Saturday, 9 September 2017

Will Blackstone Succeed in de-listing Croesus Retail Trust?

I recently sold all my units in Croesus Retail Trust in Sep after holding this for 2.5 years... and including the dividends to be received on 28 Sep 2017, the total returns has been around 67%. This counter has exceeded all my return expectations as i have invested in it purely for dividends.



In an earlier survey, 53% of readers say that it is too attractive to give up the yield without a fight! πŸ€• and there is a chance that they may be right. As such, even though Blackstone offered to buy over my shares at $1.17, I divested them in the market at $1.155 cents. I am fine with giving up 1.5 cents per share for the binary outcome whereby if the scheme of arrangement fails to go through, the stock is going to tumble down. 

Scheme of Arrangement

Blackstone initiated a scheme of arrangement rather than a usual takeover bid is because they want to take Croesus Retail Trust private. This is a "all or nothing" transaction for Blackstone. Let's analyse what the "key ingredient" of success is for a scheme of arrangement by looking at two recent examples.


Temasek owned about 54% of the Company and through a scheme of arrangement, it took SMRT private by acquiring 75% of the shares it doesn't own. SMRT was operating in a challenging environment and the scheme represents a chance for minority shareholders to exit at a higher price.

Mr Sabnani also noted that SMRT is being taken private based on the Scheme of Arrangement where Temasek will need acquire 75 per cent of the shares. "In the case of General Offer, you need to secure 90 per cent of the remaining shares. So in SMRT's context, Temasek has to secure 90 per cent of the outstanding minority shareholders' votes (which is the 46 per cent it does not own). That's a high number, higher than (that of) a Scheme of Arrangement. And if they don't get that threshold, they will need to raise the offer price," he explained.



Northstar also tried to privatise Innovalues through a scheme of arrangement. In this case, the major shareholders who owned close to 39% of the company has agreed to vote in favor of the scheme.

Four major shareholders - including the CEO Goh Leng Tse, directors Pung Tong Seng and Ong Tiak Beng and substantial shareholder Koh Boon Hwee - collectively own 38.73 per cent stake in Innovalues and have undertaken to vote in favour of the scheme. The scheme will require the court's sanction and approval by Innovalues shareholders representing not less than 75 per cent in value of the shares held by those voting at the scheme meeting.

In both instances, the majority shareholder is either the acquirer or has agreed to be acquired by voting for the scheme. This seemed to be somewhat lacking in the case of Croesus Retail Trust?

Shareholders of Croesus Retail Trust


Looking at the list of shareholders of CRT, the shareholders are widely dispersed and the largest single shareholder is linked to Goh Yew Lin (GK Goh family). See report here.



Will Mr. Goh vote for or against the scheme? 

Mr Goh Yew Lin, managing director of GK Goh Holdings, which controls GKGI, told The Straits Times: "We haven't decided whether to accept. We invested in Croesus because it has an excellent portfolio of assets in Japan, and the trust was for a long time trading at an exceptionally attractive yield. Although Blackstone's bid is at a premium to the undisturbed price, they're very smart investors who clearly expect further upside by buying at these levels. We'll wait to see what the independent advisers recommend before making a final decision.

It's hard to imagine why Mr. Goh would vote for the scheme if he is still buying close to the takeover price but he is definitely one voter who can de-rail the privatisation scheme if he votes against it.

How to get the scheme approved?

My earlier post indicated that you need at least 75% of the unit holders in value present to vote for the scheme.


What happens if the scheme fails?


Looking at the share price chart, if the scheme fails, it will likely fall towards $1.00-1.10 range as the company has incurred expenses in organising this scheme of arrangement. 

Now that i have fully divested my shares, i will watch from the sidelines. 

The exciting show will be take place on 13 Sep 2017 at 10am and investors will know whether they are croesuing, chorusing or cursing....😎


Monday, 4 September 2017

Do you believe in Insurance?



I never really believe in Insurance (or perhaps was brought up by my mum not to believe in them). My mum always said "δΏι™©ιƒ½ζ˜―ιͺ—δΊΊηš„" since i was young and those views was ingrained even though her views was a tad too extreme. Probably she was "bugged" by over-zealous insurance agents trying to sell her useless policies but maybe she was right.... because instead of buying policies, you should be buying the insurance company. 😁 That was how Warren Buffet became extremely rich by using "free money" from insurance premiums to invest.

Warren Buffett was able to build his fortune in two primary ways: by owning private companies that generate large amounts of income for him to deploy, and by entering the insurance business to get his hands on cheap investment capital. Warren Buffett abhorred debt; it wasn't his style to borrow money at 5% and try to invest it at 12% (Munger, meanwhile, built his large fortune by taking out margin loans to amplify his high conviction stock picks). Instead, Warren Buffett used the "free money" provided by insurance premiums allowed Buffett to use leverage—by investing the money for a return before he had to pay the money back to those making successful insurance claims, Buffett was able to use this spread to build quick wealth.... source

When did I buy my first insurance policy?

As i mentioned earlier, i was brought up not to believe in insurance. How did i ended up with my first policy then? πŸ€”

I bought my first policy when i was in the army. The agent was from Prudential and he was an ex-army sign-on who became an insurance after he left service. He basically convinced the whole group of us into buying the investment-linked policy ("ILP") which offers direct exposure to the Singapore stock market because history has shown that stock market will outperform the rest. The fund is Prulink Singapore Managed Fund and the fact sheet is here. Actually he was not wrong. My premium would have compounded at around 5.8% annually since inception and the return would have been decent.


For simplicity, assuming i put in $1,200 at the start of every year and it compounds at 5.8%, my premium paid of $28,800 would turn into $59,624 today after 24 years! Unfortunately, my surrender value today is only $30,680 (death benefit is now ~$75,000)... so what exactly went "wrong"?

Reason 1 - My agent asked me to increase my sum assured protection from $5,000 to $45,000 but this protection may not have come at a very high cost vis-a-vis a term insurance 

My agent called me one year into the purchase and said that i should increase the sum assured to $45,000 so that if anything happens to me, my family would receive some payout. Well, he wasn't wrong, except that it was a huge price to pay as the premium eats into the amount set aside for investment returns. Well, you can't have the best of both worlds can you?πŸ€” 

Reason 2 - When i started working, i decided to switch the fund from Singapore Managed Fund to Global Managed Fund and the latter under-performed big time. I think this is one of the biggest mistake i made in the ILP. I should just left the exposure to the Singapore market and my surrender value today would have been much higher. 

The fund size for the Global Managed Fund is small and the returns of 2.4% paled in comparison to the Singapore Managed Fund.


So how did my ILP performed after all these years. Let's take a look.... the premium paid of $28,800 turned into a surrender value $30,680.... Working backwards on the surrender value, it means that my premium was being compounded at 1% annually and that is worse than buying a life policy.

Assuming a life policy protects and compounds at the 10 year government Singapore Savings Bonds of 2.12%, the surrender value should have been at least $37,046... meaning that the ILP returns has severely under-performed due to the two reasons mentioned above. ILP is probably a black hole.... a huge part of the premium goes towards paying for some critical rider every year and only a small balance was used to purchase units in the fund.

When did i buy my second policy?

I bought my second policy from NTUC Income when my first kid was born for the both of us. Let's see how that performed. My sum assured was around $50,000 and the premium paid was $21,473 but the surrender value is $25,272. The NTUC Income Life Policy somewhat has performed slightly more respectably at 1.8% compounded interest than Prudential.

Am i going to get a third policy?

The answer is yes but this time round it is different and I hope i am much wiser now. πŸ˜‚

As my life progressed to 40s, the original policies taken when i am in the early stage of my life are no longer adequate. I have a family to think about and a mortgage to take care of should something happens to me. At the same time, i have been gradually building up my retirement portfolio so as i assess my current situation, what is important is that the family is taken care of should something bad happens to me. Do i intend to get a life policy again for coverage? The answer is no as it is just too expensive a product. My intention is to buy term and invest the rest of the money instead of relying on the insurance company to do that for me.

The third policy that I will be getting will be a term insurance that pays a lump sum of $500,000 for permanent disabilityπŸ€• , 36 critical illness πŸ€’ and death πŸ˜‡ from now till i turn 70.  

It is interesting to note that the premium is still relatively low if you pay till 60 years old and it escalates up exponentially beyond 60 years old. This is all about probability as insurance policies are 'underwritten' by actuary. While the good news is that i can terminate the term policy at any time, the downside is that the premiums has zero "returns" should you live beyond 70 and Singaporeans has one of the longest life expectancy in the world at 82 years old! πŸ˜‚

The reason why i stopped the coverage at 70 is that it gets prohibitively expensive beyond that and i believe i will be happy to "go' once i live past 70 years old and hopefully at that point in life, I will have adequate passive income for life. 

So here is the poll question for today....once i have the 3rd policy in place, i will have adequate coverage. What do you think i should do with my ILP with Prudential? Take the poll here.

 Click to vote

Let me know what you think and i will update you on my next course of action when it has taken place. πŸ˜Ž

Happy Insuring !











Friday, 1 September 2017

SRS activities for July and August 2017

How time flies and today is already 1 September... 

Since my last update for Q2 (April to June), I have done the following in July:
Post the IPO of Netlink NBN Trust, more analysts (especially those who were in the blackout period) starts to release their analysts reports on the Company. You can download the 58 page report by DBS and the 23 page by UOB by clicking on the respective links. Now there are 8 analysts covering Netlink NBN Trust with an average $0.93 target price.


In terms of price movement, it is heartening to see that the price has finally break above the 81.5 cents resistance to close at 82.5 cents yesterday. This is a "giant" so i wouldn't expect it to move fast


Dividends

In terms of cash flow, I received the following dividends in July and August:
  • $500 from UMS Holdings
  • $355 from Starhill REIT
  • 534 shares of Fraser Commercial Trust (Scrip Dividend)

UMS Holdings

UMS Holdings announced a sterling set of results in August where 1H 2017 net profit already exceeded that of FY2016 and is rewarding shareholders with a 1-for-4 bonus issues. There was also a 1 cent dividend to be paid in 27 Oct 2017. The results announcement is here


Ironically, after the results announcement, both DBS and CIMB downgraded UMS Holdings to hold (whatever hold means πŸ€”)
The share price tumbled thereafter.... and on 29 August morning, Mr. IPO stepped in to support 30,000 shares at a price of 92 cents and see it dropped further to 90 cents at close of the day πŸ˜‚  The rationale for buying is that at 6 cents dividend a year (my projection), the yield is around 6.5%, which i am happy with. If the company maintains its 1 cent dividend based on the enlarged share capital post bonus issuance, lagi better.


Mr. Andy Luong (CEO) and Mr. Stanley Loh (executive director) then followed Mr. IPO and bought 300,000 shares at $0.905 and 50,000 shares at $0.90 respectively on the same day πŸ˜Ž (i am pretty sure i bought before them that day).

Passive Income


Based on the additional 30,000 shares of UMS Holdings and the latest projections, passive income for me and wifey will reach $46,822 (or $3,908) per month. The target for this year is to hit $60,000 per year. Just to be clear, the passive income target stated is for the two of us.

Croesus Retail Trust (non-SRS holdings)

After my previous post on CRT - Time to say Good "Buy", I received another reminder to vote! πŸ˜‚. The poll which i ran also drew 78 responses and the majority (53%) polled said that the yield is too attractive to give up without a fight. You can still vote if you want to here.


One of the strategy which i am contemplating (despite my kacang putih holdings) is to sell the existing shares at current price (say $1.155). If the vote goes through, i "loses" $0.015 cents). If the vote didn't go through, i expect the price to correct downwards to between $1 and $1.10, of which i can then load up more shares. Is there any chance the acquisition price will be further improved by Blackstone, i think the chance is low. So based on probability, it may not be a bad idea. πŸ˜‹

SRS Holdings


Post the recent purchases, my cash level in SRS account has dropped to $21,495. I was contemplating another counter that is yielding 10% per annum but it is rather thinly traded. Let's see how it goes!

Here is the update for now.  Happy SRSing! 




Saturday, 26 August 2017

Croesus Retail Trust - Time to say Good "Buy"?

It was an interesting week, where i "received" two privatisation offers - Lafe Corporation and Croesus Retail Trust.

Not all privatisation offers are good and Lafe Corporation was one great wealth destructor

Lafe Corporation was for my dad and listed with much fanfare back in April 2000 with a market cap of $460m. The market cap today was $22m and for every $1 invested in the Company, it is worth only $0.0478 today, destroying wealth for investors in the Company πŸ€• 


While my dad didn't invest from the onset, his few thousand dollars worth of investment a few years back is now worth $36 after share consolidation. Without the share buyback at $0.90, he will be out of pocket by $4 if he had to sell the shares through his broker. Maybe i should send Christopher a "Thank You" letter on behalf of my father? πŸ™„

Anyway, the morale of the story is to invest in good companies and cut your losses if you are on the wrong boat - which of course is easier said than done! πŸ˜

The same week, i received the scheme document from Croesus Retail Trust ("CRT") as well as a 'non-transferable' invitation to a SIAS - CRT dialogue session (no proxy allowed).


Given my "kachang puteh" holdings, i am likely to give the meeting a miss but in case you don't know, the SIAS-CRT type of dialogues are usually paid for by the Company to SIAS as part of its media engagement plan to "smoothen" the path and allow management to convince shareholders why this is such a great deal for them. In any case, the scheme documents was also written as such. Perhaps they should also invite Blackstone (acquirer) or their investors to the meeting as well? πŸ˜‚

Let's see what is in the scheme document... i will just focus on the gatefold...


The top right of the scheme document says "your vote counts"... so far still neutral as you can vote "no" to the scheme obviously. The scheme consideration was for S$1.17 in Cash via a scheme of arrangement (not takeover). 

Transaction Overview

Funds managed by Blackstone Group is offering to acquire CRT via a scheme of arrangement. If the scheme is approved by Unitholders at the meeting on 13 Sep 2017 10am at the Fullerton Hotel, then Unitholders will receive:


provided that, at least 75% of unitholders who are present or via proxy approve the amendments of Trust Deed and more than 50% in number of Unitholders representing at least 75% in value approve the scheme.... πŸ€”
In other words, unit holders who hold 25% of CRT will have a big say in whether the scheme goes through or not.... 


What does the "gatefold" says to Unitholders?

Gatefold are those special paper printed in colour to "highlight"  or tell a story in a prospectus or circular and these pages are prime locations in property terms, hence the key messages from the management can be found here. I will paraphrase it here for the semi-hokkien investors...  πŸ˜

Story 1 - "Mai Tu Liao (meaning don't wait anymore), this is a good chance for YOU to sell your shares at a si-peh (damn) good price"


They then present graphs to show that $1.17 is the historical high of the stock's trading history since IPO. All factual, so cannot say that they are wrong.

Story 2 - The Buyer is kam-gong (stupid), they are buying your units at si-beh swee (very attractive) valuation even higher than the most bullish analyst hor! Where to find...


They then proceed to you that the $1.17 on offer is higher than the NAV or the adjusted NAV and above the price targets of all analysts covering CRT

Story 3 - Ma kong bo (don't say I never tell you)... if you leeject (reject) the offer, next time bery bery difficult for you to run road...


This is the most absurb ah... lim-peh is only a small fry... still enough volume to run road lah... plus i have been holding it for the dividends, not to trade in an out leh...

Story 4 - Even the most kiang (clever) adviser also tell you the buyer is gong (stupid), so please take the money and run !!


Like that win liao... everyone says the buyer is gong.... so who is this gong buyer?


Errr... even though i beng but i not blur leh... i know what is a Black Stone hor... Black Stone is is "or giao tao" in Hokkien hor!!  Is the Blackstone Group so gong or not... let me go and see if can dig out some track record of Blackstone Funds....


Not bad leh... I assume the Blackstone Real Estate Partners Asia fund (2013 vintage) will be buying this and as of 30 Sep 2016, the net multiple and IRR is 1.32x and 16.9% leh.......Ok the buyer is not as gong even though everyone seem to tell me they gong... they are actually going to make more money after i sold this investment to them...


Who can actually "de-rail" the scheme?

Given the huge free float, how the voting will happen will actually be quite interesting! In addition, a Swing Voter - Goh Yew Lin also raised its stake in the Company to 7.11%. The article is here. It will be interesting to see how he votes and whether he will find a few kakis to vote against the scheme.

My View

Given the free float of 79.8%, it will actually not be easy to delist the company via a public tender or take-over, which is why the buyer is buying this through a "all or nothing" scheme of arrangement. In addition, if not for the offer from Blackstone, the share price would probably take a much longer time to hit the current levels. So if Blackstone is able to find value at $1.17, it's natural that they will want to take it  private completely so that they can do their own asset enhancements. 

What is the yield at $1.17. Assuming the distributions is maintained at 4 cents (for discussion sake), the yield is still a decent 6.8%. If the acquirer takes a leveraged position through cheap financing, the yield can be in the teens....

I have yet to decide whether to vote for or against or whether to attend the SIAS-CRT or the actual meeting... i think it can be an interesting learning experience! πŸ˜Ž

Is it time to say Good Buy or Good Bye? You tell me... vote here



Sunday, 13 August 2017

A letter to my new "old" fan....

After my post on "which stage of your life are you at"... I received the following in the comments section. I thought it would benefit more if I share it as a blog post, especially from someone who has taken the time and effort to write to me. 

Hello Mr IPO, 

I recently became a fan of your blog. I am 55 and still working (civil servant). Planning to retire at 60/62 if I can keep my sanity till then:-) 

You mentioned that you have been traveling annually... well taking time off to recharge is how I keep my sanity till now ... 🀣

I hardly traded nor invested since I started working at the age of 20. My savings are all from my salaried income. I am frugal but I have been travelling yearly.  

I must say you had been a great saver! πŸ‘πŸ» It was pity that you didn't try investing or trading when you were younger so I am not recommending that you should start now as you are at a different stage of life.  My guess is that your risk tolerance and profile is low hence volatility in the markets is not something that you will "enjoy".  Given your frugal nature, you shouldn't need too much after you retire other than the travels which should increase.

I have two properties- HDB flat I am currently staying in (all fully paid up for) and a condo unit with sitting tenants since 2015. I have returned CPF all the money I withdrew for both properties with accrued interest and paying cash to service the mortgage loan for the condo unit. 

Returning CPF the money drawn for properties to earn 2.5% and paying current mortgage with cash is a good decision since you have no inclination to invest. If you can afford, continue to keep the cash in the RA account to earn a higher risk free return for as long as permitted by CPF. 

My combined CPF balances (OASARA) by the end of the year would be slightly more than $800k (not much I now). I just started contributing to SRS funds like 3 years ago (very late as well). I also have savings parked in 3 different banks amounting to more than $100K earning pittance. I will also be getting a total of $500K once my two endowment policies mature when I am 62/63.

Given you are debt free on your HDB, your basic needs are already covered. Hence, I would recommend selecting a CPF life plan that gives you a stable monthly cash flow needed to cover all your expenses as long as you live so that you can focus on living well. 

Once you retire, if the rental income exceeds the mortgage payment, you are in the pocket, so that would be an additional source of income. If not, you may need to consider how to make it cash flow positive by paying down the principal, extending the loan (which can be difficult) or consider selling it for a profit. 

I am writing you to get some wise counsel as to how/where/when I could do with my SRS funds, CPFOA and/or my bank savings. Dabble in trading/invest/or... Thank you. Kind regards- A newbie investor

I am not sure if you really want to dabble in stocks and shares after you retire 🀣. The reason why I am so focused on creating a stream of passive income is so that I don't have to be glued to the trading screens. These are stocks that I will invest for the long term and i ignore the price movements. If you are considering investments, I would suggest reading more about the subjects and putting small amounts to work subject to a certain limit. I would also consider corporate bonds but you would need to be highly selective and discerning. 

I have not explored this option but there are annuity plans which you can consider given your high savings.. I.e paying one lump sum of cash upfront and then getting a fixed amount for life. This could supplement CPF Life and you are assured a steady income for which you can live a good life and travel around. You may want to start exploring that option now but do remember to assess the counter-party risk and whether they are credible and reliable. 

Do stay away from Chinatown after you retire  as that is the fastest way to lose wealth... πŸ˜†

Enjoy planning your retirement. 
Mr. IPO 

Sunday, 6 August 2017

Planning for Retirement - What stage of your life are you at?

Today's Sunday Times ran two articles in the Invest Section which i thought is relevant for young readers. The articles are "A Letter To My Daughter who has just graduated" and "New Grads? Never too early to think of retirement". Do find time to read them as she wrote from a perspective from someone who has been through the journey in life.

For the benefit of new readers, especially those who have became "Mr' IPO's fans" more recently, I have compiled a series of write ups which i have done in the past to encourage you in your journey for financial freedom. 

This post today is written based on the different stages of your life. 


IF YOU ARE STILL A STUDENT AND READING THIS POST

I have to say that if you are currently still a student, below 25 and reading my blog post, you have great potential ahead of you. I started playing IPO and trading the market during my army and university days. I have to tell you that was the best time to learn lessons from the market because you don't have much to lose but in the end, I still paid tons of school fees. The purpose of my blogs is to let you lose less while learning πŸ˜

If you plan it well, you are going to retire a millionaire by the time you reached 62. Time is your friend (for compounding) and if you catch the cycles well, you will do very well. You will have at least two to four big cycles in your life. Time it well (especially the property cycle) and you can retire early. 

Your world will be very different from mine, be inquisitive, focus on doing well in your studies, get a well-rounded education, cultivate good habits and build up your network and skill sets. Education is just a entry ticket to a career but make sure you do well in your chosen field! 


IF YOU HAVE JUST GRADUATED OR IN YOUR FIRST JOB AND IN YOUR 20s to 30s

Focus on building your income through your career - I have mentioned before that your career is very important. Take care of your own career professional and it will take care of you. The relevant posts in sequence are:



Focus on having integrity and a great Emotional Quotient. They will bring you far in your professional life. 

Saving up and keeping track of all your expenses, assets and liabilities - When you just start out and receive your pay checks, don't frivolously spend it. I can't emphasize enough the importance of saving up. Save least 20-30% of your cash each month. Here was a post i wrote previously - It's not how much you earn but how much you save. It is also important to track where you spend your money πŸ˜‹ as everyone has a little peculiar hobby that will "suck" money away. You can start spending when you are have established your career and have more disposable income (usually for those who crossed 35 years old)

Buying your first property or considering a second one

If you are 25-35, buying the first property is probably on your mind all the time. My advice is to focus on buying the right properties at the right valuation. If you have followed Mr. IPO's blog back in Oct 2008 (when he is still not so "famous"), you could have benefited from his call to buy a property back then in 2008. πŸ˜‚ If you currently hold a HDB flat, my advice is not to sell your HBD Flat if you can and don't take a naked position in the property market.

Many of you are probably new to my blog but i have documented my property journey and shared snippet of lessons along the way which may still be relevant since I even lost money on a HDB flat. πŸ€• If you are new to my blog, you may want to take some time to read them.  I have arranged them in sequence below.










Property is a good levered play and an inflation hedge, so make full use of it. I have made money from my property investments previously but I am at a different stage of my life today. I am focused on being financially free and paying off my remaining mortgage. Buying a property, with the additional buyer stamp duty, is not something that "appeal" to me right now. In fact, since i first blogged about it, i have repaid the CPF drawn to pay for the existing property. 


I am happy with the "unrealised capital gains" from my current place. My downside scenario in the event that circumstance changes (e.g my kids don't want to stay with me or if i can't afford it anymore), will be to "downgrade" and move to a smaller place.

Trading - If you are in your 20s and 30s, you are likely to be trading more than investing. This is because you will want money fast. As such, you are punting IPOs, trading stocks and finding ways to maximize your returns. I have no issues with trading at all. It helped me hone my investment acumen and made me know myself better. Just make sure you know what it entails in trading as cutting losses in trading is absolutely critical. 

Punting IPOs is not going to make you rich, so you have to expand your investment scope - While my nickname is Mr. IPO, IPOs will not make you rich (I repeat) πŸ˜‚.  You have to move on from punting IPOs and start investing into shares and bonds. Recently, someone I met asked if i believe in IPO stocks and was "shocked" when i gave him a resounding "NO" and the reasons are listed here (see Lesson 3)


IF YOU ARE IN YOUR 40-55 RANGE

You are probably quite established in your chosen career path and have a decent amount of regular income and some savings. The goal now is to become financially free and build up a passive income when you retire. The passive income will come from the assets you hold post-retirement. It is important that the assets are generating enough to cover your regular expenses. I am currently at this stage of my life where i am accumulating assets for retirement.

CPF should form part of your retirement plans

I have previously shared with you about using CPF for retirement. You should read the post together with very helpful comments from a reader here

How much cash will be in my CPF when I turn 55? 

Here is a post by Wilfred Ling on whether it is possible to get $1m in the CPF by 57. 

Assuming I stop working today and CPF Ordinary Account still pays 2.5% and CPF Special Account pays 4% annually, thanks to the effect of compounding, my combined OA and SA balances will be $908,164 when i turn 55. As such, i will definitely hit $1m in my CPF when I turn 55 since i am still contributing to CPF now. So don't hesitate to use CPF as your retirement plan tool.  Tools to consider including topping up your own account voluntary if you have yet to hit the minimum retirement sum, so stop thinking that the government is out to take your CPF money away (ok probably i will get a few opposing whacks here) ... πŸ˜€ ... need to wear mask again. πŸ‘Ί


Other tools and assets to consider

In addition to CPF, you should probably consider using your SRS account for both tax reduction and retirement planning (for which the purpose of this blog). You should then accumulate assets using all the different accounts, CPF, SRS and Cash.  Some assets you can consider will be properties, shares and bonds. I am documenting my progress as we speak and hopefully you will be able to gain some knowledge from it. 

Start Investing and into global stocks - Once i past my 40, i slowed down my trading activities and started investing more seriously. As such, you will see investments that are more long term. One of my aim is to start investing in US companies (such as the likes of FANG - FaceBook, Amazon, Netflix and Google) in small amounts. With the advance of technology now, there is no reason (or excuse) why we cannot be global in our investment approach.

Passive income - My target is to be able to retire well and have a passive income that will enhance or maintain my lifestyle. My latest passive income chart is here and my target is to reach >$120,000 per year when I retire. You can track my progress at this blog. 


IF YOU ARE AT 55 YEARS OLD AND BEYOND

Here is a booklet from CPF when you turn 55 this year and needs to decide what to do with the CPF.

Life after retirement - I would like to retire before 55 and take on some advisory role. Maybe i might even start a fund management or financial planning firm.  (Don't be shy - I am sure you will want to sign up to be my client after eating my free chillis all these years right?) πŸ˜‚  I hope that after retirement, i can start traveling around the world, probably using AirBnB to stay a few months in the warmer countries. I will eventually update my travelogue blog ...hahaha. just be patient ok...  provided you still want to see a not so young man blog about his travel exploits.

Here is a toast to retirement and I hope you will reach your target too! If you plan for it, i am sure you will reach there sooner rather than later.

Related image


Friday, 4 August 2017

Net - LinkedIn

A further update to my earlier Netlink Trust post where i managed to add another 25,000 shares of Netlink Trust to my SRS account at 81 cents on 2 Aug 2017.

This bring Mr. and Mrs. IPO shareholding in Netlink Trust to 100,000 shares and based on the projected yield of 5.73% in FY2019, the annual income will be around $4,641

The passive income will reach $44,886 using the higher projected yield and the monthly "distribution" is presented below. Still having gaps for Feb and August.


On a non-related note, i have finally set up a LinkedIn account for Mr. IPO ! πŸ˜‚ I have never found the need to create one for my "real self" and ironically, now i have one for Mr. IPO.

You can find my LinkedIn profile here. If you want to add me to your professional network, please feel free to do so πŸ˜. I promised you won't be "turned down" 


Happy LinkedIn Networking! 








Monday, 24 July 2017

Netlink Trust Strategy Update



I previously highlighted my strategy on Netlink Trust in my post here where i would like to buy 100,000 shares of Netlink. Here is the update for the trades done last Friday.

•  Mrs IPO managed to be allotted 13,000 shares from her application of 50,000 shares over the ATM. The IPO, as expected, opened weakly and I managed to get an additional 37,000 shares for Mrs. IPO at 80c. The entry price is a tad better than the ATM price

•  I also mentioned that i didn't apply for the Netlink Trust as i would like to use the cash from my SRS account. I managed to buy 25,000 shares at 80.5 cents for my SRS account on Friday but my other buy queue at 80c was not filled (I queued at different times from Mrs IPO). I was hoping that the stabliisation manager would run out of bullets and the price will drop further πŸ˜‚ In any case, i will decide on the balance 25,000 shares later depending on how the share price perform in the coming weeks.

Interestingly, both Daiwa and DB issued buy calls on Netlink NBN Trust in the last few days....


On a related note, since i have utilised around $20k for the Netlink purchase above, I have decided to top up $15,300 into my SRS account today for this year's tax deduction. This will bring my cash balance back up to around $69,000. 

Happy SRSing

Sunday, 16 July 2017

My "Strategy" for Netlink Trust IPO

I gave a one chilli rating for Netlink NBN Trust IPO this week. The write up is here.

Business Trusts haven't done as well as REITs in general in SingaporeπŸ€”  - probably because Business Trust started on a wrong foot and left a bad taste on investors. The first business trust to be listed was First Ship Least Trust and that left a very sour taste on investors as evidenced by the -19% since listing (ouch! see table compiled by Edge below). 


The Edge compiled a list of Business Trusts performance and those that performed well are "real-estate" linked like Croesus and Viva Industrial Trust as well as perhaps, Hospitality and Healthcare Assets. One of the worst performing was Hutchison Port (you just can't bet against LKS!). 

What can you actually glean from the above table? 

Assets that perform well have earnings that are more predictable and sticky. In other words, the cash flows generated are predictable (long term rental leases). Assets that relied on good weather (Accordia to play golf) or on ships visiting the ports (Hutchison) are less predictable and forecasting recurring revenue is challenging, not to mention rival golf courses or ports. Investors at the end of the day, like safe, consistent returns. Whether it is "sexy" or not is another matter altogether πŸ˜‹


How do i see Netlink NBN Trust IPO?

Is the revenue recurring and stable? It is like the gate keeper. All broadband players Singtel, Starhub, M1, MyRepublic (and what have you eventually) will need to pay the gatekeeper a connection fee and a monthly maintenance fee. These are big boys, so the possibility of bad debt is probably low. If consumers switch from one broadband provider to another, Netlink don't really care as long as they continue to use broadband. So i would say yes. Will government lower the regulated fee - the government will adjust the fee from time to time depending on the number of connections etc, but it is unlikely they will "kill this company" as too many local retail investors are vested in this. So net net, i think revenue is pretty stable, consistent and recurring but I am not going to price in any growth here.

Will the technology be replaced? Personally, i think Broadband is the way too go. It is hard to imagine using ADSL or other slower technology as now is the age of IoT (Internet of Things). Will there be a competing technology to replace fibre broadband? Probably one day it is possible but not in the next 20 years (according to the prospectus?). Assuming i invest 100,000 shares ($81,000) which generated 5.5% yield per year ($4,455), it will pay itself back in 18 years. 

Will it form part of my retirement portfolio? If this IPO has been priced at the top end of the range, the answer is a resounding no. Now that it is priced at 81 cents, i will actually consider applying for some. Given the huge public tranche, i give the placement tranche a miss (my broker promised to give me any number of shares i requested. Lol). Over the weekend, I managed to convince Mrs to part with her "secretly stashed away cash" to apply for some shares in the IPO.

How am i adding Netlink Trust IPO in our retirement plan?

I last updated in March this year that the projected passive income for 2017 is around $40,717. The link is here. I recently "re-underwrite" my portfolio due to forex movements etc and I intend to add about 100,000 shares of Netlink Trust IPO in our retirement portfolio, using the assumed yield of 5.43%. This will add about $4,398 to my yearly income, bringing the projected annual income to around $45k (target for the year is $60,000, still a long way to go!). The "pro-forma" monthly income, assuming i managed to add 100,000 shares of Netlink is below (l have also learn how to use pro-forma from all the prospectus i have been reading πŸ˜‚): 


Since Mrs has applied for 50,000 shares and i have no idea how many shares she will be allotted (if it is none than it's fated. hahaha), i will adopt a "wait-and-see" attitude. The reason why i am not applying for the IPO using "cash" is because i have a lot of idle cash (around $74k before this year's contribution) sitting in my SRS account waiting to be deployed. If it opens below IPO price next week, i will use the cash in my SRS account to top up to 100,000 shares. If it opens above, then i will just continue to wait. After all, the next interest is only payable by June next year. I can afford to wait since the pricing is not going to run too far ahead. I will be worried if investors treat Netlink as a growth stock. I look at it more as a Broadband Perps.


Happy SRSing πŸ˜ƒ

Sunday, 9 July 2017

SRS portfolio - Q2 update

It has been a while since i blog about SRS account. Let me see if there are any interesting stuff happening to me in Q2 2017...

Dividend and Interest Income

Received about $8,854 in dividends this quarter
  • Received $2,975 from Hyflux 6% Perps 
  • Received $1,500 dividend income from UMS Holdings
  • Received $356 from Starhill REIT
  • Received $2,319 from Perennial Real Estate Bond
  • Elected to receive 567 units in Fraser Commercial Trust (Scrip Dividend) - Cash equivalent $752
  • Elected to receive 1,131 scrip dividend in Croesus Retail Trust (Scrip Dividend) - Cash equivalent $952
  • Wifey received some cash interest from her Aspial bonds (off my balance sheet - so not included here. lol)
I found that electing to receive scrip dividend is not that bad as it automatically "roll-over" the dividend into new units. It was available for Fraser Commercial Trust and Croesus Retail Trust but not for the rest. I will continue to build up my portfolio of REITs and dividend paying stocks here. 

UMS Holdings and Croesus Retail Trust has done very well for me, appreciating by 92% and 55% respectively and i have held them for years. Blackstone has since made an offer to acquire Croesus Retail Trust at $1.17 per share (see report here). We shall see if GK Goh manages to help increase the price from Blackstone! But if the privatisation is successful, i will have to find other stocks to replace this and it will most likely be dilutive since Croesus is giving me such a good yield.

CPF

I blogged about my intent to pay back CPF the amount drawn for my property in January this year. Well, i have done that in April this year in a "spur of the moment" and repaid CPF the principal plus the interest i owed them in one single cheque. I decided that repaying CPF is probably better than repaying the banks since CPF is charging me 2.5% while the bank is charging me SIBOR + spread.

IPO

I am actually "on-a-roll" here where i managed to get some meaningful placement shares for the last 5 IPOs - Kimly, Sanli, WCG, Shopper360 and Y Ventures! I am still holding on to them but will likely start to reduce some of these positions. I am also likely to turn down the placement for Netlink Trust. I was thinking of applying from the ATM tranche (save the 1% placement fee) or use my SRS account to buy them post listing. Netlink Trust will be more of a retirement portfolio and not for IPO punts.

Going Places

I mentioned that one of my goal in 2017 is to travel to 3 new cities or places - i have met them already! πŸ˜€ I will share with you next time... this is one crazy year of traveling for me

Happy Retirement Planning

Sunday, 9 April 2017

Using CPF for retirement

The Sunday Times ran a two-part series on CPF last Sunday and today. It's definitely worth spending some time to read through those articles and ponder on them regardless of your age. πŸ˜„

This will allow you to make informed decisions on CPF and whether you want to take "irreversible" actions when you are younger, such as topping up your CPF or transferring cash from OA to SA. (I didn't do any of the above when I am young, as I was not "well informed" or didn't bother to. πŸ˜†) 

CPF should form part of your retirement planning and help enhances your life after you retire. Since each one of us has different plans and uses and are at different stages of lives, I will touch on areas that affect me more. 


Setting aside the retirement sum in exchange for a lifelong "passive income"

When I turn 55 (based on current rules), I have to set aside the prevailing Full Retirement Sum of $166,000. I can start "withdrawing" monthly payout of between $1,270 and $1,410 for life from aged 65 till my demise. 

If I want more monthly payout, then I can set aside more cash, up till the Enhanced Retirement Sum of $249,000 for a monthly payout of between $1,850 to $2,050. 

πŸ–πŸ» (I haven't yet to find out what happens to the "cash" if I die early 英年早逝. This will be quite important in my decision in selecting the different plans!) πŸ€”

How much can I withdraw from CPF at age 55?

You don't have to protest at Hong Lim park really. You will be able to withdraw part of your CPF at aged 55 or anytime thereafter if you choose to keep the cash in the Retirement Account. 


For simplicity, you can withdraw the higher of $5,000 or amount in excess of $166,000. 

πŸ‘‰πŸ» Implication: If you already have combined OA and SA balances above $166,000, you can treat CPF as a long-term fixed deposit bank (provided the rules or FRS amount don't change πŸ˜‚). 

Example - if i already have the FRS and I have withdrawn $50,000 from CPF to pay for my monthly mortgages, I can consider "repaying" CPF the $50,000 from my savings and year end bonuses. This will allow me to get that $50,000 back when I am 55 and allow me to earn 2.5% p.a. In addition, I don't have to pay myself "interest" back to CPF on that amount drawn! 

Example - if I have sufficient cash or passive income to cover for my daily expenses, I can consider keeping those cash in the Retirement Account. After I turn 55, the first $30,000 earns 6%. See graphics below on the interest earned. 

How much interest does balances in CPF earns?

Interest in CPF balances earns "risk-free" returns of between 2.5% to 6% depending on your age group. 

Topping up CPF accounts 

As you can see from the graphics above, there are a few things which you can do for retirement to earn a higher interest rate. 

Example - you can top up your own Special Account with cash each year or you can transfer cash from OA to SA. This earns you 4% interest instead of 2.5% each year. Over the long run of more than 10 years, the compounding effect of that extra 1.5% can become very material! 

Example - I top up $3,500 cash each to the Retirement Accounts of my parents every year. I get a tax deduction and they earn a higher interest and get a monthly payout ($3,500 divide by 12) ! Win-win situation πŸ˜‚

Example - if your spouse isn't working, you can also consider transferring your CPF savings to him or her. This will ensure both have higher "life-long" passive income! I always believe that retirement planning is not just for you alone, but for all your loved ones. 



Example - during CNY, instead of putting red packets of your kids into meager earning bank account, you can consider depositing the cash into their special accounts. A $500 contribution when your child is 5 years old can turn into $3,553 after 50 years at 4%! Meaning a $50,000 will turn into $355,300. I will probably start depositing their Ang Pow money into their special accounts from this year onwards. 

Medical expenses 

Medisave account balance will remain to pay for future healthcare expenses. The current Basic Healthcare Sum we need to set aside is $52,000. 

The Sunday Times provided the graphics for using your medisave. 


That's it for today. Happy CPF planning. 

Saturday, 8 April 2017

SRS March 2017 update

There is not much update in March except that UMS holdings has actually gone "crazy"! The price started moving after some analysts tout it as the next privatisation candidate. My only "regret" is that i didn't load up on it when i intended to in Jan this year. Procrastination is bad in this case!  


My SRS portfolio is doing well due mainly to UMS holdings and is up 22%. I have blogged about my purchase of Starhill and Fraser in Feb 2017.


In case you are wondering, for the non SRS portion, i am still holding on to the Hyflux Perps (yielding 6%), the Aspial bonds (yielding 5.3%) and the Perenial Bonds (yielding 4.65%).

Happy SRSing.



Saturday, 4 March 2017

SRS Feb 2017 update

On Valentine's Day, I used the cash in my SRS portfolio to buy presents - 2 REITs for myself. My criteria was pretty simple:

1.  Yield of REIT is more than 6% (both yield more than 6.5% at my purchase price)
2.  Price/NAV is less than 1.0x (both trading around 18-20% discount to its book value at my purchase price)

From that list, i bought 30,000 units of Fraser Commercial Trust (yield of 7.6%) at $1.29 and Starhill Global (yield of 6.9%) at $0.755 each on 14 February.

The addition helps bring my projected passive income to around $40,717 each year. Based on my historical cost of $610,349 (without accounting for revaluation gain), the portfolio is yielding around 6.7% and you can see from the chart below that i have some cash coming in every month except for Feb and Aug.

 

I have in my goal for 2017 to reach $60,000 per year by end of this year and at $40,717, i am close to the 68% mark. Assuming I am able to utilize my cash of $75,000 cash in the SRS account, i should be able to hit the 75% mark. My eventual target is more than $100,000 per year, so i still have some way to go. I will continue to add on to dividend or interest paying counters when the opportunity arises.

Happy SRSing ^_^



Monday, 16 January 2017

Moolahsense / Trading Update - Jan 2017

I first blog about Moolahsense in May last year. My blog post is here.

Since then, I have met up with the management team of Moolahsense and decided to increase my allocation to $75,000.



My interest earned for 2016 was around $4,335. Having said that, the potential delinquency has gone up in recent weeks and currently, i have about 3 cases of late/no repayments currently.

Let's see if it turns out well eventually but with the economic downturn, i am expecting higher delinquencies in the coming months. 

Goal 2 - Generate trading income of $1,000 per month

I mentioned that one goal of 2017 is to generate about $1,000 per month. My blog post is here. January has turned out to be a good month so far.  Let 's see i can meet the goal by end of the year. As of mid Jan, i am slightly higher than my $1k per month goal. This is a 12 month journey so let's hope i can keep this up.



I haven't shared my trades as i am still not sure if i should but my current trade is in SGX made a few days back.



Happy swinging. Make the hay while the trump rally last! 
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