How To Enjoy Brokerage Fees of Only S$10 Per Trade (60% discount to normal commission) Using DBS Vickers Pre-Fund Feature.

I just opened an online trading account with DBS Vickers as they offered a discounted 60% commission rate of only S$10 per trade (or 0.12% of traded amount whichever is higher) which is far cheaper than the usual minimum brokerage of around S$25 per trade for trading on equities listed on SGX. Any Singapore listed stocks purchased will still be credited to one's personal Central Depository ("CDP") account which is unlike online Brokers (Tiger Brokers, MooMoo etc) which hold your purchased stocks in their custodian account. This thus gives (i) absolute comfort over the legal title of SGX securities purchased since it is under one's own account and in adddition, (ii) savings over potential imposition of custodian charges. Nonetheless, there are some things to take note since the pre-funded feature is not as intuitive for new users onboarding to Vicker's platform.

Commission rates as at 11 January 2022

1.There is no electronic payment for shares ("EPS") feature during settlement

I was initially wondering how do I link up the EPS to transfer money into my DBS Vickers trading account. Apparently, new accounts setup with DBS Vickers these days do not require EPS. During account opening, DBS Vickers would have already asked for a multi-currency DBS account to be designated for use during settlement. Upon the T+2 settlement date, DBS Vickers will automatically deduct the cash from the specified multi-currency DBS bank account.

2. One will need to log into Digital Banking first instead of direct browser log in to DBS Vickers to gain access to the special feature.

Under the trade "Settlement Mode" feature, the drop down list will only reflect the option for "Cash Upfront" (which is the cheaper $10 commission preferential charges) if one logs in from DBS Banking site. Then from the DBS Banking site, click on "Invest" header and then log into DBS Vickers from the hyperlink. 

Take note that if you log in directly from DBS Vickers online browser trading platform, then this special option will not appear at all from the drop down list at "Settlement Mode " and you can only select the usual "Cash" option which cost S$25 per trade.

Ok, now for the confusing part, if you are using the DBS Vickers App, then this "Cash Upfront" option will appear in there and you do not need to go into DBS Banking App unlike the browser form.

Parting thoughts

In summary, the browser version of DBS Vickers is strangely different from the App version in terms of the ready availability of the "Cash Upfront" option. One other thing to note is that the above concessionary rate is only for "Buy" trade and not "Sell" trade. Overall, I like the auto deduction at settlement date akin to GIRO feature and is hassle free. Of course, one would need to ensure that one has sufficient cash balances in one's DBS multi-currency account. 

The Hidden Danger Of Investing in US Based SREITs Due to Shareholding Restriction.

The recent US Manulife high aggregate leverage level crisis (within a whisker of the statutory breach at maximum of 50%) due to a sharp decline in valuation of its investment properties has brought up another key risk that many retail unit-holders did not consider in-depth previously. Even during the COVID-19 crisis with global lockdown, the valuation of investment properties of most REITS were not adversely impacted. It has also been more than a decade since the 2008/2009 global financial crisis. The key risk that I am talking about is the possible failure of a rights issue exercise to raise funds due to the peculiarity of the situation of SREITs with investment properties in the US.

Why rights issue exercise may fail for SREIT with properties in US?
This is because the Sponsor may not be willing to undertake the rights issue given that they need to maintain less than 10% stake to qualify from withholding tax exemption for dividends received. If not, US withholding tax of 30% will need to be applied for all future distribution. Nevertheless, it is not the end of the world. The sponsor could still form a private equity property trust to buyover some of the investment properties at the revised net book value to provide liquidity to the REIT for reduction of leverage.

The sad thing is that if a rights issue exercise is not conducted, the alternate option via sales of investment properties to its sponsor at this juncture would still be a lower price due to bad market timing and also lead to another vex issue of cherry picking the best assets out and leaving the worst properties in the REIT. While this is better than a fire-sales at depressed pricing to non related external parties, existing unit-holders may not be happy and there would be some unit-holders who still preferred a rights issue exercise instead. 

Parting thoughts

Will a good and reputable sponsor be able to save their listed REIT from financial challenges given unit-holding consideration that hampers the prospect of the usual rights issue? The upcoming corporate action from Manulife US REIT will be a good case study on what will happen to the rest of the US SREITs like Keppel Pacific Oak REIT, Prime REIT and US Hampshire REIT in the event that they faced the same aggregate level crisis due to plunging valuation of their investment properties from higher discount rate and lower future cashflow projection. 

(P.S: Please also see my previous post: "Manulife US REIT Spectacular Self Implosion- Risk of Firesales of Office Properties Or Dilutive Rights Issue".)

Alibaba (HKSE 9988) 75% Stock Price Explosion in Valuation and Revival from Bottom Low of HKD60 Per Share.

It is interesting to note that Alibaba suddenly shot through to the moon in January 2023 (75% surge in valuation from bottom low as of last week at HDK102 per share) after plunging to a low of HKD60 per share in late October 2022. Apparently, there are 2 main factors: Firstly, analysts are now bullish on Chinese stocks due to the removal of draconian measures against COVID-19 and the impending re-opening of the world's second-largest economy. Secondly, the market views the news that Jack Ma will be relinquishing control of Ant Group as a positive development for Alibaba too. 

I am vested in Alibaba with 2,300 shares at around S$40K in market value based on recent stock price. I did not buy a lot into Alibaba during the trough period as it was too much for my risk appetize. My average price is around HKD89 per share and looking at around a 20% capital gain. Those who bought at a low of HKD 60 will probably see a 80%-90% unrealized gain in market value of their shareholdings soon- so congrats!

Sometimes I think that I got no fate with sudden wealth- I am fated to only be able to accumulate wealth gradually at the pace of the tortoise. Whenever I buy something for capital growth, most likely than not, what I bought will sink in valuation. So I am contended with the bite-size small amount (in the context of my entire investment portfolios) that I have invested into Alibaba thus far. 

Central Provident Fund Updates-Aiming To Achieve Enhanced Retirement Sum.

For 2022, I managed to hit S$232K in my Central Provident Fund ("CPF") Special Account after interest income from the CPF Board. I hope to eventually attain the Enhanced Retirement Sum ("ERS") before age 55 years old. Thanks to earlier years investment using my Special Account as well as the beef up tips gained from Mr AK (A Singaporean Stocks Investor-ASSI) by consistently transferring CPF OA to CPF Special to take advantage of the higher differential 1.5% in interest rate, I was able to coast through my Full Retirement Sum ("FRS") a few years ago. However, internal funds transfer is only valid up to Full Retirement Sum ("FRS") level-once this level is reached, the accumulation rate for the special account slows down.

Above depicts S$9.3K of interest income paid out from the CPF Board into my Special Account.

For my CPF Special Account, this forms the last resort for a decent standard of living even if my cash investment portfolios go completely South. Hence I will not be taking any additional risk with my CPF Special Account and will just let it earn the normal 4%-5% interest income with the CPF Board.

My Ordinary CPF Account has another +$60K in investments in REITs and also S&P500 via Endowus. Anyway, the remaining money here has been reserved to be used to pay off my housing loan.

As for Medisave account, the balances here to me is only temporary as I will most likely be using this amount up completely since my parents do not have any enhanced H&S plan and I will need to pay for their old age medical expenses- it is hard being the sandwiched generation....haiz.  

Investment Portfolios Updates- S$536k (30 Dec'22)- Investing During Bear Market Turmoil.

While the stock market conditions have improved slightly, December 2022 remains in the doldrum and the expected year-end huge rally mentioned by many analysts did not materialize at all. Based on StocksCafe, my year to date unrealised losses (including historical dividends received) is <-7.17%> as at 30 December 2022. The income investing strategy is still working well for me and getting realised investments in the form of recurring dividends helps to cushion against economic turmoil and mitigate the vagaries of exploiting the most opportune market timing to take profits.

1. Portfolio 1- Stocks held in SGX Central Depository 

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

I have invested my excess fund of approximately SGD10K over 2 tranches of 7,000 units each at prices of US$0.540 and US$0.520 respectively during the last week of December 2022 into DigiCore REIT. In fact, I have been gradually building back my stakes in DigiCore REIT since I sold off all my DigiCore REIT units at US$0.865 per unit to take profit during the mini-rally in August 2022. Please see "Is DigiCore REIT a Good Buy Now Since its 41% Decline in Unit Price From IPO?".

2. Portfolio 2- Margin purchased securities

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

2.1 Additional investments were made into Capitaland China Trust. The devastating frequent shut down and rental rebate to its retail shopping malls will soon be a thing of the past going forward into 2023. China has done a sudden reversal of its zero COVID strategy. 

2.2 Manulife US REIT is in trouble as its fair valuation has dropped substantially which caused its leverage ratio to hit 49% (1% short of Monetary Authority of Singapore maximum ceiling of 50%). There is a high probability that Manulife US REIT may be blacklisted by Maybank Securities in its allowable margin programme. Nevertheless, Manulife US REIT has now dwindle to become a small part of my entire margin portfolio such that even if it became non-marginable or zero in value, I will not be caught in a margin call. I have also applied the stress test on my Portfolio 2 in the event that the other 2 US office REITs (Keppel Pacific Oak and Prime) also ended up in the same predicament and overall, I would still be able to escape unscathed. 

2.3 If push comes to shove and the recession worsen, I still have an alternative backup plan in place to ensure my margin portfolio held up for the longer term. 

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

3.1 I have increased my stake in DigiCore REIT for capital growth as its price has declined 41% to its IPO debut which I personally think is being oversold. 

3.2 I have also took profit on my short term investment into Global Investment Limited with a small 7.1% capital gain within 2 months. 

4. Portfolio 4 (Other Investments)- Non-listed equities and DBS DigiPortfolio

I have invested S$1K into DBS DigiPortfolio to test out their new category of digital portfolio. This product is an income focused portfolio which has 55% in equities, 40% in bonds and 5% in cash holdings and seeks to pay out 4% dividends per annum. So far, I do not really like it as visibility to its components needs quite a bit of mental acrobatics. 

In future, I will also be opening up a pre-funded brokerage accounts with DBS Vickers for investing in index ETF that has a focus on income distribution. The brokerage fees starts from a minimum of S$10 per trade (or up to 0.12% of any transaction) for such an account. Portfolio 4 is being opened also to diversify away from the use of Tiger Brokers. 

Is DigiCore REIT a Good Buy Now Since its 41% Decline in Unit Price From IPO?

This will be a short post with regard to DigiCore REIT. The last week of December 2022 has not been a pretty sight for DigiCore REIT unit prices. Its price sank to U$0.515 per unit at one point in time. I have invested my excess fund of approximately SGD10K over 2 tranches of 7,000 units each at prices of US$0.540 and US$0.520 respectively during this last week of December 2022. In fact, I have been gradually building back my stakes in DigiCore REIT since I sold off all my DigiCore REIT units at US$0.865 per unit to take profit during the mini-rally in August 2022.

To be honest, I do not really like Digicore REIT since its IPO days as it does not have a strong sponsor affiliated with Temasek Holdings and also due to the fact that one of its major tenant started to sink into bankruptcy soon after its IPO debut (not exactly helpful with building up trust and confidence in the sponsor when such "bad news" suddenly materialised after IPO). Nevertheless, its current unit price performance has been in the doldrum- despite its management commencing share buyback from 1st December 2022- and thus gives one a golden opportunity to be vested in new economy assets.

My recent additional investment of DigiCore REIT at an average entry price of US$0.530 per unit gives around an attractive distribution yield of +7.78% (some more this is before the recent M&A completion). As long as its fair valuation of investment properties do not decline to the poignant state of Manulife US REIT to affect the MAS imposed aggregate leverage level (maximum 50% for SREIT), I shall be able to wait till its price recovery before selling it off again.

Manulife US REIT Spectacular Self Implosion- Risk of Firesales of Office Properties Or Dilutive Rights Issue.

Manulife US REIT ("MUST") just dropped a bomb shell this morning (30 Dec 2022, 6.48am) on SGX that its fair valuation of investment properties dropped by a whopping <10.9%> (US$237.4Mil) and that its leverage level went up to 49% which is just 1% shy of Monetary Authority of Singapore ("MAS") aggregate leverage limit of 50%. It is fortunate that back in April 2020, MAS had announced that it had raised the leverage limit for S-REITs from 45% to 50%, else MUST would have been in blatant default of regulatory limit already and this may lead to further breaches of financial covenants. Still the current 1% buffer is not at all reassuring. No wonder its unit price has plunged <20%> since 1st December 2022 from US$0.375 to as low as US$0.300 per unit despite no news being announced publicly beforehand- I reckon that some insider news got leaked out way beforehand. What ever lead to this sudden self-implosion that has an ominous and potentially fatal consequence?

1. MUST Own Disaster in the Making?

Note that I am vested in MUST and I was shocked by this announcement as the REIT itself is now hanging by a cliff in terms of its survival. In previous years, MUST had embarked on a path of rapid M&A to build up its properties portfolio and income for distribution. Personally, I do not like the numerous occasions that MUST proceed to issue rights in private placement tranche at a discounted price without making such rights available to existing unit-holders by pointing to the need for urgent completion of the M&A deal. Another consequence of the rapid and aggressive pursuance of M&A deals resulted in its aggregate leverage level becoming one of the highest among US Office REITs at over 40%, thus leaving it with little leeway in the event of major economic downturn which can lead to a drastic fall in the fair valuation of its investment properties. 

2. Potential Red Flag of the US Office REIT Managers

I thought that Choon Yuan who runs the Investmoolah blog summed it up beautifully in his posting on US REITs (Why buying US Reits like PRIME and ManuLife Could Be Dangerous) on 29th December 2022, just one day before the disastrous announcement by MUST, on this:

"One thing that worries me is how both managements are not doing a share buyback when they are valued at a 50% discount to their property valuations. The REITs are afterall a portfoilo of properties and at such a discount, REIT managers would have deemed it attractive to be a good buy.

The lack of action by the management shows that either the REITs are short on cash or that they are anticipating a large writedown in property value of a magnitude greater than 20%. These would be terrible situations that the managers are not revealing. For context, a smilar US REIT called Digital Core is buying back its shares during this sell down at the 0.6-0.7 Price book value. Hence, it is no surprise this particular REIT has outperformed the other 2."

3. Why Did the Fair Value of MUST Properties Plunged So Drastically?

The bulk of the decline in fair valuation actually come from Figueroa which dropped US$104Mil (or -33% from prior year). The reason cited by MUST is that in the case of Figueroa, , the valuation as at year end 2022 is reflective of the occupancy plans of the property’s two largest tenants, Quinn Emmanuel and TCW Group, with the former executing a renewal and downsize while the latter plans to vacate at the end of their lease term (31 December 2023). Figueroa makes up 44% of the portfolio valuation decline as at year end 2022.

Personally, I thought that the valuer may have been too conservative in their projection on the replacement of vacated space after the exit of major tenants of Figueroa in 2023.

Parting thoughts

While I was initially optimistic on the future prospect of MUST given that their management is rather pro-active and has commenced its strategic review in early December 2022, the current development is extremely worrying. MUST is coming close to a breach of statutory requirement as well as breaches of banking covenants. We thus cannot rule out a fire sales of its properties or a dilutive rights issuance coming up for MUST. I thought that there is some similarities to the 2008 and 2009 Global Financial Crisis in terms of plunging property valuation of REITs and possible credit squeeze if the US economy continues to spiral downwards.

Choon Yuan (Investmoolah) put up another insightful thoughts of his regarding the current predicament faced by US REITs of risks arising from (i) higher discount rates and capitalisation rates of properties as well as (ii) high vacancy rates. Before ending this post, I will just put up some food for thoughts-I have extracted and placed here his exact words in the comments section of his post during our interaction at his blog:

"The first risk mentioned will affect all US reits from Digicore, Utdhampshire, PRIME, Keppelpac, Manulife; while the second risk has varying degree, I expect all 5 REITs leverage ratio to increase in 2023 and it depends on who will bust the 50% limit first".