Author Archive

Posted on August 30, 2010 - by Market Uncle

Stubborn HDB Property Bubble?

Some of my friends painfully resisted buying a flat for the past few years, hoping that the property bubble will pop when the global recession erupted. But to their disbelief, the prices and cash over value (COV) continue to defy gravity and broke new highs. This prompted me to take a closer look at this bubble, why is it so stubborn!?

Demand

Looking at the past prices (available data from 04 to present):
src: http://www.hdb.gov.sg/fi10/fi10321p.nsf/w/BuyResaleFlatResaleIndex?OpenDocument

it can be seen HDB resale prices hit the bottom and remained there after ‘97 Asia Financial Crisis to late 2006. Though this period included the dot com bust (2000 to 2002) and SARS crisis (2003), there is still generally good economic and population growth (local + foreign). Thus it is quite unthinkable that demand for flats will remain stagnant for nearly 10 years! Read more…

Posted on August 17, 2010 - by Market Uncle

Portfolio restructuring over the last 4 months

Partially divested First Ship Lease Trust(FSLT) into Pacific Shipping Trust(PST) on 29 June 2010

I can count myself ‘unlucky’ that FSLT had 2 of its ships returned prematurely and took a big hit to its total outstanding contractual revenue and just blame this on the ‘business’ risk. But looking further into the business to understand that the risk is actually much higher than I thought actually attributes more blame to myself. The high yield comes at a price that I sadly have to pay. Most of the contracts are made when shipping rates are over inflated and ships overvalued. When all things come crashing down, the odds are basically heavily stacked against FSLT. It is already fortunate that only 2 ships are returned. The only good news in this midst of this gloom is that the worse for shipping seems over. Though the global economy is still not on firm footing for full sustained recovery, at least the chance of another big recession is quite slim.

I have a habit of raising funds from one sector and putting them back there. Though this make no investment sense, but nonetheless, its just my preference. I decided to divest part of my FSLT into PST. PST also have simiar structure like FSLT but with a more sustainable distribution payout policy and loan repayment scheme. Its recent distribution accretive acquisition is the main factor that entice me to cross over. Though I’m aware that they do not yet have the funds to acquire them and most probably will require equity raising in late 2010 or early 2011, I believe the yield will still be higher post capital raising.

To put things in perspective. There are two deep cyclical sectors I’m vested, Shipping and Oil & Gas (O&G) Support. Both are still going through pretty bad storms (poor demand and oversupply of vessels) and no one can tell when the storm will blow over. But I’m pretty sure when the sunlight burst through the clouds, the returns will be good. No better time to invest other than bad times. Read more…

Posted on August 10, 2010 - by Market Uncle

Shopping vs Investing, behaviour peculiarity

Sale!!!

Whenever there is some genuine sale giving ‘huge’ discounts, e.g. 50%, 70% off original price. There’ll always be enthusiastic crowds grabbing the items as if things are going for free. I recently encountered one for branded handbags near my working area. Most shoppers are predominantly ladies who seems to have a mental database of each item and their prices. They knew their ‘true’ worth and face no problem telling which are the real bargains. Thus seldom do I see them regret their purchases.

Stock market sale

While Great Singapore, Christmas sale happens regularly once a year and some sales never seem to end (e.g. Courts), sales in the stock market occur much more unpredictable and sporadic. In contrast to sales in Orchard Road that drew crowds, sales in the stock market scare away people. The greater the discount, the thinner the trading volume. Read more…

Posted on April 26, 2010 - by Market Uncle

I bought Mermaid Maritime, United Envirotech and Aspial

Photo by > NeoGaboX<

I bought Mermaid Maritime, United Envirotech and Aspial

No longer had the luxury of time to blog on each and every transaction within days, I might as well consolidate them into a single article and post them when I had the time. Anyway, it will still serve my intended purpose to track what I do over the years and still garner some feedback, though not as timely as I hope to. But life is all about compromise, isn’t it?

New addition to my portfolio since the MacArthurCook Industrial REIT error

1. Mermaid Maritime on 19 January 2010
2. United Envirotech Ltd on 22 March 2010
3. Aspial 22 April 20

Qualitative Reasons behind Actions

1. Mermaid Maritime

Despite seemingly increased effort to cut dependence on oil by going into other forms of energy or greater ‘green’ efforts on energy conservation, I doubt the demand for oil will be drop in the next 10 years, enough for me to double my returns on all my oil related businesses. After SPC, CH Offshore and KS Energy, Mermaid Maritime is my latest acquisition in this business. Other than SPC, all of them are involved in support related services in the Oil & Gas industry. For Mermaid Maritime, they are primarily involved in tender rig drilling and sub-sea engineering. What attracted me was their seeminly good financial health (cash and equivalent slightly exceeds outstanding debt) and actually traded below net tangible assets.
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Posted on March 23, 2010 - by Market Uncle

Valuer for HDB units, an easy job?

After years of painful search and watching the property prices continue to defy recession forces, a friend of mine finally settle for flat in a mature estate with about $50k above (already high) valuation. Querying the valuation of the flat, I discovered it is valued at the higher tail end amongst recent HDB resale transaction. And yet my friend is paying $50k above this.

HDB valuation methodology

I came across a recent article to the Straits Times forum from the Singapore Institute of Surveyors and Valuers commenting on HDB valuation:

…
For homogeneous properties such as HDB flats, the common valuation method adopted is the direct comparison approach. This approach is similar to that used by a potential buyer when considering the purchase of a flat. He would look at the location, consider the age, size, design, height and other important characteristics of the flat and compare the prices paid for comparable flats in the locality.
…

src: Straits Times Forum: HDB flats: No new valuation method
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Posted on March 10, 2010 - by Market Uncle

Do we need to monitor the stock market so closely?

Hectic but fruitful life after a new entrant

Ever since my girl was born and my confinement lady left, life have been very hectic, tiring and sometimes frustrating. Eventually, when she learnt to smile at us, its had been one of the happiest moment of my life and instantly felt all this was worth it :). Looking back, my last post was more than 3 months ago and I haven’t really got the time to meddle with my portfolio or look up company reports ever since.

Missed opportunities?

As my girl grow up, nearing her fourth month on earth (not counting the time she spent evolving in my wife’s womb), she finally seems to be able to adjust to our earthly culture and give me some peace to do my stuff without constantly crying and requiring us to decipher what she want. So finally I an able to find time to stock take on my portfolio, read up a little on my companies and what had gone on in the last 3 months. Surprisingly (at least to me), I neither didn’t miss much of the action nor any really great opportunities. As far as fundamentals go, the reporting seasons only occur once every 3 months and the last one was just concluded. Looking at the results and outlook stated in the financial reports of my companies and those I’m interested in, none really warrant much action and there isn’t really much changes in their stock price for me to bang wall on missed opportunities. Read more…

Posted on December 30, 2009 - by Market Uncle

Investing in REITs – Really for the yield?

Business model of typical REIT

People invest in Real Estate Investment Trust (REIT) primarily for the stable dividend yield. REITs are supposed to provide good source of passive income for those with neither the cash nor the leverage capacity to invest in typical properties for passive rental income. Is this really so?

Before answering that question, let’s look at the business model of a typical REIT. In layman terms, REIT acquire properties and lease them out for rental income. The funds for acquisition comes either from shareholders (share issue), banks (loans) or both. REIT is supposed to pay out ALL profit from rental income less all other business expenses (including bank loan interest) required to keep the REIT alive.
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Posted on December 14, 2009 - by Market Uncle

6/6 Hindsight vs 0/6 Foresight

6/6 Hindsight

Comment and analysis articles started popping up everywhere after Dubai World requested creditors to delay debt repayments for 6 months. Articles explaining how the collapsed of these property castles built on shaky grounds of leverage was just a matter of time and listed so many warning signs that any idiot could predict this crisis with ease. This kind of postdated prediction also occured after the subprime crisis erupted in the United States.

While it is true that genuine warning signs were indeed present and if people took heed, many of such crises could have been avoided. But in this era of information barrage, where one has to sieve real information from fake, good from bad and useful from useless, spotting a few true red flags from countless fake cry wolves are always a challenge.

0/6 Foresight
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Posted on November 22, 2009 - by Market Uncle

I bought MacArthurCook Industrial REIT on 18 Nov — a bet gone wrong?

1. 6 November 2009: MacArthurCook Industrial REIT (MI-REIT) announced a severely value destructive recapitalisation plan on the 6 November 2009.
2. 11 November 2009: Cambridge Industrial Trust (CIT) annouced the usage of $10.5m out of $28m from recent private placement to acquire 9.76% interest in MI-REIT.
3. 16 November 2009: CIT alerted MI-REIT unitholders to the value destructive nature of the recapitalisation plan and urge them to vote against the resolution at the EGM on 23 November. They intend to vote out the managers of MI-REIT and install themselves as the manager of the REIT.
4. 17 – 20 November: Separate rallying announcements, newspaper ads by CIT and MI-REIT to seek support against and for the recapitalisation plan respectively
5. 20 November: MAS announced that it will not approve managers of CIT to manage MI-REIT due to potential conflict of interest.

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Posted on November 2, 2009 - by Market Uncle

Cut loss on United Food and Ocean Sky, invested into Suntec REIT on 28 Oct 2009

United Food Holdings

Mistakes are mistakes, no matter how they are packaged. United Food Holdings is one of the most spectacular value destructing business on my portfolio. Starting with a huge cash horde which translates into a large cash per share, it can easily qualify as one of my best cigar butt. But as time go one, the management demostrated outstanding capability to drain it with seemingly failed but huge investments (land, soya beans).

Ocean Sky International

Unlike United Food Holdings, I did not classify Ocean Sky as a cigar butt in the beginning. However, just like any typical manufacturers hit hard by the falling orders due to the ongoing economic recession, they are driven into quarterly losses. Read more…