Author: Market Uncle

First Ship Lease Trust – Back to Earth

2Q 2009 Results First Ship Lease Trust, FSLT announced its 2Q 2009 quarter results on 21st July, 2009. Forward DPU forecast came in at 1.5 USD cents, much lower than the 3.08 USD cents ever announced. Rather then feeling disappointed, I felt reassured of my investment instead. The forecast of 1.5 USD cents DPU was arrived at by setting aside 50% of free cash flow to pay off debt, rather than distribute to shareholders. This, in itself, is more prudent and sustainable in keeping FSLT afloat. Impact on FSLT The following table illustrates the impact of DPU cut and...

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HDB Prices – Still so sticky?

In my earlier post on property prices in February this year, I shared my view on why I think there are still room for the prices to drop further. However, one waiting since then will be quite disappointed to note that the prices are still very sticky, especially HDB resale prices: (src: http://www.hdb.gov.sg/fi10/fi10201p.nsf/WPDis/Buying%20A%20Resale%20FlatStatistics%20-%20Resale%20Price%20Index?OpenDocument) High prices to stay? I came across at least one article that doubts the prices can be sustained for long. But prices seems stuck on an up trend, although at a slower pace. To provide potential glimpse of the future prices, HDB had voiced their position:...

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Downside to Value Investing?

The story The controlling shareholder, Wong’s Brothers, decided to delist Tsit Wing at an offer price of 27 SGD cents. The rationale behind the delist is due to poor interest in its stock (low market valuation that does not reflect its worth) and to facilitate restructuring by easing capital investment into the business as a private status. Downside to value investing Entering my 4th year of investing, I finally experienced a downside to value investing – voluntary delisting of an undervalued company. I have myself to blame (or at least someone, or something to blame) if I wrongly valued...

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I bought CH Offshore on 25th May 2009

Before I go into the rationale behind my purchase, I will like to share some thoughts on the oil & Gas industry (from the investment context) and value investment in general. I had quite a fruitful discussion on the above topics in one forum thread and exchange of comments with a reader on my blog entry when I purchased SPC. Oil & Gas Industry from an investment point of view The first thing that came to mind when one discussed about the industry is crude oil price. As far as investment is concerned, unless one buys a crude oil...

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Matrix for Personal Finance Planning

Rationale As I was working on a long term planning project, I came up with a matrix to put various initiatives in perspective. It suddenly dawn on me that I could apply that matrix I developed to personal finance planning. I promised my friend to blog on it, so better keep my promise :). Personal Finance Planning Matrix The above shows the personal finance planning matrix I’ve created for a typical, non-financially independent individual like myself, still slogging to make ends meet. Basically, annual income can be spent or set aside for future use. Spending is typical a reaction...

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First Ship Lease Trust’s Distribution Reinvestment Scheme (DRS)

DRS Summary In short, DRS is a scrip dividend scheme for FSLT to make payments through issuing new shares in place of cash. FSLT had 2 strategies to reduce cash payout in terms of dividend, one is via direct reduction in distribution (from almost 100% to 75%) and second is via DRS. While a 25% cut in direct distribution conserve about USD 4m, how much DRS can conserve depends on the take up rate, up to a potential conservation of about USD 12m. To entice shareholders to take shares instead of cash, the shares are offered at a discount...

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I bought Singapore Petroleum Company on 27th March 2009

Rationale Ever since the crude oil prices hit around US$ 30 sometime ago (from a record high of above US$ 140 last year), I believe the business fundamentals for oil companies (e.g. SPC) have made a U-turn. There are a two main sources pressuring their income statement: Inventory write down (declining oil prices) Declining revenue (from falling demand and refining margin) Given the speed at which crude oil prices had collapse by Dec 2008 (around US$ 40), the inventory write down should more or less been completed by the last FY report, ending 31st December 2008. While demand will...

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Yield Investing versus traditional Value Investing

Motivation No one doubts that the current economic crisis is one of the worse the world experience since the great depression in the 1930s. However, the silver lining is that it brings one of the greatest investment opportunities too. I remember $20,000 is not even sufficient to buy one lot of DBS or UOB, now this same amount can buy one lot each of DBS, UOB and OCBC (with some to spare if not because of the rally on friday). I had wrote before that market price always lag (not lead) fundamental changes. Even though stock market are generally...

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Property prices, how much lower can it get?

I read with interest an article published today on Sunday Times, 22nd February 2009, Keen to cash in on mortgage sales? Quoting from the article, … potential buyers are “coming in floods”, asking to be on her company’s list or calling about properties on offer. … but it is very difficult for us to strike a deal because the buyers are putting in very low offers. They want to go only for a killing… looks like the current economic crisis have lured out these buyers, waiting to pounce on distressed fire sales. Though prices had came down recently from...

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Global Interest Rates and Foreign Currencies

Almost every month, there are news of some central banks in some corner of the earth slashing their interest rates to fight the ongoing credit and financial crisis. These came along with aggressively generous economic stimulus packages by various governments, drawn from reserves or borrowed from future generations. Theoretically, the potential amount of money flooding the market is sufficient to create a tsunami, devaluing their currencies and loosening credit. But I see no sign of any minute rise in tide across the horizon. Global Interest Rate Trend The above chart shows the Interest Rates of some key central banks....

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First Ship Lease Trust 4Q 2008 results – Desperate measures in drastic times

4Q results at a glance First Ship Lease Trust posted its 4Q results today, 21st January 2009. DPU for 4Q will be USD 3.08 cents but will be cut to about USD 2.45 cents from 1Q 2009 onwards. i.e. Using last done price of 46.5 SGD cents and assuming 1.5 SGD to 1 USD, the yield will be cut from current annualised 39.7% to 31.6%. Rationale behind distribution cut It is mentioned in the press release that the distribution cut resulted from a change in distribution policy, from a target distribution of 100% distributable cash flow to 75- 80%....

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Digging a hole to fill another

It is said that the current financial crisis is the worse the world have seen since the last depression in the 1930. So it is not surprising that big problems requires big effort to deal with them. The problem then becomes even bigger in itself when the effort turns too drastic. The world greatest printing machine A special report was published on cnn website sometime in early December 2008 that summarised the amount of bailout money US allocated and spent. The table does not include the recent auto industry bailout. At the time the report was published, 2.6 trillion...

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I bought Cambridge Industrial Trust … again on 12th December 2008

Update On 11th December 2008, after trading hours, Cambridge Industrial Trust announced their successful refinancing deal of 390m, 3 year tenor term loan at an effective interest rate of 6.6% per annum. Rationale Qualitative Assurance – fear allayed By 2009, many REITs would have hefty term loans due for refinance, Cambridge Industrial Trust is one of them. The on-going credit crunch saw many banks cutting back on their lending. They would rather earn less than to suffer potential loss if the money lent cannot be recovered. One REIT in Japan had collapse after it had trouble repaying its debt....

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Property vs Equity as an Investment

Rationale I happen to have chat with my former colleague on the investment merits of equity versus property, in the context of passive income as primary concern and capital returns being secondary. Under this context, an investment must be one that provides a stable cash flow, either from monthly rentals or dividend payouts. Property vs Equity Rents vs Dividend At first glance, property provides stable rental returns, usually in substantial monthly figures that can supplement or even substitute active incomes from work. Monthly rental figures in the magnitude of $3,000 to $5,000 are reasonable for renting out entire 3-room...

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