28 December 2011

Non Convertible Preference Shares III

[This is an update of a previous post.]

Traded on the SGX, NCPS are traded like shares (which means the bid-ask price fluctuates), but gives out dividend/coupon payments like bonds.  There aren't that many such NCPS, and they're most likely from the 3 big banks in Singapore. So long as the issuers don't call back their NCPS, they will continue to pay out the dividends at the stated rate.  However, some of these have 'maturity' dates where the coupon rate reverts to a floating rate thereafter.  Prior to the maturity date, the bank cannot call back the NCPS.

The risk of failure stems from the issuing company going down under (you lose your pants!), or when it fails to pay out any dividends for their standard shares resulting in no dividend payout for their NCPS as well. However, the likelihood of these negative events appear slim given the strong historical performance of these Singapore banks.  But then again, we've seen also big banks in the US going down under in recent history!

If one is not worried about the fluctuations of the "capital", and is happy with the dividend/coupon payout, NCPS may not be a bad option for building a "cashflow" stream.  So long as the issuer doesn't call back the NCPS, you will get the annual payout (usually half-yearly or quarterly) perpetually.  If they do call back the NCPS, you will get back the par value anyway.

Below are the respective NCPS.  Read as such:
[NCPS]
[Date of maturity] @ [Rate] ([Dividend/Coupon payout date])

Hyflux 6.0% - Cumulative NCPS
- 25 Apr 2018 @ 6% (25 Apr, 25 Oct)
- Thereafter @ 8% (25 Apr, 25 Oct)

DBS 4.7%
- 22 Nov 2020 @ 4.7% (22 May, 22 Nov)
- Thereafter @ 3-mth SOR + 2.28% (15 Feb, 15 May, 15 Aug, 15 Nov)

UOB 5.05%
- 15 Sep 2013 @ 5.05% (15 Mar, 15 Sep)
- 15 Sep 2018 @ as above [2nd maturity date]

OCC 5.1%
- 20 Sep 2018 @ 5.1% (20 Mar, 20 Sep)
- Thereafter @ 3-mth SOR + 2.5% (20 Mar, 20 Jun, 20 Sep, 20 Dec)

OCC 3.93%
- 20 Mar 2015 @ 3.93% (20 Mar, 20 Sep)
- Thereafter @ 3-mth SOR + 1.85% (20 Mar, 20 Jun, 20 Sep, 20 Dec)

OCBC 5.1%
- 29 Mar 2013 @ 5.1% (20 Jun, 20 Dec)

OCBC 4.5%
- 28 Jan 2013 @ 4.5% (20 Jun, 20 Dec)

OCBC 4.2%
- 14 Jan 2013 @ 4.2% (20 Jun, 20 Dec)

SOR refers to the Swap Offer Rate.

For an elaboration to understand about these preference shares, you may want to examine this talk on Comparing Bonds from an SIAS MyMoney investor education programme.

For the latest, refer to SGX List of Preference Shares.

You may also be interested in SGX List of Retail Bonds.  As an example, "LTA n4.17% 160510" means that the bond issuer is LTA at a coupon rate of 4.17% per annum and matures on 10 May 2016.

24 December 2011

Recollections of 'my' companies

It's the eve of X'mas 2011, and it's a good a time as any to take stock of events in the year that relates to companies I've taken a stake in.  It's been a horrible and unforgiving year - tsunami in Japan, massive floods in Thailand and Australia, financial crisis Part II in Europe, SMRT coming out like a disaster movie, repeated floods at various parts of Singapore, and the bird flu apparently making a come back in Hong Kong.

Adampak had one of its factory underwater in Thailand when the floods hit. 

Qian Hu is still fishing around and doing poorly this year after the European market tanked.  Fishy.

SPH failed to deliver my papers on a few occasions.  Not getting their basic service done is a bad sign.  And the long time Chairman of SPH has become the President of the Republic.

In contrast, SingPost has consistently delivered my posts.  But the amount of junk mails these days is simply amazing!  But if it keeps the postman busy, it's good?

Singtel phone bills continue to increase throughout the year as the number of handphones I owned have gone up.  How many handphones does one need?  I am still not subscribing to any M1 services.  What will LTE technology bring to their businesses?  More data traffic is the way to go, ever since the rise of the iPhone and iPad.  Long live Steve Jobs!

Still haven't bought anything from Aussino.  I think I'm still happy with my bedsheets.  The trouble is that these things can last quite a while.  I'm not hopeful about their business.

HourGlass appears to be doing decent business.  Lots of tourists visiting Singapore these days and hopefully there're there in the branded class that the newly rich patronise.

SMB United is in the midst of a takeover bid.  Remains to be seen what the outcome will be.

Global Logistics Properties has dived in on the Japanese property market in the months following the Japanese tsunami and nuclear disasters.  Looks like some smart moves.  It's going to be sometime before we see these pan out.  China and Japan are all about exports and emergent consumption.  And that means there is a logistics battle to be won.

On the property front, the cooling measures seem to be gradually taking effect.  Amazingly, the E-Condo I'm living in now appears to be going at twice the price I bought, and that was just 5 years ago.  In land scarce Singapore, this is one area where there is no room for abundance, unless technology breakthroughs bring new opportunities.  I'd stay away speculating the home properties given that these will likely continue to attract frequent policy interventions.  This is one unstable "C" among the infamous 5Cs.  But Capita-Commercial Trust and Mapletree Industrial Trust are alternatives in the commercial and industrial sectors (REITS) for a 'stable' income stream.  That's not a bad thing.

Singapore banks have stood the test of the last two rounds of financial crisis in the US and Europe.  OCBC remains healthy and I'm sure their OCC 3.93% NCPS will continue to pay out annually.  How does the future hold for SP Reinsurance and Sing Inv & Finance?  I'm living off their dividends.

Water is the business for Hyflux.  However, I certainly wouldn't hold my breadth on Hyflux itself. It had banked on the rich African market which was unfortunately aborted by the Arab Spring.  Perhaps the opportunity will present itself again.  It has tried to diversify into China and we shall see how that transpires.  But their overall business in water and waste should remain viable and hence Hyflux 6% CPS should remain ok for the steady income stream it produces.  We need to drink, and we certainly have to shit.  One can die from not being able to do either you know.

CSE Global seems to be having trouble making profits out of their software projects.  It didn't help to find their customers caught amidst the rising tide of the Arab Spring as well.

Ah China!  Who knows where things will go from here.  One can certainly see the throngs of newly rich everywhere.  And I mean everywhere.  So perhaps it's healthy to benefit from their retail growth story via Capita Retail China Trust.

Tat Hong's factory near my neighbourhood seems to have either moved, or else all their cranes have been rented.  Bad sign, good sign, depending which way it went. But they're likely benefiting from their business down in Australia.  It's a reconstruction and recovery story after the floods in Australia had receded.

When economic woes abound, and the price of oil climbs to ridiculous levels, airlines businesses are all downhill, including filings for Chapter 11 (US)!  But I believe SIA will recover and will do well again when things pick up.  But one wonders how the new management team is fairing? 

By a similar thread, SATS' future rests on the recovery of the air transportation business.  They have just secured a contract to operate the new Cruise passenger terminal.  That could perhaps help broaden their business to the sea business.  In any case, they continue to have the stable business of providing food for the SAF.  National Service is good for SATS.

Speaking of food, Brands products from CerebosPac is a must have booster for kids preparing for exams.  What a year of exams!  That's a lot of Brands Essence of Chicken.  It also appears to be one of those staple items for hospitalisation gifts as well.  Students and hospitals, it's all about people!

Kian Ann, Innotek, Teck Wah and Meiban Gp?  Waiting for the manufacturing and engineering to recover perhaps.

With Certificate of Entitlements rising to epic proportion, car ownership has become another that has gone beyond-the-line-of-sight "C" for followers of the 5Cs.  But they all need to go for annual inspections, and the number of cars aren't getting any less despite this.  VICOM for next buy?

Merry X'mas!

07 November 2011

Savings is all relative

I've been giving my two school-going kids their weekly allowances.  My older boy who is in secondary school is given $20 a week.  My younger daughter who has reached the end of primary school is given $3 a week. Yet, the boy has practically no savings, every cent is spent.  My girl on the other hand has a net savings of more than $500 (inclusive rewards, and birthday ang pows).  Interesting isn't it?

One could argue that a secondary school student needs to spend more money than a primary school.  Perhaps the canteen food is more expensive.  Perhaps there is greater peer pressure to hang out and chill out.  Perhaps there are more CCA activities in the afternoons and hence the corresponding expenses.  But I suspect it's a question of being a "saver" versus a "spender"?

One interesting indicator is that whenever my son gets his allowance, he tends to spend big on the first few days of the week.  Instant gratification, and consequences be damned!  He can rapidly run out of cash before the end of the work and struggles to live on the balance for the rest of the week.

My daughter on the other hand has yet to exhibit these same behaviour.  So there is hope yet.  We shall see how things pan out next year when she is also in a secondary school.

30 August 2011

Detroit, Automotive Capital of the World

2008 was a watershed year for many in the automotive industry. No less so than the BIG-3 which are headquartered in Detroit, Michigan. 

General Motors

Along the expanse of Woodward Avenue, Detroit celebrates an annual event in the month of August each year which sees cars from the 60's and 70's gathering along Woordward Avenue for an annual drive-by (see Woodward Dream Cruise).  I hear that Woodward Avenue is much like Route-66 and a nostalgic piligrimage for automotive lovers.  It is quite a sight to see the many oldies, both vintage cars and drivers alike during the week of the Woodward Dream Cruise!

Woodward Dream Cruise 2011

While it seems that the automotive industry is very much alive along the fringe of Detroit city, it seems that Detroit city itself may have seen better days.  A fate similarly shared by its basketball team, the Detroit Pistons. Many dilipidated buildings abound, even within the heart of the city.  For a city of its size, it seems awefully quiet, even on a typical weekday.  Apparently, the city once hosted a population of 2 million.  Today, it stands at a scant 750,000.  Many have chosen to move out to the suburbs, where new housings are a-plenty.  Perhaps the only times when the city thrives is when baseball or football games are on.

Vacant buildings in the heart of Detroit

Still, there are positive signs that the city is slowly, very slowly, recovering.  The automotive industry continues to dominate its industry, and hence its economic weakness.  GM, Ford and Chrysler, as well as many ancillary businesses continue to recover and perhaps prosper.

A very simple lesson here: diversify.



08 August 2011

August Does Not Augur Well - US Market

Yet another August and a tumultous one yet again.  The market seems to have taken a little breather from the news that the US government wasn't going insolvent, and then decided that it still wasn't happy.  Or, there were enough insider news going on that S&P was going to downgrade the US's AAA rating downwards, and the market responded pre-emptively with the inside news.  Whatever it was, the rapid drop across the board and its subsequent "hut'chew" effect has caused yet another series of contagious effect.

Is this yet another once-in-three year opportunity for a Great Global Sale?  It may not be a market bottom, but I certainly view this as another fascinating buy opportunity.

04 July 2011

The Moneytree and its many branches

Since I strive to make it a point that my monthly expenses stay below my monthly take home pay, bonus is then an affair of choices.  What should I do with my bonus?  It seems the competing demands are a plenty:

1. Contribute to my spouse's CPF-SA account (up to $7,000) and benefit from income tax benefits and 4% returns.

2. Contribute to my spouse's CPF-MA account since it is below the threshold, and benefit from 4% returns.

3. Contribute to my kids' Fundsupermart accounts and build up their unit trust portfolio for their education funds.

4. Pay down my mortgage (2.6% loan interest) and reduce the monthly instalment payment to build up my CPF-OA (gaining 2.5% interest).

5. Contribute to my own unit trust portfolio or in my trading account to buy more good dividend paying stocks. 6-10% returns with associated higher risks.

6. Save up and keep in a Money Market Fund for vacation expenses.

7. Leave it the bank savings account, earning peanuts, but with ready cash-on-hand as part of my contingency funds.

The answer is likely a combination of above - probably 1, 3, 5, 6 and 7. 

It doesn't make immediate sense right now to do 4 since interest rates are still low. 

I guess I will not go for 2 either, unless I've maxed out my spouse's CPF-SA and there is no better place to make more than 4% returns.

Related:
Free "e-book": Achieving level one financial security for Singaporeans [ASSI]

24 June 2011

Cashflow - A Tale of Stable Income

Heard from a colleague over lunch. 

He apparently bought a pair of properties for investment previously, paying down only 20% and secured loans for the rest.  The servicing of the loans were offset by his rental income from each of his two properties.  His tenants were all expatriate and paying tidy rentals for his properties which were located in the outskirts of the city area. 

Nice cash flow - using other's people money to make money.  Well done! Proud owner of several properties.

One day, one of his tenants called him to say he was being laid off, and he would not be able to continue paying his rent.  My friend got pretty worried, because he would have to pay a hefty monthly sum to service his loan without a paying tenant.  So he agreed to let his tenant tide over by lowering the rent, and allowed him to temporarily delay payments, hoping desperately that his tenant would be able to secure an alternate job soon.

About this time, his other tenant tried to call him on his mobile.  As he described it, "I was running scared!  I didn't want to answer his call.  Because if he was going to tell me that he had also been laid off, I didn't know what I was going to do!"

This was in the late 90's. More than 10 years later, he's apparently in a similar state.  He's starting to get worried again and is seriously thinking of getting rid of one of his properties.

02 May 2011

Pattern of Behaviour

What is it about these stocks that shows such strong correlation in their performance for the past few years?  They are definitely not in the same type of business.

Steady and Rising
Steady and Volatile Rising

Stock: SingPost

Despite the challenge of electronic media and the resultant cannabilisation of snail mail, SingPost remains the postal service within Singapore.  Aside from property/rentals, it is also leveraging its mail distribution service to go into logistics.

SingPost: Will logistics expansion dim its attractiveness as a dividend stock? [Investment Moat]

Stock: Mapletree Industrial Trust (MINT)

1 May 11 - Analysis by ASSI

25 April 2011

Credit Cooperatives

There seems to be a number of Credit Cooperatives in Singapore.  These typically involve membership with regular payments (investment?) that pays out dividends in the magnitude of 3-5%.  What's the catch?  Is this a good avenue for wealth management?

22 April 2011

Death of INVEST

Yet another local investment/wealth-management magazine bites the dust.  The latest issue of "INVEST" is its last.  Over the past few years, one magazine after another have shutdown - Q, PULSES and now INVEST.  It's tough to get circulation in print media going for a small market (population) when information are available real time.

FUNDSUPERMART while still alive, has reduced its frequency of circulation.

Seems the only ones still going strong are THE EDGE (weekly) and SHARES (fortnightly).

15 April 2011

Non-Convertible Preference Shares (NCPS) II

[This is an update of a previous post.]

Traded on the SGX, NCPS are traded like shares (which means the bid-ask price fluctuates), but gives out dividend/coupon payments like bonds.  There aren't that many such NCPS, and they're most likely from the 3 big banks in Singapore. So long as the issuers don't call back their NCPS, they will continue to pay out the dividends at the stated rate.  However, some of these have 'maturity' dates where the coupon rate reverts to a floating rate thereafter.  Prior to the maturity date, the bank cannot call back the NCPS.

The risk of failure stems from the issuing company going down under (you lose your pants!), or when it fails to pay out any dividends for their standard shares resulting in no dividend payout for their NCPS as well. However, the likelihood of these negative events appear slim given the strong historical performance of these Singapore banks.  But then again, we've seen also big banks in the US going down under in recent history!

If one is not worried about the fluctuations of the "capital", and is happy with the dividend/coupon payout, NCPS may not be a bad option for building a "cashflow" stream.  So long as the issuer doesn't call back the NCPS, you will get the annual payout (usually half-yearly or quarterly) perpetually.  If they do call back the NCPS, you will get back the par value anyway.

Below are the respective NCPS.  Read as such:
[NCPS]
[Date of maturity] @ [Rate] ([Dividend/Coupon payout date])
Hyflux 6.0% - Cumulative NCPS
- 25 Apr 2018 @ 6% (25 Apr, 25 Oct)
- Thereafter @ 8% (25 Apr, 25 Oct)

DBS 6.0%
- 15 May 2011 @ 6% (15 May, 15 Nov)
- Thereafter @ 3-mth SOR + 2.28% (15 Feb, 15 May, 15 Aug, 15 Nov)
DBS has announced that they are calling back this NCPS on 16 May 2011.

UOB 5.05%
- 15 Sep 2013 @ 5.05% (15 Mar, 15 Sep)
- 15 Sep 2018 @ as above [2nd maturity date]

OCC 5.1%
- 20 Sep 2018 @ 5.1% (20 Mar, 20 Sep)
- Thereafter @ 3-mth SOR + 2.5% (20 Mar, 20 Jun, 20 Sep, 20 Dec)

OCC 3.93%
- 20 Mar 2015 @ 3.93% (20 Mar, 20 Sep)
- Thereafter @ 3-mth SOR + 1.85% (20 Mar, 20 Jun, 20 Sep, 20 Dec)

OCBC 5.1%
- 29 Mar 2013 @ 5.1% (20 Jun, 20 Dec)

OCBC 4.5%
- 28 Jan 2013 @ 4.5% (20 Jun, 20 Dec)

OCBC 4.2%
- 14 Jan 2013 @ 4.2% (20 Jun, 20 Dec)

SOR refers to the Swap Offer Rate.

04 April 2011

SRS Adjustments

From 1 Jan 2011, the Supplementary Retirement Scheme (SRS) contribution limit would be raised to $12,750 from the current level of $11,475.

See: Elaboration on SRS by IRAS

24 March 2011

When Japanese is great, when Japanese is bad?

It would seem that the nuclear meltdown risk is gradually tapering down with positive hope in sight.  However, the effects of the fall-out is still propagating.  Restaurants which branded their Japanese heritage were often seen as up-market.  But right now, the same branding is probably a death knell.  Japanese restaurants are experiencing an immense sense of emptiness with no customer in sight.  Perhaps, it is now the optimal time for these restaurants to do whatever major maintenance work needed and wait out this period of fear for all things Japanese.  Will these companies survive the drought in business?

18 March 2011

Japan and the Rest of the World

Understandably, the Japanese stock market is nose-diving.  In the aftermath of the multiple disasters of earthquake and tsunami, and the continuing threat of multiple nuclear meltdown, Japanese businesses are deeply affected one way or another.  Aside from property loss, it is also the loss of manufacturing facilities, evacuation and relocation of its workforce, dislocation of distribution facilities and networks, and the impact of energy shortage within Japan.  There would probably be an even heavier sell down thereafter to convert stocks to cash to support rebuilding, especially to rebuild households.  There is perhaps room for a 20-40% drop. 

On the other hand, the reasons for a global meltdown of the stockmarkets weigh heavily on the unstable events in MENA and the risk of a slowdown in the 2nd largest global economy (Japan).  There is perhaps room for overselling and hence an opportunity to buy in for the longer term.  Certainly, there will be a need in massive infrastructure reconstruction in Japan as well.  But that is probably going to be on hold till the risks at the nuclear plant are brought fully under control.

15 February 2011

A period of fear, A period of opportunity?

There seems to be a fair bit of fear at the moment.  STI has been pulling back quite a bit over the Chinese New Year, coupled with tightening measures in China, and the domino situation across the Middle-East.  I am viewing any pullback at this time as a good buy for accumulation for the long term.

The ones I am eyeballing and watching with anticipatory interest:
- SPH
- M1
- Adampak
- Guocoleisure (wait for UK recovery and impact on their UK casino operations)
- Teckwah
- Capital Commercial Trust (NAV appreciated due to mark to market value of properties)
- Sp Reinsurance
- Hsu Fu Chi
- Cerebos
- Singpost
- SATS (wait for recovery of food business in UK and appreciation of the Stirling)
- Tat Hong (wait for re-construction in Australia)

24 January 2011

Gold and Fear

Gold

The price of gold has gone up so much over the recent years, it has reached historical heights (see Gold Index on MarketWatch).  Several weeks ago, my aged mother decided to pawn away all her gold jewellery.  She's getting of age and has decided that cash is more valuable to her than holding hard assets like gold jewellery.  It brings to mind the saying that "cash is king".  There appears to be some spectre of wisdom here.  I figure when the wider populance is starting to mess around with buying-selling gold, it has perhaps just about reached a peak.  Time to exit gold?

Fear & Predictions

For much of 2010, the market talk was about caution and expectations of China being a market to be as an investor. 

It would seem that firstly, the market continues to climb a wall of worry as oft repeated by Wong Sui Jau's blog.  If I had stayed out of the market, I would certainly have been worse off.  It has clearly paid off to continue to invest in times of continued fear.  The outlook continues to remain the same for the year ahead.  Into the third year since the market low, it is of course a time for caution.  I'm going into a infinite loop here somewhere in this argument?  Hmmmm....

Secondly, China has turned out to be an underachiever in 2010 for the investor.  Is it perhaps a healthy correction?  For sure, all the wonderful market predictions just prove that there is no clairvoyance out there.  Generally wrong.  Fascinatingly, in Fundsupermart's latest issue of their magazine (which is now half-yearly), it has noted that their Country predictions have turned out to be quite poor.  There seems to be no reward for timing and picking the market.  I predict a second year of poor results for the China market (in so far as investors are concerned).  Another infinite loop?

Accuracy

How accurate have my own prediction and stock picking turned out?  So far, poorly.  On at least two ocassions when I exited a position, it turned out that the price I sold at was the bottom, and subsequently recovered.  Looks like I can be buy-indicator.  Buy when I sell!

Analysing deeper, I realised this wasn't quite true.  On several other ocassions, I have been correct, exiting as the stock started going sideways, and for months since.  So what's going on here?  It's the traditional historical bias of recency and loss aversion affecting the mental state!  Selective information processing?

What has remained rewarding has been to stick to stocks that had a business I could reasonably understand, good history of dividend payout, a fairly stable business which did not whipsaw rapidly, and companies where insiders were also regularly buying and not cashing out (and/or company buy-back of shares).

I remain commited to a steady investing strategy.

14 January 2011

Overnight millionaires (or not)

Fascinating e-mail this.  Looks like there are millions of people supposedly declared millionaires at the stroke of an e-mail.

----- Original Message -----
Sent: Friday, January 14, 2011 12:03 PM
Subject: Final Notice

> We wish to notify you again that you were listed as a beneficiary to the
> total sum of US$18.5 million Dollars in the intent of the deceased (name
> now withheld since this is our second letter to you).
> We contacted you because you bear the surname identity and therefore can
> present you as the beneficiary to the inheritance since there is no
> written will. Our legal services aim to provide our private clients with a
> complete service. We are happy to prepare Wills, set-up and administer
> Trusts, carry out the Administration of Estates and prepare and administer
> Powers Of Attorney.
> All the papers will be processed in your acceptance. In your acceptance of
> this deal, we request that you kindly forward to us your letter of
> acceptance, your current telephone and fax numbers and a forwarding
> address to enable us file necessary documents at our high court probate
> division for the release of this sum of money in your favour.
> Yours faithfully,
> Anthony Wang

06 January 2011

Blog Talk 2010

It's interesting to observe, after having posted several months on this Blog, just where the audience is from.  Expectedly, while the majority of hits were from Singapore, the number two and three audiences were from US and Russia.  I've a funny feeling that those from Russia are either bots, spam or scam [with apologies to innocent Russians]. As for the audience from Singapore, I figure there are a number of repeat customers who are probably accessing daily.  Anonymous friends I guess. Others are from more esoteric locations.  Amazing.

In terms of topics of interests, it seems that a very significant portion of views were on topics concerning Non-Convertible Preference Shares (NCPS).  That is probably a reflection of market interest in income producing investment.  Safe haven?  I guess I would get a lot more hits if I keep talking about NCPS.  But that's not my aim.  So no, not going to happen.

Sadly, this Blog remains with no public "Followers".  I do look forward to receiving the 1st Follower one day. 

Welcome to 2011!