more, I am a jinn, not a wish ATM, you moron! Give you one more chance!"

"Ok ok, I am sorry. I want happiness." Said the first.

"WTF... Can be more specific? how the hell am I supposed to know what makes you happy, I am not your mistress!"

Fustrated, the first man yelled:" give me lots of money la!"

"That's easy, I already gave you 10 billion dollars. Be gone! Next." 

"Hmm... I want to be appreciate whatever I have, always feeling contented. Is this too vague?"

"No, no, that's ok. But why not 10 billion?" Asked Jinn

"If I have 10 billion, but I worried this worried that, what is the point? If I have 10 billion and crave 100 billion, there is no end to it."

"This is tough, need more power, I can't gave you everything, but I can remove greed and jealousy, without these, maybe you find contentment. Now go" said the Jinn

The third came forward. "I want 100 billion." Jinn frowned and replied:" after hearing what the second man said, what do you still want money?"

He said:" I am not sure if I will appreciate or not appreciate what I have, so of course take the most tangible money first , 100 billion is freckling lots of money! I should be happy. And even if I am unhappy, there is plenty of ways to buy merry what! Also, who is to say money must be inversely related with happiness."

"Ok, you get what you wished" said the Jinn. 

-----------------------------------

If I find a Jinn, I will be the third man.

If not, I strive to be second man.

What about you?

Techcomp: A dragon can't fly above Europe?

(Not vested) This blog is about why I didn't move on with a possible purchase. 

I owned Techcomp shares in the 2010-11. Made some capital gain about 20% in 1 year holding period.

On and off, I did look at Techcomp. It has a good qualatative story. Distributor and manufacturer of Analytical and medical equipments, in the 2009-2011, the growth story was the expansion of manufacturing arm and the acquistion of European company for technological advances and to break into the Europe markets. The food scares in China and the ramp up in health care spending are supposed to be big catalysts for its products. 

It has never really turn around the Europe business but managed limp around ok. It's first major problem come when Sino-Japanese relations took a turn for the worse, and being a distributor for a number of Japanese products, business was affected. 

There was some renewed interest recently when there was a share placement to strategic investors, I look again, thinking sino-Japanese relations is a one off event when business is concerned. I saw the weak current ratio and stopped digging. 

Then, few days ago, Europe announced QE, so if QE works, then will Techcomp Europe ventures finally pay off. Before 2010, it did have very consistent growth in both top and bottom lines. Maybe with the flush of liquidity, the PRC company can finally swim in Europe waters and soar. This coincide with a about 30% fall in price to 25 cents ( below NAV) just days earlier, and I decided to take a third look.

 

I decided to look beyond the weak balance sheet for a possible turnaround play. I track the company acquistions pattern, rather frequent if we include the latest American company acquisition. 

I was still rather disturbed. The companies brought by the Techcomp has really diverse manufacturing capabilities. What exactly is Techcomp looking for? Also, manufacturing is making loss according to the most recent  AR, I thought Medical equipments has rather good margins, and whatever happened to the clean cabinets used in hospitals for PRC? 

I look away again, I need another drastic fall in price or catalyst to happen before I look at in again.

Random thoughts: ideas for stall at a flee market

There is this flee market whereby pupils will sell goods (guided by teachers) and the proceeds will go to charity.

I thought it is a worthwhile initiative and agree to take part. Then I realized I have to source for the supply myself and have to plan everything. Another project with the concept of learning entreprenuership has the supply provided, and marks are awarded for presentation. I thought of both to be the same. I took part in both, think I must be crazy or think myself to free, looking back.

Initially, I thought, how bad can it be. I have been analysising business haven't I?

I thought of balloon castle, selling stationary with a unique packaging message etc. The real problem is cost! When I source for the supply using contacts and online. The cost I can get is about $1 to $2. I intend to sell it at only $2, any higher, I think will be quite a turn off. Best part, if I do not make a profit, I do not mind, but all the money will go to waste and I will feel bad trying to  recover cost, and will most probably just treat my seed money as donation too.

My CCE HOD who used to run a business outside, see me thinking through this event (her project actually, I am just a participant), told me she will do a donation drive and ask pupils to package the collected items nicely so that they are involved not just in the selling process. And it will be FOC. What a brilliant idea! She has kindly agree to let me share the "loot" oops, no la, collection. 

Anyone has any brilliant idea? Leave a comment or if you want privacy send me an email? I intend to only use $200 for this "venture"

LOL, sorry for being a giam gana

Random thoughts: NTUC warehouse at Joo Koon

NTUC warehouse is a place that required membership. But if u are just taking a look around, there is no need to pay.

It is a surprising nice place for kids.

The corridors are wide. Enough for them to run a around a bit, and it is not crowded on a Sunday morning. The items on display are mostly in bunk, so my boy and niece cannot take them easily, unlike neighborhood NTUC, I am always worried about them dropping or breaking anything.

There is a walk in chiller. My 2 kids have a  great time running in and out and experiencing "winter" LoL. Even if I had some fun doing that... Hehe 

As for products, not really all things are cheap, you need to select. Some of the big packets chocolate, candies are really cheap because it is expiring in late February. So not really useful. But I still

Manage to get big bag of Hershey chocolates, and my wife got big box of hello panda, Skittles and yanyan for her pupils too. Ya, she more generous.

Some of the new year decorations are really cheap. A long vase for putting YiNg Liu is only $8!! I saw a vase going for $40 at ikea. 

The yong tau fu are frozen, but I think it really cost less than what you get by piece at wet market. I think if we are cooking for big family, the yong tau fu can last 2 meals. 

The staff are friendly too. 

Random thoughts: 2 weeks and looking into 2015

These 2 weeks have been emotional rich for me. Plenty of me time for "ah huh" moments. 

I didn't really set resolutions for 2015. I think I can now. 

1) Keep running once a week

2) Always try to bring a smile to my family. I have been busy, some nights I worked till 1 am ( because I lazy to do some admin work earlier on) and down will flu. So very often, I have been quite zombie. Today, is those days again. My wife asked why I so stone and serious, I said effect of medicine. I feel apologetic as I am frequently in the state of "stone". It's only when I try to put the wind shield on my car and pretend to be hit that I heard my wife giggle. How sweet the sound, I realised I actually find her "lor so" and immature many times, but I never really try to make her smile. Let's see if I can get her to smile at least a few days in a week. Same goes for my parents ( both side, giving blessing as in Santa Claus) is my hidden resolution when I write that post, but never get on with it.

3) Work. Continue with what I believed. As a middle manager, I always ask myself what is my "value"? I felt in my new school, there are many capable people who can do my job better. So I remind myself, whatever I want to change, must impact pupils directly.

I will take away as much admin chores as possible. SEM and review writing is mine, I want them to do proper reflection.

Be kind to mistakes, complaints. As long as they are not taking pupils for a ride, all weaknesses should be forgiven, and have a warmth environment to teach with little stress.

I always think I might be happier if I am just a teacher. Until I met another middle manager trying to push work to others, I can say "no" due to my "position", what if I am at the lower food chain, not sure if it will kill the passion. I resolute never to do that knowingly.

Keep exploring new methods to teach. I am having fun. Especially when I tried removing the tables and chairs and switch off the fans to experince hardship of Samsui women. My class till now remember how 辛苦means. I ask them to carry 2 bags over their shoulder and experince the weight. Give them coupons as pay. Ask them to exchange it for table or chair, or if they want to keep it for the final exchange of waiver to do writing exercises. One remarked: 老师，你不会去抢！”. What a authentic context to teach about exploitation! 

Sorry about rattling about my lesson. My pride! Lol. I keep tempting them throughout to give up their coupons to exchange for a chair or get back their bags. Half the class gave in. The last 6 standing, I explain 吃苦耐劳，and节省。I thought it will be more effective than using powerpoints. But alas, the next day, most forgotten the words, only can remember 辛苦。LOL. Think only 2 remembered most.

Random stories: Man with a wolf heart

The heart smith had many coming to him for help. Most people came to him for broken heart. They felt broken with the the passing away of a loved one, or felt rejected and want to be love again. With his experince, he has no problem helping people with broken hearts. 

It was during the wee hours of morning, he would sometime get requests for something different. 

A man was carried into his place in a stretcher. One of the person carrying the stretcher told the heart smith that the man had cheated his parents and friends of their money and ran away. They found him and drugged him. They wanted the heart smith to fix his black heart so that he would return the money. The heart smith did the repair. The heart smith would only repair heart upon request, he vowed never to fix anyone's heart without request as he did not want to play God. Hence, although he saw the 2 men carrying the stretcher with black heart too, he said nothing. 

In recent days, news of gruesome murders spread. There was a murderer on the loose. One day, a famous philanthropist came. He had helped many. The heart smith stood up and bow as a show of respect. The  philanthropist said:" I have a heart of the wolf, every full

Moon I have this thirst for blood, I have tried everything to tame it, I would chained and locked myself during full

Moon nights in case I lost the battle. I have been very successful in taming this monster in recent years, but this month, the full moons appear out of nowhere. It no where near the 15th of the month! I want a second chance, and I think I deserve a second chance." The philanthropist is almost in tears when he said the last word. 

The heart smith immediately agreed but told him he never did such repair before. The philanthropist said:" please, thank you, I have nothing to lose."

The heart smith worked hard, it is complicated, but realized he might just be able to repair it. He needed something though. A small piece of heart to replace the toxic part. He was wondering how to proceed when the philanthropist start shaking uncontrollably. The Heart smith look out, "what the hell! Why is there a full

Moon suddenly!" He thought. In desperation, he took a piece of his own heart to complete the filling. Now all he need to do is to soldering, the rest of the process will be a piece of cake.

Enduring the pain in his heart, the heartsmith preserve, with blood soaking his shirt. The philanthropist seem

To have calm down, he saw what the heart smith is doing and said thank you.

Suddenly, the door burst open! The constable chief has arrived with his constables. "So, what evil black magic is this! Arrest them." Yelled the chief.

The heartsmith pleaded:" No I can cure him! Give me time! Please" 

The constables separate them forcefully. "He can't survive like this!" Before he could said another word, he was knocked unconscious, but before he lost consciousness, he saw the philanthropist lip saying:"It's ok, thank you!"

When the heartsmith wake up. He learnt that the philanthropist has died. He will be on trial soon. Many of the people that the heart smith helped came forward to help him, vouch for his innocence. He was released.

At the entrance, the constable chief told him:" count yourself lucky. I will be watching you" The heartsmith said nothing. Even he could do nothing for his icy heart. He walked away, far away for the town and vowed never to do a heart repair again. For he now lived with a hole in his heart.

(Adapted from

Short stories- the heart smith)

Random thoughts: What I want...

There is this passage in the curriculum that write about the woods wanting to see the world and was made to a ship, bamboo wanting to sing, and make into a flute.

So I give my class a task, I ask them what they want. I give them 12 choices.

智慧 = wisdom
运气 = luck
健康 = health
名气 = fame
钱财 = wealth
幸福 = bliss
美貌 = beauty
自信 = confidence
爱 =love
梦想 = dream 
自由 = freedom
尊重 = respect

Why these 12 choices? Because these are the words they learn, LOL, I am doing revision at the same time. They are supposed to write a short paragraph of what they want, why they want it, and how are they going to achieve it.

To give them an example, I wrote a "model answer" for their reference. I wrote it in less than 5 minutes. But when I read it aloud in class, it gave me goosebumps. It really describe how I feel, what I wanted. I would say it is 80% accurate in describing how I feel.

It goes like this:

我想要智慧。

让我明白世界的真理。

让我明白什么是幸福，

怎么得到幸福，

也怎么让人幸福。

于是，我努力生活。

我做好一切事物，

常常为别人着想。

我有了知足，我快乐了。

For those who cannot understand Chinese, it is something like this:

I want wisdom,
for me to understand the truth about the world
for me to understand what is happiness
and how to achieve happiness
and at the same time, give happiness to others.
I give my best in all I do,
I think of others,
I learned contentment, I am happy.

When I marked their books today, I am not surprised to see that the majority choose wealth, followed by health. The rest choose fame, freedom and happiness. Love and dream are selected by one pupil each respectively. 

The ironic thing is, we all know the standard answer of choosing anything except wealth, but we live our life putting wealth accumulation at the forefront.

There are a few that wanted wealth so that they can be happy! Hey!! Happiness is one of the options!! Why not choose it directly, why put the cart in front of the horse? The nice thing about teaching young kids is that they are still innocent, and write very honestly. I am not going to destroy that by telling them what is the "right" choice or "standard" answer. How honest and cute can they get? I have a girl writing that one way of getting wealth is to marry well! I have a good laugh. Do note that I am not making fun of any pupil work, but really enjoy the innocence and purity in their answers. 

I ask them to share with others what they want, why and how to achieve it.

I then ask them to ask themselves is what they choose what they really want?

How hard and persistent they are in pursuit of that goal tell a lot if they really want it, most importantly, they need to ask themselves when they achieve what they want, how would they feel. 

How to see through red dusk if we do not chase after dusk at the first place?

What would you choose? LOL

Cheers
Sillyinvestor aka dark teacher

Random thoughts: roller-coaster ride of work and rest

As a teacher, I have a relatively long break of about 3 weeks in year end. Huh? I have 6 weeks? Come join and see for yourself.

Don't get me wrong, 3 weeks is already super duper cool for me. In fact, I would switch off for quite a while and worried about going back to work and get busy. I call it the engine off syndrome, you have a hard time restarting.

I think about getting another job, earning financial freedom, etc. I dread going to work and getting back into hectic tempo. 

But 3 days into full working days, I think my engine has warned and I don't feel so blue anymore, although I really sleep much lesser and is generally tired and constantly thinking throughout the day.

It's such a roller-coaster ride. But I was thinking, if I have a choice and choose not to work, will I be a lesser person in terms of productivity. Will I deprived myself the chance to undergo the rite of fire?

Anyone feel like this too? 

Random story: The farmer

The farmer toiled whole day at the field. He hate the work and at the same time do not know what he would do without his field. 

He dreamed of the day he could leave the field and do what he likes. He is not too sure what he wants, but he enjoy fishing at the lake, the feeling of owning the world, and simply watching the world move by. 

He worked extra hard, learning about new farming techniques, use of fertilizers, rotation of crops etc. He made progress, but one storm killed his harvest. He slip into depression.

He picked himself up again, and swore not to let life get the better of him, and he tried again. This time round, he is more successful. Then his son fell sick, and he has to spend a fortune curing his son. 

The second setback was too

Much for him. He now make just enough to make ends meet. There is just too much uncertainty. He find time for himself and fishing. He taught he has found the life he wanted, until he couldn't find the money to treat his wife cancer, and his wife knowing the situation, refused treatment too.

The farmer is full of guilt, and cried and cried. His son blamed him. He yell at his wife, whenever his wife smiled at him on her sick bed. 

When his wife conditions worsen, he ran to the temple, and pray for help. He got none. 

His wife passed away. 

He used alcohol to lessen his pain. His son has to give up his studies to help with the family expenses. 

He keep yelling at his son. He realised his son now smiled at him the same way his wife did. It hurted him.

He went fishing, and didn't returned home for days. When he did, he saw his abondoned field. He regret his despondency. He went back and found  whatever valuables that was left was gone with the son.

He look back at his wretched life and ask if he could turn back time, what would he have done differently? 

He went back to the field to toil. It seems to understand his pain, and he gave all he got to the field.

A few years later, with only work in his mind, and nothing else, his farm business grow, and his life and fortune turn for better. 

There was another storm in another province, and a businessman came to him, wanting to buy out his whole farm. He told the farmer " quote your price."

The farmer said "take all you need"

The businesman said:" what can I do for u?"

The farmer said:" if only I stop caring about myself only, my pain, my dream, my life, earlier"

I need nothing, take them. Help the victims, just let me continue toiling the soil. 

Random thoughts: beating the heat in a morning walk

In the past, we always have this weekend walk/ trek at Mount Faber or botanic gardens. As parents get older, they cannot take the slope and sometimes even I can't stand the heat. We end up just walking for half an hour.

I know of a few good places that are outdoor, yet well sheltered.

This blog is about the Sentosa Broadway.

From vivo, walk along the Broadway just beside the harbour and enjoy the view. A few tug boats polluted the otherwise fresh air.

Not too bad a view right? And it is sheltered

We even find a baby monitor lazard, happening right?

Doing a stress test for Mapletree Industrial Trust

I recently added MIT to my portfolio.

A 7% yield for a blue chip Reit which I believed is sustainable, is good enough for me. I am not bothered by the fact that it is trading above NAV.

For my previous analysis, please see here.

I decided to do some stress tests. I am being realistic here, not conservative. You can apply a harsher test for bigger MOS.

First interest rate hike test.

126 mio to mature in FY 15, lets add 1% more interest cost for this amount.

199 mio to mature in FY 16, lets add 2% more interest cost for this amount

145 mio to mature in FY 17, lets add 3% more interest cost for this amount

1.25 mio + 4 mio + 4.35 mio = 9.6 mio extra cost.

Next occupancy loss.

The picture show industry occupancy rate as a whole, you can see vacancy rate has been creeping up except for business park. I like to buy when things are not so rosy to prevent shock. 

Next, stretching back to 2007.

Again, we can see the occupancy rate is already at a low of 90% but taking into the consideration the high available stock release into the system, it is safe to say that we can apply some further discount of 5%, and also 5% fall in rental rates.

We have

Flatted factories: 156.5 mio rev ->141 mio

High Tech: 44.4 mio -> 40.1 mio

Business Park: 50.1 mio -> 45.2 mio

Ramp up :42.1 mio -> 38 mio

Loss in revenue=29 mio

Loss in distribution = 29 mio * 0.75 * 0.75

=16 mio

Approximate total loss of distribution at 2017 or earlier = 26 mio

However, MIT has 2 BTS fully committed

Both are high tech building

BTS – Equinix: 385,000 sft

BTS – Hewlett-Packard: Increase of approximately 400,00 sft

Giving a 10% discount to spot rate, will yield $2.16 per month per square foot, which I think is a conservative enough rate in the next three year.

So we have 785000*2.16*12= 20.3 mio revenue

contribution to distribution = 20.3 * 0.75 * 0.75

                                            = 11.5 mio

Net impact on distribution = 26 - 11.5

                                           = 14.5 mio

1H distribution = 88 mio

Annualize it = 176 mio

Take away 14.4 mio, we will have 161.6 mio

Assume 10% dilution in the next 3 years due to DRP

We have have a DPU of 8.6 cents

At my purchase price of $1.47, it will be a yield of  5.8%

Now, I ask myself, what is the possibility of occupancy rate and rental rate all falling by 5% and dilution increase by 10 %? What is the possibility of something worse than that happening.

With government tapering land release for industrial use, I believe I am conservative enough in the stress test. 

 (http://www.businesstimes.com.sg/real-estate/government-trims-confirmed-list-industrial-land-sales-for-h1-2015)

I am quite sure I am not at the peak of the cycle, the longer term demand of the industrial area, will then depend on the economy of Singapore. I do not want to go into that. I believe Singapore Inc will continue to be sound, there is already noise about MAS doing something about our currency to make manufacturing more competitive. 

Is 5.8% yield a OK yield for me at the darkest hour? (If my projection is correct, the industrial space will be at its worst in a decade).

Given the strong pipeline of possible acquisitions, and a decent gearing of 33% (Which is expected to fall with DRP), will there be no more injections for the next 3 years to offset the falling occupancy?

My answer is 5.8% yield, could well be the worst case scenario, It is not too far from my target of 6% return and the probability of that happening is actually very low.

So I buy. This is my valuation method. =)

Your truly Silly

Cheers. 

Random thoughts: A cool and inexpensive way for family time in SIngapore

Where: Airport

T3 parking. $10?

Skytrain to T1: Kids super excited!

Starbucks coffee to go:$5 per pax (optional)

T1 playground: Free

Enjoy the view from the viewing gallery and sip coffee as your kids entertain themselves: Priceless

Lunch: Up to you

Photo-taking at atrium T3: Free (Nice christmas decoration)

T3 basement toy shop; bring along a toyomi car, there is a big car track in the toyshop: Kids are really happy playing and trying to squeeze each other out, while your in-law and wife go shopping at NTUC. Good me time and switch off.

If you have spend more than $30 for your lunch, bring your kid to mickey house bouncing castle at Level 1 of T3, its free.

A day out with the family. Priceless