Sunday 30 July 2023

Look to China and USA For Better Investments

Over the span of a few months, there are 2 interesting observations.

Better Yields Found in China and USA

If one follows FSM latest offering, FSM is offering 4.5% interest on USD cash for Singapore accounts. This shows how much interest can be earned on USD dollars. Similarly, among SGX-listed US REITs, it is noticed even the presumably safer US REIT such as United Hampshire is offering a 4% yield higher than S-REITs.

In China, the state own entreprises which extends beyond the large China state banks (such as China Construction) are offering 7-8% dividend yield. Ping An, the largest China private insurer is offering 5.5% dividends; compare this to Singapore's Great Eastern which is offering a paltry 3.5% dividend yield. Do note most China State own enterprises and Ping An are trading in Hong Kong Dollars.

This shows how good yields are in these countries as compared to Singapore.

Sing Dollar (SGD) is near all time highs against USD and HKD

The second thing that helps us local investors is that our SGD has been unusually strong against USD and HKD. This offers Singaporeans a chance to buy these stocks cheaply.

With such an opportunity based on these 2 observations, it makes sense to change some SGD into foreign currencies to snap up the higher dividend yielding comparables. I would be capitalising on these 2 observations to purchase more foreign assets.

I do not forsee SGD to be continuously strengthening and going to the 1.25 range against the USD/SGD. This is because a too drastic appreciation will affect Singapore's economic competitiveness. So it is unlikely for SGD to appreciate much more than what it has done.

Saturday 29 July 2023

Prime REIT: A 18% Dividend Yielder for Accumulation

PRIME Reit has fallen due to the Manulife Saga where the latter did a surprise downward valuation on its properties.

To clarify my doubts, I had emailed PRIME Investor relations and received a reply that the REIT is not conducting a valuation exercise for this upcoming 1H results. The usual will be done year-end In addition, the REIT has spoken to valuers and auditors and no material change is expected. 

Safe For Now

With this, we can be sure for the next 6 months, PRIME will not be breaching any financial covenants nor MAS's regulatory limit. 

What's Next for 2024

Naturally with the expectation of a 0.5% hike from the Fed and the worsening of the US office rental situation, it is definite the capitalisation rate for PRIME properties will rise by at least 0.75%. Currently the valuation of PRIME's property are going at a Cap rate assumption of 6.25%-8.50%. It is likely for this year's 2023 annual report, we will see cap rate assumptions of 7.00%-9.25%.

With this, one can expect property valuation to decline another 12% from PRIME's reported segment. Therefore the leverage ratio will likely change from 43.7% to 49.7%. This means PRIME should just be slightly below the regulatory limit.

However after 2024, cap rates should fall because the US federal reserve is expected to reduce their interest rates from the last quarter of 2024.In this sense, 2025's cap rate should not increase but reduce a little.

Expected Dividends

Dividends wise, I am expecting 1H2023 to report in a 2.0 US cents dividends. However, with the rising SOFR rate which its loans are pegged to, one should expect some decline in dividends in the 2H. Hence I'm expecting a 1.5 US cents for 2H 2023. This brings the total of 3.5 US cents, equating to a yield of 18% at current price.

All in all, its a REIT that can be considered. However, investors should set aside some of the dividends they receive in case equity raising is needed by the company if conditions deteriorate. 

Thursday 27 July 2023

Keppel Pacific Oak REIT: A definite 12% Dividend Yielder Minimally

 KepPacOak released its 1H2023 results. A summary is as follows:

(i) No downward valuation of properties announced

(ii) Leverage ratio of 38.4% with cost of debt at 3.89%

(iii) Announced Dividends of US 2.5 cents, which gives a dividend yield of 15% as of now.


While portfolio occupancy fell to 90.8%, the overall increase in rents has allowed the REIT to report a stronger revenue (growth of +2%). Due to this, I don't expect KepPacOak portfolio value to fall much. The year end reported decline will be due to a higher terminal value used admist the rising interest rate environment. Other than that, no other factors will lead to a valuation decline at year end.

Therefore I do not expect the REIT  to breach the 50% MAS regulatory mark. 

While they have announced a 2.5 cents dividends for 1H, i expect a slightly lower dividends at 2 US cents for 2H. This is because 2H will witness the full impact of SOFR which rose by 1% over the past 6 months. 

At 4.5 US cents dividend, the REIT is rewarding shareholders a 13% dividends yield consistently in this environment and barring a major tenant leaving. This is based on current share price and is double the amount Singapore reits offer investors (6.3%)

This is a good REIT to own, rather stable with a relatively healthy leverage ratio and is now giving out high dividends. 

Tuesday 25 July 2023

July Portfolio Update: Improving Dividends Received

With Manulife REIT making a surprise downward valuation which saw its leverage ratio increasing, US office REITs in the same industry and listed in SGX took a beating. I had used this opportunity to accumulate more in KepPacOak and PRIME due to their sell down, as investors might be spooked that they follow in the footsteps of Manulife US.

I do not foresee these 2 US Office REITs reporting a sudden downward valuation in their upcoming 1H results which will breach their loan conditions or regulatory limit. Valuation exercises are typically done at year end, barring sudden drastic changes in valuation in Manulife's case. 

Similarly, I added more in Yangzijiang Finance due to its lowering in price by 1 bid. Through thorough evaluation of its business, I am optimistic of its execution as the credit situation in China's real estate should be improving. I added a new company in my portfolio called "Country Garden" who is one of the largest private property developer in China. Country Garden was chosen over the SGX-listed Yanlord as it is larger in size and caters to the mass market property segment in China

Increasing Dividends

With the accumulation of KepPac, Prime and YZJ Finance, my expected dividends received annually in the healthy range of 5 digits.

While that is good, PRIME reit faces the situation where shareholders might need to fork out cash for equity raising if its valuation goes down by more than 15%. Hence, I will need to keep some powder dry to guard against this.

Thursday 13 July 2023

Good Time to all in CPF for T Bills

 As i had written in a separate post, anything above 3.45% in T bills rate is better than CPF OA.

With this first hurdle cleared, the second question is when is a good time to utilise a large amount of CPF OA into T bills. In my view, the time is now.

Interest Rates for Singapore Bonds are Flattening

On the international market front. yields for Singapore bills/bonds are not going up. The daily yield for MAS T bills issues have remained the same for the past 1 month  and my expectation is that rates are not going to increase much henceforth. 

Similarly, the SORA has demonstrated the same trend where it has not increased but decreased a little. This is due to the expectation that the US Fed may hike at least 1 or 2 more times and they have kept inflation in control

Expectations for Latest T-Bill rates

Based on the latest issue, T bills yield has fallen by about 0.06% since 06 July 2023 which was the latest T bill issue tranche. I expect similar mangitude in fall and this tranche of T bill should be about 3.95%.

Wednesday 12 July 2023

Lower Interest Rate Narrative in US Intact

The latest CPI numbers from US shows inflation has slowed and is about 1% above the Fed's desired rates.

Market has intrepreted that as good news and a rally has occurred. To many, a low CPI numbers mean an eventual lowering of US interest rates. So how can us investors benefit from a lowering of interest rates which affects USA?

Main Beneficary are the Overleveraged Property Companies

Lower interest rates means the interest cost of debts is lower.

Secondly, lower interest rates mean risk free rates used is lower. For property valuations, the value of a property and the risk free rate has an inverse relationship. The lower the interest/risk free rate, the higher the property value. A higher property value means a company leverage ratio is lower.

One beneficary group are the US REITs. Year to date, share prices have fell 50-70% due to the fear of rising interest rates. Now that the fear has turned to reality and is now u-turning, my belief is that these US REITs will see a positive re-rating of 70-80%.

Many are listed in Singapore which we investors can buy and own. Furthermore, their current dividend yields are high averaging 12% and above, with some degree of stability. Lastly, with a reduction in risk free rate, the leverage ratio of these REITs will fall, taking them further from MAS's regulatory leverage ratio limit of 50%

Hence, the US REITs space is something I will keep evaluating. My view is that they will be the main beenficary of the lowering of interest rates in USA.

Sunday 9 July 2023

Elite Commercial REIT: Elite among Singapore's Listed REIT

A UK-based office REIT, Elite has demonstrated a strong portfoilo occupancy rate so far at 97.9%. This is because a strength in its tenant mix is that it has the British Civil Service agencies as its main tenants.


  • Forward Dividend Yielder of 12%
  • Stable Tenant as 99% of its income comes from the UK Civil Service Agencies

Why it is Attractive

In my view, its strength lies in its tenant mix. 99% of its income is derived from UK's government bodies leasing from Elite. And even out of the 1%, a significant number comes from a non-governmental organisation that has some funding from the Welsh government.

Elite Commercial Tenent Breakdown by Income (about 99% is from the UK Civil Service)

Attractive Dividend Yield

Elite's DPU has started to fall due to a higher interest expense arising from rate hikes, as compared to the US commercial REITs, it has only 69% of its debt fixed and the rest subjected to floating rates.

Based on its latest quarterly financial results, it is expected to give about 1.9 cents per share. This translates to a forward dividend yield of 12% at current price of 29 cents. This is an attractive yield which is why I determine the REIT as an elite dividend yielder among SGX listed REITs (Singapore's REIT which has mostly non government tenants are yielding only 6-8%)


Revenue declined 0.4% year on year as there were some vacancies. However, I am not that worried, given its tenant mix.

Second Risk: Rising interest rates. Unlike USA, England's central bank does not seem that it will stop its rate hikes yet. Hence it is expected Elite's interest expense will increase, at worst I'm expecting a quarterly DPU of 0.6 cents, which is still a respectable 8% yield.

Third Risk: Elite's Leverage ratio is at 45.8%, as capitilisation rates increases due to higher interest rates, Elite will move closer to 50% which is MAS's regulatory limit. However, given that there is some distance, I feel it is not too much of an issue for now

Last Advanatage: Rental Uplift (pegged to UK CPI numbers, subject to minimum of 1%, maximum of 5%)

From 1 April 2023, Elite will be having an increase in rental inflow among its UK properties, this is a boost and I expect this to offset the interest rate hikes experienced by its loans. Elite is expecting a UK$4.2 million increase in revenue due to the rental uplift (11% increase in revenue). This means it can sustain a further 1.75% increase in borrowing cost from current rates of 4.6%.

In summary, a 12% dividend yielder for a REIT whose main tenant is the British government seems very good. I am evaluting to invest in Elite to diversify away from USA and China stocks. In addition, due to the stability of its tenant, I feel Elite might be an even better investment than buying Singapore REITs, Singapore properties for renting or owning a physical UK property for renting. 

Singapore investors could consider Elite as it gives a good divdend anda  stable tenant in the form of the British Government with a long term lease signed (average 4.8 years lease). Elite is able to raise its rentals because the UK government is fair in its dealings with Elite. As a disclaimer, I do not own any Elite Commercial REIT shares at the time of writing.

Saturday 8 July 2023

Alibaba: Unlocking Value for the Next 12 Months

Yesterday, Alibaba saw a large rally in its share price. it was a stock specific news where ANT Group's investigation was concluded with a fine of about US$1 billion. With that, this means ANT can move forward to launching itself for an IPO probably in the Hong Kong Market

Who Else to IPO?

Besides ANT group, Hema and Alicloud have been announced to be spun off within the next 12 months. This means a large amount of Alibaba's conglomerate value will be unlocked.

For context, when JD and Tencent did the individual spin off of their empire's stake, share prices of the main company did not drop much and I believe Alibaba will be the same. 

My view is that Alibaba may remain at the same level of US$90/share throughout these 12 months, while share holders will get US$33.3 billion from ANT's IPO, US$55 Billion from Alicloud and US$6 billion from Hema. This brings US$90 billion in addiitonal value (approx US$39/share). Tencent share price did not fall much post the spin off of Meituan shares to Tencent shareholders.

Core E Commerce Remains

The e commerce segment, which generates US$20-24 billion annually, will still remain within Alibaba. 

Besides the e-commerce, Alibaba owns (i) US$36 billion in shares as stakes in other companies, (ii) about US$28 billion in cash and (iii) US$47 billion in short term financial instruments. At current market cap of US$230 billion, one is buying into a US$20 billion profit generating segment along with US$110 billion in cash and other investments, it does seem to be a bargain.

All in all, a doubling of share price from US$90 to US$180 is possible, considering that US$39 per share in value will be unlocked over the next 12 months and this will enable the market to efficiently value all the stakes in Alibaba.

Tuesday 4 July 2023

Want To Have a Better Financial Future? Avoid Agents and Consultants

What is the most prevalent sight at my MRT station are the presence of housing and insurance agents. Everyday without fail, I would see at least one group.

Both seem to have the same angle of marketting, buy a house now, sell higher in the future. Buy insurance for better returns in ILP. But there are many things not told upfront....

Generlisation but That's the Truth

Due to the booming property market arising from the increasing inflow of foreigners who rent, more and more Singaporeans have switched to the property sales line. Their slogan is the same- rent a house to foreigners, next time houses can sell at price higher. 

To me, a lot hinges on the policy direction of Singapore. Singapore has to continuously take in more and more foreigners to feed this frenzy which I feel is an utter bullshit policy direction. Its akin to a ponzi scheme where more and more is needed to join the game. And in the meantime, more and more ponzi (housing) salesman are appearing and positioning a house as a value investment.

This is a house of cards and I'm not sure how long can the current government play along to this scheme. 

To me, both housing and insurance agents have gone too far by not acting in the best interest of clients and instead for the benefits of lining their pockets. Yes, I may have painted them with broad strokes; there are a few good eggs and companies but because of their need to sustain their own salary/bottomline, the (good ones) tend to cater to only the high net worths. 

After all, the high net worths can pay for agents/consultants who work for their best interest given the scale of their wealth. While the poor/middle income gets the 99% of bad eggs. I have seen a few people who were 'hoodwinked'  by agents, financially overstretched, had to terminate their policies because they were finding it difficult to fund the insurance premieums and end up losing 90-100% of their paid premieums. God knows, how the agent managed to sell the ILP when they are required to evaluate the client's financial health.

Most of Us Are on Our Own

My view is that both industries in Singapore are becoming worse with no policy intervention being apparent from the government. Unlike the UK, which has a fudicary duty in place, Singapore has none due to our liberalisation since 2007. 

In the field of insurance, all Singaporeans, their spouses and child are eligible for MINDEF/MHA Term insurance, it is the best insurance out there. So sign up for it and not the nonsense sold by agents. With the reminder of the money, allocate it for the 'investment' component, your bond portfolio can be invested in the AAA-rated CPF SA and shares/property in ETFs. I have done a mathematical illustration to show this method is better than almost all policies out there.

For housing, it is dumb to be buying it for investment purposes when we are dependent on the government to keep increasing the foreigner intake so as to meet the incoming housing supply. Our citizen population is not growing faster than the speed of us constructing new homes (even if it is only BTOs) and this is a cause of concern. In fact, with a drastic reduction in current foreigner intakes, we can solve our housing crunch and affordability issues in less than 1.5 years.

You can read here on how much more foreigners (30% increase in foreigners in the next 4 years) has to come in to sustain the current housing prices.