60-month Installment Payment Plan at Courts - a simple lesson in cashflow and expenditure management?

Recently I went to Courts to check out some furniture for my home. While browsing, I realise besides having shorter term installment payment plan (IPP) which comes free of charge, there is also the option of 60 month IPP.

For a cabinet costing $899, there is a 60 month IPP option that lets you pay, wait for it...

$39.95 a month. Whattt?

Multiply this figure by 60 and you get $2397. One would be paying 167% more for the product overall. If you annualise this value, you are paying an extra 33.4% effective interest per year!

This is even higher than your typical credit cards' interest rate!

In fact, in the first year alone, you are paying $479.40. That's slightly more than 50% of the original cost. If one is financing their big ticket items such as furniture or electrical applicances costing 4 digit, it is naturally a better option to opt for IPP that lets you pay off over 24 months/36 months, and interest-free IPP are not that difficult to find?

Usually the choice of IPP is made based off managing cashflow (especially when it's 0% interest).  It got me thinking about just under what kind of circumstances would warrant the extremes of selecting a 60 month payment plan.

No matter how much I wrap my head around this, it sounds like either bad expenditure management, bad cashflow management or otherwise circumstances forcing one to select such a plan.

A lesson is drawn from this - one should never let debt overrun expenditure management; it is a surefire recipe for disaster.

Termination of High Speed Rail Project - Impact on stocks?

Recently, there has been news announcing Malaysia's intention to terminate the High Speed Rail (HSR) project, with claims that this project does not financially benefit Malaysia at all. At the point of writing, this does not seem to be firm yet.

To share some background, the Jurong area is seeing development for Jurong Lake District. The HSR project is a part of this plan, as Jurong East will be or would have been the site of the Singapore Terminus. This would allow people to get from Singapore to Kuala Lumper (and vice versa) in the span of 1.5 hours, down from driving 4 hours. The project was slated to complete in 2026.

You may access some related articles here:

• https://www.todayonline.com/singapore/jurong-east-residents-businesses-concerned-impact-hsr-no-go
• https://www.straitstimes.com/asia/se-asia/benefits-of-kl-spore-high-speed-rail-exceed-cost-of-project-ex-malaysian-pm-najib
• https://www.lta.gov.sg/content/ltaweb/en/featured-projects/hsr.html

Two stocks that may be affected immediately comes to mind: Capitamall Trust (CMT) and Genting Singapore. Both are constituents of the Straits Times Index (STI). Note that this post contains significant speculations.

Capitamall Trust
CMT is a REIT that holds a portfolio of Singapore shopping malls under its name. The REIT currently has several malls in the Jurong Region. They are IMM, Westgate and JCube respectively.

Effect of HSR termination
I believe Westgate and IMM will not be impacted much despite taking a hit. In past AGM, CMT has highlighted JCube is being positioned as a long-term play towards the HSR project in that the shopping mall will see increased footfall on completion of the HSR project (link here). Some detractors however has also highlighted the benefit to JCube may be minimal, owing to the spendings more likely to be in Malaysia than in Singapore.

Should the termination be final, the HSR project will no longer be factored into Jcube's earnings growth. Overall the REIT might see some correction to its share price to factor in the reduced earning growth from the HSR project.

Having said this, I do not think it is a lost cause, with development of Jurong Region MRT. This itself should see increased footfall in not only CMT's malls in Jurong East, but also Lot One in Choa Chu Kang.

Another possible direction, should the management no longer sees the worth in keeping JCube, could be to divestment to obtain higher yielding properties.

The question we should then be asking is: where will then the money be used on to obtain or develop yield-accrediting properties? As far as I can tell, it's possible more malls could be built in newer or future estates. It might hurt, but it will not degrade the business.

Genting Singapore

Genting Singapore PLC is a Singapore-based regional leisure, hospitality and integrated resorts development specialist. Genting Singapore has a hotel in Jurong East area, within close proximity to the site of HSR Singapore Terminus. Apparently the Hotel was developed with the HSR project in mind.

You can access a related article here:

• https://sg.finance.yahoo.com/news/genting-singapore-may-major-victim-103825056.html

According to a shareholder at the AGM, high occupancy was noted. Assuming these are paid stays and not free stays by members, this would mean it takes a minor effect as it is nearing its cap. 

Another way to look at this would be since it was mainly developed with the HSR project in mind, then the its potential would be hit. An arguing point against this would be it was touted to benefit from tour bus coming from Malaysia passing by the hotel to begin with. If Genting Singapore intends to expand the Hotel, I reckon that future growth will take a hit (Supply > Demand).

Disclaimer: These are my thoughts and opinions of the mentioned stocks and should not be taken as a solicitation or source of decision to buy or sell - please DYOR/DYODD. 

What are your thoughts of the HSR project being scrapped and its impact? Do share!

Thanks for reading.