Something that puzzles SGDividends Maybe Due to their Inexperiences

Before we invest in something, we seek to understand it first. Thats the basic need. When we look at some trusts, something just don't click with our subconcious mind but guess its due to our inexperience regarding such entities, don't know, not sure.

Beefy Barber wants to unlock some cash value from his scissors and shavers lying in his run-down barber shop. He thought of a smart idea, why not package these scissors and shavers into a erm.."Package". Securitise it with say 100 shares. He keeps 40 shares and sell the remaining 60 shares equally to the Sexy VJC Girl and the Scheming SGDividends Team. The maintenance and usage of the scissors and shavers will be managed by Beefy Barber's employee. The revenue from the scissors and shavers will be (after deducting the management fees for Beefy Barber's employee) distributed to Beefy Barber ( 40%), Sexy VJC Girl ( 30%) and SGDividends Team ( 30%) according to their percentage of shares.

So in summary:
Beefy Barber gets 40% of net revenue + management fees ( through the employee)
Sexy VJC girl gets 30% of net revenue
SGDividends gets 30% of net revenue

Should we invest in it?Since Barber is a majority shareholder of the "Package" and also the 100%manager of the "Package", could Barber increase his management fees so as to leave little for the owners of the Trust? Hmm...So our Sexy VJC Girl thought of a smart idea. Lets create a trust deed so we can bind the amount of management fees to be received by Beefy Barber. (little kids these days..) Ok, hmm since the trust deed requires the majority shareholders to vote for it to have binding powers so we should be safe since Sexy and SGDividends hold 60%. So we decided on an appropriate management fee....say 4.5% of the revenue derived from the "Package" . Beefy Barber however wants 10% but since we (SGDividend and VJC Girl) own 60%, we win. We can only hope that Beefy Barber don't get pissed with us and still put in the effort to manage his scissors and shavers well.

So how about in the real market? Generally, a trust ( or REIT) is made up of many many investors who come and go and may not be united. Will they be able to muster up collective action even if collectively they hold the majority shares?

The point is, is there a conflict of interest between Barber and the rest of the other shareholders like Sexy VJC Girl and SGDividends?Who is to check the Beefy Barber who has the "most" say in the Trust and who is also the manager of the trust?
In a company structure, the board of directors checks the management to ensure shareholders rights are protected. In the trust structure, it seems there is no such structure in place. This is how we feel about Trusts.

We hope our worries are unfounded.

Let us meditate on the island of Sakhalin to find the answer.

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

Scheming SGDividends Just Playing Around

Cambridge has sort of cleared some issues with their financing. So, what now, can buy, can short? The Article Written by Our Sexy VJC Girl seemed to have drawn an intense discussion Here.Maybe its cos of the word SEXY which after minusing the "Why" gives a pretty nifty,cool word. Anyway, the discussion was on the value to use as a discount factor, k, so that when we discount back to find the fair value of Cambridge, its appropriate. Probabilities, Scenarios, CAPM words were mentioned and its quite an intellectual read actually, which left us starry-eyed.

Ok so we used 6% ( preferential DBS share) as the discount factor(k) used previously to find the $1 value(Max) and it has drawn some different reasonable opinions and they got a point since DBS is less risky than Cambridge REIT. But SGDividends just don't know how to use Probabilities, CAPM, calculate the WACC ( especially the Cost of Equity) e.t.c to find the discount (K) appropraite to discount back to find the value of Cambridge. So can we be more simple?Can we use some scenarios based on comparing with industrial reits in Singapore by using their dividends yield? Is it logical? Hmm, if dividend yield is one of the factors which investors look at when deciding which Industrial reit to invest in , can we consider the dividend yield as an opportunity cost? For example, if we were to invest in Cambridge, we would be forgoing the dividend yield in MapleTree and vice versa. ( OK this is not from CFA textbook, we just play play test test only lah...give chance) We all know that dividends yield is constantly fluctuating too but anyhow lets take it with a pinch of salt and just try using it as the discount rate.

Let's experiment and try it out, shall we? Let's use the values from this fantastic blog .

REIT Dividend Yield
MI-REIT 40.870%

MapleTree 17.671%
A-REIT 13.367%

Average Dividend Yield above ( as at 12 Dec 2008) = 23.96%

Average Dividend Yield for Singapore REITS = 19.314%
( Let's assume their data is correct! Should be lah...randomly tested.)

Growth Rate ( G) = 0,

Discount Rate ( k,Required Rate of return) = Dividend Yield of Peers

Dividend (D) = $0.053 ( after cut of 0.9c).

Years of asset (n) = 65 years

(Pls see our article Titled : Sexy Vjc Girl Analyses Cambrigde REIT to understand the gibberish we are merlion-ing)

Lowest Value of Cambridge ( Using MI REIT yield) = S$0.13

Highest Value of Cambridge ( Using A-REIT yield) = S$0.40

Average Value of Cambridge ( Using Average Yield) = S$0.22

Value of Cambridge when compared with Yield of Singapore REITS = S$0.27

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

Research Analysts Never Fails to Bizarre SGDividends - Are they making sense?

Our Beefy Barber bought Olam and Noble recently. The reason, cos many analysts are calling for a buy or have given it a good review. That is utterly irrational! We decided to read some of the analyst reports that he has read and we really think this reports do make sense BUT are they forgetting the basics? Or maybe they know the basics but heck lah...who cares....im paid to write professional reports and if anything go awry, just change the target price loh...worse come to worse, just fall back on disclaimers. Or maybe, they have other income producing reasons? Anyway, you can read these reports from our fellow blogger Here . ( wonder where he gets so many reports from??hmm)

Ok so like that, SGDividends say SPH BUY $15 target!. SingTel SELL $0.50.Keppel SELL $1. Wilmar NEUTRAL $1 million. Feels good. If kanna the target price, we are saints. If not, heck lah, just change.

Ok on a more rational note. Let's look at the basics. Seeing is believing. Don't need to write so many reports one or else become keyboard warrior. Let's not even go into the metric Free Cash Flow. Let's just look at Cash Flow from Operations. See how negative their cash from operations. So unless they are drilling for some black gold underneath the sea level, hopefully they can come up for some fresh air.

Apologies for the harsh remarks but Beefy Barber is our friend even though he bullies us at times.
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