Capitaland Ascendas REIT Disastrous Acquisition of Data Centre & Science Park- Selling Out Long Term Loyal Retail Shareholders.

I am utterly flabbergasted by the mostly raving praises by analysts with regard to the recently announced S$700Mil acquisition of the new Tai Seng data centre and business property at Science Park by Capitaland Ascendas REIT ("CLAR"). Yes, I have no doubt that the usual yield accretive argument and stable & resilient income streams from established tenants (Shopee) makes perfect sense. But the financing aspect of this acquisition exercise is a slap in the face of long term loyal retail Unit-holders with the severe dilution in their investment into CLAR via only a private placement instead of opening up to all unit-holders. 

How bad is the dilution on long term unit-holders?

Most long term Unit-holders probably entered into CLAR at prices ranging from S$2.80 per unit to S$3.00 per unit. If one entered during the pre-COVID days, then it will be S$3.00 to S$3.50 per unit range. Worst still, CLAR management offered a 5% discount to the market price of S$2.6059 per unit on 27 May 2025, that is, S$2.47 per unit.

Overall, S$500Mil of private proceeds were raised to fund the purchase of the above mentioned properties at the discounted price per unit of S$2.470. 

Parting thoughts

Personally, I thought that the CLAR management ought to have opened up the fund raising to all retail-unit holders instead of taking the easy way out and selling out long-term loyal unit-holders. Anyway, if queried, CLAR management will probably come up with the stupid excuses of (i) uncertainty of successful fund raising via preferential rights issue in current economic climate and/or (ii) the need for speed to close out the deal. This is extremely disappointing as this corporate action does not benefit existing retail unit-holders and is a stab in their back. 

Additional Thoughts on Unit Trust PIMCO Income- Opaque and Little Transparency Leads To Weird Theories.

This is following up on my last post on "The Bashing of PIMCO GIS Income Fund" on 20 May 2025. Since then, Mr Loo from 1M65 has also presented his extensive research by his 2 staff members. Similar to Master Leong, both concluded that PIMCO GIS Income Fund pays out one-third of its distribution from capital. Hence Mr Loo asserted that PIMCO GIS Income is functioning like our CPF-Life whereby one enjoy high upfront payout but the capital will be depleting as the recurring income is only two-third of the payout.  

There are a number of extremely contradictory points:

1. Capital Distribution unsustainable may not be true.

Yes. Apparently, it is true that one-third of the distribution are from capital as per additional details published on PIMCO GIS own website. The current yield from income produced from the fixed income instrutment is only 4.6%. Hence if one pays out 6.5% per annum, then the difference of <1.9%> payout must be coming from capital. Therefore, arguably, PIMCO GIS Income is a declining fund that behaves like CPF Life. Saying that, I disagree with this CPF-Life analogy and I should elaborate further below. 

Extract of Risk Free US Treasuries- 4% to 4.51% interest yield.

2. The current yield of 4.6% does not make sense.

The least attractive yield of the financial instrument invested by PIMCO should be US Treasuries as these are usually considered risk-free. As per above screenshot, Us treasuries hover around 4%-4.5% currently. Hence the other component of PIMCO Income portfolio of commercial grade bonds will be priced at 1%-3% premium on  top of any risk free bond rate. Also, PIMCO's investment into Mortgage back securities should be yielding between 6% to 7%.  Taking into account basic logic, the theoretical yield can never be 4.6%. It will be a lot higher. 

Did PIMCO publish the yield of 4.6% based on its historic original investment cost from the pre-spike in interest rate era and not after fair valuation downward adjustment? The maths looks pretty weird.

3. Published yield to maturity is 6.71% relative to the current yield of 4.63%

Now, if your current yield is only 4.63%, then how on earth will your yield to maturity hit 6.71%? This means that PIMCO does have strategy that works on reaping consistent capital gains from fixed income instrument. 

Note that "yield to maturity" of fixed income instrument considers not only the coupon payments but also any appreciation or depreciation in the bond's price if it's held until maturity. 

Parting thoughts

Based on the above 3 points, PIMCO is definitely not functioning like CPF-Life as per what 1M65 Mr Loo is asserting. I can only say that most unit trusts like PIMCO GIS is quite opaque and despite so many finance influencers analysing it, the only folks who knew the exact functioning is PIMCO themselves.  

Lendlease REIT Fell Below $0.50 Per Unit- 7.6% Distribution Yield.

The recent Donald Trump madness has caused many SREITs to decline sharply again with US Treasury rates spiking due to lack of market confidence and demand. Equities such as REITs are thus also adversely impacted. For Lendlease Global REIT (“LREIT”), based on the last half year distribution of $0.018 per unit, this will mean an annualized distribution of $0.036 per unit. Since last market traded price is $0.475 per unit as at 23 May 2025, this translates to a high distribution yield of 7.6%

While LREIT is not affiliated with Temasek Holdings such as REITs from the Mapletree and Capitaland stable, it is nevertheless still an attractive retail REIT for further diversification. Its heartland retail mall of JEM and long tenancy of office block in JEM to the Ministry of National Development added further resiliency to its rental income base. I will scoop up more of LREIT if the unit price crash further. Not sure whether it will reach $0.450 or below per unit. I am seriously pondering how low can SREIT decline and despite the global market pessimism, I believe the light will shine one day for REITs.

Interestingly, I noticed that Choon Yuan from InvestMoolah had moved in to accumulate LREIT recently. Personally, I am looking to add on additional retail focused REIT such as LREIT and Mapletree Pan Asia Commercial Trust amidst the current storm if the distribution yield spikes further to near 8%.

Living on the Knife’s Edge These Days- Investment Portfolios Heavy Losses and Personal Wealth Maybe Already Destined at Birth

Just when everyone thought that the China-US trade war has simmered down, the King of Mayhem, Donald Trump, unleashed another round of turmoil to the global stock markets by threatening a 50% tariff on the European Union (“EU”) and a 25% import tariff on Apple iPhones not made in US. This is hundred of billions in trade with EU. Retaliatory actions-which we are sure of-by the EU will basically mean the end of trade between US and the EU. It does not matter whether this is another brilliant negotiation tactic out of the “Art of the Deal” book by Trump as he has succeed in damaging trade and bilateral ties with EU even if he were to change his mind later on. 

1. Local bread and butter- potential loss of jobs in upcoming market slowdown.

There has been a slow down in business in retail definitely. I have been living on the knife’s edge (刀口上舔血) for the past 2 years. Despite my company making record profits in 2024, the senior management at HQ has not approved any salary increment again. I guess the uncertain economic outlook contributes to the current predicament. Maybe should have applied to be a civil servant in government for stability instead of taking a private commercial career path. Now too old to change with a short runway once you hit middle age.

2. REIT heavy portfolio going lower.

Wow, the recent see-saw up down up down for REITs is never ending. With bond price crashing due to higher yield demand for the supposingly risk free US Treasuries, this mean that REITs must also produce a higher income yield which puts tremendous downward pressure on REITs. We can see the Mapletree family of REITs crashing to near recent low again. Will it go down further? Yup, this is definitely possible given the antics of the King of Mayhem.  

3. Transferring CPF Ordinary Account to CPF Special Account for higher 1.5% more interest income.

When we talk about the strategy of transferring CPF OA to CPF special to get the higher 1.5% more interest income, the property guru and YouTuber Eric Chiew always come to my mind. This is because Eric will mock folks who do this as it means not much money left in the CPF OA to upgrade to bigger private condominium to make tons of money. 

Sometimes, one has to accept one’s wealth destiny. My ex-colleague (68 years old) who has retired told me that in everyone’s life, how much money one can made in this lifetime is more or less already decided at birth. Haha….so not everyone can expect to be like Eric who keep flipping properties to get wealthy and then get to live in landed property. If your destined life is like salted vegetable, chances are when you try to buy a second property to Huat big big, you may end up like in 2008 or 1990s where the property market crash over 20% and get very stressed up for 4-5 years trying to pay off the mortgage like a slave to the bank and your work place boss.

Or to share another tragic story, I had another colleague who suddenly got into a car accident (you can’t control other drivers from recklessly driving into you) with multiple fractures and also pain medication withdrawal side effects that effectively diminish your ability permanently to function effectively as an employee and business owner. Then how to pay for huge monthly mortgages?

Parting thoughts

The only light at the end of the tunnel is that Donald Trump only has 4 years tenure as president of the United States. Making America Great Again (“MAGA”) seems to be destroying everyone including US itself with the high prices for daily necessities and other imported products.

The Bashing of PIMCO GIS Income Fund That Gives a High 6.5% Distribution Yield- Sustainable Or Junk Bond Fund?

Recently, 1M65 Mr Loo has been talking about his potential investment target into the PIMCO GIS Income Fund which gives a more than 6% annual distribution yield (with payout on a monthly basis). On the contrary, we have Master Leong bashing the PIMCO GIS Income Fund ("PIMCO GIS") for various reasons such as the fund being mostly US focused (and his view that USD is weakening and thus upcoming huge forex losses for those who invested). In addition, Master Leong also warned about its high risk investment into assets such as the Mortgage Backed Securities ("MBS") credit default swap instrument. The credit default swap makes up about 20.22% of the investment of PIMCO GIS. Master Leong also mentioned that PIMCO GIS is using leverage which is extremely risky. Also, based on current US treasury yield of 4% to 4.45% (depending on the tenure), Master Leong asserted that the sustainable yield is only around 4% and the excess of 2% plus return is actually from capital. Henceforth, Master Leong is insinuating that PIMCO GIS NAV fund price is on a perpertual downward trend due to depleting payout funds from original capital.  So, is PIMCO GIS a junk investment as per what he asserted?  

1. Seeing with your eyes rather than hearsay- Is PIMCO GIS gone case?

Master Leong is a contrarian and has been gaining fame recently for his stock-picks which adopts the value investing approach. He has been highlighting the overvalued US market (28 times earnings) relative to China/Hong Kong markets (12-13 times earnings). For PIMCO GIS, based on my own personal experience, it is not exactly as bad as what Master Leong asserted.

2. Assertion that PIMCO GIS has too much USD (which is weakening over the long term) exposure.

The fact is that PIMCO GIS is hedged to SGD. The only issue here is what is the effectiveness of the hedge. To illustrate using a quick high level mental acrobatics exercise, if the hedge is 70% effective and say one invested S$100,000 into this unit trust, then S$30K will be exposed to USD foreign currency movement. So a drop of 20% in USD vs SGD will mean a S$6K capital loss in 5 to 10 years. This potential decline is actually already compensated via the interest income in a single year. So it is a fallacy that the entire S$100K of investment is being exposed. 

My PIMCO GIS investments so far has held up well with its capital value intact since mid-2023 and I have been getting 6%+ annual return via the monthly distribution into my bank account.  

 

Of course, if one has bought it during the pre- drastic inflation period of 5 years ago (2020-2022), then one would have been sitting on heavy capital losses (please see NAV chart above) . The capital losses from this period is certainly not because of USD weakness but mainly due to the surging Treasury risk free rates from near zero percentage (due to raging inflation) whereby the US Fed suddenly went on a spree to adjust interest rates upwards swiftly. The old adage of bond prices is inversely proportional to interest rate is unchanged here for this bond fund. 

3. Assertion that PIMCO GIS uses lots of leverage which amplify gains but also losses.

Strangely, even Master Leong is unable to provide an exact figure of how much leverage is being employed by PIMCO GIS but then insinuate that this is a major factor. So, I will suggest folks to raise query directly with their platform or PIMCO GIS fund manager. Else, it is hard to decipher whether this is a material number. For myself, I have also been using leverage in my equities investment and levergae is not a dirty word. Key to employment of leverage is risk management and the quantum of leverage employed. The track record for PIMCO GIS has been wonderful especially for my current foray into PIMCO GIS via Endowus.

4. Assertion that MBS credit default swaps are highly risky

I think that MBS triggered off crisis from 2008 global financial crisis is real. However, lot of investments also collapsed during a deep recession for both equities and bond funds. So, not a fair point. If you want safe risk free investment, then the rate of return will be only 2% to 3% in Singapore. PIMCO GIS as per above illustrative screenshot is a well-diversified bond fund.

5. Assertion of High Fund Level Expense of 1% to 1.5% for PIMCO GIS

Endowus PIMCO GIS is only 0.85% (0.55% fund level + Endowus 0.3%). The 1% to 1.5% is probably referring to the PIMCO GIS being sold by local banks and their relationship/investment managers.

6. Assertion that the sustainable return (interest income) of PIMCO GIS is only 4% with rest of one-third payout from capital

I really have to disagree with this assessment and assertion: 

(i) MBS Credit default swap already around 6.5% to 7%; 

(ii) investment grade bond and high yield bonds in the portfolio 5.5% to 8%;

(iii) Treasury bonds- 4.45%. 

Based on above interest income return and the weightage mentioned in item 4, I thought it is fairly close to 6% hence I am puzzled by the comment that one-third of PIMCO GIS distributions are being paid-out from capital.

Parting thoughts

The beauty of a bond fund is the sheer number of bonds inside it that enable one to have a well-diversified portfolio of bonds to prevent over-concentration risk should an entity default on its bond obligation. For an income investor, I am fine with the NAV movement volatility. So far (touch wood), my investments during the high interest rate period from 2023-2024 seems fine. Even my recent tranche in 2025 is holding up well in terms of its NAV capital value. 

Do take note that bond funds will still have its share of market risk and does not mean that they are risk free. Ok, that's all for today....Bye folks and have a great week ahead!

Investment Portfolios Updates (9 May 2025) - Net Investment of S$723K and Projected Annualised Passive Income of S$47K.

Wow, it has been a long 3 weeks since my last post. I had been super busy for the past weeks with entertainment of overseas clients and execution of a major project at workplace. Finally have some moment now to catch my breath and also do a quick post. I don't think things are fine at all albeit Donald Trump claiming that US and China having a "total reset" of their acrimonious relationship during the Geneva negotiation over the weekend. Since the "Liberation Day" trade tariff announcement by Donald Trump on April 2, 2025, stock markets worldwide plummeted. Despite the subsequent pull back of the reciprocal tariff by 90 days (except for China) by Trump a few days later, the damage has been done. My gross portfolios were not spared and fell to below S$1Mil while overall net investment after netting off margin loan hovers around S$723K.

1. Portfolio 1- Stocks Held in SGX Central Depository 

Not much changes here while waiting for the storm to stabilise. May'25 and June'25 have a couple of dividends payment. Haw Par Corp also paying out its usual dividends plus a special dividend totalling S$1 per share on May 21, 2025.

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 closed off my ICBC China banking stock of 12,000 shares at 13% profit to reduce leverage. Also, sold off all my rights issue (2,000 units) from Frasers Centrepoint Trust to lock in the small profit. Margin loan has been reduced from S$291K to S$273k in view of the gloomy marco-economic outlook.

3. Portfolio 3 (with Tiger Brokers and MooMoo) 

(Venture into higher risk as well as capital growth stocks here)

Interestingly, Link REIT, Alibaba and Bank of China rallied after the recent emergency meeting by the Chinese government. There are plans to include Link REIT to stock-connect-the inclusion of real estate investment trusts (Reits) in the China-Hong Kong Stock Connect mechanism will expand the investor base, increase the trading liquidity and attract more listings of these collective investment schemes to Hong Kong, analysts said.

4. Portfolio 4 (Endowus Unit Trusts & Other Investments)

I have reduced the equties funds (Fidelity Global Dividend Fund & Franklin Templeton) exposure and switched them over to the PIMCO Income bond fund which is offering an attractive annual yield of 6%.

Parting Thoughts

I do not think that Trump is going to drop the China Tariff by a lot. The Chinese government are in a stronger position and it benefits China to drag on the current standoff as it is obvious that Trump has screwed himself and is in hot soup over the lack of goods in retail stores and lack of China containers coming into US ports. 

Updates as at 12 May 2025: Speaking after talks with Chinese officials in Geneva, US Treasury Secretary Scott Bessent told reporters the two sides had reached a deal for a 90 day pause on measures and that reciprocal tariffs would come down by 115 per cent.