Fortune REIT - Another Temasek Holdings Investment

Fortune REIT is an interesting stock. In the realm of REITS listed in Singapore, it is one of the few ( maybe its the only one, we are not sure as we did not check every single REIT) which has current assets approximately equals to its current liabilities. If you have read our previous articles on REITS and about Fortune REIT, most of the REITS in Singapore have current assets very very very substantially lower than their current liabilities, which actually is quite normal given the well known fact that these entities borrow heavily to finance their operations. So let us relook at Fortune REIT , given that they just released their financial statements. Lets use some primary school maths on percentages, shall we?

TAKEN FROM THEIR SLIDES RELEASED ON NOV 08 ( ABOVE)

Firstly, at first glance, it looks impressive, doesn't it?Solid Operations, No Refinancing Needs, blah, blah,blah..all the marketing talk which actually makes us more determined to research the company actually. Circled in RED, it states that currently their portfolio of property has an occupancy of 94.4%, but let's look at their porfolio expiry profile below.

TAKEN FROM THEIR SLIDES RELEASED ON NOV 08(ABOVE)

It states that in the fourth quarter of 2008, 7.7 % of their occupied space is expiring. Let us assume that the 7.7% do not renew. That will leave us with (100%-7.7%) times stated current occupancy level of 94.4%, which gives us an occupancy level of 87.1% at end of this year. Let's look at 2009. As stated above, 33.4% of their occupied space is expiring in 2009. Assuming that the 33.4% do not renew, this will give us an occupancy level of (100%-33.4%) times 87.1%, which turns out to be 58%! Imagine going to a shopping centre, say Suntec City where around 4-5 shops out of 10 shops are closed!

This is the worst case scenario of course. There might be new tenants coming in to take up the slack, some or even all of the tenants might actually renew, and we might even be wrong in our interpretation of "% of occupied space expiring" in their slides. But well, no definition from Fortune breeds speculation.....(Just added: We are not experts in shopping malls leasing, maybe its the industry practice, not perculiar to Fortune. But from a layman's perspective, given these times, its some food for thought!)

Anyway, we are pretty disappointed with the investor relations department of this company as they did not reply on our query on how they are going to mitigate this risky outflow of tenants. Why the following sentence if you are not going to reply ?

"For general enquiries, please email us at enquiries@fortunereit.com and we will respond promptly."

Important: The objective of the articles in this blog is to set you thinking about the company before you invest your hard-earned money. Do not invest solely based on this article. Unlike House or Instituitional Analysts who have to maintain relations with corporations due to investment banking relations, generating commissions,e.t.c, SGDividends say things as it is, factually. Unlike Analyst who have to be "uptight" and "cheem", we make it simplified and cheapskate. -The Vigilante Investor, SGDividends Team

Benjamin Graham - I spanked Warren Buffet!

We found this article from briefing.com which wrote about one of Benjamin Graham's investment criteria and we thought it was a great idea to incorporate it into our investment strategy. This is a bloody stringent criteria to follow that would dramatically reduce the list of stocks we are looking at at the moment, but hey, if not now..then never, right?

Quote:One of Graham's investment fund strategies, as explained in his best-selling book The Intelligent Investor, was to buy stocks that are valued at a discount to their net current asset value. Graham called such stocks "bargain issues." In other words, Graham would look for stocks whose current assets less total liabilities was worth more than what the stock was trading at. This meant that any plant, property and equipment, goodwill and long-term investments were free.
Graham believed this approach lowers risk because if a company defaults, shareholders still stand to recoup their losses and possibly profit as the company is liquidated.
Since many companies that trade below their net current asset value have weak prospects, Graham would often have a portfolio of 100 such stocks to limit the impact of one company defaulting. Graham said that 90% of the bargain issues returned a satisfactory profit over 35 years.
Graham's investment fund, Graham-Newman Corp., returned 14.7% annually from 1936 to his retirement in 1956, versus the 12.2% return of the stock market, according to The Intelligent Investor (revised 2003 version). After 20 years, a $100 initial investment would have been worth $1,533.35 in Graham's fund, compared to $999.67 in the overall stock market.Unquote

SGDividends will now start combing the sphere of SGX shares to see whether there are any such stocks available trading below their net current assets per share. Stay tuned.

Golden Agri - An Interesting Play

"No Fear, No Greed, High Emotion equals low IQ"..."No Fear, No Greed, High Emotion equals low IQ"...we have been chanting this in unison for the past 3 years. This has been a daily routine for us . 100 times before we sleep. 100 times after we wake up.But we digress again..as usual..So whats been in our radar lately?Golden Agri!

Golden Agri has been hogging the top spot in volume trade lately. According to Reuters, it's director, Raphael B. Concepcion, recently mentioned that they are looking at acquisitions now. What an interesting stock..is it a good investment? Let us take a look at some hard facts, shall we?

Based on Thomson Reuters, the net tangible value of Golden Agri is way higher , more than twice, its closing price. Compared to its competitors, it does seem cheap! Yes, it does look damn cheap. But let's not jump to conclusions, shall we? Let's look at one of the most important data (in our opinion). Its Free Cash Flow.

Indo Agri (Below)

Golden Agri(Below)

Wilmar

As we can see, Golden Agri has been enjoying a rather consistent history of free cash flow since 2003 except for that blip in 2006. Indofood Agri does not have a long history of data and Wilmar..oh my...seem to have a rather consistent history of negative free cash flow.

Hmm...Golden Agri just sounds too good to be true!It seems there can only be 2 outcomes, for Wilmar and Indo Agri to go down in price or for Golden Agri to go up in price..which do you think? We just can't wait for 12 November 2008 for the financial statement!

Important: The objective of the articles in this blog is to set you thinking about the company before you invest your hard-earned money. Do not invest solely based on this article. Unlike House or Instituitional Analysts who have to maintain relations with corporations due to investment banking relations, generating commissions,e.t.c, SGDividends say things as it is, factually. Unlike Analyst who have to be "uptight" and "cheem", we make it simplified and cheapskate. -The Vigilante Investor, SGDividends Team

Boring = Good Investments? - Look at Warren Buffet for clues!

Warren Buffet seems to like boring investments. See the "cut and paste" screenshot below. This is his list of top investments as of end 2007 from his letters. Don't you find some similarities or clues as to what kind of companies this old fogey likes?Look at the red arrows.

Below are a brief description:

Anheuser-Busch (beta:0.31)- domestic beer, international beer, packaging and entertainment.

Coca-Cola (beta:0.61) - manufacturer, distributor and marketer of nonalcoholic beverage concentrates and syrups in the world

Johnson and Johnson (beta:0.50) - research and development, manufacture and sale of a range of products in the healthcare field to consumers.

Kraft Foods Inc (beta: 0.59) - engaged in the manufacture and sale of packaged food products, including snacks, beverages, cheese, convenient meals and various packaged grocery products.

Proctor and Gamble ( beta: 0.52) - Beauty; Grooming; Health Care; Snacks, Coffee and Pet Care; Fabric Care and Home Care, and Baby Care and Family Care.

Wal- mart( beta: 0.05) - retail stores (supermarts,mega marts)

Washington Post(beta:0.65) - diversified education and media company

Notice how the betas are generally much lesser than 1? ( Beta measures the stock volatility.The smaller it is, the lesser its price will fall in a downturn compared with the general stock market. It will also generally rise less in a upturn. Cyclical industries usually have high betas above 1.)

Notice also that the customers of these companies are retail consumers which are diversified. Don't forget his holding company Berkshire Harthaway also consists of a large portion of subsidiary companies such as See's Candies which cater to retail customers.

Hmm..maybe its a good idea to start looking at such kind of stocks for investment..don't ya think?

Infrastructure-Related Equities - Comment by Hot Sexy Student

4 days ago, our hot sexy student knocked on our door. ( In case you have not been following us, we mentioned about this student some articles back. She predicted a recession or some anomaly sometime back in late 2006. Student is now currently studying in Victoria Junior College...she told us to say one in return for her continued ad-hoc advise.Yes, we are quite shameless to sometimes ask for a teenager's advise in managing money but hey, thats to broaden our perspective. You stone-headed, "know-it-all" adults!)

According to her, keynesian policies advocate pump priming by governments during times of economic duress to stimulate the economy. Such pump priming activities include spending on Infrastructure, defence related stuff and e.t.c. With that she left, leaving her sweet perfume lingering in the air and us, baffled at what she meant and what she was trying to prove. Anyway, we came to a conclusion that she was just flirting with us and left it at that.

A few hours later, we were reading THEEDGE magazine and chanced upon this article on "Emerging markets: Bear Rally or Long Bull Run".

Quote:

Building in emerging markets might slow for a while but infrastructure needs are still very much intact in the developing word, says[ Name suppressed to prevent speculation ] . A lot of government spending on railways, roads, ports and airports in emerging markets is direct budgetary spending, which won't be affected by the global credit squeeze, he notes.

There is also pump-priming through fiscal stimulus packages that invariably include big chunks of infrastructure spending. As exports slow, many developing economies in Asia, Latin Amercia, Eastern Europe and Africa are being pump-primed with increased budgetary spending on infrastructure." Unquote.

Alas, we knew what the hot sexy "oracle" meant. What services are needed for infrastructure building? Not all severly beaten construction companies are the same it seems. Think specialist. Your guess is as good as ours.

Also just something which caught our eye from THEEDGE to share. (Not that it will affect our team's strategy, of cos).

"Since 1945, the average return for US shares under Republican presidents has been 10.2% per annum versus 15.1% per annum under Democrats". So, who would you vote for?

Heres a pic that looks like our hot sexy "oracle".