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

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 cashback

The different classfication of businesses by Peterlych

Interesting to learn he classify companies into different groups and develop different valuation to them.

1) Growers

2) Asset Plays

3) Stalwart

4) Turnarounds

5) Cyclical

Looking at my own portfolio,  SPH will fit into the stalwart category, as with the various GLC in SIngapore.

Cyclical could include YZJ, Golden agri

Asset plays?

Turnarounds? I stay away from this 

Perhaps its time to look at growers, Trek used to fit the bill, but turn out to be a lemon, others that might have the potential does not have strong balance sheet, perhaps its time to dig deeper. 

I wonder what are the reits call?

Namlee pressed metals actually fit into nothing, although it pay nice dividends, but dividend play should be at least 7% for those with leader position and maybe 8% for smaller ones, NamLee does not fit into both, It is bought for the NAV and cash generating story, which had soured.

 

SPH info

Review : Chapter 13, 1 up on wall street

PE should equate to growth rate, PE = 5 means you expect a 5% growth, so if a company is trading at PE 5 and you expect a 10% growth, then you have a deal.

Next is Long term growth+yield divide by PE, the higher the better, 1.5 is neutral, 2 is good, 3 is a steal.

Ways to gauge growth, order book and projects sold under development. Also take 10 years earnings, take av of last 3 years and the latest 3 years, there should be a growth and no losses in any year. Check also gearing level

* the closer you get to the finished products, the greater the "discount" you assigned to it, if you are commodity, CPO, the NAV is relative conservative, the inventories might need less discounting.

Effect on capex, monitor capex plans over a long period of time.

True growth, are growth that outpaced the receivables and  inventories

 

NDP rally

 

 

Heard a lot of complaints about the NDP rally.

Seriously, I think there is too much cynicism

Why would one even dream of thinking all the social spending will come free, there is no free lunch in this world, and SIngapore is a aging country, you do not want immigrants to top up the population, but you want better social spending? Does it mean sense to you?

I think its good to talk about future development, even if it is just a projection. The Paya Lebar development can be twisted into wasting tax payer money, backyard for the rich, magnet for overcrowding. Come on...

I think Singapore deserve better 

All that I have learned about reits

I learned quite a lot about reits from valuebuddies, many points which I might have missed earlier, and will use this post to recap:

1) Importance of sponsor during crisis does matter, but only if sponsor is also a large stakeholder.

2) Prudence capital management, means spreading out the loans and stretch them as many as possible, when interest rate are still low, those that also depend on short term loans, or worse use short term loans to increase gearing, are not prudent.

3) If the loan repayment is lower than 1 year of distributable income, it speaks volume of their prudence in capital management.

4) Different sources of capital, MTN, no concentration with a single bank.

5) Properties valuation and NPI yield offer little protection when crisis hit, although they offer insights to operation effectiveness and strength.

At such, Sabana is really an unknown, the CMF, who offer CMF? What is the counterparty risk of CMF? They did spread out their loans when opportunity comes, and got a better yield, but its only over 3-4 years, and the annual income could not cover any single year.

Cambridge is worse, will not touch cambridge, in my opinion, they are gearing up for more AEIs etc, they are proactive, but not prudent, many of their loans are short terms, which exposed them to risks, and their performance rewards structure reward them to do such aggressive expansion