Wednesday, September 20, 2017

The Two Japanese Reits Which Got Acquired - What Can We Learn From This?

It has been a fruitful journey investing into Japanese Reits for the past few years. Saizen Reit was the first Japanese reit which was acquired earlier before. Recently, Croesus retail trust, a Japanese reit which owned Japanese shopping centres was also successful acquired just last week. What makes them so attractive that both reits from Japanese were bought over at a premium price?

I've written extensively on Croesus Retail Trust as early as back in 2013. The timeline of the posts are as follow:

The purpose of the sharing of the previous posts is to look back at my thoughts and why I invested in Croesus in the first place. Time pass very fast. 3 years plus just went past like that. As you can see, in April 2015, I went for a Croesus retail trust retail investor day where I manage to hear from the top management of Croesus itself. I wrote in my blog that I was happy with what I heard and the management knows what they are doing. As soon as a rights issue came, I immediately subscribed to it to increase my holdings in this investment.

Last week, Croesus was acquired at a price of $1.17. My average price for the reit is about $0.80. This represents a gain of 45%+. Including dividends, the total ROI for this particular investment works out to be about 81%. It was a long journey nevertheless.

What caused the Reits to get acquired?

The most important lesson is to find out what cause the reits to get acquired and hopefully we can always buy into the right companies which generates value for shareholders. In the case of Croesus, when I first invested in it, it was purely base on the fact that the Japanese government was aggressively trying to expand their economy through quantitative easing. They had a target of 2% inflation back then when Japan was facing decades of deflationary economy. Noticing that this was an opportunity, I went to search for companies which deals with properties in Japan. Saizen Reit and Croesus came up as an investment choice.

Next, I looked at the stability of its income which is important for a reit or business trust. Saizen reit was in the residential rental business so it was really stable. It was rare for a reit to be in the residential business. Croesus on the other hand is involved in shopping centres which had some risk in itself. However, upon a closer look, Croesus management were quite committed in achieving good value for shareholders through the many positive rental yield acquisitions and AEIs. They were committed in keeping the company's balance sheet healthy also.

Finally, the Japanese reits was trading at an attractive price which was below their book value. Many of their properties were valued conservatively when you compare their properties valuation against the other nearby properties. Furthermore, Japanese real estate and rental prices were going up steadily over the years which was an added positive development. All these attracted other big investors to offer attractive prices to takeover the 2 companies. Sure enough, it happened and shareholders got rewarded.

There will always be more opportunities in the future for those who missed it. For fellow shareholders of Croesus retail trust, congrats to all!

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Tuesday, September 12, 2017

5 Lessons I Learnt From Those Who Have Achieved Financial Freedom

Let's be honest, all of us want to be rich. I started my financial journey many years back by finding out how the rich manage their money and how exactly I can do it like them. However, most probably, the information you've been finding is all directed at the super rich. How about common people like you and me? Are we able to have a little more money so we can not worry about it anymore?

Throughout the years, I've had the opportunity to meet and speak to people who have became financially free. Every time I talk to them, I learnt something new and truthfully, its not as complicated as we thought it would be. In this article, I will list down the lessons I learnt from my interactions with these individuals who have managed to get out of the rat race.

Lessons I Learnt From Those Who Have Achieved Financial Freedom

1. Financial freedom is not just about saving money

The first lesson I would bring out is that financial freedom is not just about saving money. Oh wait, do you mean I don't need to save money? That is not true either. I've seen people who have achieve financial freedom as a single person, as a married person and even as a person with kids. When I look at their lifestyle, certainly it is not just about saving money.

Most of the time, we start off our financial journey frantically saving as much money as we can. However, in our younger days, we would realise it is very difficult to save money not because we spend too much but because we have limited income. As our income increases, we would find it easier to accumulate wealth. This brings me to my next point.

2. Low income is not easy to achieve financial freedom

Income is an important equation in financial freedom. To put it simply, if we earn $2000, saving $1000 is 50% of our salary. But if we earn $4000, saving $2000 is 50% of our salary. It is impossible to save $2000 with only a $2000 salary.

Therefore, it is important to focus on upgrading our skills to increase our income. When we are younger, we should focus on getting more experience so our value becomes greater and greater. If we are unable to go up the corporate ladder, there are many other ways to create more income through part time business and freelancing etc.

3. Cash must always be flowing

Another lesson I learnt is about cash flow. The reason why its called cash flow is because it must be flowing. In business, if cash flow stops, the business is in danger. This happened to several oil and gas companies who could not generate enough income to redeem back the bonds they issued out. In our personal lives, this is liken to having not enough income to sustain our lifestyle. This could be due to overwhelming debt because of poor financial management or just pure overspending. It could also be due to not enough income or not enough cash to sustain our life if we lose our jobs.

4. Make your money work for you as early as possible 

This point is about investments. When I speak to those who have achieved financial freedom, they would always say that I'm still young and its the best time to grow my money now. Then, when they talk about investments, its always not about the hot stock or the best tips but about the most boring and routine investments they keep doing over and over again.

The safer the investment, the better it is. That's the wisdom I learnt. It can be so safe that they even recommend putting your money into CPF to get the 4% interest which is sort of guaranteed by the government. For stocks, we just have to buy low, get dividends and sell high. One strategy I've heard again and again is buying into stocks at an attractive valuation, selling partially when its at a fair price and then buying back again when it goes back down. This is like keeping a base of your capital in the stock and then trading around it over time.

5. Live off dividends and you've reached financial freedom

Many have stopped working because they realised they could survive on stock dividends alone. This is the path to financial freedom. We must know that achieving this is not by buying into the stocks in just a few days or a few months. In most cases, this takes many years to build, buying into opportunities when it comes. For example, some of them have stocks in their portfolio which they bought at such attractive price that the dividends they received have covered their initial cost and they are still getting dividends until now.

When crisis strikes, the dividends can be more than 10% when the stock price is very low. This happens for most Reits during a crisis. If the company survives the crisis, the price recovers and dividends increases as well. Its such a good investment that you won't even have to sell the stock ever again.

Financial Freedom Is A Journey

There you go, 5 lessons I learnt from those who have achieved financial freedom. The last and final wisdom I would like to share is that financial freedom is a journey. It certainly takes time and patience to stick with what we have to do. We should never think of getting rich quick as it could land us into a much worse state than what we can imagine.

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Tuesday, September 5, 2017

Optimising Joy In Spending

As people who are embarking on the path to financial freedom, sometimes we may be too hard on ourselves when it comes to spending. Recently when I looked at my credit card statements and realised I've spent more than I should, I can't help to think if I've lost track in my financial journey. But upon closer look at my financial situation, it really doesn't hurt to spend a bit more. A few hundred dollars more spending doesn't really hurt much, does it?

As a financial blog, I've been writing a lot on save save save. But perhaps, we could derive joy from spending and still achieve our financial goals. How can this be done?

The secret is in optimising our joy in spending. When we tell people who have trouble saving money to cut down on their expenses, it can be hard. People would say "Why you save so much just to bring it to your grave?", "Isn't it miserable not to spend?", "If we save so much now then what if something happens and we can't even use the money already?".

Let Joy drive your spending

Let's be honest, there are some things we derive joy from and some things which we don't. Somehow, even if we don't derive joy from, we still spend nevertheless. For example, you're an introvert and you spend your money going to bars which you don't really enjoy. However, you like going to the gym but because you spend most of your money going to bars, you don't have much left for a gym membership.

Or if you love travelling with your family and friends but because you bought a new car which you don't really need which results in you needing to pay a huge amount for the monthly instalment that you do not have much left for a vacation. In this case, it would be better to find cheaper alternatives for transportation and free up more cash for overseas trips.

Also, maybe we have signed up for various cable TV channels but we don't even watch TV much? This money could be spent better elsewhere such as going for a nice meal with your loved ones.

The key is to optimise joy in spending by deriving joy from it. It sounds simple but you'll be surprised many people spend money on things they don't enjoy at all.

Optimising Joy In Spending

Many years ago, I heard a saying that if you can buy things without looking at the price tag, that's the time you have reached financial independence. However, I'm sure most of us here still look at price tags before we purchase stuffs else we'll be broke by now.

I try not to look so much at price tags now but at the quality of the product. Even if I see something as "expensive", I will think about the quality of it and whether I do derive joy from this spending. For example, a holiday may be "expensive" if we travel on a non budget way. Taking Singapore airlines is more expensive than taking budget airlines but the quality and comfort is a vast difference. Going for a better hotel may cost us a lot more but the comfort of our family and the experience will make it worthwhile.

It has been proven that spending money on experiences brings us more longer lasting joy than buying stuffs. We may have bought some gadgets and forget about it 1 year later but the experience and joy of travelling with our loved ones can still be felt even many years later. Think about the last happy time in your life. It probably is some experience you had with your friends and family isn't it? Now, think about the clothes or gadgets you bought last year, can you still feel the joy of buying it? Probably not.

Action time

Now, for your own life, are you able to optimise joy in your spending a bit more? Why not review the ones which doesn't bring you much joy and channel the free up cash into things that bring you more joy? In this way, we could be even happier prioritising on the right stuffs.

Lastly, remember that spending money on experiences brings us more long lasting joy. It could be a good family meal, a meet up with friends or a vacation with our loved ones. We will certainly remember the experiences we had even many years later.

Let's optimise our joy in spending!

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Monday, August 28, 2017

What drives stock price volatility and how can I profit?

The Singapore Stock Exchange (SG) has been in a downswing lately and has also seen some volatility. This doesn’t mean there is a lack of profitable opportunities for investors – it simply means that they need to understand how to anticipate and profit from stock volatility.

That entails gaining an understanding of what is driving prices, so that the investor has an insight into why a stock’s price is rising or falling.

Financial results always causes volatility

One of the key drivers of volatility in a company’s stock is when the company reports its financial results. Some companies report quarterly, others half-yearly or annually. Companies often have surprises in the reported figures – both on the upside and the downside.

All stock exchanges and internet forums generate a lot of discussions and speculations, so before the actual results are announced, prices often move sharply, in reaction to the latest rumour about what the results will show.

Surprisingly, the volatility sometimes continues for a few days after the results are out – this is largely due to portfolio managers adjusting holdings, given the numbers that have actually been reported.

And of course, the market often overreacts, so that a swing in one direction or another is followed a few days later by a swing back in the other direction. Observant investors who are following key Singapore Exchange stocks, can develop a feel for when to buy and sell, to take advantage of this volatility.

August 2017 Financial Results

Property companies are definitely doing well, in fact six out of the ten best performing stocks this year, are real estate stocks. After the government relaxed some development restrictions, analyst are forecasting a continuing rise in real estate stock prices. UOL Group, City Developments and others are leading the charge.

In the August results reporting, one of the stocks that saw price swings around the reporting dates was Singapore Airlines which had a moderate 5.6% year-on-year growth in revenue in the passenger business but strong results from the cargo unit. 

However, this was put in the shade by the Hotel Properties limited (HPL) result – the company reported profits up 23%. And after a 77% rise in profits in Q1, Capitaland, Singapore’s largest property developer, followed it up with a doubling of operating profits in Q2. 

Analysts reports are worth reading

It’s well worth reading the analysts’ comments on these companies when they report. There is often background information that can help you understand whether the result is caused by special accounting measures or unusual trading conditions, or whether the company’s performance is likely to be sustained. These two different scenarios are vital for knowing whether the share price is going to be underpinned and steady, or very volatile. Market expectations that a company will constantly outperform are difficult to meet, and disappointment from investors at a missed target can result in the share price dropping.

As a private investor, you can take advantage of these volatility using a spread trading account that allows you to profit from price falls as well as price rise. However, be careful to choose a well run broker, such as CMC markets

Global environment always influences volatility

All stock exchanges are now part of the global information flow, and Singapore is no exception. Investors don’t like international tension, such as the situation between the US and North Korea. They also dislike uncertainty, such as how far US interest rates are likely to rise. All of these factors add to volatility.

Price volatility is always greater before key Federal Reserve announcements or major US economy statistics such as the non-farm payroll data released each month. 

Mergers and Acquisitions (M&A)

M&A activity, even when it’s based on rumours and hotly denied by the parties involved, can send share prices into overdrive. But Singapore has seen a slow start this year in terms of M&A activity. Some property deals have taken place, but nothing like the contested takeovers that really encourage price movements, on the back of the uncertain outcome. 

The investor who carefully observes these market fluctuations can start taking advantage of highly volatile prices to make excellent profits.

*This is a guest post

Saturday, August 26, 2017

Survey Shows Singaporeans Worry About Having Not Enough Retirement Savings

A few days back, I posted a survey conducted on my blog to show what other readers, like yourself, think about retirement needs. You can read it here if you missed it out. I then received a press release from Blackrock Global on a survey which they did on retirement savings too. I found that the findings were quite insightful so I decided to share it here:

Singaporeans are not doing enough to prepare for retirement, according to BlackRock’s Global Investor Pulse Survey 2017. The discovery comes at a time when insufficient funds for retirement has become an increasingly pressing concern worldwide, in light of today’s low-yield environment.

BlackRock’s annual survey polled 28,000 people throughout 18 markets – including 1,000 in Singapore – by asking questions on financial and investment management and the likely impact on their retirement.

Kevin Hardy, BlackRock’s Country Head of Singapore, said: “It is promising to find that Singaporeans are acutely aware of the need to save for retirement and worry about not saving enough. This mindset is essential when seeking to reduce the retirement savings gap, which is caused partly by today’s low-yield environment.”

He added: “Singaporeans’ expectation of a 5% annual investment return seems reasonable compared with their regional peers, but underestimating their life expectancy is the other caveat to address as they plan for retirement. This is especially important for women who are normally expected to live longer than men.”

Results showed 64% of Singaporeans worry about running out of money in retirement, the highest proportion in Asia Pacific. Nearly nine out of 10 Singaporeans (87%) believe they are responsible for their own retirement income. However, this realization has yet to spark action – only 68% have started saving despite the fact they save an average 15% of monthly income, the highest rate worldwide. Some 84% are saving beyond the mandatory requirement of the Central Provident Fund (CPF), or in other forms of savings plan. But it is clear respondents are underestimating how much they will need for retirement, in many cases by as many as six years.

Singaporean investment leans heavily on cash – 47% on average, which is slightly higher than in other parts of the region but much lower than the rest of the world – meaning Singaporeans may not be able to achieve enough income from their existing portfolios.

More than 62% of millennials have begun saving for retirement  

Millennials in Singapore demonstrate a high awareness of the need to save for retirement, and are concerned about outliving their savings and becoming a burden to their families.

Nearly two-thirds (62%) of millennials have begun saving for retirement, a significant increase from 2015 (56%). More impressively, 87% of those now saving are making additional investments beyond the mandatory CPF requirement. In fact, 27% (vs 24% of Singaporeans generally) are saving into private pension plans, and 22% (vs 18% of Singaporeans generally) are making further voluntary contributions to the CPF. This represents the highest proportion across all age groups in both categories.

Sentiment is generally positive amongst millennials, with half (50%) feeling confident of accumulating adequate retirement income, while 49% are confident of making retirement-focused investment decisions (scoring higher than the average among respondents in Singapore). This indicates positive investment behavior from the younger population.

Yet to fully embrace technology and professional financial advice  

Singapore is home to a technology-reliant population, with online channels (55%) being the main source of investment information before financial advisers (42%) and family and friends (39%). Although most are using technology for basic functions such as information-gathering, routine monitoring and everyday banking, a fifth (20%) of Singaporeans find technology helpful in monitoring their retirement prospects. This is seen to be providing motivation to adjust spending patterns, retirement dates, income expectations and portfolios.

In fact, 64% of Singaporean respondents are willing to buy an investment online. Of this group, nearly half (46%) said they prefer to obtain professional advice either before or during a transaction, while 36% need reassurance from a trusted brand. It becomes evident that financial advisers and technology are used as complementary sources of information when Singaporeans make investment decisions.

Hardy said: “Technology provides ease of access to information and can be a useful tool in enhancing financial knowledge – but the human component should not be ignored. Ability to harness the potential value of both technology and face-to-face financial advice will generate greater confidence in long-term investing, as Singaporeans build their desired retirement income.”

Narrowing the retirement savings gap 

It will take a long time if we just rely on savings for retirement. We should learn how to make our money grow as well to reach our retirement targets. Income is also important as if we have higher income, it makes it easier to save without having to squeeze ourselves too much.

Hardy said: “Investors need to periodically track and evaluate their progress against targeted savings goals, especially as they will likely spend more years in retirement than expected. It is important to make cash work harder by taking on some risk to generate desired retirement income. We find income-related products such as dividend-growing equities or high-quality debt to be popular among Singaporean investors. This can be a great means of delivering higher income than cash within diversified portfolios, without sacrificing asset growth.”

About the BlackRock Global Investor Pulse Survey
The BlackRock Global Investor Pulse Survey is one of the largest global surveys ever conducted and surveyed 28,000 respondents in 18 markets. In North America: The US and Canada. In Europe: France, Germany, Italy, the Netherlands, Spain, Sweden, and the UK. In Latin America: Brazil, Chile, Colombia, and Mexico. In Asia: Mainland China, Hong Kong, Japan, Singapore and Taiwan. The survey in Singapore involved 1,000 respondents. The survey took place in January and February 2017 and was executed with support from the TNS Group, an independent research company.

Tuesday, August 22, 2017

Retirement Survey Results - Understanding Our Needs and How To Achieve It?

One week ago, I launched a retirement survey on my blog and said I will release the results and also write it into a blog post. Thanks to all who have done the survey. There were quite a good handful of responses which made this blog post possible. The purpose of this post is to show what other readers, like yourself, think about retirement needs and then I will provide some examples to show how we can actually achieve our targets for retirement. Let's begin.

Survey Responses

Q1: At what age do you hope to retire?

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For the first question, most people are looking to retire at the age of 50-55 years old or 55 to 60 years old. This seems to coincide with the time we would be getting our CPF at the age of 55. I guess its also a achievable age to retire after working for about 30 years or so. There are also quite a number of people who are looking to retire at the age of 40-50 years old. Let's see how is this possible in the later part of this post.

Q2: How much do you think you need per month when you retire?

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For question 2, people generally think they need about $2000-$3000 per month for retirement. There are mixed responses where some think they need $1000-$2000 per month while others think they need $3000-$4000 per month. I guess this depends on individual lifestyle and preferences. We will look at how to achieve our desired monthly income for retirement too.

Q3: How much savings do you think you need by the time you retire?

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For question 3, it seems like most people believe they need at least 1 Million dollars to retire. Some felt they just need about $500,000 to $1 Million.

Q4: Choose which instrument you would use in order to reach your retirement goals (Select all that is relevant):

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For question 4, most people feel they can use a variety of instruments to reach their retirement goals. Stocks and CPF savings are 2 of the best instruments which people feel they could use.

Q5: Do you worry you would not have enough money for retirement?

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For question 5, most people are worried about having not enough for retirement. I guess its very hard to know what will happen in the future so people are generally worried. However, I think if we plan well ahead and have more information on how to achieve our retirement goals, it will be much better for us.

Achieving our retirement goals

In summary, the survey results show that most of us want to retire around age 55 with a monthly income of $2000-$3000 and we think we will need $1 Million in order to achieve that. Let's say if we start saving and investing at the age of 25, how much must we save to achieve that? How about if we start later, can we still achieve our retirement goals?

The Millionaire Dollar Grid

I came across this million dollar age grid from I love the grid because it shows very clearly how we can achieve our goals in just one grid.

This grid assumes you start with $0 and your savings are invested at a 7% annual interest rate. Let's take for example you start at age 25 saving $16,000 a year and investing it at a 7% annual interest rate, you can achieve $1 Million dollars at the age of 50.

Even at 50 years old, if you manage to save and invest $40,000 a year, you can become a millionaire at age 65. But, do we really need a Million dollars to achieve $2000-$3000 per month income during our retirement years?

Getting the monthly income for our retirement

There are a few methods for drawing income for retirement. The first is drawing out from our lump sum savings for our monthly needs until it runs out. This is what a lot of people have done. $1 Million dollars will only last 27 years if we draw out $3000 every month.

The second method is to get a monthly income through an annuity. We pay a fixed amount of money to buy into an annuity then get monthly payments when we retire. In Singapore, all of us are enrolled into a national annuity called CPF life. Through the survey, CPF savings was one of the top choices which many of us will be using for retirement. Through the CPF life scheme, a sum of $249,000 at age 55 will get us a monthly payout of about $1860 to $2000 when we reach 65 years old. This will be paid to us all the way until death. It seems like we don't need $1 Million to get a comfortable income of about $2000.

The only problem I guess people have with CPF is the payout age is too late. It would be better if there is some kind of payment before age 65 but I guess we would need a lot more savings in the account to get the same payout if that ever happens. Nevertheless, I still think CPF life is a good income stream for our retirement. For us who want to have some income stream before age 65, we would have to plan something additional which leads me to the third method.

The third method to get monthly income is through investing in good dividends stocks. When we have accumulated some savings, we can invest and get some income through dividends. Let's just use 4% as a safe margin for dividends. If we have $1 Million in cash and invest to get 4% dividends, this would translate into $3333 per month for us. The problem is $1 Million may be somehow hard to achieve for some people.

The combination strategy for retirement

I've mentioned retirement a lot of times in this article but to me, achieving the savings or monthly income is not to retire and do nothing at all. Its all about having some freedom to choose what we want to do in life instead of being stressed at work because we have to work for money.

As mentioned, CPF life is one of the monthly income streams we can look forward to. However, it only pays out at age 65. We can probably have some plans to achieve a certain monthly income through stocks investing or other methods before age 65. Targeting to save $500,000 and invest at 4% interest would get us $1666 per month. This could probably be achieved before age 50. Once we reach age 65, CPF life would payout probably $2000-$3000/month depending on the sum we have in our accounts. The maximum amount in CPF now is $249,000 which pays out about $2000. By the time most young people, in their 30s currently, reach retirement age, the amounts should have adjusted upwards so they could be looking at payouts of $3000 or more. If you're reaching 55 soon, you could plan to get more than $2000 in monthly payouts. The CPF retirement sums will increase accordingly to adjust for inflation.

Achieving monthly income of $2000-$3000 shouldn't be that difficult if we use the right tools. Saving up and investing in stocks is a good way to build some passive income while CPF life also provides some stable income in our later years. If we can achieve $1 Million, it would be good but it seems like even if we did not have $1 Million dollars, we could still retire quite comfortably.

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Monday, August 14, 2017

Comfort Delgro Q2 2017 Financial Results

Comfort Delgro just reported their Q2 financial results last week and this was what I was concerned about as I've invested some money into it. Being affected by Uber and Grab's private hire services, Comfort's taxi business took a hit and sent its share price going down which makes it look like an attractive investment at that point. After I bought, the share price still continue to went down by a little and seems to have stopped at around $2.30.

Anyway, its Q2 financial results still doesn't paint a good picture. Net profit fell by 6.8% mainly contributed by lower revenue of its taxi business and unfavourable FX from the weaker UK Pound and RMB. For its taxi business, there is lower revenue from Singapore, China, Australia and Vietnam. The only increase in revenue was from UK but it was completely eroded by the weaker Pound.

The only saving grace is from the public transportation business where SBS Transit's bus revenue increased due to the transition to the bus contracting model (BCM) and also higher revenue contributed from higher ridership on DTL and NEL/LRT. Australia's public transport business registered an increase in revenue too with  higher charter revenue from rail replacement.

Despite the bad quarter, comfort is giving higher dividends of 4.35 cents for FY17 as compared to 4.25 cents in FY16. Cash generated from operations also registered an increase as compared to last year. It is still a financially stable company with gearing of 12.5%.

Moving forward, I'm still seeing quite a lot of comfort's taxi on the streets but also seeing more people using the grab and uber app all around. However, we have to note that Grab incurred a combined loss of nearly US$40 Million in 2014 and 2015 alone. As for Uber, it said that it lost US$708 Million for its worldwide operations. Grab and Uber are giving discounts to riders so heavily and on top of that giving incentives to drivers too. This doesn't seem to be sustainable. I believe when the discounts end or when the incentives for drivers decreases, the taxi industry will pick up again. I did try to drive for Uber for 2 weeks last year and from my experience, you don't really earn much as a driver if you don't get the driver incentives. This is what is attracting more drivers and even taxi drivers to drive for Uber and Grab instead but it will end when incentives are no longer available.

As for its public transportation business, Revenue is expected to continue to increase as the DTL 3 opens in Oct this year. Rail revenue is expected to double as ridership doubles as well. There is also the new thomson east coast line which has yet to be awarded as well.

Its PE is currently trading at 15.42x with dividend yield of around 4.5%. To me, I still think its a fair valuation and I will continue to hold on to this investment.

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Thursday, August 10, 2017

Far East Hospitality Trust 2Q 2017 Financial Results - Review & Action

Far East Hospitality Trust just released their financial results last Friday and I thought it would be good to do a quick update since I've been writing a lot on the hospitality industry as an investment opportunity.

Net property income still decreased by -6% in 2Q 2017 as compared to 2Q 2016. However, this is a smaller decrease compared to the 1Q decrease of -10.4%. Average hotel occupancy was 87.1% in 2Q as compared to 88.1% in 1Q. Comparing year on year, occupancy increased 1.9%. RevPAR remains stable at $134 which is a good sign that it has bottomed out. Comparing year on year, RevPAR decreased -4.6% in 1Q while it decreased -1.3% in 2Q. This is a smaller decrease which is again a good sign that RevPAR is bottoming.


In summary, hotel occupancy has increased by 1% for the 1H of 2017 while serviced residence has decreased by -8.7%. RevPAR still remains low but shows signs of bottoming out. Far East Htrust portfolio consists of 64.8% hotels, 12.9% serviced residences and 22.3% commercial which contributes to its gross revenue. From the time I invested in this stock, the stock price has gone up by 10% and I've divested a portion of my investment in this stock at 0.67. It is still trading at a PB of 0.74 which represents a discount to NAV of 26%. The dividend yield at current price is about 6.24%. The reason for divesting it is to lock in some gains first while monitoring it for any other upside.

I also did a check on one of its competitors, Frasers Hospitality Trust and looked at its Singapore properties portfolio. I noticed that Frasers Htrust Singapore properties registered a higher RevPAR for both its properties. It is an impressive gain of 4.1% Y-Y.  For all its other countries portfolio, the gross operating profit also increased. Frasers Htrust will be the next investment opportunity I'll be looking at. However, it's trading at a PB of 0.99 and dividend yield of 6.53%. It seems to be at a fair price currently so if we want to invest now, there may be limited upside. I shall monitor and keep it in my watchlist for any good entry points.

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Wednesday, August 2, 2017

Outlook for REITs in Singapore and Globally

REITs have been a popular investment choice for many years now. Even for me, REITs constitute about 60% of my portfolio currently in sectors such as retail, hospitality and commercial.

Recently, REITs prices have mostly gone up which is a good time for a review now. I will look into the different sectors and the outlook plus if there's any other opportunities to continue investing in.  It may be time to sell some REITs and invest into other opportunities too.

Retail REITs

Firstly, let's look at retail REITs. In Singapore, we have a few REITs which dominate the retail scene here. Capitaland Mall Trust and Frasers Centrepoint Trust owns most of the shopping malls in Singapore. Collectively, they own 22 of the major shopping malls in Singapore which are mostly near MRT stations.

I have invested in both of the REITs for sometime now. They have provided good dividend income at around 5%-6% pa. However, retail REITs don't really have much capital gains in general as its quite hard to expand and have more shopping malls in an already competitive environment.

The retail sector will be faced with competition moving forward. The rise of online shopping means fewer people will be shopping at the stores itself. I like that the REITs have reinvented themselves where we can see most of the stores in shopping malls now are F&B. Singaporeans still like to eat outside a lot.

Capitaland mall trust recently reported their 1H financial results and one highlight is that shoppers traffic has declined -0.5% in 1Q 2017 as compared to 1Q 2016. This may also be linked to the weak employment data as released by MOM. Unemployment has gone up particularly for Singapore citizens while total employment has decreased for 2 consecutively quarters this year as seen from the preliminary figures released by MOM.

Apart from the poor outlook, we are also seeing some developments in the retail scene. For Capitaland mall, they are redeveloping Funan, which was the popular IT mall in the past. It will reopen again in 2019 with new experiences for shoppers. This will boost the dividend income from the REIT moving forward. For Frasers centrepoint trust, they are doing AEI for northpoint which is a popular shopping mall in Yishun. This is expected to be completed in end September 2017 and they aim to improve the average gross rental rate of Northpoint by approximately 9% upon the completion of the AEI.

Both REITs are trading at prices above book value now with CMT at 1.03x PB and FCT at 1.13x PB.

Commercial REITs

There are many commercial REITs in Singapore. I shall not go into the details of each REIT but focus more on the general trend of the office market in Singapore. As we see previously, total employment in Singapore has decreased but if we dive deeper into the MOM numbers, the decline is mainly due to lesser work permit workers in the construction and manufacturing sectors. This does not really affect the commercial REITs in Singapore.

CCT's One George street office tower
Image credit:

I have invested in Capitaland Commercial trust (CCT) and also Suntec REIT. Both own office buildings in Singapore with commercial as their main portfolio. Suntec REIT does have Suntec City, which is the shopping mall in their portfolio but that only accounts for 7% of their overall portfolio. Office portfolio accounts for 69% of their income.

In CCT's latest 2Q financial results, I saw a distinct trend in the occupancy rate chart which they have. If we look carefully at the below chart, the CBRE's core CBD occupancy rate has declined in 2Q 2017. This covers offices in Raffles Place, Marina Centre, Shenton Way and Marina Bay. It is not looking too good for CBD offices. On the other hand, CCT and Suntec's committed occupancy rate remains quite stable.

Image adapted from CCT's 2Q 2017 Financial results
Moving on to office rents, grade A office market rent has remained unchanged Q-on-Q after seeing consecutive decline from 2015. It may signal that the grade A office market rent decline has bottomed out. Supply of office spaces is expected to continue to increase in 2017 so there should still be some pressure on the office rents moving forward.

The stock price of CCT and Suntec REIT has risen by quite a bit these few months. However, both are still trading below their book value. In terms of dividends, base on the current price, the dividend yield is around 5.2%-5.3%.

Hospitality REITs

Lastly, let's move on to hospitality REITs. A few months back, I wrote about an investment opportunity in the hospitality sector. You can read it here. There have been many articles on how this industry will do well and also coverage by various research houses and analyst. This will be an update based on the latest financial results from some of the hospitality REITs. At this point, I'm invested in CDL Htrust, Ascendas Htrust and Far East Htrust.

CDL Htrust Studio M hotel
Image credit:

CDL Htrust just released their financial results last week with higher NPI and DPS (excluding effects of rights issue). They recently just did a rights issue at an attractive price and I went ahead to subscribe to the rights issue including trying my luck for some excess rights. Its portfolio is doing relatively well with the biggest gain from its New Zealand hotel at 91.9% increased in net property income (NPI) for 1H 2017 as compared to 1H 2016. This is really an impressive gain. The main reason is because its revenue per available room (RevPAR) for the New Zealand market surge 49% year on year.

CDL Htrust Singapore hotel market RevPAR is still declining at -1.1% year on year. As mentioned in previous articles, we should see RevPAR bottom out and start rising as hotel supplies taper off in 2018. As we can see from the case of the New Zealand hotel market, a surge in RevPAR can really improve the NPI by quite a lot.

Visitors arrival to Singapore remains high with 4.4% increase YoY. STB, SIA and Changi Airport Group (CAG) recently launched the second edition of the Singapore MICE Advantage Programme to draw more business events to Singapore as well as a S$34 million investment to strengthen Singapore’s destination appeal and drive visitor traffic.

Elsewhere around the world, Japan hotels are not doing so well as RevPAR has declined due to price competition from increase in new hotel rooms supply. We should see better performance moving ahead to the olympics games in Tokyo.

Far East Htrust and Ascendas Htrust have not reported their results yet though. In terms of valuation, CDL Htrust is already trading above book value at PB of 1.07x. Far East Htrust on the other hand is still trading below book value at 0.73x. It has gone up the past few months and my investment in this is sitting on a 10% return. Hospitality Reits have a dividend yield of around 6.2% currently. It can be a good dividend investment buying at the right price with attractive dividend yield. I'm looking to accumulate further into this sector.

Will REITs continue to perform?

I've touched on 3 different sectors namely the retail, commercial and hospitality REITs listed in Singapore. REITs present a good opportunity for those who buy at the right valuation. For me, I look at the outlook, the valuation, its financial stability, dividend yield and management strategy. Where possible, its good to check out the properties of the REITs wherever possible. Seeing crowds at a mall and all the shops having business is a good sign as oppose to an empty mall with no business.

I would look closely and monitor the developments of the retail and commercial sector while continue investing in the hospitality sector moving forward.

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Sunday, July 23, 2017

Gold Coast, Brisbane, Sunshine Coast and Noosa - Day 6 onwards

Day 6 continues from Day 5 where we reach the farm stay place. To read the previous post, click here

Day 6

We woke up early on day 6 for a farm feeding experience. All the animals are feed daily and we could join in this activity. 

They had many chickens on the farm too and we could even get fresh eggs from the chicken there. This is the first time I had the chance to pick fresh eggs laid by the chickens.

After feeding the animals and having breakfast, we proceeded to Eumundi markets which is a famous market near to Noosa. The markets had many interesting stuffs which are the locals produce. After walking the markets for a few hours, we proceeded to Noosa heads beach which is quite a nice place to go to. 

Here, we had our lunch at Betty's burger and it was one of the best burgers I've ever eaten. After lunch, we went to buy some groceries again and went back to the farm cottage for another round of BBQ dinner! 

Day 7

Time pass quickly and its time to go back to Gold coast for the last night there. It was a long drive back, probably about 3 hours. On the way back, we stop by Beefy's meat pies to grab some pies for lunch. They are known as Australia's best meat pies and its really quite good. Its a good rest point also for the long drive. 

Driving back to Gold coast, we went to pacific fair shopping centre for just a short while before checking into our airbnb apartment at Palm beach, Gold Coast. It was near to the airport, just 10 minutes drive, perfect for the night before going to the airport for our flight back to Singapore. 

Palm Beach

This apartment is just about 5-10 minutes walking distance to the beach and had 2 bedrooms plus a living room and also a kitchen. Its a cosy apartment hosted by a great friendly host. You can check out their apartment on airbnb here

Bedroom at the airbnb apartment
Day 8

Day 8 is our flight back to Singapore. The flight is early in the morning and we had to reach the airport by 7am. 

This concludes my 8 days Australia trip in Gold Coast. It was a wonderful experience and a relaxing holiday. 

You can read the rest of my post in this Australia trip series below:

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Thursday, July 20, 2017

Unlimited 1.5% Cashback card is back again! And How to get Air Miles to Travel For Free?

Standard Chartered Unlimited cashback card is back!

A few months back when I launched the new Standard Chartered unlimited cashback card on my blog, it received overwhelming response with more than a hundred sign ups on this blog alone. As I found the card useful and attractive too, I signed up for one myself and received Takashimaya vouchers.

Today, I'm going to bring this card, in partnership with Singsaver, back to this blog again for readers who have missed it. This time, the deal will be $150 Takashimaya vouchers for new customers. For those who are not familiar, the Standard Chartered unlimited card gives unlimited 1.5% cashback on all spending. There is no cap and no minimum spend required. This is very different from the other credit cards in the market which only gives you points or cashback for certain types of spending. There is often a minimum spend too to be eligible for the cashback. This is not the case for this new unlimited cashback card. This card can also be used for public transport with automatic EZ-reload top up function.

Apply for the card through the below link to get your $150 Takashimaya vouchers (Valid till 31st July 2017):

For those who love to travel - How does Air Miles Work?

Do you love to travel? I believe most of us here travel at least once a year just to explore the world or take a break out of our small island in Singapore. The best way to travel and save money at the same time is through redeeming air miles for our air tickets. Let me explain further on how this works.

Many of us have heard of the Singapore Airlines KrisFlyer program which enable travellers to earn miles and exchange it for free air tickets or vouchers. Did you know, you can actually earn KrisFlyer miles on any spend locally or overseas which means you can actually accumulate enough miles for some good discounts or even free air tickets for your travel.

American Express Singapore Airlines KrisFlyer

The American Express Singapore Airlines KrisFlyer Credit Card lets you earn 1.1 KrisFlyer miles for every $1 spend locally. What's more, receive 5000 bonus KrisFlyer miles once you charge your first transaction to your card. You can use your KrisFlyer miles to pay for all or a part of your airfare on Singapore Airlines or SilkAir on, or redeem vouchers for travel on Scoot or Tigerair.

Redemption of miles for free tickets starts from 7500. A look at the Singapore airlines website shows that an air ticket to Thailand is around 12,500 miles. You can redeem a ticket to Japan or South Korea for 25,000 miles and Australia for 20,000 miles.

In additional, you will receive $80 NTUC vouchers when you apply through the below link (Valid till 31st July 2017):

American Express Krisflyer Ascend Card - Get complimentary access to airport lounges and hotel stays

Another similar card which allows you to earn KrisFlyer miles is the American Express Krisflyer Ascend Card. This card has the same benefits as the previous card with additional 4 complimentary access per year to any participating SATS Premier Lounge in Singapore and Plaza Premium Lounge around the world. You also get one complimentary night per year with Millennium Hotels and Resorts worldwide. This card earns 1.2 KrisFlyer miles for every S$1 spent on all your eligible purchases with your Card.

You also get 5000 bonus KrisFlyer miles on your first transaction and additional $80 NTUC FairPrice vouchers when you apply through the link below (Valid till 31st July 2017):

Citi PremierMiles Card

The last miles card I'll introduce is the Citi Premier Miles card. For this card, you can earn miles and redeem on a wide variety of flights including KrisFlyer, Asia Miles, Royal Orchid Plus, Executive Club, Enrich, Infinity MileageLands, Garuda Frequent Flyer, Etihad Guest, Qantas, Qatar and Flying Blue. For every $1 spent, you will get 1.2 Citi miles. A check on the website shows it requires about 20,000 Citi miles to redeem a flight to Thailand, 25,000 miles to Hong Kong or Taiwan and 30,000 to Japan.

For this card, you will get a bonus 15,000 Miles on your first transaction and additional $100 Agoda eVouchers when you apply through the link below (Valid till 31st July 2017):

Whether its the 1.5% unlimited cashback or the KrisFlyer or Citi Premier miles card, all of these represents savings on some of our most common expenses. All offer ends on 31st July 2017.

Thursday, July 13, 2017

How To Have $1 Million Dollars For Retirement

$1 Million is a special milestone for retirement, advocated by many financial practitioners too. Why is $1 Million important for retirement? To lay out the context, $1 Million actually isn't really a lot of money for retirement. Assuming you have $1 Million dollars at the age of 55 and retire and live till 85 years old, you can spend about $33,333 every year from age 55 onward. This is about $2777 per month for expenses which really is just enough factoring inflation in the future.

$1 Million on the other hand is a good base for creating a steady stream of income for retirement. If we can generate 4% annual interest/dividend on the $1 Million, it is $40,000 which translates to $3333 per month. This is quite a good income for retirement.

In this post, I'll provide some realistic scenarios on what a typical average income earner's savings will turn out in his/her lifetime. This will allow us to see how $1 Million can be achieved realistically in our life.

Pure Savings without investment  

If a person just saves money but does not invest, this is how much savings he or she will achieve assuming a savings of about $18,000 to $20,000 annually:

I have added in a $60,000 expense at the age of 30 assuming the expenses is for marriage, house etc, the first milestone of a typical person's life.

AgeSavingsAdditional Savings
26$30,000 $20,000
27$50,000 $20,000
28$70,000 $20,000
29$90,000 $20,000
30$110,000 $20,000
31$50,000 $18,000
32$68,000 $18,000
33$86,000 $18,000
34$104,000 $18,000
35$122,000 $18,000
36$140,000 $18,000
37$158,000 $18,000
38$176,000 $18,000
39$194,000 $18,000
40$212,000 $18,000
41$230,000 $18,000
42$248,000 $18,000
43$266,000 $18,000
44$284,000 $18,000
45$302,000 $18,000
46$320,000 $18,000
47$338,000 $18,000
48$356,000 $18,000
49$374,000 $18,000
50$392,000 $18,000
51$410,000 $18,000
52$428,000 $18,000
53$446,000 $18,000
54$464,000 $18,000
55$482,000 $18,000
56$500,000 $18,000
57$518,000 $18,000
58$536,000 $18,000
59$554,000 $18,000
60$572,000 $18,000

As we can see, just savings alone will not get us anywhere near $1 Million at all even at the age of 60. Now, let's add in investment to see how it will turn out.

Savings with 8% investment

Using the same scenario and adding 8% investment return, this is how much savings we will have:

AgeSavingsAdditional SavingsInvestment return
26$30,800 $20,000 8%
27$53,264 $20,000 8%
28$77,525 $20,000 8%
29$103,727 $20,000 8%
30$132,025 $20,000 8%
31$72,025 $18,000 8%
32$95,787 $18,000 8%
33$121,450 $18,000 8%
34$149,166 $18,000 8%
35$179,100 $18,000 8%
36$211,428 $18,000 8%
37$246,342 $18,000 8%
38$284,049 $18,000 8%
39$324,773 $18,000 8%
40$368,755 $18,000 8%
41$416,255 $18,000 8%
42$467,556 $18,000 8%
43$522,960 $18,000 8%
44$582,797 $18,000 8%
45$647,421 $18,000 8%
46$717,214 $18,000 8%
47$792,592 $18,000 8%
48$873,999 $18,000 8%
49$961,919 $18,000 8%
50$1,056,872 $18,000 8%
51$1,159,422 $18,000 8%
52$1,270,176 $18,000 8%
53$1,389,790 $18,000 8%
54$1,518,973 $18,000 8%
55$1,658,491 $18,000 8%
56$1,809,170 $18,000 8%
57$1,971,904 $18,000 8%
58$2,147,656 $18,000 8%
59$2,337,469 $18,000 8%
60$2,542,466 $18,000 8%

With 8% investment return, this person can achieve $1 Million at the age of 50 with the same savings rate of $18,000 annually. Saving $18,000 a year from the age of 30 shouldn't be too difficult for many of us. Assuming a person earns $4000, he can spend $2500 a month and just save $1500 a month to reach the target.

If you think 8% investment return is too high to achieve, let's bring it down to 5% investment return

Savings with 5% investment

Using the same scenario and changing it to 5% investment return, this is how much savings we will have:

AgeSavingsAdditional SavingsInvestment return
26$30,500 $20,000 5%
27$52,025 $20,000 5%
28$74,626 $20,000 5%
29$98,358 $20,000 5%
30$123,275 $20,000 5%
31$63,275 $18,000 5%
32$84,439 $18,000 5%
33$106,661 $18,000 5%
34$129,994 $18,000 5%
35$154,494 $18,000 5%
36$180,219 $18,000 5%
37$207,230 $18,000 5%
38$235,591 $18,000 5%
39$265,371 $18,000 5%
40$296,639 $18,000 5%
41$329,471 $18,000 5%
42$363,945 $18,000 5%
43$400,142 $18,000 5%
44$438,149 $18,000 5%
45$478,056 $18,000 5%
46$519,959 $18,000 5%
47$563,957 $18,000 5%
48$610,155 $18,000 5%
49$658,663 $18,000 5%
50$709,596 $18,000 5%
51$763,076 $18,000 5%
52$819,230 $18,000 5%
53$878,191 $18,000 5%
54$940,101 $18,000 5%
55$1,005,106 $18,000 5%
56$1,073,361 $18,000 5%
57$1,145,029 $18,000 5%
58$1,220,280 $18,000 5%
59$1,299,294 $18,000 5%
60$1,382,259 $18,000 5%

With 5% investment return, $1 Million can be achieved at the age of 55. Still not too bad.

As we can see, achieving $1 Million is not too difficult in our lifetime with an achievable savings rate. However, the scenarios above assume that our savings is always 100% invested which is rarely the case since we will always have some cash on hand. There should be some buffer when using the above scenarios as a guideline.

Key to a financial free life - ESI

The key to having a financially free life is in our earnings, savings and investing (ESI). If we do not earn enough, we can always try to increase our income. If we spend too much, we can try to reduce expenses to have more savings. The last part is on investing and learning how to invest wisely.

For my life, I've focused on increasing my income for the past 2 years. Increasing income is much harder than reducing expenses as there are a lot of things not in my control. Increasing income is all about creating value in our workplace as well as out of our workplace. Skills learnt will always be valuable which people will be willing to pay us for.

This is how my income has evolved over the years:

As you can see, my income has essentially doubled on some months as compared to the past. Over the years, I've managed to create other streams of income through writing, consulting and investing. These income did not happen in an instant. It took a few years to build it up. I've also changed job for better career progression. There are a lot of things that needs to be balanced to make sure time is allocated efficiently. I've also had to, on some instances, reject additional earnings opportunities because I feel it would be too much for me to handle. 

What are your plans for retirement? Do you think $1 Million is an achievable target?

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