Posted by: donmihaihai | January 13, 2020

Sanity or insanity.

Take CCT as an example. It has about 9.7B of total assets of which majority are investment properties. This 9.7B assets earned about 0.4B income in 2018 on unleveraged basis.

If I pay 9.7B for the whole of CCT, I am paying about 25X FY2018 earning. Ie PE of 25, or capitalisation rate of 4%. PE inversion mean earning yield of 4%.

Add in some leverage, fund 2.8B of the 9.7B assets with debts mean I need to fork out 6.9B of equity(money). The return changed. PE is now 21 and earning yield are at 5%. Cap rate doesn’t change.

The above is true if I buy CCT at BV or unleveraged basis. The market is suggesting otherwise. Currently PE is about 23X, earning yield of just above 4%.

With all the super positives of CCT, CCT DPU CAGR for 2014 to 2018 was just 0.56%. Inflation rate in Singapore for next few years is expected at 1.4%pa. CCT DPU CAGR from 2005 to 2018 was 1.9%. Just a little better.

What is the sanity of paying above 20X stable earning for a property company/REIT that hardly beat inflation? The market says YES.

Take Bund Center Investment Ltd as another example. BCI own the integrated Bund Center in Shanghai and Golden Center in Ningbo. Its NBV is about 0.4B while the properties are valued much higher at 1.9B. My guesstimate is BCI will generate 0.06B a year.

This make the 1.9B valuation at 3% Cap rate and a PE of 32X. The leasehold of the Bund Center will down to Zero in 26 years or so. Something is not right. Of course, I won’t know how much BCI will earn in the next 26 years. Nobody knows anyway. The rule of law in China for property is crap, at the end of the lease, taking back lands on a mass will resulted in all kind of troubles. So existing owners which include BCI might be able to extend the lease with another payment.

The valuer is saying that the 26 years leasehold integrated Bund Center is worth 3% cap rate or PE of 32X. The stock market says NO and give it a valuation of 0.45B. Look like insanity is the valuer and stock market is rather sane.

At 0.45B market capitalisation, earning yield is 13% and PE is 8X base on my guesstimated earnings. Add in information like BCI is sitting on 0.1B cash after netting off all liabilities, and compare to CCT, I am wondering whether I should say the market is insane.

This is stock market.

Posted by: donmihaihai | December 2, 2019

Currency risk. what currency risk?

We have a small domestic market. Most sizeable companies have overseas operation and that can’t be avoid. Hence there is always a currency risk.

Many years back, a friend told me, she won’t invest in Hong Kong Land share because it is quoted in USD. There is a currency risk. Company like Keppel, SIA, Sembcorp are fine because they are in SGD…….wxyz#$$%.

Of course, she trades and that explain on why. Understanding how Hong Kong Land, Keppel, SIA and Sembcorp generate their earnings will know that quoted currency doesn’t matter at all. At worse it just adds another small layer of fractional cost.

Recently, there are people who hit on Food Empire and Yangzijiang currency exposure with number from the currency risk of their AR. Oh from AR, the numbers are there and easy to pick up. But well, those number in the AR can be a stranger to people without a good understanding of accounting. The number is best understood when one learned it language(accounting) and use the language to read the numbers rather than reading the number base on individual language.

Unless there is an outright fraud, don’t blame the company that they are using a foreign language. Investing is the only place where I see people investing their life saving after doing due diligence on something they don’t understand because it is written in foreign language.

Back to currency risk and a quick look at Micro Mechanics, Food Empire and Yangzijiang.

Micro Mechanics. Note 19, foreign currency risk of AR2019. Basically, it says expose to USD, Yen and Peso. Using B/S figure of financial assets and liabilities, it presents a net exposure of USD4.6M and a 10% movement = USD0.469M. Easy.

But wait, this does not mean, a 10% movement in USD-SGD next year will resulted to somewhere close to USD0.469M. B/S net exposure is not P&L exposure.

Next, doesn’t it look strange? Micro Mechanics operates in Malaysia and China, 2 of their top 3 markets but there is zero B/S exposure? How can that be? Well, the only explanation is the amount there representing currency not in the functional currency of their subsidiaries and the AR has not clearly state it. And when a subsidiary functional currency is say RMB and it has balances in RMB, it means there is no risk (rightfully so at subsidiary level) and this will not be reflected in Micro Mechanics SGD financials. Now when RMB depreciate against SGD, the amount will not be calculated into the risk exposure. But this depreciation of RMB against SGD is REAL especially so when REAL money is being remitted.

In short, the information of Micro Mechanics currency risk is unclear and close to useless

Yangzijiang. Note 37. Currency risk of AR2018. Basically, it says expose to USD, EUR and SGD.

Started with financial assets and liabilities from B/S, where net exposure is shown followed by removing amount in functional currency then add in contract assets and highly probable forecasted transaction in foreign currencies, it says YZJ has net exposure of RMB18B in USD. A 11% movement net after tax will be close to the amount presented in YZJ AR.

So Yangzijiang has done what Micro Mechanics has not, clearly state the exposure is after removing amounts in functional currencies then add in highly probable forecasted transaction in foreign currencies. I don’t know how highly probable these amounts are and how far out into next year. While the intent is good, the result is likely to be nowhere near what the real exposure if a 11% movement happened. And most importantly, like Micro Mechanics, those that are not presented in AR are as real as those presented.

Food Empire. Note 37. Foreign currency risk of AR2008. First paragraph says it all.

The Group has transactional currency exposures arising from sales, purchases or operating costs by operating units in currencies other than the unit’s functional currency. Approximately 2.2% of the Group’s sales are denominated in currencies other than the functional currency of the operating unit making the sale, whilst 66.4% of purchases and operating costs are denominated in the unit’s functional currency.

It doesn’t matter whether operating units is a subsidiary or group of subsidiaries, basically, if the subsidiary functional currency is RUR and a 2.2% mean only 2.2% of the subsidiary sales are in other currency other than RUR (functional currency). Where is the risk?

But only about 66.4% of purchases and operating cost are in RUR. Sound good? Think why such high level of cost not in RUR? Where are their manufacturing plants? Indirect cost? Marketing related cost will most likely to be in the functional currency of the unit.

So, the number in AR does not address the main concern of many “investors” ie the devalue of RUR against USD or SGD. The figure doesn’t even show up.

To know the real currency risk of Food Empire, look at below.

Revenue – note 4 say main markets are Russia, Ukraine, Kazakhstan, CIS market and Indo China.

Trade receivables – note 24. Say outstanding 36M and the amount denominated foreign currencies add up to about 3M. Now this does not make sense, unless it is talking about amount not denominated in functional currencies of its entities. If not how is it possible that Food Empire has USD30M of receivables selling into Russia, Ukraine………. etc?

Cash – note 25. Same thing as note 24. Just replace receivables to cash

Trade payables and accruals – note 26. Now this time its finally say, other than functional currencies.

Loans – note 29. Mainly USD and SGD loan. Currencies mismatched!

Segment – note 33. 86M of inter-segment sales! Basically, it is saying the manufacturing is not in the sales countries. This can also be seen as non-current assets are concentrated in Singapore, Malaysia and India.

This risk presentation in AR is as good as useless for many companies and lot of errors as well.




Posted by: donmihaihai | November 14, 2019

How easy to forget

The recent 180% turn in the treatment of interest cost for property development resulted in substantial changes in the financial of companies like UOL and Oxley.

In short, borrowing cost for development property is no longer being capitalised into the cost of the development but expenses as incurred. Basically, it means higher gross profit and higher borrowing. Nothing changed except for timing differences and where the cost goes.

Watch out for companies that bark at the changes, these companies are likely to be the same that have been barking on their non recognition of revenue from sold overseas units until upon completion of the development.

Property development is inherently lumpy, so do the financial of property developers. The attitude of these developers says more about their financial health than their words. Those that keep pointing to their sold but not recognised units “forgot” that they are currently recognising the sold but not recognised units previously. What more they are still building the property. Developers who bark at the increased in borrowing cost “forgot” to say that they are benefiting from the expansion of gross profit margin due to the same changes in accounting treatment.

How easy to forget. REIT forgot to say that REIT work best when they are trading at a premium to their NAV. This is when REITs go shopping like crazy. Why not? When you have cheap money, almost any acquisition is accretive. All you need to do is to make sure that you give less than you take.

Using Keppel DC REIT scenario in recent acquisition announcement as example. The REIT is buying Data Centres at close to 8% yield with debt is taken into consideration, using money from placement at just over 4% yield.

How easy for REIT manager, when investors are like bees to honey giving the manager money at just over 4% yield allowing them to buy something with debts that produce close to 8% yield. Stupidity doesn’t need a reason. Oh yeah, at 4% yield, investor is paying close to 1.6X BV for Data Centres or REIT or investment property or property company.

When was the last time you paid 1.5X BV for a property company? That was the question I asked my colleague when he was so excited with it. Of course he was still excited. Why not, when share price jumped like crazy, why care about logic.


Posted by: donmihaihai | May 10, 2019

Money is always there, but the pockets change

Reading BH 2016 letter again and noticed that below is happening to Singapore.

You need not be an economist to understand how well our system has worked. Just look around you. See the 75 million owner-occupied homes, the bountiful farmland, the 260 million vehicles, the hyper-productive factories, the great medical centers, the talent-filled universities, you name it – they all represent a net gain for Americans from the barren lands, primitive structures and meager output of 1776. Starting from scratch, America has amassed wealth totaling $90 trillion. 

It’s true, of course, that American owners of homes, autos and other assets have often borrowed heavily to finance their purchases. If an owner defaults, however, his or her asset does not disappear or lose its usefulness. Rather, ownership customarily passes to an American lending institution that then disposes of it to an American buyer. Our nation’s wealth remains intact. As Gertrude Stein put it, “Money is always there, but the pockets change.”

 Hyflux and Tuas Spring

Since I am on Hyflux, let look at some statistics.

Statistics of perpetual class A preference shares as at 14 March 18.

13,572 preference shareholders hold 1 – 99 shares total 571,360 preference shares.

6,127 preference shareholders hold 100 – 1,000 shares total 1,461,300 preference shares.

388 preference shareholders hold 1,001 – 10,000 shares total 862,800 preference shares.

17 preference shareholders hold 10,001 – 1,000,000 shares total 1,104,540 preference shares.

That is about 20K perpetual preference shareholders and plus another 17K ordinary shareholders equal to what the press has been written about – 37K mom and pop investors.

Ignore equity shareholders because equity shareholder enjoy all the upsides and bear all downsides, the above says, on average 13,572 pref holders hold 42 pref share at $100 each, mean these 13,572 invested $4,209 in average. 6,127 pref holders hold 238 pref share at $100 each, mean these 6,127 invested $23,850 on average.

Of course these are average but it does say the amount invested by most investors are not significant and at least close to 75% of these pref shareholder invested less than $10K.

These stats actually paint a different picture from what are being printed in the news. Out of the total 37K investors printed on the news, the only one hurting from Hyflux should be less than 5K investors. Actually, logically speaking, only 405 pref shareholders (388 + 17) will be seriously hurt by Hyflux. It is a far cry from 37K so called mom and pop investors.

I can understand if one invested a lot into Hyflux pref share and finding all kind of ways to get back their money. But being the press, it has to exercise some sane thinking and professional judgement and not easily misled by other or trying to mislead other due to empathy.

Posted by: donmihaihai | April 18, 2019

Random Oxley

After reading news of Oxley for years, I was quite surprise that the aggressive property developer is telling the world that it is trying to de-leverage. I did not dive deep into Oxley and Oxley will never get pass my smell test, ie flip through the number and going into the details only if needed. I know what to look for in a property developer or owner so I actually spent lot more time pulling out number to write this article than doing my smell test.

Of course Oxley is highly leverage. Highest among the handful developers that I has seen or smelled. But the thing is, Oxley current leverage is near the lowest for whole of its listed history. 4.23X, 4.06X and 4.44X for FY2017, FY2018 & 1H2019 compare to 5X to 10X for FY2011 to FY2016. Debt to equity say the same, below 3X from FY2016 to 1HFY2019 compare to 3 to 6X for FY2011 to FY2015.

Doesn’t make sense, trying to de-leverage at the time when debts level is near the lowest? I know interest rate is going up and there is more strict regulation, and the company is taking on more projects recently. But except for interest rate, Oxley has always operates under stricter regulation since listed and while Oxley indeed is taking on more project, its equity base also increased, it is far from its hey days where it was taking on $9 to $10 dollar of assets for every dollar of equity.

If we leave interest rate out for a while, then Oxley must has made some wrong moves recently. I can guess. For a company who turn around their projects fast, taking on assets that doesn’t turn will pull down their return, especially if these assets are not as income generating or sell fast. You can’t just fuel it with debts for equity investment and over dose on debts for hotel and office. The return profiles are different from property development.

What I did not say earlier is that Oxley changed the way its account for Hotel, own use office and investment property from cost to fair value in FY2016. Fine here, nothing strange on changing accounting policies, but it has a positive impact on any leverage ratio. Now, leverage ratio also become a function of capitalization rate or direct comparison as well.

With the help of a pen, Oxley can tell other, hey our B/S improved. I have problem with co. revalue their properties sitting under PPE. Revaluation upward can easily capture gain yearly as long as the co. is pushing for cap. Rate compression and aggressive in using direct comparison. But it hurt future P&L. check Oxley hotel segment P&L, it is the worse segment within Oxley.

Another funny part on these that doesn’t make sense unless you put everything together. Hotel is depreciate within the lease period, well close to 100 yrs and own use office which is free hold, depreciate within 60 yrs. Doesn’t make sense unless it is to create a positive P&L for segmental results.

After writing so much about leverage but the most important thing to look isn’t leverage or debt to asset or debt to equity ratio. Most debts doesn’t get repay. Most get roll-over. It is the ability the service the debt, ie interest that is the most important. 3 to 5 X interest coverage is just good enough but not strong, if the company has a very stable revenue stream. Like rental. Most REITs are around 3 to 5X. Now, if one add in something like property development, there will be not much safety if the development sales is slow.

Stronger listed property has an interest coverage of 5 to 10X, these are pretty safe companies. Oxley belong to the opposite where cover is 1 to 3X.

But there are tricks here. Which interest expenses to use and which earning to use. For a company like Oxley, taking interest expenses and earning appear in P&L is useless. The P&L interest expenses reflect the loan portion for hotel, investment properties and other investment not development properties where interest cost is included in the construction cost under POC. Earning is the combination of everything. Now doing a coverage ratio blindly mean nothing.

Hey there is another trick. Taking on property development with JV or associate actually promote risk taking and present only the good stuffs. Ie. Remove debts from B/S and interest expenses from P&L. Oxley one liner income from associate and JV say superb profitability from investment in JVs and Associates. How much debts are needed to fuel these returns? What Hong Kong Land is doing should be the standard for property developers. Their calculation of interest coverage includes JV and Associate.

Hong Kong Land financial also tell a world apart on how they run their businesses through their interests in BFC and ORQ with REITs and non REIT. With REIT is way more aggressive. Something doesn’t make sense again, why do investor invest in REITs, taking a 5%++ yield and thinking that a REIT is safer than a company? The hunt for yield never stop.

Hong Kong Land financials, especially on associates and JVs is a world apart from Oxley where information is just not there. Oxley present a liner on the same thing what doesn’t tell the story. Granted, accounting doesn’t say what to disclose to be exact. How Oxley disclose is telling me what it doesn’t want to disclose. Easy.

Take one of the JV Oxley Serangoon Pte Ltd in which SLB Development has an interest as associate (one accounted as JV and another as associate??). SLB number say assets – 841M, liabilities – 837M and net assets – 4M. Haha. Don’t need to be smart to know what these numbers stand for. Oxley share of net assets is only about 2M. Oxley has close to 6B of assets and 1.5B of equity. If this development is counted as subsidiary. It will blow it B/S and how many more developments can Oxley take on? Easy answer.

So why do Oxley want to de-leverage? Oxley will never achieve the same profitability if debt-to equity ratio goes down to 1 and will never differentiate itself financially. From what I can see through the numbers, there are a few investments that is not working out at the moment.

Is Oxley trying to change from a debts fuel developer who sell project super well to something else or just go back to the good old days and make sure that its sell all units fast.



Posted by: donmihaihai | March 22, 2019

you are locked in.

The Breakdown of latest regulated tariff rate $23.85.

Energy generation cost (Genco) – $18.09. 75.85%

Network cost (SP) – $5.31. 22.26%

MSS (SP) – $0.4. 1.68%

Market admin & POS fee (non-SP?) – $0.05. 0.21%

The only adjustment within the regulated tariff rate is energy generation cost.

From SP services AR, under segment results, electricity retailer is grouped under and I believe form bulk of the market support segment. EBITDA and NPAT for last 3 yrs are

EBITDA & EBITDA margin (2018, 2017 & 2016) – 181.3M(6.37%), 104.8M(3.93%), 103.6M(3.53%)

NPAT & NPAT margin (2018, 2017 & 2016) – 135.4M(4.75%), 73.7M(2.76%), 73.8M(2.51%)

What does the above figures say? Electricity retailer is a low margin business in Singapore. Any retailer who offer more than 10% discount to regulated tariff rate will be highly like to be loss making because SP services only earn max 4.75% out from 100% of the regulated tariff rate. Of Course, SP services might be stupid and lazy and new retailers are smart and out to disrupt our Singapore electricity, so they buy smart, hedge, etc etc.

But something doesn’t change, 24% of tariff rate $23.85 are fixed. The price of electricity sell by Genco must be really low/ out from projection for retailers to offer big discount.

In short, there are only 3 players in the whole chain who will take the price risk. Genco, retailer and consumer. If consumer is offered a big discount from regulated tariff rate, then either Genco or retailer will be taking the hit.

I suspect that the amount earned by SP services from being a retailer with regulated tariff is actually lower and the results were actually supported by other services included in this segment.

Base on discount offered by current retailers, most if not all will be loss making and unlikely to be profitable going forward. Why are they so stupid? SP services results might say something, retailer is high turnover, low margin business with low fixed cost. A low-cost retailer can generate high profitability as long as there is no suicide pricing.

The problem with Singapore retailers is, the market is open up with many retailers who can only outdo each other in price alone. What can they do if the end road they want is big market share and less competitor? Pricing.

What happened next? How many households will keep checking on offer rate and regulated rate in the future? I don’t know. I won’t do that of course. Now you are locked in by them.


Posted by: donmihaihai | February 3, 2019

Sad story of CapitaLand

A proposed $6 billion acquisition with $3 billion fund by issuance of new shares. With enterprise value at about $11 billion, total assets should be around the same.

Base on latest available financials, Capitaland has about $63 billion of assets and equity of almost $33 billion of which less than $19 billion belong to shareholders.

A transformation acquisition and much inks been written about it.

But the math is telling, spending about 1/3 of its equity with hardly an increase in EPS. Well the estimation is 4%. Hardly beat inflation. Spending doesn’t buy growth.

But it is so called transformation with many fancy charts and numbers being put up. New high growth sectors, leader in AUM, etc etc. Get the feet grounded. Like the storied growth sectors and fund management is certainly attractive with high ROE, bigger AUM usually mean higher ROE. But Capitaland as a group, doesn’t has high ROE, before or if this acquisition is done. Why so? Maybe few questions will answer that. Can Capitaland achieve this AUM without being Capitaland? Can fund management be decouple from the capital intensive side of the business? If the answers are no and no then the AUM is not sexy after all with single digit ROE except good story.

Also it is simple math that issue share below NBV mean decrease in NBV per share while above mean an increase in NBV per share.

Capitaland has always been written as the largest Singapore property company, innovator of Singapore REIT, blue chip REIT sponsor, Aces capital recycling model and big property fund house. But its NBV grew from $2.80 to $4.20 in 17 years (2000 to 2017) plus dividends and distribution of CCT and dividend paid by CCT and grew in CCT NBV only resulted to a NBV of almost $6.00. That is a CAGR of 4.59%. There is double counting in CCT as Capitaland own about 31% of CCT on average so that portion in dividend is retained within Capitaland but the amount is a rounding figure.

Capitaland created not even a 5% CAGR return over 17 years and among the biggest property companies listed in SGX, Capitaland growth in NBV is the slowest. Nothing sexy about capital recycling model after all. Take UOL, another largecap SGX listed co without capital recycle model and a fund house with large AUM, NBV grew from $3.28 to $11.1 during the same period. That is a CAGR of 7.43% and I am not even counting the dividends paid over the year.

Things are clearer now, nice stories which include latest acquisition and lousy numbers which include latest acquisition as well. The numbers look a little better in recent years but well it look real ugly when Capitaland is one of the biggest Asia property fund house.

But I am going to hedge my opinion. If Capitaland is able to achieve a ROE of 10% yearly without destroying shareholder value through corporate moves, then it is a decent company.


Posted by: donmihaihai | January 6, 2019

Market, Palm Oil, shipping and shipyard and property

The markets ended 2018 in volatility. Decent because volatile markets produce opportunities. I don’t know where the markets is heading to since I doesn’t own a crystal ball but a down and cheaper market produce higher return. This is truism. Investing in market with daily quotes mean volatility. This is truism too.

In recent times or years, I have been looking at beaten down industries and it has not yields positive results in terms of companies I wish to invest but I do notice that currently, other than a few sectors/ segments, valuation is really cheap with many selling at a discount to book value. The future of these companies doesn’t look bright but a basket of these stocks should do well in say 5 to 10 years as long as they are able to ride through the darkness. The return might be even better than those constantly in good news because you pay for brightness.

But I prefer to be invest in companies with certain advantages and I am not finding many. Talk about companies and industries interested me much more than market.

Palm oil industry.

Went through a few and stopped. Maybe I will return some days and read the rest. Commonality business. Huge uncultivated land banks, young plantation are painted by each company I read as competitive advantages!

Is that the case? In good times, every company expand their planting programs, trying so called controlling cost. In bad times, planting basically stopped when cost of planting actually reduced. Nerds behavior ensure low return and only low cost producer achieve higher profitability. Competitive advantage is their competitive disadvantage since every company is doing the same thing. Demand and supply. Low cost operator win. But the price of better operator is too high and I don’t see the reason for betting on them. Lousy operator is a better choice because the market needs their produces and they are cheaply priced. But the question is who.

I don’t need to know where palm oil price is heading next year. Investing in company in palm oil industry will be a multi years bet or perhaps decade waiting for as a group, for competitive disadvantage to turn competitive advantage again.

Vessel operator/ owner/ shipyard

About 10 years back, bulk and container market burst, offshore segment was the favorite. Fast forward 10 years, all burst. What I said back then still hold true. 1) It is a commonality business for all segment within this group. 2) Charter rate for offshore segment is not depend on oil price alone. There are at least 2 supply and demand. In fact, the supply and demand of vessels matter more than oil price. 3) In ship building, when one segment is down, shipyard will try to enter another segment, pushing down the price of the healthy segment.

When bulk and container segment were down, everyone shout offshore!

This should be a better industry than Palm oil. Low cost operator should stand out better. Not interested in the group of companies that are in need of restructuring as long as they are going to be managed by the same management that led them into trouble. For low cost operator, management is the key. So what even if their stocks are priced super cheap. Competent management that are able to ride cycles needed.

Management that are able to invest in down cycle needed too. Yes invest. Purchase vessels at rock bottom price even if you can’t find customer for these vessels. Baker Technology might be one as their purchase of CH Offshore look real interesting. Would be better if Falcon never milked CH offshore almost dry once Chuan Hup was out of the picture. Talk about corporate governance or how milky these companies are. I was not surprise when I saw those numbers in the annual report, conflict of interests, director duties, etc etc. None of the experts in the news bark at them. Good thing, I know who to avoid!

In an industry where there is nowhere to hide, I thought I don’t know much about shipyard and unlikely to invest in any. Changed my mind when I read Yangzijiang. Still don’t know much about shipyard and Yangzijiang is doing so so at the moment. How Yangzijiang did what it did in last 10 years even after many missteps? Good low cost operator. Wish the volatile market knock it price lower but it is not happening yet. I am not sure whether Yangzijaing is the best shipyard or profitability in the world but paying just below book value for its track record is something I would do.


ERA is listed again under APAC Realty. Are we going to do away with property agent anytime soon? I don’t know but I like the segment they are operating in. High return and easily know who the winner is if the future look like the past.

Property developer’s valuation is cheap for good reasons. Excluding investment property, they are not doing well, with or without new measures. Actually, investment property is not doing well too. The longer the current profitability level continue, the chances of something changing is higher. Or just plaining slow dead. Physically HDB or condo as investment might continue to produce lousy return even with the usual leverage.

Investment property produce incurring income but that doesn’t mean it has superior business model. But company with good investment property at right location does has certain advantage. Developing property has no advantage by itself except for good operator and reputation.

A REIT has no real competitive advantage, yeah exclude tax exemption (To government, this is the place where you need to take away exemption, no reason to continue with REIT matured locally and increase GST rate. You are benefiting existing REIT with local investment properties not new REIT that hold overseas properties. It will hurt the market a little but anyone who invested in the market is a capital provider, ie with excess money. Mom and pop investor or not) so valuation, relatively speaking has no reason to be value higher than a company in this industry.

Unless I am investing in a small cap, any new property development or investment property matter not much, it is the track records that count. Recent years has seen companies investing overseas in term of developments to sell or buying properties. It is not hard to see why so as most are sitting on excess capital with limited opportunity locally. But this does not mean buying at 5% cap rate is a good investment. In fact, because most are able to produce return initially, it is hard to differentiate who is doing right. Look back to their records through the numbers not what the management say.

Lastly, reading their number mean a good understanding of accountings. A same property or development can be accounted differently in two company books. But long term results will show.

The market has cycle as well. Or rather nothing goes up all the time. The downturn in 2008 was too fast. A better downturn to create death of STI will be a slow dead. Give me that, maybe a 5 year bear market after a 9 year bull market.

Posted by: donmihaihai | October 21, 2018

Temasek, AAA, high yield bond.

Ok not exactly high yield bond but Temasek issued 5 year bonds at 2.7%pa. Earlier this year Issued a 10 year(or 5 year?) under indirect subsidiary Astrea at 4.35%.

The thing is these bond are opened to public, ie retail investor with min 1K to 2K. It is like throwing some bloody meats into a sea full of hungry sharks.

Invert. If Temasek is doing public services then it is fine if the coupon yield is within the range, ie cost of debt to Temasek. At the higher end or out of the range, well…

Investor has to think twice if Temasek issue some IOU at high interest where it can borrow the same amount cheaper.

I don’t know what is the borrowing cost of Temasek and neither did I read those prospectus or understand Temasek well. But because these are IOU, it must be look into from Temasek point, not investor.


Posted by: donmihaihai | April 25, 2018

SGD400M is not alot

The cash on the B/S of Haw Par is not a lot. Even if the Haw Par pays out every single cent plus the coming dividend payment, the return on current price is just about 13%. And it is about 12% of the net assets.

But that SGD400M cash is the sore eye. The management has failed badly. Year after year, it has prudently looking for acquisition of operating business. But it never happen, regardless of the market cycle. The longer it remain as such, the more likely management will do something stupid due to increasing weight of the cash. About time for management to think about this 12% with an estimate growing rate of 15%.

ROE of Haw Par is always low mainly because of accounting standard. Accounting standard also doesn’t fully capture the wealth generated by investees(UOB & UOL) but it captured the swing in share prices instead. Still the wealth generated is flowing to Haw Par.

Due to such situation, Haw Par usually trade below intrinsic value or its true worth. And at certain price, it is a remarkable investment and will not be easily available elsewhere. Holding on to  huge block of UOB and UOL compare to its operating businesses created such opportunity.

As share price has never gone crazy, it save me time and effort. It is for lazy investor who sit on its ass for a long time. Whatever discount the share price might be trading at for the last 20 years, it has never mask the growth in NAV per share and will not for the next 20 years as long as Haw Par, UOB & UOL being managed as per current.

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