Wealth Buch -- Journey towards Financial Freedom

Path to Financial Freedom -- Create your exit plans

2012-02-01T02:34:00.004+08:00

I'm referring to the following blog post link
http://www.cpf.gov.sg/imsavvy/blog_post.asp?postid=943438268-310-6846058964
and perhaps others with a similar mindset.

In the post, the author lists 5 steps to financial freedom:
Step 1 – Boost your Active Income
Step 2 – Get Rid of Unnecessary Debt
Step 3 – Save More
Step 4 – Reduce Spending and Live Within Your Means
Step 5 – Invest For Passive Income

I do not know anything about the background of the author, but interestingly, to get out of the rat race, his mentality and suggestion, like many, is actually to get into the rat race and be the best rat among all.

Fair enough, especially if we start with a near zero networth. I started the same way.

But... is the road to financial freedom so direct? I used to think it was, but gradually, as you might have seen from some of my older posts, I start to have the following thoughts:
1) What's the point of attaining financial freedom at a ripe old age? Use it for medical? (Read: 1 million dollars... so what?)
2) Is there any point being a millionaire scrooge? (Read: Millionaire Scrooge?)
3) We all have different definitions of money... and hence financial freedom (Read: Financial Relativity)

In my opinion, the 5 steps by the author is a very sound retirement plan. One can retire comfortably provided one follows the plan with good discipline.

The harsh truth: This is, to me, a newer and more modern rat race, thinly veiled and disguised as a path to financial freedom.

See the similarity.

This was proclaimed as the rat race:
Study hard, get good grades, get good career, work hard at career, get promoted, retire comfortably with pension and savings.

This is now proclaimed as the way to exit the rat race, attaining financial freedom:
Study hard, get good grades, get good career, Work hard at career, disciplined savings plan, money to put into investments that will generate you passive income so that you can retire.

There isn't much difference to me. I see the difference as between being fed by pension vs being fed by your investments. Money, instead of going into your pension fund, goes into your investments.

What then, is truly the path to financial freedom? Is it merely working hard, saving well, cutting debts, spending less and increasing your passive income? I used to think so, and as I mentioned, this is actually the newer and more modern rat race.

Now, my understanding has been updated.

The path towards financial freedom, is about having a sound exit plan for everything you do.
(Read: http://ktservices.blogspot.com/2011/02/importance-of-exit-plan.html)

For example:
Having a massive amount of passive income is about having an exit plan for active income.
Having a massive amount of savings (or inheritance) is an exit plan for active working.
Having the ability to do freelancing/tuition/coaching is an exit plan for career, for school.

Exit plans are also for equities buying, business set ups, and etc etc.

In the book The Richest Man In Babylon, there was one story in which copper was imported for the King. The importer had an exit plan ready; should the king decide not to buy the copper for his plans (the main business bet), they could still sell the copper to the metal workers (the exit plan).

The lesson in this story is about finding exit plans for your investments or business ventures.

Building a path towards financial freedom is about building/creating and strengthening your exit plans.

Let me summarize what I have done over the past few months to build my exit plans (as can be seen in my goals).

1) Career
I have started building an exit plan ever since graduation. I gave tuition as a freelancer, and recently invested in a tuition centre.

This is exit plan 1.

To further strengthen, I plan to synergise my exit plan 1 with more plans, in terms of authoring my book, creating my apps. While nothing is concrete yet, these form my building blocks.

For my planned publishing, my exit plan would be to use the book for my current and future students.

For my iPhone apps creation, I needed a laptop anyway. That itself is an exit plan for me. The laptop satisfies a want (for a more than sufficient powerful computing), a need (for portable computing), and functions as an investment for future apps creation. Apps creation is itself a potential money making machine in the future to synergise with my educational skills, as well as being a hobby of mine (the exit plan).

In addition, another exit plan I have is a PhD study planned. I teach physics olympiad to secondary schools as well, and another exit plan would be to coach students in a polytechnic as an adjunct lecturer.

Thus, I consider myself as being free from my career. I can choose to stay or not to stay as I'm not limited or held by the need for the job's salary payout at all. I work more for socialising than for money. This itself is a form of financial freedom.

2) Equities
This is perhaps a more commonly practiced principle, an exit plan for your equities. As everyone knows, Berlian Laju has been suspended. This comes from me not having an exit plan, be it sound or not, in the past.

Traders will tell you to always plan for your exits, i.e. which point to take profit and which point to cut loss.

Right now, my exit plan for equities (almost none) is mainly "exit" via receiving dividends. E.g. for Starhub, I will get back my principle sum within 10 years.

So what is your exit plan?

Berlian Laju suspended!

2012-01-27T17:53:00.003+08:00

I had previously posted about Berlian Laju here:
http://wealthbuch.blogspot.com/2010/10/berlian-laju.html

This was a purchase from a long time ago. I had the opportunity twice to cut loss with $800 loss, but I didn't. It ballooned to $10k.

Too bad my bet didn't work out... Probably have to write off 10k from my portfolio.

Lessons learned:
1) If you don't cut loss early enough when things looks wrong, the loss will cut you deeper.
2) A TA purchase should be given TA treatment. Do not switch to FA or hope treatment. Vice versa.

Returning almost all of 2011 dividends to the market through this single counter. Thanks Mr. Market for the lessons :)

On the bright side, my rubbish counters have reduced by 1.

Goals for 2012, The Year of the Dragon

2012-01-18T00:21:00.000+08:00

This post was sort of inspired by jwt from LP's cbox. Basically, he asked me if I have any updates on my personal goals, and he would be interested to read. I was quite surprised and honoured actually. I was too busy to really spend time to update this blog, but I was thinking, hey, I might as well consolidate my thoughts in this post to guide myself too. After all, typing everything out helps me (1) consolidate thoughts in a more structured and logical manner, and (2) take more responsibility and action for my goal because I have announced to the world.

Dragon Year 2012 is another year for me to achieve multiple goals. Why set these goals, one may ask. Well, I have set myself goals for year 2010 and year 2011. While I do not necessary achieve all my targets, at least my actions are in the correct direction. I will have an aim in life, something to look forward to, and when achieved, a feeling of exhilaration.

In an earlier post, I have briefly mentioned my goals for 2012:
http://wealthbuch.blogspot.com/2011/11/as-year-2011-comes-to-end.html#more

Here, I will try to put more clarity into my thought processes. I have divided into three groups.

Group 1: Equities and Bonds

1) Goal of achieving $2k average dividends per month, i.e. $24k dividends a year
I have shared my updated portfolio strategy into equities.

Basically, I have not put any extra funds into the market because I was saving up to take a stake in a tuition centre.

The most recent purchase will be the 10 lots of CMA Retail bond that I have acquired. At 3.8% coupon, this will add another $380 to my annual dividend amount.

Aztech as a company has fallen way below my expectations, to the effect of stopping dividends payout. I will be looking to divest this.

Berlian Laju, Hor Kew and Cosco are my worst non-performing counters, and I will be looking to divest too.

CitySpring, while non-performing, is still giving dividends. I can take my time on this counter.

The other equities, some being in green and some in red, are still performing well, and giving dividends. Apart from property companies like GLP and CMA, which did not perform well nor give much dividends, the rest are pretty stable since most are blue chips.

My dividends for 2011 exceeded $10k, and I hope to grow this further in 2012.

Group 2: Business Startups
1) Setting up of a tuition centre
I've agreed to take a 50% stake in a centre, and the deal will be settled within a month.

I have already moved my current students for 2012 to the centre. Most likely I will be earning MUCH lesser from this action from active tuition as overall hours spent on teaching might be reduced, but I hope it will work out in the long run.

I can't really know how it would turn out, but I have some plans in my head which I hope to execute successfully. Giving myself a year or two to try this out.

2) Setting up of publishing
It is still my dream to have my own book, autograph it, and share my knowledge through this book to students. It is my dream to have students over Singapore reading my books, and scoring well for their exams because of it.

But I want to keep the copyright. And I have further plans for this. Will have to see how it pans out.

3) SmartPhone Apps for Education
It is not just iPhone apps now. Basically, I will try to see if I can make use of my expertise in programming and tuition to create really useful apps.

Not sharing too much of my ideas here yet as nothing is concrete.

But hey, one thing that is concrete is that I have bought my 15" MacBook Pro with an upgraded hard disk of 750GB 7200 rpm. It set me back by about S$3K. Ouch!

I can't judge how it would affect me, but hey, at least I could treat it as my personal reward for 2011!

I have also bought a Wacom Pen Tablet to assist in creating youtube videos with cool animation.
I have done an experiment. Just search for H2 Physics Overview in youtube, and the first result is my creation.

Group 3: Personal Development
Just last week, it suddenly struck my head that I might want to go for a PhD on a full time basis.

Why? I do not know. I have done some research on the available schemes. Basically, I'm interested in a scholarship scheme that pays $4k monthly, while sponsoring the PhD.

What about my current job? Well, it pays not too well, but I'm still ok with it because the job comes with lots of flexibility. I'm a very technical person, and I think I have learned quite a bit of technical stuff at the current department. In my earlier post, I mentioned I'm unsure and I feel stagnant. I did feedback my boss on this. I'm pretty confident of my strong technical skills in the company, but perhaps it might be time to move on.

Perhaps that was the motivation that pushed the idea of a PhD research into my head, and with a bond-free scholarship to go along with so that I have enough to survive and eat.

The deadline for this application is May 2012 for the Jan 2013 intake. Hopefully they will take me in...?

Just don't steal the chance from me if you read this :(

Am I doing it right?

2012-01-08T12:02:00.001+08:00

Much as I try to motivate myself with the statement:

There's no absolute right or wrong; just do what you think is right.

I can't help thinking sometimes if I'm indeed pushing myself on the right track. I don't want to go through the trouble to type a long history, so I shall just summarize in point form.

I have these goals lying in my head for quite a while:
Time-consuming goals
Childhood goal: Start a tuition centre (taking 50% stake in a current centre)
Recent goal: Start a publishing house and publish truly useful educational materials for A levels (I must share my knowledge before I forget or before anything unfortunate happens to me)
New goal: iPhone and Android apps for education purposes (for free downloads to help students)

While I'm working my ass off on these goals, I need money to eat, I need money to invest in the materials to work towards the goal, etc. Yet, my current job is so damn low-paying.

So the question lies here.... should I search for a higher paying job while I work on my goals? Yet, will the new job be so busy that it does not allow me time nor energy to work on my goals?

Don't get me wrong, I like my job, I like what I do as sidelines. But I need to grow as well :x

It's truly a testing moment as I see my job salary remaining moderately stagnant (due to the company itself, a US MNC which isn't doing too well), while I see my friends and siblings getting higher and higher salary increments in government sectors. Yes, I might have achieved more than most my age at the moment due to extra income from tuition, but deep down, I know that isn't anything sustainable. My available time will slowly reduce, my energy will slowly wane...

It makes me wonder if working on my goals while staying stagnant in the job market is the correct move in comparison to climbing the career ladder. The cliche answer is: "only time will tell".... Yet it doesn't help in coming out with any solution.

Finished with lamenting, signing off back to working on my goals.

As Year 2011 comes to an end

2011-11-21T11:49:00.001+08:00

In case you are wondering, I do know that year 2011 still has one more month to go. But I do think it is time to start reviewing and plan ahead for the next year.

This is the link to Goal 2013 which I had set myself in November last year.

Year 2011 was super busy because of the following goal:

4) Setting up a publishing company and publish my notes
I'm currently about 35% done with my first A level guidebook. With most of my students having finished A levels from my side, I will have lots more free time come end Nov and Dec. This is the time to power up and increase my authoring.

Target timeline: Book completion (Mar 2011), Publish (Apr 2011), Sales (May~Jun 2011)

Sad to say, this was not achieved at all. I'm only currently 75% done with the book due to my heavy involvement in tuition. Nevertheless, I do think I have spent an enormous amount of time on this book.

I have to say I respect people who managed to author good books. It was a rather daunting task. There were much more challenges than I had thought. Writing good notes isn't simply (like some guidebooks out in the market) just putting information and leave it as it is. This leaves students in the lurch, only able to memorize from the notes without deeper understanding. No, I want students who use my notes to truly benefit, to truly appreciate Physics. In fact, I have been giving snippets away for free here and there to students who truly need it, and who truly wanted to learn.

While I didn't achieve this goal at all, there was progress. Which means the goal setting was still useful. Moral of the story: Aim far, and even if you do not achieve your goal eventually, you are still one step nearer to it!

In Year 2011, I have neglected two goals, namely

2) Goal of setting up ExamWorld to a super big site to help more students
3) Goal of building WealthBuch's traffic further

Interestingly, traffic continues to come in rather frequently without me adding any additional information.

As for goal 1,

1) Goal of achieving $2k average dividends per month, i.e. $24k dividends a year

There was a slight increase, having put extra cash into SMRT, SGX and Singtel this year. I also added equities of GLP, CMA and Capitaland along the year. As you can see, I'm inching towards a more blue-chips portfolio consisting mainly of monopolies and oligopolies.

While I'm still far from $2k per month, there was definitely some progress.
Additionally, my uni school fees bond are almost paid out. The interest of 2.6% was low compared to the % dividends I have received from SPH, which was why I left it as it is.

Finally, for goal 5

5) Goal of reaching a million in investable assets between me and my girl

I'm still inching towards this "daunting" goal. Personally, my investable assets managed to cross a quarter million mark, although it is still less than $300k.

For 2012,

I'm moving ahead with an updated strategy.

Portfolio Strategy
My portfolio in equities are starting to shift towards blue chip companies. I'm happy with a 4% dividend yield for blue chips, to a 7~8% yield for stable REITs.

I hope to be able to exit the following eventually:
1) Aztech
2) Berlian Laju
3) Cosco
4) Hor Kew

Granted, these companies do not look like they will collapse anytime, and I'm still receiving dividends from Hor Kew, hence I'm ok to wait a while longer for I do not need the cash yet.

I will still be looking to add to my portfolio of stable blue chips, i.e. Singtel, Starhub, ST Engg, SPH, SMRT, etc. I will also hope to be able to add SIA Engg, SembCorp Industries and M1 eventually to my portfolio.

2012 Strategy
2011 was rather uneventful for me. 2012 will hopefully be a more exciting year. My plans are roughly up, and my strategy to ensure a sustainable income source for years to come.

1) Setting up of a tuition centre
I've discussed with a tuition centre, and agreed to take a 50% stake in the centre, and eventually a 100% stake. The centre is surviving well, but I hope to be able to bring it to higher heights through a massive introduction of IT in certain portions.

As such, I have moved my current students for 2012 to the centre. Most likely I will be earning MUCH lesser from this action from active tuition as overall hours spent on teaching might be reduced, but I hope it will work out in the long run.

2) Setting up of publishing
While it might be better to find an established publisher to publish and market my book, I want to try my hand in setting up one as I want to keep the copyright of my hard work.

Fortunately, I'm aiming at a market where there is not much books yet for it is rather niche. That is, A level physics. Not aiming to earn much, but aiming to have a head start and a foot hold.

3) iPhone Apps for Education
I was looking at Sitex 2011, and had almost decided on a MacBook Air, before deciding a MacBook Pro is more suited for me.

Since Apple traditionally comes out a new model for MacBook Pro around the start of the year, I will be waiting for IT Show 2012 to get my MacBook.

Why do I link to MacBook? This is because iPhone Apps can only be developed of Mac machines at the moment.

I have an interest in programming, and I'm going to treat this as a hobby for a start (like my tuition services), to develop apps which can complement tuition. I believe no one has done this before (the idea in my head at least) and I aim to be the first to do it. But first, I need the MacBook and to learn the programming required... i.e. Objective C.

All of (1), (2) and (3) while seemingly unrelated, will eventually be able to exhibit synergy in some manners, or so I thought.

Meanwhile, I will still keep my full-time job as I embarked on these new ventures.

An errant forumer using momoeagle

2011-10-31T07:38:00.001+08:00

Notice

======================================================================
Latest Update: I have emailed the admin at ShareJunction.com, and he has banned momoeagle from posting in the forums there.
I thank the admin for such a speedy response in upholding the integrity of online sharing.
======================================================================

It has come to my attention that an errant forumer has been using my nickname, momoeagle, in ShareJunction. Please take note that momoeagle in ShareJunction is not me, nor do I share or believe in his analysis.

Apparently, this user has been masquerading with my username in InvestIdeas, and the admin at InvestIdeas has kindly deleted his account and I have registered under myself.

The reason for this post is that this particular user is bent on misleading others using my nickname.

Please take note that I do not support the counters that this clone recommends using that name, nor the "analysis" he wrote. There have been a number of people who asked me privately why I posted "this and that" on InvestIdeas. A real life friend, MusicWhiz, even sent a private message to the "momoeagle" at InvestIdeas.

There is no need for this clone to have any integrity in posting when it is under another person's established nickname, and I believe this defeats the purpose of true sharing among forum members in the investing community.

momoeagle is now my username in a number of stock forums, and no other:
1) ChannelNewsAsia
2) Valuebuddies
3) InvestIdeas
4) NextInsight
5) RMAO forum
6) HardWareZone
7) LowYat Stocks forum

This clone goes by a few nicknames and apparently has no support for his analysis and counters. Hence his current actions.

Meanwhile, I will be back to being busy in real life, i.e. setting up two businesses on top of my full-time job. No time or $$ for stocks, really.

Signing off.

Quick Thoughts on STI

2011-09-28T14:51:00.003+08:00

Some quick thoughts:

1) History likes to repeat.

http://sg.finance.yahoo.com/q/ta?s=^STI&t=my

The 97 market crash resulted in a V-shaped rally which followed in a quick crash to bottom in 2003.
The 07 crash resulted in a V-shaped rally as well. The bottom may well be at 2013, probably near the STI 2000~2500 level if the percentage drop is similar.

2) Pivot point analysis
STI has pivots at certain numbers, and it has been pivoting around these numbers for the last few years.
The next three pivots to watch out is 2450, 2200 and 1950. Expecting around 2200 to 2450 when combined with part 1.

3) 61.8% fibonacci retracement level
61.8% is the golden ratio.
Based on market top at 3313 and bottom at 1455 (1678 difference), the 61.8% (1037 points) is around STI 2275.

4) The Feb of 1996
STI topped at 2504. Probably some support at this level.

Based on the 4 points, the probability of STI moving towards 2500 level is very high. That is at least another 200 points more to go down.

My 2 cents. I have not liquidated much of my positions yet.

Excerpts from The Intelligent Investor

2011-08-19T10:42:00.001+08:00

The recent market volatility prompted me to post two excerpts from the Intelligent Investor by Benjamin Graham. His wisdom may show some light:

Excerpt 1

A serious investor is not likely to believe that the day-to-day or even month-to-month fluctuations of the stock market make him richer or poorer. But what about the longer-term and wider changes? Here practical questions present themselves, and the psychological problems are likely to grow complicated. A substantial rise in the market is at once a legitimate reason for satisfaction and a cause for prudent concern, but it may also bring a strong temptation toward imprudent action. Your shares have advanced, good! You are richer than you were, good! But has the price risen too high, and should you think of selling? Or should you kick yourself for not having bought more shares when the level was lower? Or—worst thought of all—should you now give way to the bull-market atmosphere, become infected with the enthusiasm, the overconfidence and the greed of the great public (of which, after all, you are a part), and make larger and dangerous commitments? Presented thus in print, the answer to the last question is a self-evident no, but even the intelligent investor is likely to need considerable will power to keep from following the crowd.

It is for these reasons of human nature, even more than by calculation of financial gain or loss, that we favor some kind of mechanical method for varying the proportion of bonds to stocks in the investor’s portfolio. The chief advantage, perhaps, is that such a formula will give him something to do. As the market advances he will from time to time make sales out of his stockholdings, putting the proceeds into bonds; as it declines he will reverse the procedure. These activities will provide some outlet for his otherwise too-pent-up energies. If he is the right kind of investor he will take added satisfaction from the thought that his operations are exactly opposite from those of the crowd.

Excerpt 2

Imagine that in some private business you own a small share that cost you $1,000. One of your partners, named Mr. Market, is very obliging indeed. Every day he tells you what he thinks your interest is worth and furthermore offers either to buy you out or to sell you an additional interest on that basis. Sometimes his idea of value appears plausible and justified by business developments and prospects as you know them. Often, on the other hand, Mr. Market lets his enthusiasm or his fears run away with him, and the value he proposes seems to you a little short of silly.

If you are a prudent investor or a sensible businessman, will you let Mr. Market’s daily communication determine your view of the value of a $1,000 interest in the enterprise? Only in case you agree with him, or in case you want to trade with him. You may be happy to sell out to him when he quotes you a ridiculously high price, and equally happy to buy from him when his price is low. But the rest of the time you will be wiser to form your own ideas of the value of your holdings, based on full reports from the company about its operations and financial position.

The true investor is in that very position when he owns a listed common stock. He can take advantage of the daily market price or leave it alone, as dictated by his own judgment and inclination. He must take cognizance of important price movements, for otherwise his judgment will have nothing to work on. Conceivably they may give him a warning signal which he will do well to heed—this in plain English means that he is to sell his shares because the price has gone down, foreboding worse things to come. In our view such signals are misleading at least as often as they are helpful. Basically, price fluctuations have only one significant meaning for the true investor. They provide him with an opportunity to buy wisely when prices fall sharply and to sell wisely when they advance a great deal. At other times he will do better if he forgets about the stock market and pays attention to his dividend returns and to the operating results of his companies.

Recent Updates

2011-08-12T15:45:00.002+08:00

On Portfolio: Overall -5%. Fortunately less than total dividends received over last two years

Did a series of buy transactions recently.
SGX at $7.13 (average $7.36)
CMA at $1.44 (average $1.65)
AIMS at $0.205 (average $0.201)
SMRT at $1.88
Capland at $3 (average $2.32)

Sold all GRP at $0.205.
Drew up a list to sell, but was too slow in executing.

Frankly speaking, I'm unsure why CMA and Capitaland continues to trend down whether market went up or down. It's ridiculous and this is making CMA look even more like a con job. What the hell is the CEO and board doing? Is there any point getting awards, getting record profits, but not caring a hoot on shareholders' value?

I'm still clearing some cobwebs and loose ends in my head, and looking to restructure my portfolio, probably realizing an estimated paper loss of $20k (on past mistakes when I first started) to clean it up. Cheap deal for 3 years of lesson I would say. More to read up.

I'm looking to do something different in the year 2012. Somehow life's events are pushing me towards a path where I once pondered if I embark on. Let's see how it goes.

STI EW count?

2011-06-30T21:53:00.003+08:00

Been too busy.
This is a latest EW count?

Just my 2 cents.... It could be wrong. For viewing pleasure and for entertainment value.

Primary 4:
A: 3314 ~ 3118 (-196)
B: 3118 ~ 3280 (+162)
C: 3280 ~ 2916 (-364)

Primary 5:
1: 2916 ~ 3208 (+292)
2: 3208 ~ 3000 (-208)
3: if 1.618 of 1, then +472 = 3472 (3165 is critical due to downtrend line not drawn in)

Alternate count:
Primary 4 has not ended.
A-B-C-X-A-B-C

My 2 cents. That's all. Back to work.

Ceasing Updates to this blog

2011-04-15T15:00:00.001+08:00

I'm ceasing updates to this blog. Simply have no time nor mood. I might return if and when I have more time after I complete some of my targeted goals.

Please kindly visit the following blog links instead. I will be back, but not so soon.

Blogs on Singapore
The Finance.sg
Passive Income Investing
CookieGuy's KT Wealth
AK71
SingaporeanInvestor
Rick Kid Wannabe
Dividends Rich Warrior
kmchang's investment journey
DIY Value Investing
Sanye Investment Portfolio
A Investor -- Alvis
Ghchua's Investment Portfolio
AC88 Blog
Bully The Bear
Investment Moats
SGBlueChips
SGMusicWhiz
SGFinancialFreedom
My Willy Nilly Thoughts
The Wealth Journey
NTU Chartist
Synapse Trading
Holy Fish Shrine
A Notable Quote
The P-T Trader
Hahalol
My Market Opinions
Singapore Stocks Picker
Create Wealth 8888

March 2011 Portfolio Update

2011-04-03T12:27:00.000+08:00

March saw a terrible disaster at Japan, leading to my holdings of companies with Japanese exposure going down substantially. In addition, panic selling brought down prices further. Unfortunately, I have used my opportunity funds to enter Singtel the previous month. But fortunately, Singtel did not go much lower than my buy-in price at all, displaying the resilience of this telecom company. Neither did Starhub budge much too.

Since I have no opportunity funds, I did not enter this month. The good news: prices have not substantially recovered since the Japan crisis. The bad news: my rate of growth of opportunity funds wasn't as fast as I would like it to be.

While we profit from the crisis, do spare a thought for the Japanese by donating to Red Cross or the little donation box at Yoshinoya counters around Singapore.

A short summary of my core holdings:

Portfolio cost: $190k
Portfolio value: $205.4k
Percentage gain: 8.07%

There is no change in my dividend amount as I'm back to accumulating cash and working on my book. I have to admit writing up the guidebook took much more challenges and time than I expected. I do not expect to meet my personal deadline for it. Furthermore, my commitments are increasingly taking my time away from blogging and the market... Let's see how this goes...

Adding to the $24k in the basket I hope to sell off at the bottom, my total cost continues to stand at $214k with no difference from the previous month. I do have some funds in my bank account, but looking at the pathetic 0.59% in philips MMF, I rather leave my cash in the bank at the moment.

I took a quick look at my CPF Education Loan and I'm pleased that only $4k remains to be repaid, from $25k when I started working 2.5 years ago.

Trading Basket -- Hoping to sell off

I want to sell these off when I can, or cut loss when I can take the loss :(
Portfolio cost: $24.3k
Portfolio value: $18.4k
Unrealised loss of around $5.9k

(red = freezer stocks to remind myself of my mistakes)

30 lots of Hor Kew at 0.125

27 lots of LC Dev at 0.177 (accepted the rights + 3 lots excess)

2 lots of Cosco at 2.67

160 lots of Berlian Laju at 0.065

Follow Up Quick Views on Eratat

2011-03-09T18:14:00.004+08:00

In my earlier post on Eratat, I stated my views of the business and the events happening without taking a good look into the balance sheet. I got interested to pour through Eratat's business, etc, because it appears that quite a number of people are interested in it.

In this post, I will share some quick calculations on Eratat.
Also in this post, let's assume that the financial figures presented by them is correct and all cash is indeed there, else all calculations would be wrong anyway, which sorts of defeats the purpose.

Finally, I take all calculations rounded off, and an exchange rate of 1SGD to 5RMB for simplicity of calculations. Some of my calculations will be in SGD and charts are in RMB.

As of 31st Dec 2010, Eratat mentioned an NAV of about 0.30 (SGD). At a current price of 0.215 (SGD), this represents a discount to the NAV. It has cash of 0.077 (SGD) per share too. In fact, over the past 8 quarters, NAV has been steadily rising. Q1 ends 31st Mar 09, and Q8 ends 31st Dec 10. There was no change in the number of shares for these 8 quarters.

ERATAT's NAV in RMB (fen)

However, there is something that worries me here, that is, the trade and other receivables, which is included in NAV calculations. The total per share value of its trade and other receivables is a rather staggering 0.21 (SGD) in SGD. That's like 60% of its total assets, and 70% of its NAV!

The problem with trade and other receivables is that these are trade deposits placed with other companies. It is thus not easy to audit such receivables and verify it.

Essentially, if you are paying for "assets" that is not yet collected, that is at the mercy of other distributors, assuming what is reported is true. The reason why this assumption has to be made is because I know how certain individuals in China can create separate holding companies for such purposes of siphoning, but I shall not go into the details how this work.

The breakdown of the age of trade receivables are as follows. There was no quarterly breakdown given before 2009.

(RMB ’mil)	1 to 60 days	61 to 90 days	91 to 180 days	Total
Balance as at 31.03.2009	127.9	33.6	6.2	167.7

(RMB ’mil)	1 to 60 days	61 to 90 days	91 to 180 days	Total
Balance as at 30.06.2009	217.5	19.7	-	237.2

(RMB ’mil)	1 to 60 days	61 to 90 days	91 to 180 days	Total
Balance as at 30.09.2009	177.9	68.7	-	246.6

(RMB ’mil)	1 to 60 days	61 to 90 days	91 to 180 days	Total
Balance as at 31.12.2009	184.1	53.8	-	237.9

(RMB ’mil)	1 to 60 days	61 to 90 days	91 to 120 days	> 120 days	Total
Balance as at 31.03.2010	138.9	72.5	57.7	-	269.1

(RMB ’mil)	1 to 60 days	61 to 90 days	91 to 180 days	Total
Balance as at 30.06.2010	188.0	90.7	26.4	305.1

(RMB ’mil)	1 to 60 days	61 to 90 days	91 to 180 days	Total
Balance as at 30.09.2010	217.3	101.9	28.5	347.7

(RMB ’mil)	1 to 60 days	61 to 90 days	91 to 120 days	Total
Balance as at 31.12.2010	216.2	102.8	47.9	366.9

Putting in Chart Form will show it clearly.

Chart of Total Trade Receivables

Chart of Trade Receivables aged >60 days

In my opinion, Trade Receivables > 60 days (2 months) is a rather long time. What's more, it has been increasing over the last few quarters. Doesn't look very healthy to me at the moment...

I also computed a chart of NAV minus Trade Receivables per share for Eratat over these past 8 quarters.

Chart of NAV less Trade Receivables per share

As we can see, the net NAV remains moderately constant, which sort of tells me that most of the profits went into the trade receivables portion. Of course, there were some dividends given out, but I believe it won't affect the result too much as the payout wasn't really consistent in the beginning. It also tells me that the ratio of trade receivables to total assets or net assets have been growing over the past 8 quarters.

It is thus of utmost importance for any potential investors to monitor the growth of trade receivables. I know this post is only on 2 years (8 quarters) of Eratat's history, but all in all, I remain extremely skeptical of Eratat's growth story.

My views on China Eratat

2011-03-04T09:07:00.004+08:00

Recently, I noticed quite a bit of interest in this S-Chip counter called China Eratat. Upon doing some really basic research (note: just basic one), I came upon the conclusion that it isn't worth a punt. While it may eventually turn out to be a multi-bagger, I wouldn't place my bets on it.

I posted some of these in http://www.sgforums.com/forums/2092/topics/423944. I rather not share this over at CNA forum because I know, once people gets extremely bullish about a stock, some would snare, insult, or exhibit some form of mentally incapacitated animalistic behaviour. Might as well share it at places where people are more willing to take note or share with. As CW88 puts it, analysts like to give bullish views because that is what most people like to hear.

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My initial views
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China Eratat is a sportswear company operating in China. To me, China Textile companies aren't a good fundamental buy at all.

1) Low barrier to entry.
2) Highly competitive.
3) Traditionally low margins. It would be very suspicious if the margins are high.

And the weird thing is, why the need for placements for $13.45m cash on Jan 2011 when the company has $30+m cash in its balance as of end Dec 2010?
==> This is suspicious.

And if the cash is needed for growth, why bother to give dividends of total $2+m? Giving dividends not only deplete cash (if needed), but also incurs extra unnecessary expenses.
==> Suspicious too.

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Views from a forumer
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Regarding Placement:

Have a look at this. http://www.nextinsight.net/index.php/story-archive-mainmenu-60/912-2011/3549-eratat-97-surge-in-latest-quarterly-net-profit-and-why-it-wants-to-place-out-shares

CFO Ken Ho was specifically asked during the briefing how the placement would affect expansion plans - the simple answer is that with the placement would allow them to grow even faster, but that even if the placement does not through, their expansion plans including the launching of the new Eratat Premium Product Line will continue to go through.

They feel that the placement with CMIA will also add credibility and raise the profile of the company, as CMIA is a well-recognized fund known for long-term investments in China's growth, in particular its rapidly growing consumer market, as China transforms from a manufacturing-export dominated economy into one that is consumption--focused.

With all the blanket-stereotypically negative sentiment towards and distrust of Chinese companies going on in the Singapore market, the establishment of a major fund such as CMIA as a major shareholder, which according to Ken Ho spent 2 months doing its due diligence on Eratat's balance sheets prior to the attempted placement, also serves to increase investor confidence in the reliability of its numbers.

Despite doubling profit over the last 2 quarters on a year-on-year basis, Eratat has actually decreased its dividend payout ratio, presumably because it wishes to retain more cash for expansion. However, to eliminate the periodical dividend payouts altogether would be rather drastic and may induce negative investor sentiment over its cash position, since it has a policy of regular dividend-payouts, as long as this constitutes only a small percentage of its cash position, as is the case with this 2 million, I wouldn't be too worried and am in fact pleased as an investor that they are sharing profits with us.

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My comments add on
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Btw, all CEOs have to make their plans sound nice. If CMIA wants a share of Eratat, they can jolly well buy direct from SGX market. The two points remain that why the need for a placement of 13m when they have 36m cash and can still give out 2m worth of dividends.

One more thing, big funds entering doesn't mean they are right. Tradewinds Global Investor entered China Hongxing in Jan2011, and Hongxing is now suspended for accounting irregularities. Hongxing has been giving dividends too. Think about it.

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Additional Views from the forumer
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No one is denying that it's still an s-chip, I like certain s-chips like Eratat because they are sorely undervalued due to the blanket judgements done by most local investors on Chinese companies listed here as unreliable, they fear these companies, I like to purchase when people fear, especially irrationally - because it cannot be the case that all of the few hundred Chinese companies listed in Singapore are lying about their balance sheets, that is statistically extremely unlikely. It also helps that Eratat is rated second by the Business Times among all Chinese companies in terms of corporate transperency. Yes I'm not saying that you can be 100% sure about anything, but then again there are risks with every investment.

CMIA can buy from the open market, but we're talking about 65 million lots here. Eratat's daily volume is barely a few million. If they were to buy from the open market, it may well cause Eratat's share price to skyrocket before they can complete the bulk of their purchase - hence the desire to negotiate for a placement. Also, they're going to become a major shareholder that participates in management, their experience and networks in the Chinese market may well also open doors for Eratat. Coupled with the fact that their addition raises the profile and credibility of the company, CMIA may well feel that they also have a feel bargaining chips to bring to the table. Eratat has shown so far that it is able to turn its excess cash into profits and I therefore see no reason not to be confident that the increased cashed position from the placement can be translated into increased profitability.

2 million is much smaller than 13 million. The 13 million will serve only to bolster its expansion plans but as CFO Ken Ho has said, is not critical to its expansion plans, which is why they would not simply settle for any deal.

As for why they are still giving out divdends, as already explained in my previous point, to eliminate dividends altogether decreases investors' confidence - they have compromised and are in fact paying less dividends, both on a prorated absolute basis and in terms of payout ratio compared to last year, despite doubling net profit over the last 2 quarters, retaining a higher proportion of cash to facilitate expansion plans.

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My comments add on
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To me, not eliminating dividends so as not to decrease investors confidence isn't a good reason at all. A growth company that is well managed should never distribute its dividends if it has much better use for the money.

Next, companies seeking for growth and are confident about it will give shareholders a better deal by growing via debts instead of growing on net cash. Getting a huge placement with no concrete plans other than to increase the cash level will severely dilute existing shareholders. Any EPS or any dividends to be received will be severely diluted in the future as well, unless profits can grow just as fast.

Disregarding the above and the fact of being S-chip, the first 3 points I raised in the first post are sufficient to make me not touch this for a long term play. A world famous investor mentioned in his most recent shareholders letter that it was his mistake to have moved into the textile industry. I guess you should know who he is.

It's your money. You decide.

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Reply by isaac
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one more point to add on:

look at eratat’s cash balance: RMB 159,319,000

Interest earned on that amount: RMB 154,000

Interest rate: 0.01%. [Pointed by comments below, it's actually 0.1% for 3 months]

I believe PRC’s interest rate is 1.5% thereabouts.

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Further views from the forumer
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A growth company should never distribute dividends? Can we categorically say that it is statistically proven that growth companies that pay dividends, even if only amounting to a tiny fraction of their cash position grow less than growth companies that pay absolutely no dividends at all? I highly doubt that any statistical analysis would show this, and even in the unlikely scenario that it does, it also does not imply that every growth company that pays dividends would tend not to grow. Common sense would tell you that with a bit of research, it would not be difficult to find a growth company in any market out there that has had a policy of paying dividends throughout the years but still managed significant growth through the years, especially if the dividends amount only to a small fraction of net profits, hardly detrimental to the growth plans of any company.

Conceivably, not paying dividends at all, especially in the case of s-chips given the unfortunately negative perception that every Chinese company listed in Singapore is tarnished by at the moment due to a few bad eggs would actually signifcantly decrease the stock price of the company, because it could be the case that local investors perceive dividend payouts by Chinese companies to be a validation of its profits and cash position. Whether this is the case is difficult to verify but this is conceivably how the management perceives the situation to be and that therefore not paying dividends would actually result in negative perceptions due to factors out of its control, and that therefore eliminating dividends would not be in the interest of its shareholders.

Furthermore, with working capital amounting to the region of 480 million RMB, it does not seem that paying dividends amounting to 10 million RMB would signficantly affect expansion plans, the benefits of protecting investor sentiment quite possibly outweigh the the opportunity cost of not using that 10 million RMB for growth. It's hardly as if it's 65 million RMB, if it was paying 65 million RMB in dividends and then getting a placement amounting to that I would certainly be concerned - but that is hardly the case at all.

It is also surely an oversimplifcation to say that every company in the textile industry will fail. The growth stories of the likes of the many famous apparel/fashion accessories companies around the world tell the story - Nike, Kappa, Esprit, Polo or even Chinese equivalents like Li Ning, Anta and 361 Degrees tell the story - compare their prices from as far back as 8 years ago to what they are now - we're talking about multi-multi-baggers here. I'm not saying Eratat will definitely be another one of them but I'm optimistic and bullish based on what I've seen so far - not only is it a potentially great growth story, it is also potentially highly undervalued at a forward PE of between 3 to 4 due to the blanket negative sentiment that s-chips are currently suffering from, resulting them in many of them being in prices and valuations that you would only normally only see during a recession for other companies.

As for [isaac] and your point about loans, please read up on the loan situation in China, it is not as simple as you think, and I would trust that the CFO of a listed Chinese company would understand the situation better than someone like you who has probably never applied for a loan in China before.

http://www.nextinsight.net/index.php/story-archive-mainmenu-60/912-2011/3549-eratat-97-surge-in-latest-quarterly-net-profit-and-why-it-wants-to-place-out-shares

I think I've made my points clear and will make no further comments for now, to each his own.

My add on here on the loans in the forum post yet:
Why would one believe blindly in a CFO without question? He might know better, but still, 0.01% interest is still weird. Even a basic savings account here gives at least 0.1% interest. 0.01% is 10 times lesser!!

~~A quick look at the Bank of China for local context shows an interest of 0.475% for SGD100k and above.~~
~~http://www.bankofchina.com/sg/bocinfo/bi3/201002/t20100207_961728.html~~
~~Compare with 0.01% again???~~

~~Comparing with SGD is fair because Eratat is listed in Singapore, and IPO and placement funds are in SGD.~~

~~Admittedly, I didn't check up the books to see if it was really 0.01%, but isaac is a personal friend.~~

Thanks to Joshua's comments, the interest rate is 0.04% instead of 0.01% as the interest is for 3 months. However, I do think that 0.04% is still too low.

UPDATED: The effective interest rate is 0.4%, so it does look more normal now. Sorry for the calculation error. My bad for not verifying it completely.

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My comments add on
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To me, dividends of 2m out of 36m cash (5.5% of cash pile) is hardly a tiny fraction of the cash; utlised properly, it could be used grow even faster. While it is true that s-chips are suffering from negativities, the question remains on whether the cash is indeed there. Dividends are not the way to judge if the cash pile is valid. Anyone who used that as the meter for judging and had bought into CHX would have been in for a rude shock.

I fail to see how any of my posts meant every company in the textile industry will fail. I mentioned that the textile industry is one of highly competitive and low barriers to entry. There's no point comparing with just the established brands as you have. We have a moderately new entrant CHX in the same industry as Eratat, and CHX advertising in the NBA, yet what happens?

The growth story could be nice, your reasons extremely valid, but the uncertainty is not about the growth or your reasons. The uncertainty and risks lie in the integrity of the reported statements. Again, with the established brands like Nike as you mentioned, the uncertainty of the integrity of their reports is much lesser.

It is already tough enough to judge and take the risks of whether a business will take off; what's the point of taking on additional risks of the integrity? Unless I personally make a trip to China, see their shops and sales, etc, I find it hard to put my money on a company that I have little idea how their products are like, and how their customers feel about their products compared to others.

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Upon further research of the mentioned investor CMIA and its credibility, I digged out some additional information on it:
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Additional Information about CMIA and its track record:

CMIA invested in FerroChina, which is now suspended
http://www.asiaone.com/Business/News/My%2BMoney/Story/A1Story20090503-138965.html

http://www.pr.com/press-release/301406

Admittedly, they invested in ChinaMinZhong as well, although they have been selling while the price has been continuously rising. ==> Hardly a long term investor.

From the website:

CMIA Capital Partners ("CMIA") is a private equity firm focused on investment opportunities in China and Southeast Asia. To date, CMIA has led over US$600 million in private equity investments. CMIA is primarily focused on Growth Capital opportunities, and has also financed Greenfield, Buyouts and Privatizations selectively. Established in 2003 and headquartered in Singapore, CMIA also operates out of offices in Shanghai and Hong Kong.

US$600m is hardly a big enough fund with muscle power.

But now, there are lawsuits against CMIA for negligence:
"Directors of Fund II are suing Mr Lee and CMIA in Singapore for alleged breach of fiduciary duties. CMIA and Mr Lee are counter-suing the directors for defamation and breach of investment management agreement, among other things."

In conclusion, the following paragraph does not hold:

They feel that the placement with CMIA will also add credibility and raise the profile of the company, as CMIA is a well-recognized fund known for long-term investments in China's growth, in particular its rapidly growing consumer market, as China transforms from a manufacturing-export dominated economy into one that is consumption--focused.

To me, CMIA does not add credibility at all. It was only established in 2003, hardly long enough to be considered a long-term investor nor sufficiently well-recognized.

Remember that if funds lose money, it is their clients and investors that lose, and not the managers themselves.

Feburary 2011 Portfolio Update

2011-02-28T17:44:00.001+08:00

Feburary was a down month. Lots of selling. Many of my holdings went very red, especially Capitaland and CapMallsAsia. I guess it has something to do with what the China govt is doing to their economy to put on a brake.

My entry this month was GLP, 3 lots at $2 and 3 lots at $1.88, giving me an average of 6 lots at $1.94. I believe GLP will benefit in the long run from the growth of China as an industrial play. My average is slightly below its IPO price, and I do think it offers a marginally safe entry point.

I also entered Singtel at $2.89. This is for yield, and I will ride Singtel for its ups and downs if possible.

A short summary of my core holdings:

Portfolio cost: $190k
Portfolio value: $207k
Percentage gain: 8.69%

Dividends went lower to $1083/mth on average. This is mainly due to Aztech's poor result. The Material Supply segment of Aztech failed to secure new contracts again and again. I will be considering whether to sell Aztech, take the loss, and move on to another counter.

Adding to the $24k in the basket I hope to sell off at the bottom, my total cost stands at $214k, an increase from the previous month's $197k. All my MMF units have been redeemed. I sort of "showhanded" at GLP and later on, Singtel. Basically, I'm 100% vested at the moment, and the dividends and salary received today will all go to fund Singtel's purchase, leaving me with about $500 left in bank to start March.

While this is dangerous, I do this to make myself short of cash, so that I would work harder to look for more cash. This has worked in the past, and pushed me to establish myself in the tuition arena. I'm looking to push myself further to complete my book and get it out asap. It is a risky holistic strategy I employ on my own financial health, and I do not recommend anyone to follow this risky strategy. I do not have much debts, and I have in place my dividends that will be coming in mid March, more tuition fees coming throughout the month.

Trading Basket -- Hoping to sell off

I want to sell these off when I can, or cut loss when I can take the loss :(
Portfolio cost: $24.3k
Portfolio value: $17.2k
Unrealised loss of around $7k

(red = freezer stocks to remind myself of my mistakes)

30 lots of Hor Kew at 0.125

27 lots of LC Dev at 0.177 (accepted the rights + 3 lots excess)

2 lots of Cosco at 2.67

160 lots of Berlian Laju at 0.065

Personal Updates

2011-02-22T10:03:00.001+08:00

As you might have realised, my updates are getting less and less frequent.

I'm bogged down by work and tuition as usual. But my time for writing blog posts have now been mostly re-directed to working on authoring my A level physics guidebook. As such, I will be reducing updates to this blog substantially till I complete this book, this aim, this dream of mine.

Granted, such a guidebook will not yield high margins when it gets published. According to http://www.business.gov.sg/, publishing gives the lowest margin compared to other businesses. Indeed, the ROE is probably between 50% to 100% after most expenses are deducted if I'm the author.

Then again, while I do need the money for food (I'm being practical), I'm more concerned on getting a book out and attempting to make a small contribution/impact on the learning of physics in Singapore. I find that a number of students get disillusioned about physics around O levels, and most ceased to take it at A levels, or perhaps struggled at A levels physics because of self-beliefs that physics is hard.

In my opinion, schools have to take a responsibility, and I do think that most schools perhaps do something wrong in teaching physics. I have my own beliefs and ideas, and by implementing it, I have successfully gotten a total of 5 As out of 7 students I taught over the past year for O level physics. That is 71.4% of my total number of O level students in my group class. The remaining students, 1 received an unexpected B3 of which he was sorely disappointed, the other received a B4 of which he was extremely happy because he fought back from a fail grade without giving up, perhaps because I did not give up on him.

At the same time, I'm planning a personal road map for growth. This is to complement Goal 2013. For my current engineering job, I would probably stay till the end of this year, or latest, end of next year, before I decide on either of the following paths

(1) Find a new job to get new experience in a different company environment and culture.

(2) Freelance Tutor like LP.

(3) Start a business with the aim of learning how to build working systems, while living on my savings and dividends. My first aim is to have one focused on creating high quality educational materials, of which my first target is the guidebook I'm authoring. However, I do not think I could fit into the timeline I set for myself in Goal 2013. Nevertheless, I shall try.

(3) is more important to me at the moment. Perhaps I would do all 3, but I wouldn't be sure at this juncture. I'm pretty sure that if I embark on such a path, my income and growth rate will initially drop a great deal such that

(i) on financial status, I would start lagging behind
(ii) on emotional status, I would start doubting
(iii) on relationships, I would perhaps need more support

As for my equity portfolio, I will be waiting for the next bullish phase. I believe STI is now under-going a correction, and it will soon be time for STI to cross 3200, to move to 3400~3500 region. That will be the time when I start taking some money off the table, perhaps leaving only profits and money in my perceived more stable dividend stocks like Starhub and SPH. I will be looking to offload Aztech after being sorely disappointed at their results and their IR who do not even bother to reply any email.

As you can see, while equity investment is a huge portion of what I have now, it is probably going to play a smaller role for me in time to come. That's my plan for time to come.

Last is housing and marriage. Currently, I'm expecting this to occur in about 2.5 years to 3 years time. But I guess I will put my energies and focus on this after I finish my book, which will currently be top priority.

A Quick Take on the recent results of some companies I own

2011-02-16T09:51:00.000+08:00

Quite a number of my holdings released results over the past two weeks. The companies are
Starhub, AIMSAMPIREIT, Saizen REIT, Silverlake, new purchase GLP, CitySpring, Starhill, CCT, K-Green, First REIT, GRP, ST Engg

Time is really tight for me, with family commitments due to Chinese New Year, with my recent take up of being a trainer for a sec sch's Junior Physics Olympiad team and the long hours spent on preparation of materials, with my continuous authoring of my planned A level physics guidebook, and with my engineer work.

I took a quick look at the recent results, and but I know time doesn't allow me to do and post a detailed analysis on each and every counter. The main thing I garnered was buying cheap defensive blue chips giving good dividends in a recession seldom go wrong.

My comments collated over the last few weeks:

1) Starhub
Overall, the results are in line with expectations. Dividends remain at 5c for this stable defensive counter, and intends to remain the same for FY2011.

This is one counter where I had been truly successful by being contrarian. Most of my purchases were done when they announced a loss of EPL contract to Singtel. I still remember that was the time where many analysts were calling for SELL because of the EPL loss.

Starhub was distributing 4.5cts dividends per quarter at that time, and on the following quarter, started distributing 5cts per quarter. The analysts that were calling for SELL immediately decry that this is not sustainable, and maintained SELL.

My contrarian view and action to purchase was based on my thoughts:
http://wealthbuch.blogspot.com/2010/02/starhubs-dividend-yield.html

It was there that I mentioned about the loss of EPL: "Of course, the true impact will only be known from Jun 2010 onwards. Let's see how it pans out. My belief is that the impact will be minimal."

Analysts report are now claiming more bullish views on Starhub. In fact, one of them mentioned that "overall, the impact of the EPL loss on STH’s subscribers has been less significant than previously feared". Are we to trust these "professional analysts" who called for SELL on Starhub at $2, and call for BUY at $2.6?

In fact, I'm waiting for the dividends to eventually grow higher.
http://wealthbuch.blogspot.com/2010/02/starhubs-potential-for-growth.html
"I have confidence in Starhub's management and its ability to exceed expectations again. The final blow to the analysts' report will come if and when Starhub raises its dividend payout to 5.5 cts come 2011 or 2012."

I'm glad I listened to what I know about electronics as an electrical engineer, and not some analysts who probably don't even have an idea how telecommunications work.

Moral of the story, read analysts report with a discerning mind. This applies for all blog posts as well, including mine.

I shall still hold on to this counter for its stable dividend payouts.

2) AIMSAMPIREIT
Again, results were within expectations. 0.51 cents was declared for the quarter.

What gives the twist was a sudden announcement of private placements, and AIMS has decided to issue another 0.285 cents dividends before the new units are issued.

There are some who decry that private placements are always bad. Not necessarily so for my case. My warchest has dwindled substantially due to recent purchases of GLP, so a rights issue might not be right for me at the moment. Furthermore, I'm not concerned of any dilution because my stake is too small. This exercise merely reduces my stake from 0.006% of AIMS to 0.0054%.

To me, people just like to complain. If they give placements, there will be complaints why rights aren't issued where everyone gets to participate. If they give rights, there will be complaints why they rights are issued again. It's a never ending complaining process which leaves me scratching my head. I prefer to see it in a simple way. I'm contented if there's little change to the DPU. Dilution doesn't matter to me if yield and gearing remains comparable.

My Quick calculations on the DPU after the placements.
Assumptions:
1) Only 42m (that they are paying in cash) can provide dividends to us, and the 30.9m they are drawing from loan gives zero dividends
2) Dividends per annum is at 2cts
3) Rounding off, we have 2b units now, and 0.2b units are issued.
4) The new building indeed gives 7.6% yield.

A conservative estimate of the new DPU would be
(2 * 2b / 2.2b) + (0.076 * 42m / 2.2b * 100) = 1.96 cts per share.

I'm pretty sure my estimate is much too conservative, and in all likelihood, it will remain the same.

The gearing remaining rather constant, 34% to 33.6% following sale of property announced earlier, while NAV should drop from 27cts to about 26.5 cts.

All in all, I'm supporting this placement as having a larger and more diverse property base would ensure a more stable property income. Having lots of tenants offers stability in income receivable in itself.

3) Saizen REIT
Dividends of 0.52 cts was declared. While it may seem low (0.52*2/16 * 100% = 6.5% yield on my cost), one have to take note that
(i) properties have been sold to reduce the absolute quantum of the YK Shintoku loan.
(ii) 0.26 cts per share was used to reduce YK Shintoku's loan.

Supposed a breakthrough manifests itself that YK Shintoku's loan was successfully refinanced, and assuming that a conservative 50% of the 0.26cts is distributed as dividends, the yield on my cost would then be (0.13 + 0.52) * 2 / 16 * 100% = 8.125%.

There are still warrant proceeds which have not been used yet to clear the loan. I believe the refinancing would become more attractive to banks once the loan is reduced further.

If anyone has the warrants at a cheap price, please convert to help :)
I have a tutorial to help here: How to exercise your warrants?

4) Silverlake
There was a 62% increase in revenue, along with many other increases. However, we have to take note too that there were acquisitions done, and hence increases in revenue is expected.

Dividends of 0.3 cts have been announced.

I believe this company is interesting, and I shall continue to monitor it.

5) GLP
GLP profited. I entered at $2 and $1.88 the subsequent day, having a total of 6 lots now and an average price of $1.94, just 2 cents below the IPO price.

Nothing really interesting.

6) CitySpring, Starhill, CCT, K-Green, First REIT, GRP, ST Engg
I group these together because there are nothing big in their reports, to me at least.

CitySpring: 1.05cts dividends declared. Nothing new for a boring company, apart from promises, be it empty a not, to review the capital structure of CitySpring.

Starhill: 1.04cts dividends declared. Nothing exciting this round.

CCT: 3.93 cts dividends declared.

K-Green: 4.31cts dividends declared, slightly more than expected. A no gearing trust with potential to increase this payout, even though it might be paying down from depreciation.

First REIT: 0.87cts dividends declared. Defensive healthcare REIT with low gearing.

GRP: 0.01cts dividends declared... How much more boring can it get? But I like boring dividend stocks :)

ST Engg: 11.55 cts dividends declared, with a larger orderbook and expectations of even higher turnover in FY2011. 30.3% ROE with EPS 16.1cts. This is a true testament, along with Starhub, that it is very very seldom wrong to buy into defensive dividends blue chips during recessions at lows!!

Digiland.... Beware again....

2011-02-08T18:45:00.001+08:00

Earlier, I posted about Digiland...
http://wealthbuch.blogspot.com/2010/06/digiland-beware.html

We had Digiland calling for a 'massive' rights issue - a 1-for-1 renounceable non-underwritten rights issue of up to 8,526m new shares at $0.001 per share, to raise $8.25m!

It failed. SGX did right.

Digiland did not give up. They gave placement shares, amounting to $8.2m in total.
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_A21A84CBFA42A2064825780A00300423/$file/Anncemt-PlacementShares31Dec10.pdf?openelement

A total of 1.7b placement shares was issued to add to the 8.5b float.....

And finally you get new substantial shareholders in
1) Fortune Woods Global Investment Limited (10.8%)
2) Smartful Global Holdings Limited (5.7%)

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Rule 1311 of the Listing Manual which states that the Exchange will place an issuer on a watch-list if it records:

(i) pre-tax losses for the three (3) most recently completed consecutive financial years (based on the latest announced full year consolidated accounts, excluding exceptional or non-recurrent income and extraordinary items); and

(ii) an average daily market capitalisation of less than $40 million over the last 120 market days on which trading was not suspended or halted. For the purpose of this rule, trading is deemed to be suspended or halted if trading is ceased for the full market day.

Investors should also note that pursuant to Practice Note 13.2 Paragraph 2.1, the Exchange conducts quarterly reviews to identify issuers to be included on the watch-list. The quarterly review will take place on the first market day of March, June, September and December of each year. The Company will make an immediate announcement should it be notified by the Exchange that it will be placed on the watch-list.

************************************************************************************

At 8.5b shares trading at $0.005, Digiland's market capitalisation is $42m.
It appears that the placement shares, etc, are all to prop up the market capitalisation to ensure that it will not be put on the watch-list.

With this round of $8.2m injection, the market capitalisation grows to $50m...
Could they be expecting SGX to change Rule 1311 to be $50m soon? Or is something else up their sleeves?

It's quite unimaginable to me for anyone to want to put their monies into a company with 3 years of consecutive losses. I wonder how real the two new investment companies are...

I think something is fishy... Beware...
I wouldn't bet my money on it.

Robert Kiyosaki's Who Took My Money

2011-02-08T00:43:00.001+08:00

Recently, I finished reading this book from Robert Kiyosaki, which I think is a good read after Rich Dad, Poor Dad.

In this book, Robert stressed on the three asset classes (business, real estate and paper assets), the velocity of money, and the accelerators for money. He stresses a lot on using Other People's Money (OPM) and Other People's Time (OPT).

The reason why he thinks employees have the greatest risks is because
1) you are not guaranteed any job security at all
2) your income is taxed after expenditure, which doesn't make sense to him

As a business owner, while interviewing for potential staff, he looked around and saw all the young guys, and thought to himself: "I wouldn't hire myself". The reasons, he mentioned, included being older than everyone else, more expensive than everyone else, and finally, less technologically savvy.

In addition, his purchases of properties, assets, etc, are all done and protected with legal entities. These are company costs, and are all expenses before taxes. The amount of savings is substantial when a large sum of money is involved. To him, taxes are the single greatest expense.

Cash Flow vs Capital Gains
In his book, he likened about Cash Flow vs Capital Gains to Dairy Farmers vs Cattle Ranchers. The main difference between the two is that both have cattle as assets, but both treat their assets differently, and operate via different business models. To him, true investors invest for cash flows, and gamblers are there for capital gains. "Capital gains is the dream of gamblers. When you invest for cash flow, you are investing in a money-back guarantee. If you invest in capital gains, you invest in hope. The biggest thief of all is hope."

While he emphasizes on building cash flow, he does invest for capital gains as well. It is all about a matter of priorities.

Building cash flow is similar to building pipelines, and expanding the cash flow is about expanding the diameter of the pipelines. Robert mentioned how he move cash flows from one assets into another new asset, and then repeat for a 3rd asset, and this process continues. Bringing down to more layman terms, it is a little similar to buying a dividend counter, then use the dividends to buy another dividend counter, and so on. The big difference is that Robert does it with leverage, while we don't do the same for paper assets.

While some might view leverage as risky, I do agree with Robert that this is a matter of perceptions and financial intelligence. The same event viewed with different people eyes will result in different conclusions. Again, it can be analogous to a maths question seen through my eyes and my students' eyes. I will most likely find it much easier than they do.

Banker's View

There was a little interesting anecdote about a banker's view on who to give loans too. Robert asked a banker whether the banker would loan him money to buy mutual funds. The reply was negative. But the banker would consider loaning him money if he was to invest in business or real estate.

The banker replied that he won't loan money to buy mutual funds, but he would consider loaning money for a business start up or for purchasing a piece of real estate.

Insurance

I like the sentence. Those who need insurance are probably those who cannot get insurance anymore.
How true this is :x

5 considerations for each investment

1) Earn / Create
==> How is it going to help you generate your cash flow?

2) Manage
==> How are you going to manage this investment?

3) Leverage
==> How much leverage can you get for your investment?

4) Protect
==> How are you going to maximise your profits, and protect it from creditors?

5) Exit
==> How are you getting back your original investment money back?

The 4 quarters of our life

This is another interesting way to see how our life is. Basically, we can assume that we start work at the age of 25 and retire at the age of 65, working a total of 40 years.

The 4 quarters are each of 10 years, which means
1st quarter: 25 ~ 35
2nd quarter: 35 ~ 45
Halftime
3rd quarter: 45 ~ 55
4th quarter: 55 ~ 65
Overtime

Basically, we aim to win in every quarter. However, winning in one quarter doesn't mean you will definitely win in the other quarter. Things could change drastically.

While this is an interesting way to divide our working lifespan, to be honest, I only found this portion interesting, but how it really applies, I could not yet fully comprehend.

All in all, I do like this book. It's a refreshing read as it is quite different from Robert's Rich Dad, Poor Dad. There are a number of things that were mentioned (but I didn't write down) on what businessmen really do to protect and accelerate their networth. You could borrow from the National Library for a read.

January 2011 Portfolio Update

2011-01-31T18:06:00.001+08:00

January was supposed to witness the Capricorn effect. Indeed, the first few days of January registered a STI increase. I've read somewhere that if the Capricorn effect did not materialise, then the market would be worse off in the later part of the year. This happened in 2008.

The only change to my portfolio this month is that I purchase another 23 lots of AIMSAMPIREIT at $0.215 2 days ago to round it up nicely to 120 lots. Apart from that, I didn't see anything good for buying for myself. I'm getting more and more cautious at the moment, only entering very selectively. There's a time to buy, there's a time to wait, and there's a time to sell. To me, I believe this is the time to wait, to be excessively patient and cautious. While I believe markets can still rise, most stocks at this level have a low margin of safety as compared to before, so I would wait.

A short summary of my core holdings:

Portfolio cost: $173k
Portfolio value: $196k
Percentage gain: 13.37%

Dividends reached $1155/mth on average. No dividends this month, but I'm expecting dividends to come (starting from 28th Feb) from Starhill Global REIT, CapCommTrust, AIMSAMPIREIT, KGT, CitySpring and First REIT. I'm also expecting dividends to come from GRP and Saizen after they announce their results. Starhub's yet-to-be-announced dividends would most likely be delayed, typically coming after their AGM.

My percentage gain rose mainly because of First REIT's rebound. A number of holdings went XD this month as well, namely AIMSAMPIREIT, CapCommTrust, and First REIT.

Adding to the $24k in the basket I hope to sell off at the bottom, my total cost stands at $197k, an increase from the previous month's $192k. Adding these to my MMF units, my total available funds for investments stay constant at $205k. I did not pump any new money into my MMF this month.

Trading Basket -- Hoping to sell off

I want to sell these off when I can, or cut loss when I can take the loss :(
Portfolio cost: $24.3k
Portfolio value: $18.5k
Unrealised loss of around $5.7k

(red = freezer stocks to remind myself of my mistakes)

30 lots of Hor Kew at 0.125

27 lots of LC Dev at 0.177 (accepted the rights + 3 lots excess)

2 lots of Cosco at 2.67

160 lots of Berlian Laju at 0.065

Musings and Ramblings

2011-01-23T03:03:00.001+08:00

Seriously, I have no idea what to write for this post, but I'm just rambling along.

Much as I would like to have a more relaxing 2011, Jan 2011 turned out to be a crazy month so far. I had so many things on hand.

As my dividend investing strategy continues, I realised that my cashflow gets better over time. While having achieved a $1.1k average monthly dividends does not ensure retirement, it does give some form of flexibility if I ever want to strike out on my own. Given my current circumstances, if I were to remain in my current state, I could retire if I want to right now, giving the occasional tuition and doing the occasional trading.

But I'm not going to do so. Why? It's not really about money, although more would be nice. It's about my passion, it's about what I want.

Why do I teach tuition? I really find it fun, but that's only one side of the equation. The best reward comes from successfully turning a failing student into acing the exam! The most recent example would be my 7 O level students with a score of 2 A1s, 3 A2s, 1 B3 (had expected an A2), and 1 B4 (from failing). It's a feeling of euphoria that I can't really describe with words when I know that these students who ace their exams were once lacking confidence, scoring badly, and looking for me to help pass their exams.

Why am I aiming to write a physics guidebook? I want my book to really benefit students in scoring, because I really do think it would have an X-factor, something extra to it, as compared to the books on the market. I do dream of being able to autograph my own book for my students. It's fun, and it's an experience that I want to have.

For the last 2 years, I helped teach a secondary school for Junior Physics Olympiad. It's another great feeling when I know some of the students achieved awards for their respective categories. What makes me happier was to know that this school just received the best non-IP school award for this competition. I was approached this year to help teach another secondary school for this same competition. Let's see if I would be able to do a repeat performance.

Why am I still in my full time job? It pays peanuts (to me at least), but I stay because I really like to do programming and solve problems (engineering). What makes the place even more fun is the colleagues I work with, the things we talk about, etc. They are the reasons that would hold me back and make me think twice if ever I want to leave for greener pastures.

So while I'm setting goals here and there, in actual fact, I'm setting a target where I want my passion to grow towards. I guess I'm an addict to seeing achievements, not just my own, but also people I helped, people I trained, people I know, etc. This is the main reason keeping me awake every night, thinking how I could author and write my notes better for the common student, thinking which are the best questions for training my A level and olympiad students, thinking of any new educational techniques and tricks I can conjure to arouse the interest of students, etc.

Guess I'm rambling too much. I better go sleep.

Growth Strategy for 2011 and beyond

2011-01-04T01:46:00.002+08:00

Happy new year to readers in the year 2011!

Year 2010 was a rather good year for me in terms of networth growth (nearly doubled). It was a year where I was super busy, but monetary and spiritually rewarding. Why I said it is spiritually rewarding is because I believe it is my calling now to assist and help students do well in their studies, through active teaching and through books.

Year 2011 and beyond is indeed more exciting than ever before. This post is not going to be about any new year resolutions, because I have already set myself in place with Goal 2013.

Apart from Goal 2013, this is my view of the economy and market in concise form:

1) Asset prices continue to rise.
2) Markets continue to rally.
3) Precious metals and commodities may continue uptrend.
4) While I believe it will rally, eventually, there will be a very very great crash. Just when. My estimate is 2018 based on a ten-year cycle.

The first reason is the apparent bearishness of many in the market. To me, a bullish/bearish appearance in stock prices does not indicate a bullish/bearish emotion of investors in the market nowadays. The main reason is because of institutions and liquidity, as explained in the second and third reasons below. Yet, many bullish/bearish indicators are usually dependent on price movements. Is that really accurate when currencies are depreciating at such a fast rate? IMHO, there are a huge number out there with bearish views of the market. Not based on prices, but based on observations and my interactions with people, and by putting myself in their shoes. To me, many have been "financially awakened", have read many financial blogs and financial books, and hence are more aware and cautious of playing the market unlike before. The recent bear is still fresh, and naturally, fears will linger about an impending top. I try to be contrarian and call for another mega rally with a time frame of 6 years.

The second reason is because of the presence of high liquidity in a world that is more financially awakened than before. Is it not scarier than before that more and more people, especially the younger ones (like me), are talking about the concepts of financial freedom? While there are indeed still people who do not bother, I believe there's a rise in the numbers who do bother. Hence, I believe more and more people will buy more and more assets (including paper assets like stocks), leading to a buying fervour that will grow and grow.

The third reason is that with printing of currencies by so many countries, the value of currencies are dropping. So what if a government owes lots of debts; when desperate, one only need to "print" more cash to return the creditors. Furthermore, quantitative easing provides even more low interest cash to institutions to borrow and buy assets worldwide. Who cares about currencies and debts anymore. It's a never ending cycle:

use spare cash buy assets <==> borrow cash to improve liquidity and position for more purchases

And how to get the extra cash to lend? Just print more. Eventually, printing of currencies can help buy up more and more assets till currency gets worthless. Quite a gloomy eventual outlook on currencies, but a mega bullish outlook on asset prices.

But eventually, all good things must come to an end. All parties must end. Will the world greatest economy allow their reserve currency status be removed? I don't think so. That will be the time when these borrowers sell everything at a large profit and return the cash, solving the problem of debt of the country. A conspiracy theory I believe in. When it will end is up to anyone's guess.

The stock market is like a sheep farm. The institutions borrows the cash to feed to the sheeps in these sheep farm, and slowly fatten them up over a period of time. We see this as a bull market, where everyone is buying. Everyone is earning money and everyone is happy.

When the sheeps are ripe for harvest, it's time for the slaughter to lock in the profits. Institutions will start a mega selldown to lock in their profits. TA practitioners will see supports being broken, and start selling at the same time, further fuelling the selldowns. This is what we see as a bear market.

Eventually, most of the sheeps are all slaughtered. It's time to grow and fatten a new batch of sheeps. This is what we see as market recovery. And yet with all these financial manipulations, no value is created. I'm just a small sheep in this farm, but I believe the fattening process will continue, and hence I'm staying vested.

This is why my growth strategy for 2011 and beyond, apart from remaining vested in the market, includes growing my own asset, which is a business, one which aims to value create instead of competing. One which aims to assist instead of destroy. And for myself, I have identified to be in the business of creating educational materials to help students score. This, would be my main thrust and growth strategy through year 2011.

December Portfolio Update + Quick Review of 2010

2010-12-31T16:00:00.000+08:00

December was a rather quiet month.

The main changes to my portfolio are

1) First Reit. I initiated a position in First REIT rights at 0.165, and subsequently exercised the rights by paying another 0.50, bringing my price to 0.665. This gives a yield of about 9.64%. This is a stock I wanted while it was 40c region, but procrastinated too long. While, hindsight is 20/20.

2) Silverlake. I initiated a position at 0.33, and I have written 2 posts about this.

3) CapitalMallsAsia. I initiated a position at 1.86.

4) Cut loss on China Sky at 0.22. While on hindsight, I could have done better and sold it this week with a profit instead of a $500 loss.... :(

5) Took profit on Breadtalk. Again, on hindsight, I could have earn more if I sold it this week, but then again, it's hindsight, and my number of lots is so little it would have mattered much anyway.

6) Subscribed for LC Dev rights.

A short summary of my core holdings:

Portfolio cost: $168k
Portfolio value: $184k
Percentage gain: 9.82%

Dividends reached $1115/mth on average, after all the changes in my portfolio above. Of course, this can change over time, either through portfolio shuffling, or through changes in business of the stocks I hold. In the month of Dec, dividends came in from Starhub, SPH, CitySpring and AIMSAMPIREIT. I have already spent some of these dividends on a new All-in-one PC from Dell (Price $2k) :)

The percentage gain dropped a great deal because I have inserted quite an amount of spare funds into the market this month. These fresh funds have yet to gain much. In addition, a number of my holdings went XD, so some of the gains were realised back as dividends.

Adding to the $24k in the basket I hope to sell off at the bottom, my total cost stands at $192k, an increase from the previous month's $177k. Adding these to my MMF units, I have reached near $205k.

Trading Basket -- Hoping to sell off

I want to sell these off when I can, or cut loss when I can take the loss :(
Portfolio cost: $24.3k
Portfolio value: $18.4k
Unrealised loss of around $5.8k

(red = freezer stocks to remind myself of my mistakes)

30 lots of Hor Kew at 0.125

27 lots of LC Dev at 0.177 (accepted the rights + 3 lots excess)

2 lots of Cosco at 2.67

160 lots of Berlian Laju at 0.065

Quick Review of 2010
The year of 2010 went rather well for me. At then end of 2009, my investible capital (by cost) amounted to $112k. At the end of 2010, today, my capital has reached $205k, an increase of about $93k for 2010. This include both realised gains ($11k) from the market and from savings from active income sources ($82k).

I made quite a few mistakes in my timing of exits; i.e. I exited China Sky and Breadtalk on a down day. But it does give me a peace of mind and some opportunity cash to lie in wait.

Year 2010 also saw my amount of technical analysis reduced by a fair amount, and having a greater focus on the fundamentals of companies. While my analysis on fundamentals, balance sheets and businesses is still at the extremely basic stage, at times, I ponder over whether one should spend a substantial amount of time to delve so deeply into a company's statements apart from picking a few critical points to look at. Time is of essence, and returns per hour is of priority to me. I like the checklist that cookieguy has for analysing stocks (must get it from him!). What he does is to analyse the stock based on his pre-determined checklist which he has made from his investing experience.

I will try to get a post on my views and goals for year 2011, and how I would set out to achieve them.

Quiet Good News for Starhub

2010-12-30T11:01:00.001+08:00

Financial numbers should never be the absolute decision maker/trigger when determining whether to buy into a business. Here's one quiet good news from Starhub:

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StarHub secures deal from Marina Bay Sands

SINGAPORE : Info-communications provider StarHub said on Wednesday that it has secured a deal from Marina Bay Sands to provide telecommunications and entertainment services.

It added that the services will extend to both Marina Bay Sands (MBS) Expo and Convention Centre and its luxury hotel rooms and suites.

StarHub did not disclose the actual value and the period of the deal, but said it was a multi-year, multi-million dollar agreement.

In a statement, StarHub said the services will include mobile voice and data services, high-speed broadband and Internet lines.
In addition, a range of StarHub pay TV services will be available in all of MBS' 2,500 guest rooms, as well as on all 75 public screens around the resort, including the casino area.

As part of the agreement, visitors to the resort can also buy a co-branded prepaid mobile SIM card.

Ng Long Shyang, head of Sales and Marketing at StarHub, said the agreement underscores the company's commitment to offer a suite of business solutions that meet the needs of the hospitality industry.

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Starhub does not merely serve the telco and broadband industry; it has its foot too in the hospitality and home-entertainment industry.

What does this bode for Starhub? As an infrastructure company providing content based services, such contracts help to further increase the cashflow inwards to Starhub, with perhaps a lesser capex in providing such services. If I'm not wrong, license fees for TV broadcasting do not increase with more subscribers coming on; it is a fixed cost, and the average fixed cost will only decrease as more and more subscribers come on board.

A blue chip STI-component company with its infrastructure ready, operating in industries with ultra high barriers to entry (telco, broadband, cable TV), with forays into home-entertainment (karaoke on top of cable TV) and hospitality (as above)... What more can I ask for with a 10.5% dividend yield on my cost?

While I won't seek to buy more at current prices, I will definitely increase my holdings if its price ever comes down.

Silverlake Axis Part 2

2010-12-22T01:42:00.000+08:00

Silverlake's Barrier to Entry
Silverlake processes more than 50% of retail-banking transactions in South-East Asia. As mentioned earlier, Silverlake's software integrates the front-end and back-end of bank operations. From lending, deposits, credit cards, banking operations, Silverlake's software handles it. As the performance of such a software is critical to the smooth operation of banks, the reluctance and costs to switch are extremely high. As a result, it's customers will very likely stay loyal. Why risk a smooth banking operation on an untested new software when the current one is working very well?

From broker's writeup: It is of no coincidence that its clients are largely Southeast Asian Banks, including six of the nine anchor banks in Malaysia (EON Bank, Alliance Bank, Affin Bank, Hong Leong Bank, Malayan Banking and AMMB) and two Singapore Banks (OCBC and UOB). In Indonesia, it has six of the largest 10 banks, including Bank Mandiri, Bank Rakyat, Bank Tabungan Negara and Bank Niga.

In my opinion, with such client base at hand, any new bank wanting to set up shop in Singapore or Malaysia will consider Silverlake as a strong software logistics support for their banking operations. Coupled with loyal clients (based on logic, since I'm an engineer and I know how softwares tend to "stick" to companies for long), it would be tough for any newcomers into the market to snatch any clients.

Silverlake's Recent M&A and Contract Wins

2006
1) Partnership with IBM Innovation Centre
2) Entered into two contracts to supply a suite of integrated core banking solutions to the Islamic Bank of Thailand and a foreign owned retail bank operating in Thailand.
3) Majority shareholder sold 135 million shares @ $0.555. Stake declines to 73%

2007
1) Secured two contracts with a combined value of approximately RM24 million to supply a comprehensive suite of integrated core financial solutions.
2) SAL invest US$20.35 million for 30% stake in Chinese's Unifisoft Holdings, a top 5 PRC banking IT solution provider.
3) SAL secured three new contracts in Malaysia, Philippines and the Middle East, collectively worth approximately RM29 million
4) Silverlake Axis Expands Licensing of SIBS Into Capital Markets Industry With Contract For US$7.35 million

2008
1) SAL has secured two new contracts in Thailand and the Philippines for a total value of approximately US$6.8million.
2) Repurchased 30.3 million shares @ $0.09 - $0.12
3) Announced that banks has delayed their IT upgrading due to the crisis.

2009
1) Repurchased 25.8 million shares @ $0.08-0.09. It holds 55.8 million treasury shares.
2) Acquired the remaining 75% issued share capital of SBI Card Processing Co.. Ltd. For S$7.6 million

2010
1) Acquired SSB and QR Solutions from Founder for $339 million paid in the form of 1,025,635,634 new shares. Founder stake boosted to 83.6%.
2) SAL will provide cards (credit, debit and loyalty cards) and logistics IT solutions to HNA Group Co. Ltd for S$70 million
3) Bank Islam Brunei Darussalam (“BIBD”) Extend Strategic IT and Solution Provider Partnership with Silverlake Axis Ltd. (“Silverlake”). Contract sum is confidential
4) Strategic Alliance with HNA Group (total assets of RMB 160 billion). Founder agree to sell 242 million shares to HNA and placed in escrow for 3 years. HNA will enjoy all gains above $0.16/share if the shares are sold after 3 years.
5) Business Collaboration between Hitachi Information Systems, Ltd and Silverlake Axis Ltd in the Development and Outsourcing of Financial and Distribution Systems for the Japanese Market
6) Silverlake Axis to Provide Core Banking System to Support CIMB Group’s 5 year 1Platform Initiative. Its partners won the RM 1.1 billion contract. SAL share is undisclosed.
7) Secured a major core banking contract worth approximately S$30 million from one of the largest regional banks (the “Bank”) in South East Asia.
8) Founder sold 50 million shares @ $0.32 to boost free float

Why it appeals to me
1) As a primarily software company, Silverlake does not have a high Capex, but rather, the costs needed to maintain and improve the functionality of it's core banking software. In addition, the asset value of it's intangible licenses are hard to be given a concrete valuation. With it's sufficiently high ROE and ROA, I would say that the value of the intangibles are rather substantial. Of course, I stand to be corrected here.

2) Silverlake deals mainly with the financial industry. The crisis of 2007~2009 hit the financial industries hard. As a supporting industry to the financial world, Silverlake is hit hard too. This can be seen from it's financials, where gross revenue and gross profit declined substantially going from FY2008 to FY2009.
However, as we recover from the crisis, I expect Silverlake to benefit from the recovery as banks seek to reassert and consolidate their positions in South East Asia.

3) Technically, Silverlake hit a low of 8cts in Mar 2009. Recently however, it went above 35c before coming down to the current price. 33c, the price I bought, is it's 200MA region. If it gets bullish, it could break this critical 200MA line to go higher. If it gets bearish, I'm happy to average down this company.

4) Management intends to grow the recurring income segment, which is an important income moat to buffer against any volatility.

Risks of Investing in Silverlake
All investments carry some form of risks. Silverlake is no exception.
The main risk comes from it's low liquidity, so if you really need desperate cash, you might have to sell it at a loss in the short term. And this is one reason why fund managers will not be interested in a share with such a low amount of free float (<40% free float).

I shall lazily conclude this post with the management's outlook for Silverlake:

With the recovery of the Asian economies from the global financial crisis from mid 2009, the Company
was able to conclude five new contracts totalling approximately S$210 million with existing and new
customers in 2010. As confidence returns, it expects to receive more requests for proposal during the
rest of FY2011. It is in advanced contract discussions with several banks and financial institutions in
South East Asia and expects to secure more contracts and upgrades for the licensing of SIBS in
FY2011.

The five new contracts will contribute to a strong recovery of the software licensing and customised
software solutions business in FY2011. This recovery will add to the stable revenue generated by the
newly acquired Structured Services Business of maintenance and enhancements. The recovery of
software licensing will broaden the revenue base of the Company as well as contribute to its net profit
growth in FY2011. The Company remains optimistic of its business prospects.

Silverlake Axis Part 1

2010-12-21T02:23:00.001+08:00

This is a write-up on this mini Malaysian company listed on the SGX called Silverlake Axis.
This write-up is not entirely original from me; it is a compilation of write-ups from a certain blog, my broker, Kim Eng's research and Nick's excel sheet calculations (thank you Nick!).

The company describes itself on the website: "Silverlake Axis is a leading provider of end-to-end universal integrated banking solution. The Group's award winning Silverlake Axis Integrated Banking Solutions are implemented at over 75 customer sites in Asia including 40% of the Top 20 Largest Banks in South East Asia."

Basically, Silverlake is a Malaysian software solutions provider specialising in the financial industry. Silverlake develops the software for banks to interface and integrate their front-end retail-banking services with the back-end, known as “SIBS” or Silverlake Intergrated banking System. SIBS is a centralized software system for managing accounts and products such as deposits, payments and loans for banks. Specifically, SIBS provides solutions in areas such as deposits, loans, remittances
and payments, electronic banking, credit cards and trade finance. Silverlake Axis owns the intellectual property tights to SIBS.

Some of Silverlake's more famous clients include:
Hong Leong Bank, OCBC Bank, United Overseas Bank, Malayan Banking Bhd, Malaysia.

Silverlake's Financials

Silverlake has grown it's revenue from FY2003 consistently year on year, with the exception of a substantial decline in FY2009, likely due to the financial crisis that swept across the world.

It's ROE is pretty decent, and it is in net cash position (1.29 RM sen per share). A software company by nature, it has a business model that produces a recurring cash flow with low recurring capital expenditure.

From Kim Eng's report: In March 2010, Silverlake acquired two companies from its major shareholder. This promises a more recurring income base than its traditional banking solutions licensing business that has been hard hit by the global financial crisis. Structured Services involves software maintenance, management and change request services for clients that have previously implemented SIBS, while QR Group provides retail systems solutions and services. Both businesses are highly profitable with net margins in excess of 40%.

The dividend payout has also been quite decent. At 1.7cts for FY2010, it would be a 5% dividend yield at a price of 34c (I bought at 33c).

As the economy recovers, and along with it the financial sectors, Silverlake would likely benefit.

Silverlake's Segmental Breakdown

Management intends to grow its recurring income base to provide stability to its financial performance.

The cash it generates, plus the contracts it secures from Asian banks, suggests that the intangible assets associated with its Silverlake software are significant. This is somewhat expected of a strong software company, whose main intangibles arises from licenses of it's softwares.

From my broker's writeup: The purchase of Silverlake Solutions will provide steady cash flow via maintenance contracts, compared with the lumpy contracts it currently derives from the SIBS software. As the MD, Mr Raymong Kwong, put it: “In FY2011, up to 50% of revenue will be recurring”. This is evident in its Q1 FY2010 results, where out of the RM 56.15 million in revenue, RM 32.72 million was generated from "Maintenance and enhancement", or about 58.3% is recurring.

Shall end Part 1 here since it's already 2.22am.

CapitaMallsAsia and First REIT Purchase

2010-12-17T09:46:00.037+08:00

Recently I bought 3 counters, FIRST REIT, Silverlake, and CapMallsAsia (CMA). This post will focus on CMA and FIRST REIT, and the simple reasons why I bought it.

The first and foremost reason is that CMA has fallen below it's IPO price of $2.12. While on hindsight, it would have been better to load GLP at $2.11, I went with CMA for the reason above :x

The second reason is more technical. Doing a basic Fibonacci retracement, 1.844 appears to be a nice support. However, I was a little impatient, and went in 3 lots at $1.86, along with 1 lot at $1.85.

Of course, it could go lower. However, I believe in its business, another reason why I decide to buy into this. I'm willing to load at a lower price if it goes lower.

There have been talks about CMA's NAV and P/E ratio. In my opinion, CMA is in the business of development. NAV isn't a good judge because in developing malls, you are basically in the business of enhancing and increasing the NAV.

You buy a land for $X, you build a mall for $Y, you enhance and improve visibility and attractiveness of mall to draw crowds for $Z. The final valuation would and should be greater than $X +$Y +$Z, else they should just get out of business. What this means to me is that they "grow" their NAV over time.

Who to sell to after that? Pick CMT, CRCT or CCT. Job done for CMA, buy another land for $X next. The P/E ratio will then increase accordingly.

In other words, NAV should logically grow over time, while P/E ratio will likely fluctuate rather widely.

The only concern is that CMA isn't dividend friendly, or so it seems. I would still sell it eventually for a capital gain just for this reason.

While it is not technical discipline to catch a falling knife (one should catch a fallen knife instead), I'm too tempted by what I perceived as value in a blue chip that is linked to ah gong. Shall see how it goes.

This is another quick technical buy without much analysis. First REIT is basically one of two healthcare REITs listed in Singapore.

I bought 12 lots of rights at 0.165, which translates to an average price of 0.665 after paying for the rights and an eventual expected yield of 9.6%.

First REIT is a REIT which I had wanted for a long time since the days of 40+c. Subsequently, it shot up to 0.985 before giving rights, which gives a TERP of 0.7+. At 0.665, it's a small bargain, given that the rights are for acquisition purposes and hence yield accretive.

The expected reason for the sell-down is because international investors are not eligible for the rights issue. Hence, the nil paid rights are being sold on behalf of these international investors. At the same time, if the spread between the mother share and the rights are too big, it's worth it for investors to sell the mother share and buy the rights to capitalise on the difference. Hence the overall selling pressure.

And with the expected reason, I scooped up some. Hopefully it will turn out right eventually.

With my loadings, my warchest has dwindled substantially. I'll be looking to cut loss and take profit for some counters before year 2010 ends. Just to rebalance the game of numbers....

Keppel Green Trust -- an email to IR

2010-12-07T14:37:00.000+08:00

At last I have the time to really flip through K-Green's prospectus. I didn't really do it earlier as I was really busy with my students' exams.

Taking a look confirm what most people have been saying all along... KGT might well be distributing it's NAV to it's stakeholders at the moment.

So I sent an email to KGT's IR and asked...

My email:

I'm an investor in K-Green. I refer to the following 3 paragraphs from K-Green's prospectus.

"On the expiry or earlier termination of the Senoko State Land Lease, the Senoko Trustee has to yield up to SLA without charge the demised premises together all buildings, structures and appurtenances thereon in good and tenantable condition and state of repair (fair wear and tear excepted) and in clean and sanitary order and condition and all fixtures in good working condition and satisfactory maintenance (fair wear and tear excepted)."

"On the expiry or earlier termination of the Tuas DBOO Lease Agreements, Tuas DBOO SPC has to yield up to the lessor without charge the demised premises together with all buildings, structures and appurtenances thereon in good and tenantable condition and state of repair and in clean and sanitary order and condition."

"At the expiration, surrender or earlier termination of the Ulu Pandan Lease Agreement, Ulu Pandan SPC yielding up the land to PUB in a good and clean state and condition that complies with all laws at the risk and cost of Ulu Pandan SPC (including undertaking remedial works that are required to yield up the land to PUB to the requisite state and condition)."

Senoko has an agreement for extending it's lease for 15 years. For the purpose of my question, let's assume it is extended successfully.

The following is the amount of concession remaining:
Senoko: 29 years
Ulu Pandan: 17 years
Tuas: 24 years

To my understanding, at the expiry of the leases or concessions, all buildings and lands are returned without charge. Based on this, the terminal value of the NAV should logically tend to zero over a period of 29 years. Am I missing anything here?

The reply:

Thank you for your email.

Your understanding of the concession agreements of the three assets under K-Green Trust (KGT) is correct.

We would like to take this opportunity to assure you that the Trustee-Manager of KGT is focused on providing long-term, regular and predictable distributions to its Unitholders. While the three existing Singapore plants are contributing steady cash flows to the Trust, KGT will also be seeking additional new assets so that the Trust can continue to maintain the level of distributions over the longer term, when the concession agreements of the three plants end.

As stated in the Introductory Document issued on the listing of KGT dated 31 May 2010, Keppel Integrated Engineering, the sponsor of KGT, has granted KGT rights of first refusal to four assets. They are the three district cooling system (DCS) plants under Keppel DHCS Pte Ltd, and a 22% stake in a waste-to-energy plant in Sweden. KGT is looking to acquire the three DCS plants in the near term.

My next reply:

thanks for your reply. I appreciate it.

My main concern lies in the long term NAV of K-Green, whether it could be maintained, or better, increase, over time. The reason for this concern lies again in the concession where the assets are to be returned without charge.

From the 3rd quarter report, EPS is 0.7 cts while FCF per share is about 3 cts. I understand there's an one-off upgrading expense of $4.8mil, or about 0.76cts per share, so the actual EPS would probably be about 1.46 cts.

The projected DPU is 3.91 cts. While it is below the FCF per share if we extrapolate it to half a year, it is greater than the EPS. Would this reduce the NAV in the long run?

I understand too that KGT is seeking to acquire new assets by leveraging on its zero gearing. By leveraging, I would presume it's taking on debts. This would increase the gearing, but does not enhance the NAV. However, this does increase the profits of KGT and hence the EPS. Let's assume again that KGT has acquired the new assets. I would like to ask if KGT plans to retain most of this additional income instead of distributing it in order to build and buff its NAV over time, assuming that the new EPS becomes greater than 3.91 cts?

At the moment, there's still no reply on the 2nd email. Granted, I made an error (as pointed out by Nick) that the one-off upgrading expense has already been factored in, and removing it will not add to the EPU.

The main concern as pointed out by many is that KGT's NAV appear to be self-liquidating; they have a fixed asset lifespan, yet they did not retain any cash for depreciation of their assets.

The only way it could work out is when KGT purchased its new assets, and ensures it's EPU is greater than it's DPU. However, whether that would happen is unknown. The only consolation is that it is at 0% gearing, which sort of assures me that the problems happening with CitySpring would likely not beset KGT in the foreseeable future.

At my average price of $1.11, I hope I won't get to regret it in time to come.

November Portfolio Update

2010-12-01T10:11:00.002+08:00

November was quite a volatile month.

The main additions to my portfolio are

1) Saizen Reit. I added another 40 lots at 0.155 during the recent selldown, bringing my total to 140 lots. Hope I won't get to regret it :)

I was watching out for SingPost and Singtel, but they did not reach my target price yet. Will continue to watch out.

A short summary of my core holdings:

Portfolio cost: $148k
Portfolio value: $173k
Percentage gain: 17.06%

Dividends reached $1025/mth on average, after the additional 40 lots of Saizen REIT. Dividends came in from Starhill, GRP and LC Dev this month. I'm looking forward to receiving the dividends from SPH, Starhub, CitySpring and AIMSAMPIREIT next month, and I have already spend these dividends on a new All-in-one PC from Dell (Price $2k). It's my personal reward for myself for achieving my $200k goal, and I'm buying the PC purely from cash dividends. :)

LC Dev is calling for a rights issue, and I think I will subscribe for it and see how it goes.

Adding to the $28k in the basket I hope to sell off at the bottom, my total cost stands at $177k, an increase from the previous month's $170k. Adding these to my MMF units, I have reached near $202k. I have not included include the rights issue for LC Dev yet.

Trading Basket -- Hoping to sell off

I want to sell these off when I can, or cut loss when I can take the loss :(
Portfolio cost: $28.6k
Portfolio value: $19.7k
Loss of around $8.9k

(red = freezer stocks to remind myself of my mistakes)

30 lots of Hor Kew at 0.125

20 lots of LC Dev at 0.21

2 lots of Cosco at 2.67 ===> After seeing how Berlian Laju behaves, I'm starting to like this stock, and might move it to part of my core holdings eventually. I will need some more time to read up more here.

160 lots of Berlian Laju at 0.065

20 lots of China Sky at 0.245

I might be re-looking Cosco, Hor Kew and LC Dev to decide if I want to keep it in my main portfolio.

Sabana REIT -- Some Quick Thoughts

2010-11-27T18:00:00.000+08:00

Sabana REIT debuted yesterday below it's IPO price of $1.05.

I had initially considered buying it at $1, but some considerations stopped me from doing so. From my sources that I looked through, this is the details:

1) Gearing: 26.5%
2) NAV: 99c
3) 99% space occupied.

4) Shar'iah Compliant
5) Dividend yield: 8+%
6) Sponsor: FreightLinks (owning 4.3% now)

What stopped me from buying:

1) Freightlinks isn't a very strong sponsor in my opinion. Their share price has been hovering on the low end. One of my criteria is to have a strong sponsor for REITs, although there was an exception when buying Saizen REIT.

2) It's an industrial REIT. For 8% yield, it would be better to focus on AIMSAMPIREIT, which has (i) a stronger sponsor in my opinion, (ii) higher percentage yield and (iii) not restricted by any policy, i.e. Shar'iah Compliant.

3) Shar'iah Compliant means Sabana REIT will have restrictions in terms of tenants, and might pose a problem as they have to donate profits from non-Shar'iah Compliant tenants.

4) It's still above NAV of 99c. The share price is now near the NAV.

For Keppel Green Trust (KGT), the few considerations above exists too. I did buy KGT near NAV with my average price of $1.11 vs the NAV of $1.15. However, KGT has a very strong sponsor, and is in a very defensive industry of power generation and water desalination. I had initially wondered if this is a ploy by Keppel Corp to unload their units after reading a fellow investment blogger's blog post, and this was a reason why I hesitated so long when KGT was trading near $1. However, after some longer considerations, I decided to go into it for a safer play because of the zero debt nature of KGT. As a business trust, KGT could likely leverage up (of course with a drop in NAV) and extend their lease on their current assets.

For Sabana, I can't help but wonder too if it's unloading its assets when the market looks good at an inflated price. Compared to Mapletree Industrial Trust where it's sponsor owns >30% of the REIT, CWT owning 12.2% and ARA owning 1.9% of Cache Logistics Trust, Freightlinks only owns 4.3% of Sabana REIT.

One should also bear in mind that NAV depends on the valuations of the underlying assets. In a bull economy, property valuations rise, and along with it, the NAV. In a bearish economy, the reverse could happen, like what happened to First Ship Lease Trust's LTV ratio. While NAV is a consideration when buying REITs for me, it is not the ultimate tool used for making the decision.

Previously, I have written a little on my criteria for selecting REITs:
Intro to REITs Investment

Perhaps I'm wrong that Freightlinks isn't a strong sponsor, but before I'm sure of it, I don't think I will put my monies into Sabana yet. Other than for a quick punt. :x

Negative Emotions Kills Your Progress

2010-11-26T00:03:00.000+08:00

Recently, I chanced upon this pretty self-explanatory graphic from the following website:

http://theprosperousmarketingblog.com/do-you-find-yourself-allowing-these-seven-major-negative-emotions-to-take-over-your-subconscious-mind/

Basically, negative emotions detract us from our path of intent... at least to me, it does... Over the years, I have gradually learn to think more positively, and to try to put away negative emotions as far as possible. Why get trapped in a vicious cycle of negative emotions and get nothing done eventually?

Emotions is a state of our mind. And being a state of mind, it means we have the power to control it. I believe there are some who called in NLP, abbreviation for Neuro Linguistic Programming.

In a nutshell, NLP is about using words, past experiences, etc, to alter your state of mind. Nothing is solved, of course, but when your state of mind is altered to a more positive one, things are often more easily completed.

Take for example. I have this H1 maths student last year with failing grades. I asked her what her target score was, and she told me a B3. I asked her why not aim for A1 or A2, and the reply was it's not possible for her. In the end, she scored a B3. This made me wonder.... if she had wanted to score for an A1 or A2, her state of mind would be different. She would have put in more hard work, and not give up easily on questions during exams. Perhaps she would have really achieved an A1 despite failing all the years before.

Or perhaps, a more common example is in the issue of BGR. When student couples break up, some lose focus on their school work (the original path of intent), and choose to focus on the negative emotions brought about by the break up. In the end, grades suffered. Yet others are able to put the negative emotions behind very fast, and are able to continue with their school work.

Negative emotions are destructive in that they make you unhappy (and thus shorten lives :x) and at the same time, possibly lose focus or do something more drastic to derail you from your intended path.

Do recognize however that emotions are something human; it's scary to have zero emotions. Having both positive and negative emotions are part and parcel of life's diversity. However, we have to learn to put behind negative emotions so as not to affect us in achieving our goals. Think positive often. Think happy things often. Think about your successes. Transform your state of mind to a positive one. Being happy or unhappy does not alter the length of each second, each minute, each hour. Isn't it far better to stay and feel positive?

To end this, let us just sit back, relax and smile.

Choosing Fernvale HDB over Esparina

2010-11-19T10:51:00.000+08:00

This post is in response to sgbluechip's post on Esparina
http://sgbluechip.blogspot.com/2010/11/visit-to-esparina-residences.html

For me, I'm eligible for the Esparina. In fact, it's right behind my parents' HDB. So I probably know that area very very well.

While I blogged a little bit about the Esparina before, I decide not to go with it in the end. The reasons:

1) Price. A 5-rm HDB costing $326k at Fernvale is much cheaper. Not only is it cheaper, it is also bigger. The price per square foot is lower.

2) Location. The Fernvale HDB I paid an option fee for is also walking distance to the Jalan Kayu eating belt. It is also near a 24 hrs NTUC supermarket and Koufu eating place. While it is not near any MRT, it is just beside Fernvale LRT, which connects to SengKang MRT. A bus stop distance away is the Greenwich mall that is being built currently. For drivers, the place is just beside TPE, very near to CTE and SLE.

3) HDB restrictions. Buying an EC entails the usual HDB restrictions. All restrictions are gone only after 10 years. With this consideration, I would think a HDB is more worth it.

4) Facilities. Anchorvale swimming pool and gym are just beside this HDB. A new and big shopping mall is in the planning documents just 5 mins walk away, although I don't think it will be built anytime soon.

5) Potential Rental. Greenwich is being touted as a good investment by the property agents because it is near the upcoming Seletar air base, and hence will be easily rented out in the future. Well, this HDB is 2 bus stops nearer. While it might not be as luxurious as the Greenwich Condominiums, all it means is that if ever I were to rent it out (3 yrs to build + 5 years Minimum Occupation Period = total 8 years later), it would be cheaper.

Also, I went with this Fernvale HDB over the Punggol WaterFront because
1) I don't believe in the waterfront. To me, it's just a marketing gimmick, and it might not even succeed. If the river isn't done up properly, mosquitoes and probably a stench will linger around that area.

2) Punggol is nearer to the sea. With the upcoming seletar air base, if any planes were to fly over, it would fly over Punggol, or so I thought.

3) While it is very near Punggol MRT, it is still on the far end of Singapore. Not like Fernvale is any better though, but Fernvale is still very near to 3 major expressways.
The above are my little considerations

The above are my small thoughts and considerations in choosing Fernvale HDB over any executive condominimum. On top of that, I would probably need the extra money (savings) to fund some of my ideas, be it successful a not.

Goal 2013

2010-11-15T15:40:00.002+08:00

As the year draws to a close, it's time for me to set my goals and visions for the years ahead so that I have a clear path and direction to take.

My goals for 2010 are here:

http://wealthbuch.blogspot.com/2009/11/goal-2010.html

Completion Report:

1) Goal of achieving $1k average dividends per month, i.e. $12k dividends a year
Achieved!

2) Goal of setting up ExamWorld to a super big site to help more students
Didn't update much. Will continue to build it.

3) Goal of achieving at least USD$20 per month in adsense income.
Failed. Got banned from adsense. :(
Could be a blessing in disguise as I'm planning other things.

4) Writing my own notes for my tuition students, and eventually be able to publish and sell to the different schools in Singapore
Started, progressing ok.

5) Goal of reaching $200k (SGD) networth in equities and MMF
Will be achieved next month! Currently at $196k+. Excludes CPF.

It has really been a long and hard year. I slogged long hours to reach this stage. It was only 1 year ago when I set these goals for myself. I'm actually surprised I managed to achieve goal 1 and 5, and goal 3 for a short while.

At the moment, my average dividends per month can cover most of my monthly expenses. It's around $1020, while my personal monthly expenses are usually around $700. Not bad for myself. When the time comes for me to withdraw $$ from my loss making equities and transfer them to dividend stocks, it would probably rise further. But for now, I shall keep those "stuck" money there. Afterall, my realised profits probably more than match the paper losses at the moment.

In all, the goals I have set for myself are more or less achieved. The general direction was where I wanted it to be. The moral of the story: if you set yourself goals and stick to them with self-discipline, even if you fail to achieve it, the general direction will still be correct. I'm glad I managed to achieved a few of what I set out to do a year ago.

My most major expense this year would be my paying of the HDB option fee of $2k, which is still rather small. I guess an even more major expense would come in 3 years time in 2013, of probably around $50k upwards, due to renovations and furniture. That has to be taken into account for my upcoming goals.

Going forward, my goals are slightly of a longer term nature. It is not a one year goal this time round, but a 3 year goal. At the end of 3 years, I will be 30 years old.

1) Goal of achieving $2k average dividends per month, i.e. $24k dividends a year
This new goal is my target in 3 years time. The targeted rate of growth is slower because I will likely be using my cash for my other goals.

2) Goal of setting up ExamWorld to a super big site to help more students
Continued, ever-lasting goal.

3) Goal of building WealthBuch's traffic further
Currently, I have 14k page views a month. I plan to increase this further by having more articles for readers. Less so from promoting it. I hope what I wrote was interesting enough so far.

4) Setting up a publishing company and publish my notes
I'm currently about 35% done with my first A level guidebook. With most of my students having finished A levels from my side, I will have lots more free time come end Nov and Dec. This is the time to power up and increase my authoring.

Target timeline: Book completion (Mar 2011), Publish (Apr 2011), Sales (May~Jun 2011)

A tuition centre could be after this. In plans.

5) Goal of reaching a million in investable assets between me and my girl
A millionaire by 30 years old? Wow. Perhaps I'm just daydreaming, but well, no harm trying!
This excludes our first HDB and our CPF funds. My girl has perhaps about 0.7 times of the amount I have in investable funds after working for about 5 yrs. Respectable I would say. Will need to triple total assets to achieve this goal.

I will need quite a bit of luck this round I guess.

My HDB Purchase

2010-11-12T10:12:00.001+08:00

I have selected a HDB flat last month, and paid an option fee of $2k. It's a build-to-order flat that costs $325.8k, and should be ready in about 2013. This is indeed a very big expenditure over the long run, and it makes me wonder how am I going to service the loan without much stress.

Extrapolating the growth of CPF savings from me and my girl's accounts, I estimate the total CPF savings to be sufficient to cover about one third of the cost by mid 2012. Basically, that leaves $200k to be serviced, still a substantial sum. In addition to that, I estimate that another $50k (at the minimum) might be needed for renovations. That puts it at a total of nearly $400k. I will need to plan financials when the time comes. For now, it shall remain as that.

I seriously wonder how most young Singaporeans are going to survive well into retirement with housing prices rising faster than the median salary. Is there any point being asset rich and cash poor?

While I know I'm ahead most of my peers, the total initial cost estimation is still at best, stifling. Guess this is what we can expect if we want to stay in a bustling city state with most amenities within tens of minutes of driving distances away.

At the moment, I have two choices crossing my head, and I've not much idea which is the best approach.

1) Allow HDB to deduct all of CPF OA amount
It will reduce the absolute loan amount, but nothing is left in CPF for a long time.

2) Use some CPF funds for CPF investments first, before letting HDB deduct the remaining amount. This will result in an overall increase in debts.

I'm unsure if number 2 would be a better choice. Granted, I could transfer most of my money into SingPost and SPH, yielding me 5% to 6% per annum. This appears to be more profitable when compared to the 2.6% interest being charged by HDB. It's slightly riskier, but in the long run, it might be more worth it.

Anyone has any thoughts? I have not run any simulations yet, but I'm still for number 2 at the moment. Afterall, it's a marathon and we have to think far ahead.

Additional Thoughts:
I have done this before for my CPF Education Loan. My spare funds were used to enter SPH and the market instead of paying my loan asap. The difference between yield and interest has benefited me much like how a bank benefits from issuing fixed deposits.

Saizen REIT@valuebuddies

2010-11-08T01:38:00.000+08:00

The following is a compilation of forum posts mostly by d.o.g., a respected forumer on valuebuddies forum, on Saizen REIT.

In general, he isn't too optimistic about it. On a sidenote, I'm much more optimistic, and have taken the opportunity to add another 40 lots of Saizen at $0.155 during last week's selldown.

This less optimistic and very very well written and thought out post serves to act as an alternative viewpoint.

The forum thread is here: http://www.valuebuddies.com/Thread-Saizen-REIT?page=3

Printing money should cause the yen price of Japanese assets to increase. It is not clear that the actual price in SGD would change. In theory, the currency should depreciate at the rate that it is being printed. In practice, the 2 rates may not be the same, and either effect could dominate for some time.

If Japan prints money slowly enough it could pay off its debts without too much currency depreciation. But this would not please the big companies. If Japan prints quickly enough to depreciate the yen significantly, other countries could follow suit, in which case all the exchange rates revert to their previous levels since all the currencies depreciate roughly the same amount.

Also, if Japan prints money too quickly it could set off hyperinflation, where the currency depreciates faster than it is being printed. This would bring about the collapse of the economy (see: Zimbabwe). Japan is still a rich country with lots of credibility among foreign investors, so this is admittedly an unlikely scenario.

So far, Japan has chosen the safe route of a slow death via deflation.

Deflation in the Japanese real estate market has meant that property values have declined for 19 years in a row. Land values are now about half of 1980s peak values. While it is true that property prices are nearer "bottom" than in the past 36 years, it is not clear just where that "bottom" is.

For the property market to bottom out and start going up, Japan must quickly return to "normal" growth rates of perhaps 2-3% per year. Given the poor demographics, this is an uphill challenge. In the short term, anything can happen. But there do not seem to be any long term catalysts for a Japanese recovery.

Japan retains a technology edge in its exports. But the Japanese giants with this technology are investing in China. Sooner or later, their technology will be transferred, sold, licensed, duplicated or simply stolen. Then what?

A lot of technology was transferred in the past to Singapore. But Singapore was too small to ever pose a threat, and the government also played nice in protecting intellectual property rights. China's manufacturing capacity far surpasses Japan's, and the Chinese government has shown little interest in protecting foreigners' intellectual property.

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The Economist table referenced measures over/undervaluation with respect to "long-run average of price-to-rents ratio". A more recent table is here:

http://www.economist.com/node/17311841?s...d=17311841

According to the Economist, as of 21 Oct 2010, Japan is 35% undervalued. But the Economist's measure fundamentally assumes that the long-run average of price-to-rent ratio is rational. We know that Japanese real estate was overvalued in the 1980s. That means the price-to-rent ratio was very high i.e. not rational. For the last 19 years, property prices have been declining. Assuming rents were stable, the price-to-rent ratio has been declining. That would make Japanese property undervalued - if you assume the inflated price-to-rent ratios of the last 19 years were in fact rational.

The reality is that rents in Japan have been falling. Property prices have fallen even faster. However, Global Property Guide claims that as of Apr 2010, gross apartment rental yields in Tokyo were 5.1-6.2%. This doesn't look like a deeply undervalued market to me. Rather, it indicates how bad the bubble was, that after 19 years the yields are still not all that great.

Given the poor economy, I think rents are more likely to fall than rise. A property where the rent is falling is inherently worth less than the current yield implies, since future rents are lower before you even factor in the time value of money. So Japanese property may not really be undervalued. It could be a value trap: you buy cheap, and it gets cheaper, because returns (rents) keep going lower.

As usual, YMMV.

Current and potential Saizen REIT unitholders might find the following document interesting:

http://www.reinet.or.jp/docs/outline/toh_20100401.pdf

It is the Japan Real Estate Institute's survey of real estate investors. It is done every April and October. The April issue shows the latest cap rates and expected rent changes for various types of properties in different cities. Some things stand out:

1. Office rent expectations are basically flat or declining. The only areas expected to see rent growth are a couple of wards in Tokyo, and even then the most aggressive expectation is for rents to go up 3% in 5 years and 5% in 10 years(!).

2. Residential units in Tokyo are valued at a cap rate of about 6%. Outside Tokyo it's 7-8%.

The picture is basically one of stagnation. No meaningful economic growth expected for the next 10 years, as measured by office rents. And residential units yielding 7-8% are no bargain - this is the market rate.

Since Saizen specializes in residential units in secondary cities, on a 100% cash pass-through basis it should yield at least 7-8% if all its properties are generating free cash. Saizen's last distribution was 0.26cts, for 2 months' cashflow. Annualized, this is 1.56cts, but adjusted for warrant dilution it is 1.04cts. Against the current price of 16cts, the yield is about 6.5%.

The YK Shintoku portfolio generates no cash, but only accounts for 9% of NAV. Assuming it gets refinanced, it might add 10% to distributions. That gets us to about 1.15cts, or a yield of about 7.2% on a diluted basis. This is what a normal, undefaulted portfolio of residential properties outside Tokyo should yield.

In other words, the price of Saizen REIT already assumes that the YK Shintoku portfolio will be refinanced i.e. there is no discount for risk. We also know that recent lease renewals have been at lower levels, 4.3% less. So future distributions from Saizen will be lower.

At the current price, unitholders are getting a current yield of 6.5-7.2% on a diluted basis, and this yield will decline in the future. There does not seem to be any margin of safety.

*******************************************

9.75% is on an undiluted basis. Since the warrantholders are in the money (exercise price: 9cts) it is likely that most if not all the warrants will be converted. The warrants represent 50% of outstanding units, so upon conversion there will be 1.5 times as many units. Same cash distribution dividend by more units = lower DPU. 9.75% / 1.5 = 6.5%.

The warrants expire on 2 Jun 2012. Realistically speaking, there will probably be only 3 more distributions before the warrants expire/convert: for the periods ending 31 Dec 2010, 30 Jun 2011 and 31 Dec 2011. If the managers are nice, they may do an interim distribution for the 5 months to 2 Jun 2012.

So at most, a unitholder today will get 9.75% yield for 23 months, and after that he will get 6.5% - assuming that distributions (on an absolute basis) remain flat.

Given the flat or declining outlook in the real estate investor survey, future renewals and thus distributions will probably be lower. Saizen's recent renewals were 4.3% lower, even worse than suggested by the real estate investor survey.

It would be sensible to expect future distributions (in absolute yen terms) to be at least 3-4% lower than the most recent distribution. This is before factoring in any decline in the Japanese yen, which looks increasingly likely given the domestic debt load and exporter pressure on the government.

There are plenty of arguments out there about why the yen is likely to depreciate in future. I would be very interested to read a coherent counter-argument on why the Japanese yen should appreciate in future. If nobody can come up with anything that supports the strong-yen argument, maybe it would be wise to expect that the weak-yen scenario is likely to happen i.e. Saizen REIT unitholders should expect lower future distributions in SGD terms.

************************************************

I checked the 4Q10 statements. It turns out that a lot of the cash generated was used to pay down debt. So the 1.56 cents of annualized distribution is not a correct measure of the actual pass-through distributions.

For FY10:
Distributable Income: JPY 1,366,947
Units Issued: 953,203
Implied DPU @100% payout: JPY 1.434
JPY / SGD: 62.46
DPU (SGD): 0.0230

So we actually do get approximately the 2.4 cents that a 6% yield on 40 cents of NAV would imply.

On a fully diluted basis:
Units: 1,429,805
DPU (SGD) @100% payout: 0.0153

Assuming they eventually stop paying down debt and resume normal distributions, it seems that Saizen REIT can eventually pay out 1.53 cents, about a 9% yield on a fully diluted basis at the current price of 15 cents. The policy is to pay 90%, so the likely future yield is about 8%.

Does this now make Saizen REIT a good investment? Certainly, it's not as bad as I initially thought. I would still hesitate to say that there is a big margin of safety.

I actually think the more interesting detail is that Argyle Street Management (chaired by V-Nee Yeh, co-founder of Value Partners) has a deemed interest of 16% and has appointed 2 of its officers (Chan Kin and Angie Li) to the board. That alone would probably merit further study. ASM is now the biggest owner (and thus the biggest loser if Saizen REIT blows up) so they should have done a good amount of homework.

*******************************************

I looked through the IPO prospectus. It turns out that V-Nee Yeh / Argyle Street Management was present from the start - he / they helped create Saizen REIT to begin with. At IPO, ASM owned over 11%, and the 2 Japan High Yield Funds (managed by the REIT manager) owned 44%.

The 2 High Yield funds have since distributed their holdings to their investors, leaving ASM as the biggest owner. ASM has exercised all its warrants, so we can safely assume that they believe Saizen REIT is worth more than 9 cents on a diluted basis (duh). But 9 cents is a long way off from the current price of 16 cents. So caveat investor.

********************************************

Musings -- A loyal employee's life

2010-11-05T17:47:00.001+08:00

Musings is a category where I will muse about random stuffs

I just had a salary raise from my full time job. While it might be fair considering the company's position, I'm still a little dissatisfied. However, I'm still stuck because I have to serve my scholarship bond with it.

Basically, I'm dissatisfied because this will contribute very little to the rate at which one can grow his/her networth. Being an employee entails
1) obeyance, follow the orders and directions of someone higher up!
2) being paid a fraction of your worth. The company needs to make profits for shareholders and for the CEO to own a personal helicopter!
3) repeating the same mindless thing many times. This is what others call job experience, or in my opinion, the experience of being able to repeat jobs that are slightly too complicated to be automated by a robot.

Of course, there's nothing wrong in climbing the corporate ladder. But try doing that in an engineering company where there are so many engineers who are equally good, if not better, than you do, and who are older, more senior and thus more eligible to be promoted as compared to you. Try doing it at a place where most of the higher ups are still young, and would most likely still stay for the next 20 years. Chances are, the opportunities will be very limited.

What are my possible routes down the years?
1) Move to a government stat board? There are two I'm interested in, but I shall not say where yet.
2) Be a full time tutor. Perhaps :x
3) Get a bigger place to open a tuition centre, and find like minded tutors to join in. Sounds fun to me.
4) Author even more educational books for A levels. Sounds fun too. I always "dream" of being able to autograph the books that my students could possibly be using.

I realised my current strategy of buying dividend stocks is starting to allow me more flexibility in choosing my paths. Once I managed to have all 200k into an average of 6% sustainable dividend paying equities, I can look forward to take more risks with that small dividend income ($1k per month as of now) as a backing.While the rate of earning isn't all that fantastic, at least it's still able to sustain my most basic monthly expenditure.

The future remains unknown, but it shall remain exciting and fun. Chiong ah!

October Portfolio Update

2010-10-29T22:59:00.003+08:00

The month of October saw one of my freezer stock slowly being defrosted... Berlian Laju... That was indeed lucky... I'm still contemplating when to sell it...

The main additions to my portfolio are

1) AIMSAMPIREIT. I was given 27 lots, 24.5 lots entitled, 2.5 lots excess. At the moment, I have 97 lots. Dividend of 0.3938 cts have been declared as well.

2) Keppel Green Trust. I loaded 2 days ago at $1.06 as it seems to be holding well. Whether it will continue to hold remains to be seen. At the moment, I have 15 lots, all at an average of $1.11.

A short summary of my core holdings:

Portfolio cost: $142k
Portfolio value: $169k
Percentage gain: 18.99%

Dividends reached $975/mth on average, after my 24.5 entitled and 2.5 excess AIMS rights came in, and after I loaded the additional 5 lots of Keppel Green Trust.

Adding to the $28k in the basket I hope to sell off at the bottom, my total cost stands at $170k, an increase from the previous month's $160k. Adding these to my MMF units, I have reached near $188k, $12k short of my target of $200k by cost come end 2010. It now looks possible to achieve $200k target because of the remaining salary for 2010, the Annual Wage Supplement, the Variable Bonus and the dividends from my basket are coming in. Dividends should be coming in the next two months from Starhub, Starhill, CitySpring, SPH, AIMS, Saizen and GRP. LC Dev in my freezer basket is also giving dividends. Basically, the dividends are sufficient to feed me for my remaining 2 months (I supposed), and my active income savings from my full time job will be able to push me to achieve my goal.

I think I might be cutting loss for some, and taking profits for others, around Dec to Jan and rebalance my portfolio somehow. Will have to find some time to do some basic calculations :)

With some free time when my students finish their A levels exams, I will be getting a cupboard from Ikea to store my tuition stuff, and a new and more powerful computer to help me do my stuff. Hopefully my meagre tuition income after most of my students graduated will be sufficient to fund this. Expected amount: $2.5k.

All in all, 2010 networth goal looks set to be achieved... just barely though :)
2 months to go!

Trading Basket -- Hoping to sell off

I want to sell these off when I can, or cut loss when I can take the loss :(
Portfolio cost: $28.6k
Portfolio value: $21.5k
Loss of around $7.1k

(red = freezer stocks to remind myself of my mistakes)

30 lots of Hor Kew at 0.125

20 lots of LC Dev at 0.21

160 lots of Berlian Laju at 0.065

20 lots of China Sky at 0.245

I might be re-looking Cosco, Hor Kew and LC Dev to decide if I want to keep it in my main portfolio.

Growing Networth -- My Journey so far

2010-10-26T15:53:00.000+08:00

A reader of my blog sent me an email:

I'm working on a framework to allow a fresh grads to generate more passive income ( through dividends investing ) than their monthly expenses and my current spreadsheet shows this as being possible by age 31. The caveat is that the grad has to save 75% of take home pay.

You clearly broke all my financial assumptions on my spreadsheet so I'd like to understand more about your own personal ideas.

This blog post serves to answer his questions, and at the same time, help me to consolidate my thoughts.

My email reply was:

The only thing that can possibly thrash the financial assumptions you had is to me self-employed income. Assumptions in this case could usually be correct only if we are talking about income from employment because that follows market rate. Self-employed is in itself spoiling the market. Do it right and returns will also be spoiling the market. Don't you agree?

I teach tuition not purely for the sake of extra income, but also because I like interacting with my students. The upcoming A levels stresses me just as much as it stresses my students. It's a joy, and a passion, to see As on papers. I'm lucky in this sense that I get to enjoy, yet profit at the same time, from this passion and joy of mine.

I also mentioned that

As for me, I wouldn't recommend anyone to replicate what I have done because it requires tremendous amount of time and sleep sacrifice.

Well, I slogged hard, super hard, like a cow, a horse, for the year of 2010 for my dual income. On the outside, I appear a super motivated, super hardworking person. However, deep inside, I do know that this isn't the way to go in the long run. Much like how Boxer in Animal Farm works.... hard.... At the end of the day, when age starts to catch up, one won't be able to maintain the intensity and pace of work. YET... one does need hard work in the initial stages to achieve a boost, a strong foundation, a power-packed launching pad, to bring one to higher heights in the future.

And that's one reason why I decide to work so hard, both in building my networth and in achieving my dreams to help students achieve their dream results.

The following is a small list of blog posts I had on how I have travelled along this journey so far.

On building income streams and networth
How I build my income streams

My Maths Equation to Increasing Networth!

On management of my life and money
Rich Dad's CashFlow Quadrant for me

My Money Allocation

Importance of Cash Flow

On my dividend strategy
Dividends Reinvestment Strategy Calculations

Passive Dividend Investing

On my journey to reach my first 100k
My First 100K -- a long journey

How I progress from here, how I alter my strategy and time management, depends on situations and circumstances. I don't want to fix myself; being too fixated on a plan can sometimes lead to stubborness and a reluctantance to change. It's better to adapt and learn as one goes, and change plans and strategies accordingly.

And that's why, I have this blog to help me chart my journey, help me rationalise and think through clearly what I'm doing and what I really want, and at the same time possibly help and motivate others to do better than me.

Thank you for your time in reading this post.

Berlian Laju

2010-10-25T11:13:00.002+08:00

I had wanted to write about Berlian Laju before the recent rise-up, but I just didn't have the time to do so.
These were the articles I had wanted to share when it was around 3.5cts.

http://www.theedgesingapore.com/blog-heads/kang-wan-chern/16933-kang-wan-chern-berlian-laju-tankers-badly-timed-expansion-moves-leave-investors-cold.html#

http://www.nextinsight.net/content/view/1963/60/

http://www.nextinsight.biz/content/view/1513/79/

http://www.nextinsight.biz/content/view/1521/79/

I shall just summarize my thoughts in points...

Why I bought last time:
Listen to others :x

Why I keep:
New Indonesian Cabotage law that will benefit Berlian Laju greatly
==> Berlian Laju is the greatest beneficiary in my opinion

2nd biggest chemical tanker operator in the world

Below NAV

Why I will sell eventually:
I don't like the management issuing rights so many times
Bad financial management
Corporate bonds offering 10% coupon. Wow so high! ==> Indicates high risk?

Why I might keep in the future:
Berlian could spin off a shipping trust from itself, and clear it's debts.

Let's see how it goes.

Note: I do not recommending buying it, unlike CIMB.

My Reservist and what I have learned

2010-10-20T13:34:00.001+08:00

I'm back from reservist. I really can't believe how I survived the past month of busy-ness. But back here I am, still in one piece, fortunately.

I talked to many of my peers while in reservist, and have quite a few interesting insights. Unlike what the newspaper make out what the age group of 20~29 to be (in terms of high debt), none I knew while in reservist were under that category. However, I was rather aghast that while most know that financial planning is important, most do not know how to plan their finances, nor know how to invest their monies.

Some of the financial stats of pple I talked to and asked are below. It was rather interesting and enriching.

Person 1. Masters student with scholarship allowance of $3k/mth
Surprisingly, he has not much savings. While he's not in debt, he spend quite a bit on travel. However, that's not his main expenditure. Interestingly, he spends nearly $1k a month on insurance and savings plan, all "advised" by his financial advisor. As such, he has not much savings left. He has since graduated from his masters program, and starting on a salaried job soon. Same age as me.

Person 2. First class honours student with salary of about $4k/mth before CPF
He has cleared his CPF education loan (I have 6.6k left to clear) and has about 30k in savings now. No car nor any other assets. Interestingly, he spends about $700 a mont on insurance and savings plan too, again as "advised" by his financial advisor. Same age as me.

Person 3. O levels education. Salesperson with average commission $4k/mth
I did not ask him too much, other than the cost of his car and his average salary (excludes bonus I suppose). His car is a VW that costed him $82k, and the monthly loan repayment is about $800. 2 years older than me, and married with kids.

Person 4. O levels education. Employee of $1.2k/mth turned businessman of 3 businesses
This is the person I'm most impressed with. He's 2 years older than me, and married with kids., complete with his SUV. One of his business has a turnover of 600k annually at the moment. This business was started with only $1k in capital! (FYI, I have watched his business grow since inception 2 years ago.) I talked the most to him, and learned quite a fair bit of things. His monthly expenditure comes close to $5k and he can still afford it easily as his business is still growing.

At the moment, this businessman friend is living mostly on his savings while reinvesting most of his business profits back into his business to grow it further.

What I have gathered is, it appears that at times, higher education is a double edged sword in terms of financial growth. In a way, it ensures that you can live comfortably as a middle class. In another way, it binds one to being employed, and makes one more unwilling to take on risks. This makes it emotionally harder to break out of our comfort zone to move into the unknown.

Face it, how many of us would be able to climb the corporate ladder to become a CEO and earn probably upwards of $30k/mth?

One revelation I had too was that as a business owner, the salary you draw from your business is not the only amount that you have. You are actually paid for growing an asset (your business). Your asset and networth continues to grow even as you pay yourself a salary.

Next year will be the year I'm going to experiment further. Stocks will probably continue to be of lower and lower priority as I attempt to generate funds through other ways.

Afterall, like what my businessman friend said. "What's $10k a month? It's nothing at all! You can't do much with that!"

September Portfolio Update

2010-10-01T09:49:00.002+08:00

The month of September was yet another crazy month. I increased my networth by another $9k including dividends and after expenses. In fact, it has been such a busy month that I did not even look much at how the market was doing, nor did I have much time to update this blog much. However, I had my google adsense account banned too during this crazy month where I did not even have time to visit my own blog much.

Some updates on my portfolio
1) This is the month where I have exercised my Saizen's warrants. I have also written a guide on how to convert your warrants in SGX.

2) AIMSAMPIREIT rights issue is coming up. I will be subscribing for the rights + excess rights, 24.5 lots entitled plus probably 24.5 lots excess.
Total Cost: $7595

A short summary of my core holdings:

Portfolio cost: $132.5k
Portfolio value: $156.7k
Percentage gain: 18.3%

Dividends reached $900/mth on average, and it will touch $940 after the AIMS entitled rights comes in.

Adding to the $28k in the basket I hope to sell off at the bottom, my total cost stands at $160k, an increase from the previous month's $155k. Some external funds have been prepared for the coming AIMSAMPIREIT rights, so next month will see a boost because of this. Adding these to my MMF units, I have reached near $180k, $20k short of my target of $200k by cost come end 2010. I'm still trying, but I doubt I can make it... Still, I'm glad to know that my general direction is correct.

I have also spent $2k on the option fee for my HDB at Fernvale Foliage. I will blog more about this at a later date.

Trading Basket -- Hoping to sell off

I want to sell these off when I can, or cut loss when I can take the loss :(
Portfolio cost: $28.6k
Portfolio value: $19.9k
Loss of around $8.6k

(red = freezer stocks to remind myself of my mistakes)

30 lots of Hor Kew at 0.125

20 lots of LC Dev at 0.21

160 lots of Berlian Laju at 0.065

20 lots of China Sky at 0.245

I might be re-looking Cosco, Hor Kew and LC Dev to decide if I want to keep it in my main portfolio.

True Financial Freedom for retirement?

2010-09-20T13:58:00.002+08:00

* I realised I took very long to prepare this write-up due to my busy schedule :x *

Many a times, I see and hear people attempting to expound on their newly-read theories of financial freedom. The clichés of passive income, multiple streams of income, and all sorts of jargon that you can see and learn in any basic personal finance books all zoomed in the air towards you.

It strikes me as odd because if everyone in this world were to become disciplined and achieved their dreams of having a passive income exceeding their expenditure so as to be financially free, who in this world would still work? And if no one works, how will passive income still be generated?

To me, the 80/20 rule still applies. What most of the population knows (about passive income, etc) probably does work, but it is unlikely to bring us to the 20 of 80/20 any more. It's a wonder sometimes how some think that they have an advantage after reading just a few more personal finance books than others. The more I think, the more I believe that passive income generation is way overrated for the path towards financial freedom.

Again, another rule which I believe is that work is good for the soul. I believe the world is designed in such a way that work is necessary, else we will just waste away. Our souls and lives are like our muscles; if we don't do useful work with it, we will just waste away slowly since there's no need or use for us anymore.

So what constitutes true financial freedom in today's world?

To me, what makes one truly financially free is the ability to generate cash flow anytime without reliance. By reliance, I refer to relying on the government or your employer to survive.

What Wealth Journey mentioned in the following blog's comment is very true.
http://sgfinancialfreedom.blogspot.com/2010/09/my-thoughts-on-retirement.html#comments

"What knowledge, skills and expertise must I build up from now till I am 65 so that I will still be relevant to society then?"

The skills you need to acquire are those that will not regress with time. Example, project management skill but not IT programming skill. Sales talk and pitch that will be relevant in any industry that require sales. Accounting experience and skills that will be as relevant in 10years times and today. Medical knowledge for a GP will grow instead of shrink. Legal experience that will grow instead of shrink.

So you have to ask yourself, what is your vocation now? Do you see your skillset being relevant in 10 or 20years time? If not, which vocation are you going to transition to? Do you want to start learning the relevant skillset? Again , if the vocation you are transiting to has a perishable(regressing) skillset, then you shouldn't learnt it 'coz it's another 20years before you can used it.

Of importance to everyone is financial skill. It grows as the years passes and does not regress.

Of importance again is your ability to accumulate as much cash to invest (instead of spending on frivolous items) in your productive years (23-40yrs old). Your 20years of financial skill (when you have done most of the mistakes you could) will then be immediately relevant to you when you reach 40yrs old when there is no room for failure in your investing.

A little viewpoint of the engineering company I work at:
Staying too long at my current engineering job will only lead to me being obsolete when the technology matures. Experience and unique skills will count for nothing here when technology gets inevitably phased out. This was evident in 2008 during the retrenchment exercise. Sticking too long to a company exposes one to a growing risk which gets more and more substantial as you grow older and older. Having lots of savings is a good cushion, but it in no way guarantees you will be able to survive forever on that.

Hard technical skills can only bring one so far. If it never goes obsolete before you retire, good! But if your skills go obsolete when you are around 40 years old, good luck. Chances are, you are not needed anymore, and all your previous work experience will come to naught.

To me, Transferable Soft skills are the way to go
These transferable soft skills include the ability to sell and convey ideas, the ability to manage and organise, stress and time management, ability to analyse, ability to invest, and abilities like being multi-lingual. These are skills that are transferable from industries to industries, and does not regress with time at all.

What I am doing in the tuition industry, or in attempting to write a book, is in a way, attempting to secure, to learn, to build upon an income source that I can continue on even if I'm retrenched. I'm building my ability to generate income without relying on external employment. I'm building a skill on something which I can carry through for the next 20 to 40 years. Teaching is in a way selling and conveying ideas and concepts to the students. So is authoring.

And the above is only my initial plans. Further plans will include learning how to start, run and operate a business, how to sell products, etc. All these are invaluable soft skills which will carry one through life. Haven't we seen many successful people giving seminars and writing books at a ripe old age? Running a business at a ripe old age? These are financially free people who still have the ability to generate income at old age. It's whether they choose to do it.

How to go about achieving all these in order to be financially free? It's something challenging, mentally stimulating and exciting to me. Hopefully I can be up to the challenge I set myself on.

Google AdSense Account Disabled‏

2010-09-19T13:47:00.003+08:00

I received the email from google that all adsense supporters dreaded:

This message was sent from a notification-only email address that does not
accept incoming email. Please do not reply to this message.
---------------------------------------------------------------

Hello,

After reviewing our records, we've determined that your AdSense account
poses a risk of generating invalid activity. Because we have a
responsibility to protect our AdWords advertisers from inflated costs due
to invalid activity, we've found it necessary to disable your AdSense
account. Your outstanding balance and Google's share of the revenue will
both be fully refunded back to the affected advertisers.

Please understand that we need to take such steps to maintain the
effectiveness of Google's advertising system, particularly the
advertiser-publisher relationship. We understand the inconvenience that
this may cause you, and we thank you in advance for your understanding and
cooperation.

If you have any questions or concerns about the actions we've taken, how
you can appeal this decision, or invalid activity in general, you can find
more information by visiting
http://www.google.com/adsense/support/bin/answer.py?answer=57153.

Sincerely,

The Google AdSense Team

I'm seriously demoralised, upset and I have no mood to write anything else. I have no idea why there are invalid clicks, and I have sent an appeal. I don't track any IP addresses on this blog, so I can't check anything at all. That's USD100 down the drain as I have just painstakingly reached it again this month after about 5 months. It's really rather moronic as my adsense earnings aren't even a lot to begin with.

That said, I have lost all motivation to continue building on any adsense sites or income, nor blog about anything any more. ~~This is the last post. Any updates to this blog will be discontinued with effect from today.~~

But because of AK, cookieguy from LP's cbox, I will continue with this blog. Meanwhile, I will start to look for ways to replace adsense here, and replace the ads in ExamWorld as well. I will restart and replace and revamp my sites, probably for Yahoo Publisher Network and Adbrite. I still want my coffee pocket money :x

Since Google doesn't want to give me my pocket money, I will replace it eventually. Let me find some time for it.... I will do it.

How to Exercise Your Warrant Options (SGX)

2010-09-05T19:34:00.001+08:00

I have exercised my Saizen Warrants recently. While doing so, I realised that there are people who were unsure of how to exercise their warrants. So here I am, writing a mini tutorial on how to exercise your warrants and convert them into mother shares.

I found out how to exercise my warrants from here:
http://www.cdp.com.sg/faq/warrant_faq1.html

Step 1:
Find out who your warrant agent is from
http://www.sgx.com/wps/portal/marketplace/mp-en/products/securities_products/company_warrants

Step 2:
Call your warrant agent up. The phone number is listed on the website above.
You will need to get them to send you the exercise notice form. Give them your address, and they will mail it to you accordingly.

Step 3:
Apply for a cashier's order from your bank. The amount on the cashier's order is equal to the value of the warrants to be converted. Cashier's orders can be ordered using internet-banking for free. I went with DBS. However, the cashier's order from internet banking can only be collected at a few branches. Do check out with branches are available before applying.

A $5 surcharge is chargeable if it is applied at the bank itself and not through internet banking.

Step 4:
Fill up the exercise notice form when you receive it, which will include your name, address, securities account number, and the number of warrants to be converted.

Step 5:
Prepare an envelope, and put your completed exercise notice form, together with your cashier's order into the envelope. Although it is mentioned in the CDP website that your latest account statement is needed, in actual fact, it is not. You do not need to send it to the warrant agent. However, this is my information from calling up the warrant agent for Saizen Reit. It would be prudent to confirm with your warrant agent.

Step 6:
Affix a stamp and send your exercise notice!

There you have it.

Update:
The day the warrant agent receive your notice is the Lodgement date. The warrant agent can decide whether to list your shares at the Lodgement date or the following working day.

Once it is listed, your CDP account will be debited of the warrants, and credited with the new shares. The company will also announce on SGX website the number of warrants converted (without names of course).

August Portfolio Update

2010-09-01T00:47:00.003+08:00

My time spent looking at the market is dwindling by the day. The advantage is that I'm even less flustered by the daily market fluctuations than ever before. The month of August was crazy for me as my tuition piled up due to students taking their preliminary exams.

That said, I still managed to increase my holdings somewhat. The amount was rather major for my portfolio...

1) I loaded an extra 5 lots of Keppel Green Trust at $1.13. On hindsight, I could have been more patient, but that would only mean a few cents cheaper. Well... not much $$ there though...
Total Cost: $5650

2) Saizen released its results. I quite liked it. Hence, I bought an extra 40 lots, and have decided to exercise my 60 lots of warrants before the book closure date for its dividends. This will be done by this week.
Total Cost: $11800

3) AIMSAMPIREIT revealed plans for Project Durian, and although the EGM has not yet commenced, I expect the rights issue to be passed. I intend to subscribe for my 24.5 lots of entitlement, and another 24.5 lots of excess rights.
Total Cost: $7595

In total, it would work out to about $25k.

A short summary of my core holdings:

Portfolio cost: $127k
Portfolio value: $147k
Percentage gain: 15.8%

Adding to the $28k in the basket I hope to sell off at the bottom, my total cost stands at $155k. Some funds have been pulled out for Saizen warrants. Adding these to my MMF units, I have reached near $172k, $28k short of my target of $200k by cost come end 2010. Quite tough to make it happen at the moment, but I shall try.

Trading Basket -- Hoping to sell off

I want to sell these off when I can, or cut loss when I can take the loss :(
Portfolio cost: $28.6k
Portfolio value: $17.2k
Loss of around $11.4k

(red = freezer stocks to remind myself of my mistakes)

30 lots of Hor Kew at 0.125

20 lots of LC Dev at 0.21

160 lots of Berlian Laju at 0.065

20 lots of China Sky at 0.245

Edit: I realised I have 160 lots of berlian instead of 150 lots after relooking my CDP statement

Preliminary Plans on Goal 2011

2010-08-29T02:07:00.000+08:00

As the year approaches the 3rd quarter finish, some plans are already forming in my head for Goal 2011. The first 8 months of 2010 were good to me, but somehow, plans for next year have started to form in my head by itself. Perhaps I'm a little too impatient :)

For Goal 2010, the paths, strategies, methods, I have taken appeared to be bringing me closer to fulfilling my goals. The work was hard, at times tough, but the result is that I'm closer than ever to achieving my goals set out at the start of 2010. The only exception was ExamWorld, of which I have not updated much due to my hectic schedule.

My plans for coming year are in a way slightly different from 2010, yet in a way, similar. The growth of networth will still be on my checklist, but this time round, there will not be any concrete goals. This is because I will be planning to shift focus to a few things during the first half of the year where my tuition sideline (which is seasonal) will not take up as much of my time as now.

In my head, I'm hoping I can achieve the following in the year 2011.
(i) Make ExamWorld even bigger than before. I hope more students can benefit from this blog site I set up.

(ii) Finish my A level Physics Guidebook and get it published by around March 2011. The earlier it is done, the more it can benefit students of the 2011 A level batch. This is hard work, and certainly not easy, but I will try.

(iii) Attempt setting up a few content sites for adsense, and eventually other forms of internet income. This will be something new I attempt to try. Whether it will succeed eventually isn't a big deal as the opportunity cost is my time.

(iv) Spending more family and relationship time before the seasonal tuition strikes.

2011 is also the year where my scholarship bond will end. It is also the year where my girlfriend's teaching bond end. I will have to revalue my goals and priorities in life to determine which step to take next in this area.

So many things are running and whirling through my head now. The possibilities I have are indeed exciting me. There are just so many question marks.

How will my plans go? How will my networth grow? How will my portfolio perform? How will my life be? Guess that's what makes life interesting.

Considerations on Saizen REIT

2010-08-27T15:01:00.001+08:00

Caelitus of CNA forums has kindly formed some questions for me to refine my thought processes regarding Saizen. I appreciate that a lot, and I'm posting his questions, and my answers here as a reference.

From Caelitus:
I will write candidly. From what I know, you have 40 lots of the share and 60 lots of the warrant. This is over and above your existing holdings which remain unknown to me. If you were to load more of the mother share, your exposure to this counter is increased compared to that of one where you converted your warrants. The latter brings the amount you committed to the warrants to earn the dividends (productive, de-risking).

Question yourself.
1. What are your rules on risk optimisation?
2. What percentage does Saizen form as a part of your portfolio?
3. As Saizen is focused on the Japanese residential market for 2nd tier cities, what are the opportunities and threats ahead? Deflation, diminishing population, portfolio of freehold properties available for redevelopment?
4. What is the opportunity cost? What about your other targets for dividend play or capital gain? We can look forward to future distributions but Saizen is not bounded by any regulation to distribute 90% of their income. Note the huge bank of warrants which has a very dilutive effect.
5. Management seems to be on the ball after the lessons learnt and have put their own money on the table. Is that positive enough for you?
6. What are your money management rules? Note your projected activities e.g. marriage, your book and your home purchase. As your combined salaries rise, you may not qualify to purchase a flat from HDB direct. A 1st appeal may work but the 2nd may not. Hence, you may need to strike at the private residential market. Will you have enough cash without having to liquidate preciously built positions from Apr/May 09?

I thought questions 1 and 2 are important to guide you. Answer (2) and follow (1) diligently.

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

My Answers:

1) Pardon me, for I don't really understand what is risk optimisation. To me, this counter is one of lower risks as the downside is probably limited while being way below it's NAV. Overall, my amount in blue chips is about the same as my amount in REITs and Trusts, and these two form the bulk of my portfolio, at nearly 80%.

2) For 100 lots, it will be about 9.4% of my portfolio (including cash ready for investing). This percentage will drop over time as I will be seek to top up more on Starhub and SPH, and AIMS, and hopefully drop to only about 8+% by the end of year.

3) As a matter of fact, Saizen's growth will be stunted for quite a while. The main draw to buying is that I see is as one of the most undervalued REITs in SGX. Coupled with the fact that most people are still affected by the shadow of 2007, I go with my judgment and calculations to top up my holdings yesterday. The results were above my personal expectations as well.

4) Warrants subscription gives the management more leeway in managing their debts as well. I have done my calculations on the warrants too: http://wealthbuch.blogspot.com/2010/03/saizen-reit-analysis-part-2.html

5) I'm happier with the management's actions of converting all their CMBS loans to the more traditional bank loans.

6) I will have sufficient for those projected activities. Currently, my dividends stand at $800/mth on average, with the bulk coming in at the end of year. I have my bonus and AWS coming in soon too. All these will be sufficient to boost my war chest come end 2010.

As for home purchase, I can still qualify at the moment. I have applied for Fernvale Foliage, and gotten queue num 132 for the 168 flats. The probability of me choosing a flat here this time is very high as I like the facing and direction of all 8 blocks of the 5-rm flats so far. Should be able to get a minimum of 5th floor I guess. It will take 4 years to build, so it would be a long way before I need any cash for renovation.

AIMSAMPIREIT Rights Issue

2010-08-23T23:25:00.001+08:00

AIMS AMP Capital Industrial REIT announces proposed acquisition, new debt facility and fully underwritten renounceable rights issue.

Key Highlights:

Proposed acquisition of a high-quality industrial property at 27 Penjuru Lane Singapore 609195 (the “Property”) for S$161.0 million;
New debt facility of S$280.0 million; and
Fully underwritten renounceable 7 for 20 rights issue to raise S$79.6 million, (collectively, the “Transactions”).

The property being bought is at 27 Penjuru Lane, Singapore 609195, a warehouse and logistics facility.

More details of the purchase can be found here

I have no idea why the mini-selldown today for AIMSAMPIREIT when this news was released. Perhaps it was dumping by a small minority who can't afford the rights. Afterall, there's a new major player into this REIT, namely Dragon Pacific Assets Limited, just before news of the rights issue was out.

To me, I view this positively. The rights issue is being used for acquisitions, and is yield accretive. In terms of just numbers, the pro forma dividend amount is not too far off from the original amount, 0.52 (post-rights) compared to 0.54 (pre-rights). At a rights issue of 7 for 20 priced at $0.155, this gives a nearly 13.4% dividend yield on the new units! Of course, this is a simplified calculation as I did not take into account the 0.02 dividend loss on the original units. Some more calculations will be done later.

Compared to CIT which offers a placement, a rights issue by AIMS gives investors like me a chance to participate, and at the same time, a chance to increase my holdings via excess rights as well. Rights given by an equity I have faith in is definitely better than one that appears to be in the doldrums (Berlian Laju).

Some further calculations:
Currently, I have 70 lots, which gives me a dividend of $1505 annually. With this rights issue, I'm entitled to 24.5 lots. Excluding any excess lots, my dividend from AIMSAMPIREIT would increase to around $1965, an increase of about $460, or nearly $18 per month, at a extra cost of $3797.50. This is akin to buying new units at 12.1% yield. And it also means that my yield increased from 10.14% to 10.5% based on my cost price. Of course, the more excess rights one can get, the better the yield will be.

The only downside is that while the price wouldn't have changed much, the NTA is down from 31c to 26c. However, the post-rights price would still be at a discount to the NTA.

My current plan would be to observe the price, and perhaps nibble a little if the price drops much more. The main bulk of my funds would be prepared to subscribe for the rights plus excess rights (24.5 lots as well).

After this purchase, I will most likely have to look into increasing my holdings in SPH, Starhub and Starhill to rebalance my portfolio.

Why I don't like saving plans

2010-08-18T14:55:00.003+08:00

By saving plans, I refer to the plans sold mostly by insurance agents. These are plans that takes a fixed amount every month, and as seen from it's name, save it for you in a special savings account whose interest rate is higher than the bank's interest rate. In return, you are given some form of extremely basic insurance in the event of death, and you are allowed to withdraw a small amount monthly if you need it via vouchers sent to you. One example is NTUC Revosave.

However, there's a catch. The maturity date is 25~35 years later, with perhaps a 1~3% annual rate compounded over the 25~35 years.

To me, the main reason why people buy saving plans are because
(i) Super Duper Conservative
(ii) Financial Ignorance

In my opinion, if one were to lock up the money into a savings account for 25 year, it would be better to do dollar cost averaging into equities dealing with defensive sectors of the economy. Over the period of 25 years, the rate of return beating that of a savings account is almost 100%.

"But dollar cost averaging requires lots of money! I don't have the cash to do that when most of the blue chips are in thousands per lot! A savings account is safer and better for me!"

Well, one simple way in which we can automate a dollar cost averaging strategy like a savings account, is to make use of POEMs' sharebuilder plan.

http://www.poems.com.sg/FinancialServices/sbpFAQ.asp?value=sbp

Selecting equities like Starhub (8% yield), Singtel (4% yield), SingPost (6% yield), SPH (6% yield), or even STI ETF presents a low risk and high probability over a period of 25 years in beating a savings account. Suppose the prices of these equities remain the same for 25 years; the dividend yield would easily exceed that of a savings account.

If one were to take slightly higher "risks", equities like UOB, DBS, OCBC, SGX are just as good.

In short, why go for a savings plan? There's no guarantee that the insurance company selling you the savings plan will not fold up as well. Essentially, the risks of the company folding up is the same. Yet the yield is so much lower. Compounded over 25 years, the difference could be quite high for quite similar risks. At least to me, it is. That's why, I will not go for a savings plan.

I will try to add some calculations here later.

How I build my income streams

2010-08-11T17:39:00.001+08:00

"Multiple sources of income is the way to go!" How often do we hear that, and how well are we able to achieve it? It's a very nice idea and concept, nothing revolutionary, but still out of reach to most people who could only dream of it.

Indeed, it's something easy to say, not as easy as it seems to achieve. As humans, we are limited by the constraints of time and energy. This is the reason why leverage is necessary to reduce the amount of time and energy we need for each income stream. By leverage, I refer to leveraging on the time and energy of others, and also leveraging on the power of technology.

A short history of my journey so far:
Since graduation in Jun 2008, my first active income stream is my full-time job, where I serve my scholarship bond. It's a place where I'm being leveraged by others to build their wealth.

After that was settled, I began to teach tuition, restarting a passion that was stopped due to my final year project. This forms my 2nd active income stream. This is where I learned to leverage upon the power of technology to market myself as a qualified tutor.

With these 2 active income streams on the go, I begun investing in dividend stocks and attempted some form of trading. However, the preparation to trade do take up time which I can't really spare, and I have since reduced its amount significantly. I rely on dividend income investing now as my 3rd income stream. I have since build up my average monthly dividends to about $770. Multiply this by 4 to 5 times and it can almost replace my full time job.

My fourth income stream, though super duper small, comes from the ads I have on ExamWorld and WealthBuch. Because I have focussed so much effort initially on the first 3 streams, this stream was rather neglected. It's enough to feed me some coffee every month though.

Of course, I admit that what I have done so far, is common to what many people are doing too; there's nothing revolutionary. In summary, full-time job, part-time sideline, investing, blogging and attempting to make an income online. I'm not doing anything special nor extraordinary. I'm not born with a silver spoon in my mouth either, nor do I eat from a rice bowl made of gold.

I know I cannot stop here and stay in my comfort zone. I have to improve myself continuously to bring and accelerate myself to the next level. I hope to be able to roll out an additional income stream plus improve on my 4th stream by 2011.

My Plan:
1) Starting an Additional Income Stream
I will be creating educational materials for students who are hungry for good books for revision. I have lots to share, lots of ideas to implement, and I hope to see my vision come true. I like to imagine a place where many students see the light on complicated concepts after reading the guides I wrote. As mentioned in an earlier post, I have already started on an A level physics guide. I'm still a little undecided between setting up my own publishing firm or to go through an established firm. At the moment, I'm leaning towards the former.

2) Increasing my online income source
It's pathetically low at the moment, so I hope to be able to spend some time to improve the traffic, and perhaps create additional niche sites for more adsense income. EHow.com looks like a good website to start on writing articles as well. I'm not really into affliate marketing though, but I may try it some day.

Meanwhile, I will continue in my dividend strategy of buying equities. For my tuition sideline, I believed I have reached a plateau with my current strategy. I will need to think of a updated and improved strategy to address this concern eventually.

I can forsee 2011 to be an even busier year for me.

Quick updates

2010-08-10T00:51:00.001+08:00

Rather busy, and fell ill. So I shall log down my personal quick views of some of my stocks which has just reported their results.

Starhub
5cts dividend announced.
Net profit fell, EPS drop to 3.39 cts. However, this is because Starhub does not amortize the smartphones sold over 2 years, but recognized it immediately. I expect a much higher EPS over the next few quarters because of this.

A few things to take note for the following quarter:
(i) How loss of EPL will affect its pay TV revenue
(ii) How Next Generation Network will affect Starhub
(iii) How the new law that enables M1 to join the payTV will affect Starhub.

Overall, I will treat this is neutral and within expectations.

Aztech
0.3 cts dividends announced.
As expected, LED segment was profitable. More contracts from HDB announced. Given the number of HDB blocks around, this segment could be still rather profitable for the next few quarters. It's strength in the electronic segment is maintained.

Marine Logistics segment was rather stable in revenue. The most worrying is the Material Supply segment. Aztech has not secured any new contracts for 2 quarters. I might divest Aztech for a better yielding stock if they cannot secure any new contract by the next 1 or 2 quarters.

CapitaCommercial Trust
3.91 cts dividends announced.
Nothing much to crow about. 2 properties were sold during the last quarter.
Results are all in line, and secondary reports from banks are all in favour of CapitaComm over other REITs.

With the gearing, CapitaComm has the flexibility to further leverage up to acquire more yield accretive assets.

Starhill
0.91 cts dividends announced
Drop in dividends is because of increased number of units (due to newly issued CPU for Malaysian assets purchase). However, pro forma calculations suggested 1.05 cts dividends for the next few quarters. Hopefully this will come true.

With the gearing, Starhill has the flexibility to further leverage up to acquire more yield accretive assets.

AIMSAMPIREIT
0.5376 cts dividends announced.
Nothing surprising. Dividends same as previous quarter.

At <30% gearing, the flexibility to leverage up for yield accretive acquisitions is higher than Starhill. Industrial buildings are also more stable income investments in my opinion.

ST Engg
3 cts dividends announced.
Net profit increased 34% over previous quarter.

A quick glance shows that results were very good, and management expects next half of 2010 to record higher profits than the first half. A defensive blue chip in my opinion.

In total, I will have about 1.5k dividends coming in between August and September. This excludes CitySpring's and Keppel Green Trust's as they have yet to announce their results and dividends

The Story of the Marriage Passbook

2010-08-04T15:29:00.001+08:00

I was looking through my old emails, and I discovered this interesting mail.
It's very nice and touching, while at the same time, includes the virtue of saving.

Relationship is an investment. It is wealth in itself.

Enjoy the story:

=====================================================================

Marriage Passbook

Jocelyn married William this day. At the end of the wedding party, Jocelyn's mother gave her a newly opened bank saving passbook. With $1000 deposit amount.

Mother: 'Jocelyn, take this passbook. Keep it as a record of your marriage life. When there's something happy and memorable happened in your new life, put some money in.

Write down what it's about next to the line. The more memorable the event is, the more money you can put in. I've done the first one for you today. Do the others with William. When you look back after years, you can know how much happiness you've had.'

Jocelyn shared this with William when getting home. They both thought it was a great idea and were anxious to know when the second deposit can be made.

This was what they did after certain time:

- 7 Feb: $100, first birthday celebration for William after marriage
- 1 Mar: $300, salary raise for Jocelyn
- 20 Mar: $200, vacation trip to Bali
- 15 Apr: $2000, Jocelyn got pregnant
- 1 Jun: $1000, William got promoted
.
.
.
.
..... and so on...

However, after years, they started fighting and arguing for trivial
things. They didn't talk much. They regretted that they had married the most nasty people in the world.... no more love... Kind of typical nowadays, huh?

One day Jocelyn talked to her Mother:

'Mom, we can't stand it anymore. We agree to divorce. I can't imagine how I decided to marry this guy!!!'

Mother: 'Sure, girl, that's no big deal. Just do whatever you want if you really can't stand it. But before that, do one thing first. Remember the saving passbook I
gave you on your wedding day? Take out all money and spend it first. You shouldn't keep any record of such a poor marriage.'

Jocelyn thought it was true. So she went to the bank, waiting at the queue and planning to cancel the account.

While she was waiting, she took a look at the passbook record. She looked, and looked, and looked. Then the memory of all the previous joy and happiness just came up her mind. Her eyes were then filled with tears. She left and went home.

When she was home, she handed the passbook to William, asked him to spend the money before getting divorce.

The next day, William gave the passbook back to Jocelyn. She found a new deposit of $5000. And a line next to the record: 'This is the day I notice how much I've loved you through out all these years. How much happiness you've brought me.'

They hugged and cried, putting the passbook back to the safe.

Do you know how much money they had saved when they retired? I did not ask. I believe the money did not matter any more after they had gone through all the good years in their life.

July Portfolio Update

2010-07-31T00:02:00.001+08:00

July was rather bullish. Sometimes, I wish it wasn't so bullish so that I can buy stocks that give good dividends on the cheap.

As mentioned in the earlier STI technical update, I expect a 5th wave to be occurring. That means it is still bullish, but a terminal end could be near (not yet). I would have to be more cautious if I want to buy any equity.

July saw me doing 2 things, of which (2) I'm not sure if I have made the right decision.

1) I bought 5 lots of Keppel Green Trust at $1.14. I remember staring at it at $1.02, and hesitated for a while. Subsequently, it climbed back fast to $1.06 and then $1.13 since. From here, and also from staring at SP Ausnet at 92c, I told myself that next time, if I think I like the price, the dividends and what the stock is doing, I should just buy it. There's no point waiting. Instead, divide the accumulation into batches, and enter slowly.

2) I subscribed to Berlian Laju Rights issue with 30 excess lots. I went through the reports, both primary and secondary, and concluded that the it has the potential to be rather profitable in 2 years time, when the Indonesia Cabotage law kicks into effect in 2011. There's potential for this counter, but I expect some cap to it's price at 7.5 cents. Latest news is, the rights is undersubscribed, so I would end up with an average of 0.672. Will continue to monitor and escape when possible.

There's no dividends this month, but Starhill, CapitaComm, AIMSAMPIREIT and Aztech have all released the amount of dividends they are going to give. A tidy sum for me coming in August and September :)

A short summary of my core holdings:

Portfolio cost: $115060
Portfolio value: $137015
Percentage gain: 19.08%

My spare funds remains around $20k after adding K-green and Berlian Laju rights. As of now, the cost of my portfolio has finally reached $164k after adding Berlian rights and MMF units. $36k more to reach my FY2010 target. I need to work hard for it. My goals for next year would be more free time and thus, less earnings; so I better earn more this year before it ends.

Trading Basket -- Hoping to sell off

I want to sell these off when I can, or cut loss when I can take the loss :(
Portfolio cost: $28270
Portfolio value: $18130
Loss of around $10.14k

(red = freezer stocks to remind myself of my mistakes)

30 lots of Hor Kew at 0.125

20 lots of LC Dev at 0.21

150 lots of Berlian Laju at 0.0627

20 lots of China Sky at 0.245

I'm writing a book

2010-07-28T17:33:00.003+08:00

Yes, you heard right. I'm currently attempting to write a book on A Level Physics. It's a lot of hard work, and that explains my infrequent updates on this blog. Definitely not easy. I sleep <5 hrs a day to try to write, and think of ways to improve it, to make concepts clearer to the students.

What am I writing
I'm writing on an A level physics study guide. I chose to start on physics because physics is my forte.
After all, I'm among the top 10 scorers for 2001 A level Physics in Singapore, and among the top 39 in Asia for the 2nd Asian Physics Olympiad.

Why am I writing this book
While I was tutoring my students, I found that most of them could not understand their school notes well, nor understand current study guides on the market well too. There isn't much guides for them to choose on the market as well.

I really want to reach out to all the students who have difficulty understanding some of the concepts. But I also understand that my time is limited. In writing this book, I hope to be able to share my knowledge and benefit more students before I (might) forget the stuff one day.

What makes my book different
My unique understanding, and analogies to explain certain concepts. I try to link things up, and make complex things simple.

Well, I try. There's all I can divulge.

How is the market for such books
Admittedly, not big. A levels is a small market here, unlike O levels. Margins will definitely very small.

But hey! My main aim is to reach out and help those students. Profit for my time, of course since I'm still financially unstable, but I don't need supernormal profits.

The low profit margins is why you see less A level books and more O level books in bookshops.

I have some ideas on how to market, but I don't think I will share it here.

Publisher or self-publish or?
This is what I'm considering. To go through a publisher, or to self-publish as my own publisher.

I have decided to go on the latter path, because I want to try out something new in life. That is, register a business and own it! Whether I would succeed a not is immaterial, although I would try to of course; it's the experience and adventure of doing this I want to have.

I have ideas after my guide is written on a series of other self help materials to help students score better. Better to have my own ideas and publish them, than to spend the effort to get other publishers and convince them to publish.

When will it be out
I aim for March 2011, but I'm unsure if I can hit it. My students this year get my notes as I finish each chapter. So far, the feedback has been good, and I have made some changes to the way I phrase some concepts to make them clearer based on students' feedback.

All I know is, I have to work harder to get this out. There are just so many students floundering and having headaches over the A level Physics. I really believe my book will be beneficial to them.

But belief is one thing. I have to get it out, published, and market to the students. Nothing can replace pure hard work here.

Ganbatte to my book and the students who need it, and do pardon me for my reduced frequencies of updates. I really need to get this book out asap, else one more year of students will miss it out, and some will eventually grow to hate physics as a subject.

STI Technical Analysis 23rd Jul 2010

2010-07-26T01:34:00.000+08:00

This is an update to the wave count done on 6th Jul 2010
http://wealthbuch.blogspot.com/2010/07/sti-technical-analysis-6th-jul-2010.html

Apparently, I made the mistake of adapting the count to my expectations when I should have followed my timelines.

It appears that STI has completed it's intermediate 4th wave at 2648 on the 25th May 2010.
It remains if STI can break the previous high of 3037 for this high to confirm.

This is the chart of the updated count:

More bullish days? I'm not sure. Let's see how. The H&S pattern appears to have been broken. As mentioned earlier, when a pattern is so obvious, it would more often than not, NOT play out. It appears that the minor 3rd of this intermediate 5th wave is playing out now. Primary 1 has perhaps not ended.

Supposed my count is correct, we have intermediate 1 = 1947.3 - 1455.47 = 491.83
Supposed intermediate 5 = intermediate 1 since intermediate 3 is extended, we will have a final target of
2648.15 + 491.83 = 3139.98

This is a theoretical estimation, based solely on Elliott Waves counting. I'm not very proficient in this, so please check with your own system.

I will revisit my count if it is violated.

Oceanus -- Overhyped counter?

2010-07-20T10:38:00.001+08:00

Recently, Oceanus came under my radar. I was always fascinated by their business of rearing abalones, a Chinese delicacy, in their farms. It had went from a share price of <20c to near 60c, before coming down again to 31.5c recently. It is interesting in its strategy to acquire farms and lands from the centre of the coast, such that it can grow both left and right sides, while its competitors would find it harder to expand because they would have farms separated by Oceanus.

Before I do any impulsive buying (like before), I made it a point to look through some secondary sources (especially the more critical ones instead of the more bullish ones). I digged out the following nuggets of information from value investing forum Afralug Forums (formerly WallStraits forum), which are rather insightful.

The most interesting paragraph is the following:
"The financial statements use fair value accounting which books estimated changes in market value as revenue. While this may comply with accounting rules, it is total nonsense from a cash flow perspective because none of the so-called fair value profits can actually be converted into cash. Only when the actual goods are sold and cash received will the company know what their real profits are."

I have indeed seen similar circumstances of such revaluation gains/losses in shipping trusts, REITs, property counters, and counters like Berlian Laju. These revaluation exercises have the ability to affect the EPS of the company, and thus, we should take note of it when valuing a company. It's interesting that this can apply too on Oceanus, something which I knew, but never thought of applying here yet.

Just like my previous post on the gearing of REITs and how revaluations can affect the gearing, revaluation can also affect the NAV of Oceanus. But as along as the abalones are not sold, it's not real profits, but "paper gain".

The 3 best posts I picked out:

************************
From dydx:
************************

================================

Oceanus has just announced that 4 parties have converted a total of 37.62m existing warrants into new Oceanus shares - all at a conversion price of $0.15/warrant - and the total outstanding issued shares has now reached a new record of 2,016.55m!.....
http://info.sgx.com/webcoranncatth.nsf/V...ercise.pdf

Based on the last done share price of $0.31, Oceanus now has a market cap of $625.1m. This is actually lower than when I wrote my last post on 29Jul08, at which point Oceanus had a higher market of $759m, based on the 1,765m outstanding issued shares and a share price was $0.43 then. So it does appear that all the business growth in the last 2 years and the secondary listing in TSE via 2 TDR issues so far, have not really enhanced total shareholders' value.

Based on the Q1-FY10 results announcement released recently.....
http://info.sgx.com/webcoranncatth.nsf/V...1Q2010.pdf
as at 31Mar10, Oceanus had in its farms in PRC a total of 172.919m live abalones in different stages of growth. Based on the current market cap of $625.1m, I get a derived value of approx. $3.60 per abalone being attached by Mr Market now. Frankly, I am not sure whether this value or method of valuation makes any sense. But what I do know is that in a seafood restaurant near my house, I can get live small-size abalones served steamed with fresh garlick for something like $4.00 each.

================================

************************
From d.o.g.
************************

================================

Larger (heavier) abalones are worth more, so assigning the same value to abalones regardless of weight is not appropriate.

Also, the market value rises faster than linearly i.e. an abalone that weighs twice as much is worth more than twice as much in market value. So computing value by total weight doesn't work either.

Usually the abalones are sold at specific stages/weights, so it's more common to value them based on the quantity in each weight band, with a different per-weight value in each band.

The fundamental problem with abalone farming and indeed any long-lived agricultural business like timber, cattle or tobacco leaf production is that at any given time, there is a huge amount of capital at risk, while only a small part of the total value can be realized at any one time.

For abalone, it typically takes 5-7 years to reach full maturity and optimum market value. If the abalone are sold earlier, not only is the weight lower, the per-weight value received is also lower, so the IRR is lower. This has to be balanced against the negative cashflow throughout the growing period. As a result, the business owner must choose between cash flow and ultimate value.

The financial statements use fair value accounting which books estimated changes in market value as revenue. While this may comply with accounting rules, it is total nonsense from a cash flow perspective because none of the so-called fair value profits can actually be converted into cash. Only when the actual goods are sold and cash received will the company know what their real profits are.

The problem of negative cash flow is exacerbated when a company is growing, because more and more capital is tied up in the business. Thus, initial success can turn into eventual failure if the company is not able to obtain sufficient amounts of money at a reasonable cost to meet its working capital needs. More problematic is the poor market visibility: because each company only sees current market output, it believes the market is undersupplied, so it expands at a furious pace. Eventually all the new production hits the market at the same time, and prices crash.

There is a huge amount of pricing risk in abalone. Traditionally, demand has outstripped supply, resulting in very high per-weight prices. These prices have enticed many players to go into abalone aquaculture, to the extent that the market price of abalone has already begun to fall. Those who purchased abalone in Singapore during Chinese New Year should have noticed that prices were meaningfully lower this year versus last year.

Furthermore, market prices are spot prices reflecting current supply - they don't reflect the much larger future supply that is coming up. Oceanus is far from being the only abalone producer out there.

IMHO it would not be surprising if within the next 5-10 years, abalone becomes a commonly available food, available year-round at affordable prices. Good for consumers, not so good for producers.

For further reading, here's the 2008/2009 annual report of the Tasmanian Abalone Council:

http://www.tasabalone.com.au/documents/2...Report.pdf

In particular page 21 (Quota Holder Sub-Council Report) quotes Peter Cook, a keynote speaker at the 2009 International Abalone Symposium, as saying:

"Higher market prices of the past 10-15 years have been the engine powering farm expansions; however a “perfect storm” is currently driving market prices down 30% or more. A devastating combination of (1) a 400% increase in farm production in the past 9 years (much occurring in the last 3 years) and (2) the world economic downturn and (3) continual lack of development of “home markets” resulting in over 98% of the worlds farmed abalone marketed to Asia Pacific countries. Premium species are driving the Chinese market, with production and demand in China being a dominant factor but, unfortunately, not necessarily impacting overall world demand as many people expected”.

In other words:

1. Past abalone prices were very high;
2. Farms ramped up production; and
3. There is now oversupply.

This oversupply situation probably explains Oceanus' attempts to set up abalone restaurants and create a captive offtake channel. Unfortunately restaurants have their own issues as Oceanus is finding out.

And of course we have the other problem of biological assets - since abalones are living things, they can die from disease, stress, pollution etc. Insurance is often costly or simply unavailable. Even when insurance is available at a reasonable cost, and is actually claimed and paid, the company is reimbursed for its inventory losses, but not for market share losses. By the time it rebuilds production capacity years later, its old customers would have already turned to other suppliers.

Investors in Oceanus should think very hard about:
a. access to working capital;
b. abalone pricing; and
c. a "black swan" type event killing the abalone inventory.

That should inform their view as to its true value as a business, and its merits as an investment.

================================

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From musicwhiz
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1) The CEO of Oceanus has been constantly featured in magazines, news reports and even on TV show-casing his abalones and his business model. To me, this smacks of something wrong – why is the CEO of a company spending more time promoting his business rather than running it? In my personal experience, the best CEOs are the ones who lay low, keep to themselves and just work hard on growing the business. These are usually CEOs who under-promise but over-deliver; unlike some CEOs I’ve met who do exactly the opposite (i.e. over-promise and under-deliver)! To put it in one sentence – there was way too much hype surrounding this company; hence valuations would have been pushed up too high because of this hype (and inflated expectations).

2) D.o.g has adequately explained the fair value accounting problems, and I have always felt that companies with biological assets always tend to use Fair Value accounting which is technically correct but in practice, it means nothing at all. As an accountant, any gains arising from a revaluation of either assets or inventory should have been conservatively and prudently accounted for in Equity under “Capital Reserves”, and NOT brought to the Income Statement to be recognized as fluctuating gains and losses. This departs from the old concept of “lower of cost or NRV” which was the prevalent practice pre-2000 (before the Enron collapse and subsequent Sarbanes-Oxley Act). Now, companies have become over-zealous in “revaluing” their inventory and investments, to the extent of producing absurdities when it comes to interpreting this financial information. Companies such as Wilmar and Guangzhao IFB (suspended) also have this item in their income statement, and frankly so did China Milk as well. To me, the concept of fair value is just that – merely a concept. The practical implications of fair value are that you assume you can divest or sell the asset for that exact fixed price, which in the real world may be all but impossible as it may upset the supply/demand balance. A good example would be mark to market of share investments based on market prices; but when it comes to selling, if liquidity is not present, the huge cascade of sell orders will easily crash the price.

3) Regarding the huge working capital requirements of the business, one should note that this may be the reason for the Taiwan Depository Receipts (TDR) plan which Oceanus has rolled out a while back. The plan was to issue new shares as part of the TDR plan to raise more funds to grow more abalones. I think the dual-listing “fever” which has hit our shores can clearly show up which companies have a constant need to raise capital, and which can simply grow using internal cash flows.

4) A quick glance at Oceanus’ 1Q 2010 Balance Sheet ended March 31, 2010 also shows that fair value gains made up the bulk of their revenues at RMB 177 million. The Balance Sheet itself shows a drain in cash from RMB 561 million as at Dec 31, 2009 to RMB 298 million as at March 31, 2010, an outflow of close to RMB 263 million in just 3 months. Their current assets also consist of RMB 910 million of abalones, which as d.o.g. mentioned may or may not be able to realize their fair value due to downward price pressures and a potential future over-supply situation. Hence I would view the current asset balance with appropriate suspicion. In addition, a look at the cash flow statement will also show negative free cash flow for the Company.

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What fresh grads should or should not do?

2010-07-14T14:29:00.002+08:00

I read with interest the following from the CPF IMSAVVY blog on what Fresh Grads and Young People should and should not do:

====================================================
In view of the above, the following is what the young person should do:

1. Save up a war chest of at least 6 months to two years (depending on the stability of the job) of cash.

2. Get the basic insurance because you don’t have money to pay your medical bills for yourself if you are sick.

The following are things that a young people should NOT do (which unfortunately almost all my clients did it all):

1. Do NOT invest a single cent in stocks and unit trusts. Your priority is to build up cash. Unit trusts and stocks are meant for long-term. You should not have the mentality of cashing out these investments for short-term.

2. Similarly do NOT buy regular premium ILP which has high investments component.

3. Do NOT buy regular premium endowment or anticipated endowment (those that you get X% every Y years).

====================================================

While the writer is writing his beliefs and is sincere in sharing what fresh grads should or should not do, there are two points that I don't really share my beliefs.

"Save up a war chest of at least 6 months to two years (depending on the stability of the job) of cash."
and
"Do NOT invest a single cent in stocks and unit trusts."

The writer is CFA certified, so perhaps I might be wrong or less professional in my personal understanding. So how would I do it differently from what he says then? Instead of saving up such a strong war chest of emergency funds and NOT invest a single cent in stocks........ I would:

i) Save up a war chest of about 1 to 2 months only, while spending the energy to generate alternative income sources (in my case, giving tuition). There's no point letting the additional money rot in the bank with current interest rates.

ii) INVEST into dividend paying stocks, but of course, with prudence. Why I chose dividend paying stocks is because that will greatly assist in our personal cashflow, resulting in a more stable stream of money/income.

(i) will ensure income continues to flow if one was unlucky enough to lose the job. Doing (i) and (ii) will allow a young fresh grad to supplement his income, and over time, build up a substantial portfolio of dividend stocks via prudent expenditures coupled with prudent investing of savings and dividends.

I'm not a financial planner or guru, nor am I CFA trained, but these are my views, and it has worked wonderfully well for me so far. Am I doing it wrong? Or is it just that my way is more unorthodox? Or maybe I was just lucky that nothing bad happened with my "risky" ways. Hmmm..... Perhaps sometimes, we really need to do things that buck generally accepted norms?

Greed Kills -- News Report

2010-07-13T11:06:00.001+08:00

Teacher in $130,000 debt over World Cup bets

By MAUREEN KOH

HE was thrilled when Germany beat Australia 4-0 in the Group Stage match at the World Cup last month.

In just under two hours, the first-time bettor made $6,000 - the equivalent of two months' salary for the secondary school teacher.

But by the time Brazil suffered a quarter-final defeat by Holland, John's thrill had turned into shock and fear.

He had chalked up nearly $130,000 losses in bets with three different illegal bookmakers.

The only way for him to pay off his debts was to sell his car.

He started with "small bets between $2,000 and $4,000" for the first two matches, but upped the stakes to as high as $10,000 for each bet.

At his request, we are not using his real name as he risks losing his job.

In the hour-long interview with The New Paper on Sunday earlier this week, John, 28, who has been teaching for two years, pleaded repeatedly: "Please, please don't name the school too.

"I can't afford to lose my job now - my future will be gone."
While he has "deeply regretted" his folly, he admitted: "I realise it's too late."

He added: "I was blinded by greed."

Only his girlfriend, a 26-year-old primary school teacher, knows about his debts.

John said: "I've already let my parents down - I can't hurt them further."

It was his cousin who had introduced him to football betting, he claimed.

John follows the English Premier League and the European Championships.

But he had never placed any bets on the matches, even legally, until last month, when his cousin bragged about how much money he had made in the World Cup four years ago.

John said: "I was tempted, especially since my girlfriend and I were planning to get married next year. My cousin said it was a golden chance for me to make extra cash."

He added: "If not for him, I wouldn't be in this mess."

~~------------------------------------------------------------------------------------------------~~

For the final sentence, the blame was put on his cousin. No one forced him at gunpoint to place his bets.
In my opinion, it was greed, temptation of quick cash, that lured him to his "doom".

Lessons to be learned:

Just because someone said it is easy to earn the money does not necessarily mean it is easy for you too. Different people have different luck, different skillsets, different analysis, etc... you get what I mean.
Do not risk money that you need. In this case, the money was needed for his marriage next year. What's the point of risking it at betting? What's more 2~3 months worth at one bet? It could go either way, and fortunately or unfortunately for him, it went the wrong way.

This, is truly the dangers of gambling. Unlike trading, where one can limit one's loss by cutting it when surprises happen, in the case of football betting, you can never cut your loss when surprises spring themselves upon you.

Suppose he has $40k to spare, on hindsight, I think it would have been a better idea to dump all into SPH at $4 (10 lots) and perhaps lose some of the principal to market volatility than to lose all at football betting. At least if he does not want to withdraw the amount left in SPH, he will still get a cool annual $2.5k dividends,

Fortunately for this guy, he's still young, has a stable job. $130k debt can still be cleared with his salary. This lesson did not come cheap to him. I hope he will bounce back even stronger than before.

May the force be with him.

Gearing of REITs

2010-07-11T22:32:00.002+08:00

I have had some questions on what is meant by gearing of REITs and how it could affect a REIT.

What is gearing?
In the most simple terms, gearing is calculated by the amount of liabilities dividends by the total assets valuation.

Let's say for REIT X, the valuation of all its buildings and assets comes out to $1 billion. The total liabilities is $300 million. This will work out to a gearing of 30%. [I stand to be corrected in my concepts. Feel free to comment if my understanding is wrong.]

Different countries would have different policies for the maximum gearing for a REIT. In Singapore, there's a cap of 35% gearing.
Indeed, as I have pointed before, gearing is a factor in my consideration on whether to put my monies with a REIT. But we have to take note that gearing is not the sole criteria.

Why some gearing is important for a REIT
To me, REITs are leveraged instruments. Why leveraged instruments? It's because they leverage on debts to grow. By buying into a REIT, we are also buying into the leverage. Just like if we are buying a property on bank loan, we would be using leverage too. The main difference is that the debts of a REIT are non-recourse to us. If the REIT goes bankrupt, only our principal is gone; we do need to repay the debts. We can't do that we properties we own.

We can't expect a REIT to function with zero gearing or too low a gearing. This is because usually, the returns of a REIT surpass the interest paid on the debts. There's no point leaving the cash in the bank when you can earn much more by borrowing the money to multiply it faster than bank interest; i.e. leveraging on debt.

This, is how financial instituitions earn from giving fixed deposits (i.e. Sing Investments). This, is also how businesses and REITs earn. Debt is a double edge sword which has to be manipulated carefully for the greatest benefit to us.

Without any gearing, the rate of growth, the amount of earnings that a REIT earns could possibly be reduced as compared to another similar REIT with perhaps 30% gearing.

Debts are sometimes viewed negatively. But prudent debts taken to earn should be viewed with a more positive note. However, the distinction between prudent and non-prudent is something very subjective. Then again, everything we think and do usually has an element of subjectivity.

Newly added (thanks to cw8888!):
That said, we still have to bear in mind that gearing to a REIT is not as important as it's ability to secure refinancing of its debts. However, a lower gearing is usually desired for a REIT as it can usually help the REIT secure financing or refinancing easier.

How REITs can increase or decrease gearing
This is where mathematics come into play. Simply put, REITs can easily decrease their gearing by having a rise in the valuations of the buildings they own, and vice versa. When a REIT's gearing is high in times of recession where property prices are depressed, we can be sure that when the economy picks up in the future with increasing property prices, the gearing will decrease, and the REIT will be able to borrow more to finance new purchases. Of course, this is a double edged sword as it would also mean REITs would be purchasing more expensive assets.

This basically sums up my thoughts on the gearing of REITs. I will update this post when I have new insights or ideas on gearings.

STI Technical Analysis 8th Jul 2010

2010-07-08T23:59:00.000+08:00

Although STI rallied nicely, I don't have a good feeling about this rally.

Reasons:
1) volume is low. The volume over the past few days rally is below the volume 50 day MA. I will only consider it good volume if it is higher than the 50 day MA (i.e. NOL).

2) STI closed with a hanging man candlestick pattern right at the resistance line and the upper bollinger band. Of course, it would be good to see a confirmation candle tomorrow.

Chart:

3) We can see also that the different indicators. CCI climbed to oversold region. So did %R.

4) My Elliott wave count expected an interim top again.

5) However, MACD and Stochastics still look rather good. Again, these are usually lagging indicators.

The looming head and shoulders pattern is very obvious right now. But when a pattern is as obvious as this, more often than not, it will not fully materialise.

To suck more premature shortists into the market, the best way to do so would be to bring a head and shoulders breakdown to almost completion, before totally destroying the pattern to reach a new high. This could happen if my previous Elliott Wave count for STI is correct, that is, we are currently in an intermediate wave 4.

Let's see how it goes. Shopping list for dividend stocks ready! Will STI be obedient?

STI Technical Analysis 6th Jul 2010

2010-07-07T00:46:00.005+08:00

It has been a long time since I looked at the STI chart. Had been really busy.

I took another look at STI, and found a more bullish Elloitt wave count. We could be in a minor wave 4 of Pri 1 instead of having begun on Pri 2.
How this is going to play out, I'm not exactly very sure. Whether minor wave 4 has finished, I'm not very sure too as I simply don't have the time to go deep into the hourly charts to confirm this count. However, although it is bullish, an interim top appears to be forming again.

My chart without the usual indicators:

Why this count? It's because I took into account a few common behaviour of waves, especially wave 4.
Waves 4 are usually very long, draggy and not volatile, with lower volume overall. This forms the basis of the 4th wave labelled as 3(iii)[4]

The current market is also about the same feeling and behaviour, which leads me to think it could likely be a wave 4.

Finally, I noticed that the market feels moderately bearish. A contrarian would go bullish at this point. This is however very subjective, so I would not elaborate further.

Will I be able to buy back Singtel cheaper than $2.97? Maybe not now :(
But at least if this plays out, I would be able to get out of my mistake longs.

Have to observe as it continues.

I have prepared a list of stocks I want to buy if the market falls.
I have also prepared a list of stocks I want to sell if the market rallies furiously.

Either way, I'm fine. :)

June Portfolio Update

2010-06-30T23:59:00.000+08:00

June was relatively quiet. I warned in the first week of May, a Head and Shoulders pattern was observed at the end of 5 major Elliott Waves. This would signify that our interim top has arrived.

As mentioned in the previous update, May saw STI plunging nearly 300~400 points. For the month of June, STI rebounded higher in a possible wave B, while appearing to start a renewed plunge the last few days, ending the month almost flat.

I sold Singtel at $2.97, a little too early given it's price now, although I could have bought it back cheaper at $2.90 the day after. With the sale, my monthly dividend amount has dropped to $715. However, I'm quite optimistic I will be able to buy back cheaper soon, possibly in time for the next round of dividends.

The month of June also saw dividends coming in from Starhub (again), CitySpring and AIMSAMPIREIT, totalling nearly $1k. There was also a one-off $200 GST Credit.

A short summary of my core holdings:

Portfolio cost: $109360
Portfolio value: $124780
Percentage gain: 14.10%

My spare funds has increased and reached near $20k. Not a lot, but sufficient for a few lots of quality value here and there, I hope.

Trading Basket -- Hoping to sell off

I want to sell these off when I can, or cut loss when I can take the loss :(
Portfolio cost: $25210
Portfolio value: $15130
Loss of around $10.08k

(red = freezer stocks to remind myself of my mistakes)

30 lots of Hor Kew at 0.125

20 lots of LC Dev at 0.21

60 lots of Berlian Laju at 0.117

20 lots of China Sky at 0.245

Half-yearly update on Goal 2010

2010-06-27T18:16:00.002+08:00

Half of 2010 has passed! The last time I reviewed myself was my quarter review here.

1) Goal of achieving $1k average dividends per month, i.e. $12k dividends a year
Since the quarter review, I purchased an additional 19 lots of Aztech at 0.24, raising my average to 0.2338 and my total number of lots to 50 lots. In addition, I topped up more AIMSAMPIREIT at 0.205 till I have 70 lots. However, I sold my remaining Singtel lots at $2.97, but failed to buy back at $2.90 :(
I believe I will be able to buy back Singtel at a lower price.

The average monthly dividends from this basket stands at about $715, an increase from $659 since the previous update. If Saizen meets my moderately conservative expectations of $12.20 per lot per month, after conversion, I will achieve $775 monthly. Saizen's report will be out soon, so I will wait for it eagerly. The board has been buying more and more warrants recently. It's really an undervalued counter.

2) Goal of setting up ExamWorld to a super big site to help more students

Still the same...

Singapore's first free online short to
medium questions and solutions database

Haven't been updating a lot recently (again) :(
Although I did add a few questions.

There are also some adsense income from this site even though I didn't update much. Enough for a cup of coffee or two a month!

3) Goal of achieving at least USD$20 per month in adsense income.
I have achieved this on average for the last 2 months. I guess I should be able to reach $100 again in 3 to 4 months time...

Traffic to this blog has increased to about 120++ unique viewers a day, and about 600+ page views a day. I realised that the CTR for Examworld is actually higher than the CTR for WealthBuch. After giving some thoughts, I believed that CTR will be high for content sites with information that people are looking for, and not a blog on the financial freedom journey I'm taking.

4) Writing my own notes for my tuition students, and eventually be able to publish and sell to the different schools in Singapore
I have progressed quite a fair bit here. Initially, I was not able to type out my notes immediately on a word processor because when faced with a monitor screen, my inspiration just went out of the window.

So, I started off with what I do best. I imagine that a tuition student was beside me, and I was trying my best to write down the major concepts for him. With that, I handwritten quite a few sets of notes.

And now, recently, I have managed to progress to typing out straight, printing out the notes, review it, edit it again, and repeating this process. After which, I gave to my students, and procured for feedback from them to improve the notes.

I hope to be able to complete everything by the end of this year, and probably set up a publisher (to just own the copyright and do the sales, not the printing which will be subcontracted out) to publish the guidebook.

As of now, it's a payless extra sideline :)

5) Goal of reaching $200k networth in equities and MMF
As of now, my networth in equities and MMF adds up to nearly $155k. Another $45k to achieve before reaching my target. Extrapolating my current rate of increase tells me that I might not be able to reach this goal by the end of 2010.

From 2011 onwards, I might be adding properties to networth goals. However, for 2011, I expect my rate of growth to be slower, as I'm planning to just let my money grow via dividends and dividends re-investing, and spending a bit more time with my loved ones, while probably working less hard.

GANBATTE!
I will review my goal at the halfway point again in end-Sep 2010....

Academician turned Property Millionaire

2010-06-24T16:02:00.000+08:00

This is a very interesting article I read from asiaone. It's about a Dr Peter Yee whose never-give-up attitude has led him towards the much-desired path of financial freedom. To him, there is no such thing as failure, just learning. Dr Peter Yee is a property millionaire.

http://www.asiaone.com/Business/My%2BMoney/Opinion/Story/A1Story20100617-222682.html

Some of the inspiring quotes from the article, and what I can gather from it:

1) Do or do not. There is no try.
Like what Nike says, Just Do It.

2) You should never give up in life, regardless of your age. There's no such thing as failure. I have started businesses and closed them down. People might say that I am a failure, but I don't think so. Instead, I change.Like what Energizer says, Never Say Die

3) If you don't like, then you are like a prostitute. You only like the money, but you don't like the job." Then I thought, "Eh! I feel like a prostitute." [laughs]. So I resigned and managed to pull out some capital from the deposit . That is the beginning of my property investment career.
Do what you love. Money will come along.

4) It was very hard for me to accept that the world is so merciless. It won't work to pay him endlessly. So we did something for ourselves.
The world don't owe us a living. We have to take action for ourselves.

5) But not everyone can afford those areas.
[laughs] So, begin with a poor man's area for cash flow.
Start small. Don't attempt to take big bites too early, too fast.

Ganbatte!!!

STI Technical Analysis 23rd Jun 2010

2010-06-24T00:29:00.000+08:00

STI looks dangerously toppish at the moment.

My fresh funds continue to stay out of the market. No point going in if I'm expecting the market to correct deeply.

Chart as shown:

The potential big head and shoulders that is looming is really scary at the moment. Especially when it is slanting, this presents a more bearish scenario.

STI rebounded at the 50 dma today at 2850. How long more will this support hold? I don't think it will hold long. Potential upside will be capped at 2890, the 61.8% retracement level and previous top. The 61.8% retracement holds a significant meaning being the golden ratio.

Even if there's more upside, it will be limited. I will maintain not entering fresh funds yet.

Time and Money

2010-06-23T16:05:00.000+08:00

Unless one is born in an ultra rich family, our initial assets are very limited. True wealth can only be gained when we understand how to make the best use of our limited assets. This is the same for businesses as well; if you can make better use of your limited assets than your competitors, you will emerge stronger and better over time.

There's opportunity cost for your time or your money
For every second spent on our current job, we incur the opportunity cost to earn more on another job for the same amount of time spent. Why work on something that pays less? There are opportunities out there for us to grab to earn more for the same amount of time spent. Everyone of us has 24 hours a day, 7 days a week. Why are some earning more than others? The reason is because those earning more know how to maximise and scale up their value and monetize it.

The same goes for money. For every dollar spent reducing a loan and thus the interest charged, the money could have lost the opportunity to build up assets at a higher return! This is the reason why I have not fully paid up my education loan (interest at 2.6%) but instead, chose to put it in SPH with a dividend yield of 6.8%. The difference in 4% p.a. is what I earn.

It isn't that smart to earn more by working more!
Well, would you take 3 full time jobs and work 22 hours days to earn 20k a month? I wouldn't.

To me, it would be better to work more productively, that means get paid more per hour. And why not spend energy on improving this aspect of our income generation?

In case anyone is mistaken, I don't mean that we should be lazy and work lesser and lesser.

Look after our asset of Health!
While in the quest for financial freedom, inevitably, some might fall out due to health issues. Health is a necessary asset for us to grow our wealth over time and to enjoy the fruits of our labour. It is the main pre-requisite behind our financial freedom journey.

Health is priceless, for everything else, there's MasterCard. :)
No point exchanging a priceless asset for something that's more quantifiable.

I forgo my HDB at Buangkok Vale

2010-06-19T10:48:00.003+08:00

I mentioned earlier that I had applied under the BTO scheme with my girlfriend for HDB at Buangkok Vale. Well, we forgo our choice because we was given a rather poor queue number, and all of our choice units (about 85+% of the development were ok for us actually) were taken.

Basically, to us, to take the remaining 40 units is akin to scraping the bottom of the barrel. If we had wanted the HDB, we are left with no choice but to fork out $240k for a place where we wouldn't like ==> we don't really see the point.

True, it's cheap relative to resale prices nowadays, but we don't really see the point as said.

I've learned 1 lesson: if I want something good, I better not leave it to chance. Sure, chance might have given me an excellent queue number, and I would have gotten a choice unit. Instead, life decides to inculcate me this lesson. It's not about being choosy; after all, as humans, we want the best for ourselves and our families. Since chance does not want to give me a nice queue number via balloting, I have decided I will not leave it to chance.

What are our choices now?

There's one Executive Condominium (EC) development coming up that we are interested in. I have emailed the developer, and found that it will start launching from 4Q2010.

The price is indeed more expensive. In fact, could likely be twice as much as the HDB I had originally balloted for.

i.e. 500k++ for 80sqm (est) for EC vs 240k for 4-rm HDB

Other than it being an EC, it is also walking distance to Buangkok MRT, which has food courts and a supermarket. It's also walking distance to Hougang Green. On top of that, it's merely a few bus stop rides to Sengkang Compass Point or Hougang Mall, although we could take 1 train stop there too.

One might say that the price is way too expensive as compared to the HDB. In fact, my mum was worried if we could eventually pay for this development.

Let's do a reality check:
I expect this development to be ready in 3 years time at the earliest. In 3 years time, I expect the total CPF amount for me and my girlfriend to be about $100k. In cash, each of us would be able to fork out at least $50k with ease, which gives another $100k. Being a first timer, we would get another $30k rebate.

Assume the condo is priced at $600k. Stamp duty would amount to about $12.6k

In summary, amount that I would need to loan is about $615k - $230k = $385k
Taking a bank loan at 4% interest over 30 years, this would work out to $1113 per month in repayment. Together with condo fees, it would probably amount to $1.5k a month.

Assuming ceteris paribus, this would be moderately affordable when I extrapolate my possible assets in years to come. My dividends in defensive stocks would be able to cover most, if not all, of these fees. Of course, I could liquidate all my stocks and pull out another substantial sum by then, but I don't see the point of doing so at the moment.

In fact, after the minimum occupation period of 5 years, I could rent out the whole place to cover the loan too. This will greatly assist in my cash flow. Estimated time for this to happen would be 2018.

Preliminary calculations done. I shall wait for this development with my girlfriend. Meanwhile, I shall work harder and smarter to generate more assets.

STI Technical Analysis 17th June 2010

2010-06-18T00:24:00.004+08:00

I have tweaked my Elliott Wave count of STI. It appears that based on Elliott Wave Theory, STI could reach and peak at 2900.

Wave A 2647 - 2820 = 175
Wave B 2820 - 2725 = 95
Wave C 2725 - 2900 = 175

Based on chart, it appears that 2900 is a very possible mega resistance as well.

I see a slanting Head and Shoulders pattern forming. This is very bearish. However, it is so obvious that I wonder if such an obvious pattern will really play out. Let's see how it goes. It could be a feel-like and look-like head and shoulders formation that doesn't break the downward sloping neckline..., and it would still satisfy the Elliott Wave pattern of a wave correction.

The fibonacci retracement level is at 2889. The downwards resistance, which coincidentally hits two interim tops and is parallel to the bottom support which hit 2 interim bottoms, suggests 2900 as a mega resistance.

Indicators are starting to point to overbought as well. But these are secondary to me.

Some extra stats:

The Left Shoulder for STI took 20 days to go from tip to toe.

For the possible Right Shoulder, from toe to today, it's the 16th day. If it so happens to be a mirror reflection, the top would be reached next wednesday. But I doubt so, because the right side of the head is shorter time frame... Perhaps the formation of the Right Shoulder need not reach 20 days, but Friday or Monday... It might not need to reach 2900, but fibo retracement at 2889 for a 61.8% retracement,

Also, the 50 dma is coming down, so it might form some sort of resistance.

Take a step at a time. I'm rather bearish... and my fresh funds are just waiting with low interest, but I will sleep well.

Final note: The sluggishness of the market feels like some wave iv of C. This is in line with the Elliott Wave count presented for a wave v final top...

Floods in Orchard Road

2010-06-16T14:12:00.001+08:00

Dr Yaacob Ibrahim, Environment and Water Resources Minister, says: "You can't design for rainfall of this level, it is just too huge. The thing we can accept is that we can only design our canal of a certain size, and at the end of the day, we have to live with some of these occurrences which occur once in 50 years or so. I know it is inconvenient to some Singaporeans, but on the part of PUB and NEA, we'll do our best to alleviate the problem as quickly as possible."

********************************************************************

A deja vu of Nov 2009, where our minister mentioned a flood of once in 50 years too :)

Nov 2009:
THURSDAY'S deluge which submerged parts of Bukit Timah was a 'freak' event that occurs once in 50 years, Minister for the Environment and Water Resources Yaacob Ibrahim said yesterday.

Jokes aside. I wonder how the electronics shop at Lucky Plaza and the food stalls at Wisma Atria, etc, will be. Damages would be rather high.

Hopefully no one is injured...

On a sidenote, Starhill Global REIT owns a stake in Wisma and Ngee Ann City. Capitaland owns Ion Orchard. Wheellock owns Wheellock place, all around the same area. Just thought I would mention this since this is a primarily finance blog.

Singtel Technical Analysis 15th June 2010

2010-06-16T01:27:00.000+08:00

I have sold Singtel some days back at $2.97.

Singtel went down to $2.88, after which rebounded to $3. I'm still waiting for a lower price to buy in, hopefully before the dividends of 8c.

According to my chart, Singtel is in a rising wedge with declining volume. With resistances by the 200 sma, 200 ema and 100 sma looming up, with the pattern of the bearish rising wedge, it does not seem to bode well for Singtel's price actions. Moreover, the 50 sma is coming into play to resist the price while the $3 psychological barrier seems a little formidable at the moment.

We have to note that the longer the prices stay below these critical moving averages, the lower these moving averages will get, and the more depressing these resistances will get.

I'm moderately hopeful I will be able to load back my 2 lots at around $2.80 soon.

Singtel, hope to see you there!

1 million dollars... so what?

2010-06-15T23:39:00.000+08:00

This morning, I overheard this in the lift when a colleague was chatting with another over some property price.

"1 million leh! A normal person wouldn't even be able to earn that in one lifetime!"

That set me thinking... that isn't really true! A million dollars over 30 years is about $34k per annum. According to salary.sg, a $34k per annum salary is higher than 18.6% of the population (let's not get started on the distinction between PRs and Citizens).

Just a thought... Sometimes... I wonder why a million dollars is set as a milestone... Supposed a million was defined as 10⁵ or 10⁷ instead of 10⁶, would it still be a milestone? This is financial relativity. But that's beside the point in this post.

Indeed, it appears that most of us do earn the magical million dollar in our lifetime. But so?

As per conventional wisdom, what can set us apart from the rest:
(i) How much is saved from the amount earned.
(ii) How the amount saved is used or invested.
(iii) The rate at which we generate income.

All 3 points above are very important in my opinion. Merely focussing on the first two points will only probably help one live comfortably, but not enough to go very far.

How much is saved from the amount earned
This has been repeated over and over again in many books and blog posts in many blogs. I will not bore you with the same stuffs again. Basically, it's still about delayed gratification, and prudent spending and saving habits.

How the amount saved is used or invested
This is another common wisdom. Again, this is something that has been expounded over and over again.

The rate at which we generate income
This is perhaps something very under-rated. To me, one can save 90% of their income, one can compound their savings at 20% p.a., but if one earns a pittance, ultimately, the amount left would still be little!

The age old formula still applies
Income * Percentage savings * compounding effect of savings

Needless to say, without a moderately high income, one's networth would not grow quick enough. Our time on Earth is limited. What's the point of reaching a respectable networth only to spend it on medical bills or passing it as inheritance to children who might not even treasure it?

The effects of compounding is well known, it's effects well documented. But where's the base capital going to come from? $0 compounded at 50% p.a. for 30 years will still result in grand total of........ drum rolls.......... $0!

Granted, markets traditionally compound at around 10% p.a. Let's say at the age of 25, you have $100k to start compounding with. Excluding any additional savings, and doubling every 7 years, after 28 years at age 53, it would be $1.6mil. Sounds nice? Yeah, numbers are nice sounding. But wait, how many would have $100k at the age of 25? How many would be able to truly achieve 10% compounded for 28 years? At 53, with $1.6 million in your bank account, what would you do? Go for a nice tour and huff and puff with heavy luggage around? Slogged hard for 28 years just to enjoy your golden years?

The irony for most people is, when they are young, they have the energy to do many things, but not the money to do so. But when they are old, they have the money to do things, but not the energy. The sad fact of life is, humans athletic capabilities peak around 25 to 30 years old, and the body could probably last well into the late 40s. After that.... it depends on your genes.

Yet another sad fact of life... many worked for money only to see it fly out fast.

What's my solution? I work for the fun of it. I try to make sure my work is play. For example, I like to interact with students and share my knowledge and insights with them. That's why I'm give tuition on the sideline. I like to solve and analyse things logically. That's why I decided to be an engineer. At the moment, I can say that I'm truly doing things I like. Income is still important no doubt, and fortunately for me, I have a nice income from doing things I like.

Right now, I'm writing an A level physics guide for publication in the future. Do I see any fun in this? You bet! I know I have many interesting and unique insights for different topics, and before I forget them, I want to document them down. At the same time, I try to analyse and gather feedback from students where I can improve my notes. It fits my personality well.

I make sure I enjoy my years while increasing my networth instead of slogging for it. I try to make sure my income is above average so as to grow my networth faster than most. In fact, I'm at a zone so comfortable and happy that I don't mind remaining this way forever. Then again, that's not my personality too. Pretty soon, I will attempt to shake myself out of this comfort zone, but I shall leave that to when I'm more sure of my plans.

FSL Trust -- Some thoughts

2010-06-13T08:50:00.003+08:00

FSL trust recently suffered a drop in share price due to bad news from Groda defaulting on their ships, coupled with Daixin Petroleum arresting two of their ships because Groda used them as collateral for buying fuel.

Background of FSL Trust:
FSL is a provider of leasing services on a bareboat charter basis to the international shipping industry. It has a modern, high quality and diverse portfolio of 23 vessels consisting of 7 containerships, 9 product tankers, 3 chemical tankers, 2 dry bulk carriers and 2 crude oil tankers. The average age of the ships is around 5 years.

My quick calculations of their possible dividend yield after taking into account Groda's default:

	1Q 2010	1Q 2010 without Groda
	US$'000	US$'000
Revenue	24,432	20,767
Net cash from operations	16,329	12,664
Repayment of Secured Bank Loans	(8,000)	(8,000)
Income available for distribution	8,329	4,664
Units at end of quarter ('000)	598,665	598,665
Distribution per unit (cents) per quarter	1.39	0.779

I did not take into account the additional gain due cash from previous quarter, resulting in an actual DPU of US1.5 cts. But that isn't really as important here.

From the presentation slides, Groda accounts for 15% of total revenue. Taking that 15% away, and assuming ceteris paribus, we could expect a dividends of about US0.779 cts.

Let's take US0.77 cts DPU, and a poor exchange rate of US 1 to SGD 1.35.

For the following unit prices, this would be the yield:

Unit Prices (SGD Cents)	Estimated Yield
39	10.66%
38	10.94%
37	11.24%
36	11.55%
35	11.88%
34	12.23%
33	12.60%
32	12.99%

Yield wise, I will be happy to purchase at around 35 to 36 SGD cts, if it reaches there. For the debts and risks, I would think the nearer to 12%, the more willing I will take the risks to purchase 10 lots.

FSL Trust NAV and Liquidation Value
According to reitdata.com, FSL Trust's NAV is about 60 cts per share. According to gm89, the liquidation value is about 46 cts per share.

FSL also has about roughly 9.3 cents per share in cash waiting.

Buying at 35 cts (if it reaches there) would be buying at 34% below liquidation value.

Debts and repayment

At the moment, FSL is attempting to repay US$8mil of loan every quarter to pare down it's debt. This is about US$32 mil per annum. Given debts of about US$480 mil, this will take about 15 ~ 20 years to finish paying all debts, assuming ceteris paribus.

How does this sound to me? Given the ships' average age of around 5 years, and industry ship lifespan about 25 years, we have another 20 years ahead before the ships are done for. The repayment of US$8mil would be just nice.

Assuming (yet again :x) that nothing else changes for the next 20 years, no new ships purchased, etc, FSL would be debt free, and with all ships scrapped, in 20 years time. This is much like COE in Singapore; you pay 10 years worth of COE, and spread monthly instalments to 10 years, to use a vehicle that will be scrapped in 10 years. At least to me, FSL will not have to finish depreciating and scrapping the ships when debts are still around.

The above are just my preliminary thoughts. I might buy in at 35~36 cts, if it does touch these prices. The only thing stopping me for now is because selling pressure is still strong.

AIMSAMPIREIT -- Extra ViewPoints

2010-06-12T01:58:00.000+08:00

Here, I'm posting some extra viewpoints by Grandmaster89 from CNA forums:

I identified a few key risk in investing in AIMS REIT. I hope the Management can tackle proactively this year.

1) Asset valuation is still decreasing despite the slow recovery in the local economy. I guess asset valuation in industrial properties could be lagging behind the general economy since manufacturers will only recover substantially once spending power has returned back to pre-crisis levels. High unemployment levels isn't helping it at the moment. When manufacturers recover, the demand for logistic and manufacturing hubs will increase hence driving up asset valuation.
Changes in Asset Fair Valuation

1H 09: + S$1.0 million
2H 09: - S$22.7 million
1H 10: - S$37.1 million
2H 10: - S$0.74 million

This clearly shows that over S$60 million was wiped out in AIMS (or MI-REIT) balance sheet over the past 18 months. It is good that this decline is easing and might even start to trend up in 1H 11 onwards.

Why is this crucial ? Changes in asset fair valuation is reflected in the income statement and in the balance sheet thereby affecting its investment property and equity value. AIMS debts specifically states that its gearing (debt/asset) must not exceed 38% and if it exceeds 35%, there will be an increase in interest rates by 1%. Another substantial decline in asset valuation may cause its gearing levels to rise without another penny being borrowed. The reverse is also true - an increase in asset fair valuation may decrease its gearing and hence giving it more leeway to draw-down more debt in the its refinanced loan facility (assuming they can secure it).

2) Occupancy level remains high but there was a sharp drop in 4Q.

2Q 10: 98.2%
3Q 10: 99.2%
4Q 10: 96.0% (acquisition of 5 Properties)

3) The Management intends to grow the Trust aggressively with the aim of it attaining S$1.4 billion worth of assets by 2015. This is quite impossible to achieve with a 35% gearing limit. Moreover the Trust does not retain its income for acquisition purposes in the future. Hence this implies that equity financing might be utilized in a few years time.

4) The Trust doesn't have a diversified source of funding and bankers. Currently it only uses secured bank loans from a select few banks. It has yet to take on convertible securities, unsecured loans, bonds and preference shares. While I do not like a highly geared trust, it isn't very healthy to have all your debts in one kind of instrument through a few select key banks. I believe AIMS intend to cement relationships with new bankers to get loans at a far more competitive rate (eg interest and maturity). Hopefully AIMS can help boost the Trust to investment-grade credit rating.

AIMS REIT FY Presentation Slides:

Broaden and diversify the Trust’s funding sources beyond the existing key relationships.

Target an investment grade rating of Baa3 or above (current rating Ba2) from Moody’s by maintaining strict financial discipline and investment grade metrics over the cycle.

Looking forward to their asset divestment and loan refinancing movements this year.

Digiland -- Beware

2010-06-10T10:39:00.002+08:00

Digiland is the pennies of all pennies to me. Over at Afralug forums, there is a warning by forumer dydx. His posts on this company are really great, and I see no need to rewrite everything myself into a warning.

Digiland is one penny I will avoid at all costs, be it from TA or FA. TA, it's easy to buy but hard to sell. FA, it's market cap is too big, share dilution too big, for a loss making company that's so small.

Below, I will compile some of the critical posts made by forumers at Afralug on this company. It's a buyers beware, punt at your own risks, kind of stock.

-----------------------------------------------------------------------------------
By dydx
Digiland International
Judging by the extremely high volume transacted on this counter in the last couple of days - again taking the No.1 position in today's "Top Volume Table"!! - it appears that many people are betting on Digiland International as another "get-rich-quick" investment.

And why not, since the market is 'hot' and will likely run up further. Especially so since the risk appears so small - buy at $0.005/share; after that, queue to sell at $0.01/share. If you are lucky, the trade would give you a 100% return! If you are luckier to contra it off at $0.01/share, the trade would give you a 100% return without even coming out any cash capital! And if you are unlucky, just contra it off at $0.005/share and lose your 2-way brokerages - small money anyway!. And at $0.005/share, a 1,000,000-share trade would only cost you $5,000, before brokerages. Anyway, since there is so much liquidity in this counter, what can really go wrong!

I think people better start taking a good close look into the company's 1H (ended 31ec08)-FY09 results announcement.....

The company continued to make losses, and had a NEGATIVE equity to the tune of $2.785m as at 31Dec08, and still owed banks some $3.8m. What is most amazing is that Digiland International had a mind-boggling 8,526.0m issued shares outstanding as at 31Dec08. So even at a share price of $0.005, the company still carries at a market cap. of $42.63m.

So many silly people are willing to pay $0.005 for a share that is technically worth nothing! Theoretically speaking, such people would stand to lose 100% of their investments, if suddenly others wake up and stop buying at $0.005/share, or if any creditor of the company decides to push for its liquidation.

It also pays to note substantial shareholder Tan Kim Yong has been selling his holdings - quite happy at $0.005/share, of course!

Beware!!!

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

By dydx

I simply cannot believe this! Digiland is actually calling a 'massive' rights issue - a 1-for-1 renounceable non-underwritten rights issue of up to 8,526m new shares at $0.001 per share, to raise $8.25m!.....
Source: http://info.sgx.com/webcoranncatth.nsf/V...9Jun10.pdf

If this proposed capital raising is successfully carried out, Digiland will end up having 17,052m issued shares - likely becoming one of the biggest companies in the world, but only in terms of the number of issued shares!!

Bearing in mind that there is already hardly any buyers of this counter even at $0.005 - the lowest possible 'bid' price - in most days, I wonder how subscribers of the rights issue would trade out their new shares! Is this a plot by some interested parties to try to recreate short-term market interest in Digiland, so that they could unload their shares at $0.005 or $0.01?!

The latest Q3 (ended 31Mar10)-FY10 results continue to show a very difficult state in Digiland's IT trading business.....
Source: http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_EE07184767EEED8B4825771B0030BCFA/$file/3rdQuarter31Mar10.pdf?openelement

Based on the present 8,526m outstanding issued shares, at a share price of $0.005, Digiland would have a derived market cap of $42.63m - equivalent to 23.7x of Equity of $1.8m as at 31Mar10!!

Quite clearly, this is likely another case of putting good money after bad. IMHO, SGX should simply delist Digiland to save more ignorant investors from wasting/losing their money to some dubious companies....

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

By MrValue

Surprise that digiland shares are more widely distributed than many blue chip companies - close to 30,000 shareholders!! And yet not a single one of them is a substantial shareholders with more than 5% of it's shares.

It's then no surprise that mgt wld want to raise funds to keep the company alive such that CEO teo will continue to get his $250k to 500k annual remuneration, never mind the $280k cost to raise this money.

Hope SGX will do something.

Musings -- Credit Card Debt Defaults

2010-06-09T23:37:00.000+08:00

Musings is a category where I will muse about random stuffs

Recently, I read with interest that the statistics released by the Credit Bureau of Singapore. A whopping 7.16% of those in age group 21 to 29 defaulted their credit card debts. That's about 1 in 14 of us. The news article can be found here.

Being in this age group, I'm indeed extremely appalled. Most of the times, to be eligible for a credit card, one needs a minimum annual salary of $30k, so these are not exactly people who do not earn enough. It really makes me wonder how these people get into such debts. Most of my friends in this age group does not appear to be in credit card debts.

Probably these people lack discipline in maintaining their financial health. Perhaps there are more pressing reasons, I wouldn't know. But 1 in 14 to default on credit card debts isn't a joke. Businesses pray on the needs and wants of consumers, and at times attempt to turn wants into needs.

As an investor in companies like Starhub and Breadtalk, I would love to see consumers throng to the companies I own shares in. Credit card debt? That's their problems, and the banks' problems, not mine.

But as a Singaporean in the same age group of 21 to 29, I dread to see my fellow peers "suffering" from such debts. That's one of my reasons for blogging here now; other than charting my own journey towards my goal of financial freedom, I'm hoping that whatever I wrote here will someday benefit someone to take action to improve their financial health.

Indeed, it's always easier to spend than to save. In Singapore, lots of money is spent to "have face", to appear high class. Driving a BMW puts you one above the rest. Having a $10k holiday in Europe give you bragging rights in front of your neighbours. There are just so many things to spend our money on. A new iphone? A new laptop? Or how about a brand new set of gym attire?

I'm not saying that one should live like a total miser/scrooge. What's the use of that? It will only turn you into a millionaire scrooge eventually. What I want to mean is that although one should enjoy in life, one should still aim to live below one's means. You know, it's not hard to enjoy life by living below one's means.

The Chinese saying goes: Bitter first, sweet later (先苦后甜). It makes a lot of sense here. Spending now merely adds on to our financial burden later on in life. The magical power of compounding will not be helping us. In fact, by defaulting on credit card debts, the magical power of compounding will actually work against the defaulter. A $100 dollar debt will balloon to $125+ in a year. 2% a month, or nearly 25% a year, isn't a joke.

A lifestyle that depends a lot on debts in not sustainable in the long run. I shudder to think how some people can get themselves enslaved for life by living above their means. Especially for the younger generation... it appears to me that most are enslaved by consumerism.

Our personal financial health is not the responsibility of anyone else except us. If we don't take good care of it ourselves, who else truly will?

Google Adsense Monetization

2010-06-08T01:03:00.004+08:00

For the month of May till now, my adsense click through rate (CTR) for WealthBuch is at 0.21% while the click through rate for timeless info site ExamWorld is at 1.54%. However, the page view for WealthBuch is nearly 7 times of ExamWorld and the Pay Per Click (PPC) is higher.

Somehow, for WealthBuch, this drop in CTR came on the backdrop of me changing the blogskin. My main reason for changing this blogskin was because of the template designer accessible from http://draft.blogger.com, and pointed out to me by La Papillion, which makes it much easier to customize this blog as and when I wanted.

Perhaps it's the rearrangement of the blog, perhaps it's the rearrangement of the ads position, perhaps the ads are not targeting the right audience, perhaps it's due to some other factors, I do not know. The low click through rate just gets lower for WealthBuch as time goes on, unlike ExamWorld.

It's indeed interesting. Perhaps ad and blog colour do play a part. ExamWorld uses the most common white background and link colour blue, whereas WealthBuch uses an unconventional dark background along with an unconventional link colour of orange. That could be a reason. But I guess ExamWorld has sort of found a niche, and the ads now fit in very well. Not so for WealthBuch, especially after the tweaking of the blog skin.

The money isn't a lot, nor would it make my life substantially better. I do not dream nor aspire to be a full time blogger as well. Just that I don't want to sit down and let the CTR continue sliding without knowing why. Shall see....

I guess I need to relook the strategies again. Maybe I'm doing something wrong?

There will be more changes and tweaks along the way as I experiment for this blog.

Think I must. Experiment I will.

Musings -- Achieving a million dollar portfolio

2010-06-06T09:23:00.002+08:00

Musings is a category where I will muse about random stuffs

I remember in my primary school days, there's always essays on "what would you do if I have one million dollars". Somehow, the sample essays, or the essays written, were always about the same content, which are

1) I will donate some money to charity.
2) I will spend the money on a holiday.
3) I will spend the money to buy so and so something.

etc... etc... etc...

Looking back, it does appear interesting that very few essays would include using the amount in an investment portfolio. Perhaps some would say that they will use the money to set up a business, and that's that. I do understand that the main gist of writing such an essay is to train the students in thought processes, language skills as well as composition skills instead of skills of managing finances. Yet, I can't help thinking how this might impact the little minds 20 years later in the area of finance.

But... managing personal finances is a skill that everyone must have in order to live comfortably on this planet. With well managed personal finances, achieving a 7 figure equity investment portfolio isn't something that is impossible in our life time. You don't need extreme good luck to achieve it. You don't need to earn super high income to reach it.

All you need, is discipline and hard work.

Look, I'm not talking about people who are incapacitated somewhat without the means to earn, be it mentally or physically. I do donate to Community Chest in hope that some of my funds will eventually reach these people.

I'm talking about people like me, young, able, energetic, ambitious, and full of drive. The biggest advantage I have is age. Why merely dream of just a 7 figure portfolio? Work towards it! Yearn it! I see it in my mind!

To achieve the goal, one must have plans and strategies. Just like a house cannot be built without a blueprint, a website cannot be displayed without proper coding, an exam is seldom scored well without conscientious studying, a 7 figure portfolio requires proper vision, planning and strategy. Seldom will anyone wake up suddenly one day and find that they possess excellent financial knowledge and a 7 figure portfolio to go along with.

1 investment blogger that I know of, who achieved his 7 figure portfolio, is ghchua. He has stuck to his strategy for nearly 10+ years, and his portfolio has crossed into 7-figures. His strategy can be read at his blog.

Another story I heard of is from my broker. He has a university friend who was a banker. However, as a banker, he did not follow his peers who spend lavishly. Instead, he bought UOB (years ago) year after year. Subsequently, he has more than 100 lots of UOB at average of around $10. The dividends received from this portfolio is sufficient to feed him.

Yet another story I heard was this person, who's a banker as well. He consistently buys SingPost. He was retrenched in 2008, but the number of SingPost lots he has is sufficient to feed his whole family with another $50k to spare for dividend reinvestments. Basically, he does not need to work anymore to support his family.

What are common about these people? They settled on a strategy and stuck to it for years. They planned, they worked towards and they maintained the discipline to make sure their strategies succeed.

These are just some strategies real life people have employed in their lives, and succeeded. What about us? What makes us any different from the people above? The younger we start, the better and easier it is for us!

But, some might say that it's not easy to start young. They tell me they have limited capital, so they can't invest. There are also other excuses. But to me, the advantage of being young is the amount of energy, drive and ambition we have. Utilise it to the maximum and capital would not be as limited anymore.

One disadvantage of being young other than limited capital: the amount of wants we can afford is less than our seniors as they have been out in the workforce longer. Discipline on delayed gratification is then needed here. What made the above examples succeed is that they had the discipline not to over-spend. They do not spend lavishly on flash cars that depreciate fast. They invest their money prudently.

Moral of the story: We definitely need a strategy to grow our wealth, and we need the discipline to stick to our strategy no matter what.

A strategy to grow does not only mean prudent investments or excellent trading. It encompasses an holistic approach. We need
(i) discipline, delayed gratification
(ii) how much percentage of capital to invest
(iii) strategies of investment, dividends or growth/value investing?
(iv) strategies to grow active income, both main source and side source
(v) strategies to grow passive income, i.e. blogs, property rentals, books

Every single thing plays a part in our journey, our quest to achieve a 7 figure portfolio, and ultimately financial freedom.

For me, my strategy has been presented in a few other blog posts.
My Money Allocation
Dividends Reinvestment Strategy
Goal 2010

Whether this strategy pans out well will only be known a few years later. Afterall, I'm only 2 years into the Singapore workforce. But so far, my strategy has put me slightly ahead of most of my peers.

A 7-figure portfolio? If I can maintain my rate of growth, I will be able to achieve it in 10 years time. And that's a big IF.

[Well, maybe I can achieve it faster than that.]

STI Technical Analysis 4th June 2010

2010-06-05T12:07:00.000+08:00

STI rises on low volume rally. We can see a very very clear volume divergence between prices and volume. This is warning sign number 1.

In addition, for my Elliott Wave count, 3 waves up can be seen from the chart below. The minimum 38.2% retracement for intermediate wave B of Pri II downwards has been achieved. My alternate count would be that this signifies the end of minor a of int wave B. Either way, in the mid term of perhaps a few months, the general direction is down.

With Hungary joining the PIIGS economy, and Dow Jones falling -323 points last night breaking the critical 10000 support, we would very very likely see STI come down to test 2700. Or if we take into account a 3% drop in Dow and Europe, 3% for STI would signify a 84 points drop!!!!

A view of my chart is below:

It might look like STI has "broke" the 200 DMA resistance, but to me, it's probably a backtest that crossed it a little to lure in more retail investors. It might also signify the end of int wave B.

Because of this, and Singtel's chart, I have offloaded my remaining lots in Singtel, which is a big component of the STI. I have not the time yet to look at Capitaland's chart, which is one reason why I didn't take profit on it. Another reason is because my price of Capitaland is extremely low at an average of $1.64. It's fair value is about $3.5 (calculated long ago), so selling at fair value didn't really make much sense to me yet. Perhaps I should relook it's balance sheet to redetermine it's fair value.

In any case, June 2010 will likely be a down month. My expectations for the end of Pri II is about 2245 at 50% retracement between 3037 and 1455. However, I will continue to purchase stocks which I deem of value.

Disclaimer applies.

I sold my remaining Singtel lots at $2.97

2010-06-05T00:51:00.001+08:00

Admittedly, it's quite tough emotionally to sell when everyone is bullish; it's not easy to be contrarian.

I toyed with the idea of selling both Singtel and Capitaland, while using the profits from Capitaland to cut loss on China Sky today as I'm rather bearish. In the end, I only executed a sell order on Singtel.

My main reason for selling Singtel was simple.

1) I'm bearish about STI index, and Singtel is a major component of it.
2) Based on the Singtel chart I have below, Singtel was on the resistance line yesterday. I sold because of that.
3) From chart again, we see a lower high and lower low. Based on Dow's theory, this is bearish.
4) From chart again, Singtel was at the 38.2% retracement level. On hindsight, Singtel went on to touch the 50% retracement level, and come back down to close at the 38.2% retracement.

Initially when Singtel touched $3, I was thinking if I have made the wrong decision to sell as it appeared to have broken resistance. On hindsight, seeing that Europe and Dow Jones just crashed, I believe my decision was good. Singtel closed at $2.96 as well. There's a high likelihood I will be able to buy it cheaper based on charts.

On hindsight yet again, perhaps selling Capitaland would be a wiser choice. I didn't sell because I know the price I got it was super cheap (<$2).

For my dividend stocks, I left them as they are. Shall see...

With the sale of Singtel, my monthly dividend amount has dropped to $713. I might buy back Singtel in the near future if it drops enough.

May Portfolio Update

2010-06-01T01:16:00.002+08:00

May was a month of mayhem :)
Like I warned in the first week of May, a Head and Shoulders pattern was observed at the end of 5 major Elliott Waves. This would signify that our interim top has arrived.

Indeed, May saw STI plunging nearly 300~400 points. My newly loaded Aztech in April saw a decline to 20cents, while my overall portfolio went down by a fair bit.

My only purchase in May was an additional 25 lots of AIMSAMPIREIT at 0.205 to make up 70 lots. This adds another 500+ in dividends to my annual dividend amount. As of now, my average monthly dividends amount has achieved $733, getting closer to my first target of $1k average per month.

As for my trading basket, Berlian Laju has proposed a rights issue. This is extremely irritating as I have condemned this stock to my freezer, yet it is begging for attention with a rights issue. Worse still, the price drops further, exacerbating my unrealised loss in this counter. This counter, along with China Sky, are my biggest headaches. Indeed, if you do not cut loss early enough, the loss will come and cut you. This applies to me.

The month of May also saw dividends coming in from Starhub, Breadtalk, Capitaland, Aztech, Cosco, SPH, ST Engg, Hor Kew and Starhill, totalling nearly $2k. A nice mid year bonus for me. The month of June will see Starhub, CitySpring and AIMSAMPIREIT dividends coming in. I look forward to that.

A short summary of my core holdings:

Portfolio cost: $115140
Portfolio value: $127115
Percentage gain: 10.4%

At the moment, I still have sufficient spare funds to load in case of any possible downturn. I'm trying to build my cash reserves as fast as possible. This would be moderately hard in the months to come because
1) Berlian Laju rights issue --> I might sell the rights or cut loss on my counter.
2) HDB Option Fee of $2k --> Selection of HDB flat
3) My sis's new matrimonial home --> Promised to buy something big for her
4) A new desktop --> Thinking how I should clear my table to get a new desktop. My current laptop is old.
5) Saizen REIT Warrants --> Need $5k to exercise.

The above are big commitments which will suck up my cash reserves. I have to try to earn more than they can suck to increase the reserves. Ganbatte!

Trading Basket -- Hoping to sell off

I want to sell these off when I can, or cut loss when I can take the loss :(
Portfolio cost: $25210
Portfolio value: $15160
Loss of around $10k

(red = freezer stocks to remind myself of my mistakes)

30 lots of Hor Kew at 0.125

20 lots of LC Dev at 0.21

2 lots of Cosco at 2.67

60 lots of Berlian Laju at 0.117

20 lots of China Sky at 0.245

STI Technical Analysis 27th May 2010

2010-05-28T01:41:00.002+08:00

STI staged a nice rebound. My primary count is that we have completed wave A of Primary 2, exactly at the 23.6% retracement line.

The rise from 1455 to 3037 represents my Primary 1 with a 3rd wave extension. Primary 2 begun at 3037, and would usually achieve at least 50% retracement. That could possibly mean STI to reach 2243 in a few months time after this technical wave B rebound.

There are alternate counts that Primary 2 has ended, and we have begun Primary 3. I beg to differ as
1) 23.6% retracement is too shallow for Primary Wave 2
2) Timeline is too short
3) Bollinger Band has not closed up to signify end of Wave A and beginning of Wave B ==> which means wave A might not have ended yet.

Wave B could possibly form the right shoulder in a giant Head and Shoulders formation, before commencing the C wave of A. Being a Primary Wave 2, my expectation would be a simple A-B-C correction, with wave C perhaps 1.618 times of wave A. Wave A took 389 points (3037 -> 2648), so wave B could take 38.2% retracement to probably 2800, before a wave C to bring us to 2200 region at 1.618 times of wave A, for a final 50% retracement of Primary Wave 1.

My strategy: I might sell Capitaland at the top of Wave B, and use the profits to perhaps cut loss on Berlian Laju. Berlian Laju announced rights, and I'm extremely reluctant to subscribe for the rights. My paper loss at Berlian Laju amounts to 3.4k at the moment, not a small amount. Capitaland is a high beta stock that doesn't give a lot of dividends, although it's about 6.4% at my average price. Shall see how it goes here.

The other strategy would be a turtle, and ride all these fluctuations out, while storing cash for the ultimate load up at the 22xx region for Primary 3 wave.

STI Technical Analysis 21st May 2010

2010-05-23T01:09:00.000+08:00

It looks like my maximum downside target has been reached. That was where I entered AIMSAMPIREIT. AIMS isn't an STI component stock, so it will not be affected too much. On hindsight, I should perhaps enter STI ETF instead for a probable 300 points rise (30 cents on STI ETF).

Mentioned in an earlier post on 2nd May 2010 was a mini Head and Shoulders. A larger Head and Shoulders formation appear to be forming. With this expectations, there is high probability of the market bouncing up from here towards 2945 (>61.8% retracement), a previous high.

Another indicator for me is that many are getting bearish. I love to be contrarian, and turn short term bullish at this moment, with my chart below:

5 waves down have been observed. It could either be the minor 1 of intermediate A of Primary 2, or just intermediate A of Primary 2 itself. I'm going with the former because the time frame appears to be too short for an intermediate wave.

My eventual expectations of the intermediate waves for this correction would be something like this:

And we are only done with the first wave of A.

However, we have to take note too that when a pattern as obvious as this is on the charts, very likely, the market will like to go with a less obvious pattern. Unfortunately, I have yet to identify a less probable pattern at the moment.

The expectations of 2945 is also valid at the moment with EW counts. I'm expecting a minor wave 2 upwards. By EW rules, wave 2 should normally achieve at least 50% retracement of wave 1, but as per the cardinal rule, not exceed wave 1. 2945 satisfies both criteria.

Purchased some AIMSAMPIREIT

2010-05-22T02:24:00.001+08:00

STI went to hit 2676, very near to the 2675 low last hit on 9th Feb 2010. I was contemplating whether to buy in some blue chips to trade, but in the end, I decide to follow my original plan of a dividend portfolio.

I added 25 lots of AIMSAMPIREIT at $0.205 to my portfolio, reaching a total of 70 lots.

My reasons for purchase were that

(i) the gearing is low, (ii) the dividend yield is high, (iii) the properties are all in Singapore except for 1 in Japan, which is a stable country as well, (iv) the price has become more attractive and is still way below NAV, (v) it's a gem which I believe has not warmed up to market's expectations yet, (vi) it has strong sponsors now, (vii) it's leases are longer than its peers, and of higher yield compared to purchase prices, and (viii) 0.205 is a long term support, and buying at this price represents the a very low downside risk, while giving me a nice 10% dividend yield.

With this purchase, my cash level for investing has dropped to about 4.95%, while my average monthly dividends has risen to about $733, with Aztech being the riskiest of the lot at the moment. I did consider Aztech as it would give me an expected 8% yield at current price instead of 7% at my average price, but I'm reluctant to over-expose myself to Aztech at the moment.

I will have to consider how to deploy my remaining funds. In a bear market, I have learned that it's not price actions that make me unhappy, but not having the opportunity funds to buy when it is cheap.

STI Rebounding time?

2010-05-20T01:22:00.004+08:00

STI looks set for a possible rebound. I counted 5 waves down, and STI has touched the 200 SMA.

My expectations is that if it does break, it will not break this 200 SMA convincingly as this is possibly a 5th wave of some small degree. The alternate count would be a 3rd wave extension, the 3rd of 3rd wave. A technical rebound should be in the works, but it will just remain as it is, a technical rebound. I'm bearish bias at the moment since the mini Head and Shoulders breakdown.

In addition, it looks as if a bigger Head and Shoulders might be forming on the weekly chart. Will have to monitor. This right shoulder should be the cap to any technical rebound by STI, possibly around 2945.

I don't expect STI's move down to go past the 2nd red line before a 3-waves move up for the technical rebound.

My cash level has increased further to 8.45%. However, there's not much that I want to purchase yet, so I shall await better prices for some of my targets patiently.

AIMSAMPIREIT 4Q2010 Results

2010-05-19T11:34:00.000+08:00

Basically, this is another undervalued gem in my opinion, in the leagues of Saizen.
My earlier write up of this REIT is here

The results was a nice surprise for me in terms of the DPU. It was slightly above my expectations. Earlier, I bought based on a conservative estimate of 0.45 cts DPU, although my calculations showed at least 0.5 cts DPU. The surprise was that DPU came out to be 0.5376 cts, giving me a nice dividend of $241.92 for 45 lots payable in June 2010.

This works out to be about 10% yield based on my entry price of 0.215 on a low gearing of 29%, among the lowest in the industrial REIT sector.

The NAV remains at 31c. There's also no management fee bonus paid out ==> it's only paid when the DPU increases by at least 2.5%. Have to monitor to check that management does not increase gearing unnecessarily and dangerously to increase DPU so as to get fee bonus.

This is a short post to update as I'm really really tied up with work these few weeks :(

Saizen REIT 3Q2010 results

2010-05-15T02:20:00.001+08:00

I have to say that their report is very clear, completed with a nice content page and explanation of the results, which was within expectations. Some summary of their results:

1) All CMBS loans except the mega YK Shintoku loan has been repaid via either bank borrowings or cash. As for the YK Shintoku loan, the loan servicer is still in process of formulating acourse of action.

2) Saizen has commenced accumulating cash in May 2010 for resumption of distribution. Good news!

3) On top of the JPY 1 billion loan of YK JOF mentioned in my earlier post on Saizen, another JPY 2 billion loan for YK Shinzan has been drawn successfully.

4) YK Shintoku's CMBS defaulted loan remains at JPY 7.7 billion

I have had people telling me that a REIT not giving dividends is a red herring. That might be true, but in the case of Saizen, I firmly believe it is not because of my homework done so far.

Saizen has come a long way since it's Nov 2007 listing. On the charts, it has been on a downtrend since it's listing, with the lowest about 50% lower from the current price. The price appears to be stabilizing as Saizen obtains more traditional financing via bank borrowings, and has cleared up most of its CMBS loans.

Indeed, YK Shintoku's loan still sticks out like a sore thumb. However, I do not think that the loan servicer will ask for foreclosure. Logically, if the loan servicer does not need the cash urgently, it would be wonderful to leave the loan as it is to enjoy an almost risk free 7.07% interest rate, especially when YK Shintoku still has high occupancy rates with stable cash flow.

With the new loan facility from YK Shinzan, Saizen has some additional cash to pare down YK Shintoku's debts. They could also refinance YK Shintoku's loan using the properties as collateral.

Also, by next quarter, we shall see more pple exercising their warrants due to impending dividend announcement. As such, more funds will be available to Saizen for debts repayment as well. 493000 lots of warrants redeemable at $90 each lot will provide Saizen with about $44 mill SGD, which is about JPY 2.8 billion, sufficient for a third of YK Shintoku's loan.

Using calculations from my earlier post on Saizen, I expect an annual dividend rate of $12.20 per year, or $3.05 per quarter, on a very very conservative estimate. That means, about 0.3c per share per quarter.

My expectations would be 0.2c per share for the next quarter's results, since May 2010 was where they first accumulate cash for distribution. Any more would be a nice bonus. Yet if it's less, I would sleep well knowing I bought at greater than 50% discount from NAV. :)