2.57% November 2018 SSB issuance

November SSB issuance saw the average per annum interest rate raised by 0.04% from the previous month. On top of being the 2nd highest issuance this year, at 2.57% this is competitive with the current CPF interest rate of 2.5%.

Despite this issuance being only the 2nd highest for the year. What is interesting, is that the near term (Yr 1 – Yr 5) rates are increasing at an increasing clip. This provides a good alternative to leaving money in the bank.

Since repaying part of the home loan in Mar and Aug, my hurdle rate for CPF-OA has since fallen to 2.5%. As such, I have decided to take a small slice of this issuance as part of the wedding savings plan.

Mth Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10 Average
Jan 1.32% 1.58% 1.71% 1.82% 1.99% 2.22% 2.43% 2.65% 2.86% 3.06% 2.13%
Feb 1.55% 1.59% 1.67% 1.77% 1.91% 2.07% 2.26% 2.44% 2.61% 2.75% 2.04%
Mar 1.42% 1.55% 1.73% 1.92% 2.08% 2.23% 2.38% 2.53% 2.69% 2.87% 2.11%
Apr 1.42% 1.77% 2.02% 2.25% 2.41% 2.51% 2.59% 2.67% 2.79% 2.97% 2.31%
May 1.65% 1.95% 2.14% 2.28% 2.42% 2.54% 2.62% 2.72% 2.84% 3.00% 2.39%
Jun 1.68% 2.14% 2.21% 2.21% 2.30% 2.52% 2.67% 2.81% 2.96% 3.12% 2.43%
Jul 1.72% 2.19% 2.35% 2.42% 2.56% 2.77% 2.91% 3.06% 3.22% 3.41% 2.63%
Aug 1.78% 2.16% 2.37% 2.54% 2.67% 2.76% 2.81% 2.86% 2.95% 3.11% 2.57%
Sep 1.75% 2.02% 2.22% 2.39% 2.52% 2.60% 2.66% 2.73% 2.82% 2.97% 2.44%
Oct 1.74% 2.08% 2.22% 2.31% 2.42% 2.55% 2.63% 2.72% 2.83% 2.97% 2.42%
Nov 1.80% 2.09% 2.27% 2.42% 2.54% 2.63% 2.69% 2.75% 2.84% 2.98% 2.48%
Dec 1.89% 2.19% 2.38% 2.54% 2.66% 2.73% 2.77% 2.82% 2.90% 3.04% 2.57%

SSB highest interest rates in Jul (2.63%), followed by Aug & Dec (2.57%)



Quick and dirty for Keppel KBS Reit

Keppel KBS Reit’s share price has been on a freefall after the announcement of an impending right issue. The question that I wanted answered was, is if this price would be a good time to jump in?

Here are some details of the Issuance

  • West park Portfolio Acquisition Price: USD 93.1mil
  • Loan: USD 80mil, 5year tenure

By book value the Westpark portfolio would be the 5th largest property in the Reit’s portfolio, but due to the small size of the Reits portfolio (<USD 1bn), this relatively sizable issuance is likely to erode the face value of the Reit.

Balance Sheet figures, All Figures in (mil)

Status Assets Liability A/L Shares NAV Last Price Disc to Bk
Prior to Acquisition 869 319 2.72x 632 0.87 0.715 17%
Post Acquisition 962 399 2.41x 818 0.68 0.56 17%

*Figures taken from presentation of Keppel KBS Reit annual report

Based on a discount to present book value, it does seem that the current price of USD 0.56 is trading at a similar level to the past book.

Income statement figures, All Figures in (mil)

Status YTD dis Income 4Q dis income Total Income DPU
Prior to Acquisition 33,538 9,4691 43,007 6.8%
Post Acquisition 33,538 9,9422 43,480 5.3%
1 Assume that 4Q distribution of the Reit would remain same as 3Q
2 Assume that the Westpark portfolio would bring about a 5% increase in income per quarter

From the income statement, it is evident that the Reit is facing headwinds. Not only is the revenue falling, it’s 3Q figures are below the mean of the consolidated YTD figures. Which is likely the reason why they need to inject a new building.

The Reit’s management has also guided that for “every +/-50bps in LIBOR translates to -/+ 0.06 US cents in DPU per annum”, which does not bode well considering how interest rates are trending up in the near term.

Given that the annualized distribution yield demanded by investors prior to the acquisition was hovering at 7.5%. I would thus expect the price to continue to correct until the next set of results are unveiled.

Financial Confidence

I came across this term while watching a Youtube video by this person called Dan Lok. He is a Canadian entrepreneur/consultant who specializes on big account closing. While he isn’t a Warren Buffet I thought what he mentioned about financial confidence resonated with me.

Most people are familiar with the words “financial freedom” or “financial security”. Both terms connote having or building a cornerstone of wealth to tide you over bad times. Even though FIRE is all about increasing your value, saving and investing, most conventional blogs focuses more on the “saving and investing” part.

“Financial confidence” is like FIRE’s answer to increasing value. Like its name, “financial confidence” is all about having the skill sets and knowledge to build wealth. So even if the world does come crashing down on you one day, you are still resilient and able to create new value in an ever-changing world.

These themes resonated with me a lot as most conventional financial literature focuses on using the power of compounding to help build wealth over a long period of time. But I realized that if the roof was truly on fire, I don’t have the time or resources to live twice as long.

I am on the wait list for his book F.U. Money and will post a review after I am done with it.

Active Income

I’ve always thought of the FIRE game as math’s, plain and simple. At some point you realize that there is a limit to how much you can save and that the next step is to increase your income.

I’ve never been good at increasing my side income skills. Frankly, aside from dividends, which has provided some level of passive income over the last 2 years, I’ve never really dabbled in other ways to make more cash.

That’s before I met Gary Vaynerchuk and his 2017 Flip challenge. Okay never mind, that this is Yr 2018 and I am 1 year behind the curve. This guy is a serious eye opener and in my opinion a very shrewd observer of the changing tech scene, especially when it comes to small businesses.

You can watch his video here

It has barely been a month since I’ve started this exercise and I’ve already sold 3 items. I’m seriously contemplating going down to the thrift store this weekend to see if I can find something valuable to flip for free.

Given my skills, the S$20,170 target looks like miles away, but I guess the process is more important than the product. Imma chip away at it one step at a time.

2.42% October 2018 SSB issuance

The latest SSB issuance is out, and is frankly not that exciting. Overall, the interest rates have remained fundamentally the same. The overall yield has fallen by 0.02% from the previous month and the 1-year yield is down by 0.01%.

2.44% Sept-18 vs 2.42% Oct-18Nothing fancy about the issuance, but investor’s who have a time horizon of 2 years for the bond can note that the 2-year yields are slightly higher than the last issuance.

I think the bond issuer’s are fully cognizant about how the SSB’s are not supposed to be “high yielding” investments. Especially since there have been reports of falling savings rate in the banks. Not a surprise either since their interest rates are so low.

Here is an incomplete list of the past SSB issuances.

Dividend recap 3Q2018

In total, I received $509 in dividends for the third quarter. This amount is progressively getting larger as I switch towards dividend paying stocks instead of growth stocks. In the previous year, the amount received was only $107.

Breaking the $500 per quarter mark is a good sign that the portfolio is progressing. In time, I do hope that this will grow to $750 and hopefully $1000 per quarter.

Dividends received Reit: $367.24

  • Capital Retail China Trust – $111.41
  • AIMS AMP Capital Reit – $50
  • Mapletree North Asia Commercial Trust – $29
  • ESR Reit – $176.83

Dividends received Non-Reit: $152.3

  • Singtel – $107
  • Wilmar -$35
  • Raffles Medical – $10.3

Homeowners can retain up to $20K in CPF-OA when applying HDB loans

The latest news that homeowners can elect to retain $20k in their CPF-OA when applying for a HDB housing loan, is to me a welcomed move.

Previously, homeowners had to completely use up their OA balances, before being able to take a loan with the HDB. This meant that not only are they left with minimal buffer space in their CPF, they also miss out on the additional 1% interest from the first $20k in the CPF-OA.

Some may ask, why bother to retain the money in the OA when you can be paying down the loan and avoiding the interest? I think that an immediate advantage is to let the first 20k sit in the OA garnering an additional 1% of interest, while funneling the rest into the SA, where it earns an additional 1.5%.

The new rules are a boon for soon-to-be homeowners like myself, who see the SA as a cornerstone to their retirement plans. In fact, if you continued to funnel everything above the first $20k into the SA. I’d reckon that the FRS would not be too difficult to achieve.