Buy More Keppel DC REIT or Sell Off All? Mixed Signals From Analysts And Market Noise After Q1 2024 Results.

Keppel DC REIT ("KDC") is now a faint shadow of its former glory. Its fall from grace begin when tenants default and a high interest rate environment broke the myth of invincibility and resiliency which many investors previously harboured for data centre REITs. Some even compare holding on to data centre REITs as a safe bond-like haven. Today, I will touch on my thoughts on whether one should buy more of KDC or simply just dump all units and move on to other investments with more upside potential. 

Please see below for my latest video on YouTube channel. Going forward, I will be posting various exclusive investment contents onto my YouTube channel only. Please subscribe to my YouTube channel also to get the latest content for sharing.

Using Hospitalisation & Surgical Insurance To Get Free Medical Checkup and Medical Treatment at Private Specialist Clinics- Beware of the Consequences.

Yup, you folks read the topic and subject header correctly- it is not a typo. What the heck am I talking about? Apparently, there are a number of people out there who has found a hidden "hack" to make use of their Hospitalisation & Surgical ("H&S") insurance plan to get free health check-up or medical treatment by specialist clinics. According to my friend (let's call him Kenny for the purpose of today's sharing session), as long as you know the right doctors at the private hospitals, they will know how to write in their medical report for one to file a H&S claim against their insurance companies to cover their medical examination costs and also 5 star hotel stay equivalent at A Class ward in private hospitals.

1.  "It is stupid to spend your own money on medical checkup. Make use of your H&S plan"- per Kenny.

My "friend" Kenny is a very street smart guy. A few months back, when I mentioned that I had recently spent S$1.5K in medical consultation and treatment for my chronic illness (asthma) at a respiratory specialist clinic, Kenny immediately commented that I should have consulted him earlier for alternative route. He and his spouse never waste their money for health-checkup or specialist treatment. As aforesaid mentioned, Kenny asserted that he knows of ways to be able to make a claim on H&S. He also remarked that "It is stupid to spend your own money on medical checkup. Make good use of your H&S plan". 

Coincidentally, Kenny has some chest pain issues then. So, he checked himself into a private hospital for 1 day to do a battery of tests which came up to S$13K in total bill. The results of the tests did not reveal any medical issues. True enough, the insurer approved the entire H&S claim of S$13K and made a full payment on behalf to the private hospital (The H&S plan of Kenny was purchased many years back hence it is the only one that I knew of that still covers "all charges" if one has bought the Extra Rider under the old scheme while rest of insurers such as NTUC Income Insurance Limited had already forced a co-payment in cash by policy holders under the old H&S scheme). 

2. Insurance Companies are not stupid- they have safeguards in place to mitigate such occurrences and deal with folks with these mindset for claims. 

To continue with the above story, Kenny got a shock when his H&S insurer wrote to him that due to this claim, they will be increasing his premiums by  three-fold for 1 year which amounted to increase of S$2k-$3K per annum. Kenny was very upset and told his insurance agent that he will be terminating his H&S with the insurance company. Currently, he has asked for quotes from a few other H&S insurers in the market for H&S replacement coverage.

It turns out that there is no free lunch after all. The consequences just came in a bit later.    

Mapletree Industrial Trust Rapid Plunge in Valuation- Opportunity in Current Crisis or Value Trap?

Mapletree Industrial Trust ("MIT") recent market price has declined rapidly amidst the higher financing cost environment and Middle East troubles. Today, I will touch on whether the current crisis presents a good entry point for MIT and my recent additional investment this week.

Please see below for my latest video on YouTube channel. Going forward, I will be posting various exclusive investment contents onto my YouTube channel only. Please subscribe to my YouTube channel also to get the latest content for sharing.

Lendlease Global Commercial REIT- Aggregate Leverage Computation and Good Buy?

Lendlease Global Commercial REIT ("LREIT") market price has remained in the doldrum despite the major JEM acquisition. Today, I will touch on how to compute the Aggregate Leverage ratio stipulated by MAS as well as my personal thoughts on whether LREIT is still a good buy at this juncture. 

Please see below for my latest video on YouTube channel. Going forward, I will be posting various exclusive investment contents only onto my YouTube channel. Please subscribe to my YouTube channel also to get the latest content for sharing.

Singtel Trading HALT and The Perpetual Rumour of Optus Sales.

This is really weird. Singtel actually needs to call for a trading halt this morning (3 April 2024) to tell investors again that it is not in talk or discussion to sell Optus. Earlier this year as well as recently on 13th March 2024, Singtel had already vehemently denied that it was in a deal discussion with Canadian private equity firm Brookfield to sell away its strategic stake in Optus. 

The strange rumour is being perpetuated by the Australian media on an impending sales of Optus to a Canadian Private Equity firm and the eventual "latest breakdown" of the deal during negotiation is kind of absurd.  

Parting thoughts
For the past few weeks, a number of investors seemed to believe and harbour hope that there is "no smoke without fire" and Singtel is going to announce a big surprise with a sales of Optus. Singtel price declined by <-3.15%> from S$2.54 as at 2 April 2024 to S$2.46 at of 12pm, 3 Apr 2024 after the trading halt was lifted.

Investment Portfolios Updates (28 March 2024) - Net S$594K and Projected Annualised Passive Income of S$41K.

Gross investments (including deployable cash) is at S$880K. Net investment value is currently at S$594K (after margin financing) with projected passive income of only S$41K due to Keppel Pacific Oak US office REIT suspending dividends for 2 years. SREITs have again sunk to the bottom of the ocean after rising up in earlier part of the year. Going forward, I have included a "Portfolio Allocation" pie chart to keep track of my current shift away from intense SREITs focused investment portfolios.  I have been busy investing and diversifying into Bond Funds via Endowus before the official announcement of the widely anticipated interest rate cuts by the US Fed in 2nd half of 2024. 

(Note: Please also refer to my other Family Portfolio which is projected to yield +S$20K of passive income per annum).

1. Portfolio 1- Stocks held in SGX Central Depository 

(Note: This portfolio is designed to provide immediate dividends for use as it is under my own CDP account and the dividends credited goes directly to my bank account.)

I have sold off part of my DigiCore REIT units to buy into Mapletree Logistics Trust. In addition, I have also sold off all my holdings in Capitaland Integrated Commercial Trust and bought into United Overseas Bank when there was a decline in its price. 

2. Portfolio 2- Margin purchased securities

(Note: My margin purchased securities has grown to a sufficient scale to sustain itself and can pay off annual financing charges as well as to gradually pay down the margin loan through dividends generated.) 

(a) Bought into 3,0000 shares of China Ping An insurance group as its price has reached one of its all-time low. Bought it more for capital appreciation recovery play and its attractive 8% dividend yield (albeit a 10% withholding tax). I think that the high dividend yield will more than compensate the possibility of long waiting time for its stock price to recover by at least 50%. 

(b) Have also paid back some margin loan as well as converting more expensive USD loans to SGD denominated since my natural forex hedging strategy against USD assets held is no longer effective with the huge drop in valuation of US Office REITs. 

3. Portfolio 3 (with Tiger Brokers)- Venture into higher risk as well as capital growth stocks here

(a) For the last 1 week, I have been using Tiger Brokers and this portfolio to do some short term trading between UOB and Mapletree Logistics Trust and managed to make some side income of S$400. Will probably be taking this money out for spending on food. Inflation has been crazy for the past year.

(b) Added Ping An insurance group to this portfolio too.

(c) Added more into Alibaba when its price dropped below HKD70 a share. 

4. Portfolio 4 (Endowus & Other Investments)

(a) While others folks have bought into more REITs to exploit on their extremely low market prices, I have been building up my stake in bond funds via Endowus. The high interest rates lead to many bond trusts paying out higher distribution as interest rates rise. If interest rate were to be cut, bond prices should further appreciate. In addition, have also been buying into global equities fund for further diversification and long term capital appreciation.  

Summary

I used to have more than 90% of my overall investments concentrated in SREITs. It is still a long way to push it down further to my own targeted reduced allocation of 50%. With the expected cuts in interest rates by the Fed since the last Powell announcement, SREITs valuation are currently rallying again which is like a game of see-saw. It is also a long long way to go to re-build up my annual passive income distribution from the SREIT cut in dividends and higher borrowing costs. 

2024 Dividends Receipts as at 20 March 2024- based On Ex-Dividend Date Occurrence (S$16.8K).

I thought it would be useful for myself to have a summary by months (instead of the exact payment dates listing in StocksCafe) of the dividends received thus far as well as future dividends that will be received to plan for re-deployment.

Key Highlights:

1. As alluded to the above illustration, most of the Q1 dividend receipts are actually in the month of March 2024 whereas Jan and Feb have just a couple of hundreds of dollars. 

2. StocksCafe unfortunately only has data from the main stocks markets on dividends distribution. So for folks using Robo advisor platform like Endowus or Syfe, there are no integrated Income funds monthly distribution data being input into StocksCafe for automated tracking. It has to be done manually in StocksCafe system to reflect the payout from those unit-trusts or Income Portfolios. But I am happy enough with the former, that is, the automation at least for HKEX and SGX based dividends payment which has already significantly improved my life from the days of super tedious excel tracking of all dividends for each and every stocks in my portfolio. In short, I am not presenting the monthly distribution received from my Endowus Income Portfolios for now- this portfolio is still immaterial in size but I plan to build it up till S$200K eventually in the next few years.

3. I am currently in the midst of rebuilding my amount of yearly dividends which has been greatly impacted by the self-implosion in the US Office REITs. For example, Keppel Pacific Oak US REIT decided to stop paying any distribution for 2 years. The rapid increase in interest rates also mean higher margin financing cost and reduces the net dividends available. 

Parting Thoughts

There seems to be some detractors online who frowned down on REITs which hold a significant part of their investment properties in China and Hong Kong (even for Temasek sponsor held REITs) such as Mapletree Pan Asia Commercial Trust and Mapletree Logistics Trust. My personal take is that China and Hong Kong will eventually recover from its current headwinds if one is taking a long term view. There are abundance talented smart, resourceful and hardworking Chinese and Hong Kongers colleagues that I have known and met…some of the finest people out there. So don’t be too quick to belittle and discount China and Hong Kong.  

Mapletree Logistics Trust Plummeted Close To Another 5 year low of S$1.410 Per Unit.

This is a short post for my own reference and also sharing. Today, Mapletree Logistics Trust ("MLT") has plummeted to an astonishing low point of S$1.410 per unit as of 20 March 2024. The only worse period than this is during the COVID crisis in March 2020 (S$1.362 per unit before a V-shaped recovery in unit price then). There seems to be an abundance of extreme pessimism permeating throughout the current SREIT stock market segment. Based on its last quarterly DPU of S$0.02253 per unit and annualising it, we will get a distribution yield of 6.4% now based on S$1.410 per unit. This is way better than the beginning of the year 5.3% at the price of S$1.710 as at 2nd Jan 2024.  

1. SG 10 year risk free bond for benchmarking of premium

The current 10 year bond rate is 3.114% as at 20 March 2024. Hence the current distribution yield of 6.34% is approximately +3.23% higher than the risk free rate. Personally, I thought this is a more decent return relative to the 5.3% yield in earlier part of the year.

2. Script dividend election price for recent distribution is S$1.524 per unit.  

Another interesting point to note is that the re-investment price for those who opted for the script dividend are getting new units at S$1.524 per unit. With the weak market price of S$1.410 per unit, this is a further 7.4% discount to the re-investment plan price.

3. Aggregate leverage ratio of 38.8% and 83% of debt hedged with fixed interest rate.

MLT leverage ratio for Q3 FY23/24 is at a healthy 38.8% (below my personal 40% red line as well as MAS 45%) . Moreover, 83% of its debt are hedged into fixed interest rate which gives stable and clear visibility for the next 3.7 years. 

Parting thoughts

In view of the above plus points and also the indisputable fact that MLT has a very strong sponsor in Temasek Holdings, I have taken up additional 4,000 MLT units @ S$1.42 per unit this week using my Tiger Brokers account. I have an upcoming S$12K dividends by end of March 2024 for adding on to MLT next week if the price were to suddenly plunge further after the Fed Reserve meeting. 

Betrayal by Friends and Spouse and Handling Dispute At Work.

The former Night Owl Cinematic ("NOC")  Sylvia Chan is back and hitting hard. Unless you have been living under a rock, the NOC saga has been dragging on for 3 years now. For those wondering what this is about, I will leave the link to her latest YouTube videos here. Today's post is not about the NOC saga, rather, it is on dealing with similar situation in commercial or voluntary organisations where you have Party 1 and Party 2 going after each other throats and where you are being drawn into the "Dirty Messy Fiasco".  I will just share my thoughts on the handling of such situation in event that you are being drawn into the quicksand or is actually part of the warring party. 

1. If possible, don't get drawn in at all.

Avoid taking sides or joining any camps if you encounter such disputes/fights going on between Party 1 and Party 2. Don't ever just listen to one side, always listen to the other side also for their version of what actually happened. You will find that most of the time, there are no obvious right and wrong over what had happened. 

The only thing of certainty is that those participating (and if you are caught in it) in such fiasco end up either worsening the already ugly situation or making even more enemies. 

2.  鹬蚌相争，渔翁得利 （The fisherman takes advantage from the fight between the snipe and the clam).

I have seen this happened in my home's residential committee. 2 groups of residents levying breach of statutory act by the other group or accusation of fraudulent use of funds or abuse of power. The 2 groups were so busy fighting one another that the subcontractors/vendors got away with slacking on the job as the committee overseeing them were too busy with infighting. End of the day, it is a lose lose situation for all.

3. The Narcissist will not listen- His/Her viewpoint is always supreme and right over others.

If you are dealing with a narcissist out on a war path against you, don't waste your time. Try to avoid that person or speak directly to his/her boss to directly override him/her. If unfortunately the person with narcissism is your boss, then maybe better to just resign and look for new job as nothing much you can do.

Note: Narcissistic personality disorder ("NPD") is actually a mental illness which involves a pattern of self-centered, arrogant thinking and behavior, a lack of empathy and consideration for other people, and an excessive need for admiration. Others often describe people with NPD as cocky, manipulative, selfish, patronizing, and demanding.

Parting thoughts

A lot of time, lack of communications or misunderstanding lead to many conflicts. In addition, always show proper respect to ensure that the other party does not lose too much "face" during communication even if the other party is "wrong" in your own opinion. Sometimes, ego is the root of all evil. 😎 

Frasers Logistics and Commercial Trust Acquisition of Germany Logistics Assets From Sponsor- My Quick Thoughts.

Frasers Logistics and Commercial Trust (“FLCT”) announced on the morning of  March 15, 2024 that it will be acquiring 4 logistics properties in Germany from its Sponsor, Frasers Property at a 5.1% discount to professional valuation at a purchase consideration of S$189Mil. However, FLCT price dropped by close to 2% from previous day in line with the rest of the general SREIT market price upon the announcement. I was a a bit surprised at  the decline in market price despite the deal being yield accretive since it will be 100% financed by debt. Nevertheless, this reflects investors current risk appetite and sentiment towards SREITs.

Aggregate Leverage Ratio Analysis

I did a quick high level check to find out whether this deal has a severe detrimental impact on FLCT leverage ratio. The S$189Mil deal makes up around 2.8% of its current investment properties portfolio. Its aggregate ratio would have grown from 32.4% as at September 2023 to 34.3% as at end March 2024 (expected completion date). This is still way below my personal conservative red line of 40% (the MAS one is 45%). There is thus still adequate debt headroom for buffer against further economic shocks from falling properties valuation as well as further yield accretive acquisition.

Parting Thoughts

I thought that the long WALE of 6.1 years and also reputable 3PL tenants such as Schenker for the 4 properties are an arguably good buy. Saying that, interest rate risk as well as stubborn inflation that are still above the Fed target are still downside factors to watch out. In addition, management of FLCT could have been more investor friendly to work out the details of the exact yield accretive impact for more transparent disclosure in their presentation materials. 

Prudential Dividend Funds- Weird Sales Cold Call By Personal Assistant of Unknown Agent.

Dividend paying funds seems to be the rage these days. Out of the blue, I suddenly got a cold call earlier this week from a personal assistant ("PA") of an unknown agent who asked me whether I want to find out more about their Prudential dividend fund. She is trying to fix me up on an appointment with her financial advisory agent to find out more about dividend paying funds. It was a bizarre and hard conversation with this curt PA:

Prudential PA: "Sir, have you heard of Prudential dividend investment fund?"

BK (me): "Sorry, may I know who's on the line and what is this call about?" 

Prudential PA: "Sir, what's your name, is it a good time to talk to you?" 

(Hmm, why she keep asking my name when she herself has not introduced herself or shed light on what this is all about?)

BK (me): "May I know who's on the line and what is this about?" 

Prudential PA: "Have you heard of Prudential dividend investment fund? Can you spare me 5 minutes?"

BK (me): "Nope, never heard before.  I got a meeting. But I can spare you a minute." 

Prudential PA: "WHAT's your name? HAVE YOU HEARD OF Prudential dividend investment fund? I will get my agent Sam to contact you. "

BK (me):" I already got a Prudential Agent lah".

Prudential PA: "But has your agent brief you on anything about our Prudential dividend investment fund? It also offer you insurance protection at the same time."

BK (me): "Nope, my current Prudential agent never brief me on this product."

Prudential PA: "Great. Then I will get my agent, Sam, to call you. WHAT's your name?!" 
(I can sense the lady getting impatient and irritated with me as her voice was raised".)

BK (me): "Ok, your agent can call me."

Prudential PA: " I will get my agent to call you". (Next moment, she just put down and cut off her phone abruptly without even saying goodbye).

Well, strange that the personal assistant is getting so desperate to want to get an appointment for her boss via cold calling but her brusque attitude over the entire tele-conversion is really out of the world. Also, is making a living so cut-throat now that they can just target a customer who already has an existing Prudential agent that has remain close in contact with me over the years? What makes this weird PA thinks that she can just wrest the business relationship away from the existing agent that easily? 

Endowus Investment and Management Fees Savings Hack of Up To S$600 per annum.

I have been using Endowus since end August 2023. So, I thought that it is a good time to take a look back at the use of Endowus platform for investment and to share my experiences. Overall, I like the easy to use mobile and web version of the platform. For today's sharing. I think I will touch on the fees chargeable by Endowus for access to their platform via cash investments.

1. Any Upfront Sales Charge or Transaction fees?

The unique thing about investing via Endowus platform (relative to direct purchase of Unit Trusts) is that there is no upfront sales fees and transaction fee. In addition, Endowus also provides a 100% Cashback on trailer fees. Hence, there is no point to buy unit trusts from the traditional route of banks or insurance companies Investment Linked Products ILP).

In addition, there is no charges for redemption/selling of units in the "Endowus Goal' being created.

2. Annual Fees of up to 0.6% per annum Chargeable by Endowus.

There are basically 2 types of recurring management fees here for buying into Unit Trust on Endowus. (i) The first one is the usual fund level management fees by the actual fund managers and (ii) Endowus level management fees, which is of interest here to us for the purpose of today's discussion.

If one is investing into the "Advised Portfolios" of "Core", "Satellite", "Income" or self-created Multi Fund portfolio, the Endowus level management fees will be between 0.25% to 0.60% per annum. The higher your investment quantum per goal, the lower is your fees. Note that quantum threshold to determine your fees is based on quantum of per investment goal you created in Endowus. Hence an Endowus user CANNOT combine all the balances in different goals to argue that he/she has reached the higher level tier to enjoy cheaper rate. 

3. Endowus Mangement Fees Hack- Go For Single Fund creation instead of multiple funds

Most retail and newbie investor will end up with this higher 0.60% management fees due to smaller capital being invested upfront in any single goal. If one invested just into one single fund, then this platform management fees will drop by half to only 0.30%. For a S$200K capital, this is a savings of +$600 per annum and +S$6K over a decade! 

Hence instead of creating a single goal with say multiple funds of 5 unit trusts, one can simply just create 5 goals with 1 unit trust in each goal. This will drop the platform management fees to only 0.30% since Endowus has a special single fund goal charges of a mere 0.30% per annum. 

Parting thoughts

If one wants to go with the pre-set "advised" portfolios such as Income Portfolio recommended by Endowus, then there will be the higher platform management fees charge of 0.60%. This is well worth it given that Endowus investment team will monitor and give various recommendations to change the constituents of the portfolio to those better performing or drop under performing ones.

If one decides to DIY to create a portfolio of one's own favourite unit trusts and if one wants to save on the platform management fees of 0.30% differences per annum (as alluded to pt 3 above), one can simply create multiple goals with 1 single fund in it. The downside to this would be that one would need to manually track on excel one's recurring allocation per month into the different months and also perform one's own balancing.   

Interesting Posts of the Week In Our Blogosphere Community.

Hi Folks, this is going to be a short post for sharing. Recently came across 2 interesting and thought provoking posts in our Blogosphere Community:

1. "Coping With The 32% Decline In Dividends" (By Towards Barista FIRE)

I have been following Barista Fire here as both of us subscribed mainly to the dividend investing approach and he has been generous online in sharing his journey towards financial independence. Our mate from “Towards Barista Fire” has shared some strategic move execution in order to address the inevitable problem of dividends cuts that will sooner or later arise due to uncontrollable marco-economic events such as the (i) 2020 COVID pandemic on most businesses and (ii) the 2022 sudden interest rate hike environment that lead to devastating impact on REITs dividend distribution. 

For those who are about to embark on “Barista” Fire, it will be good to have a quick perusal on the 2 strategies that he has mentioned in particularly on the 2nd strategic execution method to address the volatility or lumpiness in the dividend investing approach- please see his interesting thoughts and post here. 

2. "Just sold at record high!" (By Property Soul)

Nice post and warning given by Property Soul especially with regard to the “myth” from news media that Singapore properties has always appreciate in value and keep setting new record high prices. She has also shared the forgotten mid-1990s era where many over-zealous property buyers bought at the peak of the property cycle and then took 20 years to break even their purchase. In addition, all the "hoo-hah" of ever record property selling price that appears in the media one should take it with a pinch of salt. 

I am apprehensive about the indomitable confidence of some property agents and property YouTubers in the buy and upgrade private properties to make money and achieve financial independence. Apparently, Singapore property will always appreciate in prices. It is also asserted that the purchase of 2 private properties (1 for own family living and 1 for rental investment income+ capital appreciation) is a “proven” way to succeed in Singapore. 

Parting thoughts

My current wishlist is for interest rate cuts to start materialising soon from the US Federal Reserve before most of my holdings in REITs start to disintegrate into oblivion. Powell has recently told the House Financial Services Committee that he expects interest-rate cuts to come this year. He echoed those comments on Thursday before the Senate Banking Committee, saying that cuts "can and will begin" this year- so let's keep our fingers crossed.

Hong Leong Finance Released Horrendous Set of FY2023 Results- Best To Head For the Exit.

 

Hong Leong Finance (“HLF”) just released a horrendous set of FY2023 results. Personally, I thought that from the result announcement deck, one can already see the lack of efforts by the HLF presentation team. There were no powerpoint deck prepared like other listed companies to “beautify” their materials. The presentation team can’t even be bothered to put up a content page listing down the summary and page number of key financial reports (you can look at Haw Par Corporation- at least they bother to do a simple content page). Why I am saying this is that every job is a self-portrayal of  one-self and one should always endorse it with excellence….this seems to give one a sense of the culture inside the HLF organization from the lack of further efforts in their basic presentation materials. Anyway, just my personal belief and impression.

Horrendous Set of FY2023 Results with Dividends Cut.

Now back to the FY2023 results discussion- please see screenshot extract below of the published materials: 

Overall, profits for FY2023 attributable to shareholders dropped a whopping <28.7%> from S$ 131Mil in FY2022 to only S$93Mil. This is terrible given that the local banks such as DBS, UOB and OCBC are reporting record profits for FY2023. HLF interest income increased by a mere 68.8% but its interest expense increased exponentially by 286.4%! 

Now, some folks will jump in and say that HLF cannot be compared to banks as it is a finance company. My point is simple, I will be better off investing my funds in the local blue chip banks rather than wasting the past year in HLF.

Another point is that the activities of HLF is a subset of what the banks provide- if management were to sell away their HLF business, the local banks will be potential bidders for it. 

Parting thoughts

Let’s call a spade a spade. My personal thoughts are that HLF management team has performed badly as alluded to the FY2023 financial performance which is shocking. Their senior management should take a leaf out of Joseph Tsai’s book on what he had done at Alibaba, that is replacing the executive team of its various business units if the old ones are running out of ideas on staying competitive and growing the business. Alternatively, just sell off the business to the local or international banks to realize the net asset value per share of S$4.59 relative to its last market trading price of S$2.48 per share as at 29 Feb 2024. 

(P.S: I have decided to sell off all my personal and family portfolios related holdings in HLF. Initially, I thought of going to the AGM to raise the above improvement points but based on my personal sensing of the culture in place, think it will be just a waste of my own time. So I voted with my own feet out of this disappointing investment foray into HLF.) 

United Hampshire US REIT Announced Another Set of Resilient Results for FY2023- 10.76% Distribution Yield.

Like clockwork, the management team of United Hampshire US REIT (“UHREIT”) delivered another set of splendid 2nd half and full year 2023 results. It’s the only US Commercial REIT to deliver improved market valuation of its investment properties relative to the disastrous drop in valuation of the US office REITs due to higher capitalization rate and discount rate from higher interest rate. Its overall aggregate leverage ratio improved slightly to 41.7% relative to FY2022 of 41.8%. Unfortunately, UHREIT seems to have been impacted by the recent crash in US office REITs market prices. Its unit price has declined -10% from its peak price of US$0.52 per unit attained earlier during the 1st week of February 2024.

1. Quick Results Highlight

Gross revenue grew +7.1% to US$72.2Mil relative to US$67.6Mil  in FY2022 while Net Property Income increased by +7.6% to US$50.6Mil relative to US$47.1Mil for FY2022. However, distributable income declined from US$33.1Mil to US$30.4Mil (-3.6% drop) in FY2023 mainly due to (i) higher interest expense and (ii) the paid out of 2H 2023 Management base fee in cash to preserve unit-holder value and minimise unit base dilution.

The 63,000sqft of new Academy sports + Outdoors store at St. Lucie West commenced operations in November 2023 which was way ahead of original schedule in 2024. Its opening was just in time for the year end festive shopping season and was a contributor to the growth in gross revenue.

2. Capital Management

Aggregate leverage is at a healthy 41.7% due to spike in valuation of its investment properties. There are also no refinancing requirements until November 2026. While UHREIT is also under the general category of commercial property REIT, it is way different from US office REITs. 

As we can see above, office commercial property valuation has declined by <-32%> since June 2020 while Strip Center commercial property valuation (such as those owned by UHREIT) increased by +14% since June 2020. We know the tragic fate that had befallen Manulife US REIT, Prime US REIT and Keppel Pacific Oak US REIT all of which are struggling from or close to breach of aggregate leverage ratio due to the drastic decline in property valuation. UHREIT currently possesses the most resilient class of commercial properties that have survived the COVID crisis as well as the current high interest rate environment crisis resulting from inflationary control measures.

3. Admirable High Distribution Yield from UHREIT.

At 5.54 cents and US$0.445 market price per unit as at 24 February 2024, UHREIT is giving out an annualised 12.45% distribution yield.

If we stripped out the amount reserved for further AEI or capital expenditure as well as management fee in cash, UHREIT is still giving out an impressive distribution of 4.79 cents and an awe-inspiring yield of 10.76%.

Parting Thoughts

UHREIT has been delivering a consistent and splendid results yearly since its IPO. So far, it has proven itself to be exceptional well run and resilient despite the COVID crisis and escalating interest rate plight faced by its business operations. Keeping my fingers crossed that it continued to perform well and that its investors gradually realise the value proposition its business and that they sky high risk premium demanded from UHREIT will decline over time. 

Prime US REIT On Survival Mode And Signs of Green Shoots For Entire US Office Segment.

Prime US REIT ("Prime") has amazingly announced a better than expected results. I was expecting it to have breached its banking covenants after valuation decline. However, its aggregate leverage ratio is still within 50% and that it is giving out bonus units and 10% of its distributable income as dividends while retaining the rest for CAPEX and refinancing. Not surprisingly, its languishing unit price rebounded sharply on 22 February 2024. There are a few very interesting announcements by the management of Prime that is worth highlighting and which gives some idea on whether things are starting to turn around for US office commercial sector.

1. Prime US REIT seems to be confident to refinance the US$600Mil that is due in July 2024.

Prime plan to pay down US$100Mil of debt in 2024. It is also already in constructive refinancing discussions with the lenders of its US$600Mil credit facilities due in July 2024. From the optimism and upbeat tone displayed by its press release and public relations, I reckoned that their management team is confident of clearing the upcoming financial loan extension hurdle. This is a good sign.  

2. Pipeline of new office supply has dwindled and continued to fall.

This seems to be a major turning point that is being prominently highlighted by the management of Prime. There are 2 main factors which I will briefly elaborate on below:

2(a) Office ground-breakings and deliveries fell to an over 20-year low in 4Q2023.

Deliveries of new office space has fallen from 85Mil sqft 4 years ago to 46Mil sqft in 2023.

2(b) There are quite a number of conversion of excess commercial office building supply into residential buildings.

The US federal government and major US cities have been introducing incentives for building owners to convert their office buildings into residential buildings to address the excess supply in commercial and excess demand in residential apartments. Incentives of up to 75% discount on future tax assessments for buildings that convert commercial space into residential space are being dangled. 

2021-2023 has seen such offer soaring and being taken up by building owners. There were conversion activities of a 10 year high of 18.8Mil sqft of office space in 2023.

Parting thoughts

While I am impressed by the growth in leasing momentum and the brightly painted picture of record reduction in US office space supplies by the management of Prime, I am still apprehensive on whether we have seen the rock bottom of the US office sector. Ultimately, the high gearing ratio of 48.4% of Prime is just 1 small step away from a fire-sales of its office properties. 

(Note: On 5 February 2024, I had already disposed all my current holdings of Prime US REIT at US$0.16 per unit in order to mitigate my risk exposure to US office REITs. It was a lucky move as Prime US REIT has plunged by another whopping <-19%> to US$0.130 per unit as at noon of 23 Feb 2024. I have since redeployed the proceeds to other growth stocks instead of REITs.)

3 Points on Keppel Pacific Oak REIT To Watch Out- Finally Some Light At The End of The Tunnel.

I am just back Singapore today from my overseas business trip. During this past 1 week where I was super busy with work, it looks like a lot had happened in Singapore with the (i) sudden bombshell released by the management of Keppel Pacific Oak REIT (“KORE”) that they will halt all dividends payout for 2 years and (ii) the removal of CPF special account at the age of 55 by Mr Lawrence Wong, our deputy Prime Minister during his 2024 budget speech. The focus of this post will be on the disastrous announcement by KORE management that had sent shockwave among all of its unit-holders (as for the CPF Special and Retirement Accounts changes one can easily find many posts and comments on existing social media hence I will not be adding on to it). 

1. Unexpected total halt in KORE dividends distribution.

To be honest, I was expecting a 50% reduction in dividend payout in order to have adequate funds on hand to pay off CAPEX and expiring bank loans. The 100% halt in distributions caught me totally off guard as I think that its latest year end financial results is actually decent with no breach in banking covenants and a respectable aggregate leverage ratio of 43.2% despite the turmoil facing US office REITs. 

Nevertheless, I think that the tough measure seems to be the best option currently. At least KORE is not forced into selling off office buildings at a mammoth discounts to their current valuations (this is what happened to Manulife US REIT). Rights issuance at this juncture also will not work due to the rapidly spiralling downwards of unit price. The 9.8% maximum unit-holdings per unit-holder will also be an issue as it will be virtually impossible to get the sponsor to underwrite unsubscribed rights during an equity fund raising exercise from unit-holders. 3rd party bankers even if willing to take part will demand an exorbitant fees to take up unsubscribed rights. 

2. Is the worst over or more bad news to come?

As alluded to point 1, the drastic rescue plan seems to be preparing for a dooms day scenario. There could be more bad news such as losing of key tenants or worsening occupancy due to the work from home trend and macro-economic recession risks. We have seen the REIT pricing collapsed by over 40% in a single day since the announcement of the recapitalisation plan. 

If one cannot stomach the risks, then it is best to exit all office REITs including KORE.

3. Is it a good time to buy more of KORE? 

The hard truth is that KORE has lost its economic moat with the move towards work from home by US businesses and its employees- this is most likely a permanent change.

Although I  think that the current US$0.135 per unit as at 19 February 2024 is severely undervalued relative to its net asset value per unit of US$0.69 (this is an absurd market valuation at only 0.2 times of KORE's net asset value per unit), I will not be making any further long term placement into KORE or any US office REITs.

Parting thoughts

While I will not be making any further long term investments into KORE, I may be taking up a small short term speculative position towards the end of this week as I anticipated more irrational selling pressure and bloodbath when Prime US REIT released its results after the close of trading on 21 February (Wednesday).  With the long delay in results announcement by Prime US REIT relative to prior year, I reckon that their management team are busy drawing up more drastic measures-rather than a simple dividend halt- to save itself from financial ruin. KORE and other office REITs will most likely be adversely affected by the extreme pessimistic market sentiment about to be unleased by Prime US REIT. 

Do brace yourself for the impact and good luck to all existing retail investors of KORE.

Investment Portfolios Updates (2 Feb 2024) - S$613K and Projected Annualised Passive Income of S$46K.

While the valuation of my net investments had gone up relative to 2 months ago, my projected passive income has declined from S$50K to S$46K. Interest expenses from margin financing has gone up. In addition, I have revised downwards the projected yield from StocksCafe for Keppel Pacific Oak REIT as well as Prime REIT- the latter I have amended the expected dividend yield to be zero as it is in "deep shieet" from the looks of it still not releasing its financial results compared to its previous year end announcement date.

(Note: Please also refer to my other Family Portfolio which is projected to yield +S$20K of passive income per annum).

 1. Portfolio 1- Stocks held in SGX Central Depository 

(Note: This portfolio is designed to provide immediate dividends for use as it is under my own CDP account and the dividends credited goes directly to my bank account.)

I have taken up additional shares in Haw Par Corporation as well as entered a small position into CapitaLand Investment Limited. 

2. Portfolio 2- Margin purchased securities

(Note: My margin purchased securities has grown to a sufficient scale to sustain itself and can pay off annual financing charges as well as to gradually pay down the margin loan through dividends generated.) 

I have taken up new position in another REIT using margin financing. US Office REITs that I am holding (Keppel Oak and Prime REIT) are expected to perform badly this year given their weak financial position and close to breach of banking covenants. The only consolation for me is that their current pathetic valuation has now become immaterial to my overall gross portfolios.

3. Portfolio 3 (with Tiger Brokers)- Venture into higher risk as well as capital growth stocks here

(i) Keppel Corp share prices shot up with the announcement of a record year of profits as well as a good amount of final dividends. I had taken profit when its share price hit over S$7 and redeployed it into Ping An Insurance Group.

(ii) I continued to add in additional 200 shares into Alibaba as Jack Ma and Joe Tsai had also buy in US200Mil of shares. The million dollar question is will 7th Feb 2024 results announcement be a catalyst to break the death spiral of Alibaba stocks?

(iii) During this 2 months period, I have also added a position into Thai Beverage as it was trading near its 52 weeks low. Please refer to this video on why I added a position into Thai Beverage. 

(iv) I have continued to accumulate additional stakes into United Hampshire US REIT during the downturn when its price was hovering at US$0.37 per unit.

4. Portfolio 4 (Endowus & Other Investments)

I have added in a new self created balanced growth funds that is 50% equities (Fidelity Global Dividend Fund + Fidelity Asia Pacific Dividend Fund) and 50% bonds (PIMCO fixed income+ Allianz Global High Yield Fund) which will give an expected passive income yield of 4.8% per annum. 

I plan to continue building up my investments using Endowus as it enables diversification into bond funds.

Summary

I think that 2024 looks set to be another bad year for REITs due to the high interest rate environment which will affect most REITS and their distributions when their loans are due for renewal. Gone are the days of dirt cheap close to zero interest rates. Nonetheless, I am optimistic that the yearly rental escalation clauses should eventually negate the effects of higher financing costs for REITs. 

Know your own Employee Rights- Is Non-Compete Clause Forced Onto You Even Valid in Singapore?

I read with amusement on the most recent civil suit case brought upon by Shopee against its ex-senior employee to stop him from working for its Competitor ByteDance using the "Non-compete clause". So far I did not recall seeing any employer succeed in the State Courts of Singapore for such draconian request. Restraint of trade is generally frowned upon by our Judges in Singapore and rarely granted. 

1. How prevalent is non-compete clause in employment contract?

Well, it seems to be rather prevalent and forced especially onto management level staff when they sign the employment contract. Sometimes, even for junior level staff hiring, some HR departments will use a "standard template" which will strangely contain this. Perhaps the principle of these Employers will be to put in as much restriction to protect the company rights even if the clause cannot be uphold in court. Bottom-line is, it gives the company employer a basis to go after and hustle a staff who may join its competitor in future. 

2. So should you be worried if one resign and join one's competitor with such a clause in employment contract?

My personal thoughts to this is that generally, one should not be too worried as restraint of trade is something that our justice system really frowned upon. We are talking about the bread and butter of a human being. The Employer can put it there and craft as much black and white as they want but it is going to take a lot more than this clause to succeed in obtaining an injunction or other legal action that your ex-employer will want to put you through. 

Nevertheless, such clause maybe enforceable in certain circumstances. For example, if your Employer pay you say S$100K in terms of special separation bonus after you resign and clearly highlighted this in one's contract for you to rest at home and shake leg for one year, then the court may lean towards the employer in its enforceability of temporary restrain of trade for a year.

Parting thoughts

Anyway, above are just my personal thoughts. One needs to go to consult a professional law firm to go through your employment contract if one is worried that it may become a potential issue in future or prospective resignation to join a rival company. It is a small price to pay for a legal opinion and ease of mind. The best approach I reckon is to have an amicable discussion with one's current employer on separation issues such that it does not go down the path of a lawsuit which is a lose-lose for all parties.

Keppel Pacific Oak US REIT Reported Valuation Decline of 6.8%- Still Good But Strange Twist To Delay Results Release on 31st Jan 2024.

Today, the market reacted with shock at the sudden U-Turn in results announcement date of 31 Jan 2024 by Keppel Pacific Oak US REIT ("KPO REIT") and it crashed over <20%> as at 11.00am of 31 Jan 2024. Valuation report is out with a decline of 6.8% in property valuation, which I thought, is rather good news given that its aggregate leverage ratio is at 43.2% and Interest Coverage Ratio at 3.1 times as at 31 December 2023 year end. 

I am not exactly sure why KPO REIT management decided not to release the financial results as pre-planned in their notice on 5th January 2024. But this U-Turn move may signal some hidden can of worms such as adjustment of financial results or massive reduction in dividends to pay off debts. 

Extract of announcement on decline in valuation by KPO REIT

Overall, I think that the situation seems not too bad given that KPO REIT has thus far avoided the tragic fate that has befallen Manulife US REIT. Hope that there will be at least some dividends being payout to unit-holders. What are your thoughts folks?

Ping An Insurance Group Becoming High Yield 8% Dividend Stock- PE Ratio @Amazing 6.3 Times Earnings.

I try to make this a short post to reflect my current thoughts and my latest stock purchase addition into my investment portfolio. For the past 2 months, I have been seriously contemplating on whether I should increase my investment stakes in China equities that has been badly beaten down. 2 of these on my target list are (i) Alibaba (which I already held 1,500 shares) and (ii) Ping An Insurance Group. But the uncontrollable downward spiralling of China stock prices and the deflationary local environment there makes me extremely nervous and puts me off whenever I try to muster enough courage to click on the "Buy" button on my trading App.

1. Rainbow Amidst the Current Thunderstorms.

China has been in a bear market for the past 3 years and every week it keeps getting lower. Many fellow retail investors who are holding onto China listed companies have been burnt by the worsening economic conditions. I have been holding on to my remaining 1,500 shares of Alibaba stocks for 1-2 years. The good news is that recently, there were encouraging signs (as well as various rumors) that the China Government will come up with a more substantial rescue package to boost its equities market. 

2. Buy Now Or Wait For Further Official News Announcement?

I thought that the sensible thing would be to wait for official news confirmation before buying into China equities to prevent a wild goose chase and confirm that we are nearing the end of the market capitulation stage. However the usual adage of high risk high return applies, so I decided to start deploying some investment funds into either Alibaba or Ping An Insurance Group.

3. Makes More Sense to Diversify into Ping An Insurance Group Instead of Alibaba.

Many renowned China listed companies are now trading at fire-sales pricing. Hence I decided to diversify my China holdings and buy into Ping An Insurance Group. The latter has been badly beaten down recently when rumours surfaced that Ping An will need to do "National Service" to rescue Country Garden. Its management team has since came out to vehemently deny that the CCP has instructed it to inject funds into the troubled developer which is facing imminent bankruptcy if things do not improve.

At a dividend yield of 7.8%-8% and PE of 6.3 times, the established Ping An Insurance Group looks like an ideal candidate for both capital growth and high dividend yield return investment.

[P.S: Saying that, note that its Revenue and Net income for the past few years (2020-2023), seems to be declining and showing indicative red-flags about its ability to withstand the current local economic downturn albeit the decline in share price is substantially more than the financial results]. 

Ping An's 9mths 2023 Results against 2022

Parting thoughts

I am currently vested in a small stake of 500 shares of Ping An at around HKD34 a share. Will add on more shares if there are better news being released in the coming months ahead.