ST’s bearish on reits! Time to buy?

Fee-fi-fo-fum; I smell the blood of reporters and analysts that were bullish on reits. Be they alive or be they dead, I’ll grind their bones to make my bread.

ST has finally given up promoting reits (something I’ve been bitching about recently here and here), reporting: MAYBANK Kim Eng Research has gone against the long-prevailing view and downgraded Singapore’s red-hot real estate investment trust (Reit) sector amid a period of increasing price volatility.

Reits have come under heavy selling pressure the past fortnight amid fears the golden days of low interest rates may be ending.

The FTSE ST Reit Index, which tracks the sector, dropped 1.68 per cent yesterday and is down 8.2 per cent since May 22, when the United States Federal Reserve’s chairman raised the possibility of ending its money-printing.
http://www.cpf.gov.sg/imsavvy/infohub_article.asp?readid={309678777-17695-45587420}

Gee, less than a month and two bullish stories, ST is now reporting bearish news on reits. Even when I waz an equities salesman, I didn’t change my views so fast. ST Money Desk practicing to be salespersons.

But before rushing into reits, think. The prices of reits were helped by institutional equity investors* buying them for the yield. Now those who chased yields in the equity markets may switch into cyclicals and defensives, if they think the yield party is over. If so buying into reits may face a stampede out of reits, and then relative underperformance.

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*Remember, bond investors don’t buy reits. They stick to bonds, moving to junkier bonds for yield. When cautious, they sell the junk and buy US govt bonds.

Time for ST to stop promoting Reits

Opps ST nearly did it again. On Saturday, an ST headline screamed: “Buying opportunity after Reits rout”. http://www.cpf.gov.sg/imsavvy/infohub_article.asp?readid={498059457-17610-6138972043}. Market overall was off 24.6 points (0.74%), while the reits’ index was off a marginal 1.1 point.

Could have been worse. The last time ST promoted reits, ““It was no different in Singapore, where the benchmark Straits Times Index sank 61.2 points or 1.8 per cent to 3,393.17, its worst one-day plunge in percentage terms since its 2.2 per cent reverse on May 7 last year” (“Markets tumble amid US, China fears”: ST headline. Didn’t have the balls to tell us, reits here were off about 5%”http://atans1.wordpress.com/2013/05/28/bad-timing-st-article-on-reits/

On a more serious note, ST shld not be promoting reits. True the yields are better than most plays, but reits are leveraged plays. Now is not the time to be bullish on reits.: http://atans1.wordpress.com/2013/05/21/s-reits-why-stay-away/

I’m still long but I got in in 2008 and 2010. I’ve been riding the run and collecting the payouts to pay for my expenses.

 

Bad timing! ST article on Reits/ Will mkts continue rising?

On 22 May ST screamed “Reits look like good bets to yield-hungry investors”

The opening para read “SINGAPORE real estate investment trusts (Reits) are among the hottest assets in town to own”.

http://www.cpf.gov.sg/imsavvy/infohub_article.asp?readid={332593593-17481-7717667817}

On 23 May, Japan’s stock market fell by about 7%. “It was no different in Singapore, where the benchmark Straits Times Index sank 61.2 points or 1.8 per cent to 3,393.17, its worst one-day plunge in percentage terms since its 2.2 per cent reverse on May 7 last year” (“Markets tumble amid US, China fears”: ST headline. Didn’t have the balls to tell us, reits here were off about 5%*. They have since recovered slightly.

Fee-fi-fo-fum; I smell the blood of reporters and analysts. Be they alive or be they dead, I’ll grind their bones to make my bread.

For what’s it’s worth, I repeat my take first expressed here http://atans1.wordpress.com/2013/05/21/s-reits-why-stay-away/. But I’m not selling, yet, juz collecting the distributions, and watching to sell.

Update after first publishing: Juz read in FT that while the Topix index is down 10%, reits there down 1%. Seems investors want to own real assets, given that Japan wants to raise inflation.

Update, Update: However, there are three good reasons why stock markets, a few blips aside, will continue to grow for some time: central banks are scared; there is lots of money waiting to be invested; and returns on all other assets are low … Strapped to these three rockets, the market can still soar. Of course, Spain could yet go bust or China grind to a halt. There could be a natural disaster, an act of terrorism or war. History tells us a bust is waiting down the track, but while the world economy recovers and governments and central banks maintain their pledge to keep printing money, we should expect prices to rise.
Phillip Inman from Guardian

 

S-Reits: Why stay away

Here are gd reasons not to come into S-Reits or to buy more.:

http://www.fundsupermart.com/main/research/viewHTML.tpl?articleNo=8173

Time to get real on retail Reits, and S-Reits generally?

Ong Kian Lin, an analyst with Maybank Kim Eng, wrote in a note dated March 22 that the recent S-Reit rally was not due to strong fundamentals but fuelled by inflated asset values from quantitative easing by the US Federal Reserve and ample liquidity.

He noted how retail and office property prices have gone up but rentals have been slow to catch up.

A Colliers International report reflected this divergence. As at the end of the first quarter of 2013, retail property rents in its areas of study have fallen from the previous quarter while capital values went up.

While maintaining a positive outlook for the retail and retail Reit sector, Savills’ Mr Cheong noted signs of trouble in that retail sales figures are trailing growth in areas such as tourist arrivals, population and inflation.

Retail sales fell 2.7 per cent in February. Tourist arrivals last year was 9.1 per cent higher than the year before. The consumer price index rose 3.5 per cent in February from a year ago. Total population growth was 2.5 per cent between 2011 and 2012.

The demand seen in the market right now is due to sentiment still being buoyant, Mr Cheong feels.

“At the moment it’s still rising, but it’s a binary issue. You cannot go and push to the tipping point, you push to the tipping point, everybody will bolt for the door like a fire in a cinema or retail mall. If everyone bolts for the door, everything will be vacated.”

NUS’ Prof Sing said retailers have increasing choices of malls. And the risk is that with greater choice, consumers may drift away from traditionally popular malls, leading to a downward spiral.

“When this happens, tenants will also start to move out. This cycle will continue, because you (as a manager) cannot pull in the crowd, I (as a retailer) cannot afford to pay such a high rent, I have to move out from the mall. So you put in another tenant that is not as good, so fewer people will come.”

Prof Sing and Knight Frank’s Mr Png said they are watching the Jurong East area, with several commercial and retail developments due for completion.

Retailers also have to cope with tighter foreign manpower policies.

“Much as the government would like to talk about productivity you find that retailers, the services business, is still very labour intensive,” Mr Png said.
http://www.cpf.gov.sg/imsavvy/infohub_article.asp?readid={4798875-17374-4688516258}

Err the issue of inability to raise income could also apply across the board to office and industrial reits too, given the economic slow down. Price rises can only depend on yields going down. FTR, I own various Reits.

DBS still loves Reits

It prefers those with stronger earnings growth potential and/or have potential to deliver earnings surprises. Preferred S-Reits are Perennial China Retail Trust (PCRT), MGCCT and Cambridge Industrial Trust based on their upside potential.

PCRT is seen as attractive due to its valuations and earnings visibility as operations are ramping up at its malls. New development assets are also completed and seen generating cashflow. Target price is around $0.84.

MGCCT offers investors “an attractive opportunity to own iconic, best-of-breed commercial assets”. The trust has resilient cashflow with strong organic growth drivers. The target price at $1.18.

As for Cambridge, its completed acquisitions and asset enhancement initiatives (AEIs) are expected to contribute positively. Its target price is seen around $0.93. I personally am not comfortable with Cambridge because it lacks a tai kor.

It advises investors who benefited from price gains in Mapletree Industrial Trust, AReit, Suntec Reit and Parkway Life Reit shares, to consider selling these.

Property: Tharman is wrong that measures are working?

Colin Tan has a regular column on Friday in Today. Unlike the other property “experts” that appear in the local media, his take is always slightly different from the govt spin. Take this week’s http://www.todayonline.com/business/property/cooling-measures-or-market-booster

Based on the new private home sales data for March, the seventh round of the Government’s property market cooling measures must definitely qualify as an own goal, as a colleague put it. Instead of cooling the market, the latest curbs unveiled in January actually boosted it as buyers turned up in droves.

Tharman was quoted by today’s ST as saying: “Property prices remain high but they are moving in the right direction”, and that govt had no plans for additional measures.

I’m sure prices will soar now that buyers know no more curbs coming.

 

S-Reits remain “betterst’ in region

S-Reits delivered the region’s highest dividend yield as at the end of last month, the latest month-end Asia Index Report produced by the FTSE Group has noted.

The FTSE ST Reit Index and the FTSE EPRA/NAREIT Singapore Reits Index ranked highest in terms of dividend yield and lowest in terms of volatility, relative to their regional counterparts.

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$100 chicken if food tracked house prices?

Reading the u/m, got me doing some very simplistic calculations on the back of an envelope, and using some very simplistic assumptions, it would be plausible and reasonable to argue that  a chicken here would cost at least $100 if its price kept pace with the rise of the cost of a three-room HDB flat since the early 1970s.Maybe Coyote Chee’s economists could do a study? No point asking s/o JBJ. He now trying to be half-past six lawyer like dad, wanting to argue in person that the govt breached the constitution in funding the IMF.

If the price of food had risen as quickly as the price of houses over the last 40 years, we would now be paying more than £50 for a single chicken, according to the housing charity Shelter.

The charity says that since the early 1970s, house prices have risen far faster than grocery bills.

In 1971 an average home in Britain cost less than £6,000.

Forty years on, it had shot up to £245,000. BBC article

 

When ST headline is bullish, time to sell?

In SunT, the headline screamed,”Market risks ‘seem less threatening this year’”. Oh, dear. If ST reporters and editors are getting less cautious, isn’t this a contrarian sign. Maybe? But to be fair the forecast was made by a UOB Asset Management executive.

So far, as well documented here, I’ve been emphasising buying stocks with sustainable dividends or payouts, decent yields (slightly above our 5% inflation rate), with the possibility of capital appreciation. I’ve been long on smaller cap S-Reits that have tai-kors with money for several yrs. I’m not a buyer at these levels, but neither am I a seller. I’m a nervous holder. Until you cash out, the profits can evaporate. Taz why good, sustainable yields are important. But that means taking on more risk: Reits are not a play safe investment. Their gearing and the requirement to pay out 90% of their earnings, could result in investors coughing up in rights issue more than they got in payouts. Taz the reason for my nervousness.

Stocks on my watch list are SBS and SMRT. But they’ve been on my to buy watch list for three years already.

 

 

 

S-Reits: Gd analysis

The reason for the highest yield spread for SReits against other markets is due to the proportion of industrial, healthcare or emerging market REITs within the index.

In the case for Singaporean industrial properties, these are leasehold interests so the yield profile against Japanese assets is always going to be higher. Did’nt know that abt Jap assets

Hotels, Indonesian/Indian healthcare/retail properties trade at higher yields than office & retail properties.

So basically although the SReit index trades above its peers – there is a reason for it! And should not imply that SReits are cheap.

A reader made this comment on http://atans1.wordpress.com/2013/01/10/s-reits-cheong-all-the-way-says-ocbc-sec/

Book PM could cite in validation of “Growth, ‘cheong’ all the way”

In “Planet of Cities”, by Shlomo Angel*, a professor of urban planning at New York University, argues that cities must prepare themselves for rapid growth, citing New York and Barcelona: In the 19th century both cities decided to prepare themselves for rapid growth. In 1811 New York’s city council approved a plan which allowed all of Manhattan to be built up and included the island’s now famous street grid. In 1859 Barcelona followed suit with a similar concept to expand the city nine-fold.

Err PM not planning to increase the population that much.

And on why working-age population matters:

http://www.economist.com/blogs/buttonwood/2013/01/demography-0

Netizens, pls realise that the intellectual underpinnings are there for the White Paper. It’s the conventional wisdom. Raving, ranting and screaming will do no good.

Nothing will, not even the ballot box: “A vote for the WP is a vote for the continuance of PAP policies” says WP Low. So lie back and enjoy being raped. Think of the value of your property when you cash out and move on overseas.

Reputations: Be mean & laugh

Here’s an intermission from the antics of Mad Dog (or is it Coyote?) Chee and the S’pore Indian Party as the SDP should be renamed: I mean with both potential candidates being Indians of great credentials (I know Dr PaulA and have a lot of respect for him) and from privileged backgrounds*,  in a predominantly Cina area, what was the SDP SIP thinking? The PAP fields a poor Teochew boy made good, and rumour has it that Low was looking around for another Teochew lang. Unfortunately after Staggy Yaw, none in WP are suitable. Chee and gang must be idealistic mad dogs if they believe that race doesn’t matter in S’pore. It does unless the hegemon decides otherwise.

As to the withdrawal, I’ll blog on it after thinking about what Morocco Mole and Secret Squirrel told me. Anyway I had analysed that the SDP wanted some goodies and that WP should agree: http://atans1.wordpress.com/2013/01/13/when-mad-dog-meets-tua-kees/

Here’s my “Tak boleh Tahan” riposte to various things I’ve read, in the last few days, on the internet. You you find them as entertaining as the Mad Dog’s antics. Or is he a coyote?

Law prof’s “academic integrity”

When prof Tey Tsun Hang  was charged for corruption in that he persuaded his student to pleasure him in return forgiving her better grades, he proclaimed loudly his “academic integrity”. I tot he was going to defend himself by saying that “I didn’t screw her”: all first-world academic codes of conduct frown on professors screwing their students. Well, we now know that his definition of “academic integrity” excludes sex with students. Bit like Bill Clinton’s definition of sex: it excluded a certain action between gal’s mouth and his organ.

And as to his alleged persecution because he criticised the judiciary (http://www.tremeritus.com/2013/01/11/sex-charge-an-academic-persecution-of-law-professor/), so it’s OK for a professor to have sex with his student, so long as he criticises S’pore judges. ERr what about minors?

BTW, if Alex Au had posted this link, I’m sure his friend, the AG, would have written to him that the piece was in contempt of the judiciary. But as it appeared in TRE, the voice of the masses, one can only speculate that the AG doesn’t want to soil his hands http://atans1.wordpress.com/2011/12/11/why-i-miss-tr/. Or AG doesn’t believe that TRE carries any cred with reasonable, thinking S’poreans, it “is a bearer of rumours, rubbish and nonsense”. Or that it will soon close down because “TRE readers are losers, houseflies and maggot’s young”, who are not willing to keep the site going by donating money. http://www.tremeritus.com/2013/01/15/tr-emeritus-a-bearer-of-rumours-rubbish-and-nonsense/

Jos talks cock again

From CNA:

Singapore can possibly take a leaf out from other jurisdictions to look at how they curb rising property prices. Member of Parliament for Holland-Bukit Timah GRC, Christopher De Souza, said this includes learning from Hong Kong and Australia … he prefers the Australian model. He said: “What the Australian model does is prevent foreigners from buying anything except new developments in Australia, and then hold on to that and eventually if they want to sell, to sell only to an Australian citizen.

“This allows the local population to set a correct pricing mechanism, which I feel is a good alternative for Singapore.”

Minister of State for Finance Josephine Teo said Singapore already has such restrictions on the entire HDB market and executive condominiums.

Currently, foreigners are not allowed to buy HDB flats and they are also barred from buying units in executive condominium developments that are less than 10 years old.

Hello Jos: What about the restriction that can only be sold to citizens? Not here is it. If she doesn’t ak PAP MP, thinbk she will listen to what Opposition MPs are saying?

Related post: http://atans1.wordpress.com/2012/10/26/jos-too-is-talking-cock/

Will Mrs change mind?

‘After saying for days that he was seriously considering contesting the single seat ward of Punggol East, Reform Party chief Kenneth Jeyaretnam has now said he is “90 per cent likely to go ahead”.’ (ST a few days ago): yesterday he said he was running.

There are allegations that his wife wears the pants in that household, and that she was finally persuaded that he should run.

Will she change her mind, now that SDP has withdrawn? Her heloo will be whipped by Ah Lian.

Ong Yee Kung is soiled

This ST reporter speculated that Ong was not PAP’s candidate in PE because he was part of the losing team in Aljunied http://www.singapolitics.sg/views/why-was-it-not-ong-ye-kung. Err ever tot that his roles in SMRT and NTUC, coupled with local drivers’ unhappiness and the strike by FT drivers made him toxic. Meritocracy? What meritocracy? http://atans1.wordpress.com/2012/12/10/meritocracys-feet-of-clay-ong-ye-kung/

SDP doing shumething right?

And finally coming back to Chee. SIP SDP must be doing shumething righr to warrant this bitch from ST journalist. Maybe the Dark Side was worried that the Jedi SDP will expose the weakness of the PAP clones? That the WP needs the SDP to provide the base for the clones to reach out to the moderate sheep.

http://www.singapolitics.sg/views/sdps-win-win-win-strategy-lose-lose

Sadly, we won’t know if this thesis is correct.

BTW reading these two pieces by two ST ladies, it is reasonable to speculate if ST’s newsroom is now the in-place for S’pore’s airheads, now that SIA has raised the education qualifications for its waitresses in the sky. Not that the ST ladies would have qualified on the looks front. Even Auntie Sylvia looks better. But then she’s now got $15,000 a month pin money to spend on clothes and accessories, like Kate Spade Tin. Happy shopping gals.

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*Heard a story that SDP was finding it difficult to choose because both of them want to defer to the other. Smart boys, if story is true. Losing to Ah Lian is bad for the reputation of any smart man.

S-Reits: “Cheong all the way” says OCBC Sec

Especially industrial Reits ’cause of the 7% yields.

“Looking into 2013, we believe S-REITs would likely retain their shine, underpinned by three key drivers. First, the sector offers the highest yield spreads among its peers in other major markets. Second, S-REITs are likely to be in favour amid the uncertain macroeconomic outlook, given their defensive low beta nature. Lastly, the outlook and financial position of S-REITs are generally positive, which should translate to firm performances going forward.”

S’pore Biz Review

I wouldn’t be a seller, but I sure am not going to add to my exposure to Lippo-M, AIMSAMP or Fraser Commercial, or to buy any other reit. But watching like a hawk to find a reason to sell.

Stock ideas for M’sia and Indonesia

Playing the property game

http://blogs.barrons.com/emergingmarketsdaily/2012/10/08/fund-managers-finding-opportunities-in-emerging-market-real-estate-plays-including-cement/?mod=BOLBlog?mod=BOL_article_full_blog_em

FCT, Suntec: Cheong all the way say brokers

OCBC Investment Research raised its fair value on Frasers Commercial Trust (FCT) to S$1.31 from S$1.23 while maintaining its “Buy” call. The interest savings arising from the early refinancing of a S$500 million loan facility and stronger rental income after the acquisition of direct tenant leases at China Square Central are also positives, OCBC Investment said. And after selling KeyPoint for S$360 million (US$292.7 million), FCT is likely to sit on net proceeds of S$357.8 million and book in a gain of S$72.8 million. Frasers is likely to use the bulk of the sale proceeds to redeem half of its series A convertible perpetual preferred units and reduce its existing debt, OCBC said.

DBS Vickers says, “We continue to like FCT due to its stable income profile and the positive impact coming in from its management execution, as evident in Causeway Point’s enhancement strategy. Thirdly, given that it’s trading above book, we see opportunities of inorganic growth.” What the last means is that FCT can issue new units to acquire properties. 

Then there is Suntec REIT, with DBS Vickers citing its attractive yield and the positive earnings impact in the medium term from its asset enhancement initiatives.

Maybank Kim Eng, which earlier this week upgraded its rating on the REIT to “Buy” from “Hold”, while increasing its target price to S$1.66 from S$1.42, agrees citing as positives the progress of refurbishment work at Suntec Mall and Convention Centre and the near complete occupancy of its office portfolio against the negative of  a looming supply glut.

FYI1, AIMS AMP Capital Industrial Reit portfolio value has risen by 5.6 per cent, said the Reit on Tuesday. Based on the new valuation made on September 30, 2012, the Reit’s portfolio is now valued at S$965.7 million. Its previous valuation was on March 31, 2012.

FYI2,Bloomberg reported last month that the local REIT market has led the global league table so far this year, returning an average 37 per cent. That is twice the gains in the United States, United Kingdom and Japan, according to Bloomberg data, and better than Australia, which advanced 24 per cent.

A natural topic for national conversation

An article in SunT ST last week on farming on the rooftops of HK reminded me that I had written in My S’pore: A greener & more pleasant land about using the roofs of our HDB blocks and other high-rise buildings to create a greener S’pore using examples from Switzerland. I also added, “This being S’pore, we could use HDB roof-tops to be self-sufficient in basic veggies, and range-free eggs.”

Well not only are the Hongkies now farming on the top of high rises, but I have since learnt that the Americans were already doing it for some yrs now: The idea to grow more food within city limits has spread in recent years along with increased awareness about the quality of our food and where it comes from. Advocates say urban farms can also provide important green-space and, when built on roofs, help reduce energy use and storm-water runoff. In dense cities like New York, with high real estate prices, rooftops represent enticing, unused space. Several cities, including New York and Seattle have revised zoning and building codes to help encourage the practice.

http://www.reuters.com/article/2012/07/19/us-farms-urban-idUSBRE86I0U120120719?type=smallBusinessNews

Maybe Khaw can get his planners to see if leasing out the roofs of HDB blocks to wannabe farmers can help lower the cost of the HDB flats to S’poreans?

And this is a natural topic for our National Conversation (Ya silly pun, I accept). It is a non-political topic of conversation for the S’pore of 2030.

Only SDP and NSP activists, Ravi the lawyer, KennethJ, Goh Meng Seng and TJS will strain out gnats to find a political angle to this issue. LOL.

Related link: Parks along abandoned railway tracks in the sky (NY) and on the ground (England)  
http://www.bbc.co.uk/news/magazine-19872874

Bearish news for First Reit?

Background info

Lippo Karawacial is First Reit’s financial sponsor: “On 11 December 2006, Lippo Karawaci became the first company in South East Asia to list a Healthcare REIT on the Singapore Stock Exchange with Indonesian assets. Assets in the First REIT includes the Siloam Hospitals Lippo Village, Siloam Hospitals Kebon Jeruk, Siloam Hospitals Surabaya, Siloam Hospital Cikarang, Mochtar Riady Comperhensive Center and The Aryaduta Hotel and Country Club Karawaci, and four Singapore based properties.”

http://atans1.wordpress.com/2012/07/20/first-reit-nav-revision-bonus/

Now the bearish news

One of the sources told Reuters that first-round bids were below expectations, but the sale process will continue to give the buyers an opportunity to bid higher. It wasn’t clear how much the bidders had offered for the stake in the first round.

 Blackstone, Bain Capital, KKR & Co and Dubai’s Abraaj Capital have been shortlisted for the second phase of an auction of a fifth of private Indonesian healthcare operator Siloam in a deal that could fetch as much as $300 million, sources said.

Seller PT Lippo Karawaci is seeking a valuation of more than 20 times Siloam’s forward core earnings for the stake, they said, declining to be named as the discussions were private. Siloam is the country’s biggest private hospital firm.

“Lippo may be back in the market next year if the valuation disparity is too big,” said one of the sources.

…

Lippo plans to sell a minimum 20 percent of unit Siloam Hospitals for between $200 million and $300 million, but could increase the stake to 49 percent if the price is right. It hired Bank of America Merrill Lynch to run the auction, sources have told Reuters earlier.

http://www.nytimes.com/reuters/2012/08/27/business/27reuters-lippo-privateequity.html?_r=1&src=busln&nl=business&emc=edit_dlbkam_20120827

So there may be no revision of First Reit’s NAV
http://atans1.wordpress.com/2012/07/20/first-reit-nav-revision-bonus/

Might even be revised downwards. But Global buyout firms are keen on Indonesia’s consumer and healthcare sectors despite steep valuations, as they are betting on the country’s fast-growing economy.

Indonesia has one of the world’s lowest healthcare spending-to-GDP ratios, but its rising middle class – which represents more than half of its population of 240 million – is expected to sharply increase its medical spending and drive growth in the sector over the coming years.

“The healthcare sector still continues to remain the darling of private equity. Even with rich valuations it is easy to find bidders for this sector,” said Krishna Ramachandra, head of corporate finance and investment funds at law firm Duane Morris & Selvam LLP.

But a growing number of investment banks are advising clients that south-east Asian rivals such as Malaysia and Thailand now look more enticing than Indonesia. Morgan Stanley and Credit Suisse say the Indon economy is overheating. Barclays is relaxed abt the “problems”.

Questioning the conventional wisdom on 50-yr loans

When netizens like Ryan Ong and the readers of TRE, the government, and the constructive, nation-building media agree that 50-yr mortgages are bad for the borrowers and S’pore, I had no alternative but to think about the issue. Surely, they can’t all be right. A waste of my time as I’m unlikely ever to want, or to get approved for such a loan: I’m past 55. But then, I got plenty of time.

Let’s start with the most blindly obvious fact. The very long period, more than half the average life span of a S’porean*.

– “Borrowers could easily get stuck … if the market crashes”. This was written by an apprentice of the Dark Side (which confusingly in the context of S’pore belongs to the the Men in White) in yesterday’s ST.

– Or that interest rates can go up beyond our wildest imaginations. Well according to the government, a 30-yr mortgage on a 99-yr lease is “affordable”. So waz another 20 yrs?

– Anything can happen (PAP loses power and Gerald Giam leader of WP becomes PM?).

Seriously, the deified Lord Keynes said the only reasonable response to the question “What will interest rates be in 20 years’ time?” is “We simply do not know”. And he was talking only about 20 yrs. The point I’m trying to make is that even the 20-yr standard mortgage is problematic and risky. So don’t over exaggerate the risk for 50-yr mortgages, when 20-yr mortgages are already risky.

(BTW, roughly 20 yrs after Keynes made that remark that, Britain was fighting the Third Reich: it was losing. Any intelligent nation would have surrendered. After all, the Fourth Reich rules the Eurozone on which Britain depends for its propsperity.)

Next, we are told that the interest payments are “humongous”. True. But has anyone done the sums to see if someone had bot a bungalow in the mid-1950s on a 50-yr mortgage (didn’t exist then: in fact mortgages were for very short periods only, and only available to rich people), would he or she have made money in the mid-2000s? Would the cost of repayments be worth it? I think, we know the answer.
http://atans1.wordpress.com/2012/01/08/what-grace-fu-cant-afford/

I’m not saying that history will repeat itself. We are unlikely to have a competent PAP government bullying ruling us for another 50 yrs (And the PAP stated getting incompetent 21 yrs ago). And anyway, men like Dr Goh Keng Swee are  dead, or retired like Ngiam Tong Dow and one LKY.

What about nothing left in the CPF account for old age? Seriously, does anyone think that the cash put aside in the account will be worth much?

What I’m not saying is that a 50-yr mortgage is good for borrowers, or S’pore. What I’m saying it that it’s juz the logical extension of a 20 or 30-yr mortgage. Its cons are equally applicable to a 20 or 30 yr mortgage. Does anyone who takes out these mortgages expect to continue financing the mortgage for said period? No, the plan always is to refinance on better terms a few yrs after taking out the mortgage. Same for 50-yr one too. The interest rate and other risks are similar, juz magnified.

The issue in taking out a mortgage is not affordibility but one’s risk profile, reasonably and rationally considered. But thinking rationall and reasonably is not easy.

Interesting post: Some useful number crunching
http://www.investinpassiveincome.com/further-comments-on-the-50-year-loan/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+InvestingInPassiveIncomeAssets+%28Investing+In+Passive+Income+Assets%29

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*82.2 for a male S’porean and 85.6 for a female.

Far East Reit refuses to increase yield

Here I prophesised that Far East Reit would be forced to increase the expected yield on its trust from a niggardly 6-6.5%.

Well Morocco Mole (sidekick to Secret Squirrel) tells me that the Reit, which owns hotels and serviced residences in Singapore has not changed its pricing, despite CDL’s yield of 6ish% and Ascendas Hos of almost 8%.

So don’t subscribe if you are hoping for a pop in the price on listing day. CDL looks a better yield play. Got public track record.

Related post:
http://atans1.wordpress.com/2012/07/30/ascendas-hospitality-trust-surprises/

Ascendas Hospitality Trust surprises

Ascendas Hospitality Trust (A-HTrust) closed at its issue price last Friday. Considering that the public offer was about 6.9 times subscribed and yields projected at 7.9% (FY13) and 8.0% (FY14), while CDL’s is 6% (admittedly that is trailing) and strong demand for the placement, I expected the securities to close higher.

Maybe it’s the structure? The A-HTrust is a ‘stapled security’ comprising the Ascendas Hospitality Business Trust (80%) and the Ascendas Hospitality Real Estate Investment Trust (20%).

Mr Tan Juay Hiang, chief executive, Ascendas Hospitality Trust, said earlier last week: “The REIT structure does allow unit holders and investors to enjoy a more tax efficient structure. And the business trust will allow the platform to look at the potential development projects, unlike the REIT there is a limitation. So on a staple securities basis, it does provide quite a fair bit of benefits for unit holders and investors.”

Maybe it’s  because the trust said it’s looking at acquisitions to grow the value of its assets going forward. Rights issueS, more debt?

Maybe because as analysts said there are downside risks to hospitality trusts as the tourism market is highly sensitive to global downturns. Projections could go wrong.

Maybe it shouldn’t have allotted an additional 73.4 million securities to the placement tranche of its initial public offering in Singapore as part of its overallotment process?

Update on 31 July: Another reason could be that the assets are outside S’pore and investors place a premium on S’pore based assets. The reverse of the govt’s “FTs are betterest” policy.

Anyway, means the coming Far East Reit got to redo its sums again about being cheapskate
http://atans1.wordpress.com/2012/07/24/far-east-reit-cheapskate/

Keep an eye on A-HTrust. Could be worth adding to portfolio for yield and capital appreciation. I like the combi of biz trust and Reit, though not sure if it will work in practice. Got to research the issue.

Two S’pore buy-outs in trouble?

Buy-out companies are tapping non-traditional funding avenues to overcome difficult IPO and bank loans markets? TPG Capital, which has around US$52bn in assets under management globally, is considering an expensive high-yield bond for precision engineering firm United Test & Assembly Centre. TPG had in June 2011 looked at an S$500m IPO.

KKR, which has around US$62bn in assets under management globally, became the first private equity fund to use a high-yield bond to refinance a buyout loan in Asia when it took out a US$300m  five-year bond for Singapore technology company MMI International, in February this yr. KKR had in March 2011 looked at an IPO exit for MMI worth S$1bn (then US$785.7m).

In April, it spun that it was planning an IPO for MMI worth  raise between US$400m to US$500m. The IPO was expected to take place in the third quarter. More.

Given market conditions, not likely.

Far East Reit: Cheapskate

Far East Reit which owns hotels and serviced residences in Singapore, is being marketed at a yield of 6-6.5% Compares unfavourably about 7.9% offered for Ascendas Hospitality Trust (at issue price: expect it to fall to 6ish level when trading starts i.e. price moves up) and 6% for CDL Hospitality Trust

http://www.reuters.com/article/2012/07/20/us-fareast-reit-ipo-idUSBRE86J04L20120720

Bet you the yield will have to be improved (giving room for some capital gains) for the institutions.

FCOT: Great insight!

“FCOT sold a S$10 mil yielding KeyPoint for S$360 mil and bought a S$10 mil yielding Caroline for S$113 mil!”

http://www.investmentmoats.com/money-management/reit/frasers-commercial-trusta-reit-worth-looking-out-for/

Effectively it’s get the same yield but reducing the capital used by 31%, releasing the balance of 69% for hopefully more proftable use. Great financial engineering. F&N’s chairman should tell his sis-in-law at Temasek to pay F&N and FCOT to teach Temasek financial engineering.

And great insight by Investment Moats: worthy of a Buffett.

Bad PR by FCOT. It should enhance shareholder value be publicising its financial egineering skills.

Though must point out that the returns in Caroline’s case are in A$. Nevertheless …

But given that FCOT was gifted the Alexandra Technopark by F&N when F&N was trying to salvage its investment in FCOT during the financial crisis, there’s a danger that FCOT may have to return the favour. I was surprised that F&N shareholders did not kick up a fuss as the valuation then looked rather low, even taking into account the crisis. But then the property is “peanuts’ in relation to F&N’s assets. So there’s a gd chance that F&N would not ask FCOT for a favour.

As to the best use of the Keypoint money, redeem the convertibles in full: increasing leverage. Rely on F&N’s balance sheet: maybe pay it a fee for “renting”. Worst case: rights issue again. But then I’m a bit of a gambler (like the cowboys and cowgals at Temasek), even if I invest in Reits for the yield. Some habits die hard.

Katong property more valuable than Hawaiian island

So the the Katong home of the late Liem Sioe Liong, one of Indonesia’s richest men, is valued at approximately S$100 million, according to a report in Indonesia’s TEMPO Interactive. The property is 86,000 sq ft.

It was reported yesterday that the billionaire boss of technology giant Oracle is to buy 98% of the Hawaiian island of Lanai. Larry Ellison’s successful bid is unknown, but the asking price for the 141 sq mile (365 sq km) was said to be between US$500m and $600m
http://www.bbc.co.uk/news/world-us-canada-18529739
.

Reminded me that in the late 1980s, the grounds of the Imperial Palace in downtown Tokyo was said to be worth all the land in California. Australia sold part of the land its embassy was on and paid off half of its foreign debt.

Cambridge Reit

Almost no coverage from analysts, so this might interest
http://sreit.reitdata.com/2012/05/25/cambridge-dmg-4/

The yield is great, the gearing levels are ok but the lack of a big, conservative brother scares me. In times like this, need a big, stodgy brother like F&N, Keppel, or AMP; or effectively zero gearing (Lippo trusts). I consider CapitaLand too racy for me despite it’s a TLC.

Saizen Reit

 This article (“Residential properties have been the most popular among investors based on its stable return,” said Ishinabe. “Since last year, investors have expanded their interest into other types of properties such as office buildings and commercial facilities.”) on two bulls in Jap commercial property despite supply a’coming reminded me of u’m post on Saizen Reit that tot me the basics of this residental property Jap Reit. 

http://singaporeanstocksinvestor.blogspot.com/2012/05/saizen-reit-to-buy-or-not-to-buy.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+ASingaporeanStockmarketInvestorassi+%28A+Singaporean+Stockmarket+Investor+%28ASSI%29%29

 

Test needed to ask questions at co. meetings

(Or “Shume really stupid shareholders” or “Why SGX shld pay Mano Sabnani to conduct courses on asking sensible qns at AGMs and EGMs”)  

Sometime back, the media reported that some daft shareholders (same people as those who complained at DBS AGM that DBS paid 50% premium over Bank Danamon’s share price to get controlling stake? I mean these people never ever heard of a premium needed to secure a controlling block?) abt CapitaLand’s China exposure and share price since 2008 or 2007 at its AGM.

Don’t they read the int’l media?

Example from BBC Online:”China has, thus far, avoided the much-feared hard landing,” said IHS Global’s Ren Xianfeng.

“Expect no major property meltdown or construction bust. Expect no deflationary spiral or banking crunch.”

Analysts said that given the steadiness of the property market, policymakers were likely to continue to ease their policies to boost growth.

Ting Liu of Bank of America-Merrill Lynch forecast that China’s economy was likely to grow at an annual rate on 8.5% in the second quarter, up from 8.1% in the first three months of the year.

And on the share price: don’t they realise that equity markets have had a choppy ride since 2008. And that China-related stocks have been the target of bear raids and that CapitaLand is an obvious target to short given that the stock is liquid and shares can be easily borrowed

In case anyone doesn’t understand the reference to Mano, he asks vv intelligent questions at AGMs and EGMs. Only one I can bitch abt is at K-Reit EGM when he queried the price paid for Ocean Towers from its parent. Shumething like Ocean Towers seldom gets sold at mkt price, except perhaps in distressed sale. Kanna pay premium.

How times have changed since the late 70s (Moral suasion)

Someone wrote in to Voices as follows

 

Property developers countering govt policy

 

The extra stamp duty of 10 per cent was introduced in December to curb excessive foreign investment in private residential property. This cooling measure has failed. New private home sales last month were the strongest in nearly three years.One possible reason is the increasingly common practice by property developers to absorb the extra stamp duty as part of their marketing strategy, visibly offered as a carrot to potential buyers in their advertisements of property launches.If a government policy could be circumvented this easily, then it has lost its effectiveness. The Government should make it illegal for property developers to absorb any stamp duty.

 

In the late 1970s, never mind making it illegal for property developers to absorb any stamp duty: someone would call up the developers offering this deal and tell them that what they were doing was “not in the national interest”, and please scrap the offers. Developers would listen to the polite request to behave responsibly in obeying the spirit of the law rather than the letter of the law because no developer wanted the tax authorities going thru their books if they decided to follow the letter of the law.

 

How times have changed since when I started work. For the better or the worse in this instance, I am uncertain.

 

 

Reits R financial engineering

Reits have a new tool to juice up returns: perpetual securitiesor perps. Could “leverage up” without “debt”. Shld not technically use the word “bonds” even though they are effectively bonds.

http://www.todayonline.com/Business/Property/EDC120504-0000036/Perpetual-bonds–A-boon-to-Singapore-REITs

Could be burps if shumething goes wrong.

The central bank is worried that retail investors may not understand perps*. I’m worried reit managers may be seduced by investment bankers to use perps indiscrimately. Us investors get shafted. So invest in reits where the sponsor is big, stodgy and conservative (like F&N, or AMP), and has a big stake in reit.  If sponsor doesn’t meet the first criteria, think long and hard. I did in case of LMRT, and bot in.

Update: Comments on ST article abt central babk’s stance.

———————————–

*Bankers said MAS officials had voiced their concerns over retail holdings of perpetual bonds during at least two informal meetings in recent weeks.

The central bank’s scrutiny is preliminary and there is no suggestion of any wrongdoing on the part of the banks or companies involved in the recent flurry of perpetual bond issues. But the discussions show that the regulator is worried individual investors may be taking on too much risk without a full understanding of the product.

http://www.todayonline.com/Business/EDC120515-0000049/Perpetual-bond-rush-causes-alarm-in-Spore

MIIF & FCT: Useful updates

Never summed up the courage to buy MIIF because although it is a China infrastructure play, yirld is super, and MIIF is net cash, its underlying investments are up to their eyebrows in debt: could affect MIIF’s payouts, NAV and price. But chk out for yrself  
http://www.investmentmoats.com/money-management/dividend-investing/amfraser-have-some-seriously-optimistic-cash-flow-projections-for-miif/

For the working stiffs who got cashflow from day jobs. Not for retiree who gambled his cashflow.

 CIMB likes Frasers Commercial Trust I own shume.

Update: DBSV likes FCT too
http://sreit.reitdata.com/2012/05/18/fcot-dbsv-3/

Ascendas India: DBS is bullish

http://sreit.reitdata.com/2012/05/02/a-itrust-dbsv/
 (Ya I know technically it’s not a Reit, but it looks like one.)

So am I. )))). BTW, the Indian rupee has strengthened after the government said on Monday that it would delay proposed laws targeting tax avoidance by one year.

But five things wrong with the Indian economy.

Gd Reit table

http://mystocksinvesting.com/wp-content/uploads/2012/05/Singapore-undervalued-REIT-stock-comparison-5-May-2012.png

Thanks to complier.

Lippo Reit: OCBC is bullish, but Indon economy is slowing

http://sreit.reitdata.com/2012/05/02/lmir-ocbc-14/

So am I. But Indonesia’s economy grew at its slowest pace in 18 months amid a slowdown in exports as demand from key markets such as the US, Europe, China and India weakened.

Worse, the Indonesian rupiah has fallen 8% against the US dollar in the last twelve months: a weak currency may hurt the purchasing power of domestic consumers and dent demand. Remember domestic consumption accounts for nearly 60% of its economy.
http://www.bbc.co.uk/news/business-17980123

Other analysis, info on LMIRT:

http://s-reitinvestmentblog.blogspot.com/2012/05/analysis-of-lmir.html

http://diyvalueinvesting.blogspot.com/2012/04/lmir-q1fy2012.html

Why the rich live in exclusive areas like Sentosa Cove or Districts 9, 10

They want to make sure that they do not break God’s order Love Thy Neighbour
http://front.moveon.org/three-words-in-the-bible-that-some-people-totally-ignore/?rc=daily.share&id=40399-20042274-0D2I6Wx

After all, being wealth shows that God favours them.

 

Property: Rich Indons buying in London

More wealthy Indonesians are looking to buy a second home in London, while interest in Singapore has waned, according to Property Report, a real estate magazine, citing a study by global property consultancy Knight Frank, earlier this month.

“Interest from Indonesian-based purchasers in London property increased by over 100 per cent last year … Indonesia moved up two places last year in Knight Frank’s rankings of Asian buyers in London, from 11th in 2010 to ninth position… weakening of the British pound against the rupiah has made the idea of buying property in London more attractive to wealthy Indonesians”.

Even though Singapore remains the No 1 destination for Indonesian property investors, the Republic’s recently-introduced additional buyer’s stamp duty was having a “cooling effect”, the report said.

BTW, lots more Muslims and rich people there. The Arabs love London, so do the Russian rich.

Knight Frank also said Singapore remains the favourite for the Indonesians, “Indonesians are among the top-three property buyers in Singapore after China and Malaysia. Last year, Indonesians bought 1,714 properties in Singapore. In the first quarter of this year, the number was 137″.

“We estimate that Indonesians spent 1.5 trillion rupiah (S$204.5 million) on property in Singapore (last year)”.

Not another excuse to promote S-Reits?

(Or “S-Reits: Is an amber light flashing?”)

Regular readers will know that I’m up to my eyeballs in Reits (AMP, Fraser, Lippo and Ascendas India, ya I know AI is a biz trust, but it’s a Reit except in form). Greedy for the yield, what with inflation at above 5%. And no high salary to fall back on. In fact no salary at all. (((

Generally Reits are up 10% in 1Q, and taz without taking into account the payouts! So I’m not complaining.

But I’m getting concerned abt future total returns (price + payouts) when the expected appreciation of the S$* is given as a reason to buy Reits. “If they [investors] expect the dollar to appreciate … there will be more interest in Singapore-dollar-denominated assets … Reits that are listed in Singapore and traded in Singapore dollars will benefit as well,”  someone senior from SIAS Research was quoted by MediaCorp as saying recently. And remember that SIAS is the self-proclaimed watch dog for retail investors!

WTF, ever heard that quite a number of Reits are diversified geographically, or are exposed to a specific country like India, China or Indonesia? If a Reit has oversea income, that income would be “reduced” when translated into an appreciating Singapore dollar.

Anyway, as of last week, DBS Vickers liked Mapletree Logistics Trust, Ascendas India Trust and Frasers Commercial Trust. These were Reits to accumulate ahead of payout declarations because it expected the payouts to exceed mkt expectations.

CIMB favoured CapitaMall Trust and Frasers Centrepoint Trust for their retail exposure and strong growth potential. And OCBC prefered industrial REITS, which offer yields in excess of 8% to outperform.

But do remember that unlike companies, Reits have by law to payout out 90% of their income. There is no such thing as keeping something for “a rainy day”. Something that “dividend stocks” like Haw Par, SPH or F&N do. With a Reit, if income drops, the payout drops and the share price will drop to reflect the reduced payout.

As a Reit investor, you got to sell when the going gets good, or be prepared to hold it through down-cycles and be prepared to cough up monies then for rights issues to shore up the financials.  Net-net, could use up the payouts you got in gd times.  

————–

*Following the recent announcement by the central bank to allow the Singapore dollar to appreciate at a faster pace.

F&N: Trading at deep discount to RNAV says DBS

As the shares closed at  6.74 today, I tot readers might be interested in DBS’s continued call to buy F&N.

My problem with this stock is that there doesn’t seem to be any plans to reshuffle the portfolio of assets (Asia Pacific Breweries, F&N Berhad, Times Publishing, properties and a few other things) to extract more shareholder value. It’s more of the same. But dividend is sustainable, yielding abt 2.7% (trailing). Better than leaving money in the bank.

DBS Group Research | Mar 30

Close: $6.70

 … announced that its wholly owned subsidiary, FCL (China) Pte Ltd, is proposing to privatise its 56.17 per cent-owned, Hong Kong-listed entity, Frasers Property (China) Ltd (FPC). The proposed privatisation will be undertaken jointly with Riverbook Group Ltd, a wholly owned subsidiary of Ascendas Land International Pte Ltd. Riverbook is also the second largest shareholder of FPC with a 17.16 per cent stake. The main assets of FPC include the 157,610 sq m Vision Shenzhen Business Park and Shanshui Four Seasons in Shanghai with 737,000 sqm earmarked for residential/commercial uses.

We believe that the rationale for this exercise is that the current traded price does not reflect its value as FPC is trading at a 43 per cent discount to its NAV.

Furthermore, FPC’s trading value is relatively low at less than HK$1 million a day. The privatisation is likely to provide more flexibility for the major shareholders to extract value, in our view.

We continue to see value in F&N, as it is trading at a 24 per cent discount to our RNAV ($9.02), with the potential to progressively unlock value over the longer term – Asia Pacific Breweries, F&N Berhad, Times Publishing, properties, etc. In the meantime, the group’s earnings will benefit from the strong performance of its brewery unit, stable investment property earnings, coupled with about S$1.7 billion in unrecognised property development sales in Singapore. We believe its low landbank and partnership strategy for land tenders will better insulate it from policy risks in this uncertain market.

Link between changes in PR rules & ministerial salaries?

The move to scrap one avenue for rich foreigners to fast-track their permanent residency applications by parking large sums of money here will have little impact on the Republic’s economy, analysts noted.

In fact, an analyst went as far as to describe the Financial Investor Scheme (FIS) – started in 2004 – as having “outlived its usefulness.
http://www.todayonline.com/Singapore/EDC120405-0000087/Scheme-for-rich-foreigners-outlived-usefulness

The devil whispered in my ear, “What this means is that there will be less people applying for leave to buy houses in District 10, and less demand for places in Sentosa Cove, and super high end luxury apartments. Remember there is a group of S’poreans who have had their salaries cut by about half. Less competition for them now when it comes to buying luxury-end properties?”

“Perish the tot,” the angel of the Lord said. “These are the people who introduced GRCs.”

“My point exactly,” said the MU supporter.

Angel of the Lord, “Since 2010, these businessmen, have not been allowed to include the cost of buying a private home as part of their required investment.”

MU supporter, “The pigs knew they were going to have to cut their salaries. Pre-emptive move to ensure they are not affected by the cut in salaries.”

Angel, “OMG! What can I say? You may have a point!”

Tesco Thai Property Fund Debuts Strongly as Yield Play

Even Bangkok punters play the yield game.

http://www.nytimes.com/reuters/2012/03/19/business/19reuters-tesco-thailand.html?_r=2&src=busln&nl=business&emc=edit_dlbkam_20120319China%20IPOs
:

“Younger S’poreans should not be burdened with taxes” and “only about 50% of S’poreans pay taxes”

Minister K Shanmugam has said that the Government does not want younger Singaporeans to be saddled with tax burdens, even as it ensures that the elderly are taken care of and no one is left behind.

When I read the above, I could only chuckle and then sigh. I had juz posted my very mixed tots about Mohammad Charlie Jasni who is earning $850 a month, buying a $99,200 HDB 2-room flat, noting that after the $40,000 grant the HDB loan is $59,220. On a 30-year mortgage at the HDB Concessionary Loan rate of 2.6%, the monthly repayment is $237. Mohammad is only able to pay $83 a month because the mortgage was reduced to slightly more than $20,000 because he and his wife have used up their CPF monies of $40,000. If they default, they have lost serious money.

About 15 years ago, in 1997 or 1998, I had an interesting conversation with some expat couples in their early 30s at my club . What surprised them most about S’pore was the financial commitements that their S’porean contemporaries had: 20 to 25 year loans to buy public housing apartments, and 10–year car loans. They said that back home (Canada, OZ or the UK), they would never have dared to make such long-term financial commitements. But it was par for the course here. And they would have not needed to, I added. They agreed. Well, now HDB mortgages are an “affordble” 30 years.

Of course, the PAP doesn’t want to burden the young with more taxes. The young can’t afford to pay higher taxes: they are juz managing a decent, comfortable life after meeting the interest and principal payments on their 25 to 30-year HDB mortgages. More will vote Opposition if taxes are increased. And I don’t mean the bluish near-clones of the men in white. They will vote for the people in red. Or they will riot.

The minister also said, ”[W]e also have to send another message, which is that, only about 50 per cent of Singaporeans pay taxes”. This surely is wrong? If only 50% of S’poreans pay taxes, then why is the government giving a permanent rebate for the poor so that GST becomes a lot less regressive*?

We all (rich, poor and so-so) pay GST. That is why economists consider this tax to be the most efficient and effective way of taxing people. Tax is paid when one consumes. We all consume. 

(It also has the added advantage of taxing consumption, not savings or investments. In traditional economics savings and investments are good, consumption is bad. Bit like how the PAP thinks? Investing in a 30-year mortgage is good, but spending more on consumables is bad.)

What he means by “taxes” is “income tax”. The minister when he was in legal practice was one of the top litigation lawyers around. He was very, very good. Err I hope that now he is a minister he doesn’t join the likes of PritamS, Vikram Nair and Hri Kumar Nair. Their use of words reminds me of::

    “I don’t know what you mean by ‘glory,’ ” Alice said.
    Humpty Dumpty smiled contemptuously. “Of course you don’t—till I tell you. I meant ‘there’s a nice knock-down argument for you!’ ”
    “But ‘glory’ doesn’t mean ‘a nice knock-down argument’,” Alice objected.
    “When I use a word,” Humpty Dumpty said, in rather a scornful tone, “it means just what I choose it to mean—neither more nor less.”
    “The question is,” said Alice, “whether you can make words mean so many different things.”
    “The question is,” said Humpty Dumpty, “which is to be master      that’s all.”
    Alice was too much puzzled to say anything, so after a minute Humpty Dumpty began again. “They’ve a temper, some of them—particularly verbs, they’re the proudest—adjectives you can do anything with, but not verbs—however, I can manage the whole lot! Impenetrability! That’s what I say!”

(Lewis Carroll’s Through the Looking-Glass, and What Alice Found There )

———-

*But TOC’s Uncle Leong has described the problem with the government’s “solution”, “A new GST voucher will be given to help particularly lower-income and elderly Singaporeans, comprising three components – cash, Medisave top-up and U-Save.

‘So, you pay for your GST increase in cash, but you get the bulk of it back not in cash, but as Medisave top-ups which you can only use for medical purposes, and U-Save which helps you to pay for what has historically been generally increasing utility bills.”

A wicked, mean tot. Could one of the reasons for putting the money into CPF accounts rather than pay cash be to lessen the cost to the government? The real value of the cash in the CPF accounts are steadily and steathily eroded by inflation. With the Medisave account paying 4%, and the ordinary account 2.5%, and inflation at juz below 5%, could the government be hoping that inflation reduces its headline cost by the time the money is withdrawn? Even if inflation returns to the 2% range, the real cost to the government is reduced. As I said, a wicked, mean tot that would never occur to a PAP supporter or a journalist in our constructive, nation-building local media.

http://atans1.wordpress.com/2012/02/27/budget-a-plague-on-both-your-houses/

Behind the $83 a month HDB flat

(Or “Mixed thoughts about the poor having to take out a HDB mortgage” or “What the HELL? PAP misses the plot!”)

In, I suppose, an attempt to show that ministers were not talking rubbish about someone earning less than a $1000 being able to afford a HDB flat (thanks be to a government subsidy, and forced savings via the CPF system), the constructive, nation-building ST had an article on how Mohammad Charlie Jasni who is earning $850 a month is able to afford a two-room HDB flat.

The analytical, compassionate, risk-adverse part of me agreed

– With the view articulated by TOC’s Uncle Leong that it would be better if Mohammad was allowed to lease, and not have pay a mortgage ($44 versus $83 a month)

  — It’s cheaper.

  — There is a possibility of him defaulting and losing all that he and his his wife have put in ($40,000 in CPF savings), “the probability of job loss, pay cut, sickness or accident, may be relatively higher than others … the likelihood of him defaulting on his mortgage over the next 30 years may be high”.

  — He and his wife would have some savings for the couple’s old age. He is only able to pay only $83 a month because his and his wif’e's CPF savings of $40,000 have been used up, reducing the amount owed to slightly more than $20,000.

– And with this comment on this TOC article thread, “I find it very CHILDISH for the government to glamorise a policy that enables a low income earner to own a HDB flat, and yet ignoring the fact that the same low income earner will face the bigger problems of making ends meet on the daily basic necessities like food and transport.

‘These low income earns may own a HDB flat but cannot survive paying the basic expenses in our daily life, and then end up dying of hunger… good policy meh? …”

On the other hand, the analytical, risk-taking side of me thinks that here is a couple who because of the CPF grant and forced savings have been given the chance to better themselves.

The couple can sell off the property after five years and make a good profit (at least $100,000) on the flat, even assuming a slightly weaker market. They can move to Johor, rent a place there, and he can commute. Alternatively in five years time, assuming he is allowed to rent the place out, he can use the rent money to rent a place in Johor, and commute. He could even go into business, while living in Johor.

The couple has options that leasing does not give them, albeit at greater risk. Many of the comments I read on this issue on the internet portray people like Mr Mohammad Charlie Jasni as passive and helpless. The one good thing the ST article shows is that this is not true. They are just as keen to better themselves as better-off, more fortunate S’poreans. In its Alice-in-wonderland way, the government is trying to help them out of a surreal place that is largely the creation of the government.

The issue is why is public housing so expensive: a two-room flat costs $99,200?, Note after $40,000 grant, the HDB loan is $59,220. On a 30-year mortgage at the HDB Concessionary Loan rate of 2.6%, the monthly repayment is $237. Mohammad is only able to pay $83 a month because the mortgage was reduced to slightly more than $20,000 because he and his wife have used up their CPF monies of $40,000. If they default …

But let’s celebrate Mr and Mrs Mohammad Charlie Jasni. They give the lie to the Hard Truth that only immigrants work harder and aspire to have a better life. They also give the lie to the casual assumption of many do-gooders that the poor are passive and helpless.

Roxy-Pacific: Insiders buying

I’ve kept an eye on Roxy-Pacific since at least last March. It trades at a huge discount to RNAV, presumably because of its massive debts. I’ve concerns that it may not be able to refinance its debts if we have a repeat of the 2008 crisis.

Well, the executive chairman and an executive director were buying recently according to this BT report on Monday: Executive chairman of the board and CEO Teo Hong Lim and executive director Koh Seng Geok acquired shares of residential property developer Roxy-Pacific Holdings in the second half of February with a combined 1.849 million shares purchased from Feb 20 to 29 at an average of 45.5 cents each. The acquisitions, which accounted for 21 per cent of the stock’s trading volume, were made after the stock rose by 17 per cent from 39 cents on Jan 20.

The purchases were also made after Roxy-Pacific Holdings announced on Feb 16 a 5 per cent drop in Q4 profit after tax to $11.40 million for the three months to Dec 31, 2011. Earnings for the full year, however, rose by 16 per cent to $49.65 million. Chairman Teo Hong Lim picked up 1.399 million shares from Feb 20 to 22 and a further 380,000 shares on Feb 29 at an average of 45.5 cents each, which increased his holdings (direct and deemed) to 366.512 million shares or 57.57 per cent. He previously acquired 2.5 million shares on Jan 12 via a married deal at 40 cents each and 1.528 million shares from May 9 to Aug 22, 2011, at an average of 46 cents each.

Executive director Koh Seng Geok, on the other hand, bought 70,000 shares on Feb 21 at 45 cents each, which boosted his direct holdings to 4.398 million shares or 0.69 per cent. He previously acquired 40,000 shares from September to October 2011 at an average of 39.3 cents each and 100,000 shares in February 2011 at an average of 44.5 cents each. The counter closed at 47.5 cents on Friday

Do Reits have unintended commercial consequences for SMEs?

I invest in Reits for the yields and the brokers and local media have discovered Reits as a great defensive play. But SMEs claim that Reits have caused their rentals to escalate unreasonably.  JTC has been asked to review its current policy of divesting industrial space to private entities (like its Ascendas).

Business Times – 02 Feb 2012

SMEs blame Reits for growing rental pains

JTC asked to review its current policy of divesting industrial space to private entities

By MINDY TAN

(SINGAPORE) Rising rentals for commercial and industrial space have emerged as a pressing issue for small and medium enterprises (SMEs), and the fingers are pointed squarely at the dominance of real estate investment trusts or Reits as landlords.

The Reits’ drive to enhance yields and returns for unit holders – which usually translates into rental hikes – have left many SME owners, who feel they have limited alternatives here, fuming.

It has also led to calls – including a recommendation by the newly formed SME Committee – for JTC Corp to review its current policy of divesting industrial space to private entities like Reits and return to its previous role of an industrial landlord, so that it can provide ready and affordable industrial space to SMEs.

‘Rentals and capital values of properties are going up, impacting business costs for SME owners and eating into their bottomline,’ said Lawrence Leow, chairman of the SME Committee.

PM’s salary in 1970 and in 2012

(Or “PM’s salary in 1970 and today using a terrace hse’s price as a reference point” or “Fooling around with numbers: Can prove anything with numbers”)

According to this, LKY’s annual salary in 1970 was $42,000 a year. The value of my parents’ home was then $35,000  based on a neighbour’s transaction if I recollect correctly). So LKY could have bot the house and have $7,000 spare cash left over (17% of his annual salary).

His son now gets under the revised salary scheme a yearly salarly of $2.2m (assuming he gets his bonuses). My parents’ house now is valued at $1.5m (based on a neighbour’s 2010 transaction). The PM can buy the house and still have $700,000 in his pocket (32% of his salary). And this after a 36% pay cut. At his 2010 salary, he could have bot the house and have $1.5m (50% of salary) spare change.

Bottom line: LKY had a bad deal relative to that his son gave himself, and the one he has now accepted.  Even taking into account inflation, our PM is earning much more than his dad. In fact, the PM’s pay rose a lot more than the sum of the inflation rate, and rate of the appreciation of the terrace house’s value.

And unlike dad, who allowed ministers to earn more than he did, our PM is the top earner in the cabinet.

On how much David Marshall was earning (see this), I’ve been told that he could be wrong to claim he was getting $8,000 a month when he was Chief Minister in the late 1950s. When he gave the interview that mentioned that figure, he made several mistakes that were corrected before publication. This could have been one mistake that went uncorrected.

Will keep readers informed as this $8,000 figure had been widely (and unthinkingly) used to beat up the PAP: bunch of greedy pigs. As I’ve tried to show, it “proves”, if anything, PAP ministers are grossly underpaid using Marshall’s numbers. Juz as today’s example ‘proves” that our PM is overpaid.

My wider point is that numbers can be manipulated to support any view. There is no “truth” in numbers per se.

Finally, maybe Marshall was not mistaken over his $8,000 monthly salary because LKY was earning $3,500 in 1970. When he came into power in 1959, he slashed civil servants’ and ministers’ salaries by about half. And given the economic and political problems of the 1960s, he might not have dared to give himself a raise.

For that thank the Communists and their fellow leftists. They kept LKY on the straight and narrow,’cause he knew their power to cause trouble. If they were unhappy, they got protestors onto the streets, not mobilise anonymous grumblers on the Internet.

Finally on the performance bonuses.  The way the bonus scheme  is drawn up, esp how easy it is to achieve the targets (see here somewhere),  reminds me of the Caucus-race in Alice in Wonderland (a favourite book). This was a race where the runners all started in different positions, ran for as long as they liked and stopped in different places. Then everyone got a prize.

Metro: Share price of 0.695 includes 0.36 of net cash

DMG & Partners Securities on 27 December 2011, issued a “Buy” call on Metro Holdings. As the price remains unchanged at 0.695 (despite a strong market); and given that less the net cash, the stock is only trading at 0.335;  and a yield of almost 3% (historical), it’s something worth exploring despite it being a China play, and a property one at that.

(Background: Metro was founded in 1957 as a department store operator and became a household name. It diversified into property development in the 1990s and was one of the early investors in China’s real estate market, thereby missing the bullet of being a retailer here.)

It has since built up a portfolio of prime commercial properties in Tier-1 cities in Shanghai, Beijing and Guangzhou, as well as several property projects and joint ventures in Tier-2 and Tier-3 cities. Key properties that the group owns include Metro City and EC Mall in Beijing, Metro City and Metro Tower in Shanghai and GIE Tower in Guangzhou.

Leveraging on the group’s retail experience, Metro has chalked up an impressive track record as a mall operator and investor in China. To date, all its property ventures have been profitable, with past divestments making gains of 5-25 per cent premium over book value.

Over the past five years, shareholders’ equity compounded at a CAGR of 9 per cent. This was achieved without the use of excessive leverage given management’s conservative style. Its strong balance sheet (net cash of 36 cents) allows it to deploy capital opportunistically. The ability to recycle capital and profits into new projects has been a hallmark of Metro’s management.

The company is in the midst of selling its 50 per cent stake in Metro City Beijing for 1.25 billion yuan (S$247.5 million), a 50 per cent premium over its latest valuation. Should the deal go through, Metro will be able to book a pretax profit of $87.4 million. We estimate this will lift book NAV by nine cents/share.

On our estimates, the stock has an RNAV of $1.02 billion, or $1.23/share, after netting out liabilities. At current price, the stock is trading at a steep discount of 45 per cent to RNAV. Our target price for the stock is $0.86, based on a 30 per cent discount to RNAV.

S’pore Property: But would banks be allowed to?

Mortgage rates make the difference

So what contributed to the recent decoupling of Singapore and Hong Kong home prices?

The simple answer is mortgage rates.

Driven by strong loan growth and rising loan-to-deposit ratios, Hong Kong banks have raised their mortgage rate spreads since early this year [2011]. This has resulted in higher mortgage rates and reduced demand for residential properties, which in turn led to the slide in private home prices since September.

On the other hand, the Government’s property cooling efforts have so far been thwarted by very low mortgage rates. With base interest rates remaining near record lows and Singapore banks charging very low mortgage spreads, affordability remains high.

However, there is a risk that Singapore mortgage rates would rise next year from their current low levels. Like their Hong Kong peers, Singapore banks have also experienced strong loan growth over the past year, which in turn has pushed up their loan-to-deposit ratios – although it must be said that ratios in Singapore dollars are generally still low.

Moreover, with the debt crisis that is plaguing the European Union, there has been anecdotal evidence that some European banks are pulling back their credit lines in Singapore to help boost capital ratios as required by the EU debt plan. If these banks continue to deleverage, it could result in less competition in the lending market for Singapore banks, which may then feel comfortable enough to raise their lending spreads, including mortgage spreads.

In fact, during the 2008/2009 global financial crisis, local banks such as UOB and OCBC were able to increase their net interest margins as foreign banks reduced their lending activities in Singapore.

Thus, while the recent decoupling in Singapore and Hong Kong residential property prices may make for an interesting read, we do not expect it to last for long, especially with the latest round of cooling measures introduced in Singapore.

http://www.todayonline.com/Commentary/EDC111223-0000039/A-tale-of-two-cities

Should happen as this UBS analyst postulated in late Dec 2011. But if the government thinks property prices will tank, not juz fall a little, the local banks will “do the right thing” by home owners, but not investors. It has happened before. In the crisis in the mid 80s, when many home owners had negative equity, the banks “did the right thing” and did not ask for more equity. Home owners had gd reason to vote PAP.  

 

 

Liberal immigration policies leads to higher property prices

No not PAP propoganda but a sober analysis by Deutsche Bank that looked at the relationship between demographics and house prices in Western economies.

An analysis by Ajay Kapur of Deutsche Bank shows this relationship is pretty robust. He finds a positive relationship between changes in the working age population ratio (15-64 year olds relative to the rest of the population) and residential property prices, real prices almost always rise when the working age ratio is improving. In contrast, real property prices fell in one in three years when the working age proportion was falling. This ratio is declining in many countries; indeed in some the absolute number of workers is set to fall.

http://www.economist.com/blogs/buttonwood/2012/01/housing-markets

What Grace Fu can’t afford

(or “Why PAP Ministers feel underpaid”) 

So Grace Fu for one is unhappy about her salary cut. At least , for only a few hours sadly, she had the courage to voice her unhappiness. Then she repented her outburst or rather blamed us for “misunderstanding” her? Like we “misunderstood” Han or Han “misunderstood” SMRT’s SVP? At least Han had the excuse of his use of Singlish (his spoken English, let’s face it, is rubbish) for the former.

Well she should be very upset when she compares herself to S’pore’s last Chief Minister. Last March I wrote, Someone in TR wrote that David Marshall in an interview said he was paid $8000 a month in the 1950s as Chief Minister and went on like Marshall to rant against the PAP.

Based on $8000 a month, Marshall was paid $96,000 a year. From what I understand that could buy 3 bungalow properties in a then non-fashionable area in the East, say Frankel or Opera estate. He could have some change leftover. Today, a minister earning $3m a yr, may juz be able to buy a bungalow in these areas with his annual salary.

Well, assuming Grace Fu is earning say $935,000 (her new pay grade according to Gerald Ee and his maths-challenged committee), a 25% drop, she can’t buy nothing in the area on her salary. She can’t even buy a terrace house in a nearby estate.  They are going for around $1.5m.

(Now if this piece cannot find its way into “Petir” or “Fabrications about the PAP”, then Zaqy and friends on PAP’s new media team are sleeping.  As the efforts of Zaqy and gang based on the support the PAP is getting on the Internet, is so bad I’ll end as follows)

Ah well, she can still buy one 5-room and one 4-room HDB flat or a nice private condo apartment. But taz beneath her, I’m sure she thinks.

——

(Note Tan Jee say has a house in Frankel)

Related Posts

http://atans1.wordpress.com/2011/03/18/how-many-houses-david-marshall-could-buy-on-his-salary/

http://atans1.wordpress.com/2010/12/29/property-what-a-ministers-salary-can-buy-in-1957-and-2010/

What the news of the numbers of PRs owning HDB flats (and how it was reported) tells us

(I waited eight days after the data on PRs owning HDB flats came out because I wanted to see if the local MSM would give a favourable-  to the government- spin on the data, which the MSM could reasonably do. The MSM was silent.)

Last Tueday, BT reported that  S’pore permanent residents (PRs) owned some 48,700 HDB flats as at September 2011 , according to the Ministry of National Development. It was answering a PAP MP’s question. According to this, there were approximately 1,038,473 flats as of May 201o.

This means that 4.7% of HDB flats are owned by PRs. So those lurid figures (over 20%, if I remember correctly) claimed by TR are not true.

It was also reported that 39,100 units in the 3rd Quarter 2011, are rented out. Assuming that the rentees are all FTs (PRs and other foreigners), a not unfair assumption, this means only 8.5% of the flats are occupied by FTs. Again, nothing near what TR claimed (over 30% from memory). 

Now as PRs are 13.9% of the resident population or 10.2% of the total population*, and PRs and other FTs 37.1% of the total population, these HDB numbers indicate that PRs and other FTs cannot be a major cause of HDB price rises. If  the 8.5% of the flats are occupied by FTs were 30- 40% (in line with their share of the population), then they would be a major cause of price rises. So Mah was right to he said that PRs and other FTs had no or little effect on public housing prices?

The way to look at this piece of data in relation to all the data made available is that FTs  have an effect (disproportionate perhaps?) because the supply was not keeping pace with demand given the influx of FTs. Khaw’s programme of building a surplus buffer is an admission that there was insufficient supply when the FTs were flooding in, courtesy of the government that we voted in in 2006.

No surprise then that the government and PAP spin doctors, and ST and MediaCorp staff missed telling us shumething important. This piece of info shows that Minister Mah did not know the numbers, or was fibbing when he said that PRs and FTs had no or little effect on public housing prices. They had an effect because he goofed, and then was in denial.  Hence the silence when the local MSM or spin doctors could have rubbished TR’s assertions, and the belief that FTs are the the major cause for HDB price rises?

This piece of information helps give some perspective to the ongoing (often heated and irrational on both sides) debate on public housing and immigration. Yet it only appeared in BT, which is behind a pay wall most of the day. Later Yahoo! reported it. This reminds me of what David Boey in a letter to Voices wrote, ” [R]elevant information is sometimes unavailable to the public or is not presented in a consistent format to facilitate analysis.”

How true and sad. Can fix this lack of info or not, PM? Will be a test of your promise of more openness, and change.

————-

*”Singapore’s total population stood at 5.18 million as at end-June 2011. There were 3.79 million Singapore residents, comprising 3.26 million Singapore citizens and 0.53 million permanent residents, and 1.39 million non-resident foreigners, ” Department of Statistics report released on September 28th 2011.

“Singapore’s total population stood at 5.18 million as at end-June 2011. There were 3.79 million Singapore residents, comprising 3.26 million Singapore citizens and 0.53 million permanent residents, and 1.39 million non-resident foreigners.”