Archive for December, 2010|Monthly archive page

CitySpring Infrastructure Trust: a TLC dog with fleas

In Infrastructure on 08/12/2010 at 5:21 am

As regular vistors to this blog will know, I’m a sucker for yield and NAV plays. So I was starting to think abt CitySpring Infrastructure Trust which offers a prospective yield of abt 7%. It is also a Temasek-linked trust and could possibly be trading at a discount to NAV.  An investing sweet spot.

Fortunately before I even got to reading up the basic data on the trust, I chanced across a Kim Eng Eng Research report dated 30 November, which called the trust a ” sell”.

To forestall a credit rating downgrade of the three bonds issued by Basslink, CitySpring Infrastructure will set aside A$20 million (S$25.4 million) in an escrow account for this asset before next January. Although this move may resolve the CreditWatch placement by Standard & Poor’s (S&P), a capital structure plan involving an equity cash call seems inevitable in our view. So, while the forward yield of 7.1 per cent based on the previous DPU guidance appears compelling, there is no denying the risk of dilution.

… The bonds, worth a total of A$866 million, face a potential ratings downgrade that will trigger a cash lock-up at Basslink and affect CitySpring’s distribution policy … CitySpring will still need to submit a capital structure plan that will satisfy S&P’s stringent risk assessment. It plans to do so by next September. As one of the options, Basslink’s cash flow may be applied to reduce debt … A capital structure plan involving an equity recapitalisation seems highly possible in our view, given the presence of other debt obligations, such as the $142 million corporate loan due in August 2011 and the $130 million City Gas loan due in 2012. Even if Basslink continues to pay a distribution, unit-holders’ yield may still suffer a dilution.

We cut our DPU forecasts for FY March 2012 and onwards from 4.2 cents to three cents to factor in the removal of Basslink’s contribution. Our TP is lowered to $0.52, reflecting our assumption of a capital injection of $100 million to reduce gearing. Downgrade to ‘sell’.

Looks like the perfect storm. And I’ve found out that it’s last reported NAV is 0.34cents.

But I’ll monitor the trust, waiting for the capital raising exercise which I agree must come. It might then be like AIMAMP industrial reit or Fraser Commercial* — gd yields and discount to NAV to compensate for the overhang of units created by the rights issue. BTW, for waz it’s worth, I read in Monday’s ST that OCBC’s reit analyst and DBS’s  head of asset-backed structured product like industrial and office reits.

Investors in the Mapletree s-reits may want bear in mind that this trust was once a high-flying investment trading way above NAV, and giving gd yields. Until it the managers went walkabout in Oz Outback. Being part of the Temasek stable doesn’t mean that one can “close eyes and buy and hold”.

*office and malls (here and in Oz)

S’pore 2011: Credit Suisse’s view

In Uncategorized on 07/12/2010 at 5:04 am

Sorry leh online political activists. This posting is abt the stock market. The purpose of this blog is investing, not local politics, though I admit it may sumetimes sound like a do-gooder, or worse, a rant blog.

CS sees strong economic growth, employment numbers and corporate earnings growth (who doesn’t) are lending support to an 18% upside for Singapore (STI target of 3,737) with corporate earnings expected to grow 14%  in FY 2011. The main drivers will be gaming, transport and agribusiness.

It will another strong year for tourism.  Cash-rich companies will “undertake aggressive capital management” next yr — I suppose this means M&A, paying bigger dividends, buy-backs and gearing up.

Return on equity (ROE) among Singapore companies is expected to improve from an estimated 11.5%  for 2010 to 12.7 % in 2011 and 13.1% in 2012 “with further upside expected to be driven by more aggressive capital management”.

It i s’overweight’ on capital goods, property and transport, and the higher beta top picks are Sembcorp Marine, Keppel, NOL, CityDev, and Olam.

And bullish on on Wilmar and  SIA. Mid cap ‘overwight’s are CDL Hospitality Trust, Wing Tai and M1.

But funnily S’pore is an ‘underweight’ on the basis of relative valuations within the region, which I take to mean that either other markets (Indonesia is hot, hot) will outperform, or it lacks confidence in its S’pore numbers, or both.

An interesting online investing innovation in US

In Uncategorized on 07/12/2010 at 4:56 am

Broker is getting VC funding to do something interesting:  do it yrself asset allocation and rebalancing.

Betterment lets users transfer money to their accounts and decide how much of it they want invested in the stock market and government-backed treasury bonds. Stocks are typically a little more volatile in the short term, whereas treasuries have a guaranteed yield but generate a much smaller return. The idea is to let users pick just how much risk they want to take on their savings.

Betterment chooses which stocks to buy and puts the individual securities into each user’s account … does not charge its customers a per transaction fee like most online brokerage accounts … charges a management fee of 0.9 percent of the average annual balance. Betterment accounts are as liquid as a savings account, with the money transferring directly to and from users’ checking accounts.

NYT article

Oil: Did anyone notice?

In Energy on 06/12/2010 at 5:14 am

The price of oil on both sides of the Atlantic has hit its highest level since the financial crisis.

In Europe, Brent crude futures rose to $91.58 per barrel, while in the US, West Texas Intermediate hit $89.35 – the highest levels since October 2008.

Despite the market rally, prices still remain 40% below their pre-crisis peak.

Among the factors driving prices higher are rising demand because of the global economic recovery and cold weather in Europe, as well as the weak US dollar.

Meanwhile, temperatures are also expected to fall in the eastern United States, according to the US National Weather Service.

BBC Online story.

DBS Securities: Small cap suggestions

In Uncategorized on 05/12/2010 at 10:58 am

… don’t overlook the potential of the small caps. We have observed that the post-Christmas to pre-Chinese Near Year rally tends to stimulate retail participation in the market – and retail investors very often tend to focus on the small caps. Among the small caps, we favour capital goods and basic materials plays such as Ezion, PEC and Midas. We also see construction stocks such as Yongnam and OKP benefiting from the accelerated building of new HDB projects as well as several major transportation and/or infrastructure projects in the pipeline.

Extract from report issued a few days ago.

“In Singapore, people of different ethnicities feel they belong and fit in” Huh?

In Uncategorized on 05/12/2010 at 7:31 am

An unknown American author says S’pore is the happiest place in Asia. I won’t go throuhg his detailed analysis, you can read it in SunT.

But I cannot understand how he could come to the view that, “In Singapore, people of different ethnicities feel they belong and fit in”, given the feelings of S’poreans of all races and religions about the growing gap in income and the very liberal immigration policy.

The govmin’s policy of preferring growth over narrowing the income gap is in itself not destabilising nor will it lead to general unhappiness. “A lack of social cohesion and abundance of socio-political stability does tend to coincide with a high level of inequality. But that’s because a high level of inequality is generally the result of one group of people dominating and marginalising another, which is not a recipe for widespread amity and fellow-feeling.” (extract from  an Economist blog)

So by itself growing wealth disparity does not inevitably lead to social discontent or unhappiness. Phew! After all MightMind has told us that weath disparity will grow.

But throw into the simmering water of income inequality, the fact that one out of two people here, may on present trends, be foreigners (at present it’s about one FT to two residents, the latter term includes PRs), and a reasonable person can reasonably conclude that we will have problems.

Many more S’poreans will feel marginalised by the increasing income gap; and by the presence of FTs who the govmin uses to hot-house economic growth, be the S’poreans be prostitutes, service staff or executives, poor, or middle class, Chinee, Indian or Malay. E.G, how will true blue S’porean Tamils feel when asked their caste by self-styled high caste, fair-skinned Aryans? Believe me this has happened at SPH.

I’ve written before, I’m an quitter-in-residence. I have not quit physically for two reasons. One is that hotel services are pretty decent, even if I can find better value elsewhere. Read the rest of this entry »

How to maximise the effect of caffeine

In Uncategorized on 05/12/2010 at 6:34 am

A cup of coffee followed by with a 20-minute nap will double the caffeine effect. Try it.

What the SDP bear tells us abt ourselves

In Uncategorized on 04/12/2010 at 5:43 am

“Or the difficulty of choosing a unifying symbol in a multiracial, multireligious society”.

When Danny the Bear appeared, I guessed it was a take on the over-reaction of the authorities over an ad agency’s prank. The authorities were upset that they had to investigate whether a bear was on the loose in Ulu Pandan. There were mutterings of prosecution for wasting the time of officials, though to be fair no 0ne has been charged yet.

My next reaction was “Typical ACS boy stunt. A bear is so Ang Moh”. Dr Chee was from ACS. But, BTW, his sis doesn’t look like an MGS gal. I always think of MGS gals as tai-tais waiting for their drivers.

But then thinking about it (plenty of time, I am 55 going on 62), I realised that the SDP would have stepped on land mines if it had tried to use something more indigenous. Choosing  an Asian animal symbol is difficult in Singapore,where even though there is a dominant race, we pride ourselves on being (OK “trying to be” might be more accurate) a multiracial, multireligious society. This means being sensitive to the sensitivities (or perceived sensitivities) of other races or religions.

A dragon or panda would be too Chinese; an elephant or tiger would be too Indian; and a lion might get the SDP sued by the “Courtesy” police. And of course animals that have religious symbolism are also a no-go area because of religious sensitivities, or perceptions thereof.

What about the mouse deer? In Malayan and Indonesian folklore, Sang Kancil always outsmarts the bad and stronger crocodiles, tigers and elephants. And helps the other animals fight these bullies.

Hmm, looks like a good symbol for what the SDP says it is trying to do. Read the rest of this entry »

Rewriting the rules on what constitutes “insider trading”

In Uncategorized on 03/12/2010 at 5:25 am

The US forced the concept of “insider trading” onto a reluctant financial world in olden times.

So recent developments in the US deserve our attention. Legitimate research is in danger of being criminalised by the SEC.

[T]he CFA Institute’s standards and practices handbook, which declares: “The idea behind the mosaic theory is that each individual piece of information is nonmaterial by itself: an individual piece of information would not move the price of the security if disseminated in a public press release. Taken together, however, the bits of information can form a meaningful mosaic. This practice is perfectly legitimate.”

It would seem that the SEC is challenging this theory. If it is (no one outside the SEC is sure if this is the case), and wins, the financial world will be turned upside down.

The law as it stands

S’pore Inc: almost Finnish but more value for money

In Economy on 03/12/2010 at 5:24 am

No not our overall standard of living or in innovation, but in educating our kids.

This chart from the Economist using data from a recent McKinsey report shows that S’pore’s education standards are just below that of Finland and, more interestingly, that it spends money on education more efficiently than Finland or HK. The x-axis shows the amount spent per student. Or for that matter, the Ontario state system (second in world after Finland) and  South Korea, both not shown on this chart.  S’pore is third after Finland and Ontario. For more of what the report says abt our education system.

What is insider trading?

In Uncategorized on 02/12/2010 at 5:28 am

What constitutes legitimate research?  When is the insider trading line crossed?

A light-hearted look. You will both be enlightened and amused. You might even laugh out loudly.

S’pore Inc: We got connectivity, so do we need the PAP?

In Corporate governance, Economy on 02/12/2010 at 5:23 am

MM recently said two weeks ago that connectivity to the rest of the world is what gives S’pore its edge.

Well we got so much connectivity that foreigners (businesses and people) are flocking here, and the government’s aspiration to be a global city is a reasonable one.

If so, do we need the PAP any more?

True the governing party since 1959 has played its part in getting S’pore connected to the world (MNC friendly, including the declawing and defanging of the unions; low taxes, the use of English and gd infrastrucure).  But that’s in the past.

Time to move on? Gratitude is not infinite.

After all none of the opposition parties are calling for an end to being MNC-friendly, the use of English or building infrastructure.

SDP and RP, try to convince us that things will be better for the vast majority of S’poreans if the PAP is made to move on.

Why did I leave out the WP? I somehow suspect that the party’s central committee will have a collective and massive heart attack and stroke, if come the day after the GE, the WP finds that it has more seats than the PAP, even after the WP called for a recount, after finding itself ahead.

As to the SPP and SDA, I somehow don’t see them as ready to govern S’pore unlike the SDP, RP or even the WP (if they get rid of their defensive mentality, and behave like potential game-changers).

Over to you, the Opposition.

Calling all Muslims

In Property, S'pore Inc, Temasek on 01/12/2010 at 5:57 am

Sabana Reit needs yr help.

This is the first Shariah-compliant reit listed on the Singapore exchange (SGX), and the world’s largest listed Shariah-compliant reit by total assets. Looks like analysts were wrong to expect Sabana to attract Middle Eastern investors saying there are not many such Shariah-compliant REITs in Asia ( M’sia has three, and this is all it seems). Either they got no money, or there are more attractive investments elsewhere or in more lucrative products.

At yesterday’s closing price of 0.97  its first yr projected yield is now slightly more than the 8.22% at the IPO price of price of 1.05.

But it trades only at a “peanuts” 2 cents  above NAV of 0.99 in cash. But the properties to be injected in will only give an NAV of the 0.99.

For the time, being this infidel prefers AIMSAMP industrial reit which trades at a yield of 9.5% and an 18% discount to last published NAV. True gearing is at 35% versus Sabana’s 25%,: but the former has big Aussie insurer AMP as big brother, and the latter can only “borrow” from a limited number of “lenders” and via complicated structures. And I don’t have enough info to make judgements on its big brothers.

BTW looks like Temasek’s Mapletree industrial reit  has beaten this Shariah-compliant industrial reit performance-wise in IPO terms. They IPOed within weeks of each other recently.

Moral of the tale for pious folk of any religion: God may rule in heaven but on SGX, investors prefer to invest in a Temasek-linked reit, rather than a religious-compliant reit. The blasphemous (not I) may want to shout, “Harry rules OK” or “In S’pore, God takes advice from MightyMind”.

S’pore Inc:”Something this stupid generally requires teamwork”

In Corporate governance, GIC, S'pore Inc, Temasek on 01/12/2010 at 5:48 am

So said a senior American official, referring to a balls-up* in Afghanistan which showed the failure of British, US and Afghan intelligence.

“We have good growth; we have good plans and that is what we should be going into the election for – to mobilise people to support these plans and support the team which has brought this growth to them,” the PM said a few days ago.

But he forgot that there were two serious security goof-ups which proves twice over that “Something this stupid … requires teamwork”.

Mas Selamat climbed out of a detention centre, avoided capture despite taking refuge in his brother’s flat, and floated out of S’pore. Now anyone can do the first undetected, but the other two? And what odds all three consecutively? And if he can float out undetected, Pakis can float in, undetected, with explosives and illegal drugs.

And we had the SMRT depot break-in, that went undetected for days Given the threat of terrorism, S’poreans (and the authorities) were surprised that SMRT’s security was so lax. SMRT not an ordinary commercial company, it is also a GLC and TLC.

And then there were the PR damage limitation exercises that resulted from these incidents. They were so inept proving that “Something this stupid …  requires teamwork” comes. We had the CEO of SMRT (an FT from M’sia) blaming the public, and MPs being told by the Home Affairs minister that that Mas Selamat could go undetected in the flat “was not a security lapse’ and that hundreds were probed. What weed were they smoking? Or drug they were taking? Or what alcohol were they drinkng? Or what combination of these? Read the rest of this entry »


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