Wednesday, May 9, 2018

How To Play Fraser Logistics Trust (FLT) Rights Issuance

This is a continuation from the previous post where FLT decides to venture into their Germany and Dutch acquisitions.

After the EGM was conducted and approved on the 9th May, they quickly came up with the details of the $476m equity fund raising activities which includes a private placement and a non-renounceable preferential offerings to existing unitholders.

The private placement is issued at 345.8m new units at an issue higher end price of $0.987 each to raise gross proceeds of $332.7m. The private placement result shows that it was 3.9 times oversubscribed which saw strong participation channel from institutional investors.

In addition, there is a non-renounceable preferential offering of 152.2m new units on the basis of 1 for every 10 existing units in FLT held at an issue price of between $0.942 and $0.967 each. The likelihood is we will see it ended up at the higher end of $0.967, and this is the part which will concern unitholders like us more.

I'll give a general rundown of how my usual approach for applying for rights on reits, and then I will focus for FLT specifically.

There are generally 3 levels that you have to watch out for when a Reit announces rights or preferential offerings that will concern and impact you as unitholders.

First Level - The general occurrence is that when Reits first announce their plans on placement or rights, the share price would usually drop. This is because the placement or rights tend to be offered at a discount to the latest traded price. Since the details of the offerings are not yet announced, we won't know what the Theoretical Ex-Rights Price (TERP) is. The market will be volatile in this case speculating the details of the offerings.

Second Level - This is when more details on the offerings are revealed and released to public and the market starts computing the TERP to see if the acquisitions are yield accretive. If yes (and also depending on how much accretive it is), you can be sure that they will rebound strongly following the announcement. If it is found not to be yield accretive, then the share price would go down up to near the TERP support.

We are currently at this level for FLT.

Third Level - The third level is usually reserved for renounceable rights where the rights are transferable and can be bought and sold in the market. The rights are trading typically for someone who wants to dispose their entitled rights or someone who wants to get into the shares by buying the rights from the market.

This third level is not applicable for FLT case as the offerings are non-renounceable.



Then you have three groups of people typically in this sort of environment: 

1.) People who are currently holding the existing mother shares (like me). 

In my case, I am holding 110,000 + 35,000 (my family) shares and thus will be entitled for the rights for 14,500 shares at probably $0.967. This means I need to get ready a cash minimally of $14,021.50 if I want to subscribe to all the rights. It is also important to note that since this is a non-renounceable rights, that means that my stakes will be diluted if I do not subscribe to the rights. So die die I need to find $14,021.50 worth of funds.

In the usual case scenario, I'd also apply for excess units just in case there are extra that some people are forgoing the rights. However, since this is a non-renounceable rights and people cannot trade this on the market, it is unlikely that they will not subscribe to this unless they do not understand the offerings. I'll still try my luck but I doubt we'll get much out from it since everyone would be subscribing (look at this more like a forced offering to participate).

2.) People who are not holding the mother shares but want to get some of the actions. 

In this case, you have a few options you can take. 

The first is buying the mother share before it goes ex-rights and you will be entitled to the rights just like me. Then you can follow my first option above.

The second is simply buying the mother shares right after the whole episode is concluded and done with. That should set the tone how "low" they would go in this particular exercise. For a strong Reit, this usually does not work as the share price would rebound back to where they are before the offering. I used to try this option with my sabana and lmirt experiment in the past and was very successful.

The buying of rights in the market is usually also an option but it would not be applicable for FLT case.

3.) People who wants to participate but don't have enough funds to do subscribe.

This may sound hilarious but I've seen people who goes all in on Reits and has not enough funds when the Reits call for equity fundraising.

Since the case for FLT is non-renounceable, you are not able to sell the rights on the market which means you will be diluted if you don't subscribe.

What you can do is to "swallow the tail", a term used by philosopher in the past where you can sell part of your current holdings, get some funds out from it, and use the funds to subscribe to the rights offerings for the leftover units.

This may still work well and most importantly, you will not get diluted impact.

Summary

The key timeline to watch is the between the 23rd May and 1st June, where you can apply for the preferential offering either on the atm or your internet banking. There's still a lot of time left, so you can take your time to bid. I usually go towards till the last few days before I apply for my rights.

There will be an advance distribution from the period of 1 April until 21st May (the listing of new units of private placement) which they decide to give out 0.69 cents to existing unitholders, so do factor that in your consideration.

And of course, for whatever strange reason, the share price has rebounded strongly to pre-announcement of $1.09, which means the TERP will get even higher than predicted. Assuming it closed today at $1.09, and factoring ex-dividend of 3.61 cents + advance distribution of 0.69 cents, the ex-CD + ex-rights price would be at $1.047.

The TERP based on the enlarged unit base would be at around $1.031, which means it is still a solid discount to get the rights which is offered at $0.967.



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Monday, May 7, 2018

Dividend Income Updates - Q2 FY2018

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

The theme of this post will be based on my understanding of the advantage of dividend investing and that is to compound dividends for as early as we can, for as long as we live.

I am sure by now many of you have heard the common saying of “Sell in May and Go Away” phenomenon that has been going around, lurking and prompting investors to sell their portfolio holdings and seek a hideout until the bear comes out. There are some truth in this, as hindsight statistics have proven over the years that resembles many other hidden truths but do note that they are not bound for absolute certainty given how some years they’ve turned out otherwise.

If we take a step back and think what it really means, we will soon realize that they are unreal. They are noises to stir around the emotion of an individual, to test and see if they are investors who have a developed mind of their own or simply buying and selling based on what they heard on the street. I’ve been tempted myself not once, not twice but a couple of times, many times in fact over my investing journey and with the ubiquitous of the media stream, I believe the same goes for many.


CountersAmount (S$)Ex-DatePayable Date
Vicom6,178.00 30-Apr10-May
M14,650.00 18-Apr27-Apr
Fraser Logistics Trust3,971.00 16-May26-Jun
Ho Bee Land3,000.00 15-May31-May
Far East Hospitality Trust1,175.00 3-May12-Jun
Starhill Reit1,090.00 3-May30-May
Tuan Sing240.00 2-May26-Jun
OCBC6.46 18-May4-Jun
FCOT1.23 26-Apr30-May
Total 20,311.69

After tabulating my dividend for all my companies, the 2nd quarter dividend amount came up to $20,311.69. Since I did not receive anything in the first quarter, it makes sense that I am getting more in this quarter.

I am scheduled to target $40,000 by the end of this year, so I am keeping my hopes pretty high up. Let's see where it takes me.



Together with the past dividends, I have now accumulated about $101,403 worth of dividends and I trust that this will keep on accumulating further in the next few years to come.



I am treating this dividend income as part of my cashflow which would be reinvested into the market that will give me a higher dividend income in the future which would fund my early retirement, if that is ever going to happen.

If you think that this strategy might work out for you, I’d suggest you give it a try for at least one year and see what happens. For most, I think it’s a pretty addictive exercise to churn out year after year. 

How are you doing in terms of dividend in the 2nd Quarter?

Thanks for reading.

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Friday, May 4, 2018

"May 18" - SG Transactions & Portfolio Update"

No.
 Counters
No. of Shares
Market Price (SGD)
Total Value (SGD) based on market price
Allocation %
1.
Vicom
27,000
6.05
163,350.00
25.0%
2.
M1
75,000
1.80
135,000.00
20.0%
3.
Fraser Logistic Trust
100,000
1.05
105,000.00
17.0%
4.
Far East Hospitality Trust
125,000
0.68
  84,375.00
12.0%
5.
Ho Bee Land
30,000
2.55
  76,500.00
12.0%
6.
Starhill Reit
100,000
0.70
  70,000.00
11.0%
7.
Tuan Sing
40,000
0.42
  17,000.00
3.0%
8.
Warchest
-
-
    6,000.00
1.0%
Total
657,225.00
100%

We are just a month away from finishing the first half of this year.

This has been an incredibly fast year as we move month after month with a simple blink like that.

From the traveling front, we've also completed a family trip to Taiwan earlier this year in March and we just had a long weekend staycation at JB during the labor day holiday. 

I will also have my another trip next week to Phuket hence the early updates again :)

On the same front, I have also finally reached the milestone of accumulating 300,000 krisflyer miles this month which we will be using for our longer trip in the future. It'll be enough for a return plane ticket for the 4 for us to LA.



Anyway, for this month updates, I have divested my Comfortdelgro and allocate them mostly to Vicom which I blogged over here. Vicom went higher but Comfortdelgro went even much higher so I guess that's how life is treating me. Nevertheless, it's a decision that is made so life goes on from there :)

I have also added my position in Far East Hospitality Trust (FEHT) which I blogged over here. I think hospitality is bottoming and based on the recent result I cover it appears that the thesis is running, so I am happy with the decision here.

The number of companies in my portfolio is getting smaller and smaller. They are shrinking to levels that I don't have to monitor them very often but it's a level I am comfortable with all of the holdings.


Net Worth Portfolio

The portfolio has increased from the previous month of $653,910 to $657,225 this month (+0.5% month on month; +9.5% year on year).

This is also the fourth time in the five months that the portfolio managed to once again break the all time record high.

A quick check on the return from the sgxcafe shows that this year return is at 2.9%, lagging the STI index. But I am not really worrying too much on this aspect.

Family's Portfolio

From last month onward, I have decided to also include the family's portfolio portion in order for easier reconciliation on the cdp statement.

1.) Wife's Portfolio

I have sold CDG at a higher price than my share at $2.19 and have allocated them to FLT.

No.
 Counters
No. of Shares
Market Price (SGD)
Total Value (SGD) based on market price
Allocation %
1.
FLT
13,000
1.05
13,650.00
67.0%
2.
Sasseur Reit
8,000
0.79
  6,320.00
33.0%
Total SGD
19,970.00
100.00%

2.) Baby B1.0 Portfolio (Age: 4 years and 1 month)

No.
 Counters
No. of Shares
Market Price (SGD)
Total Value (SGD) based on market price
Allocation %
1.
FLT
13,000
1.05
13,650.00
67.0%
2.
Singtel
700
3.50
  2,450.00
33.0%
Total SGD
16,100.00
100.00%

3.) Baby B2.0 Portfolio (Age: 1 years and 4 month)

I added a bit of funds into buying more FLT share for this month.

No.
 Counters
No. of Shares
Market Price (SGD)
Total Value (SGD) based on market price
Allocation %
1.
FLT
3,000
1.05
3,150.00
48.0%
2.
Singtel
1,000
3.50
3,500.00
52.0%
Total SGD
6,650.00
100.00%

4.) Mum's Portfolio

No.
 Counters
No. of Shares
Market Price (SGD)
Total Value (SGD) based on market price
Allocation %
1.
FLT
6,000
1.05
6,300.00
100.0%
Total SGD
6,300.00
100.00%

Final Thoughts

Most of the companies will be paying out dividends so it'll be raining cashflow this month and it's the best time to save up in time for rainy days.

I'll be using most of the proceeds for the FLT rights which will be the main focus this month. I will write more on that once it is more conclusive.

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Wednesday, May 2, 2018

FI Ratio

FI Ratio is one of the quantitative relation that I would start to track in my quarterly dividend updates because they are such an important part of the whole financial independence concept.

The idea of the FI Ratio is simple.

Everyone has their very own definition of what financial independence meant to them but quantitatively it should at the very least cover their expenses through the reach of their passive income.

Most of us would start by working as an active employee earning active income which would mean our FI ratio would start from ground zero assuming you didn't have any savings back then. Over time, as we began to accumulate more savings strategy, we would start earning the interests from the banks which would qualify it as passive income. Based on this aspect, our FI ratio should over time continue its upward trajectory assuming the growth in the passive income outweigh the growth in the expenses.



The hardest part about getting from the late 20s to early 30s are the bombards of big item ticket expenses that would drown your savings down and expenses up. Imagine within a few years of working, one has to get married, buy a house, buy a car and have a few children. If this is not content enough, we have to add in travel, furniture and other expenses.

These expenses would push down our FI Ratio that we have to so hard painstakingly push up in the first place and only to see it getting right to where it all started.

Even if none of those took place, we would have to contend with the real threat of inflation as it would mean our expenses would be higher over time, assuming all else equal.

Passive income can be defined differently from many people but to me they are simply money that is not derived from my active income. This would include dividends from stocks, rental income from leasing your premise, and interest income from the banks or institutions.

What's my FI Ratio right now?

To be honest, I've never track my expenses nor my passive income too religiously so I am not aware of the exact numbers.

If I were to make a best estimate, our household FI Ratio would probably be in the range of 65% right now.

That would mean assuming I lose my job right now, I am able to cover 65% of our household expenses which would deem it insufficient. I would need to find other means to cover the rest of the other 35%.

I am expecting my expenses to be reduced in the longer years to come but will increase in the near term so that could put some pressure on the ratio.

In the meantime, I'll have works to do to continue pushing the ratio upwards, either by increasing the passive income or reducing the expenses or both ways.


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Thursday, April 26, 2018

Ho Bee Land - Q1 FY18 Results & Thoughts

Ho Bee has just announced its Q1 results for FY18 which was closely expected with no big surprise.



Rental income is the segment which I am monitoring closely and it continued its strong uptrend with a 6.1% year on year. This was due to the purchase of Lombard street which was reported in the Q4 of last year. If we compare quarter on quarter, it is stable at $37.7m, which was unchanged from previous quarter. This comes in at $150m annualized.

The sale of development properties is the swing factor here. In this quarter, sale of development properties come from the sale of the site in Gold Coast, Australia which the company reported a $2.6m gain on profits.

The share of profits from their associates in Shanghai continues to perform well, though it dropped 12.8% year on year. This doesn't contribute to a cashflow until the associates declare and distribute dividends at the end of the year.

The main drop in the nopat this quarter is due to the absence of one-off divestment sale of investment property, which last year they did to sell Rose Court. Without these absence, nopat would be year on year stable.

The company makes 7.42 cents in earnings per share this quarter and is on course to repeat the same feats as last year. NAV increases higher this quarter to $4.79 from $4.70 in previous quarter.

The big wild card lies in their development sale of their Sentosa properties (Seascape & Turquoise) which they've started to market out in March at a psf of $2,170. The last revised down they wrote off in their book was done at $1,450, so the ASP of above $2k psf now should result in a gain once they've managed to sell it out.


The other interesting development is the EUR90m that they've invested in a European fund overseas where they are looking at a Munich development to be redeveloped into a Grade A office of more than 500,000 square feet. This reminds me of the back then Metropolis before it was completed.

It does also seems like there are many players venturing into the Europe right now, perhaps it's a gem there in the making.

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Wednesday, April 25, 2018

Far East Hospitality Trust Q1 FY18 - Results Review and Thoughts

Far East Hospitality Trust (FEHT) released their first quarter results for FY18 this morning which I thought I'll give a quick review on it since I made the purchase earlier this month.

You can find the link to that article here.



FEHT posted a 3.8% increase in the gross revenue and 4% increase in the NPI which sees a stronger hotel performance this quarter due to the better reversion of the master leases.

This is in line with the thesis that I have.

From the result, we also see that hotel performance has bottomed in the previous quarter and it is starting to reverse for a turnaround starting this quarter. Demand for the hotel segment increased through higher occupany from 88.1% to 89.6% while both the Average Daily Rate and Revpar have also increased by 1.6% and 3.3% respectively. 

That is certainly a positive sign boosted by the higher demand and the lower supply.

Special demand such as the Biennial Singapore airshow in Feb 2018 will also definitely help.


There was also some encouragement with the service residence number, while they are not as good as I expected.

Previously, there were a couple of hospitality Reits which has reported lower service residence number so I was mostly worried about this segment of the business.

Still, it was good to see the year on year improvement on the occupancy rate and Revpar as the segment performed better in this quarter. ADR is still dropping though and the company continues to cite the lower corporate demand as companies continue to cut their costs.

In terms of capital management, the company has a gearing of about 35.1%, after the acquisition of Oasia downtown which will contribute starting 2 April 2018. The average costs of debt remained low at 2.5% and the spread between the fixed and floating rates were at 40.8% and 59.2%.

Overall, I am very satisfied with the performance of the Reits in this quarter and the thesis should play out nicely that we will see a growing performance in the years to come both organically and inorganically.

The company will distribute 0.94 cents / share which will go xd on the 3rd May and payable on the 12th Jun.


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