$$$ KPO and CZM $$$: March 2018

Thursday, March 29, 2018

Tuan Sing

Company Description from SGX StockFacts - Tuan Sing Holdings Limited, an investment holding company, engages in the property development and investment, hotels investment, and industrial services businesses in Singapore, Australia, China, Malaysia, Indonesia, Europe, and other ASEAN countries. Its Property segment develops and invests in residential, commercial, and industrial properties; and provides property management services. The company’s Hotels Investment segment owns two five-star hotels managed by Hyatt International in Melbourne and Perth, Australia.

Tuan Sing has always been on my watchlist and I have finally decided to enter it this week at $0.42. It was first brought to my attention by a friend last year but I did not buy because there were other opportunities or its price has gone up. Since then, UOB has published a buy report and B from ForeverFinancialFreedom (Recent Action - Tuan Sing) has accumulated some too.

What I like about the company is that most of its properties are freehold. Some of the properties are at prime locations such as 18 Robinson and Robinson Point and there are others not captured in the above screenshot. Most importantly, it is currently trading at a steep discount (PB of 0.505).

Tuan Sing Sector Comparison by ShareInvestor

Its NAV based on the latest annual report is $0.83. Assuming if it was to trade at the industry average PB of 0.6594, the price would be around $0.545 (~30% upside from current entry price). What really caught my attention and led me to pull the trigger is the letter to shareholders. One of its agenda for the upcoming AGM is the renewal of the share purchase mandate.

By doing shares buyback and keeping the shares as treasury shares, it reduces the number of issued/outstanding shares. This has an opposite effect as compared to rights/bonus issues (dilution on existing shareholders). The chairman gave 5 reasons/rationale for the share purchase mandate, do take a look if you are interested. If the mandate is approved, its NAV will increase to $0.868 - $0.870 because there are now lesser shares available for the same underlying assets. What a bargain!

Looking at its past 5 years performance, shareholders' funds and NAV has been increasing year on year. Dividend has been kept constant/increasing slowly over the years since 2010 and the yield is around 1.7%.

During Oct 2014, it traded at a high of $0.475 with NAV of $0.683 (PB of 0.695). Over the next few months, it went to as low as $0.27 and has never "recovered" despite increasing NAV and dividend. 

It is certainly not due to its corporate governance as Tuan Sing was ranked 7th out of 606 listed companies in Singapore based on the Governance & Transparency Index (GTI). This is a collaboration between CPA Australia, NUS Business School's Centre for Governance, Institutions, and Organisations (CGIO), and Singapore Institute of Directors (SID) and you can find out more information here.

So why is it trading at such a steep discount? Your guess is as good as mine. Slumpy earnings? Low dividend yield? Tuan Sing explicitly states in its Dividend Policy that "The Company’s priority is to achieve long-term capital growth for the benefit of shareholders. Most of its profits, when made, shall therefore be retained for investment into the future." Even my DBS Multiplier is giving higher interest rate than the dividend yield. lol. Regardless, this is an investment for one with patience :)

Happy long weekend everyone!

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Monday, March 26, 2018

Expenses - February 2018

We have been pretty busy with our wedding preparations. CZM came up with ~20+ tasks to-do list with various deadline assigned to me @_@" Last Friday, we went for our wedding gown/suit selections and CZM looks so pretty in all of them! Whenever she asked for my opinion, I will say very pretty (which is the truth!) and she will say I am not being helpful. Thankfully, her mum was present too. The whole process took about 2-3 hours with CZM trying 8 to 10 gowns and eventually selected 4 gowns (2 for prewedding shoot and 2 for actual day). When it was my turn, it merely took 5-10 minutes with me trying 3 blazers and selecting 3 of them. lol. Back to expenses update...

Current Profile: 28 years old male planning to get married this year and is still living with parents.

KPO Expenses for February 2018

Much lower but pretty high due to CNY, shall elaborate further below. Let me recompute expenses from our mutual fund (KPO Expense Fund), you can read more about how we manage our finances here. Technically, the expenses for February should be $1,799.61 - ($81.20 / 2) = $1,759.01.

I gave Ang Bao (red packets) to my parents and grandparents during CNY as a small token of appreciation. The mutual fund expenses of $81.20 is due to us buying Bengawan Solo CNY goodies for both our families and I attended a colleague wedding this month.

I previously blogged about my promotion and increment - Salary - You Are Your Best Investment and it was only effective from February so I gave my parents more allowance as well.

Collect bonus last month as well and treat my family to a meal at Dian Xiao Er. Love their Roasted Duck with Angelica Herb (Dang Gui).

This is a fixed monthly cost for the basic coverage - term life and hospitalization.

The $69.97 is the installment for Surface Pro which I got about 2 years back.

I would always pay for CZM's cab ride home during night time since I am too lazy to send her home. That was one of our agreement. lol.

My food expenses are exceptionally low because I stay with my parents!

I lost money while playing card games during CNY. I played an ancient game that many might not even know of its existence - Sì Sè Pái (四色牌). It is like a combination of chinese chess and mahjong. The pace of the game is pretty slow (I like) and is very suitable for the elderly/grandparents. The annoying thing is your hands will feel like cramping after a while. lol.

January 2018 - $2,256.43
February 2018 - $1,759.01

Total expenses for 2018: $4,015.44
Average expenses per month for 2018: $2,007.72

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Monday, March 19, 2018

Expenses - January 2018

I have been tracking my expenses without fail (every single cents including the cash in my wallet) since I started working. However, I do not budget because I believe that I am a KPO/thrifty by nature. Having said that, there is still a need to review and ensure that it is true. In addition, having a good grasp of the monthly expenses help in planning for financial freedom/retirement too!

One of the things I always wanted to do is to review my expenses on a monthly basis but it just isn't interesting enough so it became a yearly update:
- 2017 Expenses Review
2017 Q1 Expenses (I tried to do it on a quarterly basis and it failed miserably)
- 2016 Expenses Review

It is obvious I have brushed this aside since I am only doing a January update only now. Why now? I got motivated by 15HWW latest post - 2017 Expenses: Summary And Reflections. He has done it consecutively for 54 months! The plan is to start sharing only my own expenses. Once CZM and I get married and we stay together, the expenses update will be based on 2 of us as a family. I think it will be interesting to look back and see how much our expenses change at different phases of life.

Current Profile: 28 years old male planning to get married this year and is still living with parents.

KPO Expenses for January 2018

$3,302.55 is pretty high due to Vacation and Wedding expenses. However, those are expenses from our mutual fund (KPO Expense Fund), you can read more about how we manage our finances here. Technically, the expenses for January should be $3,302.55 - ($1,286.6 + $805.64) / 2 = $2,256.43.

I blogged about how we use miles to redeem one-way SIA Suites air tickets to the United States, New York previously - Redeeming KrisFlyer Miles for Singapore Airlines Suites = 38.6% Cashback! We finally booked the other way back home - American Airlines Economy from Las Vegas with an 8 hours stopover at Tokyo for $643.30 each. It was definitely much cheaper than we have expected!

We paid a deposit for our actual day photography and bought some random stuff/props for the pre-wedding photoshoot.

That is the monthly allowance I give to my parents.

I bought a PlayStation game - Monster Hunter World for $75.25 and a one year PlayStation network for $44.34 (I got it during a promotion 12 + 3 months). The remaining  $69.97 is the installment for Surface Pro which I got about 2 years back.

This is a fixed monthly cost for the basic coverage - term life and hospitalization.

My food expenses are exceptionally low because I stay with my parents!

There were some promotions by Uber so we took quite a few cab rides.

Public transportation seems a lot lower because of 2 reasons:
1. I am no longer using EZ Link Auto-Reload, Account-Based Ticketing (ABT) is a much better choice as you pay what you use instead of triggering top up where the money is stored in the EZ Link card. The best part is miles can be earned too!
2. Discount for commuters who enter stations before 7.45am on weekdays.

As usual, CZM is the biggest beneficiary followed by my family.

Fell sick and went to see GP. This amount is 100% covered by the company. Technically, this is not a real expense but I decided to include it to keep the expenses tracking more realistic.

January 2018 - $2,256.43

Total expenses for 2018: $2,256.43
Average expenses per month for 2018: $2,256.43

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Thursday, March 15, 2018

StashAway - February 2018

We have decided to invest more money (from $500 to $1,000 monthly) through StashAway and I blogged about it here - Automating Capital Growth Through StashAway.

1. ACCOUNT SUMMARY (as of the last day of the month)

StashAway Account Summary for February 2018

Based on the statement (28 Feb 2018), we had $6.65 profit.

StashAway Asset Summary for February 2018

As of 13 Mar 2018, we have $22.24 profit despite a significant currency impact -$94.02.

SGD time-weighted returns: 1.0%
USD time-weighted returns: 5.2%


StashAway Portfolio Details for February 2018


StashAway Transactions for February 2018

StashAway has improved the time it takes for our money to be invested significantly! I can definitely see/feel the difference.

SGD $990.00 converted to USD $751.69
Exchange Rate: 1.317032287


StashAway Fee Calculations for February 2018

No fee till August 2018 because I recommended more friends. The projected fee (assuming no referral) would be the monthly-average assets SGD $4,108.72 x 0.8% / 365 days * 28 days = $2.52

StashAway VS STI ETF
Since there is no way to compare the performances among the robo-advisors, I came out with a spreadsheet to track our StashAway portfolio performance (General Investing - Risk Level 28) against that of STI ETF which I will be updating on a monthly basis. For simplicity, I shall assume that one can either invest in Nikko STI ETF using POSB Invest-Saver or invest in SPDR STI ETF using SCB Priority Online Trading (no minimum commission). These would be the opportunity costs while we continue to invest in StashAway.

Apart from the absolute P&L, we should also look at the Reward-to-Risk Ratio where risk/volatility is taken into account. For more information, do read StashAway Clarifications - Reward-to-Risk Ratio. StashAway has the highest ratio of 1.25 which is significantly higher than the other 2 STI ETFs (< 0.4). Let me quote Freddy Lim (Co-Founder & Chief Investment Officer of StashAway), "for every dollar of risk taken, StashAway P28 is producing 1.25 times the return".

StashAway Portfolio VS STI ETFs for February 2018

This month commentary: Although the fees for POSB Invest-Saver is 5 times higher, the return is about 9.5 times higher than StashAway! What can I say, StashAway lost miserably! Hahahaha. Will we stop? Of course not, we are still very far away from our goal.

I think there is a need to redo/regenerate the volatility used to compute the Reward-to-Risk Ratio. Do take it with a pinch of salt for now. I have been compiling some data in order to do so :)

Which is the best? Only time will tell :)

This is the link to our spreadsheet - KPO & CZM StashAway Portfolio VS STI ETF which I have also added to Our Portfolio page.

StashAway Referral Link for Our Readers
Here you go: KPO and CZM Referral Link

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Sunday, March 11, 2018

Leverage - A Double-Edged Sword

I briefly mentioned the possibility of using leverage to achieve a higher return in one of our last post - Red Red Market for Chinese New Year! Coincidentally, a week after my post, I began to see Warren Buffett's articles on social media about the danger of it. lol.

Let me list a few if you have not come across them:
Buffett, quoting partner Munger, says there are three ways to go broke: 'liquor, ladies and leverage'
Buffett has one big investing lesson in this year's annual letter: Never borrow money to buy stocks

Look at how creative the titles are, maybe I should rename the article to "KPO decides to use leverage despite Buffett's warning". Hahahaha. Interestingly, for those that are unaware, Warren Buffett uses leverage too - Explaining The Secret Of Warren Buffett's Success: Double Leverage :)

Leverage is dangerous for many reasons. As one of Chinese saying goes, 没那么大的头,就别带那么大的帽子. The literal translation is "if you do not have such a big head, then do not wear such a big hat". In simpler terms, it means do not buy what you cannot afford. Having said that, if used appropriately/efficiently, one will be able to grow wealth at a faster rate. The idea is similar to how companies/corporate use debts to grow their businesses and others taking on bank loans to buy a 2nd property.

Technically, what we are going to do is still very conservative (at least that is what I think, shall elaborate further later). We will be using Standard Chartered Secured Wealth Lending at a fixed rate of 1.6% + 1-month SIBOR (~2.6% and higher). How this works is we will be pledging some of our stocks with them (you can pledge any other assets shown in the image above) and these assets will have their indicative Loan to Value (LTV) which is the amount you can borrow/leverage on. An overdraft account will then be opened and one can easily withdraw from it. One thing to take note of is the margin triggers as shown below.

If the overdraft account is fully utilized (for simplicity, let's use $100,000 as an example), any decrease in market value of the pledge assets (stocks in our case) will result in a decrease in the LTV which would eventually lead to a margin trigger. Moral of the story, do not utilize everything that is in the overdraft account!

At this point in time, you might not be able to understand the power of leverage. Assuming if I were to borrow the money at an interest rate of 2.6% and invest in a stock/REIT giving at least 5% dividend yield, what would be my return?

Example 1: Cost = 2.6%, Dividend = 5% and Capital Gain/Loss = 0%

If your answer is a pathetic 2.4% (5% - 2.6%), you are wrong! The return is actually around 92% (2.4% / 2.6%). This is not intuitive because the capital/cost of investment is actually just the interest/cost of borrowing.

Example 2: Cost = 4.0%, Dividend = 5% and Capital Gain/Loss = 0%

Even if 1-month SIBOR is to increase till ~2.4%, pushing the cost of borrowing to 4%, the return would still be at an impressive 25%. Did you notice how I assumed/kept capital gain/loss at 0% in both illustrations? Will that really be the case?

Example 3: Cost = 2.6%, Dividend = 5% and Capital Gain/Loss = -5%

Let's assume that everything is kept constant, similar to the Example 1 except that we suffered a -5% capital loss. The return would easily become -100%! A -25% capital loss would see it ballooned to -870%! Can your mind handle it?

In the spreadsheet, I assumed 3 different scenarios that will cause the market value/LTV to fall ("High Chance" falls by 25%, "Bad" case falls by 50% and a "Worst" case falls by 75%). The 3 columns show the remaining LTV/credit that is still available before a margin trigger happens. As long as the font is black, margin trigger will never happen. This is important because it will be somewhat alight with our strategy of collecting dividends while ignoring the movement of the share price.

Next, moving on to the rows highlighted in yellow and red. I mentioned previously that due to how aggressive we are in investing, we hardly have enough cash as "war chest". We believe in spending time in the market rather than timing the market. Using leverage/an overdraft account will address this issue of ours. The yellow highlighted row will be the maximum leverage we will be using under normal circumstances. The red highlighted row will be the maximum leverage we will be using when the market crashes. The plan is to use $10,000 now, deploy another $20,000 when the market falls by 25% from its high and deploy a further $25,000 if it falls by 50%. At the end of the day, it is actually a lot more complicated because there are so many variables (SIBOR, share price, dividends, etc.) that will be out of your control.

Why do I still find it conservative? Our "gearing" will be extremely low at ~3% ($10,000 / $300,000) and it can be paid off easily as long as both of us are still working. The margin trigger will never happen because we will never be fully leveraged. This is very different from CFD margins where capital loss can force close your position. Such scenario will never happen to us. There is another blogger - S-REIT Investment Blog who is using leverage with > 30% gearing and his cost of borrowing is slightly higher at 2.88% and 4.38%.

The article would not be complete without KPO sharing his spreadsheet, you can play with the numbers if it ever interests you here. The next step is to pick a stock/REIT!

Disclaimer - KPO and CZM are not recommending the use of leverage. We are merely blogging down some of our thoughts/ideas so that we can review them few years down the road to see how stupid/smart we were.

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Saturday, March 3, 2018

Portfolio Update - February 2018

Our portfolio decrease by 0.95% to $314,586 - $7,789.56 of capital injection and $10,810.46 of  capital reduction.

KPO and CZM Portfolio Bar Graph for February 2018

The month ended better than expected, it was definitely much worst before CNY - Red Red Market for Chinese New Year!

- None

No need to panic sell!

- Sheng Siong (2,000 units) @ $0.925
- STI ETF (1,000 units) @ $3.40
- Lion-Philip S-REIT ETF (3,000 units) @ $1.016
- First REIT (109 units) @ $1.3656

Sheng Siong has been one of CZM all-time favorite stock as it is defensive in nature. Regardless of how the economy is doing, we still need food and daily necessities to survive. We last bought Sheng Siong in August 2017 and that was around the time Amazon entered our market. It is evident that the increased competition online did not have much of an impact in Sheng Siong FY 2017 result with EPS increasing by 11.3%! The older generations are still more resistant towards getting grocery online (they think it is not fresh). Having said that, the lack of an online presence is a concern as we have seen how technology has disrupted what used to be a solid cash business such as SPH and Comfort Delgro. Let's see how it goes.

We bought some way overdue STI ETF during the dip/correction. The last time we bought it was in September 2017 @ $3.27 and before that was March 2017 @ $3.14. As you can see, we are not buying it every quarter despite it being one of our goals. It is difficult to DCA without a proper system because when you see the price going higher, you will not want to pay more for the same stuff. You will wait and see/hope that the price drops slightly...

The Singapore Budget 2018 was announced this month and while everyone is talking about the increase in GST, we prefer to talk about the tax transparency that was extended to REIT ETF - New Singapore Budget, New REIT Strategy! With that, we will be making another attempt to do DCA in Lion-Philip S-REIT ETF on a monthly basis.

First REIT had a DRIP (Dividend Re-Investment Plan) where investors can choose to take the cash dividends or take the shares at a discounted rate of $1.3656 (not so much of a discount if we look at it now). The cons of participating in DRIP is that you will almost always end up with odd lots but one can reinvest the dividends efficiently without commission.

February is one of my favorite month! The total dividends collected this month is $1,386.78. The breakdown is as follows:

Company Symbol ExDate Shares Total
Far East Hospitality Trust Q5T 22-Feb-18 10,156 $98.51
Singapore Post Ltd S08 9-Feb-18 7,000 $35.00
Thai Beverage Public Co Ltd Y92 8-Feb-18 6,000 $106.29
OUE Commercial Real Estate Investment Trust TS0U 6-Feb-18 8,000 $183.20
Starhill Global Real Estate Investment Trust P40U 2-Feb-18 12,000 $140.40
Ascott Residence Trust A68U 1-Feb-18 7,600 $283.48
SPDR STI ETF Units ES3 1-Feb-18 10,000 $530.00

Total dividends collected for 2018: $2,019.83
Average dividends per month for 2018: $1,009.92


KPO and CZM StashAway Asset Summary for February 2018

Capital: $5,000
Current: $4,968.91 (IRR: -1.4%)

The UI is slightly misleading, showing green when it is losing money. lol.

Health KPO Needs to Lose Weight
Date: 2018-03-02
Weight: 72.0 kg (The effect of CNY... Put on weight for the first time.)

BMI: 24.0

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