Friday, October 28, 2016

Recent Action - CDL Hospitality Trust

I've had a rather busy week so I didn't update much about the transactions which I've made for this week. I made quite a few of them and I will update them in my next portfolio updates.

I added 7,000 shares of CDL Hospitality Trust at $1.31 after the company announces its third quarter results on Friday morning.

This is something which I've kept in my watchlist for quite some time and failed to get them earlier in the year. Still, I am glad to be able to add them for what I thought to be at a decent valuation.

Since the company has announced its third quarter results, I'd also go through them a bit in this.

The portfolio is highly concentrated in the Singapore market, even though they had ventured out in recent years to various areas such as Maldives, UK and AU in order to diversify their holdings.

It's a bad thing if you have a hospitality assets in Singapore market right now.

Unlike during recessionary periods in 2008 and 2011, where demand for occupancy and hotels was affected, you can see that demand remains strong with the occupancy rate holding between 86% to 90%. With the Singapore dollar getting weaker and the government initiatives towards building a more vibrant tourism industry, this will only get better and I suspect demand will hold up.

The problem the Singapore market is facing right now is on the supply side.

The competitive environment with so many hotels being set up until 2018 will outweigh the demand in the near term. Having said that, I'm secretly hoping that in the mid to longer term the demand will work out well to meet these supply. This is one of the reason I'm putting this under my longer term investment category.

On the overseas market, the UK, AU and Japan portfolio is doing well so I think this is a good diversification towards a purely Singapore concentrated portfolio. It also appears that this is the direction the sponsor is going to take over the next few years based on the strategy they laid out.

The Maldives market is slowing but there's a minimum guaranteed fee to mitigate the drop in income.

Comparison against other hospitality reits

I have to say that among the other hospitality reits listed here, my preference is towards CDLHT than others such as Ascott, Far East Hospitality Trust and OUE Hospitality Trust. I've never delved much into Fraser Hospitality Trust.

I owned a bit of Ascott and I already blogged previously about its shortcomings. Still, I thought it's a good yield play overall if you are not expecting much.

Far East Hospitality Trust and OUE Hospitality Trust have a poor sponsor pipeline and management in my opinion and they've done nothing so far to impress me much yet. Their valuation could appear as "cheap" to the outside eye but do look out for specific lease, agreement and structure. In my opinion, they are Reits that are built more for dumping ground than to increase shareholders' value.


If you read my previous post on the X + Y + Z Strategy, I would attribute this to a "7-2+5", with +7% being my estimate yield, -2 being my potential capital loss in the short term, and +5% being a valuation which I am hoping it will pay off over the longer run. The danger with this strategy is if I get that last part wrong then I am officially catching a falling knife, but I believe it will not.

CDLHT also has a good bluechip sponsor in CDL and Millenium Copthorne and pipeline in my opinion which I think weigh a huge scoring in my comparison.

Wednesday, October 26, 2016

My Thought Process When Selecting Stocks

I've been wanting to write on this for some time but find it incredibly difficult to organize my thoughts and do so.

When I saw fellow bloggers write about their thought process on their preference and methodology on selecting stocks, it helps a lot because there are so many ways and path that we can reach to Rome.

- Azrael talks about his method of valuing stocks using fundamental analysis here.

- Chin Wai talks about his method of valuing stocks using Price to book value here.

- STE talks about his method of valuing stocks using the regression method here.

When I was at the sharing session a few weeks ago, someone came to ask me how should they come about to select stocks. It is a very common yet difficult question to answer because there are so many ways that you can come across to look at it yet giving that answer was not the easiest for me. I was dumbfounded.

Since then, I came home thinking hard over the next few weeks how should I translate this thinking into something practical that many people can relate to. If we talk about using the low price to earnings or low price to book value, everyone gets the concept but they will find it difficult to apply in real life. If you talk about using the screening filter, again it's not scientific and coded about using what sort of information is the best.

Putting on my thinking cap

My Thought Process

Here, I am going to attempt to translate my thought process into something mathematical, something which everyone is familiar with. I thought having such thought process is important because it gives me an indication and guidance when I am faced with many hurdles, temptation and questions and being able to justify why I select certain companies at certain times that meet my criteria becomes the utmost importance in my investing journey.

Before I begin, I need to stress once again that this is purely based on my personal thought process so any individuals could disagree or have a different opinions and it totally make sense.

                                                                     X + Y + Z = Total Returns

where X represents the Dividend Yield (%), Y represents the Dividend Growth (%) or Capital Gain (%), and Z represents the valuation factor.


X - These represents the dividend yield (%) of a company which is pretty straightforward. There are some questions on whether one should use the historical or forward dividend yield and I will address that in a while below but for this purpose I will use X as a determinant for historical dividend yield. This is a known factor which you and I and everyone else know about it.

Y - This is the crucial part here because almost everything revolves around this factor and the amount of competency that you have and put in researching and forecasting will determine the total returns that you will get. Here, I am putting this to represent the dividend growth (%) or capital gain potential (%) because for simplistic reason I am assuming that if the company has positive dividend growth, it assumes that earnings and cashflow are better and thus the share price would reflect a higher price in order to justify the same yield as they have previously.

For example, if I assume that Singtel is going to increase its dividend from 17 cents to 19 cents next year because earnings and cashflow are better, that would represent a 11.7% increase. This means that I will mathematically put Y = 11.7% in my head and assume that the market would account for a corresponding 11.7% increase in the share price. It will not be exactly the same amount, but the theoretical concept is usually the case.

Similarly, Y can also be attributed to negative growth. A very good example in recent case would be Keppel or M1, which is an extremely hot topic these days.

For theoretical example, should M1 decides to cut their dividend from 15 cents to 13 cents next year, this represents a (13.3%) decrease. This means that I would attribute Y = (13.3%) and would account in my head that I am expecting market to discount the share price by the same percentage point.

To reiterate once again, to be able to forecast Y requires many years of competency of understanding the business and the industry.

Z - This is where valuation would come from. Valuation can come in many forms and I will not be going into the detail here. If you are interested to learn more on valuation, you should look out for Prof. Asmoth Damodaran blog as he detailed out each individual valuation methodology and dissect them to the very detailed.

The general idea to take away here is that if your X and Y sucks, you can still get a good deal out of your investment assuming your Z value is high. There is no hard and fast rule on what you should be putting for Z but generally the cheaper the valuation the higher the value of Z be. On the other hand, if your X and Y are good, the Z value is usually very low because you will see companies that are stretching at overvalued proposition. Shengshiong and SATS are two very good example of such in my opinion.

Total Returns - When you combine all three factors, X + Y + Z, you should ideally get a rough idea of returns that you are expecting for. This can vary among individuals depending on their appetites and competencies. For myself, I am expecting a total return of 10% / year for each investment I made. This means that I usually have to work out between the three factors which of those that I wanted to focus on and get a better clarity. 

My Favorite Strategy

Obviously, the best you can get out of your returns is through achieving a high X, high Y and high Z. While they are not impossible to find, they are not easy to detect as well because for most of the part the Y and Z function are unknown factor where individual competencies and time investment put into the research matters. So I won't be stating the obvious for the purpose of this exercise.

1.) High X + High Y + Low Z =  In Excess of 10%

This quickly becomes one of my personal favorite strategy in recent times because I've been looking for companies which are catalyst driven. What this means in terms of Y is that I am usually expecting earnings and/or dividends to be part of the catalyst which would eventually drives the share price up. This is usually a short term holding and as soon as those catalysts are executed and announced in their financial results to the public, I will divest them for a profit taking.

In my current portfolio, Micro-Mech and UMS (both recent additions) falls under this category as both companies owns good balance sheet, good cash flow, high dividend yield and a stronger semi-con industry demand set to grow in 2017/2018 means that demand order will grow.

2.) High X + Low Y + High Z = In Excess of 10%

Sometimes, I find it difficult to find companies which displayed the above attributes for short term profit taking. Hence, I will delve down to the next option.

This is usually a long term holdings because of the high dividend yield and decent valuation, which warrants a hold in the portfolio.

In my current portfolio, Ireit, First Reit and Ascott Reit would fall under this category due to the nature of the structure of Reits they are in. All of them provides high dividend yield and a decent valuation, though for Ireit and First Reit I am still secretly hoping for a high dark horse Y factor (I spoke of this in my sharing seminar on the self-reinforcing cycle).

3.) Low X + Low Y + High Z = In Excess of 10%

Some of the developers which I have bought in the past would fall under this category. A good example would be companies such as CDL and Ho Bee, both which I have divested since, are providing low yield with no catalyst in sight but their valuation is so cheap that at times they might warrant a buy and keep.

Personally, I'd prefer to avoid such companies for now because of my biased preference towards a high dividend yield (high X) these days but I will keep an open mind should such opportunities arise.

4.) Low X + High Y + Low Z = In Excess of 10%

I personally suck at this strategy where a company could display a potential growth story which would eventually push the valuation even higher. I just simply don't know how to work out at such strategy so it is extremely rare that I will own such companies in my portfolio.

Osim, Super Group, Sarine, Straco are example of such companies which would fall under this category and as you can see most of them have tripled or quadrupled in value if you can get it right.


This is just some of the things that is going through my head when I invest that I am sharing with.

As mentioned earlier, everyone has a different preference profile towards their investing strategy and it is important to find your mojo that suits your profile than following others. For instance, my biased preference towards a high dividend yield (but must be sustainable) to suit my cashflow needs may not suit others who feel that they want growth in their companies. 

I hope this helps someone to have things to think about in their head when they are choosing between a few stocks to invest in with their money.

Saturday, October 15, 2016

"Oct 16" - SG Transactions & Portfolio Update"‏

No. of Shares
Market Price (SGD)
Total Value (SGD) based on market price
Allocation %
IReit Global
ST Engineering
Ascott Reit
First Reit
Total SGD

We are heading towards the final last 3 months to the end of the year and it has been a rather forgettable moment in terms of where the market went from the start of the year as it has been mostly consolidating within the same range for over a few months.

Having said that, I think there has been a couple of decent opportunity throughout so I think not everything is a lost cause. I think we just need to keep a close eye on these opportunities and strike when it happens. Waiting for a big recession is not the only sole opportunity out there for low hanging fruits.

From the previous month's portfolio, I have added Singtel into the portfolio which I have blogged over here. There is currently an overhang on the share price of the company which is related to the impending results of the 4th telcos. I believe this is merely a short term knee jerk reaction which will much be a non-event in the mid to long term.

I have also added FCL into the portfolio which I have blogged here. I'd like to thank some of the comments from readers who pointed out that they need much lesser to pay out the dividends than what I originally thought to be. So that's a good thing. In any case, I also believe that there is an overhang on the share price of the company which is related to the health of the Thai King. Fundamentals are still decent, so I thought it is still a decent company to have in the portfolio.

The portfolio has decreased from the previous month of $445,120 to $441,867 this month (-0.7% month on month; +27% year on year).

The market has been rather volatile and some of the stocks in my company are impacted as a result, hence the lower share price. Still, I do not think that is by any means a concern at this point. Economies are getting tougher to adapt but i think the underlying fundamentals are still solid.

In terms of personal cashflow, it has been extremely tight this month as I managed to eke out negative cashflow due to the many events that are happening. In addition to the bone bare no dividends, there are also unexpected events that happened such as doctor visit for my wife, pediatrician visit for my son who is sick and also the passing away of my grandmother where I need to book tickets to go back and visit. Still, I'll need to figure out how to increase these cashflow in the near future in order to avoid such a problem (negative cashflow!!!).

How has October been for you? Did you manage to do better this October than the last year October?

Friday, October 14, 2016

Why Is Accordia Golf Trust Not Acquiring Assets From Its Sponsors

I shared in the recent session sharing last week that there is beauty for Reits to grow through organic and inorganic means even though they are mandated to pay out most of their earnings to shareholders as dividends.

I also spoke about how the role of the management becomes very important because their competency will determine the direction of the Reits. There are good Reits around that is able to increase shareholder's value over time, which will eventually be implied by higher dividends and stronger share price. There are also lousy Reits which will eventually be a dumping ground from their sponsors. I will not talk about this at this point.

One of Accordia's catalyst is through M&A activities for which the idea is to gear up more over time and buy accretive golf assets from its parent. Their current low gearing at 28% loan to value ratio would enable them to buy accretive assets easily since not only they have the means to do so through gearing up but also most of the NOI for the golf assets are at 11% on average.

If you read the parent financial statement and annual report, you would have realized that they are growing through various means, in particular the driving range and also other golf classes activities. The golf assets are asset heavy which the parents does not have the intention to hold for longer period of time. The purpose when they list the trust was always to recycle the capital and develop an asset light strategy. It is the same concept as property developers.

If you read the Chairman's statement, it tells that the main reason why there are no divestment to the trust is mainly due to the land and building issues, which the trusts have been providing updates every quarter almost when the problem surfaces.

For everyone's easy reference, I have appended a table summarizing the update profile quarter by quarter to see where they are right now and how long more before they could resolve these whole issues depriving them.

Things are moving every quarter but it is going on rather slowly.

My take is it will take a long while more (probably 2 years) before they can resolve the issue and M&A activities can take place. Until then, the trust would have to depend on their current existing business which is evidently slowing down, though this is somewhat helped by the stronger Yen in recent months.

Tuesday, October 11, 2016

Recent Action - FCL

A quick update to the recent movement I have in my portfolio.

I managed to get through the queue by buying 10,000 shares of FCL at a share price of $1.48. Selling pressure has been strong in recent weeks, and we can see again that today it closes with a rather huge volume, given the low liquidity this counter have.

The Group is gaining momentum with building up a guardian of their industrial properties, especially after they have listed their industrial arms in Fraser Logistics Trust. The latest strategic investment in "Project Titan" with SET listed Ticon has attested to that. The latter having 18 industrial estates and 33 logistics locations under their development.

In Australia itself, the Group continued to extend their footprint by expanding their presence into the Sydney Western suburb area for their industrial properties development.

Fraser Logistic Trust should benefit over time from the aggressive development and strategic investment from the sponsor so it'll be close in my watchlist.

The Group paid out 8.6 cents in total the last two years as dividends and the management guided that they may do the same for this financial year. This would translate into a decent 5.8% based on the current price.

Some people are worried about their high gearing, but you can see based on the nature of their income and coverage ratio that they are at a very comfortable position.

Their current recurring income is expected to be at around $698m. This was based on the lease and the listing of the 4 Reits under their arm which they have a stake in. To pay 8.6 cents dividends, the company would need to fork out about $525m. This would be in their comfortable range of doing so.

I think that's just about the thesis for me coming into this play, as with other developers which I have previously vested in.

Some selling pressure has begun, perhaps something is brewing.

Saturday, October 8, 2016

Am I On Target To Achieve Financial Independence By 35?

The last time I did a review on this was back in 2014 (here) so it's been a while since then.

I started writing this blog in Dec 2011 where the objective is to document the journey towards the path to financial independence at the age of 35. I gave myself a stretch 10 years goal where I'd like to be by the time I am 35 years old. You can see them below.

Original Projection
YearYearStarting CapitalCumulative Annual Capital Injection Dividends on Starting CapitalTotal Yearly Dividend PayoutMonthly Passive Income

There were a few questions from readers on some of the numbers I put above so I'd try to answer though obviously it has been a long time ago and my memory could fail me.


First of all, the starting capital I had put out there is $100,000. Obviously, I did not suddenly pop out and have that magical $100K right away in my pocket. I started working in 2007 but only started my investing in 2011 so technically that was the amount I put away and save and won from my punting of occasional soccer betting earlier in my days. Those were the good old days I trained on my adrenaline rush, patience and discipline which comes in handy these days.

The annual capital injection of $60k was a bit of a stretch there and until today, I can hardly ever achieve that sort of capital injection in one single year as you will see more later below. I work backwards and found out back then that $60k was the magical number and hence simply put it there for projection purpose. Heck, life was different when I was single back then and today I am married with 2 kids (one on the way) and the sole breadwinner on the household. The $60k capital injection was just a dream. It was never going to come close to realization.

I assume 6% dividends on my principal + capital injection every year and have this compound for the next 10 years. I did not assume for any other capital gain return from the market back then, so it is totally build on the assumption of a 6% return, mainly from the dividends and reinvested.

10 years is a stretch bitch goal that I set for myself knowing in mind that it's almost impossible to reach there. Still, I wanted to push and stretch myself very hard knowing how my lazy mind works. If I gave myself a longer timeframe of achieving the target at the age of 65, I'd be less motivated to push myself and do well in human capital, which I did in my earlier days. The painpoint factor of working at the big 4 accounting firm motivates me to run away from the rat race and start pushing my dream comes true. I was very motivated to succeed back then. It is not a choice. It is in my hands to do it.


I'll fast forward the timeframe to where I am today to see if I am anywhere close my original goal. I'll go through one by one.

On the human capital front, I did better today than I expected back then where I envisioned myself to be. I knew that this was going to play a crucial role if I were going to make it for early financial independence. My fellow blogger, Chris, talked about empathy and Cinderella Story in his recent article but I don't think I would fall under that category. The closest I can think of is having a PSLE score of 186 and going to a normal stream for my secondary but that was never close to a cinderella story. I've heard stories of people who came back to succeed in their career even though they were not intellectually smart but luck plays a part in their success. I think I will attribute that to my story. Luck definitely play a crucial factor in where I am today.

On the capital injection front, the closest peak I came saving in a particular year was somewhere between 2014 and 2015. Those were the times when both my income and circumstances hit a really nice spot at the peak. Since then, expenses have creeped up slowly due to increased family expenses and they have risen a lot faster than my increase in income. I am definitely on the trend down these days.

On the returns from investment, I was fortunate to earn some positive returns from the market since the time I have invested in 2011. Even in a bad year where the stock market is down, I had managed to stay positive and survived the downturn. Until today, it is really difficult to quantify if it is due to skills or luck. I really think I have to count my lucky stars for that. 

Actual / ForecastYearCapitalCapital Injection ($) (incl. savings and dividends)Returns from stock market (%)
ActualDec-07- 10,000 0.0%
ActualDec-0812,500 15,000 0.0%
ActualDec-0934,000 15,000 0.0%
ActualDec-1058,000 25,000 0.0%
ActualDec-1192,666 30,000 3.29%
ActualDec-12133,840 40,000 40.27%
ActualDec-13219,130 45,000 19.76%
ActualDec-14279,780 55,000 11.65%
ActualDec-15360,600 55,000 5.49%
ForecastDec-16450,000 50,000 14.5%
ForecastDec-17545,000 45,000 10.0%
ForecastDec-18644,500 45,000 10.0%
ForecastDec-19753,950 45,000 10.0%
ForecastDec-20874,345 45,000 10.0%
ForecastDec-211,006,780 45,000 10.0%
ForecastDec-221,152,457 45,000 10.0%

Next Few Years Ahead

The next few years ahead is going to be tough.

Based on the review I have on my current circumstances, I can already envision that I will fail to meet my original target and have to stretch them by a further 2 years earliest. That will mean 37 years earliest based on my projection

In terms of financials, I have previously mentioned that income has peaked but my expenses are still going up, so that will mean a lot lower savings in the coming years and lesser bullet to inject for the investment.

I could draw up different scenarios to speed up on the income front like having my wife back to the workforce but I thought it's better to have her handle the household and slog it out myself. We are doing fine financially and I just need to ensure to reduce those silly errors in my judgment.

My motivation to reach early financial independence is also not as deep as I had intended in the earlier days. Back then, there was the painpoint factor which is not so evident right now. Energy was also much higher back then but now I couldn't run with a speed of a Lamborghini. 

I am a lot happier now because things are well in place, companions to play for and life being more meaningful with kid(s) running across the living room all the time. There was an occasional glitch of wanting to reach financial independence at some days of the year when some things get tough but it'll mostly disappear again within the next few days.

So 6 more years to go now. I'm praying it'll be kept that way.

Wednesday, October 5, 2016

IREIT To Expand Beyond German Properties

Readers would know that Ireit is currently my biggest position in the portfolio so I do look out for their news.

Earlier this year in May, there was an announcement for sale of the manager to Tikehau Investment Management which brings quite a bit of question marks as to what is going to happen should the sale go through.

Yesterday, there was an updated announcement to conclude the sale for the share purchase agreement with Tikehau where they would acquire 80% of the issued shares while the rest of the 20% shares would be held by Tong Jin Quan.

The agreement also has a mandate for Mr. Itzhak Sella (Chief Executive Officer) and Ms. Adina Cooper (Chief Investment Officer) to resign upon the completion of the agreement. My feeling is that they would rather bring someone they have in the group to manage the Reit for better connectivity with the fund.

There was also a mandate for the Reit to expand beyond the commercial properties just in Germany to all commercial income producing properties including offices, retail and industrial across all Europe as soon as reasonably practicable.

To me, this can go both ways as there are both advantages and disadvantages in doing this.

The main advantage to me is with Tikehau as a fund management (and sponsor), they would have plenty of pipeline sitting on their assets fund which can be recycled into the Reit. A quick look at their funds right now would see that they have a lot of industrial, retail and commercial properties in France but not much in other countries.

The good thing about it is these properties in France are fetching a net property yield of 7% unlevered. This bode well for the Reit because this would then be similar to the type of profile which they have on the Berlin properties which they acquire recently at 7.1% NPI yield. For me, as long as they can inject any properties in excess of 7% yield, the financial engineering would be easy to make it accretive and most importantly keep the dividend yield high for hungry investors like me to take a bite at it.

It remains to be seen whether they will dump assets which are non-accretive and non-quality to the Reits over time. My gut feel is they will use Ireit as a platform to expand their base into the other European market since they have already launched a French Reit where they can concentrate on the French properties for that.

The jury is still out right now but it is very easy to see over time what they will do with Ireit. The moment they do something silly that destroy shareholder's value, it is often easy to pick up and we as investors will run straight to the door. I am keeping my finger cross that it is not the case and I am giving them the benefit of the doubt right now, until they are proven guilty.

Sunday, October 2, 2016

Creating Our Own Happiness

Happiness is indispensable to those who seek them.

Everyone has their own definition of what constitutes happiness for them.

For instance, my 2 year old son creates his own happiness by playing with his toys and casually biting me. It hurts physically for me but it makes him happy. He is also happy when we get together as a family spending quality time. The world is a beautiful place. 

In a materialistic society where money can bring about happiness from consumption, many people tuned their life to earn more income in order to buy materialistic things that helps to crave their satisfaction for enjoyment and happiness.

Luxury car, houses, clothing, liquor and parties - all of these costs tons of monies that pushes boundaries for people to come for them. People are generally happy when they spent them because the feeling of owning when no one does is great but temporary. They might be happy for a month or weeks but that feeling will soon disappear as they seek to find greater challenges in their lives and more things to buy for.

Happiness from within is what everyone should be looking for.

We can create our own happiness by simply taking care and spending quality time with one another. Some of the activities like walking in the park, swimming in the pool are mostly cheap if not free.

Having lived through marriage life for a number of years now, I can truly feel how blessed I am when I have companions to go through life with me the up and down. In my quest towards financial independence or in time of distress, they are always there to support.

I might not be there yet in terms of reaching financial independence, but what I know is whether or not I reach there, I have already the best of what I want in this world. 

The best things in life are free. We only have to appreciate them, which we often don't and take them for granted.