Giving out a free book !!!

Dear Readers,

How has your week been?

Anyway, I've always believe in passing the knowledge baton and I am giving out a free book today by just answering a simple question!!

The title of the book I'm giving out: Guide to Financial Management (Hardcover). I bought this book from Kinokuniya for $48.15 5 years ago..

Check out the description here:
(Just to add: this book isn't about fundamental analysis; but it has some accounting info which will be useful as well)

Here's the question:

Why Warren Buffett doesn't invest in gold?

You can either leave your answers in the comment section under this post or drop me an email: kelvin17@gmail.com. Sorry I cant write much as I m quite busy with my studies..

I ll update this & announce the winner in this blog sometime next week. (after my exams next Thursday)...so u ll can email before 2359 on Thursday. I ll be choosing the best answer. Multiple entries are not allowed.

I will be giving out more books on and off..so follow my posts at the right hand corner, or link me up.
( will be deleting this post after the book has been given out. If there's no response by Thursday, I ll be giving it to the library near my house :) )

Good luck!

First Reit's First.

Hi Readers,

As promised , here's the writeup on First Reit.

To be very frank, I just read the annual report before writing this and I admit that before i bought this stock, I didnt really do alot of homework to understand it due to my work and study commitments.

What made me decided to buy this was these few simple reasons:

Why did I buy?


1. Management has been actively buying
-It's always a plus point to me when management start buying the shares. The management understands the company and he himself buying means that he believes in the company that he is managing. Before I bought this share, I observed that Dr. Ronnie Tan, the Director and CEO of First Reit has been continuously buying the share at about. $1.325 on 18th Feb (highest). The last transaction being 4th of March 15' where he participated in DRIP. I still see $1.30 levels being attractive.

-2. Healthcare is defensive and it was giving a dividend yield of 6.7% back then at $1.17
 I am happy with foregoing some 1-2% of dividends for something more defensive.

3.100% occupancy
 (from 2008-2014 and counting)-  check their annual reports here
Even during bad years they could still maintain their 100% occupancy

4. Rentals denominated in SGD
Despite having overseas exposure, a weakening Rupiah doesn't affect the distribution as leases are denominated in SGD. 
For South Korea, its been paid out in USD.

5. increase in dividends payout

I believe the key is consistency. It's a bonus point that their distributable amount has been increasing even during Lehman financial crisis where the share price drops to about $0.30+ per share. Do note that there was a right issue which explains why the distributable amount drops as the outstanding shares were diluted


6. DRIP
 I love to reinvest my dividends and this company has this dividend reinvestment since end of 2013 and distribution and share price has been going up despite the dilution. and somemore I'm getting at a 3% discount to stock price

7. More demand for healthcare services and nursing home occupancies
(read below)

When and how did i buy? 


I am not too sure if you'll remembered when Fed was talking about rising interest rates back then and emerging market took a toll. Rupiah weakened and First Reit's price got hit as well.
That was when I saw the opportunity to went it because the rental was collected in SGD.


What's to know about First Reit

1. Going XD this Monday
which means that you are entitled to dividends if you still hold the shares after market closes on Friday (as in last Friday). And those who are buying this Monday are not entitled to dividends.

2. Their LeaseHold is only about 10.1

I just saw this while browsing through the website. I guess it wasn't shown in the annual report but they did write about the Leasehold for all their properties.

Well what happens after a lease Expires?

Well in theory when the lease expires then you don't own anything anymore- that's it, you have to move out and the freeholder can sell a new lease to someone else...or is there a right of renewal? I am not sure though.
But this explains why they introduced DRIP, placement shares, and right Issues.

DRIP- every quarter since end of 2013
Placement- once in 2012 and in 2014
Rights Issue - once in 2010

From the above figure, it's evident that they have been aggressively buying properties and expanding from the amount funded...and this is their forward plan. They have even identified potential properties to be acquired too...

In my opinion, the 10.1 of WAAP is indeed quite low, compared to Parkway Reit, which is also trading at p/b of 1.5 but they had more exposures to Singapore and their Japanese properties are freehold. Within my knowledge, the only plus point that it has over Parkway Reit is their yield of about 5.8%. If it appreciates to about 4.9% yield, I ll rather buy more Parkway Reit should I be looking into Reits.
 

Going Forward...

So moving forward, highly likely one can expect more share placement and continuous DRIP to fund their future acquisition plans. It is the right move to go considering that once property lease ends and my best guess is they gonna let go, or pay a sum to acquire it again for a certain number of years.

So far, we can see that the management has really done an excellent job. They have really returned alot of value to shareholders, and even those who bought at peak in yr 12, should have made a profit by now. Result is the judge and they have made right acquisitions which increased their distribution every quarter.

Due to time limitations, I wont be writing about 1. prospect of the property they own relative to other properties in Indonesia and its valuation, as well as 2. their debt profile.

Honestly, with this low interest rate, coupled with the fact that there's a need for them to acquire to increase their distribution, taking on some debt seems the right thing to do. Their interest coverage ratio stands at a healthy 5.3 times (down from 5.7 yr13) and debt-to-property at 33.1%.

Also I am not an expert in the property and so it's up to the management to make the decisions & to comment on it. After all , or at least so far... they made very good decisions....

could have written more, but I gotta wake up at 6:30am for Sunday Church Service.

Feel free to write to me if you have any queries, or even to correct mistakes I have made.
I am an ordinary investor, just like everyone of you'll who are still learning..

Buy what you understand

I ll be writing about First Reit tonight and possible will compare with another Reit if time permits.

These past few weeks have been hectic with presentations and studies and exams are just a week away.

Anyway here's a quote by The Oracle of Ohama

You don't have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence. The size of the circle is not very important; knowing its boundaries, however, is vital.~ Warren Buffett (1996)

It just means you need not understand many companies to be good in investing. All you need is to understand the sector/s which you are keen in investing, be it just one business, and be good in it. Berkshire holds lesser stocks than most of the asset management companies, yet it outperforms all of them and beats the market in the long term.

Blue Chips for a STI 3500

As my exams and FYP are really nearing, I cant write much but I just wanna post what I've written in a forum.

As expected, STI is moving upwards to 3500. Everytime it breaks out high, we can expect a small retreacement or a correction and I think at this levels or so provides a good opportunity to load up on Blue Chip Stocks. Why Blue Chips? Because the Index is made up of 30 Blue Chips. When index ascends, institutional investors (from Insurance, funds..etc) stock 'em up to push the index. I ll just briefly mention a few stocks below worth looking at...

1. Singapore Technologies Engineering (STE)
I think STE still have alot of upside in the long term...defensive and growth in one stock.

Well anyway I find telco abit ex imo because they are apporaching less than 4% div for stel...
Also with whatsapp able to make calls and stuff, I find that it's possible to be challenging to telcos in the long run.


2. (OCBC, DBS and UOB)
I find the 3 banks still attractive. Those who missed the OCBC $10 boat it's still good now coz the DRIP is 10% discount (quite attractive to me) but just that I got not much bullets for now, gotta save more cash for correction. Somemore their pe is still low ..lower than STI.. dividends also more than STI...


3. Singapore Airport Terminal Services (SATS)
 And Sats. Singapore gov is always v smart, during market recovery times, they always invest money in infrastructure so that they get good returns once it recovers. Now Changi T5 is already being planned for and can u imagine it bigger than T1+T2+T3 combined. Not too sure if Sats will get the tender to settle the airport cargo and stuff but if the industry is positive I expect Sats to do well too.

4. Straits Times Index ETF (STI ETF)
Self explanatory, if STI goes up , this must go up

Feel free to contact me if there's any queries or if you like to know more .... Btw, I am still helping my dad to queue for more DBS at these levels .. :)

Currency

SGD/ KRW has officially broke the 800 support level. I am not a currency player or a forex expert; but as long as oil price remains muted , I expect more easing in SGD till export climbs. There could be a slight pull back to about 800 levels, before more downside.

SGD has weakened against other currencies after MAS decides to loosen their monetary policy.

To understand about Singapore's monetary policy, here's the article :Monetary Policy (MAS)

As Singapore is a net importer of oil and with falling oil prices, it makes it attractive to weaken SGD since they can already buy oil at lower prices. A weaker SGD also helps to boost exports (manufacturing sector especially) Not too sure if you'll know that Singapore's exchange rate is more or less determined by MAS compared to countries like Malaysia which is so sensitive to oil prices and other output factors such that government can only intervene to a small extent.

 http://www.straitstimes.com/news/business/economy/story/singapore-manufacturing-output-shrinks-december-export-demand-drops-2015

 For those going overseas trip soon, it's wise to do some dollar costs averaging to convert some foreign currencies first.

USD to SGD @ 1.36 seems attractive though if one is to look at the long term chart. That's why I didnt wanna convert my USD back to SGD despite STI being so attractive, so I bought some US oil stocks like Exxon for long term.

My SG Portfolio

Here's my portfolio and I decide not to keep it a secret other than my name and my account no.
I am a 25 yr old student with some part time job and my intention is not to show off but I hope I can inspire more people to learn the correct knowledge of investing and build your portfolio over time. These money are my hard earned and some reinvested from dividends I have been collecting when I started a few years back.  I have still a long way to go but remember the golden rule:

Timing the market is a fools game; time in the market is your greatest natural advantage. 

 I still have HK and US shares which probably will share more another time. But for dividend calculation purposes, I will exclude the following shares.

1. 1000 shares of ST Eng
2. 400 shares of DBS
3. 1000 shares of Keppel Corp
4. 1000 shares of SGX
5. 5000 shares of 800Super

The above listed will not be in my retirement fund/ or whatever fund you call it as I have prior arrangement on what to do with these.. for personal reasons.

I remember a week back, I showed my portfolio to a nice lady in school. It was about 106k something. Glad that it has move up about 1k in a week. Looks like I am close or slightly better than market returns , for that week..haha. I hope she will be inspired to grow her money too..

If you love dividends and if there's only one person to learn from, he would be the the homegrown Dividend Warrior. Through reading his past posts I have learnt alot. Unfortunately those past posts were taken down and he has started a all new portfolio as some money has been pumped into his new tuition business but I believe he will do even better this time round. He's my inspiration & I wish him all the best.

Here's the link: Dividends Warrior

That's all for today. Will write more soon and appreciate if you'll can drop me some comments below :)

Thanks for viewing

Technical Analysis on Straits Times Index (STI)

Let's look at STI.

From the chart you can see that STI is approaching the resistance level of about 3464 which has not been broken since May 13'. I still remembered it was May 22 back then where a series of bad  economic reports came in at the same time. Mainly China registered weaker than expected job data and a contraction in manufacturing activity. Ben Bernanke, back then Federal Reserve Chairman looking into possibility of increasing interest rates and scale down QE earlier than expected, Japan registered weaker than expected jobs data....

As for today, STI is testing the in 3.45k region and from Technical Analysis point of view it looks like a double top, suggesting a bearish reversal. To understand more on double top , read this : Double Top.

Another possibility is that it ll break 3.45-3.46k levels and go up higher. Honestly, it's quite difficult to tell which direction it'll be moving, coupled by the last 4 days of black candlestick and closing with a long shadow today...It suggests uncertainty with abit of bearishness.

So if daily chart can't provide a  clear picture, we should look at the weekly chart..

I think the weekly chart sheds more positive light than the daily chart. The last 4 candlesticks are white and doesn't suggests any reversal pattern. As technical analysis is all about probability , there is no sure way of telling which direction STI will go on Monday.

It could be possibly be a pullback to 3.42-3.43k levels before it breaks 3.5k ,and I highly doubt it will break the bottom upward sloping trend line,because...


From the current economic situation:

1. China lowing Interest Rates
2. US unemployment rate at 5.5% all time low. Good enough that they are considering rise in interest rates (left)
3. ECB Printing Money to Stimulate the Economy.

Looking at all these three points, personally I am more convinced that STI will continue to go up higher. STI PE of 14, with earnings yield of 7.14%, I find it reasonably cheap, relative to the S&P of 20.44 +0.09 (0.45%). (as of today). 

Q : So how cheap isit?
PE of 14 suggest an earnings yield of 1/14*100%= 7.14%. So for every $100 you invest in a business, it earns $7.14. I find this rate attractive and I have been buying the index ETF since last year and still buying via POSB Invest Saver. 

So if you believe there's more upside to STI, it's a good time to accumulate blue chips because if it's a sooner or later thing to 3.5k, the resistance at this level will turn to a strong support. Bank shares are good..






Due to my upcoming exams and FYP and demanding Spanish classes (everyone is so smart), I ll limit to max of one post a day, and probably will write more after my FYP thesis presentation on 11th May.

I haven't been so active in my investment recently though due to much stress going through in my life and I have been feeling very tired and losing appetite. As a Christian , I will continue to trust God I have decided to surrender all this to God . Be it in studies, work or investment, I am not in a battle with what everybody else thinks anymore. I ll just do my best and let God to the rest...

Appreciate if you'll can drop me some feedback or suggestions for improvement i.e. things you would want me to cover, thanks!

God bless.

Keppel DC REIT 1st Quarter Result

Keppel DC Reit has just released their earnings report. Like about 35mins ago...


Here it is:

The numbers are no doubt good, as they manage to beat the IPO forecast marginally.
But note that good results doesn't mean share price will go up tomorrow because many at times, it depends on analysts expectations, whether it meets their earnings target. If earnings good but miss expectations, share price can fall tomorrow. There's a saying: buy on rumor, sell on news.

Here are the important things to note:

1. Current Weighed Average Lease to Expiry (WALE) is 7.5years. Here's the definition: WALE.
I ll give an example to illustrate:

Assuming the property is 90% occupied:
Tenant A occupies 30% of the space and lease expires in 10 Years
Tenant B occupies 40% of the space and lease expires in 8 Years
Tenant C occupies 20% of the space and lease expires in 7 Years.

So WALE= (0.3*10)+(0.4*8) +(0.2*7)+(0.1*0)= 7.6 Years!

A higher WALE is generally perceived to be more favorable to reit holders as they face lesser risk of vacancy. Imagine your 7 years of rent is more or less secured.

However, it may not always be the case. For instance, First Reit, with WALE of 10.7 and occupancy of 100%, I dont see an issue of losing their tenants or risk of vacancy subsequently, as I believe it gives opportunity for First Reit to charge a higher rental price after lease expiry. Not too sure for Keppel DC Reit though, but report looks good for now.

2. They will only start paying dividends from listing date to 30th June. So one can expect to collect dividends after 30th June when the 2nd quarter earnings are out. Here it is:

The distributable income to Unitholders is based on 100% of the taxable income available for distribution to
Unitholders. No distribution has been declared for the financial period under review. The REIT will be declaring
distributions on a half-yearly basis and the first distribution will be for the period from Listing Date to 30 June 2015.

3. Their current interest coverage ratio stands at 8.1 times. It is calculated by taking company' earnings(take note it's earnings before Interest and Tax) and divided by Interest Expense. It is a measure to determine the ability of a company to pay interest on its debt.

Image Source: http://www.investopedia.com/terms/i/interestcoverageratio.asp

So the higher the ratio the better it is. If one company has no debt, the denominator would be zero and interest coverage ratio is infinite. If a company is full of debt, and not much earnings, the ratio will approach zero.

So how good is 8.1 times? Or isit better not to have debt? 

 I cant judge based on the interest coverage ratio alone. Think about it, if I can borrow money from bank at interest of 1% and use the money to hold properties and generate returns of 8%, isn't it a wise choice to have debt? In the low interest rate environment, it is good have debt. In fact all REITS have debt. To me, the ultimate factor in determining their ability to cover their debt is their future prospect and their ability to lease out in the long term/ rental appreciation . If management are confident that their occupancy rate remains high and stable, 8.1 is definitely adequate with a margin of safety.

To read more on the results, please download and read the quarterly report. Due to my study and work commitments, I can't possibly cover all parts of the report, but if you would like to ask me any questions/ or spot any mistakes in my posts, please drop me an email : flyfox17@hotmail.com. and pardon me for my poor vocab and grammar. It really took awhile for me to even construct proper sentances in my primary school days, and I am kinda struggling these days too...

FYI,  I am vested in this stock. 3000 shares at entry price of $0.96.





Thanks for reading! :)

Shadow Banking

China sees first default on bond principal

Hi!

Not too sure if you'll guys have read this news that a Chinese Tech firm defaulted on their bond payment. Personally, i felt that it's good move that Chinese government allows this to happen as compared to the past where the CCP would indirectly stepped in to ensure the payments were paid off. So now to gain investor's trust they can't take their cashflow for granted and simply depend on government's help. In the long run under Xi Jinping's leadership, I am quite certain that companies in China will be more credible and gain more investor's confidence as well.

As for now, the 2 China companies I am invested in is ICBC and Bank of China. ICBC is the largest bank in the world in terms of assets and 3rd in terms of market cap, with Wells Fargo coming in the first place.

I bought these shares early last year and the year before. It was the time where China shares got hit real hard due to the news of Shadow Banking.

Lets look at what does shadow banking means :

Shadow banking
The shadow banking system is a term for the collection of non-bank financial intermediaries that provide services similar to traditional commercial banks.

Let me explain.

Assuming Mr A wants to borrow money e.g. $X million. He can approach banks with probably an interest rate of 10%. So how does the banks get money to lend Mr A? By consumers' fix deposits, structured deposits and etc.

As for shadow banking, let's say Company Z (Coy Z), provide similar service to a bank, but charges lesser interests rates. When someone borrows money from Coy Z, they securitize the debts and issue in the form of bonds and gives credit rating to it

So why Mr A would choose Company Z compared to proper commercial banks?

For banks, before they lend money out, they will also ensure that Mr. A meets the minimum debt servicing ratio, solvency ratio etc. If he doesn't meet any of these, banks won't lend him money and an alternative would be Coy Z, which are not so stringent with such financial ratios.

Secondly, to attract borrowers, they usually offer interest rates which are lower than what banks offer. So someone who just wants a lower interest at the expense of the banks reputation and regulation will borrow from Coy Z.

For banks, they have safety net, which means they have proper regulation and need to ensure checks and balances, and capital adequacy ratios. Hence the chance of bonds default rate is high.

Hence I don't see a point on how the shadow banking system affects commercial banks. Though the commercial banks did help to market the debt, they only act as a sales-agent, and are not obligated to repay investors. If equity investors know that shadow banking doesnt have an impact to justify the drop in share prices of China banks, it is definitely a good time to buy the big 4 banks in China.

However, over the years as the giant nation awakes (I mean China :)) , with much huge demand to borrow to run business and buy things, the commercial banks at times lack the capacity to meet such demands. Hence an alternative would be to approach the shadow banking system. According to some measurements, shadow banking is accountable for 60% of the loans. So imagine one day if the economy fails, borrowers failed to meet debt obligations, bond holders lost their money. Company with much debt will fail, and employers got laidoff and employees and each family spends lesser and hence affects business and it forms a cycle.

So is shadow banking good?

China's ICBC chairman said that it is actually productive. Read here: http://www.reuters.com/article/2014/06/24/china-economy-shadow-idUSL4N0P52X620140624

I believe in the short run, it provides a temporary stimulus to the economy, to encourage and enlarge the capacity to lend. But if one defaults and affects another firm, and more firms, it can create a chain of destruction. That is why CCP is quite long term focused and against it, and they are not gonna rescue firms who fails to meet debt obligation.

-End

Parkway REIT

Parkway Reit. The only stock I own which still gives out hardcopies of annual report. (as of reports i received to date).

They own properties in SG and JP, and very few in M'sia to lease to nursing homes & hospitals such as Gleneagles & Mount E. ( Leasehold abt 60 yrs). Properties in Japan are mostly freehold.

Even yen weakened quite alot last year, they managed to register a realised foreign exchange gains despite much revenues derived from Japan. They also divested some properties last year with some capital gains too.

At current price,the div yield~ 4.9%, which is the lowest among all S-Reits. Healthcare Reits are defensive relative to other reits and I don't mind foregoing 1~2% of div for something more stable. Their distribtion has been increasing steadily too :)

It's important to look into the future and see if the company we are investing are still relevant. Considering the increase no. of population in SG and ageing population in SG and Japan, I expect more demand for healthcare services. Hence, the healthcare properties in someway are relevant and reasonable to expect averagely high occupancy for the years to come.

In the coming months, I dont expect the stock price to appreciate much as their p/b=1.48 unless their properties are revalued and revised upwards.

(Update 7/3/2015: I received my Thai Bev in hardcopy too :) )