Tuesday, January 30, 2018

The Days Are Long The Years Are Short

The days are long but the years are short.

This is what parenthood has to offer and those who are parents yourself will understand where I am coming from.

My younger son turns 1 tomorrow and coincidentally he shared the same birth date and year as the son of one of the community blogger, LP (Happy birthday Zef!).

4th year of parenthood

This is technically my 4th year of parenthood since I become a parent in 2014 when my elder son was first born.

Back in the days, some days feel extremely long with the changing of the diapers, frequent visit to the doctor, constant worry of endless fever and many more.

Gradually, time passes and our second son was born in 2017. We were glad to have him onboard because he brings smiles to the family.

My younger son has a totally different character than the elder. The younger is more extrovert and he likes to eat fruits more. He also likes to bully his elder brother by taking and snatching the toys most of the time. They also quarreled often when they cannot get their way by using their baby language so we have to step in.

From our side, we became a lot more experienced with the routine stuff like buying and changing diapers, fishing for milk powder and burning energies for indoor playground during weekends.

We also recycled many of the clothes and toys so there are definitely economies of scale.

Split Time

Unfortunately, with two children, we have to split our focus and attention for one each.

The elder son now goes to the nursery class, so his schedule is more fixed like mine going to work but he still needs plenty of attention when he gets home.

Often, me and my wife have to take turns taking care of one each and this takes a toll on our body as we became more tired and have less personal time for everything else. We had to hire a personal nanny to take some of that time away so we could balance our allocation of the lives we want to live.

We have plans to send the younger one to a basic beginner music class, just for him to mix around with the other children and expose him younger to different musical instrument.

Moment To Cherish

It's been an incredible moment having the past 365 days with him as part of the family.

We haven't manage to spend the night sleeping together because we cannot afford to have a vicious cycle of one child crying over another in the middle of the night so we leave him mostly with the nanny.

For his special occasion, me and my wife have decided to celebrate by booking a private event photoshoot so we could commemorate this moment. So I have taken leave from work and that's where we are going to spend our time together.

And for many more moments to come in the future because the years are short.... We have to cherish them and not take them for granted.

~ 1 day old ~
~ 1 month old ~
~ 2 month old ~

~ 3 month old ~

~ 4 month old ~
Staycation at Shangrila Rasa Sentosa

~ 5 month old ~
Baby Spa Swimming Lesson

~ 6 month old ~

~ 7 month old ~
Entopia Butterfly Park @ Penang

~ 8 month old ~
Learning Monkey & Other animals

~ 9 month old ~
Palawan Pirates Ship @ Sentosa

~ 10 month old ~
Learning how to play pool

~ 11 month old ~
Kids Club @ Phuket

~ 364 days ~
1 more day to the full birthday

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Saturday, January 27, 2018

Recent Action - Tuan Sing

I recently initiated a new position for Tuan Sing at a share price of 47.5 cents for 40,000 shares.

Tuan Sing caught my eye only recently after the report from UOB came out back in Nov last year, highlighting a few of their solid development and investment properties on hand. Since then, I’ve been studying the company to understand it a little better.

The company has been undervalued for a long while, and it continues to be so until the recent few years when they build up market cap to compete with the rest of the other big boys.

I feel there's a lot of momentum for developer this year, hence I wanted to build a larger exposure apart from the other property play (Ho Bee) I have.

I was looking for a momentum play, company that issued a clear guidance of what's going to come in the next 1 to 2 years, one with a cheaper valuation and laggard play, specifically in terms of low P/RNAV and high ROE – a combination of the two.

High ROE can be due to taking up higher gearing but in a bullish market, leverage can be a tool to expand.

Tuan Sing had also just released their final year results on Friday late night so I thought I'll cover that as well.

Tuan Sing doesn’t possess a brand name that people on the street might hear of, but they are actually a property conglomerate with various development assets in residential, investment and hospitality which spreads across different geographical area – Singapore, Australia and China. Apart from properties, which took up the bulk of their activities, they also held some stakes in SP Corporation, Hypak manufacturer and owns about 45% of Gul technologies as part of the JV.

If you just read their financial statement alone in a single quarter, that's enough to make you dizzy.

It is so extremely difficult to digest the full nature of their business.

Hotel Operations

The company received recurring income from the hotel operations in Grand Hyatt Melbourne and Hyatt Regency in Perth, which derived about $4m nopat. It is still relatively small proportion compared with the rest of their income. 

The company has also planned for an asset enhancement initiatives (AEI) for their hotels in Perth for an extended space so once it is completed we will see some retail spaces beside the hotel.

There is also a revaluation upwards on the Grand Hyatt Melbourne from $335m to $365m this year.

This is not a deal-breaker for me.

Commercial Operations

This year, the company will complete the 18 Robinson office development at about 3.5% cap rates which will further add to the recurring income portion of the earnings. 18 Robinson is also revalued upwards from $397m to $486m this year, signalling an office demand and compressed cap rates.

This is one catalyst I am watching out for in 2018. This will be their big driver to the income from FY2018 onwards. I think we'll see positive momentum coming out of this similar to Guocoland when they just completed their redevelopment on TPC.

They also bought Sime Darby for $365m earlier in 2017 to develop a commercial center in the vicinity sometime in the future. Sime Darby redevelopment is a long term catalyst but I'm unlikely to be vested till then. Not a big deal breaker for me in the short term.

Residential Development

The company seems to be bullish on the property outlook and they are launching two new projects - Kandis Residence and Remaja Land which will boost their bottomline when they are completed.

This is a mid term play, which by then it will be sold it'll probably be in the profits book by 2020. Again, not a big deal breaker for me right now. The sentiments are going to drive the momentum upwards though.

They also intend to build to build an integrated town resort in Batam in the next 2 years so again it'll be interesting to see when all are completed.

Other JVs

Apart from their property operations, they also own some businesses outside.

Tuan Sing owns 45% stake in Gultech, a PCB manufacturer. Since it's already taken private, it's hard to analyze this one. The company however, gives guidance on the performance of Gultech each quarter.

The company reported that Gultech reported bottomline of around $24m, so at 45% stake, that's roughly about $16m. Still very decent.

The company also owns some 80% of SP Corporation doing commodities trading and Tyres manufacturing. It delivered minimal on this one.


There's almost close to zero chance the company can increase the yield up as their cashflow is tight given their recurring income is still very low.

The most likelihood deal is a special one-off dividend through divestment of their non-core business or through a reits spinoff in the making, but I doubt it will be the focus in the short term.

Until then, investors can forget about this being a yield play.

Comparison with other developers

I quickly draw a comparison among the developers I keep track of.

A couple of them fits the bill from the table below - Tuan Sing, Ho Bee and Guocoland among the others.

Oxley ROE is an outlier as they took on a much higher gearing. The rest are pretty much almost similar in terms of gearing.

Final Thoughts

I'm just riding short term on this one with no plans (yet) in sight on the long term.

If we trust the table above, companies with higher ROA and ROE should do well while momentum for developers pick up, but the moment the cycle is bearish, the metrics will go down massively as companies start to hoard their assets and not released it.

My strategy would be safer to go long on a shorter time frame while momentum is still on the way.

Thanks for reading.

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Friday, January 26, 2018

You Need 2 out of the 3 Levers To Achieve F.I.R.E

Having financial independence as a target should be a long term goal for everyone.

Achieving Financial Independent Early Retirement (F.I.R.E) on the other hand makes the task even more difficult because we are competing for time where it plays a big factor.

Long term readers of my blog know that I’d like to achieve F.I.R.E sometime in the mid 30s from the start, and I’ve always make this as a personal stretch goal which I will review each year.

I have always believed that there are 3 levers that will determine the outcome of my situation and that I will need to achieve at least 2 out of the 3 minimally in order to be successful.

Before that, let’s go through what are those 3 levers first.

1st Lever: Income Growth

Most of us grows our capital base by being an employee working day job from 9 to 6.

The first salary base that we get from our first employment plays a big part in the future compounding. If we start from a low base, there’s a long way to play catch up at a later stage.

Luck often plays a big part in determining that too but we shouldn’t be dependent on what we cannot control.

There is usually an annual increment exercise for most multi-national companies, so employees should gradually see their income grow higher over time. The growth “g” part is a critical factor like most valuation methodology in investing so we need to play it smart. The “how” part is another matter altogether.

We need to distinguish the difference between progression and promotion.

Progression means you probably did okay and the company survives another year so everyone in the company gets about 3-4% of increment the following year.

Promotion, on the other hand, means you get a new responsibility and are promoted to the next level, so your increment should be higher than usual. The most common increase is about twice the amount of progression minimally, or you can put 2x Progression growth in your excel sheet. Promotion doesn’t come often and depends on many factors, but if you can consistently do it, you’ll win the rat race within the company.

Jumping to another company immediately after your promotion increase will probably give you the best ROI. I’ve seen a lot of people who do this and many employers agree this pose a big risk to the company in terms of losing talents.

The best case scenario for a 10 year career in terms of ROI would look like this:


Again, not everyone can do it well, but we’ll need to strive for it and play our best poker card.

2nd Lever: Savings Rate

While it may seem pretty obvious that we need to spend less than what we earn, the reality is it is not easy to digest until we are accustomed to seeing things differently.

The higher the savings rate, the more likelihood you are going to have excess funds at the end of the day.

That is being straightforward.

The reality is you’d likely to start from a high base and then gradually go down as you tend to start your own families, have children, buy tons of milk and diapers, renovate your home and furniture appliances and many more.

For someone who already started with a low base of savings rate from the time they are single because he may be spending aggressively on gadgets or other needs, he will have a difficult time adjusting his spending pattern once the tough gets tougher.

I’ll leave each reader to imagine what does good looks like in this aspect but the general idea is the higher the better.

3rd Lever: Compounding Returns Rate

The final lever refers to our ability to use the excess funds coming from the first and second lever and compound it over time.

This usually comes in the form of investing, either through bank deposits, equities, bonds, property or any asset class that generates positive returns.

In order to do this well, we will first need a few years to build up our level of competencies in the area of interests where we think we would excel most. The amount of experience and competencies accumulated over the years will play a significant part in the compounding returns.

The worst part of the deal is that compounding can quickly go south and is definitely an accelerator to wealth destroyer.

2 Out Of 3 Levers To Succeed

Fortunately, the good news about this is you only need to be good in 2 out of the 3 in order to achieve F.I.R.E.

Some of us may be good with our job but bad at churning out returns through compounding or vice versa where we may be good at savings but bad at increasing our income growth.

Of course, achieving all 3 jackpot would be nice to have but the idea is to try and achieve 2 out of the 3.

Let’s try to simulate a few scenarios with real numbers how this can look like.


Let’s assume John who currently earns a decent salary base of $2,500 and he receives an annual wage supplement (AWS) because he works in an MNC.

For simplicity purpose, let’s assume his annual salary base is $2,500 x 13 = $32,500, without any variable being thrown in.

John wants to retire early at the age of 40 and build up sufficient wealth for his simple financial independence lifestyle.

John is also single and attractive looking.

Scenario 1

This scenario will focus on lever 1 and 2 where John lines up a strong career path by earning a 10% CAGR over the next 15 years and is extremely frugal with his spending. His savings rate appends a high rate of 80% throughout as he continues to maintain his frugal lifestyle.

Unfortunately, John spends most of his time at work and therefore do not have time to build up his competency in growing his money. His money is mostly in fixed deposits over the long term.

From the table above, you can see that the first and second lever plays the big role in his networth while the investing returns are meagre returns that play a supporting role behind the scene.

At the end of age 40, he would still possess a remarkable $953,387 in his networth.

Scenario 2

This second scenario will focus on the savings rate (2nd lever) and the compounding returns (3rd lever) where John is rather slow at climbing the corporate ladder but he lives a simple lifestyle and he builds up his competency in investing in the stock market.

He still gets his annual increment of about 3% per year while he saves almost 80% of his income from it. He uses the funds for investing and he managed to obtain a compounding return of 15% per annum.

At the end of the 40 years, he is still able to amass a networth of more than half a million and retire early because of his frugal lifestyle.

Scenario 3

The third scenario will focus on the income growth rate (2nd lever) and compounding returns (3rd lever) where John climbs up the corporate ladder and at the same time compounding fast on his returns. He is however spending rather heavily on entertainment and travel in order to relieve his stress from work.

He still saves 20% at the end of the day, and used the money to compound at an average of 15% per annum.

At the end of the 40 years, he is able to amass a networth of $953,387 and retire early.

Which Scenario Do I belong?

This is the first time I am doing this exercise so it'll be interesting to see where do I end up.

This sharing is by no means a point for showing off but rather for academic purpose.

If I have to choose among the 3 scenarios, it will most likely resemble scenario 3 in my case.

I started my career at the age exactly 10 years ago, with a very decent salary base, and I managed to work on my income growth and climb up the corporate ladder. There were some difficult times but each progression and promotion was almost always a new challenge. I also had 3-4 jobs in my 10 year career so the trick was always to monitor the CAGR growth over the years.

Having a high capital base means a higher capital injection that I can put for my investment.

If I was to draw a flowchart, it'll be like this:


My 10 year CAGR in terms of income growth is at 12.1%.

On the savings rate, I am a crazy saver when I was single, until I get married and have children and that's when savings rate started going south. I probably saved about 80% for the first 4 years, 50% for the next 2 years, and then 20% for the last 4 years. This is probably my weakest lever at the moment.

On the investing front,  I was fortunate to churn out a return of 17.8% in the stock market over the last 8 years. This helped to boost my networth significantly especially the last couple of years.

I still have a few more years in the corporate world (hopefully) in terms of energy level and then hopefully I will move on to improve my savings rate lever.

Final Thoughts

The maths are simple.

Crazy Income + Crazy savings rate + Crazy Compounding rate = Crazy F.I.R.E

This serves only as a means of exercise to illustrate that one doesn't have to be strong in everything but focus his resource where he excels most.

If you are those who excels in your job, go for it because it can reward you tremendously and you can pick up other things at a later stage (or at the same time).

You just need to make sure that you are good in 2 out of the 3 and the maths will take care of itself.

There are many assumptions that I've purposely left out such as preparing for housing, wedding, parents allowance, this expense, that expense, etc. Two person in the same household could perhaps also accelerate F.I.R.E. This isn't the purpose of this article. 

What about you? Which scenario do you belong?

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Friday, January 12, 2018

"Jan 18" - SG Transactions & Portfolio Update"

No. of Shares
Market Price (SGD)
Total Value (SGD) based on market price
Allocation %
Fraser Logistic Trust
Ho Bee Land
ST Engineering
EC World Reit

I'm excited to begin the new year with some new addition to the portfolio.

The market has been somewhat kind in this January where it has only gone in one direction and the portfolio also benefited a little from it.

If this is a preview of what's going to come for the next 11 months, then we can really see some serious wealth building there. Of course, if the market keeps valuing the company upwards, there's a serious chance I might cash out and look for other opportunities. But all else, I think they are good enough companies to keep for the longer term.

This month, I have accumulated more on Vicom for 1,400 shares at a price of $5.77. I thought they still represent a decent proposition for an alternative fixed deposit given that their vehicle outlook prospect is improving and I think the decent yield of 4.6% meanwhile would keep me happy in the bay given the lack of other options in the market.

I have also added EC World Reit, a new addition to the portfolio, for a small position of 20,000 shares at a price of $0.77. The Reit is currently headed by Alvin, someone whom I worked with previously and I've known him for a strong and strict personality who doesn't tolerate nonsense. The Reit has an auto reversion uplift to the master leases and are a proxy to the strong e-commerce growth in the China sector. They are currently yielding a decent 7.6% based on my entry price so I'll hold and monitor meanwhile.

Net Worth Portfolio

The portfolio has increased from the previous month of $613,516 to $615,330 this month (+0.01% month on month; +26% year on year).

It's still relatively early days so I am not expecting businesses to flourish overnight and things to change so fast.

It's another round of reporting season to look forward to so it's back to reviewing of business as usual.

Thanks for reading.

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Sunday, January 7, 2018

Debunking The Rule of Thumb About Emergency Funds

It's been quite some time since the last time I talked about something that is related to personal finance so I think it's about appropriate to revisit them in the early days of the year.

The topic related is about emergency funds and it is right at the heart and foundation of personal finance.

Often, we hear about the internet or professional consultants who preach about how importance it is to keep at least 6 months of our living expenses as emergency funds before we can start investing and growing the rest of our funds.

In this post, I am going to challenge that rule of thumb that it's not always necessary and propose that we create more awareness instead about our whole situation.

What is Emergency Fund?

First, we need to comprehend the definition of an emergency fund.

An emergency fund, in my definition, is cash that we've stashed up for savings for the sole purpose of utilizing them when certain events that has a low likelihood of happening hits our lives in order to maintain the same lifestyle that we are currently experiencing.

The key to note here is events with a low likelihood and is not something that we are expecting to happen.

If it is something that has a probability of more than 50% chance of happening, then it doesn't fall under this category and we should be taking action to mitigate the whole situation before it happens instead of bumping it up through emergency funds.

Purpose of Emergency Fund

The purpose of keeping an emergency fund is pretty straightforward.

If I am a sole breadwinner of the household and have the responsibility to pay for my kid's school and other home utilities, then it'll make sense that I should keep a certain sum of money in case life takes a back hit.

What I am debating is if the general rule of thumb of at least 6 months worth of living expenses is sufficient or insufficient in cases like that.

The higher the amount, the more this can be deterring to many people especially:

i.) They do not know how much expenses they are incurring each month;
ii.) They do not know in crisis scenario how much they can scale down;
iii.) The total sum of money can be pretty intimidating to save.

How do we determine how much is enough?

You've heard so many versions of emergency funds that you are confused and do not know exactly how to start.

The first baby step (step 1) is always about increasing awareness and this is a foundation that I believe is more important than keeping an emergency cash.

By awareness, it means that we are fully aware of the surroundings and events within our boundary and control. For example, if I am someone with a background history of illness, then instead of waiting for the event to take place, I might want to proactively seek help by regularly going for medical check-up. I can even take a further step by purchasing the required insurance plan to guard myself against the expenses I might have to pay for the illness. Once this is done, I am able to reduce the amount made for my allocation of health in the emergency funds wallet.

The next step (step 2) is about understanding how much basic necessities vs discretionary are contributing to our expenses.

Many people can quickly compute how much expenses they incur in a month but failed to comprehend where the expense allocation goes to. In some cases, they are left bewildered where the money they spent are being allocated to.

In order to start understanding our own expenses, it is important that we start tracking down our own expenses for at least a month. It does not necessarily have to be to the dollars and cents and if you're someone who's lazy like me, you can aggregate them by the expense bucket lists. For instance, under my children's day and care, it would include things such as diapers, milk powder, clothing, napkins, baby food, vitamins and things like that. Then I have the education lists which include the school and the other curricular activities.

The importance and objective of doing that is we create more awareness on the overall spent on certain buckets and can eliminate discretionary expenses that aren't necessary.

The last step (step 3) is about determining where the optimal strength are in your household and surroundings.

Married couples always have the advantage on this because we have an extra partner to work with on the strength.

For instance, in my case, I am more comfortable with income creation while my wife is more focused towards savings. In this case, we agreed that we would roll the plan out by investing my income and kept my wife's savings as part of our emergency funds. 

In another case, if you are someone who is stronger in the savings, it also helps that you reduce or eliminate debts in good times so you have more room to mitigate in bad times.

If you are someone who is good in investing, then you can diversify the income so you are less dependent on one.


Often, many people keep so many months of emergency funds without understanding the underlying reasons behind it.

It is seen as an excuse that the plans are well in place when it could just be a lazy excuse to hide certain weaknesses away.

Perhaps proactively reviewing our own checks is a good way to start understanding about ourselves which might just allow us to discover some missing parts that need maintenance before it gets worse.

Thanks for reading.

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Wednesday, January 3, 2018

Investor Sentiment in Today's Bull Market

The new year has started with its first green week and the general sense you get from the market is the people on the street are more optimistic, building up a strong end to 2017.

Sir John Templeton once gave a great quote that says "Bull market is born on pessimism, grow on skepticism, mature on optimism, and die in euphoria".

If you'd ask me which stage do I think the market is right now, I would think that we are at the optimism stage, which is usually accompanied by higher market valuation, higher interest rate, tightening of the monetary policy, increased spending, etc etc. The general consensus is that we are not at the dire stage of pessimism.

The 2D diagram below would probably give an easier visual of the general sentiments of where the maximum risk is during certain stages of the financial market.

If you are someone who is a beginner in the stock market, the chances are you would enter at the point of the optimism, excitement or euphoria because it is simply just too comfortable about listening to all the positive news and outlook out there. From a psychology point of view, it is comforting to do herd investing and follow what everyone is doing, without giving much thoughts about the downside you might be facing.

On the other hand, there are several people who falls under the category of FOMO and they become disillusioned by the fact that the friends and neighbors beside them are getting richer each day, upgrading gadgets, going expensive holiday, and spending more on items. These people waited and waited and ultimately surrendered by the temptation to join in, unconsciously not knowing that psychologically they are not ready and timing wise they are last to the party.

The diagram below gives a view from a 3 dimensional matrices which is simple but more in-depth.

It summarizes this perspective into a simple, unified view of the effects of sentiments on different types of stocks and their valuation level.

The x-axis shows the different types of stocks, from the safest to the most speculative. I think it was determined according to the beta.

The y-axis shows the valuation metrics.

The different dotted lines show the hypothesis in the swing in sentiments during certain market conditions for different beta stocks.

The empirical theory shows that people tend to have high sentiment for low beta stocks with low valuation level and high beta stocks with high valuation level. The argument shows the more speculative the asset class is, the greater the valuation, the easier the push up and thus herd investing. 

Sentiments are higher but may not necessarily wiser.

In the risk based asset pricing models, CAPM, a stock's expected return depends on the risk exposure measured by beta, and the risk premium, which can be measured by the sentiments level on the expected return on the stock market as a whole. Interestingly, when sentiment is high, speculative high beta stocks have a lower returns on average over time.

Ben Carlson did a nice backtest theory on the US market where it shows the average annual returns on investors who invested at the high market valuation high sentiments level across from 1945 until 2017.

The idea is that if you have invested in lower valuations, the chances of you making a higher returns will be more likely in the future. This rhymes with the idea that money is made when you are buying, not selling and that's because when you pay for something that is expensive, the return on investment will be a lot lower if we average that out.

The converse is also true.

If you are buying at a low valuation, then you have more protection in the form of margin of safety that any doomsday scenario will be covered by your cheaper entry. Hence, the likelihood of a higher ROI is more likely to happen.

While the market can go higher with each optimism, it really depends on how ready we are mentally and psychologically to face the battle when it comes someday.

The general sentiments of the market is definitely high, and people are expecting a higher return. It might just come to bite back someday, not when the least you expect it.

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