Monday, December 31, 2018

Thinking of Every Investment In A 10 Year Timeframe Will Help Frame Your Decision Easier

Happy New Year Folks!

With the official start in 2019, I wanted to start with an article that advocates a long term mindset strategy that can help you make better informed decisions as investors.

This is something which I've personally used when I look into buying the equity of these companies.

It has helped me tremendously from the very first I began investing, especially the way I framed my thesis into making an informed decision.

Investing is an incredibly tough and arduous activity because many investors made them so.

For years, folks have begun to experiment on deep theories and implement different strategies to meet the needs of their returns, often high returns that ended up not quite working for them.

For beginners who have never touched investment previously, I can sympathize with them.

With the ubiquitous of news floating around these days, it gives people plenty of choices to ponder upon which can be good if they know how to be patient and dissect each information to their advantage. Unfortunately, we are born to be impatient in nature and are often blinded by greed which can lead us to the wrong side of ending.

Fortunately, there is one strategy which I think it could help.

That strategy is to consider every investment that you make in a 10-years time frame.



Now, at face value, you may ask me if holding on to a stock that long warrants a feasible strategy.

Read it again.

Positioning ourselves into thinking in a 10 year time frame doesn't mean that we have to hold the position for that long.

All it does is it gives us a different perspective looking into things and help frame our decision easier, ensuring that we consider all aspects of the business cycle, valuation and be mindful of the potential downsides so it does not throw us into the deep end of getting into the hottest wrong stock in town (Hello Creative).

If you buy a company with that sort of mindset to begin with, and for any reason, Mr Market decides to throw you a surprise by appraising it 20% higher in a few months time for instance, then you are most welcome to divest them when you see fit.

Again, most money is made when you purchase so it is imperative that you purchase with a solid reasoning and margin of safety.

You can also use the 10-years time frame strategy if you are a strong dividend investor but an amateur at valuing companies.

What this means is you are strong in your capital and you have a large base which makes it easier to pursue a dividend investing strategy.

Because your capital is large, the required return on your dividend investing doesn't have to be on the extreme end on the high.

This entails that you avoid companies that either pays out high payout ratio or high dividend yield that might sound you out a little bit as a trap. So you filter a lot of fluffy companies out that will increase your risk.

You ended up with a slightly "safer" companies after the filtering, assuming you have some basic knowledge to read up on the business model, history of the company, and financials (free cash flow in particular).

So you picked up a company, and say for instance it's Far East Hospitality Trust or Far East Orchard Limited.

One is a Reit, while another is an investment holding developer company.

The latter owns the former some 30% or so.

Far East Hospitality Trust (FEHT) is a pure Singapore based real estate investment trust company with the principal investment strategy of investing in the hospitality industry such as hotels and service apartments on a long term basis.

FEHT is currently trading at 60 cents, which gives a valuation of a forward dividend yield of 6.9% and a price to book value of about 0.7x.


Their properties are not exactly your typical A-grade well known of Fullerton or Marina Bay Sands, but they are a very respectable upscale to midscale grade of your Oasia Novena or Rendezvous Hotel. They also have a few in the neighbourhood area such as the one in Changi.

If you see the lease tenure of these buildings, they will at least last on average another 60 years or so and possibly seek an extension after that, which by then will not be my concern anymore because I am probably gone from the face of this earth at that stage.

Sure, they will need to ramp up to enhance some of the old buildings for maintenance and to remain competitive and this will need money but a good management is there to watch this out for us.

Now, if you are a beginner and you adopt the 10-Years time frame strategy I was advocating in this article, then you'd know that at the end of the 10 years, you'd have received a dividend return amounting to 6.9% x 10 years = 69% return, without accounting for any capital gain (or loss).

You can then look at it two ways.

First, you look at your dividend return as a part of your overall ROI on your capital payback. You know that doing the maths you'll get your money back after around 14.5 years or so (100/6.9). We have mentioned that the lease tenure of these properties goes well beyond this 14.5 years so just by sitting doing nothing and assuming FEHT is still around after that, you are likely to end up winners as an investor.

The returns might be slow, but you get the idea.

And ending up as winners means you beat 90% of the retail folks out there who are blindly losing their money not knowing why or how.

Second, you can take a look at the dividend you received as part of your reduction in the company's residual valuation.

This is actually similar to point number one I was making with the difference only by looking at it from a different angle.

If you have received a dividend return of 6.9% x 10 years = 69% return, which is equivalent to 41.4 cents, and you deduct this from your purchase price of 60 cents, then your average price will go down to 18.6 cents. If the NAV of the company stays the same after 10 years (which most likely be or can even increase for good Reits), then the valuation of the company will become so attractive at Price to NAV of 0.2x.

The same can be said of Far East Orchard Limited, which currently trades at 5% dividend yield and an attractive valuation of 0.4x Price to Book.

Even if this investment ended up as a dud or trap at the end, you get your money back through dividend after 20 years and you can be sure companies like Far East Orchard are less likely to go bust, with their history track record.

Final Thoughts

For folks like you and me who's been investing for sometime, we are always looking at returns differently in a way we wanted to challenge ourselves harder than simply just floating above the water.

But the challenge for the new investors is surreal and real.

They are not only overwhelmed by the seemingly high returns their friends are making but many are attracted to value traps or companies they buy at the peak and ended up losing their hard earned money, which spiralled down as scars for the rest of their lives.

To begin well a new investor has to be patient, remain calm and accept that floating above the water in the first few years is the norm. And most importantly, adopt the correct mindset and strategy that he can improvise after getting more experienced in the market over time.


Thanks for reading.

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Thursday, December 27, 2018

Topping Up $7,000 For My Special Account (SA) For Tax Relief Purpose

You know you are always behind when it is towards the last day before the new year and you are rushing towards finding reliefs for your tax assessment before it closes.

This year, I am leaving it again to the last minute month of the year as cashflow was struggling a little bit in the earlier months and I have finally some spare cash to devote to CPF in order to boost my future retirement income.

The more intriguing part of this topping up aspect is of course the tax deduction relief which plays a big factor for me in trying to reduce my overall assessment. A quick back envelope calculation tells me that I will be able to "save" a total amount of $7k x 11.5% = $805 right away, without even taking into account future 4% per annum benefits on this top up that I made.

From a ROI point of view, it's worth the top-up, as it's incredibly hard to make more than that in the market out there right now with such volatility.

Do note that there is a maximum cap for cash top-up relief per Year of Assessment (YA) which is $14,000 (Self $7,000 and family members $7,000).

There is also an overall personal income tax relief cap of $80,000 for those who have plenty of them though it won't be applicable in my case.


The top-up is pretty hassle free and all it took me was an easy 5 minute to finalize the transfer via internet banking.



An alternative to this cash top up is to max out your medisave account which has a ceiling of

The annual contribution limit has now been revised to $37,740 so in case you didn't hit that (most will not hit that), then you can still make voluntary contribution to your medisave account for tax relief.

In the grand scheme of things, either of the two would be pretty much the same as Medisave can be used to offset your insurance premium before 55 while for Special Account you will have to wait until it becomes a retirement account after 55.

Both account currently earns 4% risk free, so there's no worry on this part.

If you have a spare cash lying around and your tax bracket is in the higher region, I think it's worth the shot at the very least.

Do watch out the timeline as today is the last day for topping up as the account will only be credited towards the next working day which is next Monday.

Thanks for reading.

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Sunday, December 23, 2018

Reflection of 2018 And What To Look Forward In 2019

As we wind down this week towards the last week of 2018, I wanted to reflect on a few aspects related matters that is important to me.

I feel it is important to keep abreast of the situation and we reviewed them after each year has passed.


Job / Career

I left my 6 years job in the logistic company to move into an unchartered territory towards the last quarter of the year starting in September.

The increase in pay was always a welcome addition but it came with a totally different kind of challenge, a challenge which I am still accustomed to trying out.

Moving to a different company doesn't make me indifferent to how I feel all along about being the corporate slave. I feel like I am still the running front for the antagonism towards being the rat in a race.

That doesn't change my opinions until I am proven wrong.

Travel

I burst my budget for travelling this year with 7 holiday plans during the year which spans across the different countries:

Taiwan (with family) - 14 days

Johor Bahru (with family) - 4 days

- Jakarta (with family) - 15 days

- Phuket (with friends) - 4 days

- Taiwan (with friends) - 4 days

Kuala Lumpur (with family) - 7 days

Bali (with family) - 10 days

Don't ask me how I managed to escape from taking so many leaves. Honestly, I don't know that myself and it spans across the different weekends + public holidays combo.

On the travel expenses, I think I busted over $25k and is definitely one aspect I wanted to cut down in 2019.

Expenses & Savings

Despite the over burst in travel budget, we managed to keep our purse tight during the year with vigilant spending in the other categories, specifically on transport where we frequent BMW (bus mrt and walk) a lot more often, even when we are bringing our two kids out.

Meals and groceries spending were also monitored closely so we don't overspend on unnecessary things.

Savings were a modest $40k or thereabout during the year which I managed to capital inject it into the portfolio.

Family

I get to spend a whole lot more of my kids and also my parents this year which was really great.

The idea to be able to live a work life balance and to truly prioritise it stems from the fact that we were more confident to walk away from something which doesn't gels with our priority in life.

Turns out it is always a non-event but the feeling of having that trump card advantage is imminent.

Investing

Last but not least, this is the growing the pot segment.

As with all the years in the past, there are many lessons which I've learned and this year was no different.

A couple of reflections on this front:

1.) As a value investor myself (I define value investing broadly as something that is opportunistic in nature), I seem to find myself jittery at times with when to hold cash or when to take a position. Even when I am so damn sure about a position that will make me money in the future, I still wanted to perfect time it to the best of my ability so that I extracted out the maximum profits or minimized the losses.

2.) I hate to be on the wrong side of things when my call didn't turn out to be correct, especially the avoidable ones such as the Keppel KBS case. Even if this case was an isolation, I still didn't quite like the feeling of being in the wrong side of things.

3.) I swing my bat a lot lesser this year as compared to the previous year and it worked quite well. I believe this has got to do with me positioning a defensive position since the start of the year so with market volatility there is nothing much that I need to rebalance.

4.) My portfolio would suck badly should there be a bull run this year like the one in 2017. Despite being almost 100% vested all the time, the portfolio nature is defensive and they perform well when the markets are seeing red rather than green. I like the irony of these things.

5.) This is also the first year which I have picked up the shorting strategy to be on the opposite fence of things. There are people asking if it was easy and the answer to that is there are no easy stuff in investing so just watch out the risk tail on that end.

6.) I learned that you can still make money in a bear market and lose in a bull market. It all depends on how you identified your opportunity.

7.) There are a few industry leaders which was badly hit this year that caught my attention which I might turn the swing around and place a long position a bit more in 2019 if it falls under my radar. A few of those names are like CDL, Keppel, Dbs and Singtel. This is almost like doing a Dogs of the STI method but I'm only interested in industry leaders.

8.) I managed to end in 2nd position of the sgx challenge this year after losing to the bear prowl on the last day of challenge, even with a 29.6% return.

Congrats to the bear prowl for winning the competition and it was a great honor to challenge with the rest of the warriors too.



9.) There are a few folks who have messaged me about if I can reinstate my portfolio transactions back every month. There are some things which I am still working on but once things stabilised I will bring it back in the early 2nd quarter of 2019. This is more of an update.

10.) Since my article was featured on yahoo and Cpf, a lot of people has mistaken me thinking that I earn a great deal of income so I just wanted to clarify. As a single individual maybe that is true but as a household that is not the case because I am still well below the median which means technically a couple both earning median income would easily trump my income.

Having said that, there are certain advantages and circumstances which I was privileged to which was different from anyone but this is not a race against one another. This is a race against our own selves of yesterday.

What to expect in 2019?

I am expecting big changes to come in 2019 from the personal front but I'd like to only announce it once things are closer and with more certainty ahead.

On the financial matter, I am going to challenge myself with the $1m race challenge which is going to be extremely tough but I am not calling it impossible. At this point, I am "just" about $170k to that goal so I'm sure it won't be "tough". Read the opposite.

I just need to make sure I avoid falling into silly traps and watch the risk tail very closely on some of the companies.

Capital preservation is also key at this point so I wanted to be on the safer side of things (a big no to bonds for me).

Health and families continue to be the priority so I will continue to work hard on this front and not neglect it. If any, there is a big chance I might enhance this in 2019.

With that, I wish everyone a happy Xmas to all your family, stay safe health and happy.

Thanks for reading.

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Monday, December 10, 2018

2018 XIRR Performance & Networth Updates

Time really flies these days when we are in our mid 30s, pegged by a combination of busy work and heavy loads of watching our children grow as each year past by.

I wanted to wrap things up for the year given that I will be taking a holiday trip to Bali with my family for the next few days until Christmas, and wanted to do a reflection of my equity performance this year before I then wrap things up for 2018 on an overall scale. 

I received some good feedbacks last year on how I presented with my performance review, especially clearly positioning my winners and losers so I thought I’d continued with the same format for this year. 

Please bear with me as this will be a pretty long post.



Overall Market Thoughts

This was a tough and rough year for investors because this was supposed to be an expansion year where interest rates are going higher because the economy is improving and there wasn't a clear sign of global slowdown in the economy yet the market experienced some of the highest volatility we’ve seen in many years due to the trade wars and other stuff.

All major indexes including the DJI, S&P, Nasdaq, HKEX, Nikkei, DAX were all down for the year and STI was not spared either. 

What this means is that if you’d been just holding cash all along this year, you would have outperformed majority of the people. Of course, it is a very narrow angle of looking at it this way because equity as an asset has proven that they have and can perform better than cash in a much longer run. 

A couple of my fellow financial bloggers and close friends that I knew got caught in some of the situations this year unguarded.

There were the suspension of Hyflux incident, then the chronicle of APTT yield whore incident. We also have the Lippo cases of First Reit and some of the rights issue from OUE Comm and Keppel KBS. 

Even banks went down in the face of higher rising interest rate, and most Chinese and HK stocks are impacted by the tension in the trade war.

We don't even need to go to cryptocurrency to make our case.

In other words, investing in this year is tough because even if your portfolio has been sufficiently diversified across industries, you might still be caught this year by some of the incident which played out.

2018 XIRR Performance

Throughout the years, I’ve been implementing strategies that allow me to extract the maximum amount of return with the least amount of risk. I do this by either rebalancing my position or tweaking my strategies from time to time to meet the needs of my portfolio.

This year, I used a dual strategy of both going long on a high dividend companies demonstrated by my X+Y strategy (in case you're wondering what is this, you can read it here) and going short on some weak momentum fundamental companies.

I have yet to find a time to write on the latter strategy but I promise to do so once I have more time in 2019.

My portfolio remained a heavily concentrated portfolio consisting of only 8-9 positions, which remain suitable to my character to date. 

These are very high convictions position and this strategy entails that I take into account the risks and downside as much as possible because all it takes is one or two to blow up my portfolio so I put a lot of effort into watching that risk tails over there. 

This year, my lucky stars continued to provide me with great guidance in the face of many distresses in the market. 

While the Dow and S&P have returned slightly negative to date this year, our local STI index has also returned negatively at about -6.5%.

I was fortunate that my returns this year has outperform them at a decent 18.2% based on the last stockscafe report I checked. There will be some minor adjustment up and down in the next 2 weeks but I reckon it won’t dampen much of the return already locked in.

The long term 8 years return on average is about 18%, so I think I'm keeping up this year pretty close.


This is also the 8th consecutive years my portfolio has managed to do better than the index so I hope to continue this trend next year.

Let me break this down by my top 5 gains and losses details inclusive of dividends (last year I did top 10 but didn’t trade as much this year) 


Top 5 Profit Based on % Gains

The goal in my concentrated portfolio is pretty clear and that is to:

i.) Always on the lookout for an opportunity to make gains; and
ii.) Make sure my top few positions contributes positively to the returns. 

It was also around the same time that I started experimenting on my short strategy in the 2nd half of this year that I found out there was room to maneuver in this opportunity because the market was not pricing in certain downsides that I felt was adamant.

So I tested my thesis to this strategy.

APTT was amongst one of the opportunities that I managed to get in because we all knew earnings were going to be poor and that the company would be facing issues with their cashflow given certain of their debt covenants going to due sometime soon. So I went to take a short position two days before the earnings release with the intention to cover them back immediately after that. The dividend cuts whilst certainly not surprising to many, was a strong catalyst to the downside and I managed to cover back with a decent profits. Still, I have many close friends who were caught by this so I have mixed feelings on it.

The second company I managed to test with my strategy is with SIA Engineering which I blogged recently about it here on their fundamentals and although it was a pretty good gains in terms of % gains, it was immaterial in terms of the $ dollar amount.

The third company I currently have open with my short position is on UMS which I've blogged about it here on the fundamentals and the opportunity with it. I intend to have them closed after their full year earnings result next Feb. It is currently sitting near 10% gains at the moment. 

For my long position, I was fortunate to have 2 out of my top 3 holdings – Vicom and M1 made it to the list. 

Vicom has been one of my important general in this year’s volatile market and I am glad to have this around because it gives me both a decent capital gain and 6% dividend this year. This is probably a good exemplary of what I define by a 6% + 4% company when I gave the talk at Investors Exchange earlier this year.

M1 is probably the dark horse this year. 

When I accumulated M1 throughout 2017 and 2018, it was met with a lot of scepticism because the industry were in a doldrum (see my poor Singtel investment below later) and there are so many competitions out there that it was hard to “gain” from such an investment as an investor. 

I bought and accumulated them because I thought the valuation was cheap enough to give me that dark horse element and a nice 6% yield to wait for it to happen. Fortunately, the patience was well rewarded and after the announcement I sold off my shares at $2.10 to book a handsome profit from it.

Top 5 Profits Based on $ Value

The top 5 profits based on $ gains are pretty much similar to the one above so I won’t repeat again myself. 

The only exception changes is FLT moves up to the list while SIA Engineering moves out from the list because of the $ amount in value. 

I think FLT is another great example of the long term 7% + 3% strategy. 

Top 5 Losses Based on % Loss
Top 5 Losses Based on $


I've had my fair share of losses during the year and the most affecting me was the Keppel KBS due to the rights.

I clearly knew the downside scenario play of rights which I've written a lot in my past articles but was disappointed to have been caught by this when I went in too early in order to catch the mother share price.

Then, I exacerbated my mistakes further by applying for the excess rights too little given that I had limited funds to apply for the excess. When I looked at the rights results, I knew I blew my chances away. If I had played to my game, this could have been averted and I would be in the green.

Now, with all this and a potential tax case arising, this could be fatal if things doesn't go my way. I am still reviewing my position in this and Manulife for the next few weeks to see if I should divert away from that risk tail end.

It's a big lesson to learn and I had to pay for the mistake.

I was also rather disappointed with my Sasseur and Capitaretail China Reit investment because I think the entry price could have been better and the downside risk is pertinent given the trade war and devaluation of the RMB this year.

Again, I will continue to monitor on Sasseur and have them reviewed after coming back from my holiday.

Tuan Sing and Far East Hospitality were the more okay type of losses that I can accept because I think there were macro things that went against them during the year which was unprevented. I called this the "inevitable" type of investment losses I have to incur from time to time.

Networth Portfolio (2011 to 2018)

Overall, I think it's been a pretty decent year in terms of my networth portfolio growth.

The key in a rough market is really to contain your losses and make sure we don't get caught in certain situations that we don't want to.

Things like high risk equities, leverage are all tools that can be dangerous in markets where we put our guards down and am instilling a very heavy discipline when using these sort of tools.

I am fortunate that my losses (apart from Kep KBS which I'm still pissed off at myself urgh) were rather contained within and I found a couple of good opportunities during the year to nullify the impact.

Because of this, I am pleased that I managed to grow my networth this year by about $170k from the start of the year.

Out of that, the gains coming from equities and dividends during the year amounted to about $130k, while capital injection from savings took about $40k.

This is net after all the day to day expenses incurred and the savings portion are excluding CPF (because I always get this question).







Whilst we still have 2 more weeks to end the year, I will record down the networth of the portfolio to end 2018 at $833,750.

Do note that the Dec amount includes my wife's and children's portion of their shares as I have decided to consolidate them for easier reconciliation purpose with the CDP. This amounts to about $50k. Without this impact, the portfolio would end the year at about $783k.


I think 2019 will be another turbulent year because of the many elections that are happening across the Asia region. Still, what I wanted to highlight is in the midst of all the turbulence there are still opportunity that lies upon.

It is up to us to protect what matters when that happens.

Meantime, wishing everyone an early Xmas ahead :)

How has your 2018 performance been? Are there any good lessons to learn that you wanted to share with others?

Thanks for reading.

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Friday, December 7, 2018

SIA Engineering - Is It Time To Buy This Company After 22% Decline This Year?

SIA Engineering has been an investor's favorite for many years because of their moats servicing the maintenance and repair lines for various different airlines, with their own SIA planes taking up the majority of the recurring business.

It does look like a defensive business because every capacity planes that are increasing each year would have to undergo maintenance one way or another.

Over the years, the operating environment gets tougher due to longer maintenance interval perhaps as the quality gets more resilient for the newer next generation aircraft and there are many more competition in this small niche space of the industry.

The JVs are giving them good growth over the years as the company continues to invest in this segment partnership, notably with Stratasys in the areas of manufacturing technology and Cebu/Airbus for their respective maintenance with the airlines.


This year alone, the share price has dropped from $3.20 to today's low of $2.47, that is a drop of over 22.8%.

If you are someone who held this stock from the start of the year, you'd probably be screwed all over by now.

But is there really no value to this? What would be a good price to enter for this company?

I run my model using the discounted cash flow methodology by forecasting the terminal growth over the next 5 years to 1.2%, with an initial -1% for the first 2 years, then 2% growth thereafter.

I added back the depreciation which is a non cashflow item as well as their investments in the JV & Associates which are quite significant.

Their investments in the various JV & Associates are quite an important element to their business model so it is probably fair to value them separately.

What we are saying here in the DCF exercise is that we will take them out and see how much is the true value of the SIA Eng business.

PER of between 18x to 22x is probably a fair way to value this company with a discount rate of 8%.

What we get is an intrinsic value of about $2.66, which is about 7% higher than today's price.

Do note that this implies some growth into the future so if there's further deterioration to the business, then the value would plunge much further.



For investor, there's probably not enough margin of safety yet in this one.

The company has just recently cut its interim dividend and the balance sheet is weakening.

There's also no sort of catalyst at the moment and there are much better dividend counters out there to buy at the moment.

Thanks for reading.

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Thursday, November 29, 2018

Is Investing In Growth Always A Good Thing?

When investors like us invest in the stock market, the goal is always trying to grow our wealth over time. 

Investors are generally thrilled by the prospect of growth in general, whether they are referring to their income, savings or even the companies that they invest in. 

We just love things going in the "up" and "grow" direction.

It is so tempting for investors to see their companies growing by double digit each year because i.) they expect the management to take the shareholder’s earnings and reinvest them to propel for further growth or ii.) Higher growth means higher dividends that the management can decide to payout or iii.) the share price would eventually re-adjust themselves to the same valuation. 

What do I mean by that?

For example, Colgate’s share price is $63 today. If Colgate’s valuation based on price to earnings ratio is currently at 20x and the company prospects a guidance growth of 10% per annum over the next 3 years, then the forward price to earnings ratio at the end of the 3 years is expected to be at 14x. Most of the time, the market will not allow such scenario to happen and upon the announcement of the news, the share price would adjust itself to the range up to $84 such that the valuation of the company goes back to 20x. 



Of course, such scenario is a very simplistic way of putting it in mathematical form. 

In reality, we all know that not everything will go according to plan in the next 3 years. 

Well, mostly in that sense.

From a downturn to the economy to the change in the fiscal or monetary policy of the macroeconomic factor or the company could have internal labour, production or acquisition issues that they did not anticipate for. There could be a scandal in the making or a new competitor coming in with better quality and cheaper products. The possibility of any event happening in the 3 years is seamless. 

The problem is the share price has usually priced the news in earlier before allowing what the company can really perform.

The market is often forward looking and that's when most investors get caught in their pants, i.e buying when the valuation is high.

Most investors notice the prospects of a "good" investment only either when their friends tell them or when they read about it on the newspaper. By the time they put their foot on the water, most if not all of the good news have been baked in and the investor is left to pick up the mess should anything goes wrong or if the company is not able to meet the ambitious guidance they project.

Unless you are a damn good timer in exiting the market, the investor who uses this strategy are most likely to end up poorer over time.

Growth investing also has the tendency to caution the day when finally that growth slows down.

You can't have a company that grows perpetually and exponentially higher growth each year. 

At some point, the company is going to register a slower growth and when that happens the market is going to take it quite badly, re-adjusting to the slower growth outlook for the valuation it entails.

I don't have a good strategy to go long on growth companies because I'm always skeptical about either what the management say or what the world might crap on me.

Being in the financial and accounting sector myself doing forecast for the past 10 years of my work experience, I've seen almost every single time the forecast has gone haywire, even if they are only for the next 3-6 months, let alone multi-running years.

It is also extremely difficult to spot on the very few companies in their early stage of growth and then ride on them because it entails a lot more expertise on the sectors you are eyeing for (almost like going for a private equity seed stage).

I'm interested to listen though to the strategy of those who've been investing in growth companies for some time with some measurable success and how they decide to enter and exit and what are their cautious approach to not being caught.

Let me know in the comments below.

Thanks for reading.

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Monday, November 26, 2018

Investing Action Bias Can Be Detrimental To Your Strategy

I was having a short holiday trip with my family to KL in the past week so I did not particularly overlook the market too much other than quickly checking for news at night when my children has fallen asleep.

At times, I felt a bit guilty for ignoring my portfolio a little while I have some fun on the same side of the world.

Then I quickly reminded myself for why should it be that way.

While it is true that I literally did '' nothing'' to the portfolio, I reminded myself of the strategies I employed for the portfolio which has been working well for years.

My strategy to stick with a defensive dividend portfolio has been a boon bore for most of the days. It goes up a little and down a little in some days but they gradually move up after some years of convinced positioning.

Of course, I also opened a short position for UMS before I went to KL based on a couple of fundamental reasoning I have in my previous article and then I just leave it there for the thesis to work it out.

And then mostly I just leave it aside and wait for the events to play out.

I get on with my other side of life that I have.


Today's article is about how much action does an investor needs to have in order to feel justified that he or she considers certain aspects as trying to achieve.

Of course, it is common sense to everyone to know that most of the actions might not turn into desired results but many did not realise the behavioral aspects of trying to get involved with the herds.

Consider the recent events of First Reit which stole the limelight news in the past week for being the highly most volatile Reits jumping double digit day in and out.

Naturally, with such volatile event, it will be the town topic to talk to for many. Some may be fleeing for exit, while others may see it as an opportunity. Until today, we have not really received a proper explanation for causing such a train wreck other than some credit downgrade for the related associates.

The best action in this case is perhaps then to sit and do nothing until you've clearly visualize in your head the justification you need to buy/sell.

But most just wants to get a piece of the action for sake of "doing something"

This week, the big story is circulating the news about a manufacturing company Hi-P over a privatisation offer.

With such news circulating, it doesn't matter if fundamentals earnings or outlook are going to be good or bad, the share price would fly on such rumor.

Again, naturally it'll be the talk of the town and you'd be silly not to participate in such hot news right?

Does that even reminded you of the once great crypto currency which has now been quiet down quite a bit these days.

The more seasoned investors probably already know about this and are sticking to their strategies. The more experienced traders are probably having the last laugh of the day.

The newbies are most likely the lambs that get the slaughter.

Maybe, it's better for them to avoid the forum crowd, for many of the lions there are lurking, without knowing the consequences they have for "participating" in an action bias.










Monday, November 19, 2018

Investing Is So Damn Tough You Are Right

To say that this has been a tough year for investment is an understatement.

Investing, as a general form of growing your wealth is so damn tough that for one not to be losing money is sometimes already seen as a form of success.

I can totally relate why many people avoided them like a plague because contrary to many popular beliefs, it can jolly well diminish your money.


Imagine yourself being invested in Asian Pay TV Trust at the start of the year, having intrigued by its stuttering share price and a high dividend payout.

You might have thought the dividends they pay out is unsustainable hence you made a decision to project them conservatively at the fcf you think they can give out.

When APTT announces their recent results, the management is even more conservative than you are and slashed their dividends like they did to slaughter a dying pig, causing its share price to fall by 50% in one day.

APTT might be a bad example because the more savvy investors could have been advocating investors to avoid them since their ipo days.

What about a stronger company like First Reit, which owns several hospitals in Indonesia and homes in Korea and has triple net lease master arrangements with a solid industry and sponsor background.

Imagine if you are someone who've just started out and would like to form a sustainable decent dividend paying reits and you come across First Reit as a company that has a great background history in terms of both operational and financial.

You got in at $1.20, thinking a 6.7% yield is decent enough for a hospital industry and then out of nowhere got whacked down by 20% in a week without having any clue or news to what was happening.

That is 3 years of dividend panadol that you need to wait before you even recoup back your capital.

Sounds like a ponzi scheme to many.

For those that turns to arguably one of the safest company in Singapore, Singtel did not fare any better.

Singtel earnings have been dragged down by weaker regional performance and their share price have been languishing low, back to where they are in the last 10 years.

You could argue that you receive a lot in terms of dividends over the past 10 years but that's mostly for consolation.

You know that is not good enough.

At the end of the day, you might just turn to the Singapore Savings Bond and decide to wait until the recession is here but I can tell you that by waiting your skills aren't polished enough to handle such situations when it comes.

You'd be just waiting and waiting and waiting.

Investing does not guarantee that you build up your wealth and I do not have an answer to one that can guarantee that you will.

The environment we face in the next 10 years should make it even harder to make money.

It is so damn tough you are right.


Thursday, November 15, 2018

Recent Action - UMS

This is a recent strategy which I am experimenting on my CFD account which I will be explaining more in detail when I have the time to blog the full implementation on it.

I recently opened a short position in UMS Holdings at the price of $0.66 for 50,000 shares.

This was somewhat a different strategy I have for my main portfolio which focuses on dividend income strategy and will remain the core of it for the most part of things.



UMS has been a very popular stock in the past 2 years due to their recent semi-conductor upcycle, which seen their stocks price goes as high as $1.30+ prior to the bonus offer 1 for 4 sometime during this same time last year.

Since then, their results this year have not been particularly good, with the trade war between the US and China impacting the demand production of their products and some delays in capacity production.

The cut in the interim dividends from 1 cents to 0.5 cents based on their most recent results are probably the most clear signal as their businesses are slowing down and they’ve strayed away from their usual high cash balance in their book to preservation mode as they’ve started to spend some acquisitions this year, which we don’t know what kind of return it might bring back to the company.

In their recent results, sales were down by 26% for the quarter and net profits were down by as much as 41%, most exacerbated by the increasing manpower cost.

Margins for the core business remain largely intact.

Economic conditions remain largely challenging.

In the short term (and am taking a position only for the short term), this is a negative for me as most investors are looking to UMS as an income play more than anything else. 

With an interim being cut, partly due to the decline in business and also cash acquisitions, there are huge possibility that the full year dividends might be cut too as after the acquisitions, they have only $20m cash as compared to $60m a year before. This resulted in them going from a net cash to a slight net borrowing position.

Free cash flow for the 9 months is at $15m and I expect full year fcf to come in just under $20m.

I foresee full year dividends to be cut from 6 cents (which they need $32m) to 4 cents (which they need $21m), which gives them a dividend yield of about 6%. Not attractive enough for me as a long investor and I'd rather sit in the opposite fence of things. 

AMAT will report their 4th quarterly results tonight, which will impress but they have cautioned on the 2019 sales outlook, which will dampen the mood further if the cycle has finally peaked. This is perhaps also the reason why UMS is diversifying their businesses away from one customer through their recent 2 acquisitions.

For now, I am seeing some opportunity to make money by being on the opposite fence of things so let’s see if this strategy would play out on the down momentum.

Will be updating when I close the position.

P.S: If you are interested in opening an account for CFD, do refer to my banner link on my right hand side.

Wednesday, November 14, 2018

Dividend Income Updates - Q4 FY2018

I am writing this dividend update quarterly in an attempt to compile my quarterly dividend performance for the year. 

With a rising cost of living under the belt, in particular with the two kids in tow and hence require some bits of maintenance spend to keep hold, it can be particularly stressful to keep up with the expenses or cash outflow. 

Many times, we are dependent on our sole income which comes from our source of salary which we received monthly. While these may be the norms in the beginning, it is not healthy to be overly dependent on it over long periods of time as it may anytime snap behind your back. 



This is the reason why all of us need to think ways to grow our side income while we can so that we may unravel opportunities that can supplement our monthly income from salary. 

For many, these activities can range from being an Amazon affiliate seller to vlogging for a youtube channel to being a freelance writer. 

Some others in the investment space include investing in alternative assets, bonds or stocks that can give them dividend income on a regular basis. 

For myself, dividend investing has worked very well in the past few years due to the familiarity of the company and regularity of the payout, which I like it very much. 

It has helped me to curb my rising expenses when the need arises and further propel my portfolio growth through regular capital injection via dividends reinvested.

Still, with many get caught in the high yield trap as evident from the APTT incident this morning, it pays to be cautious of the payout that you are receiving.

Without further ado, here’s the Q4 FY18 dividend income details: 

CountersAmount (S$)Ex-DatePayable Date
Fraser Logistics Trust4,168.54 12-Nov19-Dec
Netlink Trust1,251.72 12-NovCFD
Far East Hospitality Trust1,050.00 5-Nov13-Dec
Starhill Reit1,150.00 5-Nov29-Nov
Total 7,620.26

After tabulating the dividends for all the companies, the 4th quarter dividend income came up to $7,620.26.

4th Quarter is arguably the weakest quarter of all, so we should see some better improvement in the next quarter.



With that, the annual dividend income has now summed up to $42,972 for the year, which so far is a record high for the portfolio. 

Together with the past dividends received, the portfolio has now accumulated $124,063 worth of dividends received and this number will keep on growing over the next few quarters and one day will become an integral part of my sustained income to live off. 

Thanks for reading.

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Tuesday, November 13, 2018

CFD Experiment - Dividends Credited and Cost of Financing

Following my experiment using CFD account to purchase shares which I blogged here a few months ago, I have finally received my first dividend payout credited to my account.

Although rather straightforward, but they operate somewhat a little differently from holding a normal ordinary shares account hence I wanted to document this for future users.

For those who've read my past articles, you would have known that I have opened up an account with Cityindex and have tried to experiment leveraging through a series of different level financing.

Being conservative since this is my first few encounters with leveraging instrument, I have only leveraged up to 1x which means for whatever position I have opened, I have half purchased it using cash and the other half using borrowing.

The cost of financing is estimated to be at about 3.2% per annum, though computed daily.

I currently hold open positions in Netlink Trust and CapitaretailChina Trust.

You can see that the cost of financing is computed daily, and I incur a financing cost of about $10 on a daily basis for these two relatively large positions.


Netlink trust also went ex-dividend on the 12th Nov and payment date for the ordinary holder will not happen until the 27th Nov.

However, for CFD account, your dividends are immediately credited to your account given that you are borrowing the shares and your borrowing cost is computed liable on a daily basis.

Given the usual nature that the share price will usually drop on the day of the xd, it usually nets off before the share price grows gradually up again.

I have not found a sweet position to utilize my CFD better but am tinkering to think that holding long term using this strategy might not be the best strategy.

But this is an experiment, so I get to see both the nice and ugly side.

Currently, Netlink is in a green position while CRCT is in a loss position.

I might tinker shorting a position for the short term in the near future when I get the chance to do so.

That'll be my another experiment I wanted to try out.

P.S: Double the risk, double the reward, but it won't be nice for those who fell prey to it.

Thanks for reading.

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Friday, November 9, 2018

5 Key Highlights From Hobee Q3 FY18 Results

Ho Bee Land Limited is a property developer and investing company which has developments in various parts of Australia, China and United Kingdom. 

The company has recently announced their Q3 FY18 results which brings about some of the key highlights: 



1.) Rental Income has once again grown both year on year (up 28.3%) and quarter on quarter (up 26.1%) mainly due to the full quarterly contribution from Ropemaker Place (25 Ropemaker Street) which they acquired on 15 June 2018. 

Extrapolating this to full year, this means that rental income contributes more than $200m to the company’s recurring income base. This translates to an earnings per share of about 28 cents before deducting the corresponding expenses. 

Rental income continues to play a large role in Ho Bee business model going forward. 

2.) Residential Sales in Singapore has remained lacklustre following the new cooling measures introduced in the 2H18. 

The company has only managed to record $1.95m sales for the quarter with a 36% net profit margin on the sales. 

The management continue to be pessimistic in this demand sector. 

3.) Shares of Profits from Associates continued to perform strongly this year and momentum in this quarter due to its sales from the residential development projects in Shanghai and Zhuhai. 

This will not yet trickle down to cashflow impact until the associates declare dividends at the end of their financial year. 

In Tangshan however, the company recorded lower profits from the sales. 

Management has also sounded cautious outlook on the demand for China residential properties.

4.) Following the European fund loan of EUR 90m made in March earlier this year, the company has not made any further announcement on the use of this fund. This however, has appeared in the balance sheet section under the “Financial Asset”. 

Separately, the company has also completed a 200m pounds Green Loan with HSBC in Aug, which we should expect some further acquisitions by the company. 

Gearing (Total Borrowings / Total Assets) has now grown to 0.42x, an increase from last year of 0.29x. 

5.) Leadership changes by promoting Mr. Nick Chua as Deputy CEO as well as Mr. Ong Chong Hua as COO of the company. 

The company currently trades at a P/BV of 0.51 and a trailing dividend yield of 4% (using 8 cents ordinary + 2 cents special).

I'll update the spreadsheet once the full year results are out.

Still in my watchlist with their strong growth potential.

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Thursday, November 8, 2018

My Thought Process On Discretionary Spending

First of all, apologies for the lack of posting as I just came back from my trip from Taiwan which my friends and I did our main objective of the trip which is to cycle. 

During our time there, we also witness a nice fireworks display and we also walked around a few of the night market. 




The topic that I wanted to write today however is about controlled spending, and this came up because my friends who were with me were asking why my spending was so low and how I manage my controlled spending, even though some of the stuff that we came across in Taiwan was really tempting at one point but I walked away from purchasing it. 

I thought I’d come up with a post on how I liberate my thought process when it comes to discretionary spending. 

First, by clearly segregating my spending as discretionary vs non-discretionary expenses in my budget, this gives me an immediate avenue to think straight between a need versus wants. 

Discretionary expenses are clearly “wants” and a nice to have and by it’s very nature you can walk out of it and nothing significant will happen to your life. 

For instance, your first and second purchase for your shoes are probably a need but beyond that it will probably go into the wants bucket. 

But these are items that are very tempting to buy, we can understand. 

A lot of money is paid to marketers to promote, market and brand their products to lure consumers to purchase them. With many various designs and brands competing against one another, this quickly becomes a buyer’s haven as they have limitless products to choose from. 

This brings us to the second point, which determines what should we be considering should we decide to buy them. 

The first and foremost is to to have a quick consult with the budget in our mind to see if we can still afford them this month. 

This will help ensure that we kept our spending tight within the intended budget we plan at the start and it doesn't viral rapidly elsewhere. 

If this criteria is not met, then I would walk away from it immediately without pondering further. 

If the criteria is met, I would then ask myself the utilization utility of the product I wanted to buy. 

If the product warrants a frequent use, then perhaps it gets closer to the need than wants and I can shift the category around. 

The idea of doing this is simply to ensure that it isn't an impulse buy that are based on first impression or look without using them much often. 

For frequent shoppers, this becomes a very important point because they generally like frequent changes or updates to the things they buy or wear, such as phones or shoes. 

I would also at times check if there was a cheaper version online for the same product that I'm eyeing because there might just be. 

Last but not least, I would then try to maximize my spend by using my Citicard Miles reward, which gives me 1.2 miles on per dollar spend. 

Some may think it's such a hassle to go through so many consideration before buying but once you are accustomed it comes naturally to you at a finger of a tip. 

We can still live a fruitful lifestyle, indulge in infrequent luxury at times and still manage to get our budget financials in shape. 

That's the best of all scenario.

Thanks for reading.

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