Tuesday, April 28, 2020

Why I'm Not A Buyer of MNACT (SGX: RW0U) Yet

Mapletree North Asia Commercial Trust (MNACT) is scheduled to report their FY2019 results later today after the close of trading.

The Reits have been an investor's favourite for many years due to its staggering growth profile in the greater region of Beijing, Shanghai and Hongkong but with the tides turning, the question is if the market priced them in..

Here's why I don't think they are a compelling buy yet.

1.) Revenue and NPI to be severely impacted in Q4

If we take a look across the results for Q3 (1 Oct to 31 Dec 2019), GR dropped by 36.3% YoY to S$67.3m and NPI dropped by 40% to S$50.8m.

This is due to the closure of the Festive Walk mall since 13 November 2019 due to the HK riots and was only reopened on 15 January 2020. From a reporting point of view, that would mean a "lost" of 1.5 months of rental, even though they did receive the Distribution Top-Up due to the closure. Rental relief was also given to tenant because of the closure.

Barely after the mall was reopened on the 15 January 2020, it was impacted by the double whammy of Covid-19, hence the mall was once again had to be closed (limited opening) and rental relief once again be given to tenants.

The impact for Q4 looks to be greater than 1.5 months (Q3), if we take the impact to start from mid Feb onwards.

In other words, GR will look to drop much worse than the 36.3% YoY comparison reported in Q3, and NPI to drop by more than 40% YoY comparison reported in the same period.

2.) DPU Likely To Be Halved

DPU for Q3 dropped by 13.3% YoY due to the closure impact, even though this was partly helped by the distributional top up they get from their insurer.

Bare in mind this is 100% payout, and we might have a totally different story in Q4 when the manager might retain the majority of the distributional income after the temporary law is passed.

Using big brother MCT as an example, they have retained close to 60% of the distributional income in Q4 due to the potential impact of Covid-19 and we might see the same applied to MNACT.

Assuming a 40% payout, we are looking at 0.67 cents/share for Q4FY20, which is likely to be a 65% drop YoY to what was reported last year at 1.956 cents/share for Q4FY19.

3.) Revaluation Loss

This is probably going to be the most exciting part of the lot.

Full year results means there's going to be a revaluation exercise done on the investment properties.

Festive Walk, Gateway Plaza and Sandhill Plaza's valuation have been going up since the days they listed the Reit and this run looks to end this year.

I've tabulated across the last 3 years valuation for their properties and it looks like this.

For FY2019, I've worked backward by taking a haircut of 15% revaluation drop for Festive Walk, 5% for Gateway Plaza and 5% for Sandhill Plaza, using the average of the respective actual exchange rate.

If my above guestimate is true, the Reits are likely to book a total of S$733m revaluation loss on their investment properties (including translation loss/gain) which is likely to push their Q4 into negative loss position.

$733m downward revaluation will represent an NAV loss of about 22 cents/share. So we are likely to see NAV drop from $1.41 to $1.20 post revaluation.

4.) Gearing To Increase

MNACT has been able to navigate their gearing well due to their revaluation surpluses in recent year, but they are likely to deteriorate and struggle this year due to their revaluation losses.

Using the same above estimates, gearing is set to increase from the current gearing of 36.2% to above 40%. This will limit their ability to take on further loans either for working capital or acquisitions, and the likely scenario is a higher retained distributional income or placement/rights issue.


MNACT is not a bad investment because I think their properties and tenant quality are pretty solid over the long term but there are big overhang in the short to mid term.

If we use Wharf Reic and Hongkong Land as our closest benchmark, both companies have reported huge reversion and revaluation losses for their retail and commercial properties and we are likely to see the same fate for MNACT, which at the moment, I don't think the market has fully priced them in yet.

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Saturday, April 25, 2020

5 Reasons Why I Chose To Defer My Mortgage Payment

One of the initiatives that were rolled out by MAS in order to assist homeowners during this period of Covid-19 is to allow for deferment of home mortgage payment.

As more than 90% of all Singaporeans tend to be homeowners, this measure will enable most people to take a breather in the midst of this pandemic crisis, which have seen plenty of job losses or pay cuts.

The deferment will revolve in between May to Dec 2020, so we are talking a period of about 8 months. This is not a long time, considering that most of us are already on a 20 to 30 years mortgage.

In the last article, I wrote that I will be applying for the deferment because I see the positive upside more than over the negatives.

In this article, I will pan out my reasons why I chose to do so.

For disclosure purpose, my application was approved by the bank with a facility letter as prescribed below.

1.) Cashflow Breather

One of the most obvious reason why the measure was rolled out was to enable homeowners a cashflow breather, especially in the midst of the pandemic crisis where uncertainty hangs towards job guarantee and pay cuts.

For the majority of us who has mortgages as one of our big expenses to cater to, the loss of employment could mean that homeowners might default or have difficulties making payments to their monthly mortgages. This could not only be detrimental to the industry as a whole but also towards individual's credit score.

For myself, the deferment allows my current position to be more cashflow positive than previously because I am still collecting rental which means the income will go directly to my pocket without having to serve the mortgage during this period.

I could then use this excess income to beef up my emergency funds and/or capital injection as warchest. 

2.) Mortgage Interests Rates Are Heading Southwards

We are currently in an era where every central banks are cutting interest rates and are heading towards zero funds rate. 

What this means for homeowners is we are likely to pay cheaper borrowing rates as our mortgage rates are dependent on SIBOR, which has been on a trend down since 2017.

The current 3 months SIBOR is at 1.6% and this number will look to go down further in the next couple of months.

In fact, just last month alone, I've received a letter from the bank that they have revised the repayment downwards due to the lower interest rate.

P.S: If you're currently paying more than 1.6% and are relooking to refinance into floating, you may refer to my link here where a consultant will contact and advise your availability to refinance.

3.) Interests Will Only Accrue On Your Principal (T&C)

Most banks will allow for 2 types of deferment.

The first is a deferment of only the principal, which means you will still required to service the interest amount.

The second is a deferment of both the principal and interest, which means you are not required to service anything during the deferment period.

For the majority of the banks (need to refer to their T&C), interest will only accrue on the principal but not on the interests. This implies that only simple interests will apply and not on compounding interests. 

You compare this with how compounding complies with your credit card debt and you will understand what I mean.

4.) Deferment is a Short Period

The 8-month deferment period is a short subset of the overall mortgage period, which for most tends to be for as long as 20 to 30 years.

What this means is that you are simply extending your current loans from 30 years to 30.8 years, which is not a big deal by any standard.

But the option of having this will have a bigger impact to many, especially those who needed them badly during this period.

Banks will also show you how much interests are being accrued during this deferment period, which for my case below shows $12,474.85.

One has to be very careful when reading and comparing this. 

It does not means that I will be better off by $12,474.85 if I hadn't taken this deferment option as I am likely to incur interests accrued under normal circumstances. What this means is throughout my tenure period, I will be worse off by $12,474.85, which in arrears of a long 30 years, came out to be a very small amount of re-amortisation every month post-deferment.

5.) Find Something That Is Above 1.6% ROI

Even if I do not urgently need the cashflow at this point, all I needed to do is to find an investment that will return me 1.6%/annum for me to be "better-off". 

I could look for investment opportunity in the market or simply lock this money into an CPF-SA (would be stupid for me to do so) or leave it at DBS Multiplier for emergency funds purpose.

I think at this point, while the cons are there with higher repayment being re-amortized post-deferment, the advantage has clearly outweigh the cons, at least for me and this is the reason why I chose to do so.

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Thursday, April 23, 2020

Everything We've Prepared For In The Past All Comes Down To This Winter Season

Winter is finally here.

By now, you must have realized that the world is on an unprecedented pandemic crisis and global economies are being impacted.

What seems like a containment in one area of a globe has now spread to more than 190 countries, affecting millions and billions of people, both physically and financially.

To limit containment, many businesses are required to shut down or suspend their operations in order to discourage people from gathering closely together. This has led to many manufacturing companies delaying their productions, hence limiting the supply it has for the world.

With many businesses unable to project for certain how long the pandemic and shutdown will last, most have resorted to quick fixes such as letting their employees go either permanently or unpaid leaves.

During the shutdown, most companies will be struggling to cope with survival as they are not able to generate any revenues. 

Most people are impacted as well because the majority will either have no jobs by now or they are forced to go on unpaid leaves which technically means no income for an extended period of time. The luckier ones are those that are still able to cling onto their jobs for now but will still be subjected to pay cuts.

What F.I.R.E Community has been preparing

Some of the people in our F.I.R.E community has been impacted by this unprecedented crisis as well.

Some lost their jobs while others get a pay cut, myself included.

Being the sole-breadwinner of the family, I can relate to the struggle because 20% of pay cuts can be bitter tough to swallow, let along those who are receiving no income at all during this period. 

Most of the survival expenses such as groceries, mortgages, utilities, electricity, and phone bills are still running on a normal or extended rate. The only saving grace is that discretionary expenses such as traveling and entertainment are shut down close to zero.

But it is still tough. 

I feel the heat.

But I think most people on the street feel it worst.

First, the majority of Singaporeans do not stash a sufficient amount of savings to tide them through periods where they do not receive any income.

According to the research study by Business Insiders (Link Here) conducted just late last year before the Covid, half of all Singaporeans do not stash at least 6 months' worth of emergency funds. One in five doesn't even have 1 month worth of expenses in working capital.

That is a staggering number especially considering a first-world nation we are today.

Yes, the government has temporary measures to assist those who are unemployed by giving them $500 worth of temporary relief fund but that's likely just enough for basic groceries for a couple of weeks. It certainly won't be sufficient if you have a larger group of family members.

Another study which was conducted last year by Business Insider (Link Here) also shows that one in three among all Singaporeans do not invest and grow their money.

I am assuming here that the group of people who falls under the subset of not having emergency funds do not invest. So they are likely the same group of people.

For most of us who have been engaged in the F.I.R.E community or discussions all these years, we can call ourselves fortunate.

Everything that we've prepared for in the past few years or decades comes to this winter moment like this.

We've built ourselves a system of resilience of having sufficient savings and emergency funds, even if that means forgoing our frequent consumption of expensive coffees or bubble teas.

We've built for ourselves multiple sources of diversified income through side-gigs or weekend jobs so that not only will we receive more income but also build upon our capabilities to do multiple tasks at different job offerings.

We've also looked at our expenses category very carefully and that means trying to get the best deal out of every big spending such as using the best credit cards for utilities, improving our cashflow through deferment of big ticket items such as mortgage rates and individual tax payments and trying to get the best deal everywhere. Very Niao indeed!

We've also put ourselves in situations that enable us to take favorable action in unfavorable market conditions such as cheaper valuations so that we can reap and sow the fruit of labour when everything else is back to normal operating condition.

These are not overnight preparation.

These are years of intensification fortifying our mental capabilities, tuning trial and errors, and instilling hard work and discipline into our day-to-day.

Everything we've prepared for in the past during Summer, Autumn and Spring all goes down into one Winter season.

We are better prepared today because we've prepared better than the majority of people.

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Friday, April 17, 2020

Why Investors Should Continue Buying The Market At This Level & Accept Ignoring The Noise Challenge

Since the market last bottomed on the 23rd March when STI falls to a level of around 2,200, it has rebounded some 400 points to end this week at 2,614.

We have seen volatility drying up a little bit since the "exciting" days of circuit breaker, when major indices like the Dow going up and giving up gains and losses of between 1,000 and 2,000 points in a day.

The past 3 weeks since market bottomed it has been on a rebound and there were many that were calling this a dead cat bounce or some that would call it a bear fake rally which is meant to trap investors.

The market continued to breach one resistance line after another in the past recent days as market participants remained convince waiting in anticipation that the market will retest the low as many were still holding on tight to their warchest.

Over the past 3 weeks, I've seen numerous amount of webinars and polls being conducted that are direction centric, each trying to gather opinions on where the market is going to head from here. Such webinars and polls were very popular because everyone is looking at each other for direction and trying to form a consensus so they can justify their actions to buy now or to wait.

That is a trait classic case of Herd Investing, which I wrote back in 2016 during the Oil Crisis.

Herd Investing

The Herd mentality comes from the social psychology terms that deals with the behavior of human beings in large groups. This mentality allows the tendency of people to think that whatever the behavior of the group is doing must be important and right and hence it makes sense to simply follow them (consciously or unconsciously).

Take a simple recent case when everyone rushes to the supermarket when the announcement of the Circuit Breaker was announced. One takes a look at another of what he or she is doing and follows and the number gets larger as it surmounts a certain capacity.

The same logic applies in the stock market.

In a bull market, most people would look for a consensus decision to pick the same companies that would attract the most talking point which would drive the price up. It is very "comforting" to know that if 100 of the market participants are buying it, then this purchase cannot be horribly wrong. But little did this person knows that he would be buying at a higher valuation than his peers are.

The same logic applies in a bear market.

Everyone wants to wait until the market reaches the bottom as if this was an easy prediction to begin with. Even as the market has actually bottomed (on hindsight), most market participants continued to hoard their warchest as they are unsure if the market will continue to fall the next day.

What this means is that no one can not only predict the bottom but it is also extremely difficult to put in a reasonable sum of warchest when market has actually bottomed. After all, what is the use when an investor is successful at catching the bottom but only allocate 10% of their entire portfolio into the market when it comes.

The overall returns will still be negligible and average at best and this strategy may not even beat a simple strategy such as Dollar Cost averaging consistently.

What Investors Should Be Doing?

I don't think I should be giving anyone any advice just because I really have no idea where the market direction is going to go in the next one week or one month or even one year.

But what is almost certain (key word is almost so still not for sure) is that in the next 3 to 5 years, we are probably going to see the market going much higher than what the current market's valuation is offering.

As a point of reference, the current STI levels right now is similar to what we've last seen in 2016 but from a valuation perspective it is actually cheaper than 2016.

Today's STI valuation of the market is close to 10.5x which is close to last scene in 2012.

It is actually pretty rare to get this sort of valuation in a decade era so I think it is still offering a lot of real good value out there to investors.

If you are still in an accumulation phase like me, you should be aggressively allocating most of your warchest to work. The % allocation can be fit to your profile needs but I think this number should be more than 60% invested at the very least.

You will thank yourself for doing this when you look back at this period post-Covid a few years from now (we'll likely resume normal life in 2022 so this is not a really long time where you cannot see light at the end of the tunnel).

My portfolio returned 26.7% back in 2016 (Link Here) and then 19.7% in 2017.

It was built upon a strong foundation when I took a lot of advantage of the market at this level when we were having the Brexit and Oil Crisis situation.

The situation might be a lot dire now with unemployment almost at an all time high and many businesses going bust but with all economic cycle this will past too some day, and when that day comes, you'd be sure that you thank your old self for taking this courageous step today.

P.S: Anyone remembers this Insurance Ads back in 2014?

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Wednesday, April 8, 2020

Apr 2020 - Portfolio & Transaction Updates

The last couple of weeks have been excellent so far in terms of the stock market.

Market rebounded up to about 20% from its low while we're still in the midst of a pandemic lockdown.

During the rally, I've used the opportunity to do a big clean up to my portfolio by divesting some positions that I had last month and then have them switched over to more retail and hospitality Reits in general, especially during the selldown before the government introduced a circuit breaker for the 1 month period.

So far, the timing for the switch has worked favourably for the portfolio.

All of these positions are now in my cdp account so the strategy is to accumulate more higher dividend paying companies or Reits while the CFD account is more for short term trading. Currently, I have no open positions in the CFD.

I've tried to continue being majority vested in the market during the selldown as I believe the current valuation of many companies are decent. I've continued to keep a small amount of warchest to take further advantage should things reversed to the south but this should continue to replenish automatically from my income and also hopefully from my successful deferment of mortgage application.

For this month's update, I have also started putting the Pre-covid price at the start of the year for my own personal inference. This price does not mean the intrinsic value of the company nor does it represents it will reach there by the end of the year, but it is a reminder to myself that I have a goal to reach an intended target within the next 2 to 3 years and being invested in companies with attractive valuations remain a viable objective.

Do I think the market will continue to re-test the low?

My answer is probably yes, but many times I've fallen prey to my own deduction.

And so does many people out there who's made projections after predictions.

If the market does test its low, you can be sure that I'm likely to finish using up my remaining warchest and probably more aggressively inject more into accumulation, but it'll likely be a steady injection through the incoming cashflow every month.

If the bear market prolongs over the next couple of years, it is actually to our advantage because we can accumulate more at a cheaper valuation so we are likely to be victorious in the mid to longer term.

This thesis will of course change should we lose our jobs during the recession and we are suddenly face with no cashflow to work with. Hence, I remained convinced that job preservation is key and for as long as I can continue to accumulate, things will look better when the eventual recovery starts.

That's all the updates I have for now, and let's see what the month of April has for us.

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Monday, April 6, 2020

The F.I Mainstream Movement Is Fueled By Crisis Like This

I started writing articles in this blog barely a few months after we've endured one of the Great Financial Crisis back in 2009. 

I was barely into a few months of working when the great financial crisis and recession hits the world and I recalled the shockwaves hit the entire population hard. People lost their jobs and many were retrenched without package to compensate for their loss. Many businesses had to shut down, some bigger ones had to downsize because of the scale of the crisis and credit liquidities plunge as banks, enabler for businesses, struggled to stay afloat.

I was fortunate to have kept on my job throughout the duration of the crisis. The only thing that probably impacted me was the salary increment that was freeze and bonus that was scrapped. It sucks especially after enduring a year of hard work but it was still better than the wider population out there who had lost their jobs.

When people lost their jobs, they lost their main source of income. This is bad because not only these people have to cope with losing their cash cow but they also have to cope with the existing expenses that remain on the table such as mortgages, car loans, credit cards, utilities, food on the table, and children's education.

Most of these people either do not have emergency funds or other sources of income that could help them tide through the crisis. In short, they were unprepared by the shock and were left hanging by a thread facing unprecedented crisis that could impact their entire years of hard work and survivability.

Because of such unprecedented shock in the economic cycle, I began to join the F.I mainstream community by writing articles and meeting with alike minded people, who believes in the same ideology of achieving financial independence over time.

Financial Independence is not simply just about having sufficient passive income (mostly through the dividends or rental income derived from our investments) covering our daily expenses.

Behind the ideology of Financial Independence, therein lies upon a strong foundation of having enough defence line such as having emergency funds for rainy days, savings before spending and insurance coverage to protect our hospitalization and critical emergency needs.

This is what we called the basic foundation of all personal finance 101.

Without having this, no one can and shouldn't be allowed to move on to the next level.

Most people in the F.I mainstream community began stepping onto the next level by maximizing their utilization of spending through picking the right credit card (cashback vs miles), the right savings account (OCBC 360 vs DBS Multiplier) and the different payment modes (Grabpay vs Favepay vs Shopback).

Once you have achieved this, the next level will be investing your money into the right asset class so that you can allow compounding to take into place during your accumulation stage.

Covid-19 Black Swan

The recent unprecedented Covid-19 black swan has once again proven to be a repeat of the GFC situation 11 years ago.

We saw many businesses closing down their operations or shutting down due to the lockdown worldwide. Many employers and employees that are operating within the Travel, Entertainment and Aviation industries were severely disrupted and hit by the crisis that they either have to retrench their staff headcount or staff has to take on unpaid leave.

An unpaid leave is considered loss of income while expenses will vicariously continue to churn during this period of lockdown. It is an unpleasant and undefining anxiety experience for sure because you just don't know how long this lockdown will last.

The stimulus package rolled out by the government where most Singaporeans can receive between $600 to $900 is probably unlikely to move the needle much. That amount, is probably basic survivability expenses where it can cover mostly food and utilities in one month.

Many companies have announced pay-cut and layoff amongst their employees despite the best government effort to mitigate this action by providing a staggered Job Credit Scheme support to cover the overheads.

While I am fortunate to still have a job during this while, I am likely to be impacted somewhat as there is a strong hint that there will be a pay-cut across all employees during this period of lockdown until business volume starts to return.

I have quickly reverted to my basic such as cutting all unnecessary expenses, boosting up my cashflow, and reviewing my commitments in preparation for the worst. I wanted to see what options there are out there so I began exploring the likes of balance transfer availability, deferment of mortgages and taxes and so on.

At the same time, I wanted to also balance out by taking advantage of the stock market panics out there which means I can now buy companies at a much cheaper valuation than I did a year ago. 

But this is a happy first world problem which I believe will take care of itself once we grounded the basic problems.

Final Thoughts

The mainstream F.I movement is fuelled by events and crisis like what we experienced back during GFC and what we experienced today with the Covid.

I strongly believe that the current turmoil will only lead to more F.I converts which is a good thing in general because what this community believes including what we preach and what we practice are generally good foundation of personal finance.

I'm thankful to be able to be where I am today because of the past F.I mainstream generation that preaches good value and I think our generation today can do the same too for the next upcoming generation and beyond.

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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:





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. 

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