living a minimalist life

I am fortunate to be in one of those industries that paid more when I was first starting out as a fresh graduate. About 10 years ago, my industry paid fresh grads about 3.8k, instead of the 2.5k which most fresh grads. It was a windfall for me. My dad, the sole breadwinner of the family, up till his retirement, only earned 2.5k maximum even after 30 years of slogging in the same company. Suddenly, my pay was about 1.3k more than his. I felt rich, really rich.

When I was an undergraduate, I often gave tuition and could earn up to 1k a month. Even with that amount of money, I was careful not to overspend. However, that 1k could give me a lifestyle that allowed me to keep up with my friends – think the usual clubbing, movies, eating at cafes, expensive coffee, taxis for the late night outs. When I started earning my first pay check, I was extremely happy. The hours were really long and to reward myself, I started taking more cabs, justifying the fact that I was too tired and money ought to be spend. I started having no qualms about purchasing $150 dresses, justifying it with reasons that I had no time to shop and if I found a dress that I really liked, then I should just purchase it instead of spending another 3 hours looking around.

However, even with my new found “wealth”, I guess frugality was already ingrained in me. I couldn’t bear to splurge on a $2,000 luxury bag (then, I must admit I have done so a few times since) even though all my peers were going crazy over reebonz.com at that time. I also could not bear to stay at upmarket hotels during my holidays or eat at michilin star restaurants. I rather use guest houses, bed and breakfasts and eat local cafes when I travelled. I was still a miser in clubs, much preferring to only go for ladies’ night than pay charges when I knew you can go in for free on Wednesday.

I assumed that the reason for my frugality was because of my past. As I have personally witness how difficult it is to earn money, and how the lack of money can constrained your lifestyle, I have no wish to splurge it unnecessarily. Funny enough, I realise that some of my peers who grew up in the same “lower income” group as me were the total opposites.

They grew accustomed to spending. Spending even more than those people who grew up among relative wealth. They thought nothing of buying a $15k watch, or a few $8k bags, or trying out fancy restaurants or going on luxurious holidays. When they got married, they felt it necessary to create the most romantic and fancy wedding ever, to don the most beautiful gown and throw an extravagant party. They wanted to make up for the lost times when they wanted to do such things, but could not do so.

I wonder. Why the difference between myself and them? Did we not grow up in similar conditions? Why was I refusing to spend for fear that I may one day lose my money? Why were they willing to splurge on everything – food, clothes, holidays, watches?

I think the key is in the upbringing. Even when my parents were poor, my parents never complained or commented that we were. They hardly mix with the rich crowd, they never crave brands. Whereas for some of my friends who fell into the latter group, their parents lamented their poverty, compared incessantly with the richer folks, and bought brands even though they could barely afford it. They desired richness and strived towards it, and put it as a goal to be achieved. What I wanted because of my poverty was financial security. What they wanted because of their poverty was luxury. 

Investing in Japan via REITS

Japan has been a sleeping giant for awhile now. With Abeconimics, there is hope that there may be revival in Japan's fortunes, and hopefully, there is money to be made from this.

I've taken look at 2 popular REITs - (i) Saizen REIT (ii) Croesus REIT

Saizen REIT deals with residential REITs all over Japan and caters mainly to small families or singles. This REIT is also very popular with savvy investors, and AK71 also buys into this REIT.

Croesus REIT deals with retail malls in Japan and is also highly recommended. If Japan consumption increases, then one strong beneficiary of this should be mall owners. More money = more shopping = happy lessee = happy lessor.

Let's look at the finances for Saizen first:

1. PE= 13.49
2. PB= 1.09
3. Revenue = 31.39
4. Revenue / share = 0.11
5. Revenue growth QoQ = -2%
6. Gross Profit = 2.52B
7. Profit growth QoQ = 4.1%
8. Cash = 42.24 M
9. Debt = 142.05 M
10. Debt / Equity = 63.24
11. current ratio = 2.42
12. book value = 0.79
12. diviend yield: 7.2%

issues: negative retained earnings; -ve cash flow.

Let's look at the finances for Croesus:

1. PE= 17.02
2. PB= 1.54
3. Revenue = 50.92
4. Revenue / share = 0.11
5. Revenue growth QoQ = 42.4%
6. Gross Profit = 2.97B
7. Profit growth QoQ = -51.50%
8. Cash = 11.09 M
9. Debt = 377.48 M
10. Debt / Equity = 124.52
11. current ratio = 2.10
12. book value = 0.759
12. diviend yield: 8.2%

issues: -ve cash flow
other information: occupancy rate of 90.9% in 2015 as opposed to 91.8% in 2014
NAV is currently 1.13 for 2015 as opposed to 1.22 for 2014. debt ratio high at 50%

All in all, i am not sure if either reit works for me! i need to carry on reading. for now, not investing. 

ST Engineering Review

ST Engineering brings to mind a good sturdy dividend stock. But is it really? Remember, even blue chips can fail as any one who has bought NOL will attest to (myself included). 

Let's check out the numbers:

P/E ratio is on the high side of 19.58

P/B ratio is 4.72

P//Sales at 1.59

ROA is a paltry 4.02% 

ROE is really pretty good at 22.54%. In fact in 2009, the ROE was at 30%!

Revenue QOQ is -2.6%, with earnings QOQ at -5/3%

EPS is 0.17 

Book value at 0.70 

What's great about the company is the cash on hand. Management has also been making prudent decisions as seen by its decision to bring down the current debt. There was a fall of 15% of cash for 2014, but there was also a drop of 25% in short term debt. 

The cashflow from operations minus capex is 400M. With the current price, the dividend yield is 4.5%. That isn't too bad. 

Verdict: I will keep a close watch on this and look to purchase on dips. This will be a good defensive stock to have in times of downturn. Even during the 2008-2009 crisis, the dividends remained constant. 

SIA Engineering - Now how brown cow?

SIA Engineering was one of the first few shares i bought when i got excited about dividends play.

Of course, I was the novice then and i still then now. Reading my review about the share must me want to laugh as there was absolutely no reference to fundamentals. Instead, the purchase was done because i believed it was a dividend yield share and faith in the airline and travel industry.

Still, with the slide in price from 4.88 to its current price of 3.87, I had better review this share again.

Let's start with the numbers:
1. P/E ratio = 22.82
2. PB = 3.29
3. ROA = 3.22%
4. ROE = 13.53%
5. revenue growth = -11.30%
6. earning yoy = -36.5%
7. cash = 465.46M
8. cash per share = 0.42
9. debt = 33.22 M
10. current ratio = 3.01
11. operating cash flow = 96M
12. free cash flow = 47M
13. dividends = 268M

Well, honestly, I am a bit worried about the fundamentals. The revenue growth is a negative 11%, and the earnings yoy is down -36%! What's happening? out of their three business lines, it seems like the problem is with Airframe maintenance. It has been dragged down so much because the phrasing out of older planes and replacing them with the new ones have resulted in less engine checks being done. That's a huge blow to SIA Engineering.

What does SIA Engineering have going for it then? A really good cash flow. If we check out the net cash flow, it is at 47M, however, the sinker is that they have been overpaying for dividends in 2015. 268M was paid out for dividends, so dividends i more than the free cash flow, and is also more than the operating cash flow. So will the dividends go down? I guess so, since the slide has already begun. It has decreased from 0.24 to 0.145 this year already.

With that, what is the dividend yield now? Taking current prices, dividend yield is 3.74. That's not worth it to put in more monies unless I am confident about the company's future prospects.

So what is the company's future prospect? The joint venture it has with Boeing and Investment Moat has done a very good review here.

Well, I will hold my shares and look to purchasing it when the price is right since i think there is still room to grow for this industry. What is the right price then? If i want at least a 4.5% yield, then this would have to be $3.20.

Well, so much for early mistakes. We pay the price for learning. 

The clash of the telcos

After reading and re-reading the wealth of information out there on telcos, I have condensed this information into the following:

1. for dividends - purchase M1
2. for possible growth outside Singapore - Singtel

Singtel is a mixed bag. They have been splashing cash trying to get into the digital advertising space rather unsuccessfully. Currently, the big boys are the US players and since there are no bounderies in the digital space, its not possible that Singtel has spotted a good deal which hasn't yet attracted these Internet Giants. It doesn't seem likely that Singtel can come up with anything creative either so I am rather wary if Singtel is going to keep splashing cash into acquisition.

Anyway, there are just too much information out there but if i had to pick a telco, then I will go with M1 for dividend play. Amongst the three market players, they seem to have the best cash flow but really, i am not sure how long that will be sustained for.

Enough of this telco research! Had spend a few days amassing just too much information. A wise man would say to leave the information gathering for now and let it crystalise into knowledge. 

Lippo Mall Retail Trust; Capitaland Retail China Trust

I had shortlisted 2 REITS to focus on in my previous post - Lippo Mall Retail Trust and Capitaland Retail China Trust

Let's start with Lippo Mall first. 

The numbers for this year 2015 1Q is pretty good. 

NAV= 0.4164

P/NAV = 0.877 (that's attractive)

P/E = 15.56

Yield = 5.5%

What's there not to like about it?

ROE is at a dismal 3.15%

Current ratio is 0.562%

Indonesia's economy is not forecast to grow much. Less growth, less people spending, less tenants willing to pay for a mall space. 

Currency issues as ruppiah is steadily dropping against the SGD.

The other thing would be its very dismal performance in 2014. If you review the financial reports for 2014, the DPU dropped, the revenue growth was negative. 

The current price was hovered around 0.36 for awhile now. I'm half hearted about this share. This may have to drop a little further in order to make it sweeter for me to bite. 

Capitaland Retail China Trust 

The numbers are from Yahoo Finance which typically takes them from the annual reports. 

PE= 9.19

PB: 0.99 

ROA = 3.28

ROE - 11.14

Book Value = 1.65 

Current ratio = 1.50

What isn't too good? Well, the negative cash flow position is pretty worrying. However, the cash flow from operations is actually increasing year on year, and the net cash flow is positive as well. Overall, the China economy grew 7% this quarter, and this is good since people are more likely to spend more. I also think the chinese culture is quite like singapore, taiwan and hongkong where there is a trend towards shopping in nice malls. Capitaland has a good record in malls and should have the know how of a good tenant mix. 

Well, looks like i am not 100% sold in on either of these two REITS. Got to review more! 

REITS

Ever since I decided that the best route was dividend shares, I have taken a new found interest in REITs. The REIT market in Singapore has also gained a lot of attention and there was this very interesting table compiled in the Straits Times over the weekend.

This would certainly be useful in my assessment of REITs since the gearing ratio and dividend yield is provided for! honestly, i am not too concern about the fee if there is still a good dividend ratio going on. You deserve your fee if you are good at what you do. Gearing ratio is something I certainly need to look at now, in light of the current rising interest rates.

With this in mind, I did a quick sieve method of zero-ing in on Reits which had 1) less than 35% gearing ratio and 2) at least 6% dividend yeld, i had a nice list of the following (in order of the most fee as % of revenue to the least):

Name of Reit	Current Price	PTB	Free Cashflow
Far East Hospitality Trust	0.77	0.7	1.4
First REIT	1.39	1.3	6.4
OUE Hospitality Trust	0.94	1	7.1
Cache Logistic Trust	1.14	1.2	8.2
IReit Global
Keppel DC Reit
CDL Hospitality Trust	1.63	1	7.1
Lippo Mall Retail Trust	0.35	0.6	13.8
Cambridge Industrial REIT	0.68	1	7.3
CapitaLand Mall Trust	2.14	1.1	2.3
Aims AMP Industrial Trust	1.505	1	8
Ascendas REIT	2.4	1.1	5.6
CapitaLand Retail China Trust	1.635	0.8	7
Mapletree Industrial Trust	1.555	1.1	7.1
CapitaLand Commercial Trust	1.535	0.9	5.4

Honestly, the figures may not be the most accurate since i got these off Straits times, and then investment moats dividend screen tracker. But this serves as a useful guide to me to review these shortlisted stocks to see which ones i am keen on, and what is a good buy price. I am quite disappointed that my Ascenda India Trust and Ascendas Hospitality Trust is not in there. So if good opportunities abound, I should consider moving my funds from existing REITS to new REITs. 

Going to step up on my research!

AIMS AMPI REIT

I am loving this sweet REIT. Ever since i picked this 2000 shares last March, it has risen in price and given me good dividends.

Let's do a quick recap on this stock:

1. This is a Singapore commercial REIT with 9 cargo lift warehouse, 2 ramp up warehouses, 7 manufacturing warehouses, 1 Business Park, 1 High Tech Park, 4 Light Industries in Singapore. They also have 1 Business Park in NSW, Australia.
2. The occupancy rate is 95.8%, higher than the industry average of 90.7%
3. DPM = 16.3% increase
4. leverage = 31.4%
5. fixed debt = 86.2%
6. yield = 7.28%
7. NAV = 1.52

Total debt: 457.2 M

The financial statements all seem ok. Good cash flow - i see cash coming in mainly through operational activities. However, there is no development assets in the balance sheet. It could work both ways in the future - this may not be the best time to grow the portfolio, but not growing the porfolio would limit the potential returns to investor eventually. I would also need to review the DRIPS plan to ensure it does not excessively dilute shares.

My take:

Keep an eye on Singapore's economy and any changes to management. i think the management is on a good track currently. I will purchase on dips.  

The million dollar question: Is a crash coming?

[credit:http://www.fool.sg/2015/07/08/how-to-prepare-for-a-market-crash/]

What do we do when there is a crash? I still remember the last crash in 2009. I just entered the work force for about 2.5 years, and half a year before the crash happened, I had already locked my money up in SPH, Singtel share. My financial adviser had also urged me to take out the existing 10k i had in my CPF OA to invest, when I asked him about the risks since OA was already giving 2.5%, his retort was that funds easily could give 10% yoy. Fast forward today, I sold my singtel shares only 2 years ago after being tired of waiting it out at $3. It is a profit if you take into account the dividends. My SPH shares are still giving me dividends but are still in the red in terms of capital investment. My unit trusts? Still 30% loss.

What lessons did i learn from that crash?
1. Having a warchest. It empowers you emotionally as well. I had zilch. just changed jobs. even after 6 months of saving and having an extra 2k, i refused to put that money in the stock market.
2. Timing. I recall lamenting to my other half that DBS was now at 8SGD. But we never put our money in DBS. With the market bleeding, it just seemed possible for even this 8SGD share to bleed away. The above table would certainly be helpful to combat this.
3. Research. I should have done my research before hand so i knew what shares i wanted to buy and what price is fair amount to pay for them. This is also related to the second point on timing. If you know that is a fair value to pay for the shares, you would be more sure of the timing to purchase. In times of trouble, its always good to have on hand companies which are cash rich, like 1) SIA (3.8B net cash) 2) Genting (3.56B), 3) SGX (867m), 4) ST Eng (725m) and 5) Dairy Farm (629m)

Do I think a crash is coming?
On one hand, i haven't heard the same confident tone that my financial adviser used when he told me to put all my money in unit trust. On the other hand, i have been hearing some friends who never used to be keen on the share market dipping in their toes. There is also the issues of the trouble Grexit, China stock market rout, MERS etc. You never know when a crash will come, the only thing you can do is be prepared.

Ascendas India Trust REIT

I have held on to this share for really long. It has given me steady dividends and it is the first REIT i have ever bought. It crashed to the lows after the financial crisis, but i held on. It hasn't given me great capital gains ever, because I bought it at a high. With more time on my hands, I need to review this to see what my options are.

Ascendas India Trust REIT financials:

1. PE = 12.22. Not too bad, comparable to STI P/E of 13
2. PB = 1.32 Not great, since this means that the market price is more than the asset value
3. ROE = 11.06 could be better
4. Increased in Quarterly revenue and quarterly profit
5. Dividend Yield: 5.4%. pretty good.
6. Debt / Asset: 16.3% this is surprisingly low!
7. Gearing Ratio: 25% , effective weighted cost of debt = 6.7%
7. Cash flow. There is a negative cash flow of 5M, and it comes from heavy investments and financing activities. 12M was used to fund 2 new properties in Bangalore and Hyderabad. An additional 5 M was used for refurbishing. 57 M + 35 M was also used to purchase new properties / land.
8. NAV = 0.678

Overall Economy Outlook:

India seems to be an elephant when it comes to growth. It is filled with potential, and yet it lumbers along so slowly. This Reit holds land in india, where they would then developed into commercial buildings for commercial use. The latest deal to date is the acquisition of Cybervale, in Chennai  and it has Renault Nissan as it anchor tenant.

It currently invests in Hyderabad, Chennai and Bangalore. Hyderabad and Bangalore seems to have slight potential for improvement in terms of demand but not Chennai. From the reports i found from Cushman, demand for commercial properties in these cities remains flat. However, the occupancy rates across the 6 properties are at least 93%, with 3 hitting 100%.

The weighted average lease term is 5.3 years, with about 31% expiring by 2017

Currency risk still remains on borrowings but rental yield has been hedged.

Increased in DPU from 4.56 to 4.86

Balance sheet issues:
1) negative retained earnings for the business trust since trust has paid out more than what it earned.

VERDICT:
I think this is a good share over the long term and i will pick up more shares if price decreases, bring down the PB ratio, and only purchase when the PB is less than 1. However, i would need to ascertain 1) India's economy 2) why Trust has negative retained earnings.

Single and Rich OR Married and Poor

This is going to be a post on stereotypes, but let's not pretend that we aren't judgmental. We all judged, it is just a matter of whether we leave our minds open to a possibility of a different future. 

Case in point: Female superiors make bad bosses but great employees. 

Case in point 2: Single females superiors make the worst bosses but the best employees.

Well, we all are familiar with the above. 

So let me put another stereotype to you: most financial bloggers are single. and Male. 

For some reason, females just find it more difficult to save money, or to plan financially for what they want. We are more consumed with sales, shopping, luxury bags, make up, dresses. If you watch tv (if you still do), more than half of the advertisements are targeting the female population. How many makeup, slimming, bust enhacements, facial, perfume ads do you see when watching the 9pm TV show? 

But the advertisements targeting male viewers are even more amazing. The products are valued at astronomical prices. Like watches, cars, technology. 

It's easy to save when you are single, but what happens when you are married to someone else who likes to splurge? 

If you are a thrifty guy, that is going to a be a problem. Your other half wants to go to fancy restaurants, romantic wine bars, pretty presents, and you are trying to save? 

But what if she doesn't expect you to pay for the stuff. Its just that she spends almost 90% of her salary on bags, dining and shopping herself? 

Hmm... 

food for thought. does love conquer all?

Ascendas Hospitality Reit

I must admit that I have been busy lately and have not been following news on REITS. Although at the back of my mind, I know that rising interest rates is a huge deterrent in investing in REITs, we would still need to compare to see what else is there to put your money in. It's not wise to keep everything in cash either, unless there is aforeseeable risk in the future. Therefore, I have taken some steps to review one of my three existing reits - Ascendas Hospitality Reits.

Summary of this REIT

This invests in hotel properties across Australia, Japan, Singapore and China. It is a total of 6 properties in Australia contributing to about just less than 50% of total revenue, 2 in Beijing contributing to 9% of revenue, 2 in Japan contributing to 22% and 1 in Singapore contributing to about 25% of revenue.

Off the top of my head, the key factors to consider for this REIT are:
1. Quality of the Hotel
2. Currency Risk
3. Tourism
4. Rising Interest Rates

I did a bit of poking around on the internet and was pleasantly surprised to see that almost all of the hotels are pretty good ratings on tripadvisor with most about 3.8 out of 5 stars. It seems like the management values location since the running pros for these hotels was its locations across all countries. However, a few did talk about the dated structure so there may be a need to overhaul the hotels properties some time in the future. Occupancy rate for the Australia properties averaged in the 80 percentile, pretty good since the average occupancy rate was about 65%

Currency risks and tourism is pretty related. With a weakening Yen and AUD against the SGD, it does seem that there may be issues with revenue in the future. This is already reflected in the latest earnings update as there was a weakening from revenue and profits derived from the Australian properties. Although this bode wells for tourism from these countries, currency risks remain a double edge sword. I would need to review to see if management has in place any hedge from currency risks but it doesn't seem to be any currently. Tourism in australia is set to grow and the australian government does seem to place a good focus on tourism as an industry. Airbnb is pretty big in Australia so this may be worth taking note since i do see airbnb having a direct and substantial impact on the hotels sector despite what Airbnb is claiming.

Rising interest rates is a cause for concern. Everyone knows it is coming but honestly, we don't know what the impact on the market would be, and whether we should drop all REITS for the time being and wait for a better time to enter. It is worth noting that 23 million debt is up for refinancing in July 2016 and interest rates would probably have risen since then. i don't think it is going to be substantial but probably by at least a further 1.5%. 23 million represents only a 5% of its current debt, so if we add this together with the floating rate debts that it currently has (which is now at 11.1%), that would bring it up to 16.1% at a really much higher rate. That's something to think about when comparing other options in the market

Financial numbers

1. current gearing is 37.2%. I am not optimistic that valuation for these properties would increase since the outlook for property in Australia, Japan and Singapore is that it is currently overvalued. If there is revaluation, current gearing may increase.

2. interest rates is currently at 3.2%. Pricing in a potential increase in interest rates for the 16.1% debt, i have estimated an increase of about 10% in interest rates, bringing it up to 3.5%

3. NAV is 0.74. Hence the current price is trading at a discount of 95%

4. Distribution Yield is at 7.126%

5. EPS is 0.3% and a current P/E of 27. PE is pretty high, not sure if its worth the price.

In summary, its a mixed bag for this REIT. I would review the other 2 to see how they fare in comparison.

Update: I've reviewed the other REITS on SGX that are in a similar industry.

	Ascendas Hospitality REIT	CDL REIT	Ascott REIT	Far East REIT
Properties	AU, SG, JP, CN	AU, JP, NZ, Maldives, SG	Global	SG only
P/E ratio	27.6	13.32	17.17	19
NAV	0.74	1.62	1.46	0.97
Current Price	0.7	1.63	1.31	0.79
P/NAV	94.6	99.3	89.7	81.4
Dividend Yield	7.1	6.8	3	6.3

Keppel Corp Review

I am invested in Keppel Corp and just managed to sit down and read through their 2014 financial report. Slow? Yes, but better late than never. We all know the macro trends affecting Keppel Corp, oil prices are down. but is it a good time to buy Keppel Corp?

Keppel Corp statistics:

1. Revenue: 13.3 B increased by 7% 

2. Net Profit: 1.8 M increased by 2% 

3. EPS: 1.04 increased 2%

4. NAV = 5.73 increased 7%

KepCorp derives income from three main groups:

1. O&M 8.5B revenue (60%)

2. Infrastructure  3 B revenue (20%)  

3. Property 2 B revenue  (10%)

Good spread of international markets:

1. singapore

2. NA

3. Europe

4. SA

Within the three main groups, O&M and Property is heading into some difficult times. Although Infrastructure is on good ground and I am confident of its prospect, it only contributes to 20% of Keppel Corp's revenue. (note to self: perhaps i should be investing in Keppel Infrastructure Trust or Keppel T&T directly or Keppel DC Reit).

View: 

- to continue regular investment into Keppel Corp via PSB since i am not confident if this is the lowest point for Keppel Corp

- to consider purchasing Keppel DC reit or Keppel T&T directly as industry has potential

SATS

SATS is a stock that is defying market trend lately. In a sea of red, it is one of the few shares that is green, and seemingly rising above market odds. In fact, fool.sg recently did a short write up on this stock.

Since I have SATS in my portfolio, the pressing question is always: 1) buy 2) hold or 3) sell. SATS is mainly in the Gateway Services and Food Solutions Business.

Pros:
1. Good dividends payout (3.9%)
2. High cashflow
3. Divested across APAC markets - JP, BJ, MC, TW
4. little competition in Singapore
5. Joint Venture with a leading meat processing company
6. CEO ex HSBC - should be good in managing cash flow and has proven so by managing cost
7. changi airport expansion in 2018 and 2025
8. Investment in high tech transportation of vaccines

Cons:
1. P/E ratio = 20.3
2. pressure from airline industry
3. bad reviews from glassdoor - low employee morale
4. rising labour cost
5. Revenue decreasing trend due to Food Solutions bringing in less revenue. Gateway solutions have not increased to offset fall.

A pretty mixed bag but pros seems to out weigh the cons. i vote hold and purchase more when price drops. However, if price continue increasing then i would consider selling and waiting as i don't quite like buying into high P/E stocks.

What i really like about this stock is : 1) management is moving into high tech transportation business 2) joint venture shows potential for growth