Wednesday, September 20, 2017

Bought Comfortdelgro and hoping for the best

The dividends being 5%+ and a currently, consistently free cash flow positive company with little or no debts. With the PE being in the low teens, it is a sin for me not to take part.

Judging by the huge gap down coinciding with the huge short-sell volume on 15 Sept and 18 Sept, this indicates that the huge down is due to short-sellers, not genuine sellers. A short-seller has to buy back the shares eventually.

Short-sell value
19 Sept - SGD 7,335,227
18 Sept - SGD 13,958,536
15 Sept - SGD 19,597,813
14 Sept - SGD 1,642,692
13 Sept - SGD 2,714,317
12 Sept - SGD 1,320,798
11 Sept - SGD 1,342,370

There is no denying that Grab and Uber is affecting them greatly. There is very little catalyst that i can imagine coming from the alliance between Uber and Comfort. The short sellers must also be taking the opportunity to short it when comfort didn't clinch the contract for the MRT line.

I am hoping for the best and will average down as it goes further. The short-sell value seems to decrease on 19 Sept. Let's see if it decreases further.

Sunday, September 3, 2017

Considerations about Hyflux

"Should i sell my perpetuals (BTWZ) or preference shares(N2H) of Hyflux?" asked a concerned HNW individual.
" I don't is complicated."I said. "Don't ask a church mouse".
But that got me thinking.

There is no denying that Hyflux is super leveraged and it is issuing debt to repay old ones. 

In May 2017,the issuance of $500 million perpetual securities (N2H) was done at a good time for the company because the closest comparison , Hyflux Preference shares (BTWZ) has been trading consistently above par of $100 since its issue, even reaching $105 at one point ( current yield of 5.7+pa).This gave the company an opportunity to issue a 6% coupon for N2H. 

Coupled with the very low interest environment then, there were many investors willing to take the risk.

BTWZ price chart ( Bondsupermart)

Most people  speculate that the company will redeem BTWZ on 25 April 2018 to avoid the step-up coupon of 8% pa. But, i am wondering, how is Hyflux going to pay back?

1) Divest projects

They have stated they intent to divest partially Tuaspring and fully divest Tianjin Dagang. 

Assets held for sale = SGD 1711 million
Liabilities held for sale SGD 664 million
Net = SGD 1047 million ( more than enough to pay back BTWZ)
(Based on Unaudited Financial Statements For The Second Quarter and Half Year Ended 30 June 2017)

But, who are going to buy them as these are customised projects and  transactions are subject to regulatory approvals? Besides, Tuaspring has been making losses so the eventual sale price might be lower. 

2) Reissue another preference share or perpetual securities.

Currently, investor sentiment is different. Investors are going to again look at the closest comparison N2H on 25 April 2018 . Sadly, it has been trading consistently below Par since late July 2016. Therefore, i think Hyflux will have to issue another perp with a coupon greater than 6%pa to pay back BTWZ ( or sweetening things up with a shorter maturity ) especially since the yield for N2H has been hovering above 6%, having even reached to a high of about 6.8+% in dec 2016.  
No thanks to the O&G related bond defaults and the higher likelihood of interest rate rises. 
N2H Price Chart ( Bondsupermart)
3) Don't redeem the BTWZ

This is a likely possibility too. Not having to reissue a new tranche could save Hyflux the issuance expenses. The issuance expenses was SGD 5.2 million ( 1.04% of $500 million for N2H) and given the likelihood that the coupon for the new issuance will be higher than 6% pa, there is not much advantages to redeeming BTWZ.
However, i think this will shed a negative light on Hyflux as there are expectations that they will redeem. 

Hopefully they are able to divest their assets for sale. Not redeeming BTWZ is the worst outcome among the 3. Their ability to easily sell their debt to the retail market is due to their brand and their history of repaying in full their debts. Without this ability, their leveraged business model is dead.

As with Keppel, Sembcorp, Swiber whose fortunes are so intertwined with the oil price, who is to know that Hyflux ( a water company) is also a victim as their supposedly big customers in MENA are cutting back on their infrastructure budgets.

A saving grace is that their customers are 98% municipals (63% Singapore government related entities) so the risk of them reneging on contracts is low. Hyflux has also been giving out dividends to her common shareholders albeit decreasing in amount. I guess its not a simple thing as to suddenly stop completely  the payouts as this will surely have ramifications on their share price and indirectly, their ability to find sources of funds. Selling equity seems like a remote possibility given the state of the share price.

The issue is rather on cash flow liquidity, regulatory risk( divesting) and project execution.
Hope Hyflux can think of something BIG out of the box. ( ELO seems insignificant, at most a distraction)

Saturday, June 10, 2017

About Corporate Bonds: My nearly itchy fingers

My banker called me one day and asked me if i wanted to participate in a certain OTC ( over-the- counter means its not on any exchange like Singapore Exchange) Singapore company bond issue denominated in SGD in the primary market ( meaning IPO of bonds). It's really HOT, she said...many people subscribing ! Buy Buy Buy Buy ...and im feeling a little bit dizzy already.  Ok she can't say that by regulation...Many times i exaggerate..

1)Unrated, perpetual. This means the company has a choice not to pay back the principal.
2)Dividend stopper . This means equity holders won't be paid dividends if  bondholders aren't paid their coupons.
3)Cumulative coupons if coupons are deferred. The company will have to pay the accumulated coupons if they missed any.
4)Coupon reset in 10 years. The company will have to add 100bps ( aka 1%) to the coupon.
5)NC5 . This means Non-callable within 5 years. After 5 years, the company has the right to redeem the bonds if they have a cheaper source of funding.

The Conversation  ( exaggerated again but the gist is there)
" The bank allows you to leverage on this unrated bond at a Loan-To-Value of about 50%. at about mortgage loan rates. You can pay back anytime with no penalty and you can withdraw anytime in cash the build-up value of the bond" - Her
" Unrated can lend meh????" - me
"Yes" - Her
" That will nearly double the yield and give me a source of funds when opportunity strikes..." - me thinking
"Yes, pls give me the minimum denomination as i don't have balls of steel ...... " -me
" You are so handsome and you are the sweetest guy i ever met...." Her, before putting down the phone.

As with all things in life, a few days later, i was told i wasn't allocated ANY and i guess i will have to wait by my phone like a forlorn puppy for my beautiful Angel to call me back again and call me handsome...i miss her ..truly.... On hindsight, i was kind of relief i wasn't allocated.

Now, the part on being able to loan an unrated bond at a high LTV with a low interest rate kind of piqued my interest. Goh Eng Yeow from Straits Times wrote about ratings in a local context before here

In summary about MY views about ratings

1) It is a tool for justification. To put it in an ah beng way, cover backside.  To an analyst or accountant, they will have more than enough skill to check if a company is able to pay back its debts but no, they still can't go ahead with the investment for their fund house even if it is perfectly safe, they need to get a chop (rating) from the rating agencies who uses the same information as them. If the investment goes awry, at least one can say it had a AAA rating when they purchased the investment

2) It is so ingrained in society, Many fund managers are only permitted to buy bonds with these AA ratings, some banks i heard are only permitted to loan on rated bonds . It's all about investor confidence. Even governments need these ratings.

3) It is bullshit. I don't mean it has no value. It has value in giving people confidence ( however needless), giving people justification on their actions, giving time-starved people who don't have the time to look through the financial statements, or people who are not skilled to look at the financial statements. ( It really has value for those who are not skilled in reading financial statements which is the point of Goh Eng Yeow which i agree to a certain extent).

4) It is hard to believe it has no bias-ness. The company who is being rated is the one who PAYs the rating agency. 

5) It could be more risky to have a a good rating. As the saying goes, the higher one goes, the harder one falls. Some examples:
QNBK 2.125% 07Sep2021 Corp(USD). It's  A+ gets lowered to A and the price dropped. Currently, it is about USD$95, compared to it initial price of  USD$100.
RCOMIN 6.5% 06Nov2020 Corp(USD). It's B+ got lowered to CCC. Currently, it is about USD$74, compared to its inital price of USD$100.

6) Ratings agency have the means to earn unlimited money. They are powerful. Just imagine you are able to predict with 99.9% accuracy the direction of the bond or share price just because you know the timing of the change in rating. ( note: i bold timing, because astute investors would have already picked up the deterioration of fundamentals and the rating agencies play catch up). For the above bonds , the price immediately changed when the rating change is announced. And these ratings agency rate thousands of companies and governments, not just a lame CEO who insider trades his one and only company.
I believe ( i hope) there are regulations but come on, life is not so simple and furthermore, they rate governments too.

So why would a company not rate its bonds?

Life sucks! Believe me...its really does...

Saturday, May 20, 2017

Penny pinching season

Officially, other than the monthly $1k ETF through POSB invest saver which pays me "brokerage" when i buy, there is nothing i dare buy from the local stock market at this point in time.
The old adage:'Buy when there is blood on the streets' came true again and i hope you took opportunity of that short period of time from late 2015 to early 2016.

What will i be doing since STI has surged - Dec 2016
How to stop oneself from being greedy - Feb 2016
Lessons learnt in this bear market - Jan 2016
Controlling my emotion - Jan 2016

So what have i been doing penny pinching during this lull season of stock investing?

1) Topped up my CPF SA account to the max of  $7k.

2) Topped up my SRS account to the max of $15.3k.

3) Analyse credit card terms and conditions and maximising them.

4) Analyse saving accounts to store the decaying cash. UOB One ($50k max), Citibank Maxigain($150k max), Standard Chartered Esaver ($1 million max) and CIMB fastsaver ($50 k max) are the best of the breed now.  YES, they are in descending order of greatness, taking into account the complexity of conditions and the interest rate they offer.
(BOC kicked me out as a customer as i really maxed out their benefits big time through a legal loophole.. so well..maybe BOC smartsaver?? I haven't been looking over there for over a year.)

5) Booked all my holidays in advance, like 8-9 months in advance. Can you imagine a round trip ticket to Narita on a full fare airline costing only $370 bucks all in during peak travel season in December? Wicked.

6)Using fwd travel insurance to negate the risk of prebooking so early, as it is the company i found that allows me to cover myself so early. Other insurers only allowed me to book about 3 months to 6 months before my departure. Btw, this is my referral link. You will get 5% off and i get $20. I seriously don't know how they will credit me the $20 actually as they don't have my bank account details.....

7) Refinanced my DBS housing loan to only 1% pa and 1.4% pa forever, linked to FD.

8) Dutifully making sure i do some activity in my National Australia Bank Reward Saver account which gives me 2.55% pa on my Aussie dollars
My Experience opening an Australian Bank account as a Singaporean Resident

9) Prepaying expenses which are guaranteed to happen like my childcare fees, telecommunication bills, utility bills.
Child development account-cda-comparison . This gives me a guaranteed 2% pa on the cash balances.
Telecommunication and utility bills. This gives me a guaranteed at least 5% off on my 1 year bills.

10) Checking whether any shop which im going to buy from anyway is listed on Shopback. Referral link. ( you get $5 on your first purchase and i get $5 if you spent more than $25). Take note that sometimes, it would be better to just google for a promo code outside Shopback. A due diligence is required on your part. I don't really like the long period of time it takes to cash out and i do get missing cash back, but oh well, better than nothing.

11) Saving money on renewing my 10 year old car. This has been a good decision as some asshole hit my car leaving a few scratches, a hit and run actually and i didn't fret over it. My servicing cost have also halved as i am more adventurous in trying new ways to save money on this car, using Schnell Ultimate II 'turtle oil' ($19.90 from Giant) and buying my own oil filter ($5.70) and paying only $20 for labour to service my car. Total cost of servicing cost $46 instead of the usual $100-120 bucks.
Renew COE for 10 Years Versus 5 Years Versus Brand new similar car

12) Not succumbing to greedy marketers efforts to brainwash me to buy expensive DHA powdered milk for my son.
Instead i buy concentrated, mercury tested, cod fish oil and drip it into the powered milk i use.
Guardian and Watson is expensive. I buy from iherb , PROMOCODE: LIM2068. ( this is a referrel link. You get 5% and i get 5%). Guardian is offering a 20% off their products now but even after accounting for it, it is still way more expensive buying from Guardian, including delivery and taxes. Take note that iHerb ships from overseas, BUT, it is still cheaper after delivery fees. Prices shown are the nett price. Disclaimer, this is the first time i bought from iherb also and after due diligence, no scams seem to be detected. Do your due diligence too, pls.

Guardian after Promo code OFFER20. 20% off.
Iherb , the price i got
So that's all folks. And here is something to mull about.

Thursday, February 9, 2017

Its not me - part 2 - Fraser Hospitality Trust

It's human instinct to want fairness and i am all for fairness. 
In one of the facebook group " Remove Sabana Reit" ,a member by the name of Mr Goh  mentioned that Sabana's rights are renounceable while Soilbuild rights are non-renounceable. This may explain why Sabana's rights expense was 12 times more expensive than Soilbuild.

Renounceable rights can be traded through SGX while non-renounceable rights cannot be traded on SGX. Naturally, since one has to engage investment bankers to list these tradable rights on SGX , it will cost more.

Fair enough. 

However, it doesn't explain why the expenses were 4.2% when the fees paid to the Investment bankers were only 3.6%. 

Where did the 0.6% ( remaining of the expense) of the $80.2 million ( $481,200) go to?
Take note that 0.6% is still higher than the 0.34% total rights expenses of Soilbuild.

Actually to be frank, a rose is still a rose, no matter what name you give it. 
Rights issuance is to raise money and whatever way you want to do it, the outcome is the same. 
And you Sabana, chose to use a more expensive route to raise the money you want.

So do not attribute an oversubsciption of 209.1% as strong support from unitholders when you spend so much money. Soilbuild was oversubscribed by 174.4%.

For some perspective
How about we forget about the above

Frasers Hospitality Trust(FHT) issued renounceable rights on September 2016. 
FHT holds a portfolio of hotels and service residences, and not industrial buildings like Sabana. 
The difference ends here.
Both issued renounceable right, both are effectively REITS and both are pretty close in dates in their issuance of rights.
On a percentage-wise, Sabana really overpayed.

To be fair, a small percentage of a large sum is different from a big percentage of a small sum. But this begs the following questions:

1) Was the issuance of a renounceable rights the most optimal way to raise such a small amount of funds?

2)Was a renounceable rights issuance ( presumably resulting in a higher cost) done because the managers were afraid that their rights will be undersubscribed if done under a non-renounceable rights issuance?  Gimmick to look good?(Yet still want to rebut to say that they are doing well with the 209.1% oversubscription.........)

3) Where did the $481,200 go to? It being higher than the total cost of the non-renounceable rights issuance of Soilbuild?

A lesson can be learnt here. In general, ceteris paribus, a renounceable rights will enjoy a higher subscription rate than a non-renounceable rights. And its pretty common sense. If i hate the company or if i do not have the cashflow to invest anymore, i will sell the renounceable rights to a willing buyer who will subscribe for it. 

Wednesday, February 8, 2017

It's not me - Soilbuild Reit

Having followed the 2 facebook groups to remove manager of Sabana, one member mentioned that the cost paid to raise the proceeds through their rights was quite huge. Let's compare with industry practice again. This skill honed from years of working under a boss who keeps asking me why i want a raise every year and the need to compare with industry practice.

So the closest one to compare with Sabana would be Soilbuild, both being industrial reits, closest in market capitalization size and closest in rights issuance dates.

Soilbuild Reit's market cap = $662 million
Sabana Reit's market cap = $459 million
(Yahoo finance)

Soilbuild Reit's rights : September 2016
Sabana Reit's rights : December 2016

Rights-related cost , millions= $0.395
As a percentage of proceeds raised = 0.2/ 59.4 = 0.34%

As a percentage of proceeds raised = 4.2% 

4.2% vs 0.34%..... more than 12 times more i missing something here? I am unable to find the breakdown of the rights-related cost.

Soilbuild Rights
Sabana Rights

Monday, January 30, 2017

A fortunate series of events - AIMS, Mapletree, Soilbuild, Cambridge, Ascendas and Sabana Reits

I am "Old Cow Eat Tender Grass" a.k.a SGDividends
HYST called me and shouted:" May the year of the Rooster see you lose lots and lots of money and after losing all your money, lose your hair too! Just because you gave me $2 and a bunch of expired discount vouchers with minimum spend of $88.... You suck!"

She slammed the phone, before i could retort and say :" It was just a joke, look at your DBS paylah, i put $88 in it......."

A bad joke, which reminded me of the Bee Gees song.

"I started a joke which started the whole world crying. 
But I didn't see that the joke was on me oh no 
 I started to cry which started the whole world laughing 
 Oh If I'd only seen that the joke was on me......."

OK, on a serious note. Are the gripes of the shareholders against Sabana unjustified? Are they a bunch of people who lose money then kao peh kao bu? Is this just an "old cow who eats tender grass" just a blind following the blind? To answer the above questions, I compiled the following tables just so one can see clearly the alignment between a REIT and its shareholders.


While the DPU and distributable income decreases over the years from 2013 onwards to 2015, their management fees increases over the years. Does this show alignment with unitholders?

Other industrial REITS

Since people always like to say industry practice, so lets industry practice it. Let's compare with the other industrial REITS.

Ascendas is really solid. While DPU increases, the management fees decreases. Good job!

Aim's fees track their DPU. As DPU rises, fee rises. While DPU drops, fee drops. OK, you win.

Cambridge is an oddball, in that 2013 was an especially 'HUAT' year for the managers but thats because they had an extremely large performance fee due to beating a certain index. But in general, as their DPU decreases, their fees decrease too.

Mapletree is pretty good. While they increase their fees, they increased their DPU. Fair enough.

Soildbuid is doing ok. Similar to Aims, as fees increases, DPU increases. As fees decreases, DPU decreases. Justified.

Yes i am watching.
Exercise your rights and join forces.


Saturday, January 28, 2017

Sabana Reit - At the cusp of an epoch

HSYT keeps saying my english sucks and i am unintelligible. Hence, the need of a nice cheem title to show that i have some class in my english. Anyway, HSYT came to collect angbao from me today and before she left, she muttered the following under her fragrant breath, just to rankle and jiggle this old brain of mine.( got class?)
Aha! Old Uncle who likes to eat soft grass immediately linked up what she was trying to say!That little limkumput of a HSYT!Luckily only gave you $2 for your angbao ,padded with massage and skincare vouchers with minimum spend of $88 bucks.. TAKE THAT!

So back to the Sabana story which i just recently bought just to support the movement. Unlike others who have lost money, i did not.


I own many other counters, including a splattering ( got class?) of REITs. I thought that if we could make this a precedent (got class?) , it will bode well for minority shareholders in that we would not be taken advantage of for all other REITS or companies. It doesn't cost much to have a voice. It cost only $37 ( 100 shares ) to make your voice heard and start making all REIT managers or companies more accountable.

Fees, Fees,Fees, Heads i win, Tails i still win

Let's look how misaligned a REIT is to the unitholders. 
(below is summarised from Sabana IPO prospectus. Nearly all REITS have a similar structure if not identical)

Base Fee  
Up to 0.5% per annum of the value of the Deposited Property.
Performance Fee 
0.5% per annum of net property income if it achieves at least 10.0% in annual growth in DPU over the previous financial year
Acquisition Fee 
1% of acquisition price
Divestment Fee 
0.5% of sale price

**Any acquisition or divestment of properties do not need unitholders to vote

Now, how could a REIT manager game the system to earn more money?  

If the REIT gearing is low, i could borrow more money to acquire a lot of properties and increase  the DPU at the same time, increasing my base fee, netting performance fee and earning acquisition fee.

If the REIT gearing is nearing the regulatory limit of 45%,  I can issue rights or issue perpetual bonds to purchase new properties to increase my value of deposited properties to increase my base fee, and earn acquisition fee.I could also divest properties, netting some divestment fee in the process.

Will it be to my benefit to work hard to negotiate a lower price for the new property purchases?NO. Since the higher the acquisition fee, the more i earn as i earn 1% on the price, but better to play safe by buying at market value based on independent consultant's assessment so that i have evidence to back me.

Do i care if the purchased property i buy is lousy? Not really, since i can always dispose of it and earn the divestment fee.

Would it benefit me to spend money to do Asset Enhancement ( AEIs) so as to retain or attract new tenants? Not really, if it's unoccupied, maybe it's better and i can now justify its disposal and earn the divestment fee.

What happens if the DPU or share price goes down eventually? I am still earning the base fee, acquisition fee and divestment fee. I can't be fired. Heck the performance fee, it's too much work to find tenants, market the properties and retain tenants just to earn the miserly 10% of net property income.


In case you are unaware, Sabana is in the process of  buying three properties and disposing 1 property. 

On a side note, please do not depend on the Monetary Authority of Singapore( MAS) to help us. They have many stakeholders whose interests MAS needs to balance while looking at the big picture. I think they are doing a good job already, having come up with a consultation paper on REITS and the issue of accountability and alignment was brought up. 

It is we, the unitholders, who must ACT as no one care more about our money than ourselves.