An eventful August!

Hello people! Seldom I got a chance to relax on a Sunday. PARDON my many posts. I saw B and Rolf doing this and shamelessly decide to board the bandwagon. 

I brought back CMPH at 97cents. With the span of a short 1 month of August, I have bought, sell and bought again. I bought when many bloggers are repositioning after the not so clear cut acquisitions of 3 toll roads and the threat of dilution. I decide to give track records of  management the benefit of doubt over my doubt. 

I (include my wife) also bought 

STE at 3.15 and 2.91

Ascendas Reit at 2.28

MIT at 1.46

SSC at 27.5.cents

Sembcorp Industries at 3.85

Gold UsD at 1040-1050

Not thinking of selling anything yet. But will be more selective going forward. 

Looking at the following In order of pereference:

1) Accordia Golf Trust

2) Singapore Shipping 

3) Lippo Mall Retail Trust

4) STE

5) CCT

6) Ascendas Hospitality 

Random thoughts: A conversation with my wife who is jittery about the market

A conversation with my wife who is feeling a bit jittery just a day after buying. LOL. Some of the conversation are edited for easier reading. For anyone who might be feeling a bit unsettled.

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Wife: Are we buying too much? Shouldn't we have some cash as spare?

Me: huh? When u told me u have X amount of cash and I ask u if u are comfortable with having X\2 as investment, u say ok. Now we are only X/4 vested. U are just buying back what u sold off earlier. 

W: ya, but I buying more than selling. I thought I will sell some before I buy more?

I: No, that's not actually what I have in my mind when I say building up a base where dividends will start to grow to a level to which we might need not to work or become a significant income supplement.

W: aiyo! How is that possible? Stop dreaming.

I: why is it not possible? Maybe not in the short term, maybe not early retirement, but Defintely possible if u are thinking about it paying for our overseas trip when we are older.

if u want to buy sell buy sell for capital gain, then that is gambling because I dun have the skills for that. But I do have a plan for a longer term of things and what to do even if market collect another 15%.  

W: mum told me even ST engineering can go to $2.

I: why not? It can go to $1.5 for all I know, that's why I always ask u to buy stronger companies that keep paying dividends. We might be far from getting the bottom right, but look, ST is giving 5% yield now, with a track record of stable or growing dividends, assume u hold it for a decade, u have get back half your money, and even if we cannot benefit from the bottom, I believe our  av. Price should not be lower than the fair price when market eventually recover.

W : when times are bad, where got dividends, even if they dun collapse?

I: with the exception of Sing Shipping, all companies you bought are blue chips with unbroken dividend records. If they fail, Singapore is in a really bad state. Also, we are not buying a single company with more than 15% of portfolio, we can still do ok even if we are wrong with 1 company and it collapse. 

W: (not convinced look.)

I : look maple industrial parent is link to temasek, Acendas is link to JTC, what are u afraid of? Anyway, I told u not to look at the market after u buy, just trust me to ask u to buy and sell

W: a.. Our son birthday ... ....

I: ( thoughts: talk about flicked minded... zzzz) 

Capital commercial Trust

This trust is interesting. 

Growth areas are visible with Capital Green, rental revision.

There are 4 risks.

1) Interešt rate hike

2) Falling rental 

3) Rising Vacancy 

4) Over-valuation

To know if growth can offset the risks, let's do some calculation.

Capital Green has committed rent of at least $11. Let's take the minimum.

Assume full year 2016 of contribution, that is 74.7 mio of contribution. 

Assume they buy the remainder 60% stake at late 2016, so 2017 will be 112mio of rental rev.

Total rev growth for 2 years about 260 mio.  Assume margin of 0.8, Net profits should in the range of 200 mio

Most of the interešt cost is fix, so the risk of hike comes when it is refinancing. Assume 0.5 interešt in 2015, further 1% in 2016 and 2 % in 2017. Total increase in finace cost will be 24 mio cumulative without new loan to fund Capital Green.

Highly unlikely that The trust will take a 1 billion loan at one go to fiancé capital green given it always spread out its debt obligation, but for simplistic in calculation,  again assume 4% interešt cost (highest of all its loan), it will be about 40 mio and total finance cost will balloon to 64 mio.

Growth more than offset interešt risk. 

Next operating weakness.

It's expiring rents are lower than current rents. And it is especially evident for Raffles City. (As pointed out by fifth person report)

In fact, income from joint ventures, which is mainly from Raffles city has been growing nicely from a year ago due to positive rental revision.

I think the odds are in favor of positive rental revision or at least status quo. Also, my experince with MIT and A-reit is it's entirely possible to have rental revision at above current rental rate. Given there is a good buffer now, I think we are quite safe from falling rental. 

That we have the issue of high vacancy. I initially wanted to talk about their tenants, but my gut speculation is that unlike retail  or industry, where there might be some stickyness due to customers' familiarity or transport cost of shifting heavy machinery, I think office shifting/ downsizing should not be too much of a hassle if the savings is worth it. So yes, this is one risk that might show itself when the supply gut come on in 2016.

Next, valuation risk. It's priced below NAV, but I believe that hardly provide any MOS since the cap rate is of the range of 4%. (See B post, I shan't parrot)

Also, I think distribution should be a main factor of valuation. So what price is a good price? I would think 7% yield would be decent taking into account its possible growth, quality asset, prudence capital management. That would be $1.2. It is not actually a far target given how badly US market is falling and te expected knock on effect on Singapore Market. It might NOT be a price that is bear - proof, but it should be a reasonable longer term price should u have to wait out a bear and collect dividends. 

Lastly, since Capital Green is so important in terms of growth for the trust. We might want to look at it slightly closer.

I believed capital green would be bought by 2017 to provide the staggered growth for the next 3 years. Also, the longer they wait, the higher the compounded cost. 

I made a simple minimum cost of acquisition  based on 6.3% compounded annually of development cost of 1.4 billion at 2017. With 60% stake, it would cost 1.01 billion. But would it be yield accretive? Given the earlier calculation of 112 mio annual rental, the yield is 10%.

It is Defintely not going to be 10% since the cost of Capital Green is unknown, and we have not factor in other expenses. But if the minimum yield is a low single digit, we can safely conclude it will be not a good deal. So again, we are fighting a losing battle where odds are stacked heavily against us.

Although the trust has exposure to Malaysia property, but since it contribution is insignicant, I decide not to go into the nitty gritty of calculating currency risk. 

Conclusion:

Will I buy? I dun know, Defintely on my watch list. I dun really like leverage yield play in the current interest raising environment.

Random thoughts: Do you have a Joint name for your trading account

Do you have one?

Why did I ask?

My MIL told me it is difficult without a will, to pass on the shares to the next of kin, if she passes on. I heard of the trouble before and she told me that all we need is a form.

I ask my broker for advice, and this is what he told me.

It is indeed very troublesome if one passes on without a will.

He told me one way to get around this is to get a joint account for trading.

When I passes on, my wife will have access to all my shares.

I thought this is important, and I will most probably start opening a joint account with her.

I am sure many of us, at certain point of Market, we will have significant amount of cash in equity. What happened if you passes on then? I guess, the amount of cash in equity could be well above 50% of your liquid assets.

We all invest for our loved ones too, one way or another. so perhaps it is time to think about this?

I tried to google for more information, but I really find nothing really useful. There are some pretty good information about will making but not how we handle our CDP shares if we passes on.

If anyone can share a helpful link. It would be most useful.

Random thoughts: Words that turn around and stared back

I ask a colleague the following questions. 

1) Do u feel excited going to the classroom and seeing your pupils.

2) Do u sometime look at them and feel "so cute!" Or look at the one or two pupils who are from FAS, and say I must do something for them.

3) Do they pop up in your mind when u are on your way to school, or sometime appear just before you sleep? 

Very obviously, her answer is "no" without her saying it. I told her I have no doubt on her capability to deliver but seriously think her passion has died and it is really affecting the way she conduct her classes. 

I told her that I think the arrangements we had for the past year to help her, reduced workload, buddy colleague are not working because all the basic ingredient is missing.

She looked rather stunt by my bluntness since I was very patient in the past 1 year. 

She told me she will think about it and she need time to search. I am not sure if she got what I said. 

I ask myself the same questions but change the subject from

"Pupils" to 

Parents

Wife

Son

Myself

I realized I have "no" for answers for some of The options too. 

Are u shocked about your own answers too? 

Is not about time, spending time... 

Just like its not about the method of teaching, rewards given or the resources a teacher has, if the heart is gone, the lesson is gone, most of the time. 

If your loved ones do not appear in your mind, and your heart dun scream when u see them... ...

Time for deeper search ...

随心笔：坦然

水从手指间渗了出来。

尝一尝，

水是清的，手是凉的。

为何，非把水带走？

火照耀四周，

房间温暖了，

谁记得，

火堆下的柴。

选择遗憾？

体验荒诞，

走？走下去。

Random thoughts: Singapore dream and mine

I guess many of us were ask what are our Singapore dream for the next 50 years.

I thought about it. I would like a nation with confidence and love. It's people not worried about competition and yet gracious about losing. Productive and innovative workforce that placed relationships and family at the forefront. 

I understand whatever we have today is built upon the fact that our economy is vibrant. We do not have a choice to live it like hermit, or take a different pace like Icelanders or sorts. But they doesn't mean we have to pursue economic growth at all costs. 

Now, since I am Singaporean, am I part of the future or the opposite?

Clearly, I am not as confident. 

I ask myself, what were my dreams when I am younger. I realised I have pursuit my aspiration but never my dreams. My dream is just cheap castle building. 

My aspiration is to be a teacher. I remembered when we are getting our 'o' levels, and I told me friends I wanted to be a teacher, one of them said:" siao! You think properly hor, you can study one, don't waste your results."

I have no regrets teaching. I remember during my army days, I sit by the marina river, looking at the financial buildings. I thought to myself, I want one of the building to bear my name or company name next time. That is my cheap dream, because I did nothing to pursuit that.  It's not about failing, because I didn't even try.

In recent years, I did have a dream in FI, although the specifics of it did change, I didn't give up on it. 

Will FI help in the bigger Singapore dream of confidence? Maybe. I don't know.

Now, I just want to watch my son grow up properly. 

Today, I went to the singapore Orchid Garden, it is the most beautiful garden I have been, beating even Gardens by the Bay. It is always there, just never discovered by me. To think we travel far to Japan to see lavender during our Honeymoon when we have a orchid paradise at our backyard. 

I wish to find my garden of Eden too. 

Happy birthday Singapore