Friday, January 31, 2014

First purchase in 2 years - Boardroom Limited

The recent market volatility made me salivate and perked my interest in the equity market again. I have been extremely uncomfortable with my asset allocation but even more uncomfortable with the relentless surge of the equity markets. These 2 years have indeed been a lesson of patience for me. So it was with extreme joy when the Fed decided to cut back a further $10 billion dollars of money printing.

It has been a period of elation for me too when emerging currencies plummeted while the Sing dollar held strong. But, things are still too expensive. 

Boardroom offers mainly :
  1. Corporate Secretarial Services, 
  2. Shareholder Services  
  3. Accounting and payroll services. 
Based on it IPO prospectus in year 2000, it has acted as a share registrar or share transfer agent for approximately 43.6% of listed companies in SGX . For corporate secretarial services, it has a market share of 19% of listed companies in SGX, in addition to private limited companies. As of Annual report 2013, share services captured about 63% of Singapore IPOs, or 86% of total IPO market capitalisation. Examples include, Asian Pay TV Trust, Croesus Retail Trust,Mapletree Greater China Commercial Trust,Far East Hospitality Trust, Ascendas Hospitality Business Trust and  IHH Healthcare Berhad. In Australia, about 30% of successful listings were completed by Boardroom.

With many acquisitions since their IPO in 2000 ($0.39), their footprint is now in China, Malaysia, Australia, Hong Kong and Singapore.

GKGoh (through Salacca) made a mandatory conditional(SGX rule 14)  cash offer of $0.575 for Boardroom after their percentage increased from about 33% to about 44% in January 2014. ( married deal with Third Ave).
In the past (in 2006), GKGoh had also made a mandatory conditional  cash offer of $0.50 for Boardroom.
In the 2008-2009 Financial Crisis, Boardroom dropped to the lowest closing price of $0.42.
It has a dividend yield of 5.17 percent with a ex-div of $0.01 every year in Feb(coming soon) and $0.02 every year in late Oct. Dividends has been consistent at $0.03 every year and i believe this is sustainable based on it's consistent free cash flow generation every year, which after netting off repayment of loans, is still enough for paying out the dividends.


A further confirmation of the sustainability of the dividends is given in a statement in the Offer Document that the purchase was for a stable, recurring income for GKGoh.


Now, is there any possibility of GKGoh being able to take Boardroom private ( happens only when it attained more than 90% of Boardroom) ? I do not think so. In fact, i am pretty confident that GKGoh will not even be able to attain 50% of Boardroom through acceptances ( 50% is needed to make the offer binding) as it would be quite silly for investors to sell it at $0.575 given that the lowest price it dropped to was only $0.42 in 2008-2009 and it current dividend yield is pretty decent. It is further confirmed by the offeror that the intention is to maintain the listing.


To me, Boardroom is a "under the radar" kind of  company with a limited dearth of information from both research analyst, bloggers or forumners ( Try Googling it). It is a cow to be milked for its dividends and it offers a limited downside ( hovering about $0.575 due to GKGoh offer price serving as a anchor point), with the worst case scenario of $0.42 ( Financial Crisis). In terms of upside, it has reached a high of $0.70  in march 2013 and given the historical performance of both the share price and the company fundamentals, it is quite safe to say that in the long run, capital appreciation is highly possible( barring any corporate mischief of course). Its current other significant shareholder now is Nanyang Press (Singapore) Limited with about 12% ownership. ( Nanyang Press owns about 0.5% of SPH. It seems that they invest in dividend paying companies.)As important to me is that this company does not print shares( akin to printing money through rights, thereby devaluing the value of something) and the shares outstanding is pretty stable ( yes, there is still employee options and scrip dividend but thank GOD no rights issuance). Of cos i am vested.

Wednesday, August 7, 2013

Should HDB owners take a private property loan?

Assuming a HDB home loan of  $350000 to be paid back in full in 30 years at the HDB loan rate of 2.6%.
Total payment after 30 years = $504,428.04. 
Interest paid after 30 years = $154,428.04
Assuming a bank loan instead to be paid back in full in 30 years at the following rates : 1.2% first year, 1.45% second year and 1.95% thereafter. (Based on 3-month Sibor + 0.5%, 3-month Sibor + 0.75% and  3-month Sibor + 1.25% from a local bank).
Total payment after 30 years = $457,747.21
Interest paid after 30 years = $107,747.21
By taking a HDB loan, the customer actually pays $46,681 in interest more over 30 years.
(I have excluded the miscellaneous cost, such as legal fees e.t.c, focusing on interest only. )

Reasons for taking a HDB loan is that HDB is more lenient and you can miss a few payments. (From hearsay)Taking a bank loan is a one way street and you lost the chance of taking a HDB loan forever. 

It makes me wonder whether if you miss payments on a bank loan, can the bank take back your HDB given that it is actually the property of the government and HDB owners are not actually owners but long term tenants with a lease period of 99 years. Maybe the difficulty could be so onerous for the bank that one could be allowed to miss a few payments too.(Maybe)

Especially when interest rates have been so low for so long but the prospect of it rising is a real possibility but when it finally do rise above the 2.6% rate, your outstanding balance would be so small that a lump sum could be paid to settle it. Think about it.

Thursday, November 29, 2012

Another reason why equities are a good investment


I have tried my hands in selling bear call credit spreads/ bull put credit spreads in the US market before to earn some premium income using time decay but the decrease in the value of the US dollar often reduces or negates the return. The occasional big moves which results in the prices moving out of the strike prices really sucks. This strategy indeed sucks. A classic example of low probability of losing but big consequence when one loses. I condemn it.
 
Having said that, Warren Buffet has been known to sell options for the premium too.
(Taken from his 2008 letter to shareholders.)But what is suitable for him may not be suitable for a small fry like me.
 
 
Another thing i  contemplated was to own US shares so as to be able to sell call options and earning additional income, on top of the usual dividends and capital appreciation. But alas, damn it, im a small fry which means i am not able to own enough of the shares to earn any meaning income using this strategy and again the reduction in US dollar makes things more sucky. In addition, now, i have to pay custodian fees which again makes things worse.
 
It came as a pleasant surprise that SGX is eyeing single-stock options within 2 years. This reduces the currency risk and complements my boring strategy of holding dividend-yielding stocks, as now i can earn additional income.  I think its good for retail investors also as it, to a small extent, helps people reduce their human instinct of selling when low and buying when high because with this strategy, people would only sell when the higher strike price is reached. Even if it is not reached, one still earns some income. Either way, one is better off.
 
With this initiative, my returns from stocks are from:
  • Capital appreciation
  • Dividends
  • Lending fees - some of my shares have been borrowed for people to short
  • Selling call options ( based on new initiative, hopefully)
 


On a side note, many of my shares which people use to short have been returned. Theoretically, this implies that the stock market should see a rally, especially when it coincides with the much publicised year-end or christmas rally. Would i use this knowledge to speculate and trade on shares then?

Nope. I still miss the good old days of 2008 when i entered the market with vengence and without a single uncertainty in my mind. I do not feel it now and anything i do, has doubt. As someone said, if you dont know what to do, just do nothing. Doing nothing is also a strategy.

Tuesday, October 9, 2012

What to do with your asset allocation?

With the latest property cooling measures, another avenue for investing one's money is reduced. With the negative perception of Gold Investing (Genneva, Gold Guarantee e.t.c), less money will flow into those avenues. There is a possibility that equities could do well given that  it's one of the few remaining avenues where money could flow into, especially given the monthly money printing by the United States and the ultra low interest rates. As our name implies and having always given a consistent message since the inception of this blog, dividend yielding stocks is still the right way to go. As usual,if in doubt, keep a 50% cash and 50% Equity of dividend yielding stocks. How about Gold and non-dividend yielding stocks with a high beta that could see capital appreciation? I feel that investing is to buy into something that gives a return immediately and not based on the whims and fancy of the dynamic market which is so darn difficult to read and easily manipulated by some big fish, even if one is an excellent technical analyst. Buying Gold and non-dividend yielding stocks is more of gambling instead of investing in my dictionary.

A friend asked me what she should do with the money.

If one is putting funds aside for retirement:
A possible avenue to 'invest' could be dumping some cash into SRS to enjoy  an immediate risk-free guaranteed gain of a reduction in taxes based on one's income bracket and waiting for any Equity correction to use the SRS funds to snap up some dividend yielding stocks. But one can only dump about 12Kyearly due to the cap. Optimum age group to do this are for those above the age of 45 years old whose income bracket is generally higher, shorter lock-in period and the 12K yearly deposit from 45 years old could possibly attract no taxes at all when one is to stretch out their yearly withdrawal. Anyway, if you are 45 years old and above, you are probably greatly affected by the new property rules.

If one is putting funds aside for property investment while waiting for a major correction(happy waiting....):
A possible avenue to 'invest' could be dumping some cash into CPF OA to enjoy a risk-free 2.5% which can be used to pay for a property investment or possibly even snapping up some dividend-yielding stocks if a major correction should occur.

The above 2 options faces some restrictions so if one wants maximum flexibility, put in bank!

Options options options. Thats the beauty of life!

Thursday, May 17, 2012

How interest rate affects perpertuals- Genting

A reader commented that interest rates were at the historical low and that the only way is up. That i totally agree. What i am unsure of is just when. When interest rate increases, price of bonds will go down, especially so for bonds without maturity, a..k.a perpertuals like Genting. Looking at the 12 month Sibor from 1987 - 2012, the highest it has reached is 7.75% and the lowest it ever reached is right now, 0.59%.
Genting perpetual was offered at $1 par value with 5.125% coupon at the time when the 12 month Sibor was about 0.59%. This implies that the market is willing to take on the risk of holding the perpetual with an additional interest rate spread of 4.535% ( 5.125%-0.59%) over the 12 month sibor.

Assuming the market expects this spread of 4.535% forever and we keep it as constant. ( Please note that this spread changes based on the market perception of Genting's risk. Obviously, MAS is causing some negative perception!) Below is the worst case price one can expect given the different 12 month sibor rates.

Yield = 4.535% + 12-month Sibor
Genting Perpetual Price = 5.125% divided by Yield

The questions now are:
When do you think interest rates will rise?
What other investment classes available to retail investors will not be affected by changes in interest rate?
Do you think property (which is leveraged by the way) will also be affected by interest rates or not?
How about equities(Shares)? Will it be affected by interest rate too?
If a severe market crash like Lehman occurs again, which will fall more, Genting Perp or shares in general?

I feel that investing is not only about the possbilities, but also the probabilities. Given the severity of the recession in Europe and the US, how high are the probability of them raising interest rates? Read the news and realise that many countries surrounding us have also been cutting interest rates, like Australia, India, Brazil,Morocco e.t.c. Sure inflation is a concern, but which is a bigger evil, unemployment or inflation?
I for one am preparing ( and hoping) for a Lehman-like crash. If it occurs, i am pretty sure that my Genting Perps will still fall but definitely not as much as shares.

Having said the above, a sharp rise in interest rates to 7.75% is still possible. Thats why keep it as a small percentage of your portfolio.

BTW, the issue i have with MAS is that there are many much more risky ,complicated and non-transparent investments out there compared with perpetuals! Regulate those first before regulating perpetuals! Come on!

Get Your Books Cheaper than the Local MPH or Borders HERE!

Friday, January 31, 2014

First purchase in 2 years - Boardroom Limited

The recent market volatility made me salivate and perked my interest in the equity market again. I have been extremely uncomfortable with my asset allocation but even more uncomfortable with the relentless surge of the equity markets. These 2 years have indeed been a lesson of patience for me. So it was with extreme joy when the Fed decided to cut back a further $10 billion dollars of money printing.

It has been a period of elation for me too when emerging currencies plummeted while the Sing dollar held strong. But, things are still too expensive. 

Boardroom offers mainly :
  1. Corporate Secretarial Services, 
  2. Shareholder Services  
  3. Accounting and payroll services. 
Based on it IPO prospectus in year 2000, it has acted as a share registrar or share transfer agent for approximately 43.6% of listed companies in SGX . For corporate secretarial services, it has a market share of 19% of listed companies in SGX, in addition to private limited companies. As of Annual report 2013, share services captured about 63% of Singapore IPOs, or 86% of total IPO market capitalisation. Examples include, Asian Pay TV Trust, Croesus Retail Trust,Mapletree Greater China Commercial Trust,Far East Hospitality Trust, Ascendas Hospitality Business Trust and  IHH Healthcare Berhad. In Australia, about 30% of successful listings were completed by Boardroom.

With many acquisitions since their IPO in 2000 ($0.39), their footprint is now in China, Malaysia, Australia, Hong Kong and Singapore.

GKGoh (through Salacca) made a mandatory conditional(SGX rule 14)  cash offer of $0.575 for Boardroom after their percentage increased from about 33% to about 44% in January 2014. ( married deal with Third Ave).
In the past (in 2006), GKGoh had also made a mandatory conditional  cash offer of $0.50 for Boardroom.
In the 2008-2009 Financial Crisis, Boardroom dropped to the lowest closing price of $0.42.
It has a dividend yield of 5.17 percent with a ex-div of $0.01 every year in Feb(coming soon) and $0.02 every year in late Oct. Dividends has been consistent at $0.03 every year and i believe this is sustainable based on it's consistent free cash flow generation every year, which after netting off repayment of loans, is still enough for paying out the dividends.


A further confirmation of the sustainability of the dividends is given in a statement in the Offer Document that the purchase was for a stable, recurring income for GKGoh.


Now, is there any possibility of GKGoh being able to take Boardroom private ( happens only when it attained more than 90% of Boardroom) ? I do not think so. In fact, i am pretty confident that GKGoh will not even be able to attain 50% of Boardroom through acceptances ( 50% is needed to make the offer binding) as it would be quite silly for investors to sell it at $0.575 given that the lowest price it dropped to was only $0.42 in 2008-2009 and it current dividend yield is pretty decent. It is further confirmed by the offeror that the intention is to maintain the listing.


To me, Boardroom is a "under the radar" kind of  company with a limited dearth of information from both research analyst, bloggers or forumners ( Try Googling it). It is a cow to be milked for its dividends and it offers a limited downside ( hovering about $0.575 due to GKGoh offer price serving as a anchor point), with the worst case scenario of $0.42 ( Financial Crisis). In terms of upside, it has reached a high of $0.70  in march 2013 and given the historical performance of both the share price and the company fundamentals, it is quite safe to say that in the long run, capital appreciation is highly possible( barring any corporate mischief of course). Its current other significant shareholder now is Nanyang Press (Singapore) Limited with about 12% ownership. ( Nanyang Press owns about 0.5% of SPH. It seems that they invest in dividend paying companies.)As important to me is that this company does not print shares( akin to printing money through rights, thereby devaluing the value of something) and the shares outstanding is pretty stable ( yes, there is still employee options and scrip dividend but thank GOD no rights issuance). Of cos i am vested.

Wednesday, August 7, 2013

Should HDB owners take a private property loan?

Assuming a HDB home loan of  $350000 to be paid back in full in 30 years at the HDB loan rate of 2.6%.
Total payment after 30 years = $504,428.04. 
Interest paid after 30 years = $154,428.04
Assuming a bank loan instead to be paid back in full in 30 years at the following rates : 1.2% first year, 1.45% second year and 1.95% thereafter. (Based on 3-month Sibor + 0.5%, 3-month Sibor + 0.75% and  3-month Sibor + 1.25% from a local bank).
Total payment after 30 years = $457,747.21
Interest paid after 30 years = $107,747.21
By taking a HDB loan, the customer actually pays $46,681 in interest more over 30 years.
(I have excluded the miscellaneous cost, such as legal fees e.t.c, focusing on interest only. )

Reasons for taking a HDB loan is that HDB is more lenient and you can miss a few payments. (From hearsay)Taking a bank loan is a one way street and you lost the chance of taking a HDB loan forever. 

It makes me wonder whether if you miss payments on a bank loan, can the bank take back your HDB given that it is actually the property of the government and HDB owners are not actually owners but long term tenants with a lease period of 99 years. Maybe the difficulty could be so onerous for the bank that one could be allowed to miss a few payments too.(Maybe)

Especially when interest rates have been so low for so long but the prospect of it rising is a real possibility but when it finally do rise above the 2.6% rate, your outstanding balance would be so small that a lump sum could be paid to settle it. Think about it.

Thursday, November 29, 2012

Another reason why equities are a good investment


I have tried my hands in selling bear call credit spreads/ bull put credit spreads in the US market before to earn some premium income using time decay but the decrease in the value of the US dollar often reduces or negates the return. The occasional big moves which results in the prices moving out of the strike prices really sucks. This strategy indeed sucks. A classic example of low probability of losing but big consequence when one loses. I condemn it.
 
Having said that, Warren Buffet has been known to sell options for the premium too.
(Taken from his 2008 letter to shareholders.)But what is suitable for him may not be suitable for a small fry like me.
 
 
Another thing i  contemplated was to own US shares so as to be able to sell call options and earning additional income, on top of the usual dividends and capital appreciation. But alas, damn it, im a small fry which means i am not able to own enough of the shares to earn any meaning income using this strategy and again the reduction in US dollar makes things more sucky. In addition, now, i have to pay custodian fees which again makes things worse.
 
It came as a pleasant surprise that SGX is eyeing single-stock options within 2 years. This reduces the currency risk and complements my boring strategy of holding dividend-yielding stocks, as now i can earn additional income.  I think its good for retail investors also as it, to a small extent, helps people reduce their human instinct of selling when low and buying when high because with this strategy, people would only sell when the higher strike price is reached. Even if it is not reached, one still earns some income. Either way, one is better off.
 
With this initiative, my returns from stocks are from:
  • Capital appreciation
  • Dividends
  • Lending fees - some of my shares have been borrowed for people to short
  • Selling call options ( based on new initiative, hopefully)
 


On a side note, many of my shares which people use to short have been returned. Theoretically, this implies that the stock market should see a rally, especially when it coincides with the much publicised year-end or christmas rally. Would i use this knowledge to speculate and trade on shares then?

Nope. I still miss the good old days of 2008 when i entered the market with vengence and without a single uncertainty in my mind. I do not feel it now and anything i do, has doubt. As someone said, if you dont know what to do, just do nothing. Doing nothing is also a strategy.

Tuesday, October 9, 2012

What to do with your asset allocation?

With the latest property cooling measures, another avenue for investing one's money is reduced. With the negative perception of Gold Investing (Genneva, Gold Guarantee e.t.c), less money will flow into those avenues. There is a possibility that equities could do well given that  it's one of the few remaining avenues where money could flow into, especially given the monthly money printing by the United States and the ultra low interest rates. As our name implies and having always given a consistent message since the inception of this blog, dividend yielding stocks is still the right way to go. As usual,if in doubt, keep a 50% cash and 50% Equity of dividend yielding stocks. How about Gold and non-dividend yielding stocks with a high beta that could see capital appreciation? I feel that investing is to buy into something that gives a return immediately and not based on the whims and fancy of the dynamic market which is so darn difficult to read and easily manipulated by some big fish, even if one is an excellent technical analyst. Buying Gold and non-dividend yielding stocks is more of gambling instead of investing in my dictionary.

A friend asked me what she should do with the money.

If one is putting funds aside for retirement:
A possible avenue to 'invest' could be dumping some cash into SRS to enjoy  an immediate risk-free guaranteed gain of a reduction in taxes based on one's income bracket and waiting for any Equity correction to use the SRS funds to snap up some dividend yielding stocks. But one can only dump about 12Kyearly due to the cap. Optimum age group to do this are for those above the age of 45 years old whose income bracket is generally higher, shorter lock-in period and the 12K yearly deposit from 45 years old could possibly attract no taxes at all when one is to stretch out their yearly withdrawal. Anyway, if you are 45 years old and above, you are probably greatly affected by the new property rules.

If one is putting funds aside for property investment while waiting for a major correction(happy waiting....):
A possible avenue to 'invest' could be dumping some cash into CPF OA to enjoy a risk-free 2.5% which can be used to pay for a property investment or possibly even snapping up some dividend-yielding stocks if a major correction should occur.

The above 2 options faces some restrictions so if one wants maximum flexibility, put in bank!

Options options options. Thats the beauty of life!

Thursday, May 17, 2012

How interest rate affects perpertuals- Genting

A reader commented that interest rates were at the historical low and that the only way is up. That i totally agree. What i am unsure of is just when. When interest rate increases, price of bonds will go down, especially so for bonds without maturity, a..k.a perpertuals like Genting. Looking at the 12 month Sibor from 1987 - 2012, the highest it has reached is 7.75% and the lowest it ever reached is right now, 0.59%.
Genting perpetual was offered at $1 par value with 5.125% coupon at the time when the 12 month Sibor was about 0.59%. This implies that the market is willing to take on the risk of holding the perpetual with an additional interest rate spread of 4.535% ( 5.125%-0.59%) over the 12 month sibor.

Assuming the market expects this spread of 4.535% forever and we keep it as constant. ( Please note that this spread changes based on the market perception of Genting's risk. Obviously, MAS is causing some negative perception!) Below is the worst case price one can expect given the different 12 month sibor rates.

Yield = 4.535% + 12-month Sibor
Genting Perpetual Price = 5.125% divided by Yield

The questions now are:
When do you think interest rates will rise?
What other investment classes available to retail investors will not be affected by changes in interest rate?
Do you think property (which is leveraged by the way) will also be affected by interest rates or not?
How about equities(Shares)? Will it be affected by interest rate too?
If a severe market crash like Lehman occurs again, which will fall more, Genting Perp or shares in general?

I feel that investing is not only about the possbilities, but also the probabilities. Given the severity of the recession in Europe and the US, how high are the probability of them raising interest rates? Read the news and realise that many countries surrounding us have also been cutting interest rates, like Australia, India, Brazil,Morocco e.t.c. Sure inflation is a concern, but which is a bigger evil, unemployment or inflation?
I for one am preparing ( and hoping) for a Lehman-like crash. If it occurs, i am pretty sure that my Genting Perps will still fall but definitely not as much as shares.

Having said the above, a sharp rise in interest rates to 7.75% is still possible. Thats why keep it as a small percentage of your portfolio.

BTW, the issue i have with MAS is that there are many much more risky ,complicated and non-transparent investments out there compared with perpetuals! Regulate those first before regulating perpetuals! Come on!