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A strategy to grow wealth and augment income (2013).

Tuesday, December 31, 2013

I am primarily investing for income and in my last blog post, in what has become a yearly practice, I revealed my full year income from S-REITs as well as how they fit into my investment strategy. They are relevant to income investors but with the spectre of rising interest rates in the years ahead as well as a peaking in the real estate cycle here, it is sensible not to be overly optimistic about S-REITs in general.

So, apart from a large purchase made in Saizen REIT in the middle of 2012, I have devoted most of my resources to stocks. These should be undervalued and are likely to continue growing for years to come. Since I want to have income from my investments, I would also like for these stocks to pay dividends.

Marco Polo Marine's yard in Batam.


Now, with these stocks, the main strategy is to buy and hold. However, I am not averse to trading around my investments. So, I could divest partially or fully if it is a good idea to do so. For 9M 2013, I revealed that I locked in gains of S$188,625.13. Has the number changed?

Well, I mentioned that I partially divested my investment in Sabana REIT last month. This added S$12,860.03 to gains from trading in 2013.

So, total trading gains in 2013 is S$201,485.16.

What about adding to my long positions?

What I hope to do primarily is to identify good companies, initiate long positions in them at fairly good prices and then wait to add to these positions if there should be bad news which send their share prices down. These are companies which I am comfortable to stay invested in for years, knowing that they possess some competitive advantages which differentiate them.

Warren Buffett famously said that we should invest with the thought that the stock market could close the next day and not reopen for five years. What does this mean?

Invest in stocks of companies which we are confident will do better over the next five years. We wouldn't be bothered by any volatility in their stock prices in the meantime unless it is to add to our long positions with greater margins of safety. If we understand this, we will know what stocks to avoid. How? Do an inversion.


With this in mind, in the last three months, I added to my long positions in NeraTel and Yongnam as their share prices declined due to bad news which I believe are neither long term nor recurring in nature. I have received fairly good dividends from these stocks and I also made some money trading these stocks earlier in the year.

I also added to my long position in SPH. I was paid both the special dividend and the year end dividend for this as well.

Marco Polo Marine is still my single largest investment although its share price has not declined significantly enough for me to add to my long position. The much higher dividend per share paid out recently was a bonus.

I also retain long positions in CapitaMalls Asia and Wilmar International. These are strong companies and leaders in their fields. They are likely to do better in future.

So, was anything new added to my portfolio?

I initiated a long position in Croesus Retail Trust and even added to this position by using funds freed from a partial divestment of Sabana REIT.

Wait a minute? Didn't I say that I am wary of rising interest rates and a possible peaking of the real estate cycle? Yes, I did but Croesus Retail Trust owns malls in Japan and the BOJ is bent on keeping interest rates really low. Abenomics demand this. The Trust has a relatively low cost of debt which is locked in for 5 years.

Luz Shinsaibashi.

Japan has also suffered from continual deflation for 20 years. If anything, the real estate cycle should have a greater chance of bottoming than peaking. Anecdotal evidence tells of a recovering real estate market in recent months that is likely to pick up speed in future.

Although my strategy, with a generous dose of luck, has worked well this year, I can only hope that it will continue to work in the new year.

To grow wealth and augment income? Yes, indeed, that is the plan.

Related posts:
1. 2013 full year income from S-REITs.
2. Yongnam: Substantial shareholder increased stake.
3. NeraTel: Added to my long position.
4. Marco Polo Marine: Exciting times ahead.

AIMS AMP Capital Industrial REIT: Optus Centre.

Saturday, December 28, 2013

I know I said in my last blog post that the next one will be on my other investments going into 2014 but I received a circular from AIMS AMP Capital Industrial REIT last night and I thought I should blog about this first. Change, the only constant in life.

Optus Centre in New South Wales, Australia, will be the REIT's first property outside Singapore. The proposed acquisition is for a 49% interest in the property.

The purchase will be fully funded by debt and, post acquisition, we will see leverage at 37.4%. This is comfortably under 40% and unless the REIT intends to have further acquisitions, I do not see a need for any fund raising in the near future.

As an investor for income, I am, of course, interested in how the acquisition might affect my income. Looking at the pro forma numbers, I am quite pleased with the whole deal.

The REIT's existing portfolio brings in S$59.75m in NPI annually while the property will bring in S$16.78m in NPI. The NPI yield of the REIT's existing portfolio is 6.2% while the NPI yield of the property to be purchased is 8.1%. I am happy to see that the acquisition is NPI yield accretive.

Sometimes, we see acquisitions which are DPU accretive and DPU yield accretive but are actually not NPI yield accretive. These are less desirable as it means that funds are being used to buy properties which will add to gross income but at a lower rate of return.


My confidence in the management of AIMS AMP Capital Industrial REIT's has strengthened with this acquisition. They have demonstrated their competence in all that they have done so far.

Although AIMS AMP Capital Industrial REIT has proven itself to be a well run REIT, with its NAV at approximately $1.48 per unit, post acquisition, to buy at a 10% discount to valuation would mean buying at $1.33 a unit. Yes, we all love margins of safety, I am sure, especially with the spectre of rising interest rates over the next few years.

At the current price level, I will not be adding to my long position in AIMS AMP Capital Industrial REIT. However, I see no reason to divest either because it has proven to be a good investment and is likely to continue delivering the goods.

As my single largest investment in the S-REITs universe, AIMS AMP Capital Industrial REIT will probably be making a slightly more significant contribution to income generated by my portfolio of S-REITs in 2014.

Related post:
1. Made and still making money.
2. 2013 full year income from S-REITs.

2013 full year income from S-REITs.

Thursday, December 26, 2013



On 15 September 2013, when I reported 9M income from my investments in S-REITs, I mentioned that full year 2013 will probably see lower income compared to full year 2012. 

This is mainly because I sold approximately half of my investment in LMIR (Lippo Malls) earlier this year and I have not made any substantial acquisitions in S-REITs since.

Please read:
LMIR: Divested 42.5% at 52.5c.

In fact, I recently divested about a quarter of my position in Sabana REIT as I moved funds into Croesus Retail Trust. Wondering why I did this?

Please read:
Added Croesus Retail Trust and reduced Sabana REIT.

Luz Shinsaibashi.
Taken with my little IXUS from my hotel room using 32x zoom!

For reasons I mentioned in my blog post of 15 September 2013, I will continue to be very cautious in adding to my positions in S-REITs. Definitely, if I feel that they are undervalued, I would buy more. Could this happen? Of course it could. Remember Saizen REIT in the middle of last year when its warrants were set to expire?

Please read:
Saizen REIT: Why did I buy? Would I buy more?

We might also get a hint that a REIT is undervalued if insiders suddenly become active in buying too. This happened with AIMS AMP Capital Industrial REIT earlier this year when its unit price declined enough to offer an approximately 10% discount to NAV.

Please read:
AIMS AMP Capital Industrial REIT: Nibbling with George Wang.

There could be opportunities for relatively compelling buys again in future. If they should present themselves, I hope I am lucky enough to spot them and brave enough to buy some. Until then, my portfolio of S-REITs might not grow.

Although it would be nice to grow my income from S-REITs, it should not be growth at all costs.

An apartment building in Japan.

So, my strategy for S-REITs is to stay largely invested for income while waiting for Mr. Market to make me offers I cannot refuse. This way, my war chest continues to grow and I will have the resources to do business with Mr. Market when he suffers from manic depression which he does from time to time.

So, what is my full year 2013 income from S-REITs?

Total: S$ 118,081.02

This is some 2% lower than the year before and I expect income from my portfolio of S-REITs in 2014 to be at least marginally lower due to the partial divestment in Sabana REIT this quarter.

Related posts:
1. 9M 2013 income from S-REITs and more.
2. 2012 full year income from S-REITs.

ASSI turns four! Merry Christmas!

Tuesday, December 24, 2013

My plane landed in Singapore at 5am this morning. Still in need of sleep. Yawn.

I took naps and unpacked. Will have to catch up with my emails, readings and blogging. Will also have to get up to speed with work when I return to the office on Boxing Day. Groan.

Today, ASSI also turns 4! Time really does fly!

Here are some photos I took on my vacation:

Luz Shinsaibashi in Osaka by night.


Very early on a Sunday morning!
Weather in Osaka? Brrrr.... but a nice change from Singapore.

OK, a couple of photos to bring in some festive cheer:


In an underground mall in Osaka.
Pretty lights in Kyoto.

In a mall in Kobe.

Merry Christmas!

Related posts:
1. ASSI celebrates 3rd birthday!
2. Croesus Retail Trust.

How to get free medical insurance in Singapore?

Saturday, December 14, 2013

It is a good idea to do voluntary contributions (VC) to our CPF-MA. 

Enjoy income tax relief (for the recipient of the VC) and also earn 4% interest per annum.


  • Reader: I assume excess from MA will flow to SA first. Once SA hits FRS, it flows to OA?


  • Assi AKCorrect. Maxing out the MA is a good idea!
---------------------------------------




---------------------------------------
We will all grow old and fall sick. It is only natural.

Not to be saddled with huge medical bills which we find impossible to pay, I am sure all of us will agree that having a good hospitalisation and surgical (H&S) insurance policy is important.

Of course, a good H&S insurance policy is not going to be cheap but would you believe me if I were to tell you that we could possibly get one for free?

Free? Am I nuts? Well, maybe, but this is how I look at it:

Build up our CPF Medisave Account (CPF-MA), stay healthy and not use the money in our CPF-MA for as long as possible. 

Yes, that is all there is to it. Why?





The CPF-MA attracts a 4% annual interest and if our CPF-MA has enough funds, the interest it pays would be enough to cover the insurance premium annually.

Of course, some might say that the premium to be paid will increase as we age and there could come a time when the interest earned is not enough to pay the premium. This is a valid point and almost bound to happen.




This is why, although some lament that the CPF-MA's ceiling has been raised once again, I am quite happy that it has been raised. This means that I will have more funds in the CPF-MA earning higher interest to offset my H&S plan's insurance premium in future. It is a good thing, in my opinion.

My CPF-MA shows:

Interest earned: $1,654.48

Eldershield: $173.21

DPS: $61.83

Incomeshield: $ 665.00

Total drawn from CPF-MA: $ 900.04

I think I will probably be getting "free" medical insurance for many more years to come.






Top up your CPF-MA or your loved ones' CPF-MA, if you can afford to do so.

The interest earned will go towards getting that "free" medical insurance that so many people I know want to have in Singapore. 

We will get it with some effort and a bit of help from the government.




Update:

Maximum sum for the CPF-MA, which will be raised annually to keep pace with the higher draw on Medisave by the elderly, will go up from $48,500 today to $49,800 next January. (ST, 2015.)



See latest update:
http://singaporeanstocksinvestor.blogspot.sg/2014/06/free-medical-insurance-in-our-old-age.html

"For those under 65, the Basic Healthcare Sum next year will be S$54,500, up from S$52,000 previously, the authorities said."
Source:
CNA, 16 November 2017


Related posts:
1. Eldershield.
2. Enhanced Incomeshield for my mom.
3. How much for H&S insurance?

Photos from AK71's special day.

Friday, December 13, 2013

2016 UPDATE:

Sharing this since I am spending a lot of time watching K-drama now. Haha. I enjoyed this K-drama, by the way. :)

It is December 2016. 

I am 45 years old. 
Gave myself a lunch treat today.







Cost: $27.00
Bad AK! Bad AK!
At least the photo quality is better now. Remember 2013?
---------------
December 2013:

Dinner time!

I don't like crabs but my family like. They happy, I happy. :)

I like this. Sweet and sour fish slices! My niece likes this too. We like the same food. Yah, I am a big kid. ;p

My sister baked this for me. Carrot cake with chocolate fudge! Yummy! I requested for only 1 candle. Easier for asthmatic me to blow out. I want my birthday wish to come true! Yah, I cheated...

The Hobbit celebrated with me:

I took this off a LED TV screen in a mall. My broker offered me free tickets but I told her I have not even watched part 1! Anyway, the screening was in town and I stay in ulu north west Singapore. Too far.
Can see an image of me taking the photo or not?
Is that AK71 on TV? LOL.
What about lunch?

Discount coupon! A real treat!

About $18.00, after discount. A princely sum.

If you are wondering at the photos' quality, I didn't have my IXUS with me yesterday. So, I took these with my Samsung mobile phone. Then, I used my IXUS to take photo of the photos on the phone's screen!

Clever or not?

Yah, I am a dinosaur. Well, it works and I got the photos on my blog, didn't I? LOL.

Happiness. :)

Related posts:
1. A drawing of AK71 by a talented artist.
2. Happiness in 2012.
3. ASSI celebrates 3rd birthday.

Gourmet sandwich by AK71 Deli.

Wednesday, December 11, 2013

I enjoy a nice gourmet sandwich once in a while but I find them rather pricey. A black pepper ham sandwich from Swiss Bake would easily set me back by $7.00 or more, for example.

Anyway, you guys know by now that I like to prepare and bring my own food to work. So, having a craving for some black pepper ham sandwich last night, I went grocery shopping at NTUC Fairprice.

I got some organic Romaine lettuce, 200gm of black pepper ham, a loaf of wholemeal bread from Gardenia and some low fat cheese. All for less than $10.00 and enough to make 6 sandwiches. Still have some lettuce and cheese leftover.

I had the bread ends. I love bread ends.

Oishi!

Enough to provide breakfast for the whole family. Nice atas sandwiches!

Related posts:
1. Supporting my companies and getting paid!
2. Tea break: Yummy home made bread.
3. Visit NTUC Fairprice and learn about investing in stocks!

Do you own properties in Little India?

Monday, December 9, 2013

A friend who stays in the vicinity of Little India told me that he would try to get home early every weekend because later in the evenings his neighbourhood would transform and it would not feel like Singapore anymore.

People would congregate in groups of more than 5 in the common areas (although technically these would be unlawful gatherings), drink beer, share food, talk loudly, sing, dance and pee on the walls. It is quite scary.

In the mornings, he would witness the aftermath (the sight and the smell) of such night time activities. Awful.

With the disastrous incident that took place last night, I hope that the authorities will really step up policing Little India and break up large gatherings. They should issue summons for the herds that dash across roads with no consideration of safety too. I know this because I drove there before and, trust me, it is very stressful for drivers.


I have avoided driving in Little India for a long time.

Perhaps, officers from the National Environmental Agency should also police the area and apprehend people who litter and pee in public. Whatever happened to CWOs?

For people who own real estate in District 8, such undesirables might affect the value of their investments. For people who stay there, it could be quite stressful. The riot last night would probably cast a pall on the entire area for some time to come.

Little India is a part of Singapore and it should be like Singapore and not some other country.

I am all for having migrants in Singapore, accepting that our population and domestic economy are too small. However, foreigners must respect the rule of law or be dealt with sternly.

Related post:
The first large scale riot in Singapore in 40 years.

The first large scale riot in Singapore in 40 years!

I read this piece of news and thought I had woken up in another country somewhere in South Asia! Imagine the fear that must have been in the hearts of people in Little India when it happened.

I hope those responsible are made to answer for this very soon.

What is the news?

A riot in Little India which involved 400 people was sparked off by a fatal accident involving a 33-year-old Indian national who was knocked down by a private bus! Yes, 400 people!

The aftermath. Cars were overturned and set on fire!

Some 300 police officers were deployed to the site after the trouble broke out. The riot was quelled in under two hours after the first call reporting the incident was received at 9.23pm.

Police Commissioner Ng Joo Hee said rioters threw glass bottles, railings and other projectiles at officers.

Horrible!

Read full story: here.

Socks! Socks! My Kingdom for some socks!

Friday, December 6, 2013

I woke up in the morning to discover that I was out of socks! Really!

It reminded me of an episode in Black Adder:

Prince George on the left and Black Adder on the right.

BLACKADDER: Sir, if I may make so bold, a major crisis has arisen in your affairs.

PRINCE GEORGE: Yes, I know Blackadder. I have been pondering it all morning.

BLACKADDER: You have, sir?

PRINCE GEORGE: Yes. Socks. Run out again. Why is it that no matter how many millions of pairs of socks I buy, I never seem to have any?

BLACKADDER: Sir, with your forgiveness, there is another, even weightier problem.

PRINCE GEORGE: They just disappear. Honestly, you'd think someone was coming in here stealing the damn things and selling them off.

In case you are wondering, Black Adder was selling them off. The Prince was clueless.

Anyway, in my case, the population of socks in my cupboard has been dwindling as they got worn out and thrown away. So, I decided to buy some new socks in the evening.

I went to the nearby shopping mall and walked into Giordano for the first time in, er, 3 or 4 years? Made a beeline for the socks which were going at 4 pairs for $20. Got the shorter ones because they feel a bit more cushy compared to the ones of regular length, if you know what I mean.


8 pairs in all. I think they should last me another 3 or 4 years. Well, I hope so, anyway.


Funny!

AVIVA paid me $10,529.

Thursday, December 5, 2013

On 28 October, I wrote a piece on single premium endowment policies and I revealed that I had one such policy with AVIVA maturing in November. 

I wondered how much would I be receiving when the time comes.

I received this advice last night:




Over 8 years, a $10,000.00 premium apparently made $2,175.00. I had previously thought the returns in the first 6 years were $800.00 or less. I was mistaken. My memory is unreliable.

So, the policy made $2,175.00 over 8 years. This means 21.75% spread over 8 years or 2.72% per year. 

Quite miserable even by endowment policies' standards. 

Still, it is better than what the SRS account would have given me in interest payments. Everything is relative, of course.

All said, this is a forced savings plan and, at one time, I thought it would be a good idea to force myself to save. 

This was money in my SRS account anyway and I wasn't doing anything with it.

On hindsight, I should have kept the money in my SRS account untouched and I would have had more ammunition to buy cheap stocks during the GFC.

I now have quite a bit of money idling in my SRS account which I consider as one of my 4 war chests. Not doing anything here is doing something too.

Related post:
How much more will Aviva be paying AK?

Dinner with AK71.

Wednesday, December 4, 2013

I meant to share these photos but, somehow, I forgot. Sign of old age.



My sister cooked a hearty meal for us. Rojak (with paste my parents bought from Penang) and Bak Kut Teh. Yummy!

Dough fritters used in both dishes. This is a way to improve productivity in the kitchen!

An appeal by AK for funds.

Regular readers know that I believe in being charitable and I have revealed before that I support 6 charities in Singapore. My favourite charity is still "Singapore Children Society" and has, increasingly, taken the lion share of my donations.

I recently received an appeal letter from another charity which I support and there was a little hand written section which moved me and I would like to share it here with you:


We might feel that what we have is not enough but if we have extra money which we are able to invest with, we are fortunate indeed compared to the poor and the needy.

So, if you have a charity that you like, please make a bigger donation this festive season. Just $10 more will make a big difference if everybody thinks the same way.


If we don't yet have a habit of being charitable, why not start today with a donation to the "Singapore Children Society"? We can make an online donation on their website: here.

Let us bring some cheer to the less fortunate in our midst. We can do it and, so, why not? Thank you.

Related post:
Have money must also have a heart.

Becoming a millionaire next door.

Tuesday, December 3, 2013

A person made $10K a month but spent $9K a month.

A person made $5K a month but spent $2K a month.

Who do you think will become richer faster, all else being equal?





The following chart was posted on my Facebook wall by Matthew Seah:


I am impressed!

Matthew is a "Prodigious accumulator of wealth (PAW)": This type of people are frugal. They save and invest. They become millionaires.





"People sometimes think that high income earners are wealthy people. This might not be true..." STE: The Millionaire Next Door.

Related posts:
1. Think you cannot reduce your spending?
2. A fast track to wealth building.
3. How to tell if you are rich?

Time for AK to be paid $12,750.

Monday, December 2, 2013

Who? Who?

Who is paying AK so much money?

Why? Why?

Make a guess?

Pause.

Pause.

Pause.

Give up?






It is the last quarter of 2013 and I am making my yearly contribution to my SRS account. 

So, I am paying myself $12,750.

Aiyoh, who threw something rotten at me

Hey, must have a sense of humour mah. LOL.





Although the contribution cap is S$ 12,750, we do not have to contribute the maximum if we don't need to or are unable to.

Don't need to? 

Well, a person who pays relatively little income tax could be tax free simply by contributing a few thousand dollars to his SRS account.

Unable to? 





Everyone's circumstances are different. $12,750 is quite a bit of money for many. 

If a person could only contribute $5,000 comfortably, then do so. 

Although he would not enjoy the maximum tax savings, he would still enjoy some savings.

I hope you will remember to contribute to yours before the end of the year.






The SRS is part of the Singapore government’s multi-pronged strategy to address the financial needs of a greying population by helping Singaporeans to save more for their old age. 

It began in 2001 and is operated by the private sector. 

Writing out a cheque to myself.

NOTE:
From 2016, the max SRS contribution is $15,300 a year.






Download the SRS Handbook: here.

Related posts:
1. Be rewarded for opening an SRS account.
2. A war chest called "SRS".

Supporting my companies and getting 'paid' in the process.

Saturday, November 30, 2013

Recognise these brands?


Or these?






These are brands that belong to QAF Limited.

Today, I was pleasantly surprised to see Cowhead brand's organic rolled oats.


Better still, they were on special offer. S$4.95 for two packets (500 grams each) at NTUC Fairprice.

Pesticides free!

What makes the purchase even more satisfying is that I am a shareholder of QAF Limited (and also NTUC Fairprice).


I like supporting my companies and getting some dividends in the process. Good idea?
------------

Update (18 June 2016):


Money from NTUC Fairprice.
Net of deductions, it is a rebate of 3.35% on my purchases.

This is on top of receiving Link points ($1 spent = 2 pts. Exchange 3,000 points for $20 Fairprice voucher. 1.33% rebate.) and also a 5% cashback from my credit card! 


AK will get more free grocery this month!

Like supporting our companies and being paid for it? I am sure we do!


Related post:
Thank you for investing in INCOME.

Croesus Retail Trust: Motivations and risks........ (Updated on 16 Sep 15 with a video and list of key take-aways.)

Saturday, November 23, 2013

I was having a conversation with a friend in a chat box and he asked me what are the risks investing in Croesus Retail Trust. I rattled off a list of risk factors and I am sure it wasn't even exhaustive.

Every investment has risk factors and the important thing for me is to ask if these are acceptable. How do I know if they are acceptable? I would have to know my motivations as an investor.

So, if we are investing for income, then, we should ask which risk factors are more significant to us. What are the things we should be paying more attention to.


If Croesus Retail Trust should consistently produce an 8.5% yield for me as an investor for income, this is one factor that would keep me quite contented. I would have less problem with keeping the status quo.

Over the next two years, with a currency hedge in place, distributable income in S$ terms is more or less predictable. After that, assuming zero growth in distributable income in JPY terms, income received in S$ terms will depend on the prevailing exchange rate. Of course, the manager could continue hedging exchange rate risk and it could be a sensible thing to do at that point in time. It is hard to say anything conclusive about this now.

They might not have to do so since my own experience with the JPY tells me that it is now near its lowest point since I first really visited the country in 1998. The lowest in recent months was S$ 12.20 to JPY 1,000. Although it could go lower, I suspect that it wouldn't go very much lower than that.

As the BOJ has mentioned many times before, Abenomics is not about devaluing the JPY. A devalued JPY would cause immense hardship for the Japanese people and it is not in any government's interest to have hyper inflation.

So, the JPY is likely to strengthen from current levels or stay where it is once Mr. Abe gets the 2% inflation that he wants for the economy. This is all in the realm of reason.

Of course, if Japan should experience a 2% inflation, logically, interest rate should go up. This would translate into a lower level of distributable income in JPY terms, everything else remaining equal.

If the JPY should appreciate against the S$ by then, a higher interest rate could be a non-issue. Otherwise, we could see DPU in S$ terms reducing. How much would interest rate increase to? How much would DPU reduce to in such a case?


Well, if the Trust should pay 1% more in interest on its debt, roughly, we could see a 10% reduction in DPU. What about 2%? Maybe, a 20% reduction. This is the best we can do. Estimates. Then, ask if a 10% to 20% reduction in DPU would still make the Trust an attractive investment for us.

At $1.18, Croesus Retail Trust didn't make my list.

$1.07? Still a "NO".

$0.965? Maybe.

$0.845? Looking attractive but where was the floor?

$0.87? Found a floor, perhaps. Buy some.

Of course, I did consider other risk factors before deciding that Croesus Retail Trust would make a decent investment for income. 

Read related posts and some of the comments generated therein by following the links provided at the end of this blog post, if you are interested.

Once we know our motivations, we know what risks are acceptable and we will know what to do.

Finally, we might not get the best prices but if we could get in at a fairly good price to start with, that is good enough.

Update (16 Sep 15):
Video by PhillipCapital




Key take-aways for me:

- 71.9% leases expiring beyond 2019.


- Mallage Shobu accounts for 20% of GRI.


- Rental reversions upwards of 20%.


- ONE's Mall and Mallage Shobu to contribute to higher income through positive rental reversions.


- Consumption likely to improve due to real wage growth and falling unemployment.



- Shopping habit in Japan changing, preferring large shopping malls.

- Croesus Retail Trust's occupancy cost* is 8 to 9% while CMT is about 17% and FCT is about 15%. Average occupancy cost for sub-urban malls in Japan: 12 to 15%. This means that Croesus Retail Trust has room to increase rent.


*Occupancy cost is the tenant's cost of occupying its space divided by sales.

Thanks to Raymond Ng for the tip off.

Related posts:
1. Invest in Japanese real estate.
2. Added more Croesus Retail Trust.
3. Initiated long position at 87c.

Added more Croesus Retail Trust and reduced Sabana REIT.

Thursday, November 21, 2013

I initiated a long position in Croesus Retail Trust earlier this month.

I recently added to this position as I believe that this Trust could do better in the years ahead.

However, I also decided not to increase the size of my investment portfolio as I am close to 75% invested which is not very comfortable for me. So, I had to do some portfolio balancing.

For a while now, I have been thinking of reducing my exposure to industrial properties in Singapore, given the concerns of oversupply.

I have investments in a few industrial properties S-REITs and my two largest are in AIMS AMP Capital Industrial REIT and Sabana REIT.

Of the two, after some thought, I decided to reduce my investment in Sabana REIT because, comparing them, I believe that AIMS AMP Capital Industrial REIT has done a better job of improving value for unit holders in the last two years.

Mr. George Wang regularly buys into AIMS AMP Capital Industrial REIT while in the case of Sabana REIT, the CEO has divested his direct stake completely in recent months. This gives me the impression that the insiders of AIMS AMP Capital Industrial REIT have their interests more aligned with minority unit holders'.



508 Chai Chee Lane
Sabana REIT's recent purchase of a half vacant building in the midst of softening prospects did not inspire much confidence in Mr. Market who has shown his displeasure in the usual way. This compared with AIMS AMP Capital Industrial REIT's development of certain properties to max out plot ratios while securing tenants in advance tells a contrasting story of performance and, perhaps, competence.

Of course, Sabana REIT could still do better in future if they manage to fill up the space left vacant by the non-renewal of 4 master leases as well as the vacant space in the latest property acquired from AMD. I would be very happy if this should happen since I still retain a relatively large position in the REIT, having reduced my investment by about 24% only.

With the partial divestment of Sabana REIT, it means that AIMS AMP Capital Industrial REIT is now my largest investment in S-REITs.

Croesus Retail Trust has become a more significant investment for income in my portfolio but because it is not a REIT, my expected full year income from S-REITs in 2014 will probably see a decline, everything else remaining equal.

Related posts:
1. Croesus Retail Trust: Long position at 87c.
2. Sabana REIT: Initiated long position.


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