Saturday, October 31, 2015

Saizen REIT $1.17 Purchase Offer - Vindication At Last

Straight out from Saizen's website is their most recent announcement - a purchase offer of $1.17 per share.

The offer of $1.17 is:
3.4% above the NAV of $1.14
26.5% above the last closing price of $0.925
31.8% above my average price of $0.88767

Since my initial purchase of Saizen REIT as the very 2nd security I bought in my investing career back in March 2014, I have collected a total of $118.35 in dividends from them.

Since I have 1500 shares, this is a capital gain of $423.50. Adding my dividend yield so far and my capital gains, I've a total gross profit of $541.85. Against my purchase value of $1331.50, this is a pretty cool gross profit of 40.7%. Since I use SCB as my broker, transaction costs were only a mere $3.39, which knocks down my net profit to 40.4%.

While the absolute figure is small now and might be scoffed by many, I believe in managing my $20,000 portfolio as if it was a $20 million portfolio. If I can't handle $20k now, I sure as hell can't manage $20mil, which by the way, would probably be how much my portfolio will be in the future ;) *wink wink* Just dreaming, just kidding, haha!

I have been a very strong believer of Saizen REIT ever since I identified that it is very likely grossly undervalued, especially when compared to actual J-REITs on the Japanese exchanges. After my first comparison in Oct 2014 last year, I revisited my analysis again and updated it at the end of May 2015 and found out that the difference in valuation became even more extended!

Recently, just 2 weeks ago, BFGF had asked me to share my favourite stock, explained in one sentence. I picked Saizen REIT, which was trading below $0.84 at that time. Although I wish I could have expanded on my choice a lot more, my one sentence was "I think Saizen REIT is a well-managed REIT that is undervalued by pretty much any metric you throw at it." I would have loved to highlighted my study findings comparing it to J-REITs, as well as how residential REITs are pretty stable, along with the recent successes of Saizen's managers, but alas, that all doesn't fit into one sentence.

After reading THE REIT BIBLE, the most important takeaway that I got which was also built upon by Green Street is that, all things equal (which they never are), unless you can justify strongly why a certain REIT deserves to command a premium over it's NAV, it is probably a safer bet to buy REITs below their NAV.

I still believe that when it comes to analyzing REITs, price relative to NAV (or P/NAV) is one of the more important metrics to look at. Definitely, it should not be the only metric used since there are plenty of other metrics around, but I think it's importance to REIT investors is once again highlighted here.

A lot of doubt has been thrown at Saizen REIT, especially regarding it's early years of performance leading up the GFC. I must admit, looking back historically, it is quite scary going into this counter knowing that P/NAV at one one plunged to 0.33 (Q2 2009) and lingered around the 0.4 to 0.5 for a very very long period (2H 2009 - Q2 2012). Since then it has slowly been creeping up in P/NAV. While looking at it now, it might seem like a no-brainer investment to onlookers, it takes some balls to buy into a foreign REIT that has been consistently trading 50% below it's NAV.

I did my homework, I took the leap of faith and I have been rewarded with an annualized return on this investment at around 25%. I am sad to lose this stable dividend payer, but I am rather glad that I am finally being vindicated about sticking with Saizen REIT.

My only regret is that I did not buy more of it!

Congrats to other Saizen shareholders! (especially Argyle who have been clinging on for the longest time, haha)

Thursday, October 29, 2015

Another Win for Public Transport!

Just got this fresh news! The Circle line is finally going to be a circle!

Now I no longer need to explain to foreign friends why the circle line is called so, but it isn't a circle. Okay, but that will only finally happen in 2025, but it's happening eventually!

With LTA stamping out car population growth (0.25% annual growth) and with high likelihood of completely stagnant car population (0% growth rates have been called for) and also actual declining car populations (go see the LTA stats and nerd out), you need to be quite highly delusional to expect that private cars would ever be a low-cost transport option in Singapore.

In fact, I wouldn't be surprised if more aggressive car-curbing measures come into play very soon, especially a form of "ABSD" for households with multiple cars. However, instead of cutting back on the taxes paid by the household for the first car, they would layer on additional layers of taxes for additional cars. In my view, that seems like a fair way to go about doing it. But then again, who knows?

I personally believe that expansion and investment into public transport and infrastructure is something that is highly beneficial to most people. In a sense, it is a form of transfer since rich people don't take public transport, while that is the main mode of transportation for the rest of the population. I like to think of it that expensive COEs are subsidizing my public transport experience. Of course the link is not so direct, but I guess that's how it is in a nutshell.

A large number of people would like to complain (only the 30% can do this) how shit and horrible our public transport system is. Obviously, they've never taken the tube in London or the subway in NYC. All they can do is compare with the MTR in HK, which in my personal opinion, I didn't find it substantially better than our train system. In fact, I still think that our metro experience is much better.

Moneysmart did an excellent write up about the real cost to own a car, but in 2011. While moneysmart estimated the real cost of driving a car to be approximately $1855, since then COE prices seem to have peaked in 2013, but have settled slightly higher than then, dragging up the total cost of a car along with it. I would imagine a better estimate to be $2000 a month.

(Btw, I have to pat myself on the back when I wrote my COE article back in May predicting the price drop in COE, along with the correct rationale - demand shock caused by the realalization of how unaffordable cars are right now, NOT a price drop caused by supply increase. If you look at the LTA statistics, the total car market is actually decreasing, not increasing. Another big consideration that I knew and forgot to mention is the stricter rules of car financing now as well. Although more COE is being added compared to the past recent years, more cars are de-registering and many of these owners are unwilling to buy a new car because of the large upfront payment and expensive monthly repayments.) 

If private cars continue to be astronomically priced, having a dense and efficient public transport system will benefit those who don't have a problem taking it. While some people have to budget $2000 a month for the upkeep of their cars, I can comfortably go out all and set the maximum budget of my transportation to be $120 (includes the extra cost of leisure time transportation as well, which the car cost does not include), which is the price of the monthly adult travel concession card. Of course the convenience of having a car at your beck and call at all times of the day is gone, but I think that I am willing to forgo and pocket the $1880 worth of convenience. That's very expensive convenience in my opinion.

Even if I decided to call cabs or take Uber most of the time, my monthly bill on that would be easily $1000 cheaper. Mixing up the public transport + taxi/alternatives option (23% of you are probably lost about what I'm talking about now), I will have a lot of flexibility with my transport options and can look at save at least $1000 monthly on transportation, if not, much much more.

At the end of the day, I think this will benefit the average Singaporean. I am looking forward for more train lines to open so it's easier to get around and explore the island. It's no coincidence that the immediate areas surrounding MRT stations are much more vibrant and bustling compared to other areas.

I'm still waiting for the day that we get driverless trains and 24/7 MRT service. Call me an optimist, but I see that happening in the not so distant future.

Wednesday, October 28, 2015

Oxley Bonds 5% 4 Year Retail Bond Thoughts

News of the Oxley bonds came out 2 days ago. 4-year tenure and 5% coupon. Not impressed.

(based on latest financial statements)

Other bloggers have come out with their take on this bond, but mine is pretty quick and easy.

I wouldn't apply for this bond and I won't be delving deeper to analysis them. Their balance sheet looks horrible to me.

Take note the key difference in being a bond investor vs a stock investor: Return OF capital vs Return ON capital.

How their business is doing is a lot less relevant to me than if they have assets which I can fire-sale at 50% discount and still recover my principal.

I thought Perennial was a decent issue to apply for.
I thought Aspial was not attractive enough for the risks present.
I think Oxley looks even worse than Aspial, so that's enough said.

Would you be applying for the Oxley bond?

Will you apply for the Oxley 4-year 5% bonds?
Don't know0%

Tuesday, October 27, 2015

Singapore Savings Bond: Nov 2015 Preview

Since an overwhelming 94% of voters wanted to be updated about the SSB, here is the Nov 2015 issue preview.

This is the final update before the application closes for the Nov 2015 issue tomorrow. It's only an update of 2 extra days from the previous post, but increases the data points from 16 to 18 out of 22, which makes it slightly more accurate.

I am now fairly confident that the Nov 2015 issue will be much higher on the long end of the yield curve than the following issue.

I am really very curious to see if the SSB will really be issued "inverted", meaning that the 1 year yield will be higher than the 2 year yield. Strange? Yes, it should seem so, because it is.

Anyway, to recap the benefits of the SSB:
- zero default risk
- flexibility of early termination with no penalty
- low capital outlay required of only $500
- free option to have stepped-up returns for up to 10 years
- very competitive rates compared to alternatives of the same risk

As mentioned, I will be applying for this issue. Will the interest be a lot? Honestly, I predict that the total value will be more than the previous issue, which was pretty pathetic, since those maxing $50k will continue to max out for this issue, and also the fact that there has been quite a bit more publicity about the SSB since the first epic flop. Will it be oversubscribed? I really don't think so. There should be more interest, but not that much more interest.

However, I think that the next SSB issue is going to have very low interest. It is going to be a double whammy of the elites already maxing out their $100k allocation within the first 2 issues, and also that its yields (as of now) on the long end of the curve is going to be the lowest and most unattractive so far.

With SCB offering a straight up 1.95% pa  2-year FD, it seems competition for cash is heating up and SCB is taking the first foot forward. Better catch up quick fellas, once that cash is locked in, it aint coming out for a while unless investors break the piggy bank on them. 

Monday, October 26, 2015

Perennial 4.65% 3-Year Issue Post-Mortem

Perennial has successfully issued their bonds!

Based on their SGX release, their retail bonds were a whooping 9.1 times oversubscribed! This trumps the Aspial issue which was 8.7 times oversubscribed. Well done Perennial!

Also, like I have brought up, Perennial is allowed to expand their bond issue amount of there is demand for it. Since there was excess demand, they expanded their total bond issue amount from just 150 mil to 300 mil! Another well done for Perennial!

Today, their bonds started trading on SGX and they closed at a decent price of 1.013! Anyone that sells now makes an immediate gross return of 1.3%! Wow, that's better than most fixed deposits! Good job Perennial!

Of the 57 people that voted in my previous poll, I hope all 33 of you managed to successfully apply for it, because everyone who successfully applied would received some bonds, especially for the ones who applied at lower amounts!

This oversubscription was easily expected by many because of the many yield-starved retail investors. I wouldn't say if its a good thing or a bad thing, but since I'm a Perennial equity holder, it's definitely a good thing for me that there is a lot of enthusiasm. Hopefully this can translate into higher stock prices and squeeze out the NAV discount that it is trading at!

Friday, October 23, 2015

Singapore Savings Bond: Nov 2015 Pre-Preview

This post is similar to the post I did last month regarding the Nov 2015 issue. I am going to make a rough estimate for the issue before the closing application date, and although I might be missing the valuable last pieces of data, I would argue that we would be getting results that shouldn't be too far off it's mark.

Based on the actual Nov issue, my estimate was only off by 4%. The day-before estimate was only off by a mere 1%.

As you can see, the next issue is going to be a bit... strange. Why do I say so?

The front end of the yield curve has inverted such that the 1 year yield is higher than the 2 year yield!

On the tail end, it has dropped about 30bps at both the 5 year and 10 year mark.

What this means is that the following month's SSB would be pretty good as a short term "fixed deposit" and it becomes much worse as a long term alternative low-risk asset.

Personally, I don't think that the marginal bps widening on the front end of the curve compared to the 30bps drop on the tail end is not enough to entice me, even though I do not foresee myself holding the SSB until maturity.

However, with only 16 out of 22 of the data points used in my calculations, there is still 28% of missing data. Given the current trend of the data, I would hazard a guess that we see something around 1.20 / 1.15 / 1.80 / 2.40.

Anyway, long story short, unless there are some exceptional moves in the yield curve over the next 3 trading days before the subscription period is over, I would likely be applying for the Nov 2015 issue.

Tuesday, October 20, 2015

Non-Market Related Updates

Hey everybody, how's it going?

Recently, I've been swamped with work, so much so that I am actually bringing back work to do in the evenings now. However, by the 2nd week of Nov, hopefully most of my work would be cleared and I am back to a more care-free life.

I know that I used to post almost once or even twice a day, while recently it's just a couple times a week. I have 144 draft in queue, some are almost done and just need proof-reading, while others are just a working title and some reference links. I do hope I can get back to a more regular writing schedule when work simmers down.

I'll also be going overseas for work soon (it's an annual thing), so I won't be around for a while. Unlike previous trips where I had time to write in advance and queue up posts during my absence, I really haven't had the time this time around.

Another thing that you might have noticed about my blog is the inclusion of simple polls at the end of some of my posts. I understand that I actually have quite a number of regular readers, though most of them are happy just picking my brain and remaining silent readers. Rather than tease you out with questions or controversial stands (I'm not THAT controversial, right?), I've decided that including a simple poll every now and then is a pretty easy way to get some user engagement with you readers.

It does help because from my first poll, I've managed to find out that the vast majority of readers would like to know more about SSBs issues in a landslide 96% victory (80-3 votes). Thank you for your mandate, haha. (Sneak peek: the current bond is likely to be substantially higher than next month's issue).

Don't get me wrong, I still welcome comments. I have deliberately left open the Anon option so that people can communicate with me. Polling isn't my way of asking you guys to talk to me less. It's a way of getting the shy ones to give me a bit more input to work with. All readers, please feel free to jump in at me when I get facts wrong. As much as I try to ownself check ownself, I'm human after all and I make mistakes. Please call me out on factual errors and I can make a correction and that would help everyone else that comes to read to be equipped with more meaningful information to walk away with.

I'm feeling pretty cutting edge by sticking in a silly poll at the end of some of my posts. It has taken me quite a bit of effort to find a suitable website that can generate simple polls which can be embedded into blogspot, but I've finally found KwikSurveys that work pretty well. Don't worry, I'm not selling them to you. They are free, which is 90% of the reason why I use them, haha! Hint hint to other bloggers that might want to add in polls to their post! Don't say good things I don't share! For the community!

Anyway, since I'm going to continue being swamped in work, I guess the only posts you can look foward to would be the guess for next month's SSB, the results of the Perennial bond and also the outcome of the Croesus rights issue. Other than those hot topics that I want to share my 2 cents, I think I will be slithering away for just a while now.

Okay, that's all for now. GMGH out.

Monday, October 19, 2015

Smart People are not automatically Rich People

(Actually I had drafted this post back in May when I first saw the infographic, but I never got about posting it. I recently saw it again on my newsfeed, so I remembered it!)

And neither are rich people automatically smart people.

Just wanted to share this infographic which I got from... CPF's Facebook page. The government damn hip these days, got infographic and all!

I think this is one of the clearest and best illustrations of "financially independent". My favourite part? There isn't some arbitrary "retirement age". Financial independence isn't an age or a specific number. Financially independent people can stop working whenever they want to. They also can decide to work whenever they want to and on whatever they want to.

I especially liked how they classified the different groups. There isn't any talk about age or academic qualifications, it is all about financial intelligence. I like this a lot because I think it is pure fallacy to think that educated people will always be more financially well-off. There are plenty of instances of high-income earners not having the financial education to be rich. Financial intelligence has absolutely nothing to do with academic qualifications, and I think this is a very important point because a lot of people will try to use it as an excuse to continue bad financial habits. You don't necessarily have to make more money to be richer, you can always just save more money instead.

More people need to see this simple infographic and let that knowledge sink in for a while so they will finally be motivated to take control of their finances.

Now I hope that I can be at least classified as the financially smart group. One day I hope to be in the financially independent group.

I can think of awesome things that I would love to do all day instead of working. Maybe I could retire in the future and be a full time blogger? I'll definitely have a food blog, that's for sure! Okay, time to stop daydreaming now. Lunch time is over, back to work!
Currently, I am....
Financially uneducated0%
Financially smart0%
Financially independent0%

Sunday, October 18, 2015

Property Thoughts Oct 2015

The last time I wrote an in-depth post about property was back in June, and it was also large based on the BNP report that I had read. I just managed to get around to reading the recent BNP report dated 24th Sep, so I'll just share my thoughts outloud.

Largely, their report is singing the same tune with a lot more data to prop up their stand. However, I find this graph to be the most interesting of their whole report:

Their supply-demand model looks pretty good, taking into account population projects, housing supply, etc. So far I like their reasoning and logic and the way they've gone around to collect data and how they have built their models. It falls in line very similar to how I've been processing my information regarding property. Of course I am but a single non-expert doing this casually, while the analyst is a CFA charterholder and doing this full-time.

On top of their rather lengthy, but detailed information about their supply and demand model, there are also some other graphs which I found quite useful.

I am not aware of this "40% limit" that the banks have. The TDSR is 60% of monthly income, but maybe it works out to be roughly 40% or something. Or he made a mistake. Maybe he confused it with the LTV limit for loans over 30 years or something. Anyway, why would the line be flat throughout the years? This line confuses and annoys me because I don't understand how he got it and why it's there.

However, the other information on the graph is very useful. As you can see, since the TDSR was introduced in June 2013, it has sort of "capped" the mortgage/income ratio. I am very sure that if such a measure was not put into place, households would be much more leveraged and the bull peak would have been extended by several quarters.

If you look at the ratio of private home prices to income, you can see that we are on the upper end of this data series. Can home prices go up to the 12-13 range? That would bring us back to the same ratio that was right before the Asian Financial Crisis and the recent cyclical peak in housing price. In the face of all the cooling measures and oversupply, I would give very low odds that the price-to-income ratio increases.

Another excellent observation which has already been picked up by the mass media is the disappearance of foreign buyers in the local property market.

Relative FX weakness in foreign buyers' currency, the 15% foreigner ABSD and tighter immigration polices makes for a very strong argument on why foreigners will not be propping up our property market. (especially if "everyone" wants tighter immigration policies)

Basically, we are on own own until the government decide to lift cooling measures.... which I doubt they will until property prices are fixed. And that means prices being lower. I say fixed because the property market is obviously broken. Why do I say that? Well, because I think it's borderline retarded to buy an "investment property" for 2.5 - 3.5% net yields. The benefits are laughable when compared to the risks. That's not to say a property bought now WILL be a bad investment. But even a gambling man wouldn't take those odds.

Their supply-demand model, linked with the affordability index and also bringing in market cycles makes for a very harmonic and logical argument.

For property owners, it would be a pretty nice fantasy that we are bottoming out now and are on our way to a new bull market, but I don't think believe so. In fact nothing supports that argument other than that price has come down a bit. I think we're in for a more 2000-2004 style bottom.

After reading their report, I am grudgingly willing to admit that my "optimistic" forecast of a property bottom is 2016 seems quite unlikely now, unless we get a large external shock (fingers crossed). I continue to save up and hoard cash, while I read finish my property books and also start fantasizing about my internal decor.

More time, more money, more prepared, more odds of success!

Saturday, October 17, 2015

"Don't take Uber, It's Cheaper!" HUH?!?!

Personally, I believe that the future is in disruptive technologies such as crowd technology, which Uber relies on. Uber is basically plugging the gaps between what taxi companies are currently offering and what private consumers want. However, they are not just filling the gap, they are actually eating into the taxi's market share because of the inefficiency of the taxi market. I do think that this is a positive for consumers, and this article is a pretty good case example of what Uber offers which taxis do not.

That being said, I do have some pity for taxi drivers. (sources: LTA, Uber)

As you can see, taxi drivers are actually competing at an unfair disadvantage with Uber.

With the age restriction, vocational licencing, medical examinations being required for taxi drivers, but not for Uber drivers, the government is behind the curve on this. I do agree that even Uber drivers should be required to go for a simple course and a basic medical exam for the safety of the passengers as well as the image of Singapore. The age requirement is a no-brainer, it should be the same, whether the government lowers or removes the age limit for taxi companies, or if they implement an minimum age limit to Uber-esque companies.

The government's role is ensuring a fair playing game, but as of now, Uber type services have a clear advantage over taxi companies and this is probably 50% of the reason why taxi companies are "crying foul".

However, the taxi companies too are way behind the curve. Their feedback system and ability to terminate drivers is unknown - whether it even exists and if it does, how does it work? Taxi companies need to figure out a way to get more competitive insurance rates for their fleets too. Their phone booking system is an absolute joke, running as if the world was still in 2005 (pre-smartphone era) while their marketing and penetration of any apps is completely laughable because no one knows that it exists. It would be even sadder if such apps exists since no one knows about it. What a waste of the PIC grant. The inflexibility of not always being able to make non-cash payments is a pain in the ass, especially when some cabbies still get angry if they have to break a $50 note.

While the government is half the cause of the simultaneous decline of taxis and rise of alternatives, they are definitely not entirely to blame. Taxi companies have become bloody obviously complacent about their business model and the business landscape that they operate in.

Where we go from here is fairly straight-forward and will happen in the months (not years) to come. The government will narrow the playing field advantage / disadvantage for the market players, which obviously can be only done in either of 2 ways - deregulating the taxi industry or increasing regulation for alternatives. Of course I am sure they will go the pragmatic approach and hit it from both sides. I am guessing an ease of the age limit, while putting in mandatory licencing and medical exams. "Passenger Chauffering Licence" sounds good. Give me some credit if you use that, okay

With that in place, the onus is on the taxi companies to wake up their idea. Unless they are willing to bite the bullet, invest in proper infrastructure to compete, they will continue on this fast track to industry extinction. They will die a somewhat pitiful but honourable death, since no one can blame the committee officials and referee for letting a rigged game continue to be played.

Personally as a consumer, I trod down the middle line. I have never used Uber because I don't really like surge pricing. I understand the reason behind it and I respect it, but I don't like it. Of course I have to be an exceptional snowflake that wants to pay the same or less than others, why wouldn't I? If I need to get somewhere in a jiffy or I can't afford the time variance of public transport, I will try to get a taxi. I still will flag down a taxi from the curb or wait in the taxi queue if its short (less than 6 people), but anything that will take me more than 5 minutes, I open up GrabTaxi and off I go. I guess I still find it slightly odd to take rides in Uber for now, but it taxi companies die, I guess I have no choice but to warm up to that idea.

What about you? Any thoughts on this rather important current issue? (innovation vs protectionism)
Which mode of transport do you mostly use outside of BMW (Bus, MRT, walking)?
Traditional taxis0%
Uber / GrabCar / GrabTaxi / Alternatives0%
Mix of both (depending on the situation)0%
I have a private car / motorcycle. I know not of your mortal problems.0%

Thursday, October 15, 2015

Living Definition of a Self-Entitled Singaporean

Now, I was having a rather pleasant day until I came across this article on my newsfeed, and it just ruined my day. (The mothership article was extremely well written by Jonathan Lim, kudos!)

The original post by the "violated" is here if you want to read it straight from the source, but here's my summary of the facts:

1) man believes that he should be immune to baggage checks
2) because he is an "original" Singaporean (not crispy, but original)
3) looks down upon an immigration officer who is doing his job correctly
4) falsely assumes his "rights" (probably watched too much American TV... yes, he even asked for a warrant)

Hearing someone talk about being an "original" Singaporean just pisses the FUCK out of me. What's the definition of a "pirated/fake" Singaporean? Passport colour orange or what? It makes my blood boil that he is our Singaporean representative overseas (well, no one elected him, but that's just how it works). Now the rest of the world is going to think that I'm a huge prick just because I'm Singaporean.

I'm a huge prick regardless of my nationality, thank you very much.

I'm pissed that such a loud mouth can go around blowing his horn regarding totally wrong FACTS about his "rights" and how he was so wronged, when in actual fact, he was not wronged at all.

Instead of feeling stupid for violating laws, he takes to social media to vent why he is correct and the system needs to change. Put a fucking sock in it will you? I'm more pissed that our system is so lax that he didn't get arrested and thrown into jail.

As a Singaporean, I wish LAW BREAKERS like him would be arrested and jailed. Since these kind of people will feel so sore and bitter with the system til the day they die, hopefully they permanently stay in whatever "overseas country" that they have moved to.

I am hearing and reading stories about ugly Singaporeans more and more frequently. It's easy to say that there will always be some rotten apples in every basket, but it's no longer feels like just a few to me. Is it because of the speed of new media that more of these stories are coming into the light for public scrutiny / entertainment? Maybe it's time I really start preparing my emergency exit strategy.

I repeat from my previous post: Just because I was born a Singaporean, that doesn't mean that I need to live, work and die as one.

Having a backup plan does not mean that I'm not a loyal patriot. It just means that I don't have blind faith and I still have a concept of risk management. If you think risk management is only about investments, portfolios, sharpe ratios, volatility, "hedging" and risk parity, you would be dead wrong. Risk management has plenty of real life applications.

Perennial 4.65% 3 Year Retail Bond Thoughts

Perennial is offering retail bonds for 3 years at 4.65%. Let's take a look-see.

I know I'm late for the party with LP, AK and B already covering it, but hopefully I can value-add to what they have wrote, especially since I have some additional observations. I have to say I really enjoy our local finance blogosphere because there is always someone writing on an interesting subject that will perk up other bloggers to opine in as well. "Ownself check ownself" is not always possible especially due to oversight, so I think that it's good that there are other pairs of eyes watching.

When Aspial released their 5 year 5.25% bonds, I was not very impressed. However, as predicted, yield-focused retail investors lapped it up are the public placement was massively 8.7 times subscribed. In the end, Aspial increased their tranche size from $75mil up to $100mil. Overall, they raised $150mil. I feel that this will likely happen to Perennial as well.

Perennial is also looking to raise $150mil, and while it is shown that it is going to the Public, it also states that there will be re-allocation from the Public tranche to the Placement tranche. Of course, this is the smart way for the company to do it. Retail investors are more yield hungry than institutional investors and have lower expectations. The company doesn't have to worry if institutional investors don't fill up the Placement tranche and make it look bad, since there isn't a specific one.

An interesting indicator that might show how well-priced this bond is would be the results to see the institutional vs public take-up rate. Perennial just announced last night that they are fully subscribed for the Placements of $100mil and I think that this is a rather good sign that institutional investors view this note as attractive. There is still $50mil for the public, and this could be expanded to $100mil if it is oversubscribed (which I think it would be).

Like in this case, if institutional take-up rate is high, it would mean that the bond is priced rather well and retail investors shouldn't worry that much that they got a not-as-sweet deal just because they are retail investors. However, if majority of the bonds go to retail investors due to the lack of interest by institutions, then the conclusion can be drawn that the individual retail investors have a much higher risk appetite than the institutions. Someone has to be miscalculating, and more often than not, it is the retail investor that is underestimating the risk of the investment, not the institutions.

However, I think Perennial was gunning for more than 2X institutional subscription and also looking for 2X public subscription, which is why they wrote they could issue up to an additional $150 mil if there is excess demand to soak up. They "failed" to get more institutions really interested, but they did fill up $100mil of orders. I'm not sure what to make of it, but that's just an extra tidbit of information that I noticed which is good to know, I suppose. I am fairly certain that the public offer would be oversubscribed.

Of course, oversubscription has nothing to do with the long-term aspects of an investment, but rather the heat-of-the-moment excitement and hype of it. The Starburst IPO was 9.5 times oversubscribed, but 1 year on it is still at IPO price. The POSH IPO was 3 times subscribed and it is 70% below it's IPO price. Oversubscription does not necessarily mean a good investment.

Perennial seems to be raising this $150mil as capital for their JV with Shangri-La into an integrated mixed development in Ghana. The JV partners intend to fund the project through the sale of the units at the development and from internal funds and external borrowings. If you don't know where Ghana is, it is in Africa. This is Perennial's maiden investment into Africa.

Total development cost of this JV is more than USD $250 mil, and since Perennial has a 55% stake in this JV, their share is approximately ~$200mil SGD.

If you think that Perennial is leveraging up for this expansion, it is noteworthy to see that they had just redeemed $130mil worth of notes which were at 6.375%. So while their gearing might be increasing by $20mil (or more if excess bonds are issued), their interest expense actually dropped by $1.7mil instead when using the $150mil number.

I think being a bond investor isn't like being a stock investor. While it might be great that the company is growing, expanding and doing well, these are not requirement to a successful bond investment.

I think that a bond investor should only be focused on 2 things. Does it have enough cash to pay out interest payments? Is it able to repay the principal amount at the redemption date? (Through rolling over the debt, profits from the business or sale of assets)

In my opinion, if an investor's investment horizon is short and he is willing to take on risks of being a corporate bondholder to an unrated company, this might be an attractive investment if assessed that the company can make the interest payments and also repay the principal. If an investor has a longer investment horizon, the stock itself might be more attractive.

So, from the bond investor in me, I actually think that Perennial looks rather good as a bond investment. Unlike the Aspial bond where I raised an eyebrow towards it, I am much less reserved about this bond. However, I am a biased shareholder of Perennial. I would rather own the stock than to own the bond. Also, I really don't think that this investment vehicle is suitable for my financial goals.

Keep in mind that what I said is coming from a biased equity holder. At least if they go bust, bondholders will usually recover something, while I would end up with nothing.

Will you buy applying for the Perennial bonds?

Disclaimer: I am a Perennial shareholder

Will you apply for the Perennial 3-year 4.35% bonds?

Don't know yet0%

Wednesday, October 14, 2015

4 Warning Signs of the US Stock Market

Taken from Zerohedge: 4 Warning and Why You Should Pay Attention. (with some charts from dshort instead because I think it looks clearer)

These are the 4 things that you might want to look at:
1) Profit margins
2) Margin debt
3) Valuations
4) Economic output

Jesse Felder also looks through the lens of history and wrote a great piece about market valuations. I would encourage a look see.

I don't believe in endless economic expansion and the never ending upward trajectory of the stock markets.

As a disclaimer, I am shorting the S&P500 index through CFDs because I'm bored out of my mind picking my toes and looking at the ceiling. The past few weeks watching the markets have been tremendously boring.

Tuesday, October 13, 2015

GMGH is a Financial Asshole

At night, I get dirty dreams that the stock markets are on fire, the property market is crashing, COE is back to $2 and Singapore is in one of the worst economic recessions that we have ever been.

I smile in my sleep.

This post by Dividend Knight rattled me a bit after I read it. I have to admit, I am one of those insensitive people that have openly said that I hope for a recession in hope of picking up assets at fire-sale prices.

However, I feel a need to defend myself so that I can continue to guiltlessly enjoy such dirty fantasies.

Firstly, saying and hoping for something in most instances does not change the outcome. Unless the outcome is directly affected by what you say (and maybe hope if they have a hope-meter to detect your levels of hope). Just because we say or hope something, doesn't mean it will happen. I don't think this point needs a lot of elaboration. It's pretty clear cut. Hope is not a strategy.

As an anonymous blogger, one of the main perks is that people don't know who I am and cannot curse me on the streets for expressing what is on my mind in my own private space. When I wish for massive economic meltdown, I do know and realize that a ton a people are going to suffer when (not if) it eventually happens. Many of these people are going to be overleveraged, while some just have plain dumb bad luck. Heck, I'm sure I'm going to suffer as well.

However, this is where crazy pot smoking hippie free love perpetually levitating market idiots can be found. The economy (and it's somewhat murky reflection, the stock market) does not expand forever in a prosperous ascent towards the heavens. There are booms and busts. That sounds so sterile. In a more real sense, businesses go bankrupt, investors lose lots of money, employees get fired and generally most people go through a hard time. Just because you use the words booms and busts doesn't remove the reality that people have to go through during those times. This is the flip side to my 1st point: Just because you don't talk about it, doesn't mean it's not happening.

Is it morally wrong to make money while other people are losing money in a recession? Yes? Well then, is it morally wrong to make money while other people are losing money, but in an expansion? Wow, isn't that double standards then?

I don't think it's wrong to make money, regardless of what other people are doing. They could be doing great! They could be doing shit. Who cares? Are you supposed to know this information? When you sell your company's products or services and eat into your competitors market share, do you cry about it at night? How is this any different? Why does what other people do matter? Is there a weekly newsletter telling you about how other people are doing and why you should care about them?

Recessions - they are NOT magical once-in-a-lifetime financial disasters which are an act of god. If you aren't prepared and ready for this one, then what about the next one, or the next one? This is the case of the ant and the grasshopper. I have got an emergency fund. I picked a stable job with a good employer. If I am retrenched, I am willing to lower my expectations, undercut my peers and work longer hours by just enough to get that next job. I am not leveraged. What more can I do to prepare for winter? Winter comes around again and again, just like recessions do. They aren't one-off things that can be hoped away or hushed and swept under the rug.

Rather than be caught out at low tide with your pants down, now is about a good of a time as any to re-evaluate your financial position and to see if you have what it takes to survive the winter. For quite a number of us, it is going to be our first winter. I am eagerly and patiently waiting for it. I yearn for it to come.

I might be an insensitive asshole for talking loudly about inappropriate subjects at inappropriate times (determined by who? The Ministry of Morales?), but you can't fault me for not speaking the truth.

Monday, October 12, 2015

Cash for Catching Litterbugs? Potential Source of 2nd "Income"!

So recently there was news that people who sabo litterbugs might get rewarded and this programme would help reduce the amount of littering in the neighbourhood.

Now, this itself isn't anything interesting at all. What I find interesting is instead the reaction to this news.

My social media had a flare-up on this with people likening it to "Big Brother" and there was even this piece by Gillian Lim from the Middle Ground (gotta give her credit about info about the increased surveillance already, which makes the Big Brother point absolutely moot) about their dislike about this idea.

While everyone is entitled to their own opinions, I too am entitled to think that their opinions are wrong.

Who the hell cares about "kampung spirit"? If you saw your neighbour stealing, should you have some "kampung spirit" and not say anything about it? If what the person is doing is wrong, why is there a problem reporting it? Littering should not be reported? But bulgary should? Who are you as a mere citizen to play judge and force your morale opinions on what is "more wrong" or "less right" onto me? There's the damn law to do that.

Screw this lame "kampung spirit" shit excuse. OWNSELF CHECK OWNSELF.

Basically, my response is short and sweet: If you are not a criminal, there's nothing to be worried about.

Wait, so you're telling me that you want to litter, but you don't want to get caught?

Who cares if people turn this into a career? How the hell is that a rebuttal? Money incentivizes people? Is this a surprising revelation?

The government gets less revenue from fines if they share the pot with the whistleblower? Er hello? Firstly, most litterbugs do not get caught. Secondly, this doesn't mean that the regular avenues of law enforcement can now close a blind eye to littering. If anything, this would INCREASE total revenue from fines.

People who want to do drugs, they don't live in Singapore.
People who want to own guns, they don't live in Singapore.

But for people who want to litter, well, that's all right! Let's all have the "kampung spirit" and look after our neighbours! After all, who doesn't like to come across some smelly disgusting trash every once in a while? /sarc

First time offenders for small objects get a $300 fine, while bigger objects are $1,000. Repeat offenders? Up to $5,000! JACKPOT!

If I can sabo one of the most detestable groups of people in our society, indirectly make my environment cleaner and make some money out of it, you can bet your sweet ass this is going to be my part-time job whenever I step out of my house.

Saturday, October 10, 2015

[XMM STI ETF Investing] September 2015 Update

It has been quite a while since my last update. I have been updating on my spreadsheet monthly, but I always forget to post up my review.

As mentioned previously, this will be my attempt at having a monthly update of the small portfolio that I am running for my sister and mother. The aim to have as little downside risk as possible, and maximize returns from there.

Here are the current stats of the portfolio as of end September 2015.

30 September 2015       Sister             Mom               Total       
Amount Contributed

30 September 2015  Stocks  BondsCashTotal
Amount Contributed

- Stocks are in the STI ETF (ES3.SI) with 7 lots.
- Bonds are in UOB SGD Fund Class A with 5902.1 units.
- Cash is earning 2.25% from filling up the remainder of my OCBC 360 account.
- Additional $600 was added to Cash.

Starting May 2015, the OCBC 360 account now only gives 2.25% interest. This is unfortunate, but it is still the best cash option for me.

I will most likely be running out of space in my OCBC 360 account as I near the $60k limit myself, which means I must find this cash another good yielding alternative. I have opened up a CIMB FastSaver account which yields 1% in preparation of this.

I have rebalanced the portfolio in January of 2015 to have a better portfolio allocation between bonds and cash. I think a 40/60 split between bonds and cash was a good "war chest" allocation, especially since I highly suspect that 2015 will have an opportune time for me to pick up some lots of the STI. 2014 did not even experience a 10% correction the whole year, so just simple probability is telling me that there will be an opportunity to shift into risk assets at a good price in 2015.

I have begun following my STI ETF Playbook, which is a mechanical strategy to help me overcome emotions and to buy more stocks as the stock market falls. It's not a scientific method at all, but it follows the basic principles of value averaging which calls for buying more when the price goes lower. In the month of August, I have already hit the 10%,15% and 20% trigger, so I currently hold 7 lots of the STI ETF.

Of course, I don't want things to be so strictly mechanical, so on top of this, I may opportunistically invest the fresh cash added each month into the STI or even liquidate my bond holdings if the opportunity really is very tempting.

The goal is to average down without being too kan chiong or humji, so I think the base case would suit me fine to help me dip my toes into the STI at increasingly safer levels. That's right, the lower the STI falls, the safer it is to invest!

No rush at all, really. Steady she goes.