Thursday, April 27, 2017

My CPF Nomination Experience

I've been wanting to do nomination for my CPF account for a very long time but has always procrastinate on laziness.

Last week, when a group of us are chatting about it in the chatgroup, I quickly made a decision to book for an appointment and I went down to the center during lunch hour.

*Do note that an appointment is highly recommended as otherwise the waiting time could be up to 2 hours.

The CPF building at the Robinson Road has moved to Maxwell road just beside the URA building and Maxwell food center. I really love the new location as it is nearer to my office and I can go straight for lunch at my favorite stall at Maxwell food center.

New CPF Center @ 45 Maxwell Road
Comfortable Waiting Area
CPF Nomination

CPF Nomination is nothing but a will made in the form of CPF account which allows CPF members to nominate the beneficiary to receive their CPF savings in an unfortunate case of decease.

In the case where no nominations are made, the CPF funds will be distributed in accordance with the interstate succession laws.

There are some people who has made a will to distribute their funds according to how they would like it to be distributed. Please note that CPF funds will not be included in such a will made. Similar to the whole life policy we have bought with our insurance company, we are recommended to complete the nomination form and nominate a beneficiary (or more).

I heard a case from a friend in the past that the settlement of the interstate succession laws can be very complicated and may take up to 3 years before it can finally be settled. It is even made more complicated if your children is a minor and would have to involve the trustee before he or she turns 18.

Just to share on my experience, the whole process was smooth and easy as I made my appointment, wait for my number at the appointed timing, and 2 witnesses came over to sign on the form and then it was done. The whole process took less than 5 min to complete. You can download the form below.

After I'm done, I proceeded to the nearby Maxwell food center and ordered my favorite chicken rice stall (Hint: not Tian Tian) and had my delicious lunch before walking back to my office.

Wednesday, April 26, 2017

CDLHT - Q1 FY2017 Results & Thoughts

CDLHT announces its Q1 results this morning which was reasonable well received.

NPI and DPU are up 6.4% and 9% respectively as a result of higher contribution from the New Zealand due to higher rental variable component that contributes to the stronger performance.

Trading conditions in other parts of the market like Singapore, Japan, UK, Australia and Maldives remain competitive and performances are still down.

If we look at the Singapore market, Q1 revpar are only slightly down from the previous year. It also trend higher than the previous quarter which is at $154 (see link). Recall that I mentioned previously the revpar during GFC went down to as low as $149. I think we are seeing bottoming taking place and will trend up from here, specifically from 2018 onwards when the law of demand outweigh the supply in the hospitality sector as a whole.

Singapore market

The Maldives market continued to see poor performance with a 8,8% fall in revpar due to competitive pricing pressure and also the relative strengthening of the USD. Thankfully, there's a minimum rent which helps to mitigate the drop.

It remains to be seen if it is right in the first place to venture into Maldives, a territory which appears relatively unknown to unitholders.

The Japanese market also continued to see pricing pressure with a drop in revpar by 7.2% yoy, albeit with higher occupancy to mitigate the drop. With tourist arrivals set to trend a lot higher leading up to 2020 Olympic, I think this market might do well in the coming quarters ahead.

Japanese market

Final Thoughts

I was supposed to go to their AGM today but thought otherwise since I have gone to the FEHT AGM not long ago.

I still believe current valuation has not priced in the positive scenario and I think it will operationally perform better than it is today so this will still be a strong keep for me in terms of relative performance. In terms of valuation, I think it's also not very expensive as it has traditionally trades at above 1.2x NAV in good times.

Vested with 60,000 shares.

Sunday, April 23, 2017

Child Portfolio - "Apr 17 - SG Transactions & Portfolio Update"

We celebrated my elder son 3rd birthday during the weekend and thought I'd do my usual annual update on his portfolio on his birthday.

As part of the annual exercise, I'd try to top up his equity position by giving him presents in the form of stock shares, which would help him compound over his years of growing up.

Given that Singtel has been dropping recently, I added 300 shares of Singtel on the belief that it presents decent long term value.

He now owns a total of 2 companies, with ST Engineering still forming the majority of his portfolio.

No. of Shares
Market Price (SGD)
Total Value (SGD) based on market price
Allocation %
ST Engineering
Total SGD

Friday, April 21, 2017

Micro-Mechanics - DCF Analysis

I bought Micro-Mechanics for 15,000 shares at a share price of 86 cents back in Oct 2016 on the thesis of semi-conductor sector rebound and heading back into the upcycle momentum.

The semi-conductor sector is cyclical in nature so it pays off big time if you can predict the bottoming and rebounding of the cycle. The same suffering goes if the prediction is wrong the other way round.

The semi-conductor sector has recently pushed up many of the semi-conductor companies in the local market. Companies like UMS, Global Testing, AEM and Micro-Mechanics have benefited from these "euphoria" in the market. Often, we hear about news coming out from demand from China or US breaking new records, but we are not so sure if this would translates back into demand for the local companies.

For the purpose of this article, I'm going to zoom down into the financial analysis for Micro-Mechanics. If you are interested to read on the company in details, you can google around and you'll find blog post article from heartlandboy and 10centsperannum which you can familiarize around.

MM - 2012 to 2017
I have to admit that I've been lazy these days and have not been researching much into the companies I own or new ideas that came in. With 2 kids and couple of other activities around, my time has diminished than what I have a couple of years ago.

Still, the recent rapid increase in the share price of MM ($1.20 as of writing) has made me wonder if they are overvalued and the action I should take next. So here I am picking myself up and spending a few hours to analyze on its numbers.

If there is anything to take note from the table, it is that the company has been able to improve their productivity on their gross margin and net margins (read the CMA division on what MM does on the financial reports for further details).

Cash has also visibly gone up over the years as the company continues to operate under a sustainable model of paying out dividends from their free cash flow and retaining the rest of the cash for their next growth.

Earnings yield have also gone up by a mile and it is only until recently that it started to go down due to the faster increase in share price as opposed to earnings. Based on TTM earnings, current valuation stands at about 12.5x earnings or around 8.5% earnings yield.

Financial Modeling

I played around with a few of the projections and numbers by putting in a reasonable scenario and extrapolating it for the next 5 years.

2016 numbers are actual while the rest will much depends on the growth factor, g.

The first scenario is having a 7% growth in the first year, followed by 5% growth in the next subsequent years. The reason why I put 7% in the first year is because we have the actual half yearly 2017 results and they are up by 7% (even though some can arguably be said due to exchange gain/loss which is a non-cashflow factor). With semi-con industry on the uptrend, it is not impossible to see such growth cases happening.

To make things easy, I have the depreciation and capex to follow the nature of the growth so cashflow projection can move around easily.

Discounted rate are set at default 10% (sensitivity +-1%) while terminal earnings multiple are set at 11x (sensitivity +-1) which I think is a reasonable for this sort of market cap.

It follows that the intrinsic or fair value for this company will be at $1.39 based on the above few assumption factors.

If we tweak the model slightly to be conservative and amend the growth factor to 7% for the first year and 2% for the following two years and then 0% growth for the next two years, we'd get an intrinsic value of about $1.22, which is at the current range of the share price.

If we want to be slightly more adventurous and project perpetuity growth of 4% for the company using the GG model, then we'd reach an intrinsic value of about $1.42. Do however note, that this sector is cyclical so it's unlikely we'd see perpetual growth unless it has a first class moat.

Amongst all this, I have of course also not considered the cash they have at hand which they can utilize to acquire some really good M&A which can improve their topline or revenue segment so anything is possible. Though, from the way the company has been increasing their dividends payout to shareholders, it appears unlikely that they will acquire something in the next few years.

Final Thoughts

I'm not usually an optimistic bunch in terms of holding the company for longer term while awaiting for growth to take place. It feels like there's always something which can goes wrong and I might not be willing to take the risk in terms of risk-reward play, unless the reward is clearly so big. 

Micro-Mech will report its Q3 earnings on the 28th Apr.

Monday, April 17, 2017

Far East Hospitality Trust (FEHT) AGM & Thoughts

I attended FEHT AGM this evening which was held at Orchard Parade Hotels.

I had quite a bit of hard time finding the hotel and had mistook it earlier for Orchard hotels which was just right opposite the premise. Thankfully I found it right on time, else I'd be late.

It was my first AGM for 2017 that I had attended (3 more to come this and next week) so the usual procedure applies. All I need to bring was an NRIC and a pen to take note. Unitholders are able to obtain the hardcopy of the Annual Report on site.

The ballroom was surprisingly huge and there were LOTS of attendees, mostly retirees. To be frank, I wasn't sure to see that many people. It almost feels like I am attending a blue chip companies in attendance.

I tried to sit strategically to avoid the throwing of chairs between shareholders and management. Okay, I'm just joking here.

Updates from CEO

The CEO gave his usual updates on the performance and some of the operational updates on the assets. Some of those are new insights to me which is the reason why I'd like to hear from the management first hand by attending these sort of AGM, especially companies that I take it seriously and trying to increase my position with.

The CEO reiterated that the past 3 years have been the most difficult for hospitality industry in the last 10 years. Growth in supply has increased 5.1% CAGR from 2013 to 2017, translating to about 3000 rooms per year which is added across our tiny island.

Gross revenues are divided into 3 segments - 65% master rental from hotel operations, 13% from service apartment and 21% from retail/restaurants/commercial space. By divisional segment, 62% comes from leisure and 38% comes from corporate needs.

There are 3 ongoing AEI activities from the Village Residence in Clarke Quay, Orchard Parade Hotel and Regency House. Without going into the nitty details,  they have managed to add 9 additional retail/commercial space for the Clarke Quay premise and do up the swimming pool and 100 rooms to go for Orchard Parade hotel which will be done in phases with limited disruptions.

The company also has debt of $250m due in Aug this year which has been successfully refinanced this month.

There are 8 potential pipelines from the sponsors that the company can acquire and has the first right of refusal. One of them is the 30% stake JV they had with the sponsor on the Sentosa development which is slated to be completed in 2019 (more on this later).

The CEO also reiterated that supply is going to taper off from 2018 onwards and they are able to reasonably forecast this because the government has stopped releasing land lease from 2014 onwards for hotel development activities. Service apartment is excluded.

Q&A Session

There were a lot of questions asked and most of them are quite insightful to say the least.

I'll just summarize a few important ones to take note.

1.) There's at least 4 questions being asked on the Sentosa development further, so I have placed this top of the list. This seems to interest most of the attendees.

The Chairman reiterated that the trust currently holds 30% stake while when they are operationally stabilized they will consider buying the rest of the 70% stake from its sponsor. Again, the key word to take note is operationally stabilized and they are often not usually so until the 2nd/3rd year upon commencement.

Sentosa hotels occupancy are typically in the lower range of 75% to 80% but at a higher rate given the tourism proxy to the Sentosa Island. Village Hotel Sentosa are targeted at middle class who wants to stay at Sentosa but at an affordable range. I personally thought it's a good initiative to build that. The hotels at Sentosa are all rather expensive to stay at.

2.) Someone asked upon the valuation of the properties upon the winding down of the leasehold properties. I think there's a huge debate about the leasehold HDB properties and valuation recently that it prompts this question out from the shareholders.

The management shared that their shortest least of the properties is currently the Orchard Parade Hotels which has 45 years lease left. There is a canal down the hotel which belongs to the government so they do not know if they are able to obtain extension upon the expiry. Having said that, the management agreed that 45 years is still far away and it wont be until the last 20 years that the valuation of the properties start accelerating downwards. By then, they would have initiated and known the progress of the extension discussion with the government on the land.

3.) Someone asked on the hedging of the interests to the fixed rate.

The company currently has 71% debts that are hedged to fixed rate and 29% are variable. The current costs of debt is at 2.5%.

The management shared that for every 1% sensitivity risk analysis (i.e increase from 2.5% to 3.5%), the company would have to pay an additional $2.4m interests costs which translates to about 3% impact to DPU (about 0.22 cents).

4.) Another shareholders asked about the percentage of booking that were coming out of operators agency or aggregators like Priceline or Expedia.

According to the management, the booking that comes from direct website is only 5% and the marketing department has been trying hard to boost the sales coming out from direct booking. 28% of the booking is coming out from the agencies and the management have been trying to negotiate for better discount deals.

5.) On the Airbnb question, the management shared the views that they are a disruptive competitors but since the government has came out with the regulations that listing of residential cannot lease out less than 6 months, the disruptive has been minimized. At the moment, they do not see this as a big disruptive concern as it is mitigated.

Final Thoughts

I'm generally happy with what I heard and saw from attending the meeting.

Whilst outlook remains bleak in the next 1 to 2 years, I remain positive that from valuations point of view, this could be a good bet coming out the next 4-5 years waiting for the sectors to recover while receiving that 7% dividend into your pocket.

I also remain convinced that we have seen the bottom in the share price and all bad news have been priced in so that's where my train of thoughts are coming from.

I've done this strategy similarly with Sabana and CDLHT and are sitting on very nice paper gains so I think this will be a strong keep for me.

Thanks for reading.

Saturday, April 15, 2017

Which Market Should I Invest In?

There has been a few times when I saw people asking which markets should they invest their hard earned money in.

The questions have drawn mixed responses depending on the circumstances of the economic situation we are facing.

The US market has generally drawn many interests because they have companies globally which has plenty of moats, while historically they have proven to trend up and trade at higher valuations. It's a much bigger scale market really, and options are aplenty.

The Singapore market is a very small market in comparison and I've seen people who shun them because they couldn't find a good company to invest in. These people chose to turn to neighbourhood HK and Japan market because it's a much bigger market.

The Truth

People need to understand that there are no right or wrong answers.

If you are an investor who had in the past 2 or 3 years been invested in the US market, do check out for blind spot because the US market has hit a high valuation and all tides ride a series of waves amongst companies, pushing their valuation higher. In other words, do distinguish if the profits you made are because of skills or luck or a combination of both. It is usually that easy to ride the bull run to make money if the environment allows them to do so.

Skills of an investor are often tested during the bear market when markets are generally down and an investor's psychological vision and patience are tested. To be able to make money during a bear market will determine if your skills are good as external factors coincide to come from the opposite direction.

Like an athlete who focuses on specific skills in a particular competition (e.g backstroke swimming), an investor should also focuses on honing their skills regardless of the environment or markets they are investing in.

The truth is it is possible to make money in a bear market environment. It is also possible to make money investing in a bad company with the right valuation. On the other hand. it is also possible to lose money in a bull market environment, just as it is possible to lose money investing in a good company but at an expensive valuation.

Hone your skills, build your competency and know what you are good or weak at because that's what that matters in good investing, regardless the circumstances you are being faced on.

Tuesday, April 11, 2017

"Apr 17" - SG Transactions & Portfolio Update"‏

No. of Shares
Market Price (SGD)
Total Value (SGD) based on market price
Allocation %
CDL Hospitality Trust
Fraser Logistic Trust
IReit Global
LippoMall Trust
Fraser Comm Trust
Far East Hospitality Trust
Keppel DC Reit
First Reit
Total SGD

It's hard to believe that we are actually already in our second quarter of the year. Time flies so fast indeed.

It's quite surprising that towards the end of March, we have the Fed decision for a rate hike and the next thing we know boom, all my Reits counters shoot up instead of going down as many expected. I think this is a rather unexpected surprise for my portfolio.

There are not many transactions that is going on within the portfolio since the last update so I thought of doing an earlier update this month as I'll be much busier towards the end of the month.

First, I made an addition to the portfolio by buying Fraser Comm (FCOT) for 20,000 shares at a price of $1.26. I think the share price has been undeservedly slammed down due to its main anchor tenant HP uncertainty but I still do think there's too much pessimism built into it. In my opinion, it is common to see lease expiry incident happening with reits managers so that shouldn't be a problem unless they are unable to position it with certainty. Still, I think with commercial sectors bottoming and trending upwards, this is a good opportunity.

Second, I sold off all my Sabana shares at a price of $0.515 for a profit of 53% inclusive of past dividend received. I didn't exactly bought this too long ago so the short term gain have been extremely fruitful and added nicely to the bags of the profits accumulated. In my opinion, a lot of the meats have been priced in the current share price so at 0.9x P/BV it no longer represents a compelling value to hold. It's a divest for me at this point.

Third, I also sold off FCL shares at a price of $1.775 for a profit of 24% inclusive of past dividend received. The company recently announced a major development they will have in Bangkok and the share price has run up because of it. While it's a positive news, it's still way too far timeline to make any sort of projection at this point, hence the divestment. I'll just sit around in cash at this point.


In my previous article (Link Here), I also wrote about my experience surrendering the policy I have. Since this portion has been provisioned in full, the surrender value of $4k received will go straight into my warchest as addition.


This is a good month as I am entitled to a bonus month which boosted my cashflow tremendously.

It was a lot better than my expectations and I have also received about 6% increment in my salary, which is also better than my expectation. This will help to boost my tight cashflow around the house.

The portfolio has grown from the previous month of $500,961 to $523,890 this month (+4.5% month on month; +40.8% year on year). This portion includes capital injection.

Performance wise I think I'm doing slightly ahead better than expected at around 12% (TWR) and 54% (XIRR) year to date but since there's a lot of debates on this metric since last year, I haven't been focusing too much. 

I'll be heading down for the AGM for FEHT, CDLHT, Ireit and UOL in the next 2 weeks. So looks like things going to be interesting how it pans out.

Here it comes again earnings season!!!

Good luck everyone.

Saturday, April 8, 2017

I Surrendered My Whole Life Policy And Lose 80% Of My Capital

I thought this will be a good case study to look back on what I did recently at some point in the future.

I would not call this a mistake that I did because I think the policy has served its purpose for the past 4 years which I no longer needed it anymore. Still, if there is a mistake to point out, it'll be that I'd be better off taking term back then. 

Well, time cannot be rewind, so I guess life moves on from here.

My WL Policy

I am not an expert in this insurance area and is/will never be an area that will interest me so I am not comparing my policy to any benchmark or competitors.

My WL policy is a straightforward deal from Prudential multiplier which will cover me a sum assured of $500k upon ceased. This multiplier will be effected until the age of 60 before it will revert back to the original value of $167k.

I chose a 15 year option paying a premium of $543 every month and have been paying them the past 3+ years before I decided to surrender.

I paid a total premium of about $20k approximately during the course of my policy.

Surrender Value

I was informed by an acquaintance in facebook that I can check out alternate 3rd party company that might be willing to buy over my policy.

I checked with purvis capital whether they will be able to offer a higher surrender value but the conclusion is they are not because the duration I have with the policy is too short. Else, usually on average they would be able to buy your policy at a 5% higher than the surrender value you might have with the insurance company.

In the end, I managed to receive a surrender amount of $4k, which sums up to about 20% of the total premium I've paid. The loss is 80% and about $16k in absolute value.

Why Did I Surrender?

This is a personal reason so I am sure there would be people who might disagree with me.

I reviewed my needs and cashflow and decided that my family no longer needs the policy as much as they did should something happened to me today as compared to 3 years ago. The amount of quantum we are talking about is always going to be subjective but we agreed and decided on what is enough.

Someone could argue that the policy can also be a good form of endowment in other uses, i.e if I keep them throughout the full 15 years and redeem them the next 20 years or something. I am not a big fan of endowment myself so that's something not in my plan at all. Still, I think it's worth mentioning that it CAN be useful to particular individual with certain needs so it is wrong to say that they are a total crap.

With more cashflow on my hand, I can have an alternate way to build up my wealth in different aspect which I think can also serve as a form of defense. Like a team of Barcelona, Offense is often a good way of defense. If you cannot defence, score more goals. But I think there needs to be at least some basic defence there and I think I've established that (not going into the details here).

How Do I Feel?

If there were anything to highlight, I think this part would be the most important of the lots.

First, I thought it was important to acknowledge that I have made a mistake buying a WL instead of a term.

Second, it was also important that I put my emotion aside, review my needs and decide on things swiftly. I could have let it dragged on for a few more years before deciding to withdraw and thought it was foolish. I thought it was important to be decisive and not wishy-washy about things. 80% loss, take it with stride and life moves on from there.

There are at least about 5 people in my circle of friends who thought that I would be suffering in this painful loss.

I guess this is the same with why people are frustrated with CPF because they are assuming CPF to be money that they would be depending for future retirement. In wealth building, I think it is prudent and conservative not to include them as part of our retirement strategy. So anything that comes out of it is a bonus, not a privilege.

I don't want to give the impression that thinks that I belittle this amount of money but it is usually part of my conservative ways in building wealth strategy to exclude these particular things in my computation by taking a 100% provision so instead of feeling like a loss, it feels like a gain to me.

Yes, I know it is pretty silly to look at it that way, but my cashflow is actually better this month by $4k because of this.

* Again, this is a disclaimer to highlight that the products do not suit my needs at this point but does not mean it does not suit any individual at any particular point of time. Just need to be clear about that.

Tuesday, April 4, 2017

Selling The Idea of Passive Income - 2

Exactly a year ago, I wrote an article on the various miscellaneous ways to sell the idea of passive income to the retail public. The link to that article is here.

In that article, I articulated the main gist of the conversation that I had with my colleagues regarding the way passive income works. It was a rather fascinating conversation in the dialogue because they were rather fascinated by the outcome more than the process to get there.

This is perhaps why it is common to see why many courses use the outcome as a selling point. Lazying by the beach on a bright sunny morning with a beer in one hand and a magazine in another or the serenity tranquility area surrounded with peace instead of the dreaded 9-5 jobs with phones ringing and buzzing around.

One of the good thing that happens this year is I managed to get one of my colleague at work to start his investing journey. He's one of my good friends at work and we had lunch often together so naturally I had the opportunity to brief him on ways to get started more than the usual general brief conversation.

He is not a total stranger to personal finance. In terms of the daily habits, he has accounted for automatic savings whenever his salary was credited so he only sees the leftover amount that he can spend. I thought that was a good initiative in trying to organize his own personal finance and keep them up in shape. He has no problems maintaining so I figure out he is interested in investing because he wants his money to grow and work harder for him.

Over a few weeks, he managed to open a cdp account and the brokerage account that I recommended, and have them linked. And after a few more days, he is up and started with an initial $5k investment in some of the companies he has been eyeing on.

People who are intrigued by the outcome or returns in this case don't usually last long in the investment scene. When the party is at its peak, these people usually join in the fun, adding fuel to the bubble but they will disappear when the going gets tough or when investment seems "risky" to them. The idea of selling passive income to the public is a lot easier to achieve than getting the actual person itself to succeed and remain in the investing scene. When the big waves come, it'd be interesting to see who remains as the last survivor ready to fight the war.