Thursday, September 19, 2019

Is Your Home Ownership An Asset, Liability Or Investment?

Buying a home probably ranks as one of the most important milestone in our lives.

After all, it is a huge investment that we have to pay upfront and will have to service for the most part of our working lives.

Hence, it is common for people to think of their home as an investment and humans typically well...do not like to lose out on their investments. No one does.

When the value of their homes drop, their hearts sank together with the times.

This is probably the reason why we see so many older Singaporeans complaining on the lease expiry of their 99 years leasehold HDBs, which may become worthless once the lease expires. After all, they've been servicing it all their lives, and now you are telling them that it is worthless at the end of the lease!



To homeowners, they have a constant worry that they might outlive the leasehold HDB home they "own" and will have no roof over the head. More importantly, they worry about seeing their home as a liability and value of their HDB expires to zero.

This is all playing in the mindset.

The idea that homeowners see their primary residence as an asset or investment comes from the fact that historically the value of their properties rise over time. Think about our elder peers or generations before us that have bought their homes for less than a third of what we are paying today.

Even if not, it is likely that in a limited land supply like Singapore, there is a high likelihood that developers will come in and "buy" out your property before the lease runs out, which is something pretty common these days.

There's also this idea of lease buyback which can be taken into consideration.

This is the reason why property purchase is so popular and you can see the reason why an additional curb of the cooling measures have been put in place.





But here's throwing back the question to you homeowners.

Do you see your home as an asset which depreciates over time, a liability or an investment?

The First Argument: A House must be classified as an Asset. We must follow the Accounting rule!

The accounting rule is pretty rigid and has been around for the longest of time.

When a company purchases a property, they would have to record it as an asset. This asset would then have to be amortized over a period of their useful lives as depreciation.

If the intention is to purchase it for investment and eventually lease out to tenants, it would have to be classified as an investment property distinctively.

It's difficult to argue with the International Standards beyond the stature of this practice.

But Wait! Homeowners don't usually generate Cashflows from the primary residence they stay in!

The idea that when you buy something as an investment, you usually expect to receive some sort of cashflow on that asset, which is something similar in the nature of stocks or fixed deposits.

If the market value of that asset or investment is determined by market forces who decides on what price should that be at any point in time, then it is no different from me picking up a stone on the street and having it valued at $1m myself, assuming I am the only interested party to play this game.

This is why there's always a lot of debates on whether gold or cryptocurrency is classified as an investment or speculation. They do not provide cashflow and their market value depends on how people perceive their usefulness over a period of time.

Homeowners face the same issue.

They live in the space they buy in and it does not generate cashflow returns for them.

You might make a case for cashflow if you have spare rooms to rent out and you derived rental income from it, but what about homeowners who fully utilize the space to themselves.

The Repair, Renovation and Improvement Is a Carrying Cost To You.

You probably have to budget for wear and tear that happens during your stay throughout the years.

If you are lucky, you would only have to spend on minor routine repairs and maintenance, while major repairs such as floor tiling, air con compressors are not uncommon either.

On top of that, you will also need to pay property tax for owner occupied and home insurance, all of which will add up by the time you finished living in the house.

Home Is More Than Just Money! It Is Where The Family Resides And Collect Memories!

The one most probably compelling reason to believe why home ownership is not an investment is because its primary purpose is providing shelter and roof over the top for the family.

Since it is likely that you and your family will need a shelter to live by, you have little control over situation where you needed to sell. Even so, it is likely that you will end up purchasing another in return for a one on one exchange.

The inability to sell the home, even in the most unlikely scenario of a property boom will mean that you are likely to simply sit on the appreciation gain, until one day when you decide to sell it off to another people and realize the gain.

HELOC To Your Rescue!

There is a however one way out if you want to treat your home as an investment.

Home Equity Loan of Credit (HELOC) facility will value the equity portion of your home and entitle you to how much you can borrow depending on your equity. The facility loan is taken under the care of putting the property as collaterals that you put in.

This method works tremendously in the past where people buys house during a property boom period where the value (thus equity) continues to go up and they are able to secure a HELOC to fund another property purchase and the steps repeat itself.

This happens until the cooling measures were introduced, in particular to the additional stamp duty for the second property onwards and the limit to how much they can borrow, that this practice has since slowed down a lot.

I'll talk and explore a bit more on this in my next article series.

Asset or Liability or Investment?

You really have to evaluate on how you define a house vs home and whether you are comfortable moving your family everytime you see an opportunity to do so.

It is definitely not a risk free environment where property purchase is promising good returns based on past historical data.

If you buy your house at a premium, it is still going to bite whether or not you treat it as an asset or liability.

Thanks for reading.


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Tuesday, September 17, 2019

Why You Should Apply For Approved In Principle (AIP) Before Buying Your Ideal Private Property?

Buying your first property can be confusing and time consuming because of the regulation changes that you need to keep up to and remain relevant to these changes.

But whatever the changes are, they are ultimately down to how much the banks are willing to loan based on the regulations of the Tdsr and your own personal commitments.

This is why it is important that you should get an Approved In-Principle (AIP) before committing to purchase a property, no matter how attractive or undervalued the property is.



What Is Approved In-Principle (AIP)?

An Approved In-Principle is basically an official agreement with the bank after they check based on your income and credit history.

The AIP approval is usually short, between 2 to 3 days, assuming you don't have specifics that they need to further investigate.

Their validity is usually 30 days from the approval date, so you can use that as an official that the bank will lend you money and you can proceed to put your Option To Purchase (OTP) on the property that you are buying.

Why Do You Need An Approved In-Principle (AIP)?

An AIP gives you notice how much banks are willing to borrow money to you. From the banks' perspective, it is important they they do their due diligence to ensure you have the financial capability to pay the loan back for the entire duration of your loan.

Without having an AIP in place, it can be difficult to engage in negotiations with the seller because you will not know for sure what's your loan ceiling and thereby unable to make an intelligent choice during the negotiation process.

If that is not all, you might also lose your option to purchase (otp) money should there be complications with the bank and you are unable to get the loans from any banks.

Most agents are also wary of the situation if you do not have an AIP because that would mean the transactions can lapse anytime during the negotiation process and you ended up with time wasting for all parties.

What's The Steps To Get An AIP? 

First, you can check on the rates that are being offered by the various loan providers based on the current market situation.

These rates do change rather quickly so you may want to get yourself updated with the latest available rates.

There are a couple of sites which allows you to compare across the different bank rates but do take note some of the small terms and conditions that are not so evident at first glance.

A good mortgage advisory or independent advisor will be able to explain to you each of the pros and cons and will be patient until you get the right deal before committing a loan.

Once you've set on which loan provider you want to take up the loan with, you will need to fill up their application form together with all the required financial information for them to check on your credit history and availability of how much loan you can get.

These includes your past 3 months payslip, last 12 months Cpf statements, Hdb financial info and latest Notice of Assessment.

What Is Considered During The AIP Review

Not all profiles of income derived are treated as equal.

For example, the TDSR limit recognizes full-time employment income as 100% but variable income as only 70%. This means that if you received $50k per year on your rental, they will only recognized 70% of the $50k in their review. 

The same goes for self-employed owner who derived their income and are only being recognized 70%.

Dividend income is not treated as income under the TDSR limit.

The TDSR bank restrictions also favour younger age profile as they are allowed to borrow up to a maximum of 35 years before you turn 65 years old.

How Long Do You Need To Wait? 

The assessment will usually take at most 2 to 3 days to assess if the information to complete.

If they need more information from you, they will contact to get more supporting documents.

With the AIP in place, you will be in a better position to know how much loans you are able to secure and play the negotiation to your advantage from thereon.

So there you go! Don't take the risk of having committed to your purchase without first knowing if you are able to obtain a loan.

You don't want to lose out on your 1% OTP for sure!

P.S: This is a series of educational post relating to property purchasing which hopefully could help some people out there buying property for the first time.

Stay tuned for more!


Saturday, September 14, 2019

Sep 19 - Portfolio & Networth Update

No.
 Counters
No. of Shares
Market Price (SGD)
Total Value (SGD) based on market price
Allocation %
1.
Starhub (Short)
120,000
1.35
 162,000.00
15.0%
2.
HK Land
  10,000
US$5.75
   79,350.00
15.0%
3.
Far East Hospitality Trust
    3,000
0.69
     2,070.00
  0.4%
4.
Ho Bee Land
       300
2.29
        670.00
  0.1%
5.
Warchest
  
 370,000.00
84.5%
Total



 614,090.00
100%






Less:
CFD Leverage @ 2.8%


(112,000.00)

Total



 502,090.00
100%

I'll do a quick update on my positions for the month of September since there isn't much going on and I'm also focusing my time with some other stuff most of the time (I'll reveal when the time is right).

The only changes made to the previous month update was the short position which I took for Starhub back in late August which you can read the thesis here if you have not yet done so.

The share price is still lingering around the same as when I placed my position two weeks ago so there isn't much movement to track yet.

Other than that, I haven't really found a compelling case to make more purchases so I'll continue to keep my warchest until I find one that does so.

STI and the rest of the markets have been going up since the last 2 weeks or so it appears that the worst is behind us. Who knows, we might just get a surprise from our most unlikely hero who appears to be very quiet in recent times.


Networth has gone up a bit this month, though it's unlikely to make a big impact in terms of growing wealth at this point.

I'll continue to exercise caution and prudent investing and will only take action and do so when I find something which offers a lot of value on the market.

With work starting to get busier, I guess there will be lots of focus to get my hands dirty and is a good tool to exercise patience.

Meanwhile, till next month's update again.

Thanks for reading.

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Saturday, September 7, 2019

How My Work In Start-Up Firm Is Different From My Other Corporate Roles

As some of you might know, I had to reverse my sabbatical plan and return back to work due to some circumstances back home.

I've completed the first full week of my new role in the startup firm so I thought I put down some thoughts on how is it different from my other corporate roles in the past.

Location & Working Environment

The office is in the co-working space in one of the malls in the Central area so it is something very refreshing to me.

In the past when I was working for my corporate roles, my desk is a squarish cubicle cells so to have something different is a nice scenery change.

The co-working space is shared amongst the many start-up firms they have there so the environment is very vibrant and lively and there's this sense of positive attitude that spreads across everyone.

Most of the meeting rooms are really nice and there are often events (and food) that you can grab or attend while you're there.






They also have a lot of resting area, a nice pantry and a ping pong, football and golf area to do some light exercise, not to mention the countless hunks and syt babes walking past your desk everyday.

No complaints about that.

Casual Dressing Style

For 13 years, I've been dressing up in a corporate style of long shirt and black pants.

In my big 4 days, I even had to wear a tie in the office even when not meeting clients which I thought was rather silly.

At some points, I was rather exhausted with all the corporate dressing requirements because I just felt it took up a lot of my energy to consume.

The dressing style here is casual, which means technically everyday t shirt and jeans will be good to go.

I find my energy level is higher when I am comfortable wearing what I like to start the day with.

Colleagues and Boss

The colleagues are a bunch of pretty fun people but a pity some of them are about to leave the organization soon.

I think they might be looking to hire some operations lead and/or key account sales as replacement. If you are interested to apply, you can always ping me to check.

It appears that some, if not most of them cannot get along well with the CEO and while on my first week I have not experienced something in a bad way, I'd be keeping my toes up on that.

The CEO is 27 years young, and is someone who comes from Mckinsey background so you know the style is fast, aggressive and direct to the point. I think that's what most people who's been working in start-up cannot relate to. For me, I've experienced a lot of such bosses in the corporate role so maybe my tolerance level could be higher.

I think the key here is to manage expectations. 

On my first week, I asked him exactly the kind of information he wants me to update him on a weekly basis so I think I've set the tone and expectations right amongst us to work with.

I am 34 years old this year, which means I am by far the oldest in the company.

The average age of the workforce is only about 28 years old so that speaks volume how lao I am today.

Role & Work

I'm heading the Finance side, but being a start up you literally have to do a lot of things on your own.

This is different from my other roles in the past where I have people under me who I can delegate the work to.

I do have an account assistant which is sitting in the Jakarta office so it will be long distance relationship and some things are difficult to delegate due to the proximity.

There's a lot of outsourcing to third party such as tax accounts and payroll so the roles involve a lot of liaising with third party.

One of the main key roles is to manage the management accounts and then have it present to the parent group and key investors every quarter to let them know where we are on the expansion.

This will be critical because the firm depends on key investors' funding to survive.

Unlike my other roles in the past where there are multiple layers of hierarchy, decisions on this one are made short and sweet because the hierarchy is lean.

Final Thoughts

My overall impression on the first week is rather good.

It could be because of the different working environment, roles or dressing attire which makes it refreshing to me. Having many good looking boys and girls around you doesn't hurt the eyes and minds either.

Being a value investor for so long on the personal front, I have also been overly cautious to invest in such companies whenever the accounts don't look good BUT I think it might not be always the case.

Entering into this different world of domain changes my perspectives of looking into companies differently on this and I think this might the biggest takeaway at the moment.

I get the feeling that for graduates who start working in a start-up firm, it will be very difficult for them to move to a traditional corporate role because I doubt a lot could adapt to the grinding of the expectations. It seems like it is easier to adapt moving from a corporate cubicle to a free working space where you can move around.

Being in a start-up firm however, means your job is likely to be less stable than working for MNCs so that is also something to take into account. 

Does anyone has any experience to share on your account the difference between working for start-up vs corporate firms?

Thanks for reading.

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Friday, September 6, 2019

Whatcard Is Here To Make Our Lives Easier And Better

Most people think of savings in the traditional way where you keep the leftover of what you have in your bank accounts after spending.

But what if I tell you that you could actually save even when you're spending.

Back in the 1950s, Diners club founder Frank Mcnamara first introduced a novel method of paying for purchases to merchants and you only have to pay back a couple of weeks later. He called it "deferred payments", which literally in today's world known as credit cards.

The idea of credit cards is no longer a stranger to us.

At first, the attraction comes from the idea that consumers can get to enjoy something first but pay the actual costs later when the amount is due.

Sooner or later, the market becomes more saturated with competitions once everyone is offering the same perks so there are no differentiations.

Today, there are increasing new number of product launch that entice people to sign up for their credit cards. These includes rewards in the form of cashback, points, miles so that consumers can "save" whenever they are spending on merchants.

Now, I am personally a fan of miles rewards myself because of my passion to travel.

Heck, I even created a traveling blog a few years ago to journal my past travels and findings which I find it pretty interesting to share with.

As a milers myself, I found the three best cards suitable for my current spending patterns are the CitiPremier Miles, DBS Altitudes and Amex Krisflyer.

If you'd like to apply for the cards, you can click on the link I've provided below to enjoy more benefits when signing up. Do take note of the terms and conditions which might change before applying.




Now, the problem with having 2 or more cards in my wallet is that whenever I purchase something in a shop or shopping for groceries or dining in a restaurant is that I do not know which cards I should use in order to maximize my rewards.

I do not have the luxury of time nor the patience to check which cards are able to give me more miles in which particular settings so I usually go for cards that are right in front of the stacks (yeah I know my cards are stacked up in my wallet one after another) and this doesn't usually gives me the best option.

For instance, Amex Krisflyer card is currently running a promotion where you can get up to 3.3 Krisflyer miles on per dollar spent for SP Utilities.

I'm not the type that usually track on these kind of activities because it is so time consuming to track on each and every promotions there are out there with merchants and credit cards.


What Is WhatCard?

Just when I thought there's no way I could hack and maximize my rewards, here comes WhatCard to save all of us lazy folks.

WhatCard is essentially a search engine to help do a quick search on a merchant to get the best rewards out from the credit cards that you have.

All you need to do is key in the merchant's name on top of their search bar and the site will immediately tell you which cards you should use to optimize your rewards.

For instance, if you search Singapore Airlines as the merchant, the site will tell you that UOB Lady's card and DBS Woman's World will yield the best rewards in terms of miles.

In my case, I do not have both of these cards so I will have to choose between the three cards that I currently have.

Amongst the three cards I have, it seems that Amex Krisflyer yields the best reward so I will proceed to use them instead of my other two cards.



The website is currently in the infant stage but I can already see them growing with the number of merchants and users that are registered in their site.

I have also personally chatted on the phone with one of the co-founders to understand their motivations behind creating the website and I think it is impressive that these people are helping to create a solution for a problem of what I used to have in the past.

The website also has a community chat forum where you can engage with think-alike card holders and to share your ideas on how you think they can improve the site and make it better.

If you are into all this, I'd recommend that you try to go to their website and have a feel of how it might work for you.

Thanks for reading.

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Wednesday, August 28, 2019

Is There Light At The End of The Tunnel For SPH (SGX: T39) ?

Following my recent article on Starhub, I've received a few inquiries from readers regarding what I think about SPH and if their current valuations are fair.

SPH has been a very good dividend payers for many years in the past and is a past time favorite for dividend investors so I can understand if there are a lot of them out there who are holding on to the shares and not knowing if they should cut loss or continue holding on to it (perhaps due to sentiments).

Long time shareholders of SPH would have experienced that the shares of the company used to get as high as $18 to $20 before doing a split back to $5. The GFC event in 2008 brought them down all the way to $2.40 before rebounding sharply when the market recovers. This was despite the start of the decline in the media print and ads as people start to read less hardcopy and go more digital. It didn't deter shareholders though as the company continued to pay decent dividends at 24 cents despite the beginning of a structural decline.

It wasn't until sometime in 2013 when they split part of their property portion out to SPH Reit that they started to reduce their dividends every year due to decline in earnings, and the share price has since languished to a new low today of $1.95.




But at today's languished price of $1.95, is there light at the end of the tunnel for SPH? Where is the bottom for SPH?

Let us take a look parts by parts of how much they're worth now.

1.) SPH Reit

Whether you like it or not, the SPH of today is pretty much a property play, which is why SPH Reit is probably the most valuable worthy of the lots.

The Group owns 69% of SPH Reit which is currently valued at $1.10 (thanks to the resilient nature of Reits these days!).

$1.10 x (2,586,531,833 / 1,617,010,890) x 69% = $1.21

2.) Seletar Mall

Seletar Mall spin off into SPH Reit is a matter of time and not if.

SPH Reit has recently established a $1billion multicurrency debt issuance, which is likely to fund a potential acquisition which is likely to be Seletar Mall. Under this issuance, SPH Reit is able to tap into both debt and perpetual securities so it is likely they will acquire something big to tap on both.

In any case, the last appraisal for Seletar mall is likely to be in the region of $488m using the latest appraised valuation last year in SPH's book, so the worth of Seletar mall on SPH's books (70% stake) is likely to be:

$488,000,000 / 1,617,010,890 x 70% = $0.21

3.) Bidadari Site

SPH and KDDL managed to outbid their competitors by winning the tender bid at the Bidadari site sometime back in 2017 at an agreed price of $1,132m.

The intention is to build the site into a mixed commercial and residential use in due time, so it's not currently contributing anything to earnings yet.

$1,132m x 50% / 1,617,010,890 = $0.35


Adding point 1 to point 3 for the property site, we would get a worth value of $1.21 + $0.21 + $0.35 = $1.77

If you are not comfortable with taking the full current asset value and want it to be further conservative, you can slap a discount to the property by 20% and you should get a lower amount to $1.77 x 80% = $1.42.

4.) Orange Valley Healthcare

The Group announces its maiden entry into the healthcare sector when it bought Orange Valley healthcare for $164m back in 2017. The net asset value for OVH is at $71m, so the company is paying around 2.5x, which proves to be too expensive on hindsight given that they recognized an impairment in Q3 FY19 by $22.8m.

Given that OVH's earnings are only at around $5.8m, and if we slap an earnings multiple of 20x for healthcare premium, we would get:

$5.8m x 20 / 1,617,010,890 = $0.07

This is also similar if we take it via the book value method:

($168m - $22.8 impairment) / 1,617,010,890 = $0.08

5.) Other Investments

SPH also has a stake in other investments such as M1 and Mindchamps, which we can value it out based on the last traded price. The company also recently added their stake in the UK student accommodation portfolio, increasing the beds to a total of 5,059 beds across 10 cities.

Mindchamps:

$0.54 x (241,600,000 / 1,617,010,890) x 20% = $0.016

M1:

$2.06 x (930,151,000 / 1,617,010,890) x 16% = $0.19

Student Accommodation:

5,059 x $1,000 / month x 12 x 70% occupancy / 1,617,010,890 = $0.026

6.) Media, Newspaper & Ads Print

SPH's share price decline is probably most contributed by the decline in the structural nature of the media and print business.

Media and advertising profits were down 11.6% year on year and it doesn't seem to abate going into the new financial year in the next two quarters.

Alone, Quarterly newspaper and publication profit declined from $63m in Q1FY16 to $13m in Q3FY19. Margins were down structurally.

With full year media and newspapers earnings expected to come in at $50.8m, and we place a conservative 8x PER multiples on the earnings, we are expected to value the media portion at:

$50.8m x 8x PER / 1,617,010,890 = $0.25

7.) Net cash less borrowings

As at 31st May 2019, the company has cash of $206m and borrowings of $2,177m.

Since the Reits portion are being consolidated into the book, we will have to separate it out.

($206m - $2,177m) x 69% / 1,617,010,890 = -$0.84

Final Thoughts

If we sum point 1 to 7 all up, we will get a sum of the parts of $1.56 worth in value.

There are some very conservative earnings multiple that I have used on the valuation above but there are some parts like the property side which we have also used the book value to justify the nav.

In this regard, I think SPH will still have further room to go down, especially if their media and print earnings continue to decline.

If you are interested in buying SPH just because of their properties, then it is a much straightforward play to buy their SPH Reits instead of going through the indirect way through SPH.

The SPH of today is no longer the SPH of the past.

They ventured a lot into unknown territory which we do not know if things might work out to be good in the end. The Orange Valley purchase gives us a good indication of how they overpaid for a project they are pretty unfamiliar about and have to pay the price.

Sentimental buy? Maybe can reduce them to a smaller position in your portfolio instead.

Short the company? Do it at your own risk. I have a relatively large position shorting Starhub already so I would want to keep my other bullets for other uses.

Having said that, the high likelihood of divestment of Seletar Mall to SPH Reit might buy them some time to breathe in for a moment.

Thanks for reading.

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Monday, August 26, 2019

Why I Think Starhub Is Going Down To $1

I took up a pretty substantial short position for Starhub today at a price of $1.35.

Starhub Limited is no stranger to most Singaporeans, as we probably use their services one way or another.

At the peak of their share price, Starhub was trading at $4.13 back in 2014, but have since seen declining numbers to end the day where they are today at $1.34 due to massive competitions, evolving technology and erosion of quality services that it can offer to customers.


Business Divisions


Mobile Service Revenue fell 10% year on year due to the entry of competitions from the MVNOs across all segments of data usage, voice and IDD services. However, there are brighter scenes in the post-paid customer base numbers as they managed to grow this segment by 7% year on year. Prepaid numbers are down by 11% as customers tend to switch from one to post-paid.

Pay TV numbers continued to struggle as they lost 20,000 subscribers in 2019 while the ARPU dropped 17% year on year.

On the enterprise business, cyber-security managed to outperform by growing by 92% for the first half, but this contributes barely 7% of the Group's overall revenue figures. Furthermore, they have agreed to also sell their cryptographic stake to Temasek, which now means going forward they will only own 60% stake through Ensign. 

Further Dividend Cuts Imminent

In the earlier days of 2019, the Group made a decision to revise their dividend payout policy from a fixed 16 cents to a variable policy of paying out at least 80% of their net attributable profits for FY2019.

The Group committed nevertheless for a 9 cents dividend for FY2019, which translated to about $155m based on their total outstanding shares.

If we look closely at the numbers, that's not looking great.

While net profits attributable to shareholder for 1H FY19 numbers amounted to $93.5m, free cash flow numbers fell to $75.9m for the first half of the year. If we annualized the cashflow, that's $150m, which is barely the numbers needed to sustain their 9 cents dividends, give or take.

For them to maintain this kind of payout at 9 cents, their business earnings would have to sustain at the current level and capex has to be minimal like they did in the first half. Already, the management has guided for capex for 2019 (excluding spectrum) to be in the range of 11% to 12% of their total revenue in 2019. Working backwards, this means 11% x annualized $2,300m = $253m capex for FY2019. They already spent $116m capex in 1H, so I'm expecting 2H capex to be at around $137m.

Don't forget we have not included the 4G spectrum capex which they have to incur an additional $282m which they have committed. 

Why I Think There Are More Rooms To Fall?

What do you get when a company has a declining business division, erosion of margins due to competitions, depleting cash balance (cash and cash equivalent at $97.5m, net debt position of $930.2m, total outstanding capex commitments at $443.8m, including the commitments for 4G spectrum rights of $282m that have yet to be incurred)?

The probable likelihood scenarios are either more borrowings (keep tapping on those while it lasts), equity rights call, or further dividend cuts, or all of the three combined together at the worst scenarios.

In order to "grow" their business and maintain its competitiveness, they will need to spend on capex, like they did with their pay tv business when they introduced brand new TV passes in order to cater to customer's preference of moving to fibre tv content.

Where the world is already moving into the possibility of a 5G network, Starhub is still lingering around 4G. I wonder whats the capex going to be like for 5G should Starhub eventually go into this route. 

Will Starhub Goes To $1?

It's incredibly difficult to call for the bottom when you have companies that are still in the midst of the decline and are shifting model to cater the needs of the new world. It doesn't help also to know that the company's balance sheet have already deteriorated when the fight is not yet over (Knock, knock TPG, when will you arrive?).

While it's a long way from here before it goes to $1, a couple of bad results followed by a further cut in dividends might be the last straw for investors to run. 

On the dividends front, an eventual cut to 7 cents/share dividends, which translates to 7% yield for investors at $1, would be more sustainable moving forward. 

The 7 cents/shares would require the company to fork out $121m, which if based on 80% payout, would require the company to earn a profit of $151m.

It would mean a further drop of around 19.2% from where they are today or a terminal growth of negative 3.5% over the next 5 years but it will not be a surprise if it comes to that stage in the next one or two years.

Combine this with where we are on the global trade war and we might just see a perfect storm brewing for this company.

Thanks for reading.

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Aug 19 - Portfolio & Networth Update

No.
 Counters
No. of Shares
Market Price (SGD)
Total Value (SGD) based on market price
Allocation %
1.
HK Land
  10,000
US$5.43
 74,934.00
15.0%
2.
Far East Hospitality Trust
    3,000
0.65
   1,950.00
  0.4%
3.
Ho Bee Land
       300
2.30
      690.00
  0.1%
4.
Warchest
  
423,000.00
84.5%
Total



500,574.00
100%

I get the feeling that the second half of 2019 is full of events in the market and there's so many talking points that have not been totally apparent in the first half of the year.

Volatility in the market seems to be back as we continue to see the ups and downs with every tweets Trump is going to react in response to the China trade and the market seems to be correlating it very closely.

This was combined with the events happening in Hongkong with peaceful demonstrations turning into a riot scene which seemingly had no conclusive events on how this is going to end. Surprisingly, amidst all the news reported, there are currently no major fatality yet which means the protest is likely to be continued pending which side will back off first. This will probably drag on for quite a while and it will have major impact to the HK economy for many years to come.

With everything that is going, I took the chance to liquidate my position in Vicom which has been giving me decent returns for the past couple of years and is considered a safe haven in times where people are looking for a place to hide.

The first shot I took upon selling was to take up a position for HK Land at a price of $5.61 on the 6th Aug. You can view my full transactions here if you are interested.

I thought it represented some value at the price I bought but apparently the HK protests seemed to be prolonged so I'll wait for the next batch before I start to accumulate further.

The company has also went xd recently for a payout of 6 cents, so my current average position is at $5.55, which is not too far from where it is now, so no hurry to add on to the call.

The warchest is an expensive call option which is vital resources in times like this so I am likely to allocate to a position only if I see real deep opportunity. So far, there's not much that brings me to much interest yet.

After all, with all the events we've been seeing, the STI is still above 3k!!! You can't exhaust your resources when the index is still that high, especially the banks since I feel there's much room for downside should we get into events that might impact the economy. They're always the first ones vulnerable.


Networth has substantially gone down since Jun due to unforeseen events which I won't repeat again here. If you're interested to read about the story, you can read them here.

Without the impact, the portfolio would have hit the 7 digit figures by now which I have never dream of but it has to be reset at this point.

There's still an opportunity to close on the gap should we decide to sell our house which is currently rented out and move on to a cheaper alternative but that's just not happening at this point. We'll have to see how it plays out within this space.

With that, I am likely to start rebuilding my portfolio for the next few years with the aim to grow them and the market might just give all of us a chance to do that.

Thanks for reading.

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