Investment Portfolios Updates (30 December 2024) - Net Investment of S$709K and Projected Annualised Passive Income of S$47K.

It has been 3 months since my last update of investment portfolios on 27 September 2024. The rally in S-REITs and China stocks fizzled out quickly in a short span and it seems that we are back to square one. Overall, real estate related investment assets still make up about 60% of my combined portfolios. I have continued to work on diversifying away from real estate related businesses and have continued investing into mostly bond related unit trusts via Endowus as well as buying into F&B retail business of Kimly Group. 

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.)

Main changes here as aforesaid mentioned is the addition of Kimly F&B retail group here. I have also took part in the preferential rights issue for Keppel DC REIT. I retained the additional units of KDC in my SGX account while selling off the additional units in my Margin Trustee account- see below.

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.) 

Took part in the preferential rights issue for Keppel DC REIT and then sold off all the 4,000 additional units in my Margin Trustee account and bought 5,000 units of Mapletree Pan Asia Commercial Trust. 

In addition, I also invested into the Bank of China as well as ICBC Bank here. 

3. Portfolio 3 (with Tiger Brokers and MooMoo) 

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

Bought into additional units of Oceanus here as well as ICBC (Bank). 

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

The public and government objection to the Allianz acquistion of Income Ltd means that the 300% capital gain deal fell into the drain. Worst still, the suspension of public trading of Income Ltd shares on Alta platform as at 17 Octobet 2024 is a double whammy due to the fallout from the Allianz deal. Income Ltd management team screwed up big time on this one.

I have also decided to start drawing down the dividends and distribution from Portfolio 4 going forward.

Summary

I sincerely hope that 2025 will be a better year and that the run-away inflation has been tamed and that interest rate will remain as it is else any increase in rates will once again batter REITs and bonds asset prices to death. 

Would also like to take this opportunity to wish all a Happy New Year and may we all prosper together in 2025! :)😎

Singapore Buyers Got Misled Into Investing Into Malaysia Johor Properties Under Private Lease Scheme- Slim Hope of Winning Civil Suit.

It is shocking when I read the news that some fellow Singaporean buyers are in legal dispute with a Malaysian developer over the form of ownership of Johor condo purchases. Apparently, these fellow Singaporeans have bought into a property under a "Private Lease Scheme (PLS)" that is unique in Malaysia but not in Singapore property market. It is akin to being a tenant as all the rights associated with ownership are missing and the only rights is to be able to stay in the condominium apartment for 99 years. You need to seek permission from the Developer to sublease or re-sell the unit.  

1. What is PLS?

Under such a scheme, the Malaysian developer retains ownership of the property and you essentially have a long-term rental agreement and NOT TRUE ownership. One thus does not have full ownership rights such as voting on condo management or selling the property freely. 

2. Where is the Disputed Residential Properties?

According to the Edge, some residential properties in Medini, an area within Iskandar Puteri in Johor, were sold in 2013 and 2014 under a PLS and not as 99-year leasehold condominiums. 

3. Statutory Claims Limit in Civil Suit as well as Signing the Sales & Purchase Agreement with Eyes Wide Open

3(i) Considering now is 2024 and that this matter is only raised up now, there will also be an issue of statutory expiry of civil claims lawsuit which is 6 years in Malaysia. Can affected PLS Singaporean buyers even file the suit in the first place on being misled into paying for a PLS instead of a normal purchase?

3(ii) Also, even if they raise a claim successfully, how do these buyers argue their way out of an agreement that they have signed with eyes wide open in the first place?

Parting Thoughts

I thought that investing into Malaysian assets can become extremely risky if one is not careful in the due diligence process. Nonetheless, even if one is very careful, we should not forget about the constantly changing policy by the Malaysian government (depending on who is in power). We have seen the aftermaths of the 1998 CLOB issue where many Singaporeans lost their hard earn money overnight due to political risk. We have also seen Forest City which was marketed to many folks in China and Singapore as a 2nd residential home under special visa stay programme but which Mahathir's government subsequently reversed hence turning it into a ghost city. 

Moreover, even if there are capital gains of 100% in say 10 years, the depreciating currency based on historical trend against SGD will mean that the investment gain will be be wiped back to zero. Therefore, buying into Malaysian property is definitely more for staying or living in rather than as a form of investment. 

To put it bluntly, I think that the affected Singaporeans on PLS have very little room to maneuver to get the ownership title restored and will just be incurring more unnecessary legal fees expenses. The only stakeholder that will surely benefit the most will be the Malaysian lawyers. 

Investing into "The Flavours of Life"- Kimly F&B Retail Group.

Since REITs prices have rallied somewhat over the past few days over Christmas period, I decided against investing more into Mapletree Pan Asia Commercial Trust and Link REIT. Instead, I have decided to invest into the F&B group with the "Flavours of Life" slogan- Kimly. Strangely, Kimly Group 's share price has fallen dramatically off its peak of S$0.436 per share back in 2021 while its business have expanded from 148 F&B outlets to 191 F&B outlets from FY2021 to FY2024- see Retail Footprint for details.

1.Retail Footprint

2. Financial Outlook and Dividends Payout + EPS Thoughts

2.1 Strong Balance Sheet with Loads of Hard Cash

I am extremely impressed with the S$98.5Mil of cash on Kimly's balance sheet. Cash is King. This huge pile of cash can be used for immediate business expansion as well as immediate paydown of S$17Mil of short term and long term bank loans during emergency liqudity crunch time.

2.2 Dividends Payout

With a dividend payout of 2 cents for FY2024 and a EPS of 2.55 cents, this means  a payout ratio of almost 80% while retaining 20% earnings in the business. At the market trading price of S$0.325 per share as at 26 December 2024, this represented an extremely attractive dividend yield of 6.15%. 

2.3 EPS on Higher Side- But Need to Consider Room For Growth

Also, Kimly's PE ratio based on EPS of 2.55 cents is about 12.94 times. F&B industry in Singapore (based on data from Simply Wall Street on Singapore Industry) range from PE of 8 to 10 so apparently 12.94 times seems a tad high on SGX. Nevertheless, I thought that its Halal "Tender Best" sub-branded restaturant has lots of room to drive growth & profitability for the future. 

Interestingly, its share price has remained in the S$0.310 to S$0.325 range despite the announcement of its full year financial results and 1 cent final dividends declared on 26 November 2024. Ex-dividend will be on 4 Februray 2025 (Tuesday) and payout date on 14 Februrary 2025 (Friday).

3. Possible Downside Risks

Of course, not all is entirely eventful for Kimly and its management team over the past few years as well as recently. There are a couple of serious downside risks:

3.1 Pokka Deal & Conflict of Interest in 2022

In February 2022, 2 former directors of coffee shop operator Kimly were fined for their role in failing to notify the Singapore Exchange (SGX) that Kimly's acquisition of drinks company Asian Story Corporation (ASC) involved a conflict of interest. This unfortunate incident also led to the disqualifcation of the above mentioned officers of the Group to act as director for 5 years.

3.2 Illquid Stocks As Most of the Share Capital Owned by only a Few Substantial Individual Holders.

The stocks (50%+) are held in the hands of 3 indviduals. General public holds the remainder. Hence trading of this counter is not very liquid. It maybe tought to sell off the stocks during unforseen situation.

3.3 The Competition is Intense in F&B.

There are many rival coffeeshop businesses in operations in Singapore. There are also other F&B operators. I am not sure why some folks think that Kimly is a relatively defensive business with resilient cashflow. The fact is that it is extremely price sensitive and  not all costs can be passed on immediately to customers. For example, we have seen the impact of the recent high inflation on Kimly Group's financial performance. There were also various closure of non-profitable stalls and resturants by Kimly over the past few years. 

3.4 Resignation of Financial Controller of Kimly Group announced on 27 November 2024.

Personally, the resignation of the Head of Finance & Accounting is a downside for me that signals possible other issues internally albeit the standard crafting of the "personnel left to pursue other personal and career opportunities". The Financial Controller joined Kimly in 2021 and then left 3 years later.

It is also strange that the Senior Finance Manager is left to hold the fort and that the Group did not look out for experienced replacement CFOs/Financial Controllers to take over.  

Parting Thoughts

For diversification away from my REITs heavy portfolios, I have decided to invest a small amount (20,000 shares) into Kimly Group given that it has demostrated stable growth in its F&B businesses. While challenges such as intense competition, inflation and cost pressures present great business risks to its profitability, I think that Kimly's senior management is experienced enough to steer the group forward given their sharp business acumen and historical track record.

Oceanus Group Makes An Immediate S$10.5 Mil Profit From Disposal of Non-Core Aquaculture Farms in China.

Oceans Group has finally released some positive news that it is selling 4 plots of land used for acquculture farming in Fujian Province of China for S$19.2Mil. The cost of the 4 plots of land in the books of Oceanus is at S$8.7Mil. This is a 120% return from this deal and an immediate gain on diposal of S$10.5Mil. Given that the Sale and Purchase Agreement ("SPA") is signed on 20 December 2024, the gain on disposal booking in will only be in early 2025 upon completion of all the warranties in the SPA. 

1. Annoucement on 23 December 2024

The interesting thing here is that no market valuation benchmarking exercise was carried out and the deal is crafted as being on a "willing-buyer and willing-seller" basis. Personally, I am not a fan of willing-buyer and willing-seller as there is a degree of lack of transparency with regard to whether a deal is fairly done if benchmarked to the market.  

2. Immediate Positive Financial Impact Upon Completion of the SPA:

The NTA of Oceanus Group will go up by approximately 22.7% upon the completion of the deal. The S$10.5Mil will be re-deployed into working capital.  

Parting Thoughts

Interestingly, if one had purchased Oceanus recently at S$0.005 per share last week, the current market price of S$0.007 per share would mean a +40% capital gain from holding Oceanus in just one week.

Overall, I thought that Peter Koh, the Group Chief Executive Officer of Oceanus Group, executed a good deal of realising hidden intrinsic value from its non-core assets. Current market value of Oceanus Group is trading at S$0.007 per share as at 24 December 2024 relative to the revalued NTA per share of S$0.0027. This deal maybe essential as Oceanus Group has been making losses at the net profit level and will help to recapitalise the company without further issuance of shares via equity fund raising.  

Selling Excess Rights Keppel DC REIT For Mapletree Pan Asia Commercial Trust.

Surprisingly, I managed to get all my rights and excess units subscription for Keppel DC REIT ("KDC") preferential rights offering, that is, 5,000 units @ S$2.03 per unit. As per my previous post, I think that KDC is overvalued, so I decided to keep only 1,000 units of the allocated KDC units while selling 4,000 units from the rights allotment to lock in a tiny profit to the market price of S$2.10 per unit and prepare for redeployment in view of the sharp correction in the prices of many blue-chip REITs.

1. Reassessment of Mapletree Pan Asia Commercial Trust ("MPACT")

On the crown jewel front, Vivocity shopping mall continued to shine brightly in terms of its financial performance for the 1st half of FY2024/25. Its other local jewel of Mapletree Business City seems to have lost some of its luster with commited occupancy dropping from 96.8% on 30 September 2023 to 92.5% as at 30 September 2024- nonetheless, its quarter on quarter occupancy has held on well. 

MPACT's Hong Kong segment also seems to have finally some signs of optimism sprouting. I think that the fear of all Hong Kong folks going over to Shenzhen to shop and dine via the high speed train and thus marking the end of Hong Kong shopping malls, may have been over-exaggerated. Festival Walk is a major shopping mall in Kowloon and not strictly just catering for tourist. It remains a popular hangout place for the Hong Kong local folks as per my chit chatting with Hong Kong colleagues.

1.1 Hong Kong star property- Festival Walk finally seeing lights at the end of the tunnel with rental stabilising.

The negative rental reversion has slowed down for Festival Walk albeit my Hong Kong colleagues still feeling gloomy with their economic outlook. 6 mths ago, the reported rental reversion is a miserable -8.7% while the recent announcement is a tad lower -6.1%.

 There are also ongoing efforts to curate the right retail mix to cater to local's demand for experiential and lifestyle concepts.

1.2 The Accretive Divestment of Non-Core Asset Mapletree Anson on 31 July 2024

The successful divestment of Mapletree Anson at a fair value gain while MPACT is trading at 29% off its NTA thus managed to lower its aggregate leverage to 38.4% (below 40% level) and boost unit-holders return.

1.3 Sharp Drop in market price back to S$1.20 per unit as at 20 December 2024 range from S$1.53 per unit on 3rd October 2024.

MPACT has corrected by approximately 20% in less than 3 months. This is despite the continued interest rate reduction by the US Federal Reserve that was just announced. It is also giving out an attractive distribution yield of 6.5% per annum based on the recent distribution.

Parting thoughts

After selling off my KDC excess stocks, I have snapped up 5,000 units of MPACT last week @ S$1.21 per unit in view of the significant price correction. Come to year end, I intend to invest another S$10K to either MPACT or Link REIT as I think that Hong Kong will eventually rise and shine brightly again given the latest developments- Hong Kong's economy is set on a recovery path with five consecutive quarters of positive GDP growth.

Do Finfluencers Really Need a License To Post On Social Media? Beware of Contravention of Financial Advisers Act.

The recent worries among our finfluencer blogosphere is that our posts or videos are in contravention of the Financial Advisers Act 2001 ("FAA") enacted by the Singapore Parliament. I think let's not mince our words here, given the crafting of the regulatory stipulations and Monetary Authority of Singapore ("MAS"), most bloggers and YouTubers can be interpreted to be giving out "financial advices" albeit all of us trying to argue that it is for education or entertainment purpose or just "ownself talking to ownself" online. Budget Babe has a good post here-"Finfluencers do NOT need to be licensed in Singapore" with regard to the above topic. Nevertheless, I think that there are some essential technical points that needs to be considered in greater details. 

1. MAS stance on finfluencers is not entirely assuring as the wordings crafted are at quite high level thus subjected to various forms of interpretations.

Extract from MAS FAA FAQ No.12 

If one is giving one's own opinion on a certain stock, then is this a financial advice? I do not think it is crystal clear based on the crafting. So let's discuss more on what are the activities that constitue financial advisory in point 2 below.

2.Type of activities regulated under the FAA- See FAQ 2 of FAA Frequently Asked Questions 

Under Footnote 1 of FAQ 2, Investment Product does include "Securities". Then the next question is what is the meaning of  "Securities" of capital market? Examples of securities in the capital market (as per the defintion on Investopedia):

(i) Bonds

A debt security that investors buy from a company, with the company returning the bond amount plus interest within an agreed-upon period. 

(ii) Certificates of deposit

A debt security that requires regular interest payments and repayment of the principal amount. 

(iii) Equity shares

A security that doesn't have a fixed maturity date, and when an investor owns a company stock, they become a partial owner of that company. 

(iv) Convertible bonds and preference shares

Hybrid securities that combine features of both equity and debt securities. 

(v) Unit Trusts/Mutual funds

An instrument that provides buyers with investment plans that involve less risk due to their diversified portfolio. 

Note: For formal defintion of Securities, one can refer to Section 2(1) of the Securities and Futures Act 2001 from Singapore Statutes online.

If we further refer to MAS Guidelines on Provision of Financial Advisory Service Paragraph 3.1 (updated 10 July 2019), it mentioned that even if one expresses an opinion on the merits of buying, selling or holidng a particular product or a class of investment products, this will still be a financial advice. 

Hence, most of the stuff we blogged about can arguably (to some extent) have some semblance under the activities regulated under the FAA. We can argue the other way till the cows come home to justify that it is purely "education or entertainment" but the fun fact remains that the definition crafted is not exactly clear cut explicit and we may still be caught in it. 

3. The 2 Stage Tests Prescribed by MAS in The Guidelines on Provision of Financial Advice and determination of whether a Blogger/You Tuber is giving out Financial Advice.

First and foremost, if the stipulation (in the context of our unique blogging scene) is ambigious and can be interpreted both ways, I need to emphasise again that then, it does not give assurance or comfort to any of us especially if we got hauled up to court. So there is no point being defensive about it. Instead, I think we can go straight to the 2nd stage of the "2 Stage Tests" prescribed by the MAS under the 2nd paragraph of FAQ 12 of the "FAA Frequently Asked Questions" as a litmus test to determine whether a blogger/You Tuber is giving out financial advice.

Extract from MAS FAA FAQ No.12 

The second stage of the 2 Stage Tests is the one that I personally find it clearer with regard to whether one is caught under the FAA and requires a license to operate. This 2nd stage under Paragraph 3.8 to 3.9 of the "Guidelines on Provision of Financial Advisory Service" offers very detailed examples of whether a person is carrying on a business of providing financial advice:

3.1 Examples (Extracted from Para 3.8-3.9)- Scenario 1

X blogs as a hobby, and posts on wide-ranging topics including food and travel. He posts on finance-related matters only intermittently, and there are prolonged periods when he does not post any finance-related content. He does not derive any income from his website. X is less likely to be considered to be carrying on a business of providing financial advice given that he does not provide such advice on a systematic and continuous basis and receives no remuneration from it. 

3.2 Examples (Extracted from Para 3.8-3.9)- Scenario 2

Y posts more regularly and exclusively on finance-related matters. He is paid a monthly fee by an advertising provider for allowing the provider to place an advertisement on his website. The fee is determined by the number of clicks on Y’s website during the past month, but Y has no control over which specific advertisement will be seen by his readers. Y receives no other form of remuneration from his blog. Although Y posts regularly and receives remuneration from his website, this is not derived as a result of his provision of financial advice or the investment decisions of his readers. Y is therefore less likely to be considered to be carrying on a business of providing financial advice.  

3.3 Examples (Extracted from Para 3.8-3.9)- Scenario 3

Z has an arrangement with an investment product distributor, under which he is remunerated for recommending its products. Z is more likely considered to be carrying on a business of providing financial advice, as not only does he provide financial advice on a continuous and systematic basis, he is also remunerated for doing so.  

Parting Thoughts

For myself and many other bloggers/YouTubers, we will thus fall under the above depiction of the 2nd Stage of the 2 Stage MAS tests of scenario 2, hence highly unlikely to be deemed as a person providing financial advisory service. 

Saying that, for those bloggers/Youtubers accepting product or service sponsorship or huge recurring advertisment fees for promoting a product, they will be deemed to be providing financial advisory service under scenario 3- hence I guess this is the group that needs to try to argue that they are only providing factual education or entertainment and not expressing any form of opinions under 1st Stage of the 2 Stages Test. This latter group will nonetheless get into technical issues headache as aforesaid discussed in my Point 1 and Point 2 due to the intentional high level crafting of the FAA statue. 

Anyway, just sharing my personal thoughts.....above for "education and entertainment" purpose only😓 

Tan Kin Lian Saga Continues- From Pretty Girls Fiasco To Joining the Chinese Communist Party Post.

Haiz, our Mr Tan Kin Lian (“TKL”) recently made news again. This time it is not about pretty or attractive girls but because of his facebook post that he is now a member of the Chinese Communist Party. The Ministry of Home Affairs of Singapore is not amused and has questioned him about it. Apparently, Mr Tan made that post in jest.

It is obvious that our SG government is watching TKL’s social media posts closely and seems to be warning him just that.

TKL has also fought back by bashing the SG government in his most recent post on the latest unmasking of the NRIC hot topic by claiming that this is a policy U-turn that wasted billions of dollars in IT and manpower resources. I am not sure why TKL got so much time to badger the government frequently. For all we know, maybe TKL will now run for MP in the next General Election?

Meanwhile, the saga continues……

Possible Stock Market Price Manipulation by Dasin Retail Trust Non-Executive Director and Ex-CEO of Trustee Manager.

Wow, another shocking news released by the current management of Dasin Retail Trust ("DRT") on 2nd December 2024. Police reports, reports to Monetary Authority of Singapore and Singapore Stock Exchange have been lodged after the current management discovered "certain documents" in the office previously occupied by DRT's ex-CEO of the Trustee, Ms Wang Qiu. I wonder whether there are any more cans of worms hidden by the previous management team and the non-executive director Zhang Zhongmin.

There have been too many bad news over the past 2 years from DRT:

1. Dasin Retail Trust On Verge Of Collapse-The Can Of Worms Finally Got Revealed With Sponsor In Deep "Sheep"! -25 April 2023

2. Dasin Retail Trust Trading Price Possibly Being Manipulated By An Unknown Individual Investor- Investors Beware! -22 August 2023

Parting Thoughts

I am glad that I have sold off all my DRT units by end of August 2022. For all we know, DRT maybe virtually worthless now albeit the market trading price at S$0.033 per unit as at 3 December 2024 (Tuesday). 

The Upcoming Acquisition of New Data Centres for Keppel DC REIT Are Not As Rosy As What Many Believes-Part 2 of 2.

Hi Folks, in my previous post on why things are not so rosy as it seems with Keppel DC, I have mentioned why I think that KDC is overpriced even with a 4.43% distribution yield even after the major acquisitions of 2 data centres at Genting Lane from its sponsor. Interestingly, I think that investors is viewing KDC as a “mini” growth stock rather than a REIT. The belief in more of such future acquisitions might be the only plausible explanation on the market premium over its net book value and current super low distribution yield.

Anyway, for those retail investors who are interested in the preferential offer, please take note of the below key dates so that you don’t miss it:

Pricing has been set at S$2.03 per unit. Every existing retail investor will be entitled to 86 new units for every 1,000 units held.

Parting Thoughts

Since the market trading price as at 29 November 2024 (Friday) is still at a strong S$2.220 per unit and the preferential offering is at S$2.03 per unit, there is approximately 10% profit for those who managed to find ways to oversubscribe & gets allotted extra units. Selling these extra units off on 18th December 2024 will then become a tidy profit within a short 2 weeks trade, assuming that the market price remains strong at current level. Of course, if price were to tank after the preferential offerings, then one has to eat grass. :)

The Upcoming Acquisition of New Data Centres for Keppel DC REIT Are Not As Rosy As What Many Believes-Part 1 of 2.

The top news for the past week, which many SREITs investors are super excited about, seems to be the acquisition of the Genting Lane Data Centres by Keppel DC REIT (“KDC”) from its Sponsor Keppel Ltd. Many analysts and also postings on social media by bloggers & YouTubers have been singing high praises over the upcoming acquisition and the associated equity fund raising of over S$1 billion in capital. The private tranche has over 3.4 times of oversubscription and I believe that the upcoming preferential offerings for retail unit-holders will be also as hot and crazy. While I think that this deal is sensible, nevertheless, I thought that it is not exactly a fantastic one and there are some key risks here that some investors seemed to have closed one eye given the hype over  Generative AI and the usual strange belief that KDC can grow its distribution per unit indefinitely with many more such "upcoming fantastic acquisitions".

Things are not exactly rosy at KDC

Well, I don’t want to be a wet blanket here. I mean I am also a former firm believer that the data centre leasing business has resilient demand with tenants that will not be migrating upon expiry due to the significant challenges in moving all the data servers and that the current Tech focused world means that this is the latest hot cake that will be growing exponentially to cater to the insatiable market demand-look at the mind whopping double digit  rental reversion that the Data Centres are charging their tenants upon lease renewal-KDC announced during their half year results that they have renewed a major tenant for +40% rental reversion. The prospective new leases at Genting Lane Data Centres are also asserted to be up to 10% to 20% lower than the prevailing market rate which implied more potential upsides upon their current lease tenant contract expiry. 

However, folks seemed to have forgotten about (i) KDC trouble at Guangdong DC and (ii) also that its current distribution to unit-holders are on artificial life support with S$13.2Mil none-recurring distribution from the DXC settlement that the management has cleverly spread over the 1st half and 2nd half of FY2024 respectively to avoid a significant tapering off in distributions to unit-holders. (iii) In addition, the new acquisition is not a free-hold building. The ownership is only for 15 years or 25 years if the extension option is being exercised and paid for. I call these the 3 key risks of holding on to KDC which I should elaborate on further:

(i) KDC trouble at Guangdong DC

I have not heard updates from any reports that the Guangdong DC losses have been plugged. I recalled vividly that Keppel DC is still unable to collect any rental income from this DC. This is extremely bad news. We need to be surgical here. The 1st half DPU from KDC is only 4.549 cents. Normalizing this, the projected DPU for FY2024 hovers around 9.098 cents or S$0.09098 per unit. Taking into account its current  market price of S$2.220 as at 22 November 2024, this implied an absurdly low distribution yield of 4.1%. 

(ii) There is S$13.2Mil of DXC settlement that has been spread over the 2 halfs of FY2024

What this means is that if not for this DXC non-recurring settlement fees, the DPU for KDC will drop even lower than the already rock bottom 4.1%. Even with the recent upcoming acquisition of the Genting Lane DC which proclaims to be DPU accretive of up to +8.1% , the new projected DPU will be at a yield of 4.43%. Bear in mind that we are no longer in a zero or extreme low interest rate environment anymore unlike the last decade. 

Also, this deal is being structured such that only 49% of the control of the new data centres falls under phase 1 in December 2024 while the remaining 51% will only complete in 2nd half of FY2025 (next year) so the effect of the increase of the +8.1% will not be immediate. So, this means that the yield is unfortunately still not very attractive for myself. I am expecting a yield of at least 5.5% to 6% for holding on to KDC. 

(iii) Very short lease tenure of 15 years or 25 years (if extension option taken) for this latest significant acquisition.

Given that this deal is valued at S$1.3 Billion, this will bring the Assets Under Management ("AUM") to S$5.2 Billion. 25% of AUM of KDC will thus be under the very short tenure of 25 years which is the norm for industrial property in Singapore. What this means is that the assets value will plunge to zero and unit-holders will need to be ready for another equity fund raising to extend the tenure from government agency JTC. This brings us back again to my point that 4.43% distribution yield is extremely low as unit-holders need to prepare to plough back capital into KDC at the end of 25 years. Keppel Infrastructure also have this issue with their concessionary assets under management but at least their dividend yield of approximately 7%-8% will cover part of the capital recycling cost to unit-holders. 

Summary of Part 1 of 2

Note that above are just my personal thoughts guiding myself on whether I should be subscribing for this KDC preferential offerings. You folks may have a totally different and optimistic view and that is fine. So don’t roast me for this post.  

In view of the above, I think I will only be subscribing to the bare minimum based on the allotment ratio and some extra to round up the numbers. I think that there is still a possibility that the market price of KDC may decline further. 

Investment Is Just Like Playing Tennis！

Hi Folks, good day to all! For the past few days while surfing the internet and social media, I kept seeing Ads with Adam Khoo playing tennis popping out. Basically, one cannot anyhow whack the tennis ball back just like investing per Adam Khoo. From motivational speaker to investment guru, wow, Adam Khoo is now everywhere selling investment courses!

I can’t help but wonder whether Adam Khoo is making more money from his personal investment picks or selling courses? Anybody attended his investment course before?

SREITS Crashed Again- REITS Or SG Banks More Attractive?

SREIT tumbled down again over the past 2 weeks. Interestingly, I see a number of folks like Josh Tan buying into Mapletree Industrial Trust (“MIT”) or Master Leong strong preference for Mapletree PanAsia Commercial Trust (“MPACT”) to take advantage of the recent “crash” while others like the famous AK71 preferred the local trio of DBS, OCBC and UOB banking stocks as better buy than REITs. For the latter, the local banks are only paying out 50%-60% of their earnings as dividends to shareholders while ploughing back 40%-50% of their earnings into the business which should theoretically keep building up their Net Assets Value and eventually their market price should gradually increase. So it gets kinda of confusing on whether one should buy more REITs during the current downturn for the REITS sector or accumulate more local SG bank stocks given the different opinions of their preferences. 

1. Time to Chiong/Accumulate more SREITs while prices crash and interest rate being slashed gradually into 2025?

Personally, I have mentioned before my thoughts in September 2024 that most of our SREITs are now priced fairly given that we should not expect future interest rate to be near the previous decade of zero interest rate environment. Distribution yield of 5.5% to 6.0% for blue-chips SREITs should be the norm now. Anything that is lower will not compensate for the additional risk premium one undertakes relative to the local risk-free rate. 

MIT’s distribution yield of 5.96% at unit price of  S$2.27 per unit is decent. But I would not say super attractive given that its market value per unit is at a huge premium over its NTA per unit. Since MIT is my second largest holdings already, I did not add on any further.

As for MPACT, while its distribution yield is now at an attractive 6.9% (@ S$1.23 per unit) and its market value per unit is at a large discount over its NTA per unit, the stock market maybe pricing in substantial worsening in distributions from its Hong Kong, China and Japan exposure. Also, its crown jewel of Mapletree Business City seems to be losing its luster. So I guess the usual high risk high reward adage will apply here. It thus depends on which crystal ball you are gleaning into for whether the foray here will reap handsome return or just a lackluster one.

2. Local Banks With Splendid Results Expected Into 2025.

There is no doubt that DBS, UOB and OCBC trio have been having a good run since last year due to the sudden spike in interest rate on their net interest margin and also wealth management business. But if recession comes, bank stocks will also crash and risk of bad debts increase exponentially. I will be staying away from banks for now unless there is a substantial correction in their prices. 

Parting Thoughts and My Watchlist.

Given the recent developments as aforesaid mentioned, I have been focusing my monthly nibble size investments into Endowus bond funds and Keppel Ltd. I thought that overseas REIT such as Link REIT looks more attractive given its market price is almost 40% off its net book value per unit and giving a distribution yield of 7.6% with 21% leverage ratio.

 

CPF Special Account Shielding Strategy Still Working Meh?

Interestingly, I came across a CPF Special Account ("SA") shielding post by Kilde while browsing on SG Investment Blogger. It was published in June 24, 2024 but updated in August 20, 2024. 

But I thought that Mr Lawrence Wong had already plugged the loophole earlier during budget 2024 and it was published on March 22, 2024 on the CPF Board website that the CPF Special Account for those who attained the age of 55 will be closed with effect from 2025 after the Retirement Account is setup. 

Source : CPF Board- 22 March 2024

Strange that Kilde folks are still promoting the SA shielding strategy wor. Or am I missing things out that there is another new loophole?

Keppel Ltd Heavily Leveraged And Un-investable?

Keppel Ltd’s share price has pulled back from its recent high of S$6.65 in early October 2024 to the recent S$6.40 per share. It’s yearly dividends (excluding special dividends or in specie dividends) is around 33 cents to 34 cents. Hence normalised dividend yield is at around 5.3% based on its current share price of S$6.40 per share. I thought that it is a good time to accumulate more of Keppel Ltd after the recent pull-back.

The Concerns of High Debt to Equity Ratio of 0.9 Times.

Interestingly, there were some skeptics who have condemned Keppel as un-investable and unstable due to its substantial borrowings. The high gearing is due mainly to Keppel’s investment properties and property development segment as well as the infrastructure division. Nevertheless, below are 3 reasons why I would personally still invest into Keppel Ltd. 

1. Shift in Business Model To Focus More on Recurring Income Instead of Capital Intensive Business 

The building up of recurring income is on the right trajectory. As seen below, the recurring operating income now forms a substantial part of Keppel’s income streams-asset management and operating activities (sales of gas, electricity, telecommunication services etc amounted to S$773Mil in 2023. This is a 54% increase relative to 2022 and makes up 88% of net profit for 2023. Keppel’s strategic shift to focus on recurring income and monetisation programme will also release more funds for investments and debt repayment. 

 

2. Keppel Is Retaininig More Than 30%-40% of Its Earnings For Growth

Keppel is only paying out about 60%-70% of its earnings per share as dividends to shareholders and retaining the rest for its existing businesses. For 2023, It has a diluted EPS of 49.1 cents and paying out only 34 cents as dividends. 

3. Prize Jewel in Data Centres Development and Management.

Keppel has recently announced that it intends to expand its current DC capacity from 650MW to 1.2GW in the near term with an additional S$10billion funds under management growth. This will take 3-5 years as these DCs will be built from scratch at selected sites.

The DC at Genting Lane is a good illustrative example. After the development of the DC, they will monetize it by selling to Keppel DC REIT. After selling it off, Keppel will still make recurring income from the management of this investment property as Manager and also rental income from its ownership in Keppel DC REIT.

Parting Thoughts

Last but not least, Temasek Holdings holds more than 20% stake in Keppel Ltd. In the event of a full-blown financial crisis, Keppel Ltd will be able to tap on the financial might of its substantial shareholder as its final life line to avoid a fire-sales at the worst possible time. I have recently sold off S$20K of my Keppel DC REIT after its strong recovery from its record low in the past 2 years which resulted in its distribution yield dropping to only a mere 3.9% with 90%+ payout and reinvested the proceeds into Keppel Ltd.      

My Stock Pick- Should One Still Invest in REITs and Other Dividend Stocks in Current Market Climate?

Hi Folks, it has been a crazy past 2 weeks with the weakening of the US Market and also our local SREITs. Back on 19th September 2024, I have discussed in my previous post that despite the jumbo 0.5% rate cut by Powell, the strong rally in SREITs maybe overdone as the distribution yield of blue chips like Mapletree Industrial Trust ("MIT") dropping to close to only 5% yield at its highest point during the REIT rally. Stronger than expected US payroll statistics also led to various market concern that inflationary pressure will be back and it is still too early to step off the accelerator for rate hikes. Even with the slight correction yesterday, I think that most SREITs are still over-valued as we cannot expect interest rates to be at near zero like the past decade. 

1. SREITs That I Will Still Buy

Seriously, I really cannot find any good buys for the top blue-chip REITs from the trio Mapletree, CapitaLand and Keppel families. Look at MIT or Keppel DC REIT, will you still dare to go in to accumulate additional units at the current pricing?

If I have any additional resources and forced to buy something, I will probably add on to United Hampshire US REIT ("UHREIT") as its price has once again tapered off and giving out a 8.8% distribution yield as at 8th October 2024. However, since this is one of my top holdings, I am already overly-concentrated in UHREIT and will have to give this very attractive SREIT a miss.

2. Overseas REITs That Is Still Worth Buying.

I thought that Link REIT ("LREIT") listed on the Hong Kong Stock Exchange ("HKEX") is a very undervalued counter.  LREIT used to be linked to the Hong Kong Government and has interesting properties mainly based in Hong Kong and China. My Hong Kong work colleagues have been mentioning this to me. Same for Master Leong YouTube channel which he has also shared as a value for money buy. Its leverage ratio is at an enviable 20% resulting from a rights issue at HKD 44 per unit in March 2023. 

I accumulated around 6,200 units of LREIT from May 2024 to July 2024 at an average price of HKD 32.2 per unit since I am getting these units at a big discount to what those rights issue holder paid in 2023. For me, any purchase that is below HKD 44 per unit is not a bad deal. It is currently giving out a distribution yield of 6.96% along with potential for capital growth.

3. Other Interesting Dividend Counters

I thought that Ping An is an interesting recommendation on various media such as Master Leong as aforesaid mentioned. Ping An price has dropped from HKD70+ to a pathetic HKD30 range due to the belief that the China Communist Party will force Ping An to do national service and recuse one of the Property Development firm. I have been adding Ping An (5,000 shares) from Jan 2024 to Sep 2024 at an average price of HKD 34 per share. Its distribution yield was previously hovering near 8% which was too attractive for me. However, with the current market pricing which lowers the yield to only 5.25%, I maybe selling it off to accumulate other investments if suitable opportunities such as if our local SREITs underwent further price correction.

Parting thoughts

I do hope that the China and HK markets continue with their revival as they have been in a bear territory for many years and hopefully produce outstanding capital growth on top of dividends distribution. Strangely, picking undervalued good dividend paying companies in China/HK has turned up to be a good decision with a stroke of good luck in recent week- I certainly did not expect the sudden capital appreciation in just one week. 

Investment Portfolios Updates (27 September 2024) - Net Investment of S$732K and Projected Annualised Passive Income of S$42K.

A rising tide lifts all boats indeed! Just 2 months back during my last portfolio review, it was still doom and gloom for our SREIT sector spiralling into a bottomless blackhole. Then suddenly, with the much anticipated rate cut by the US Feds finally materialising, all the SREITs counters started soaring. Considering that my REIT heavy overall portfolios makes up 66% of the entire investment, it contributed to a strong recovery. Coupled with the sudden China stimulus measures announced over the past few days, my China centric investments (Alibaba, Ping An, Link REIT and Capitaland China Trust) shot up by close to 25% which help rallied the overall gross investment value and investable cash balances to above the S$1 Million mark. Net investments after netting off margin loan stands at a record high of S$732K.

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.)

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 think that the financing charges would have dropped to 4.75% or 5%- anyway, have not had the luxury of time to find out from my broker. So will just leave the financing rate at 5.25%. Interestingly, my wife offered to lend me funds at a lower by 1% rate to Maybank Securities but I rejected it as I told her that she can put her liquid funds to better use and a higher return.

For Keppel Pacific Oak REIT, I think that if interest rate continue to trend downwards, there will be a higher probability that the REIT Manager may resume distribution payout as soon as the 2nd half of 2025 instead of 2026. 

3. Portfolio 3 (with Tiger Brokers and MooMoo) 

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

I have added on to Ping An Insurance just before the huge rally in HKSE. Keppel Corp as well as a small tiny stake in Oceanus were added since the last update 2 months ago.

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

The Income Insurance and Allianz takeover deal continued to be in limbo. The Monetary Authority of Singapore has not officially given the deal a go ahead. In addition, new capital were injected into the different Endowus units trusts (picked those that are bonds focused with the exception of Fidelity Global Dividend Fund).

Summary

While the investment value of my underlying portfolios have went up significantly, the sad fact is that my projected annual passive income still remain the same as 2 months back which is a tad disappointment. I do look forward to exiting my stakes in Alibaba once it hits over HKD160 per share and then convert them into higher yielding income producing assets.