Saturday, April 4, 2020

Applying For Home Mortgage Loan And Tax Payment Deferment

As part of the initiatives to help Singaporeans tide over cashflow in this difficult period, MAS, Banks and the Tax Authority have came together to assist individuals defer their obligation payment in the near term.

Home Mortgage Deferment

For banks, most of the deferment will apply up until Dec 2020 so that will help tide over working capital needs during these 7 to 8 months period.

Most banks offered 2 packages in the form of i.) Deferral of Principal Payment only or ii.) Deferral of both the Principal And Interest Payment. Interest accrued on the principal will still continue to be applied so what the banks essentially are helping out here is with the credit liquidity. This is vastly different initiatives than what we saw during the Gfc, when banks themselves are short of liquidity.

Interest arrears will be re-amortised when your loan repayment starts again in Jan 2021, so it is likely that the repayment sum will be larger than what you are paying today.

Personally, I have applied for this deferment myself as I find it a pretty good deal to conserve cash / cashflow in the midst of all the uncertainty. Even if you are not facing a cash crunch at this point, you can treat the extra cash (I am still receiving rental income for my case) as an emergency funds or warchest that you can plough into the market at this point.

Plus, it helps that we are in an era of low interest rate environment. 

I believe if the situation gets worst from here and we go into a recession, MAS and banks are likely to extend further beyond this year, unless we get a liquidity crunch like what we experienced in gfc.

For all the links to the respective banks, you can find it here:

UOB

OCBC

DBS

Maybank

Standard Chartered Bank

If you are one of those people who've yet to refinance your mortgage, you may want to do so here. Loan rates are so low now that it is probably the best time to refinance or take out your home equity loan, if you wish to do so and qualify.


Individual Tax Deferment

Aside from mortgage deferment, I have also applied for the individual tax deferment that you can defer for the next 3 months. 

This is a no brainer to me. 

It is free interests and the application outcome is automatic and straightforward. 

The amount is unlikely to be a significant breaker to me at this point but anything that I can delay at this point is a bonus. 

The link is as follow:



Pending the outcome of these two deferment applications, it will likely determine the amount of warchest injection I can put into the market to use over the next few months. 

At this level, I think the stock market for both the STI and Dow is attractive enough to enter if you have a mid to long term view and there are some interesting companies I want to put my money more aggressively. All the cash savings arising from the deferment will greatly help to boost that. 

Thanks for reading.


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Tuesday, March 24, 2020

Singapore Airlines Ltd (SGX: C6L) Is In Deep Shit And Rights Issue Call Is Imminent

The Covid-19 situation has hit the aviation industry really hard and in particular the airlines since they are highly capitalized business which needs constant cashflow to fund their operating costs, capex and fixed costs.

In the scenario where they have to cut capacity like where we are in this situation now, the company may be able to "save" on their operating costs since they do not have to incur charges like handling and ground charges that are related to the operating business.

But, they do have to continue paying for parking charges to the airport, levies as well as fixed costs such as salaries and rental that will continue to bleed the business.

Cashflow Simulation Run

I've run a simulation run where the left hand side shows their latest Q3 results for the year ending 31 Dec 2019, while the middle portion reflects what the situation is today. On the right side, I've accounted for movement that is related to cashflow, so things like depreciation is taken out of context because they are non-cashflow related items.

The middle portion reflects the current scenario we have today. 

For example, the topline sees a 95% capacity cut which was announced just a few days ago since Singapore is on semi-lockdown situation. Consequently, I've adjusted the same for operating costs related such as fuel, inflight meals and handling charges.

For staff costs, I've used a 20% haircut across the payroll while for other fixed costs I've taken a 50% haircut.

The resulting loss coming in from this simulation is a negative $(1,998m) for the quarter. If we divide this by months, it means incurring a net loss of $(666m) / month.

What this means from a cashflow point of view is that should the situation prevails, the company is burning approximately $1,461m in cash every quarter, or $487m every month.


Now, this might look okay if you are in a good standing order in terms of your balance sheet but let's see what they have today.

The company's balance sheet is in precarious condition by having only $1.5b in cash while having a borrowings that is almost 4 times the amount.

Out of those borrowings, $3.75b belongs to the bond issuance which they did over the years while the rest of the $2.35 belongs to bank borrowings.

The bond issuance ranges between 3.03% to 3.75% per annum and they have to continue paying bond interests quarterly amounting to about $40m each quarter to the bond holders. Failure to deliver and pay on time will be fatal to the credit ratings.


What is more worrying at this point is that the company have a $500m bond that is maturing in Jul 2020 this year, which is simply just 3 months away from today. The next call will mature in Apr 2021, amounting to a smaller amount of $200m.


Under normal circumstances, they can simply just issue another bonds to the public to refinance the one that is maturing (kicking the can down the road).

But under today's scenario, it is unlikely that it will be possible.

If we look at the current bond that is on the market 3.03% maturing in 2024, the bond is currently trading below the par at 86 cents. For any bonds that is trading below the par, it signals a credibility of going concern, especially in a hard hit situation like this today.

The other way the company can do is to extend their credit facility with the banks who are willing to lend them further to tide over this cashflow. But there is a ripple effect to this because of the lower revenue hence lower credit ratings which will lead to higher borrowings rate and cap the maximum amount of loan to collateral ratio.

This will be made even worse by the time they report FY2020 numbers when they had to book in a hedge loss of nearly $2.5b, which will push down their nav down by a further $2, on top of recording a Q4 loss.

Simply put, the NAV you see in Q3 is not a reflection of what their nav will be 3 months from now. We are seeing a NAV that is closer to $6.



Temasek Come To The Rescue

I struggle to understand whenever someone bought a stock and they reasoned because the company is too big to fail because of strong backing behind.

I don't think most people truly understand what it means by strong backing behind.

You see, when a company is too big to fail, there will usually be intervention or bailout in the form of "cash grants". But government don't usually activate these cash grants simply by just giving cash to these companies because these reserves are also our nation's taxpayer's money at the end of the day.

What most likely will happen is the company issuing a rights call, which in this case Temasek being the largest shareholder for the company will then pump in more cash in exchange for higher equity issuance. This will be fair to both the existing shareholder as well as all the other people who has no stakes in the industry because no one will be diluted. Existing shareholder can choose to subscribe in order not to be diluted while the rest of us will be happy that Temasek is taking a bigger stake in the company.

If that is true, then we are likely to see SIA issuing an equity call about 1 or 2 months max from today simply because their current cash balance is unable to sustain their costs for more than 3 months running. The equity issuance has to be attractive in order to allow existing shareholders to participate so it is likely that it will be issued at a wide discounted price to what the mother share is being traded on the market.

From a perspective of liquidity from point of reference, we had DBS raising capital at the depth of the GFC by issuing a rights issue to raise SGD4b back then. And we are talking about banks doing that where they were supposed to have a strong CET ratio (ok, the stress test for CET ratio is levelled up now given the GFC crisis).

If you are buying today simply because SIA is at the 21 year low and has never been this low even during the gfc, then you should be able to deduce how they are going to fund their upcoming expenses with the existing cashflow that they have.

Simply relying on strong Temasek backing or reversion to the post-covid situation is unlikely to be the answer and it is hard to be a hero during these times where almost every industry is struggling.

P.S: I don't have a long/short position as of writing but may initiate a position in the next 48 hours.


Thanks for reading.




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Friday, March 20, 2020

Mar 2020 - Portfolio & Transaction Updates

No.
 Counters
No. of Shares
Market Price (SGD)
Total Value (SGD) based on market price
Allocation %
1.
City Development (Short)
24,000
S$6.79
   162,960.00
43.0%
2.
Suntec Reits
30,000
S$1.17
     35,100.00
10.0%
3.
Royal Dutch Shell B
  2,000
£9.88
     33,400.00
10.0%
4.
Powermatic
18,000
S$1.83
     32,940.00
9.0%
5.
Broadcom
     100
US$194
     27,120.00
7.0%
6.
HK Land
  4,000
US$3.90
     22,000.00
6.0%
7.
Dairy Farm
  3,000
US$3.95
     16,700.00
5.0%
8.
Delta Airlines
     400
US$21.5
     12,120.00
4.0%
9.
Mapletree Commercial Trust  
  5,000
S$1.70
       8,500.00
3.0%
10.
CDL Hospitality Trust
  6,000
S$0.70
       4,200.00
2.0%
11.
Ho Bee Land
     300
S$1.92
          570.00
1.0%
12.
Warchest
  
     18,000.00
6.0%







Less: CFD


   (271,150.00)







Total



   102,460.00
100%

What a month it has been so far!



Just when I thought I had a great Feb month and thinking this will be a great Rat year, we were hit by a double tsunami of the Covid-19 and oil crisis scenario which literally hits the global market really hard.

In just less than a month, most indices were down close to 30% and all the other smaller cap companies were down closer to the 50% mark.

My portfolio was not spared either, notably, the current biggest unrealized loss belonging to Royal Dutch Shell, which I added two tranches and they are now down more than 25% from my earlier purchased price.

The smaller cap companies such as Powermatic was also down close to 30%, while other companies such as HK Land, Dairy Farm, MCT and CDLHT was not spared either. Delta, was massacred, but thankfully I entered at a later stage but was still down 35% from my entry price.

My latest entries this week were Broadcom and Suntec Reits, both of which during the week low and are currently green in the portfolio.

The short call for City Development earlier this week was also timely, as it provided a cover hedge for the rest of the portfolio as the market underwent Black Monday and Black Thursday. This was being done purposefully to abstain the impact from Europe and in particular the UK, which remains an unknown factor as of now.

The goal is to eventually close the short position and leave the long position in the long run as I believe the current entry price remains attractive in the long run.

The depth of this bear market caught many by surprise as both the speed in which it goes down was swift and doesn't allow one to take a breather at all. For myself, I will continue to focus on attractive companies to add while waiting for a further capital injection to add to this attractive looking market.

PM Lee mentioned that this might be a long drag fight until the end of the year. If that is so, then we will have plenty of opportunities during the year to add to our position and likely emerge stronger when things are brighter.

Thanks for reading.


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Saturday, March 14, 2020

Turning Panic Mode Into Opportunity

The past week has been brutal to most investors because of the speed and magnitude of the drop that left investors wondering if this is finally the big upcoming recession they have been waiting since the Great Financial Crisis back in 2008.

What was supposed to be a small containment case of the Covid-19 in China alone has spread to all over the world. This has now no longer been compared to just SARS but possibly something bigger than that.

Regardless of what your portfolio allocation is, chances are it brings some magnitude of damages to your portfolio even if you are holding gold as a safe haven hedge. Cryptocurrency is not spared either, dropping a massive 40% from the recent peak where bitcoin hits $10k.



The past week we've seen Black Monday, Black Thursday and then Black Friday (before bouncing off the lower low) within a space of a week. This is some volatility we've not experienced for a while and the bloodbath struck so fast that many investors chose to exit their positions waiting for a lower entry to enter.

Now, I can understand the rationale of investors who tried to cash out their positions because they are retirees who live on these incomes for the rest of their lives. But if you are in the stage of accumulating wealth I don't see why would you try to do that.

If not adding any further position into your portfolio during periods is bad enough, cashing out your investment and reverting back to cash position is just simply unimaginable.

The only reason I can think of is these people think they can for some reason get back into the market at the bottom and then ride the market back up. If that rationale is true and they believe that their timing is so perfect, then it doesn't make a difference that they should try to short the market on the way down.

I've bought a couple of companies in the past week carnage that I think has provided some decent valuation in the long run.

The first one is Delta Airlines (NYSE: DAL) which has suffered more than 35% year to date loss at the moment. Under normal BAU, this stock is trading at an attractive valuation of just 7x PER with the potential to grow their capacity over the next few years.

This is not going to happen now with all these Covid-19 situations but if this is just a passing phase, then we knew it will revert back to the mean eventually. My purchase price is closer to 5x PER with an added incentive that oil price is now lower than previously, which should help the company mitigate their costs base.

Will Delta's airline decline further next week? Maybe yes. But will Delta's airline gone out of business because of this? I doubt so. The company has a strong balance sheet to ride this storm out and they will use this opportunity to increase their standard upgrading schedules and capacity reduction meanwhile.

Will Delta's airline start to carry passengers again and resume their route to Europe (now suspended) once these things are blown over? Chances are a high yes. If that is so, then there is a good potential opportunity for the stock to rebound back to the previous valuation. If we think the Covid-19 is going to play out in a year's time, then 35% revert back to mean sounds like a decent risk/reward to take.

When there is news last week that the Saudi was engaging a price war on the oil front, I loaded more of Royal Dutch Shell (LSE: RDSB) after the share price tanks by a further 25% last week.

While I am currently sitting on a loss in this position (-8% from my average purchase price), I am gingerly confident that my loss will just be temporary.

First, we knew that the demand for oil has been low for some time since the Covid-19 takes place. There are travel restrictions in place and people are generally just scared to cruise and travel during these periods. But if Covid-19 is going to play out for just over a year, then soon enough we will see more traveling taking place and people going back to their usual routine where they can enjoy their cruises over the Antarctic Ocean. When that happens, we are likely to see demand for oil rising back up as airlines and cruises start ramping up capacity to meet the rising demand.

The supply of oil is one that is still a rather black box at this moment. Both the Russian and the Saudis are engaging in a price-war that neither is winning. In the long run, both will end up suffering and price war never benefit the equilibrium. My take to this is we are likely more than not to see Opec coming back to the negotiating table and reaching an agreement, though this may take likely a year or two or five, god knows when.

For Shell, if you look at my previous article, their upstream channel has been supported by some of the downstream segment which helps to mitigate the direct impact on oil prices. Shell is also another company that has been a believer of clean renewable energy so its bottom line is not as impacted as the other upstream players like Exxon or BP.

At the current valuation, Shell gives 13% yield (they've maintained this for the longest time ever) and are continued to be rated A-1+ and Aa2 y S&P and Moody respectively. This is a strong testament to their balance sheet and cashflow position.

Like I previously mentioned, they have also embarked on an aggressive share repurchase program so in the event cashflow becomes an issue, they can always pull this card out for the time being.


Apart from these companies, I have also bought a couple of other positions such as Apple (Nasdaq: AAPL), Sinopec (HKG: 0386), Mapletree Com (SGX: N2IU), CDLHT (SGX: J85), Dairy Farm (SGX: D01) and HKLand (SGX: H78).

I believe these companies are not only strong enough to ride this storm out but will also prosper in a year's time when the world goes back to normal BAU operations. What is comforting is knowing I bought into these companies at a good valuation so I am not worried that they will go bust.

My only divestment during this period is MTQ but this was more of recycling into a similar theme like RDS from a better risk-reward perspective than cashing out on it altogether. If MTQ risk-reward looks better, I might just get back in.

Observations

Whilst I understand that different investors have different strategies they are seeking to ride out this storm, what irks me the most is when someone tries to claim they know when the bottoming will take place and they will only start to enter when things "start" to stabilize.

I personally think that this is a basic investing principle 101.

Investors never get the best value out of the market only when things start to stabilize. If you think by watching the news and market for 24/7 and you can time to enter at the bottom, then chances are you are likely to miss out on the best part of the rebound.

Huge opportunities and the best decisions are often made when outlooks are uncertain and not when the sky is clear.

What about taking a hedge position to your portfolio then?

Personally, at this stage, I don't see the point of buying hedges.

It would have made sense to hedge a couple of months ago when the market was still high and volatility is low. But if you are just like me, who have been caught up in this bear market, then it doesn't make sense to hedge because it is an equivalent of selling your stake and waiting for an opportunity to ride the up back in once volatility settles down.

It would make more sense to keep buying with every big downward move (say 7% or 10%) and continue to average down from there. That's a strategy that's almost guaranteed to work if you are patient enough to have your holding power.

For Those Waiting The Right Signal To Buy

If you think those in the position are stressed right now because they just see their profits evaporated this year, those in cash who have sold their positions and waiting back right in will be even more stressed because they have to constantly watch the market goes back up and down, not knowing when to enter, not knowing when things start to stabilize and not knowing when the market will ride the trend back up in.

The market will always react faster than you so it is unlikely that you will be catching the waves faster than the professional institutional out there.

There will constantly be "noises" around the people that will ask you to sell and wait because they think the worst is not over but like Howard Marks said in his recent article, it is anyone's guess at best. If someone tells you that the worst is probably not over and the market will continue to go down from here, it is luck at best and not a conviction. If it is a conviction, then it would make sense to take an opposite short position to take advantage of there. There are a few successful people doing that, but for most of the people on the street, they are not.

Final Thoughts

Every panic mode like this is an opportunity where wealth changes hands.

12 years ago during the financial crisis, I heard similar "noises" from many parties who decide to cash out and wait for an opportunity right in. I decide to do otherwise and came out of the GFC much stronger than I expected to be. The same goes for every crisis opportunity since in 2011 and 2016, and hopefully the same as well in 2020.

If my case wasn't a decider enough, take a look at people like local bloggers Sim Tian Eng, ASSI and Createwealth888. Most of their success today came from taking risks and opportunities in a market where no one wants to step in and today they are the bloggers that we all respect and wanted to be in 10 or 20 years' time.

The hardest part about investing is in the emotional aspect, only in winter we will see the strength of those and know who has been swimming naked.

Thanks for reading.


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Friday, March 13, 2020

Paul Immigrations Reviews: Applying for Singapore PR Easily

Gone are the days when you need to rely on information from different sources when it comes to applying for Singapore PR.

While the ICA website provides comprehensive information on what is required to be eligible, it can be confusing at times because of the massive amount of documentation that is required for submission.

This is especially true when it comes to first time applicants or individuals who are too busy with their own work to handle all the details themselves.

I recalled going through the hassle of reading up and collating all the information myself a couple of years back when I was applying for the Singapore PR the very first time. 

I spent a lot of time back and forth to the ICA to clarify pieces of information that I could have easily gathered had I engaged a professional service back then.

Why Should You Use Consultancy Firms?

A consultancy firm increases the probability of success because they have specialists who have the expertise and comprehensive knowledge of what to include and what to expect.

These specialists have been doing the everyday work for many clients that they can advise on what are the sort of additional documentation that can help your application stand out from the rest.

Why Paul Immigrations?

Paul Immigrations is an immigration consultancy firm established in Singapore since 2016.

The company has over 100 employees, including a team of specialists with in-depth expert knowledge in immigration requirements and has served over 15,000 successful clients throughout these years.

Paul Immigrations
WWW.PAULIMMIGRATIONS.SG
Suntec Tower Two
9 Temasek Boulevard
#13-01/02/03
Singapore 038989



Paul Immigrations Reviews - The Firm’s Application Process

So what exactly that they do that makes them so valuable?

Step 1: Submitting Your Interest

First, upon indicating your interest to understand more about the process and charges, the Immigration Consultant (IC) will conduct the first round of interviews by giving the prospective applicant a call to understand the eligibility of your status for applying to the Singapore PR.

They will gather some basic details from you such as the type of work pass (i.e Employment Pass, S Pass, Personalised Employment Pass) that you are currently holding and how long you have been working in Singapore.

The IC will also ask regarding your profile including age, family members and salary information to assess the eligibility criteria of your application.

Step 2: Scheduled Meet-Up

After gathering the basic information, the IC will request to schedule a face to face appointment with the interested client to understand a bit more on the profile of him or her.

During the face to face meet up, the IC will also reaffirm again the details that were previously shared on the phone to ascertain that all the information given is aligned.

Based on the profile, the consultant will then assess to see if the profile is suitable to apply at the time and will provide feedback on the probability rate of success.

The prospective applicant would then decide if he or she wishes to proceed and engage the service of the professional at this point.

Step 3: Request for Documentations

If the client wishes to proceed with the service at this point, the Immigration Consultant would then request for all the relevant documentation to be submitted for their first review.

The submission can be done through hardcopy or softcopy through an email.

Documents a client is required to include in their submission are:

● Audited form submission (also known as Form 4A)
● Correct compulsory documents (E.g identification pass, education transcript, travel history as required by ICA)
● Essential additional documents (documents that may reflect his or her involvement in charity, community involvement, voluntary service, etc)

After the submission, the Immigration Specialist (IS) will review the documents and advise the prospective applicant if all the documents are complete and in order as per ICA’s requirements.

Step 4: IS Assists in the Completion of the Rest of the PR Application Paperwork

Based on the information provided by the client, the IS will guide him/her to complete the application form and on top of it add a customized cover letter to emphasize his/her commitment to nation-building and community outreach.

Some of the information which may be included in the cover letter can be skills that may be unique to the individual or commitment that the client might have in the society or community that he or she has built over the years (e.g establishing a harmonious racial community of different races and religion).

With thousands of submissions that the ICA handles on any given day, these factors emphasized on the cover letter may yet make or break on the decision outcome of the application.

Step 5: Submission & Outcome (Waiting)

After all is done, the IS will then guide the client in proceeding to submit the online application together with all the relevant documentation.

ICA will provide a receipt confirmation that they have received the application and the next step is now waiting for the outcome.

Typically, the outcome will take between 4 to 6 months. For some, it may take slightly longer if the volume is larger. Regardless, the IC will update the applicant with the status of the outcome when they received feedback from the ICA.



What Happens When Your Application Fails?

Typically if an application fails, the applicant should only reapply after 6 months when there are significant changes to the application that might boost the likelihood of success (For e.g, moving to a higher salary bracket through promotion or changes in marital status). These positive developments should provide some merit when the client resubmit their application the second time around.

Paul Immigrations is always available to guide re-applicants on their next course of action.

Conclusion

With the advent of first-world nations and a myriad of benefits such as subsidized housing and medical care, becoming a Singapore PR has become much harder to attain and ranks high on the priority list of many foreigners. 

To succeed in the application, the client will need to put in all the efforts to show that he or she is worthy to become part of society in the long run and is well deserved a place in this much-coveted nation. 

By engaging the professional service of Paul Immigrations, all clients can be assured that their applications will be complete and puts on priority urgency.


Monday, March 9, 2020

Black Monday

I want to dedicate this post today so I can look back in the future knowing we've gone through this one day episode.

The Covid has all along been a grey Swan event for a while. Yes, they are spreading globally with over 100k people infected at this point but they are not as deadly. Recovery rate has been pretty decent and there wasn't as much fear as we all thought out there in the market.

Then came the Saudi event over the weekend.

Over last Friday, Opec+ was supposed to meet and cooperate over the production cut by 1.5m barrels a day. Had the Russian agreed, we probably had a field day today for the O&G sector. What happened next was something that came out surprising.

Not only did the Russian decided not to agree, but it enrages the Saudi's wrath that the Saudi decides to play the game at the world's hands.

As we all know, Saudi has the lowest costs per barrel as compared to the other countries out there. This table is appended in 2016 so we are likely seeing even higher average costs for all the other countries except middle East.

This is a Black Swan event.


The market went on a relentless drop in the early morning when market was opened and it exarcebated badly in late afternoon.

STI dropped by a massive - 170 points at the end and this is something remarkable we've never seen happened before in the STI, ever!

My portfolio bleeds down by $12k movement today, but I'm sure everyone else is bleeding like I am so it's not a really big deal.



I managed to do some cleaning by divesting one counter and adding two new companies at such a good valuation that I was pretty happy at the end of the day.

It is not often you get to buy companies at this sort of valuation so why waste a good fall today.

I knew everyone is waiting and probably just waiting for it to go lower and you can be sure it is the hardest ever decision on whether to step in one foot in the fire.

My strategy is more lucid and I am planning to move and rotate around whenever I get the chance to do so. Remember that even in bad months we get rebounds along the way so we are likely to see volatility and opportunities to exit along the way. It is not a one way down in most time.

But yet the most important thing as I look at my current portfolio bleeding, I saw my average price at all the companies I bought and I knew for just as long as I could hold those until this is blown over, this will give me not just decent but very very good return. I could possibly even double my networth if I'm really lucky that this whole thing is blown over which hopefully if not this year then the next.

We've done the hard homework prior to the crash, now it's simply putting in the action where the mouth is.




UA-57154194-1