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

The Poverty Cycle

Like a typical female, I feel a need to have a network of female friends (or acquaintances) who are in a similar life stage as I am. Read: Working Mother With Young Kid. So, what better way to marry social media with this age old need than to join the myriad of facebook groups out there. 

It is an eyeopener. You "hear" about mothers who face a lot of issues with mother in laws, husbands, kids, colleagues, everyone. You are exposed to people that you won't really have a chance to talk to in the real world. Under the cover of anonymity - if there is really such a thing in today's online world, you hear stories and learn about the mindsets of others. 

It comes as a shock to me that in this virtual world, there are quite a number of mothers who are so young and so financially dependent on their husbands / families for support. Twenty-three year old with 2 kids age 4 and 2 talking about divorce, finding an admin job, trying to get maintenance.  Nineteen year old talking about living with in laws because they cannot apply for BTO since they do not meet the 21 year old age criteria. Young mothers complaining about not being able to get subsidies for their first BTO because they and their spouse do not have an income in the past year. 

Blows my mind. 

Here we are, talking about retirement and worrying about making money on our next trade. These women out there are far far far away from any form of financial independence. And what's worse is that the children they have are not going to have the fancy tuition, the stable family that children needs to thrive. Hell, they may not even get 3 meals in a day or a complete family. 

And i wonder, how did it become like this? Can these children grow up and be like us - wondering about savings and retirement and being financially independent? Can they get out of their poverty cycle? The odds are stack against them from the beginning. It is not only the poverty that their parents are in, but also the lack of maturity on the part of the parents. No job, no savings, impulsive behavior, the blame game, the victim mentality. I am not trying to judge, or rather i am trying not to judge, but i am awaken to the fact that there are so many people out there who actually will never ever be able to retire early. and as a mother, my heart goes out to their kids. 

I try not to be one of those who just criticise the government and then when asked what could be done better, turn around and say i am not paid millions so i don't have to think about that. If face with a problem, I want to be able to have some semblence of constructive thought than playing the victim or blaming others.  No, i am not trying to be noble. I am just trying to rescue my brain cells and to have a better attitude to life. You are what you think. 

But I can't see a way out for these kids. 

Education? Yes, provided the education field is really levelled. with the sprawling number of private centres and private investors backed tuition centres (read: knowledge universe), it is going to be a tough fight for these kids. And that is why i think private centres should be regulated. 

Subsidies? A lot of these mothers like to think that they should be paid for staying at home and that will solve a lot of issues. Maybe. But i am not in favour of handing fishes out if you are not sure the fish will be eaten by the right people. Teaching them to fish is definitely better. I am also not certain their kids would be able to do better in life than others. 

A mentor / mentee program? There are some social programs for kids. Maybe. 

I don't have a clue.