Sunday, January 12, 2020

Elite Commercial REIT IPO - Early look

Elite Commercial REIT (Elite CREIT) is likely to launch IPO next week. This will be the first pure-play UK-focused REIT to list in Singapore Exchange.

Update 2019-01-19 - They have only filed preliminary prospectus so far based on The Edge Singapore's 17th Jan Article here. I've updated with a little bit more info from said article, indicated in blue. I intend to write and publish a new article after studying the confirmed prospectus.



What we know so far (based on The Edge Singapore's report):
  • Valuation of its portfolio is around GBP 320m. This is now indicated GBP 317.1m.
  • Its portfolio consists of 97 freehold properties all located in the UK. 
    • Of these, 25% of the properties (by rental income) are located in London (First tier city), with the remainder in second tier and third tier cities across UK. 
    • A search on the web gives some clarity (unable to verify this better on my end) on the definition of the city tiers (link here).
  • All of the properties are occupied by UK government.
  • Properties all let on co-terminus, fully repairing and insuring (triple net) leases.
  • UK's sovereignty rating is Aa2, the third-highest Moody's rating (see the link here to Wikipedia article for Moody's rating).
  • Forecast and Projected net property income of GBP 22.654m for FY 2020 and 2021.
  • 100% distribution from listing date till end of FY2021, and minimum 90% distribution subsequently.
  • Initial yield expected to be between 6% - 7%.
  • The management fee will consist of base fee of 10% of distributable income per annum and a performance fee element.
  • In additional to the management base fee, there is also a performance fee of 25% difference in DPU between the present financial year and the preceding financial year, multiplied by weighted average numbers of issued units in the financial year. This is only payable if the difference is positive (i.e. given only if the DPU is growing).
  • Major unitholders pre-IPO are Ho Lee Group, Sunway Group and Kim Seng Holdings. Other unitholders include Apricot Capital, Lian Beng and Partner Reinsurance, a unit of Exor 52.99% owned by the descendants of Giovanni Agnelli (FIAT’s founder).

Author's Note: One may be familiar with Apricot Capital and Lian Beng as Sembawang Shopping Centre was sold by Capitamall Trust to them.

Some report can be accessed via The Edge Singapore, Business Times and REITsweek:
Some discussions can also be found on Hardwarezone forum and ShareJunction forum:





While there is little information without the finalised prospectus, things I am paying more attention to before I decide whether to subscribe:
  • Forex opportunity/risk (GBP-to-SGD)
    • Do I see more upside or downside for this? If so, how much?
    • This also means the need to pay attention to UK news that could affect this in the longer term.
  • Gearing
    • How much will be the REIT's confirmed gearing at launch of IPO? As of 17th January 2019, this is expected to be 32%.
    • Gearing being too high means the need to raise capital via placements or rights issue instead of taking up more debt.
  • The valuation
    • How is the IPO priced relative to its valuation
    • How is it then priced in comparison to its peers listed in SGX?
    • This is also instrumental in evaluating the upside and downside in conjunction with Forex opportunity/risk.
  • The REIT's strategy for further growth to its yield and valuations?
  • After evaluating the above, if it meet my criteria for buying in?

What I like about Elite Commercial REIT

  • The management fee is aligned to the performance and hence the interest of the REIT
  • Responsibility for repairs is transferred to the tenants.
  • Tenancy virtually taken up by almost 100% UK Government.
  • Some safety factor exercised into tenant break options scenario to bring up the yield.

What I dislike about it:


  • Forex uncertainty - For now, I feel that GBP-SGD rates have at best, similar chances of downside, sideways and upside movement. Potential investors may see differently.

 Readers, what do you think of this upcoming IPO? Will you be planning to subscribe?

Saturday, January 4, 2020

What did I do with my savings plan in the end?

A long time ago, I wrote a couple of posts on thinking if I should be cancelling my savings plan on the belief that investing the money that I can get back, as well as the remaining premiums to be paid up till maturity, will pay off greater returns.





These received substantial comments - a mixture of advice, encouragement and critique.

You can access the articles here if you wish:
Today, I will revisit as I have gotten some more recent questions. I think it will also be a great idea to write on this and then update the older posts so as to offer closures. Of course, I will be more than happy to continue entertaining any future questions or comments.

Okay, here we go!

Daniel asked:
Hi, did you surrender this policy eventually?

Anon asked:
"Just came across your post about this and am currently in the same position you were- should i surrender/sell policy to third party to take the loss and Invest it myself? Or just let it ride..

I chose a 5 year payment for myself but quite a big annual premium with 2 more to go.

Could I ask where you stand on this now a year later? And why did you choose a 20 year payment instead of 5 or 10 years of premiums?"
I have commented to follow up on the post, then the idea of putting these in writing gave an opportunity to expand on my answers when compared to the original comments.

On trying to sell the policy but not succeeding, and then mulling choice between surrender or keep
Initially, I tried to get a quote for my policy, but I did not receive any replies. This boils down to the choice of surrendering or keeping.

Overall, with how my investing journey on the stock market was lacklustre for the past 18 months, it could be good to have a backup in case of investing FUBAR.

In the end, I have chosen to let it ride, and probably intend to leave it till maturity and beyond. But that's not all I had done to the plan.

Changing the rate of premium payment
But what else have I done?

I changed my premiums payment from monthly payment to yearly.

I am not so sure about the other savings plan out there, but in my case, one has to pay more for monthly premium charges - close to 2% - presumably some sort of administrative charges - which does not contribute to any returns. If you are giving your premiums monthly for other savings plan, do check with your financial planner.

Basically whatever returns I am meant to get for each year gets reduced 2% p.a if I kept the monthly premium up.

The length of the plan till maturity
The choice of 20 years instead of 5 or 10 years was a bit of an uneducated choice. I started on this plan before I started educating myself financially - primarily failing to appreciate how to better exploit the effect of compounding interest and not yet learning about other investment mediums.





A long time ago, I wrote a couple short posts on the effects of compounding interests:
If I were to go back to the decision point, I would want to change to a 5 year plan (t then I can just start another plan if I wanted to).

Let's run some numbers, shall we? We shall explore 2 conditions for the 5-year, 10-year and 20-year plan:
  • Same amount of yearly premiums (pay 2400 yearly till maturity)
  • Same amount of total premiums paid, spread over the period of the plan (48000 total sum)
I'm assuming the following for simplicity (in reality, where got so good, right? haha):
  • 3% annual returns before compounding 
  • Continuing to hold until policy year 30 without withdrawals or surrendering.
Scenario 1 - Same amount of yearly premium (2400 per year) until maturity
The first scenario, minus looking in-depth into the compounding effect, was what I had in mind when I bought the plan, looking at only enforcing myself saving up via the plan.

Based on the above, the Compounded Annual Growth Rate (CAGR) of this at the 30th policy year will be:
  • 4.18% for the 5-year plan
  • 3.65% for the 10-year plan
  • 2.69% for the 20-year plan
Unsurprisingly, the CAGR of the 20-year plan and, to a lesser extent, the 10-year plan, falls behind the 5-year plan; the premiums given in the latter years have had less time to work their magic. The only reason why you have saved more via the plan is that it is being enforced. Whether that accomplishes your intended objective, that is another question.

But what about the second scenario?

Scenario 2 - Same amount of total premium (48000), spread over the period of the plan

The second scenario - that is, same amount of total premium, was what I failed to consider at the time when I decided to buy my savings plan. The CAGR from the first example applies, but the principal sum for the 5-year plan, and to a lesser extent, the 10-year plan is now working much harder than the 20-year plan as the total premium was given earlier.

So Anon, if you are reading this, while it is up to your discretion based on your preference or risk appetite, I feel it should be fine to keep the savings plan. For your own info-gathering though, it is also no harm in trying to get a quote for the sale of your savings plan. You may garner some interest as it is more than half-way through your plan anyway, unlike myself.

Readers, do you have any savings plan or any experience to share regarding it? What are your thoughts about your savings plan?

Thanks for reading.






Wednesday, January 1, 2020

Portfolio Update 4Q2019 / The Year-End Review

In the blink of an eye, 2019 4th quarter has come to an end and it's time to usher in the year 2020. Setting new resolutions to meet for the year or years ahead, so as to meet targets ranging anywhere, in varying degree of magnitude. It could be investment goals, academic goals or just some other personal goals to become a better self or to fulfill one's bucket list.





For my blog, you know what each end of the quarter means - It's time for another portfolio update!

Portfolio 4Q2019

Notes
1 - Based on EUR:SGD conversion of 1.5095 to Dec 31st closing price of EUR 0.540
2 - Based on USD:SGD conversion of 1.3446 to Dec 31st closing price of USD 0.965
3 - Alita Resources is previously known as Alliance Minerals Assets Limited. As of 3Q2019, I have decided to write-off Alita Resources due to high likelihood of being a total loss. This may, however remote, change if a miracle happens.

No new transactions has taken place in comparison to the 7th October 2019 update, however there is *a hairline* appreciation in value.

The Year In Review
I have decided to break reviewing the year's events and targets down to "the good, the bad and the ugly". This covers both the portfolio and other goals I had planned for 2019.

You may want to read last year's review as it holds relevance to the rest of this post.

The Good
The Bad
  • Slightly overpaying for Lendlease GCREIT
  • Not being able to invest at a desired pace or invest with a larger lump sum - commission fee is a bummer. I am a fan of gauging my dividends based off Yield At Cost instead of just Dividend Yield.
  • Not managing to add positions to some shortlisted semiconductor stocks before they rallied. These stocks have not hit my target price to consider recycling my funds into such positions. Oh wells.
  • Not having even bigger positions in the REITs to get more rights issues or to make the most of commission fees should I decide to sell.
  • The plan to save up emergency funds as a priority goal will means there is little savings to channel towards the investing warchest unless I can substantially increase my savings by other means, be it further squeezing of expenses or side hustles.
  • I also got to admit, for the whole year, my contents were not to scratch both in frequency and depth. I was also struggling to find the energy to write. 2019 while eventful, was also a stressful year. With the change in employment and traditional wedding completed, I think my creative energy should start to come back.
  • I fell sick the last few days - hit with a fever, cough and sore throat. :( Stay well, guys!
The Ugly 
The only real smear on this year has been the total loss of share values for Alita Resources (short of a miracle). Pretty funny, when I was once sitting on it with 2-bagger paper profit.

Alongside dozens of other shareholders, we are looking into possible actions for both the possible breaches of duties and regulations by the ex-directors, as well as if it is possible to prevent the transference of shares to Liatam for nil consideration.

It is not just about possibly salvaging the situation, but the principle itself: Even if we can't salvage anything, not taking actions as a shareholder for wrongdoings (and I stress, WHEN YOU HAVE THE POWER TO DO SO) just sets a precedent for other crooks to try similar monkey business with shareholders' hard-earned money.

Well, that wraps up 2019.





Going forward into 2020
First, I hope my feeling of energy coming back is genuine and propel me to write better. I still owe myself the promise of doing a huge Alita Resources write-up. I think this will benefit in a lot of ways:
  • Understanding investing into the lithium sector
  • Understanding early signs of any red flags
  • Understanding how the company fell apart
  • Updating on possible salvaging actions
Next, I have decided to give making my blog shows the same between mobile and desktop format, as it seemed to look better on one of the financial blogger's site I visited recently. Mobile site, while looking cleaner, I also feel readers also miss out on other areas to explore.  Change of plans - it looks bad. Probs need to be optimised further.

On the investment forefront, I suspect there will be little (if any) adding to positions or recycling of funds. Off the top of my head, the most likely adding of positions will be to existing REIT positions when rights issue comes about. I am also keen to add position to some blue-chips as well. Having said all that, I hold this does not happen too soon - I need more funds! Hahaha.

Alright, with that, I would like to thank you all for reading, and wishing you a Happy New Year - May 2020 be a good or better year!

Saturday, December 21, 2019

And it's a wrap! - Wedding Celebration Done (and some other minor updates)

Hey all! It's been quite a while since my last update, hope everyone's doing well!

Wedding Celebration
I'm pleased to announce our traditional wedding and the wedding banquet is finally completed. Better yet, I am thankful we broke even. Being the main person to manage our finances, that was my biggest source of stress and worry for the past several months.





Our families on both side, as well as our groomsmen and bridesmaid, also did a huge part in making the event a successful one, and I am really thankful for that.

Wifey also did exceptionally marvelous in supporting to keep our expenditure down, with her bargain hunting on Taobao for the wedding clothing, traditional accessories, as well as engagement of Emcee, Singer/Musician, Photographer/Videographer and hiring of groom car.

To that end, we have decided to share their contacts  If you are planning to "ala carte" on freelancing services instead of packages, you can consider engaging their services.


Emcee/Musician-Singer - PUDGY

Photographer/Videographer/Groom car
  • Frank (HP: 88136030, Whatsapp/Wechat)
Makeup Artist
  • Olivia (HP: 83637866, Wechat)
(No I'm not getting paid for this, haha - but these freelancers seriously deserve a shoutout as we were pleased with their services).

Outside of our wedding celebration, and aside from my investing journey, life's been busy but good.
  • We had spent some days taking care of wifey's families and relatives while they flew here to attend the wedding and enjoying a vacation.
  • It has been 6 months after joining my new company, and I have just been confirmed in my new job! So far, I am pleased with my experience here. There are plenty of things to learn, opportunities to develop, and colleagues are nice and down-to-earth. I hope to grow fast and be able to do outstanding stuff for my current organisation in my career.

What's next

Maybe Baby?
Generally, I don't wish to have one so soon. Having kids is going to be the ultimate commitment and I want to be adequately ready to provide for my family in addition to having the means to continue investing and adding position at a reasonable rate into the market.

But just how long more? Ideally, say, start trying in a couple of years to save up on an emergency fund as well as having a decent-sized capital to invest with.

And here's the dilemma - it is also is a race against time, being torn between wife's age (wifey prefers to have one sooner) and overall readiness - at minimal financial readiness. At the very least, I wish to save up 30K in emergency funds ("minimum savings target" for the remainder of this post), but I am having thoughts of extending the goal further to a larger amount - gonna say due to a couple of fellow bloggers' posts.

Mr & Mrs Budget - We Need To Save Up S$46,000 Before Having Our Baby! That’s A Bit Too Much.

Heartland Boy - My Cost Of Raising A Baby In Her First Year

I mean OMG, >$40K in the first year? We're so, so not ready.

Anyways, back to the savings goal. $30K is a more conservative sum aimed at surviving at least 6 months of expenditure (food, shelter, necessities and insurances) paid solely in cash. This sum do not take into account having access to CPF-OA to pay for HDB mortgage loan.

Assuming no unplanned expenditure, I should be able to expedite hitting the minimum savings target by end of year 2020.






Vacation/Honeymoon
Beyond our yearly trip back to wifey's hometown, we do have some vacation plans.

Wifey and I have plans to check out Japan at the start of 2021 - it's been on our bucket list for quite some time and we are well on our way to making it happen. Saving up for this trip will not affect saving for my minimum savings target.

But wait, where does that leave our honeymoon?

While we do want to have a honeymoon (in my mind, it will be a longer and more exotic trip to several countries in a continent), I imagine this then won't be anytime soon for again, monetary reasons, and we probably want to get this done before having a baby either.

Investing Front
Previously I have mentioned plans to write a dedicated post on Alita Resources (formerly Alliance Minerals / Tawana Resources) in here. While the planned contents have largely changed, and it has been past said several weeks, I have not forgotten about it.

In addition, I intend to write on or reflect on a investment recovery plan moving forward. With the wedding celebration out of the way, I finally will be able to have the energy to pen down my thoughts.

As with all failed investment, one has to write it off or cut losses (in my case, expecting to get nothing in return although we will have to see how things turns out), but behind every failures is a valuable lesson. I have plans for this to be a long detailed post and want to take it slow. Could even be likely it come after 4th Quarter Portfolio Update.

I suppose I should also be thankful for starting to add REITs at a time when I needed more diversification than only holding a significant position in Alita Resources.

Expect some new updates in the coming weeks. Wishing everyone a Merry Christmas and Happy New Year in advance!

Thanks for reading.

Sunday, October 6, 2019

Portfolio Update 3Q2019 / Week 1 of October 2019

Hi guys, hope everyone's doing well! 3 months flies by pretty quickly when one's busy - now it's time for a quarterly portfolio update. I'm also going to cheat a little here and add in transaction done for first week of October 2019 as well.





Income Portfolio





Counters
Units
Market Price (SGD)
Overall Value based on market price (SGD)
Allocation
1
Cromwell European REIT
3000
0.772(1)
2316.42
46.19%
2
Prime US REIT
1000
1.296(2)
1296.26
25.85%
3
Lendlease GCREIT
1500
0.935
1402.5
27.97%







Growth Portfolio





Counters
Units
Market Price (SGD)
Overall Value based on market price (SGD)
Allocation
4
Alita Resources(3)
50000
0
0
0.00%







Cash and other Assets





Counters
Units
Market Price (SGD)
Overall Value based on market price (SGD)
Allocation
5
Warchest
1
0
0
0.00%

Total SGD


4947.86
100.00%


Note 1:EUR/SGD of 1.51
Note 2: USD/SGD of 1.38 
Note 3: Alliance Mineral Assets Limited is now known as Alita Resources.

There are 3 major things done to my portfolio since the last quarterly update.

(1) Write-down of Alita Resources (SGX: 40F / ASX: A40)
Things went downhill ("Bald Hill" Geddit? geddit?) for my position here and it is currently in Voluntary Administration (VA). The worst case scenario here, which is quite a high chance of, is the stock losing all its value and I thought it will be most prudent to write down my investment here to 0 at this point.

I knew and accepted the risk I was getting myself into when I bought in - nevertheless I will recover from this and come back stronger and more knowledgeable as an investor from this.

Having said that, there is still chances of Alita Resources, no matter how remote, depending on how the VA plays out. If it comes back from the dead, the portfolio will once again reflect its market value.

(2) Addition of Lendlease Global Commercial REIT (SGX: JYEU)
I have been eyeing Lendlease Global Commercial REIT (LGC-REIT) ever since its planned listing came out on the news few months back.

Unfortunately I did not get any units from LGC-REIT's IPO. I foresaw this given the hot reception and my history of unsuccessful balloting for hot IPOs.

Nevertheless I decided to nibble a bit on the open market - paid a little more than I would have liked but this is fine as I am looking further ahead. It is considered part of my positioning to prepare for any rights issue. I am just keeping my fingers crossed it will not happen so soon while I rally my resources.

Given its current valuation and its gearing ratio, I believe management will be prudent and any injection of properties will likely need to be supplemented from rights issue or private placement.

It was also highlighted that Forever 21, a tenant of 313@Somerset has declared bankruptcy. I believe that in the grander scheme of things, this is nothing and people are blowing the matter out of proportions. Some other tenants will just take over in due time if they are gone.





(3) Addition of Prime US REIT
Got a small parcel (1000 units) from Prime's IPO earlier on. I wrote about this sometime back here.

My reasons here are two-fold. Aside from compounding my dividend gains, it is also to put myself in a position to subscribe to any rights issue as I also expect prudence from the management not to over-gear and supplement acquisition with rights issue and/or private placements. This is similar to my taking up of position in LGC-REIT in this sense.

Closing thoughts
My purchase of LGC-REIT is expected to be my last adding of position for the year, barring any rights issue relating to my REIT holdings.

My resources will continue to be tight until the end of next year and I hope any rights issue does not happen until we are at least a few months into 2020. Keeping my fingers crossed.

Lastly, I am working on a reflection relating to my investment in Alita Resources and my directions with investment moving forward but I will be taking my time before it is published. Probably a few weeks time?

Thanks for reading. You can also access to my Portfolio and past portfolio updates here.