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 are still 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 vague 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.

Why Dividends Are Irrelevant And Don't Matter!

The topic of "Why Dividends Are Irrelevant And Don't Matter" was posted recently by a famous local YouTuber which has once against stirred up lots of emotion online judging by the comments left on his video...haha.  He has over 100K of subscribers. What he says is true in theory but is just bullsh*** in reality as there is simply no stock market with perfect information in terms of valuation of stocks being traded by buyer and seller. This was also covered in my Accounting Theory module decades ago. According to one school of thought, dividends are irrelevant so that the amount of dividend paid has no effect on the valuation of a firm. Also share price will drop by the same amount after the dividends are being declared. 

1. MODIGLIANI AND MILLER ("MM") HYPOTHESIS:

The crux of the MM position on the irrelevance of dividend is the arbitrage argument. Arbitrage refers to entering simultaneously into two transactions which exactly balance or completely offset each other.

The two transactions here are the acts of paying out dividends and raising external funds. When dividends are paid to the shareholders, the market price of the share will decrease. What is gained by the investors as a result of increased dividends will be neutralised completely by the reduction in the market value of shares.

2. Why Dividend Strategy Adopters Are Always Presumed to be Stupid or Adopting an Inferior Approach?

First and foremost, I do not understand why people keep on posting such topics to whack dividend investing. Of course, all dividend investors know that fundamental of a company are important and that one cannot just invest in a company with the highest yield in dividends to determine good or bad companies. 

3. Thoughts on Dividend Investing

I will just write a short paragraph here as there are already many posts and online materials available on what are some of the good side of dividend investing. For example, the past 2 years of SREITs Bear market that hammered their prices to crazy low means that if you sell away your REITs to buy into other form of assets due to a change in your diversification & concentration review, you will not be able to enjoy the recent strong rally in their prices after the rate cut. The dividends being declared will help investors to use them for investment into other asset classes while retaining ownership of one's REIT holding to wait for a recovery from the bear market.   

Parting Thoughts

If you believe that growth investing approach such as investing in companies like Tesla that pays little or zero dividends, then go ahead. It's a free world...do what one likes lor. But don't discount another person strategy due to one's own blind spot.

This is not the first time I seen this kind of post by the above mentioned You-Tuber. He also has another group channel with other finance influencers (think it is called the "Bagholders Pod") which has also launched similar anti-dividend investing content this year to generate views. 

SREITs Maybe Overvalued Despite Jumbo Size Interest Rate Cut of 0.5% By Powell.

Wow, what a BIG surprise! The conservative Uncle Powell has finally announced not just a cut in US Federal Reserve rate but a giant size 0.5%. Current US rates now hovers at 4.75% to 5.0%. This is higher than what I was expecting. But still, the recent SREIT price rally maybe overdone. US interest rates will not fall back to the close to 0% in the past unless the US economy crash due to a severe recession. 

Assuming an eventual near term US Fed rate of 3.5% at equilibrium to fight against inflation and also to ensure adequate economy growth stimulation, returns from REITs required for most folks should be at least another 2.5% to compensate for equity risk of holding onto financially strong ones like Mapletree Industrial Trust ("MIT") and Capitaland Ascendas that are linked to Temasek. This will translate to an expected yield of 6.0%. MIT is now trading at 5.3% distribution yield as at 18 September 2024.

While I am still holding on to the SREITs in my current cash and margin portfolios, I have began selling off part of my CPF OA investments in MIT to lock in the recovery and the resultant capital gains at the S$2.50+ range.

Elite UK REIT Entering Into Student Accommodation and Data Centres?

Usually, I tend to stay away from writing any post on Elite UK REIT (“EUREIT”) as it can lead to personal attacks and persistent online hustling by disgruntled loyal investor who only wants to hear good points on this investment. Having a high concentration risk in mostly one government agency for over 90% of the entire REIT's revenue generation is extremely risky. What is there to stop the government from closing down or downsizing some of its agencies should it meet with financial constraint? EUREIT price has tumbled <-58.8%> from £0.68 per unit from its IPO days to £0.28 per unit (as at 9 Sep 2024) and has done 1 round of equity fund raising to par down leverage during the not too long ago debt crisis (current gearing is at a healthier 41.4%).  

Well, I came across an interesting video and post from Mystocksinvesting.com on an interview with the new CEO of Elite UK REIT, Joshua Liaw. In this interview, the new management team led by Joshua has mentioned that EUREIT is looking at entering into the student accommodation or Data Centre business. While there are question on whether EUREIT has the expertise and financial resources to enter into these segment, I personally think that this is the right step in a new direction taken by the new management team. Joshua has further mentioned that they intend to form a joint venture with those companies that has the right expertise to spearhead their foray into this new frontier. The vision to go into other business sector and diversification from a single major tenant is definitely a plus point. 

Saying that, execution risk of new joint ventures into student accommodation and data centres as well as UK forex losses are other key considerations going forward.

(Note: Another interesting point is that both Joshua and the new CFO, Micheal Tong, are formerly from Lendlease Group).

United Hampshire US REIT Amazing 17.7% Return to Unit-holders Since 30 June 2024.

United Hampshire US REIT ("UHREIT") has delivered an amazing return to unit-holders of 17.7% since 30 June 2024. I was initially extremely disappointed with the plummeting unit price and the ever decreasing DPU over the last 2 years especially during the high interest rate environment imposed by the US Fed. With the softening of hardcore stance by the US Fed Reserve as well as weak US economic data indicating that the US economy is running out of steam, an upcoming rate cut by 17th-18th September 2024 FOMC meeting seems imminent. UHREIT has benefitted from this latest news with a strong rally in its market price over the last 2 months. Please see my video for why I will continue to hold on to UHREIT for now. 

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Oceanus Group Limited and Red-Flag on Strange Loan to External 3rd Party at Incredulous Interest Free Rate.

Oceanus Group Limited just released a very disappointing set of half year 2024 results on 14th August 2024 which revealed a loss of <S$1.17Mil >. This is a hefty 92% worsening of results relative to 1H2023 of <S$610K>. Having years of losses and a mere 5% growth in revenue is one of the red flag indicator that something maybe wrong with its management team. The list of queries from SGX on 22nd August 2024 further add to the uneasiness over its financial health.

Personally, I am a bit spooked by another weird transaction by Oceanus management team. From the SGX query 3, it appears that the management of Oceanus Group has given a S$1.268Mil loan to a 3rd party that is interest free which is honestly absurd. If this 3rd party is so weak financially, why did Oceanus choose to work with it? I am sure there are other vendors out there who can fulfil what they are doing. 

In addition, it is ridiculous to give an interest free loan to a 3rd party and to take up credit risk of default by the external non-related party. This does not make commercial sense at all. Also why not do equity buy-over instead if the platform technology is so unique that the survival of Oceanus Group depends on it?  I am not sure whether it is just me here but do anyone else smell a rat somewhere.... 

Parting thoughts

I am currently vested in Oceanus Group via a small stake of around S$1K as previously I like the growth story sold by its CEO. But seems that there are some "more than meets the eye" stuff going on here. Oceanus Group audit committee should come out to clarify on why their management team entered into something that makes terrible commercial sense. 

Why Tan Kin Lian Keep Talking About Buying Apartments in Malaysia Forest City? Is He Out of His Mind?

 

Not sure why my Facebook will frequently show me Tan Kin Lian’s post. He has been talking about Forest City I recalled from 2017 till now. So what if Forest City is freehold condo and cost just S$300K relative to S$1.5Mil+ Singapore condo right now? Beside the issues of foreign exchange depreciation risk as well as ghost town issue, the MM2H (Malaysia My Second Home) scheme is also fraught with the ever changing political climate risk. One moment Malaysia politicians welcome foreigners like Singaporeans and Chinese and then the next moment they may just decide to ban foreigners or raise up the anti-foreigners sentiment to score political points. 

Hence I am shocked that he even mentioned that it maybe a good idea for retirees to sell one’s property in Singapore and then use part of the proceeds to buy an apartment in Forest City. One will always be a second class citizen in other countries and that is the cold hard truth. 

The Silence of the Lambs Part 2- Venturing Into the Tiger's Den.

This is actually an update on my personal career since a restructuring exercise at my workplace approximately 2 years ago. To recap, those were poignant moments then when some of my colleagues were let go by our Headquarter (based overseas). My local Singaporean director heading the local business unit also left after disagreeing with the new remuneration package on offer by the HQ Big Boss. This was strange despite the business still being profitable.  There was no replacement and I was asked to be the lead General Manager for the local business and do double-hatting for both commercial and financial functions to save cost. Fast forward 2 years and the cat is finally out of the bag: The reason for what had transpired was due to an upcoming Merger and Acquisition ("M&A"). The Big Boss at our Headquarters had decided to sell away his business to a giant Global MNC. No wonder there were so many lambs being slaughtered over this period as he was so busy trimming cost throughout the entire Group. Apparently, he was striving to get as high a selling price as possible with magnificent profit numbers by roasting the lambs. 

1. Most dramatic turn of event.

My local Singaporean director who left previously is now in the acquirer Company HQ. Interestingly, it was revealed that he was recommended his current role at the new acquirer company by my current overseas Big Boss who connected him to the new business owner/acquirer. So, it turns out that eventually, I will still be working with my ex-local director albeit each of us in a different role capacity under the new owner. 

2. Venturing into the unknown- M&A Integration.

Many fellow managers and staff were extremely worried about the upcoming integration albeit much assurance from the HQ Big Boss (who is selling away his business) and also the new business owner that there will be no retrenchment within the next 2 years due to the upcoming integration exercise. It is like a Ripley's Believe It or Not moment. :)

In addition, I have no doubts that the usual higher level fight over control by the senior management will soon start. The new organisation is so humongous that a Manager is just a small fry inside. There seems to be plenty of Director level staff. The higher up "food chain" even have different Vice-Presidents and Presidents in different clusters.  

3. Going back to global MNC.

With such a big structured organisation filled with so many headcounts and departments, navigating through the complex human spider-web will be fraught with challenges. Not to mention the clamouring for credit during project work and pushing away of blame to other department or other personnel when there are screw-ups. So not exactly looking forward to it. Worked before in some of these big organisations but find things too structured at times. So went to a smaller organisation. Now I am back to square one it seems....hmmm. 

4. Importance of passive income during such moment.

Although I have not achieved financial independence, but the interest and dividend income from my half baked tiny investment portfolios do come into handy. At least I will be able to pay off basic housing mortgage and the kid's living and educational expenses if unfortunate events were to strike later on.

Parting thoughts

I am not sure one gets wiser as one gets older, But one does learn to dodge a certain amount of hell. :p

Haw Par Corporation Delivered Another 1st Half 2024 of Excellent Results-17.1% Growth in Net Profits!

Haw Par Corporation is on its way to another year of extraordinary good results coming off FY2023-an impressive S$122Mil 1st half profits being generated!  Its 1st half 2024 Earning Per Shares (EPS) is at 55.1 cents and I think it should eventually hit more than S1.00 for the entire FY2024. This is amazing given that its historical EPS are 82 cents (FY2019); 54 cents (FY2020); 50 cents (FY2021); 67 cents (FY2022) and 98 cents (FY2023) respectively. The huge earnings for 2023 and 2024 is mainly attributable to its investment income from its strategic stake in UOB and also interest income from government debt securities.

Tiger Balm Still Doing Well.

Revenue top line from its main business of Tiger Balm healthcare have also been doing well recently and gradually recovering to pre-COVID level. It grew an impressive 6.3% year on year basis for the 1st half. Furthermore, the Management of Haw Par Corp has been looking out to deploy excess capital on hand via the acquisition of a new business. However, from management last update, they still have not found a suitable business for Haw Par Corp to acquire. 

For those interested to know more about Har Paw Corporation, I will recommend you guys to read up on an interesting deep dive of Haw Par Corporation by our Incipient Investor friend from Passive Loss's blog in 2023.

Parting Thoughts

Shareholders who are hoping for a "special dividend" payout will be extremely disappointed. The interim dividends is at 20 cents which is a miserable pay-out ratio of approximately 36% only based on the current earning of 55.1 cents. Management has previously indicated that they will continue to look out for suitable business investment opportunity. 

It is also strange that despite the better results of Haw Par for 2023 and 2024, its share price never recover to its former glorious price of S$13.60 per share in July 2021 and has continued to languish at the S$10 per share price range. 

Divestment of Properties at Premium of 8.8% Over Book Value- United Hampshire US REIT.

Great news! United Hampshire US REIT ("UHREIT") has announced that it is disposing its Freestanding Lowe's and Freestanding Sam's club property within Hudson Valley Plaza for US$36.5Mil. The Divestment Consideration of US$36.5 million represents a premium of US$2.9 million, or 8.8%, above the book value of the Properties, and US$1.5 million, or 4.3%, above the Independent Valuation. Furthermore, the Divestment Consideration is US$5.4 million, or 17.5%, higher than the purchase price of US$31.1 million of the Properties. The estimated gain on divestment based on  the book value of the Properties is approximately US$2.0 million, after taking into account the transaction-related expenses of approximately US$1.0 million.

1. Use of Divestment Proceeds

It is stated that the proceeds from the Divestment may be used to repay existing debts, finance capital expenditure, fund potential higher yielding acquisition opportunities and/or for other general corporate requirements. 

Taking into account the super low market pricing (US$0.43 per unit) relative to its Net Assets Value per unit (US$0.74 per unit), the realised value of the capital appreciation is actually benefical for retail investors of UHREIT. It will also reduce the leverage ratio from 41.7% to 39% and improved its interest coverage ratio from 2.9 times to 3.2 times. 

2. Pro forma Financial Effects of Divestments.

2.1 DPU effect if assume UHREIT had completed the Divestment on 1 January 2023:

2.2 DPU Impact:

2.3 Aggregate Leverage Ratio and Interest Coverage Ratio effect:

Parting Thoughts

Above is good news as many investors of UHREIT have been lobbying for a reduction in its leverage ratio which have been hovering over 40%. Good job by the management team of UHREIT. Today (14th August 2024) also happens to be the results released date (before trading commence) for UHREIT. Keeping my fingers crossed that the distribution per unit will not be reduced drastically due to the high interest rate environment.

Opportunity To Acquire This Quality Non-Banking Blue-Chip That Has Dropped 20% from its Peak.

I thought that now is a good opportunity to accumulate more shares of this blue-chip on SGX which has dropped 20% from its peak this year albeit the not too bad operating results.  Accumulated 2 tranches at S$6.20 per share (700 shares) and S$5.93 per share  (1,000 shares) on 2 Aug 2024 and 8 Aug 2024 respectively. 

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NTUC Income Already GG 20 Years Ago- So Not Sure Why So Many Old Men Coming Out to Bash The Allianz Offer.

I hope I don't get roasted too badly writing this post. I get the nostalgia that many old old men such as Tommy Koh, Tan Kin Lian and Tan Suee Chieh have about NTUC Income and its goal to help the lower income secure insurance coverage. This was indeed the grand vision of one of the founding fathers of Singapore, Dr Goh Keng Swee. Nevertheless, my personal thoughts and experiences are that NTUC Income Insurance has already lost track of this goal 20 years back when it was run by Mr Tan Kin Lian. 

The sucky parts about NTUC Income Insurance:

At that time (20 yrs ago), NTUC Income kept selling those traditional whole-life policy that one has to pay premium until one's death bed or for 99 years. I wrote to Mr Tan Kin Lian before telling him that other insurers already started offering limited premium paying plans for only 10-20 years (and then become fully paid up) but NTUC Income was still selling its policy holders pay till 99 years old type of stupid traditional insurance plan. His immediate response was a disappointing whether I am another insurance agent from another competitor insurance company. NTUC Income products were already losing innovativeness and relevance to the real market. On a social level, it is actually harming consumers with an inferior product relative to other insurance companies.

NTUC Income was also selling to heartlander customers its investment linked polices- the NTUC Ideal Plan. One would have lost almost 15% of one's invested capital as sales charges before the remaining capital gets invested into unit-trusts. I will leave the link to a post here from 2 March 2012 on my experience with a NTUC Income Insurance agent. 

I also encountered a lot of extreme questioning by NTUC Income assessor trying to get Hospitalisation and Surgical coverage for my aged parents about 15 years ago. They are the pioneer generation that worked hard for Singapore during the early days. I only succeed in getting coverage for my father (with various exclusions) but none for my mother. So what social goal is Tommy Koh, Tan Kin Lian and Tan Suee Chieh talking about that NTUC Income is helping the lower income get insurance coverage? This is Bull-SH*T by these old men. It is clear that NTUC Income is trying to reduce coverage for low income workers while aiming to preserve as much profits as possible.  

Bear in mind that it is Mr Lee Hsien Loong and his government that came up with the Pioneer Generation and Merdeka Generation medical packages to help aged Singaporeans like my Father and Mum generation who most needed the medical coverages but NTUC Income is not keen to cover at all...period. Without the Pioneer generation and Merdeka generation subsidies, my sibling and I would have been saddled with hefty hospitalisation & surgical bills for my aged parents. 

Is NTUC Income Insurance still relevant?

Personally, I thought that it was definitely relevant during the days of Dr Goh Keng Swee when many workers are struggling to get adequate insurance coverage. However, it has since lost its social goal decades later and at current time where for decades, they are very profit driven. Worst still is that Income Insurance is struggling with relevancy for its products and pricing relative to other insurance competitors. I have moved away from NTUC Income many years back due to its inferior products. So I do not understand why so many old men are coming out to stop the Allianz deal which actually has more pros than cons for the future of Income Insurance Ltd.