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).