Time value of money

There has been a flurry of IPO’s in 2017 and given prevailing market sentiments have been well received thus far, all but REIT’s that is. Here are all the Reits listed on the SGX in 2017, Netlink trust (17/7), Keppel KBS US Reit (9/11) and Cromwell European Reit (26/12).

For a security class whose value is so tightly linked to its yield, there were some obvious reasons for this phenomenon. All 3 IPOs had a delayed dividend payout of about 6 months to 1 year from listing. Hence, as a yield investor, one could wait and observe the first quarter financials before deciding if the Reit was worth its price.

Unsurprisingly, all but Keppel KBS Reit opened unchanged, with Cromwell even falling below IPO price. But now, after the first reporting season, all are trading above their IPO prices as the dividend payout date looms.

This phenomenon begs a few questions..

Q1: Does this mean all high yielding securities are worth subscribing to? Given that the closer payout dates loom the more certain the Reits value?

I guess not, one does not have to look far to remember HPH reit. Hyped up as owning a portion of Lee Kah Shing’s empire, the stock quickly became one of the biggest falling knife’s in the business trust universe when it became certain that it’s yields were never going to live up to its price.

Q2: Is one season’s financials sufficient to determine the growth trajectory of the securities in question?

I think in the short term, a good earnings report might show that a stock is relatively undervalued (low P/E). But i guess more effort needs to be used to determine if the yields are sustainable or likely to rally further.

I remember in 2016, when i was picking my first Reit that i tended to compare one against another to check on their relative valuations. For example, among Reits within the same PE band, i would compare yield, net gearing and financing costs to come to a conclusion on the outlook of the Reit.

The subsequent rally in 2017 proved that this was somewhat flawed. Institutional and yield seeking investors require a level of certainty on distributions. In 2017, the counters that rallied the most were the brand named Reits with sound fundamentals in growth sectors with quality assets and large AUM. One has to remember that while economic factors weigh a good deal, good quality properties can continue to experience positive rental reversions, when the overall market remains weak.

In conclusion, Folks who want good quality high yielding Reits at the right prices have their work cut out for them. They will have to discern if the current environment makes a for a perfect storm for the Reit and whether it ride the storm to sunny days again.

Change @ Work

Tomorrow one of my beloved colleague is leaving. It’s never easy to say goodbye however, I do hope she is moving on to something that she can potentially enjoy more.

Though it was obvious to me at the beginning, I think it finally dawned on her that she was stagnating in her current role. 

I don’t know what the future will bring her, perhaps she will hate the next job more than the current one or maybe she will finally find something that will bring more fulfillment to her life. Only time will tell. But for now I think it’s for the best.

For myself, I think a season of change is about to come soon. I think there are many hopes and dreams that I wanted to fulfill in my current job and plug the many holes that I see in the organisation. But I’ve learnt that these may holes lie in many a different territories and navigating it is not so easy as no one enjoys having their cheese moved.

Coming this far, I see how perhaps naive I have been, but perhaps also how much I have grown as well. I think only time can tell what the future holds.

You will never be an explorer if you don’t leave your front yard.

Viva and ESR to merge?

E-Shang Redwood Reit has announced today that it is offering a merger with Viva Industrial Trust via a stock buyout. The day ended with Viva gaining 15c off its share price and ESR ending trading at a muted level.

As I am vested in ESR Reit this news is of interest to me. As of now details are hazy but I would like to think that the merger would benefit the holders of ESR more than those of Viva as the latter is trading at a relatively higher yield. That being said, it remains to be seen how many shares would be required to satisfy the shareholders of Viva to come on board.

As this is a stock buyout, I don’t think the unit holders of Viva will be compensated through monetary terms and thus it is interesting to see how the deal is going to be structured. ESR cannot afford to woo Viva’s shareholders at the cost of its own and thus have to strike a balance between the two.

Overall, While Viva has done well without ESR thus far, unit holders of both entities are likely to benefit from the larger AUM as financing cost will be brought to a more manageable level. ESR also has a stronger foreign pipeline of projects which bodes well should the combined entity diversify away from Singapore.

Waiting to learn and understand more!

Do read more here

  1. ESR Reit announcement here and presentation here
  2. Viva Industrial trust announcement here

What we learnt when applying for BTO under MGPS

This post was updated on 19 Sept ’18

The MGPS or Multi-Generational Priority Scheme is a HDB scheme which allows married/engaged children and their parent to book within the same BTO project. 

Through this priority scheme, we were able to book a unit in what most would consider the best BTO project for the year, despite the intense competition.

While the process was relatively straight forward, there isn’t a whole lot of detailed information available on the web. This meant that we had to go through quite a number of phone calls and emails with the HDB.

Here was what we learnt..

#1 Extra special balloting chance

Under the MGPS scheme both you and your parents will be allotted with one combined MGPS queue number. This is in addition to the 2 individual queue numbers that you would have gotten if you balloted separately.

The MGPS ballot is entirely separate from the general ballot. which means you are only competing with other MGPS applicants.

#2 Only pre-selected units are available

There is a finite number of units set aside for MGPS participants. The units will be spread across different blocks and will consist of both high and low floors.

Should you choose to proceed under the MGPS scheme, you can only choose amongst these pre-selected units and hence there is a real possibility that you might be left with low floor units even though the BTO balloting has yet to start.

To be successful both you and your parents must be satisfied with their units, which can sometimes be an issue. My advice is not to look at the site plan before the list is unveiled to prevent disappointment.

#3 Scheme is for both married and soon-to-wed applicants

MGPS-hdb-explanation.jpg

One point of confusion for us was the marital status at point of application. In the HDB website on priority schemes it stated that the scheme was meant for married children and their parents.

After some clarification, we were told that you do not have to produce a marriage certificate at the point of application. Applicants under the fiancé-fiancée scheme need only to produce a marriage certificate at point of key collection.

#5 Shared Queue Number

If you do choose to exercise your MGPS option, this queue number is now shared between both couples throughout the flat process.

Which meant that all major milestones (signing option, lease agreement, etc..), must be done with both couple’s present. In other words, schedule your time well.

#6 Resale Levy

The HDB imposes a resale levy to ensure a fair allocation of subsidized housing. As previous owners of a HDB flat my parents had to pay a resale levy which must be paid either in cash or CPF and does not contribute to the value of the house.

It would be good to discuss who should bear the cost of levy, especially if the older couple had no intention to downsize.

#7 Other points to consider

I noted that there were a handful of withdrawals from the scheme even though they were placed ahead of us. While I will never know why they chose to withdraw, it probably underlines the complexity of executing such a scheme.

It would be prudent to speak to all parties involved to understand what their concerns are. Don’t assume everyone has the same set of priorities when looking for a flat and as always practice financial prudence.

Happy house hunting!

What makes money?

Someone rich once told me several things in life can make us wealthy.

  1. Time
  2. Land/real estate
  3. Money

At that time I would not have questioned this, as it made complete sense.

Then I pondered, don’t we all at some point in our lives have 1, 2 or 3? Why do some people make more money than others? Did they just have more of the 3 than the average person? Well maybe, what do i mean?

I would opine that the defining difference, is how one maximizes their resources through opportunities. When i say opportunities, i don’t mean just pure dumb luck, I mean the combination of the mindset, skill, execution ability and foresight to spot a trend and turn it into a resource.

Most of the life stories of the rich follow a similar theme. A determined and disciplined life channeled towards the venture of choice, which results in a liquidity event, upon which they were able to get yet richer. In the process of getting there, they also develop a world class nose for success.

All of us may go through the same economic environment, but make different daily decisions. The sum of how we spend our days defines who we are and what opportunities we can smell out.

Most people see their jobs as the primary source of income, those who trade bitcoins might think they are onto something big and frankly that’s not any different from the 101 different ideas floating in the equity markets on a daily basis.

Its funny how while almost everyone wants to be rich most choose not to do the necessary to get there. It starts with you and your approach to life daily..

Giving and Saving

To most people I would imagine that giving and saving would be strange bed fellows. Why bother to save if you are going to give it away? Isn’t giving at odds with achieving financial freedom?

I have been giving regularly to a welfare organization. I did it soon after I started on my journey toward financial freedom as I wanted to remind myself that there was

and I hope to continue to support its work financially even as the portfolio grows in value. My intention is to grow this sum in tandem with my financial portfolio.

To me achieving financial freedom is a shared contribution of everyone in my life, even though the sacrifices may seem personal. Sometimes, its hard to imagine my life with a lot less. It is also recognition that this endeavor towards becoming a good financial steward is not purely a financial one.

If you can’t set aside to give today when you have nothing, you won’t be ready to do so later. I choose to start

In life everything compounds, even generosity. Start the snowball today.

Book Review: Cold hard truth on Love & Money

“Money doesn’t do everything, but sometimes it can save your life”-
and in order for it to save your life then, you need to save it today” David O’Leary

Image result for the cold hard truth on money

I’ve been reading the book “Cold hard truth on love & money” by Kevin O’Leary. I picked it up, as I wanted to find out more about how rich people think about their money and the habits they cultivate.

“Mr Wonderful” is his moniker on both the shows “shark tank” and “dragons den”. Those two shows are notorious for chewing up entrepreneurs. But that’s his first rule “never mix money with emotion”.

Here are some other interesting money principles that stood out and resonated with me.

  1. Spend less, save well and invest often
  2. Touch only the interest never the principal
  3. Always invest for income – “No dividend – Not interested”

The book is peppered with anecdotes across all ages and is his way of guiding you through the main (financial) stages in life.