Wednesday, January 18, 2017

Sharing is Caring

Sharing is Caring

SG Market (18 Jan 17)

Posted: 17 Jan 2017 05:40 PM PST

The local market will likely continue to be wary of US policy risks as Trump takes an increasing strident view over trade, with the latest charge that the yuan is making dollar too expensive.

Regional bourses opened in negative territory in Tokyo (-0.5%), Seoul (-0.6%) and Sydney (-0.7%).STI remains overbought with psychological support at 3,000 level and topside resistance at 3,040.

Stocks to watch:
*CCT: 4Q16 DPU jumped 10.1% to 2.39¢, taking FY16 payout to 9.08¢ (+5.3%), meeting estimates. For the quarter, revenue and NPI surged to $89.7m (+32.7%) and $70.8m (+35.4%), boosted by the acquisition of the remaining 60% stake in CapitaGreen in Sep '16 (4Q15: 40% stake). Portfolio occupancy remained healthy at 97.1% (3Q16: 97.4%), with aggregate leverage unchanged at 37.8%. NAV/unit at $1.78.

*First REIT: 4Q16 DPU of 2.13¢ (+1.9%) grew at a slower clip to distributable income ($16.5m, +5.1%), due to the issuance of new units. This brought FY16 payout to 8.45¢ (+2%), in line with estimates. For the quarter, growth in revenue ($27m, +5.1%) and NPI ($26.7m, +5.2%) was mainly lifted by the Kupang Property, acquired in Dec '15. Aggregate leverage stood at 31.1% (+1.1ppt q/q). NAV/unit at $1.01.

*GLP: Another co-investor of its US Income Partners III fund has made its initial capital contribution of US$26m, representing 8.1% of the aggregate capital contributions to-date. Following this third syndication, GLP's interest in the fund has been reduced to 74.1% from 82.2%.

*Lippo Malls Trust: Terminated a JV with First REIT to acquire Siloam Hospitals Yogyakarta (SHYG) and retail mall Lippo Plaza Jogja (LPJ). The parties intend to resume talks after AEI works on LPJ is completed, and upon SHYG obtaining required licenses for operations by end-2017.

*Next-Gen Satellite Communications: Entered 55:45 JV with AR Evans Financial to provide investment management, economic publication, investment research and fund raising activities.

*Huationg Global: Formed 40:60 JV with construction peer Samwoh, to participate in a BCA tender.

*Sen Yue: 50% owned SMC Industrial entered into an agreement to purchase a Singapore property located at No 3 Jalan Pesawat for $7.3m.

Singapore Shares, Singapore Stocks, SGX, STI and More - PuntersGallery.Com

Singapore Shares, Singapore Stocks, SGX, STI and More - PuntersGallery.Com

Dasin Retail - 18-Jan-2017 11:58 PM

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Certificate of Entitlement (COE) - 18-Jan-2017 11:00 PM

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Traders in Punters Gallery [TPG] - Jan 2017 - 18-Jan-2017 09:51 PM

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Silverlake - 18-Jan-2017 08:52 PM

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CapitaLand Commercial Trust - 18-Jan-2017 08:23 PM

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Koh Bro Eco Eng (fka Matex) - 18-Jan-2017 07:53 PM

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Kitchen Culture Holdings - 18-Jan-2017 07:51 PM

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Kim Heng Offshore & Marine Holdings - 18-Jan-2017 07:48 PM

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KhongGuan - 18-Jan-2017 07:43 PM

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Keong Hong Holdings - 18-Jan-2017 07:42 PM

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Keppel Infrastructure Trust (fka CitySpring) - 18-Jan-2017 07:38 PM

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Keppel REIT (fka K-reit) - 18-Jan-2017 07:37 PM

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My Stock Report Card for Dec 2016

Posted: 18 Jan 2017 04:45 AM PST

My Stock Report Card for Dec 2016 Total Dividend Collected from Jan – Dec 2016 : SGD $ 62,205. Income distribution in Dec came from Aimsamp Cap Reit, SPH. I sold off SPH as I think they might be too late in their transformation exercise and added some Facebook. Happy New Year :-). What a year, 2016 ! For the first […]

SMART Goals Are Sooooo 2016

Posted: 18 Jan 2017 04:30 AM PST

Ugh, I swear if I read another life-coach blogpost talking about "SMART goals", I'm going to stab myself in the eye with a plateful of ikan bilis.  Today, SMART is THE cliche of the personal development world. It's the equivalent of a student ending his essay with, "…And then he realised it was just a dream." It makes us all roll out eyes. […]

This posting includes an audio/video/photo media file: Download Now

Selling via Fulfillment by Amazon (FBA) – Status update (Part 7)

Posted: 18 Jan 2017 04:02 AM PST

You can read my previous post on Amazon FBA here (Part 6). So far, I have 2 products listed on Amazon. I went through the whole process of lowering sales price, advertising through Pay Per Click  – PPC campaigns (Auto and Manual), doing Facebook Ads, giving out product at heavily discounted prices, going through an email list […]

Losing money yet again trying to time the market? Read this…it might help

Posted: 18 Jan 2017 03:40 AM PST

Losing money again trying to time the market? Buying too high, selling even higher? Or buying at a low price, market drops further…fear gets the better of you and you sell at a loss?? Darn! Worse, buying and selling stocks which one does not intend to pay fully…. anyway, lets face it, who knows what […]

CapitaLand Commercial Trust (CCT) FY 2016 Financial Results

Posted: 18 Jan 2017 12:21 AM PST

CCT released their FY 2016 Financial Results this morning. Seems a strong results for 2016 overall per se. 穷小子 shall touch on some of the key factors. CapitaGreen’s contributions is 100% with effect from 01 Sep 2016 Starting off with the much anticipated on CapitaGreen contributions injections to the portfolio. Note that its contributions is 100% […]

Purple cow – transform your business by being remarkable

Posted: 17 Jan 2017 10:23 PM PST

Other than the 4Ps of Marketing, now we have another P – Purple Cow. I picked up this book last week, but stopped it halfway to read another book – talking to humans. Finished it today, which took me around 5 days. Overall, it’s a very light reading. This book is about Marketing, and how […]

Tools for Titans #40 : Reject the norms of your time.

Posted: 17 Jan 2017 08:15 PM PST

This segment is about Neil Strauss. He is the author of the pick-up book The Game. If I were to read The Game in my 20s, Neil might have turned out to be my favourite author. Unfortunately, I learnt of his works through mutual friends who experimented with “negging” women with low self-esteem at pickup […]

It’s not personal, it’s just business!

Posted: 17 Jan 2017 06:00 PM PST

Here's a summary of the main points of the book: The Theory Of Business Enterprise. It's an interesting read and it definitely reflects the direction of our societies today. The video by Ray Dalio sums up the first few chapter of the book. Our entire society is turning into a giant business and everything is […]

4 Money Mindsets for My Kids to Grow Up To

Posted: 17 Jan 2017 05:45 PM PST

Truth be told, I have been arrowed to write this article by the Boss. Left to my own devices, this is territory I would rather avoid. Unfortunately, being the only parent in the team (up till today at least), the least I can do is to pull some weight. Truth be told #2. This article is long […]

Is it time to sell Apple as it hits its 52-week high?

Posted: 17 Jan 2017 04:30 PM PST

Apple Inc. (Nasdaq: AAPL) is probably the most well-known company on the face of the earth and is also the largest public company in the world by market cap. Apple hit a 52-week high yesterday, 17 Jan 2017, when its share price touched $120. It's market cap now stands at over $629 billion. Have a […]

Why Dollar-Cost Averaging is overrated

Posted: 17 Jan 2017 04:05 PM PST

Dollar-Cost Average (DCA) is a very popular investing technique and I believe it is probably one of the first few techniques that new investors will come across. With so many books and articles explaining the benefits of DCA, I also think that it is well suited for a lazy investor like me – put in a fix […]

Surbana terminated 50 staff

Posted: 17 Jan 2017 04:00 PM PST

Temasek Holding's Surbana Jurong terminated about 50 staff who were deemed as "poor performers". The layoffs occurred a couple of weeks ago, just before the Chinese New Year. Surbana has stressed that the terminations were not retrenchment exercise. The staff were let go simply because of their poor performances. It is indeed a sad day […]

Dutech Holdings – What Lies Ahead? Part III

Posted: 17 Jan 2017 04:00 PM PST

This is a continuation of the earlier posts: Dutech Holdings – What's Next? Realize $117k Profit, Hold Or Add More? (Part I) Massive FY16Q4 For Dutech Holdings – Digging Deep To Understand The Impact Of Metric Group Acquisition (Part II) In Part III, I will be sharing mainly on what are the happenings in the […]

An Interview with "SG TTI"

Posted: 17 Jan 2017 04:00 PM PST

As stated in the last post of 2016, I am restarting the interview series. I will try to have an interview with an interesting investor every month in 2017. For Jan, I will start with interviewing SG Thumbtack Investor aka SG TTI. If you have yet to read his blog, I urged you to do so soon. […]

The Emergency Fund

Posted: 17 Jan 2017 04:00 PM PST

In The Bedokian Portfolio, I made a very brief mention about the emergency fund1. I also stated that it is up to you how much your emergency fund should be and it must not be mixed into the Bedokian Portfolio’s cash component. One of the questions that I had was how to build this emergency […]

How to Milk your Cash? Best Places to Park your Cash!

Posted: 17 Jan 2017 04:00 PM PST

This post by Kyith has inspired me to write my own off-shoot version of where to stash your cash. If you are collecting 0.05% interest on your bank account, you better pay attention! I believe that there is a systematic approach to this. You just fill up the account that gives you the highest rate […]

What an unemployed 53 year old can do with $20K?

Posted: 17 Jan 2017 04:00 PM PST

Dear AK, I am 53 and I have been jobless for more than a year. I have given up on job search. Fortunately, I am a saver and have almost 200k in savings. Jobless 10 years too soon, I need to make my savings last longer. My sister told me about a 5 years endowment […]

The Long Sunset for Oil Rig Demand?

Posted: 17 Jan 2017 03:02 PM PST

Different industry have different length of business cycle. I can still remember one acquaintance of mine observe closely that the shipping up cycle usually takes place 4 years and down cycle 2 years. He may not be wrong, but in recent times, the shipping supply was so out of wack that the downturn lasted longer […]

The Motley Fool

The Motley Fool

Capitaland Commercial Trust’s Latest Earnings: Distributions Are Up 10.1%, What’s Next?

Posted: 17 Jan 2017 11:02 PM PST

CapitaLand Commercial Trust  (SGX:C61U) released its earnings results for the quarter and year ended 31 December 2016 this morning.

As a quick background, CapitaLand Commercial Trust, is managed by CapitaLand Limited (SGX: C31) and is one of the largest commercial real estate investment trusts (REITs) in Singapore by market capitalization.

At the local front, the REIT has ownership over properties such as Capital TowerSix Battery Road, and the Golden Shoe Car Park. It also has partial stakes in Raffles City Singapore and CapitaGreen and a 11% stake in Quill Capita Trust in Malaysia.

You can learn more about CapitaLand Commercial Trust in here and here. You can alsocatch up on the results from the REIT's previous quarter here.

Financial Highlights

The following is a quick take on some of Capitaland Commercial Trust's latest financial figures:

  1. Gross revenue was $89.7 million in the latest quarter, up 32.7% from the same quarter a year ago. For the full year, CapitaLand Commercial Trust's gross revenue was up 9.3% to $298.6 million.
  2. Net property income (NPI) grew alongside its top-line, recording a 35.4% year-on-year increase to $70.8 million in the reporting quarter. For 2016, NPI was $231.3 million, an 8.7% increase from 2015.
  3. Distribution per unit (DPU) for the reporting quarter was 2.39 cents, a 10.1% increase from the 2.17 cents per unit reported in 2015's fourth quarter. Capitaland Commercial Trust recorded a DPU of 9.08 cents for 2016, which represents 5.3% improvement from the year before.
  4. As of 31 December 2016, the REIT's portfolio of investment properties were valued at $8.5 billion. The REIT reported an adjusted net asset value per unit of $1.73 at end-2016, unchanged from a year ago.

Beyond that, Foolish investors may also want to keep an eye on the REIT's debt profile. The debt profile may provide clues on how the REIT is funded and its sensitivity to the interest rate environment. These are summarised for CapitaLand Commercial Trust below:

2017-01-18 Capitaland Commercial Trust
Source: Capitaland Commercial Trust's earnings presentations

As the table above shows, CapitaLand Commercial Trust's debt load had increased by around $1 billion compared to a year ago.

As a result, the REIT's aggregate leverage had increased from 29.5% to 37.8%. At the same time, its interest coverage had declined to 5.8 times while the average term to maturity had shortened to 3.2 years. CapitaLand Commercial Trust's unencumbered assets also fell from 100% a year ago to 80% in the reporting quarter.

The majority of the REIT's loans – 80% to be exact – are currently on fixed interest rates. Capitaland Commercial Trust has 11% of its loans coming due this year. Foolish investors might want to keep a watchful eye on its refinancing activities.

Operational highlights

CapitaLand Commercial Trust ended 2016 with a committed occupancy of 97.1%, unchanged from the end of 2015. The weighted average lease term to expiry was 6.6 years at the end of 2016.

Summing up the quarter, the REIT manager's chief executive ,Lynette Leong, had the following comments:

"CCT's portfolio committed occupancy rate of 97.1% as at 31 December 2016 is driven by expansion of existing tenants and take-up by new tenants. About half of 2017 leases have been renewed, and we will continue to proactively attract and retain tenants to mitigate leasing risk.

We do not expect to be significantly affected by rising interest rates given that about 80.0% of CCT's borrowings are on fixed interest rates and that it has minimal debt due for refinancing in 2017."

Leong also provided a brief outlook on CapitaLand Commercial Trust's outlook:

"Beyond the current challenging market conditions, we are looking at the next wave of the office market upcycle as well as "the future of work" – that is, how the way people work will possibly evolve in the future given the trend of globalisation, mobility and digital technology – and incorporate that in our evaluation of the financial feasibility of the redevelopment of Golden Shoe Car Park, while seeking approvals from the government authorities.

Our wish is to replicate the success of CapitaGreen so as to spark a new growth catalyst for the Trust."

CapitaLand Commercial Trust traded at $1.57 at the open today. This translates to a historical price-to-book ratio of 0.88 and a trailing distribution yield of 5.8%.

Why Have City Developments Limited’s Shares Gained Just 2.7% In The Last 5 Years?

Posted: 17 Jan 2017 10:16 PM PST

I think it is fair to say that most investors want to find stocks that can increase in value in the future, either from an appreciation in the share price or through the distribution of dividends.

So, it's worth keeping in mind the idea that both factors – price appreciation and dividends – are generally derived from the same source, a company's profit.

This profit is, in turn, driven by a company's business performance. In general, companies with strong businesses exhibit sustainable growth, high margins, high returns on equity, and low gearing (gearing is a gauge of how much debt a company's taking on).

In here, I want to take a look at the business performance of real estate developer and investor City Developments Limited (SGX: C09) over its last five fiscal years. I also want to track the total return of its stock; the total return factors in the gains from dividends.

Here's a table showing City Developments' revenue, net profit, net profit margin, return on equity, and gearing from 2011 to 2015:

City Developments
Source: City Developments' 2015 annual report

We can see that from 2011 to 2015, City Developments' revenue has been stable at about S$3.3 billion, with the exception of an unusually strong year in 2014.  The company's net profit margin has also remained at a high level of around 20% to 25%.

But in that period, its return on equity had declined markedly from 11.7% to 8.6%. The return on equity measures a company's ability to generate a profit from the shareholder's capital it has; in general, the higher it is, the better it could be. But, it's also worth noting that the return on equity can be inflated through the use of higher borrowings. This brings me to City Developments' gearing.

Turns out, City Developments' gearing has actually increased from 64.5% to 72.1% over the timeframe under study. Yet, that couldn't help prop up its return on equity.

Over the five years ended 18 January 2017, City Developments has seen its share price fall by 4.1%. But if dividends are factored in, the company's total return becomes a positive 2.7%.

A total return of just 2.7% in five years isn't anything to write home about. But, it closely tracks City Developments' long-term business performance. This is a good reminder that a stock's performance over the long-term is linked to how well or poorly its business does.

What Investors Should Know About The Latest Collaboration Between StarHub Ltd and M1 Ltd

Posted: 17 Jan 2017 07:53 PM PST

Last week, two of Singapore's four telcos signed a Memorandum of Understanding (MOU).

The two telcos in question are StarHub Ltd (SGX: CC3) and M1 Ltd (SGX: B2F) and the MOU is for the pair to study the potential for further collaboration in sharing mobile infrastructure. According to their joint press release, the focus would be on sharing radio access network, backhaul, and access assets.

This move by StarHub and M1 comes after Australia-based TPG Telecom was named in December 2016 as Singapore's fourth telco after it won a spectrum auction held by the Infocomm Development Authority. TPG Telecom has yet to introduce any services in Singapore and has plans to do so only in 2018.

Prior to TPG Telecom's entry, Singapore's telco market had for many years contained only three players, namely, Singapore Telecommunications Limited (SGX: Z74), StarHub, and M1.

The latest cooperation

StarHub and M1 have actually been working together for many years, sharing mobile infrastructure such as combined antenna systems, in-building fibre, and tunnel cables.

The latest MOU between the two telcos has an aim to "enable both companies to optimise use of certain network elements through sharing, and improve network coverage and capacity for the benefit of their respective customers."

There are other potential benefits for the two telcos in working together more closely.

Firstly, cooperation between StarHub and M1 could remove significant duplication in capital expenditure and thus free up cash and lead to lower operating expenses for them. If capital expenditure requirements are lesser in the future for both companies, it increases the chances of them being able to sustain their current dividend payments.

Secondly, collaboration can also increase the overall scale for both companies, thus allowing them to pursue investments that would not have happened on an individual basis. Both companies can also respond faster to any need for new technological investments.

Going forward

Although StarHub and M1 will be working more closely in the future, investors should not be mistaken that such a collaboration will reduce competition. The comments given by StarHub's chief executive, Tan Tong Hai, on the MOU alludes to this (emphasis is mine)

“We are cooperating to bring the Singapore infocomm industry to the next level, to compete not on pure infrastructure ownership, but at a higher level of customer service and innovative value creation.

Sharing mobile network radio elements with M1, but keeping our individual mobile core networks, will allow StarHub to provide better mobile service (in particular, mobile coverage) and still be able to differentiate ourselves."

Given Tan’s words, investors can probably expect the level of competition to remain intensive within Singapore's telco industry!

Hour Glass Ltd’s Share Price Is Down By 16% In The Last 12 Months: Here’s Why

Posted: 17 Jan 2017 07:17 PM PST

Hour Glass Ltd (SGX: AGS) is a luxury watch retailer that runs over 40 boutiques in the Asia Pacific region in countries such as Singapore, Thailand, and Australia.

Some of the brands that can be found in Hour Glass's boutiques include the marquees such as Patek Philippe, Audemars Piguet, and IWC. All told, the company carries over 50 of the finest watch brands in its boutiques.

Over the last 12 months, Hour Glass's stock price is down by 16%. What may have caused this?

Reasons for a decline

There can be many reasons behind a stock's price decline.

But, the reasons can generally be classified as business-performance-related, or investor-sentiment-related. The former deals with how a stock's business has performed or is expected to perform. And in terms of business performance, one of the really important numbers would be the stock's profits.

Meanwhile, the latter is about the overall mood of market participants – are investors more greedy than fearful, more pessimistic than optimistic et cetera? In general, negative emotions (fear and pessimism) tend to drag down the prices of stocks while positive emotions (greed and optimism) tend to push up stock prices.

The case with Hour Glass

In Hour Glass's case, it appears to be the former at work. Here's a table showing the company's revenue and profit performance in the six months ended 30 September 2016:

Hour Glass income statement table
Source: Hour Glass earnings announcement

We can see that the luxury watch retailer has suffered a 7% year-on-year decline in revenue for the period under study. This in turn has led to a 18% drop in its earnings per share.

Moreover, the company commented in its earnings release that it does not expect the current headwind to its business – a slowdown in the global economy leading to contracting market demand for luxury goods – to ease anytime soon.

Suntec Real Estate Investment Trust’s Annual Report: 23 Key Numbers Investors Should Know

Posted: 17 Jan 2017 06:43 PM PST

Suntec Real Estate Investment Trust  (SGX: T82U) was one of the first REITs to appear in Singapore's stock market given its listing on 9 December 2004.

The REIT has come a long way since its initial public offering. We can learn more from Suntec REIT's 2015 annual report. Here are 23 key figures investors should note:

  1. The makeup of Suntec REIT's portfolio can take a bit of time to understand. (The following ownership figures given in point 1 and 2 are as of end-2015.) As a start, the REIT has a 59% stake in Suntec City Office Towers and a 100% interest in Suntec City Mall. Suntec REIT owns a 60.8% interest in Suntec Singapore Convention & Exhibition Centre too.
  2. Meanwhile, Suntec REIT also has a one-third interest each in One Raffles Quay, Marina Bay Financial Centre Towers 1 and 2 and the Marina Bay Link Mall. Elsewhere, Suntec REIT owns 30% of Park Mall. Finally, the REIT owns a 100% stake in a commercial building on 177 Pacific Highway in Australia. (It's worth noting that Suntec REIT had added to its property portfolio since the publication of its 2015 annual report; the REIT had bought a 25% stake in an office building in Melbourne, Australia.)
  3. From its public listing in 2004 to 2015, Suntec REIT had delivered distribtuions of 103.5 cents per unit. It has also generated a total return of 158.5%. At the end of 2015, the REIT had $5.8 billion in investment properties and a $2.5 billion interest in joint ventures. In total, Suntec REIT had $8.97 billion in assets under management.
  4. At the end of 2015, the REIT's Suntec City stake was valued at $5 billion; its One Raffles Quay stake was worth around $1.3 billion; and its interests in Marina Bay Financial Towers 1 and 2 and the Marina Bay Link Mall were collectively worth $1.7 billion.
  5. Suntec City contributed 66% of Suntec REIT's gross revenue and 75% of net property income (NPI). Meanwhile, Park Mall accounted for 7% of gross revenue and a similar percentage for NPI. Suntec Singapore was responsible for 27% of gross revenue and 18% in NPI.
  6. Suntec REIT's NPI for 2015 was $229.2 million. This is before contributions from its joint ventures which came in at $96.1 million. From this figure, $26.1 million is attributed to the REIT's one-third interest in One Raffles Quay while $69.9 million came from the MBFC properties.

The numbers above provide an overview of Suntec REIT's business. To find out more, you can check out its annual report.

3 Things Investors Should Consider Before Investing In A Bank

Posted: 17 Jan 2017 06:25 PM PST

The Singapore stock market is home to some of the largest financial institutions in the region such as the banks DBS Group Holdings Limited (SGX: D05) and Oversea-Chinese Banking Corporation Ltd (SGX: O39).

But just because banks here are huge companies does not mean they are automatically good investments. So, what should you look out for when analysing a bank? Here are three things to consider.

1. Leverage

A bank is an inherently leveraged entity – it borrows money from depositors and lends out that capital. The thing about leverage is that it can be a double-edged sword. So, it is very important for a bank to manage its risks conservatively.

All banks in Singapore need to comply with regulations that govern their capital ratios (essentially the amount of cushion for a bank to absorb losses). But, it is also important for investors to see whether a bank has capital ratios that are in excess of the minimal requirements set by the regulators.

2. Non-performing loans

I mentioned earlier that the main business of a bank is to give out loans. As such, the management of risks in its loan approval process is critical to the overall business. This in turn makes it important for us to observe if a bank has been able to maintain its non-performing loans (NPL) ratio at a comfortable level.

To get a handle on that, we can compare how the NPL ratio of the bank we are analysing stacks up with that of its peers. Preferably, we would like the NPL ratio to be as low as possible.

3. The price to book ratio

Valuation plays a big part in determining how attractive a company might be as an investment. And for a bank, the most important valuation tool might be the price-to-book (P/B) ratio. The P/B ratio divides a bank's share price by its book value per share (total assets per share minus total liabilities per share).

This is because a bank often owns financial assets such as loans, cash, and bonds, which are all relatively simple to value given that they have a market price. Thus, a P/B ratio can be a good proxy to gauge the value of a bank. In theory, we would prefer a bank with a low P/B ratio to one with a high P/B ratio, all things being equal.

3 Things You Should Look at When Analysing REITs

Posted: 17 Jan 2017 05:47 PM PST

Singapore's stock market is well-known for the presence of high-yielding real estate investment trusts. In fact, the REITs in Singapore offer one of the highest distribution yields in the Asia Pacific region.

But, just because the REITs here offer high yields does not make them good investments automatically. What should we look out for when we are analysing REITs? Here are three important things you may want to consider.

1. Leverage

A REIT must distribute 90% of its distributable income to its unitholders. This means that it may not have much cash-buffer to tide over any sudden downturns in its business environment.

At the same time, a REIT in Singapore can have a leverage ratio of no more than 45% according to current regulations. So, a REIT could face liquidity issues if and when its leverage ratio is near the 45% ceiling during a period when its business is in the doldrums. In such an instance, the REIT may need to raise new equity to improve its balance sheet – this could dilute the stakes of its existing unitholders.

As examples of REITs in Singapore's market with high and low leverage ratios, we can look at Sabana Shariah Compliant REIT (SGX: M1GU) and Frasers Centrepoint Trust (SGX: J69U). The former has a leverage ratio of close to 42% while the latter has a more conservative ratio of 28%.

2. Cash Flow

Although a REIT distributes 90% of its distributable income, its distributable income is not the same as its cash flow. As distributions are ultimately paid out in cash, we need to ensure that a REIT's cash flow is sufficient to sustain its distributions going forward.

3. Acquisitions

Lastly, we need to look at the acquisition history of a REIT. Generally speaking, REITs grow by acquiring properties. However, given that they have no large cash buffer for acquisitions (as alluded to earlier), they have to raise equity and/or debt to purchase properties.

We would have to see how a REIT has handled its acquisitions in the past and whether its distributions have managed to grow on a per unit basis. If a REIT's acquisitions have not resulted in growth in its distribution per unit (DPU), it could be an indication that the REIT's manager is not being fair to unitholders.

A recent example of an accretive acquisition can be seen in Ascendas Real Estate Investment Trust (SGX: A17U). The industrial REIT had made two acquisitions in Australia (one business park in Sydney and a logistics property in Melbourne) in late 2016. According to the REIT manager's number-crunching, the two properties would hypothetically increase Ascendas REIT's DPU in the fiscal year ended 31 March 2016 by 0.017 cents if they had been acquired on 1 April 2015.

Foolish Summary

REITs are investment vehicles backed by physical assets that generate recurring income. As such, REITs can be useful income-generators for investors. But, there are risks associated with REITs. It is important for investors to know what to look out for before investing in one.

Mapletree Commercial Trust’s Annual Report: 11 Surprising Numbers Investors Might Not Want to Miss

Posted: 17 Jan 2017 05:12 PM PST

Mapletree Commercial Trust  (SGX: N2IU) made its debut on the Singapore stock market in April 2011.

The REIT has come a long way since its initial public offering. From its annual report for its fiscal year ended 31 March 2016 (FY15/16), there were some surprising facts and figures about it. Here are 11 of them that investors might not want to miss:

  1. The REIT's name has the word "Commercial", but Mapletree Commercial Trust's focus is actually around a diversified portfolio of properties that are used primarily for office and retail purposes. The REIT is home to VivoCity, Singapore's largest mall with over 1 million square feet of nett lettable area (NLA). VivoCity also accounted for 66.4% of Mapletree Commercial Trust's total gross revenue in FY15/16.
  2. VivoCity attracted a whopping 53.2 million shoppers in FY15/16. The high traffic resulted in higher sales. Tenants in the shopping complex racked up $939.2 million in sales during the fiscal year, up 3.3% from a year ago. It might not be surprising to see tenant sales at VivoCity exceed $1 billion in the coming years.
  3. Mapletree Commercial Trust's gross revenue has recorded a 10.9% compound annual growth rate (CAGR) since its listing. Net property income did even better with a CAGR of 13.5%. More importantly, this flowed down to the REIT's distribution per unit which grew at 9.5% per year over the same timeframe.
  4. The nice little run has not gone unnoticed. At the end of FY15/16, investors who stayed on with Mapletree Commercial Trust since its listing would have earned a total return of 100.3%. Appreciation in the REIT's unit price contributed 60.2% of the total return with the remaining 40.1% coming from the REIT's distributions.

To find out more, you can check out Mapletree Commercial Trust's annual report.

First Real Estate Investment Trust’s Latest Earnings: What Investors Should Know

Posted: 17 Jan 2017 04:54 PM PST

Yesterday evening, First Real Estate Investment Trust (SGX: AW9U) released its earnings results for the quarter and year ended 31 December 2016.

As a quick background, First REIT is a healthcare-focused real estate investment trust. It currently has a portfolio of 18 properties (14 in Indonesia, three in Singapore, and one in South Korea) that are mostly healthcare-related facilities. The REIT's sponsor is Indonesia's largest listed property company, PT Lippo Karawaci Tbk.

You can read more about First REIT in here and here.

Financial highlights

The following's a rundown on some of the REIT's latest financial figures:

  1. Gross revenue rose to $27.0 million in the reporting quarter, up 5.1% from the same quarter a year ago. For the full year, gross revenue climbed 6.3% to $107.0 million.
  2. Quarterly net property income (NPI) also climbed by 5.2% year-on-year to $26.7 million. For the full year, NPI is up 6.6% to $105.8 million.
  3. For the reporting quarter, the distribution per unit (DPU) was 2.13 cents, a 1.9% bump up from the 2.09 cents paid out in the fourth quarter of 2015. For the whole of 2016, First REIT's DPU was 8.47 cents, an increase of 2.0%.
  4. Total assets under management was valued at around $1.27 billion as of 31 December 2016. First REIT ended 2016 with a net asset value per unit of $1.01, down 3% from 2015.

Beyond these, Foolish investors may also want to keep an eye on the REIT's debt profile. The debt profile may provide clues on how the REIT is funded and its sensitivity to the interest rate environment. These are summarized for First REIT below:

2017-01-17 First REIT Debt Table
Source: First REIT's earnings presentations

We can see that improvements have been made, namely, the declines in the total debt and gearing ratio. As a reminder, REITs in Singapore have a regulatory gearing limit of 45%.

Around 70% of First REIT's loans will come due between 2017 and 2018. Investors should keep an eye on the REIT's refinancing activities. In the short term, there is limited risk from rising interest rates for First REIT given that 92.3% of its debt is currently on a fixed rate basis.

Operational highlights

First REIT completed its acquisition of the Siloam Hospitals Labuan Bajo for $20 million in December 2016. Beyond this, Lippo Karawachi has 43 hospitals in its development pipeline which could potentially be acquired by First REIT over time.

Dr Ronnie Tan, the chief executive of First REIT's Manager, had the following comments on the reporting quarter's results:

"I am proud that the Trust has delivered another new high in annual DPU, which was achieved through our focused efforts in yield-accretive acquisitions.

To this end, the Trust has recently completed the acquisition of Siloam Hospitals Labuan Bajo in Indonesia, capping off the year with an enlarged portfolio of 18 properties and an increased asset base of S$1.27 billion. With this latest acquisition, Unitholders can look forward to continued earnings growth in FY 2017."

In its earnings release, First REIT cited research from Jakarta Post which estimated that annual healthcare expenditure in Indonesia is projected to increase to US$50 billion in 2020. The REIT is also expecting to benefit from the full implementation of a national health insurance scheme covering 260 million Indonesians by 2019.

First REIT's units last traded at $1.29 each yesterday. This translates to a historical price-to-book ratio of 1.29 and a trailing distribution yield of around 6.6%.

Is Diversification No Longer Necessary?

Posted: 17 Jan 2017 03:29 PM PST

Private investors are often told that one of the most important tenets of investing is diversification. It apparently helps to reduce risk so that if there is an unfortunate event in one part of the world, one economy or one sector, then the investor’s portfolio will not be completely wiped out.

However, the reality is that the world is more interconnected than ever. Globalisation means that what happens in one part of the world affects the rest of the globe. And as the credit crunch showed, even one industry can cause chaos for all industries across the world.

A changing global economy

Clearly, the idea of globalisation is nothing new. For decades, the policy of the developed world has been to trade wherever possible without tariffs and encourage development in the emerging world. This has aided countries such as China in their development, but has also helped the developed world since the price of manufactured goods has remained relatively low.

This is just one example of the increasingly close ties which different regions and countries have with one another. As a result, if one of them endures a challenging period then it is likely to affect the others.

Similarly, the credit crunch showed that what started in the real estate industry in the US could quickly spread throughout the global banking system. This caused a number of major, global banks to go under and even meant that countries across the globe such as Greece ended up with sky-high debts and a declining economy.

During the credit crunch, it was exceptionally difficult to find assets which offered security. Gold was falling, bonds were volatile and cash returns were generally behind inflation. Therefore, it could be argued that diversification is not even possible during the worst economic crises.

Specific risks

While diversification is unlikely to protect any portfolio against a global recession or banking crisis, the reality is that it does still offer huge value for private investors. For example, on a company level it reduces company specific risk. This means that if a holding within a portfolio experiences a profit warning or some other adverse event, the total loss will be limited for a diversified investor. Similarly, if an industry experiences a challenging period, for example the airline industry in the wake of reduced demand, then a diversified investor’s portfolio could offset this with stronger performance elsewhere.

Beyond shares

Furthermore, diversification between asset classes also holds significant value for private investors. During the credit crunch, cash may have returned less than the rate of inflation as a general rule, but versus double-digit falls in share prices it performed relatively well. Similarly, holding bonds also has value while interest rates are falling and property could provide a degree of stability when share prices are coming under pressure.

While diversification will never do away with risk completely, it does reduce risk significantly. Therefore, it is still necessary for risk averse investors.

Create Wealth Through Long-Term Investing and Short-Term Trading

Create Wealth Through Long-Term Investing and Short-Term Trading

Cash Flow For 2017 As Retiree For First Time!

Posted: 18 Jan 2017 04:49 AM PST

Interests for 2017 as cash flow is confirmed and fixed!

Uncle8888 will need to focus on dividends and trading P/L to bridge that gap for rest of the year!

Three Months After Not Doing Anything To Increase GDP As Jobless Man! (2)

Posted: 18 Jan 2017 04:31 AM PST

Read? Three Months After Not Doing Anything To Increase GDP As Jobless Man!

What really change for the last few months!

(1) Drastically cut down on number of cups of Kopi Kosong with no more minimum two cups per workdays during two tea-breaks.

(2) No more spending hours or minutes per workday having to wayang or pretend to be attentive or supportive.