Saturday, December 30, 2017

Things I Look Forward To In 2018

With just over a day before the new year, I think it's about time to sit back and self reflect about what are some of the things that I expect in the new year 2018.

I wanted to originally do a target to achieve in the new year but quickly changed it afterwards because not everything is a target. Some are events that will just happen with the flow of time.

1.) Achieve a portfolio target of 10% returns

Since this is a finance blog, I think it is still something which I must put in mind at the back of my envelope.

I'm still looking to design for a portfolio that can achieve a long term portfolio of about 10% returns. I don't want to really stretch the returns to anything higher by taking unnecessary risks so the strategy is to go for lower beta returns but heavier on capital preservation.

I'm somewhat gingerly confident the current companies in my portfolio can deliver that for me.

2.) Achieve a savings rate of 20%

This has been kept the same for about 3 years in a row now and I'm not keen to change on this aspect and gungho the increase.

I am comfortable with keeping the savings rate at about 20% or $20k capital injection, whichever is higher, and then just allocate the rest of the expenses into building more experiences and nurturing the kids empowerment.

3.) Celebrating 4 years of parenthood

My elder son, Big O, turns 4 next year while the younger one, Small O, turns 1.

It has been a life full of experience all these years with the ups and downs and I would attribute it to another separate posts sometime later.

We have started to send Big O for some kind of enrichment which we think would benefit him in terms of his social skills.

We are also starting to send our younger son to a kindermusik class from next year just to get him exposed to different kinds of music instruments, play and stimulate his right brain before the routine school activity tries to take over the left brain.

4.) Experience the world outside

We belong to the miles camp when it comes to credit card and we typically accumulate around 200,000 miles in a year which also means we are able to cover our long trip travel as a family assuming we take 2 trips a year.

On the shorter trip, we typically try to save on the costs by taking budget airlines.

Already, we will be going for a half month trip in March later across Taiwan and we have plans later in the year to slow travel past Vietnam. When the kids get older, we'll spend our time exploring the Eastern and Western Europe in a much further away trip from home.

5.) Less movies, Less Writing, More Reading

I'm a person that is more visual which is why I have been enjoying movies more than reading.

Throughout the years, I have also attributed plenty of time in writing the blog so I may take some time off these activities to spend more in reading. I also think that slow reading stimulates my mind better and train my patience, which has not been a good strength so far.

6.) Learn a new language, meditate, and Yoga

I've always wanted to learn Spanish and it will be a matter of when not if I will pick this language up one day. I just don't know it yet if I will take it up in 2018, I'll have to figure out the time resources.

I'm also aiming to either pick up meditation or Yoga just to practice on patience and calming the mind. If anyone is interested, I'm good for partnership.

Final Thoughts

This is all events of what I am waiting for it to unfold in the new year and it is nothing ambitious yet really achievable things to look forward to.

I don't know if I'm at a stage where I tend to oversee things much easier or in a more leisurely manner because everything tends to fall in place quite nicely and I appreciate the things that have gone well so far for me and I don't take them for granted.

I hope every readers would have the same good year in 2018.

Thanks for reading.
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Tuesday, December 19, 2017

2017 XIRR & Overall Performance

First of all, apologies for the lack of recent posting as I had just returned from a 2 week work trip overseas followed by a week of holiday thereafter back to back.

As we are winding down this year, I would like to take some time to do a self reflection review of the performance for this year.

While we still have a few trading days to end the year, I really want to summarize and close for this year so that I can already start preparing for the new year ahead, which promises to be another exciting year.

I took some feedbacks from readers when I wrote about the 2016 performance (Link Here) last year and I try to provide as much as I can.

I don't keep a lot of tracking myself personally because most of the information are stored in my personal profile at stockscafe so I'm dependent for most of the parts. 

This is going to be a rather long post, so please bear with me.

2017 XIRR

This has been a rampant year of the bull and we see most indices worldwide goes for high double digit returns which have increased investor's networth value quite considerably.

While the Dow and S&P have returned about 23% this year, our local STI index has also returned considerably well at about 21.81% this year. What this means is that if you are just holding the STI ETF in your portfolio, your returns should track the performance of the STI, which is an incredible good performance and one to be proud of.

Unfortunately, I am one of those who did not perform better than the market as I trailed the index. My returns for this year is still a respectable 19.67% based on the last check of stockscafe as I wrote this post. I reckon the last few trading days is not going to be a lot of adjustment.

In the above tracking from stockscafe,  I also do not include the amount of cash held for investment. But if I were to take them into account by using the weighted average methodology on the percentage of cash I hold across the months, the returns for 2017 would drop to 17.45%.

Personally, I know most of my circle of friends who had done incredibly well this year so a lot of credit has to be given to them and a good job well done. If you are one of those who did not perform so well compared to the index, I just want you to know I am part of that category and we'll just have to work harder.

Fortunately, I am pretty contented and I do not mind trailing the market for as long as I am on track to meet my personal goals.

On an annual compounded returns since I started investing in 2011, my average annual return is about 17.81%. Again, this does not include the cash component portion and if it were to be included, the returns would further drop. But I am lazy to track all of that now.

On the other hand, the performance of STI since 2011 until today has been about 4.9%. So it's really not a bad thing to be just holding the index and staying vested for a long period of time.

Top 10 Profits Based on % Gains (2017)

This will be the very first time I'm analyzing it this way, which is going a little deeper into what actually contributed to my performance for this year.

As you can see from the table, I actually made some pretty crazy returns from a percentage gain point of view.

Sabana investment in the earlier year (Link Here) came out top of the notch with 53.2% return after a short holding period of 3 months. 

Micro-Mechanics was not too bad coming in second at 48.3%, but I'd be kicking in my head knowing that I could have made 100+% returns have I kept it for a while longer. This year was the year of the semi-conductor and I am kicking myself for that miss opportunity which I should have had with MM. This was a good lesson of keeping the winner in an opportune time when it matters.

Cosco, Jadason, UMS and LMIRT all contributed well too on this aspect.

The point I wanted to make about showing this is that usually a high percentage gain does not necessarily translate into a high absolute gain. At times, they are often being used for content marketing,  boasting rights and misleading the public. If you see clearly from the gains I've made on the high percentage gain, they are all small absolute amount at best and contributed nothing significant to the overall portfolio.

Most of the gains are also realized with shorter time frame, which means I locked it in as soon as possible. This could be for various reasons.

There are also a few people who've asked me if I am invested in cryptocurrency and the answer to that is I do not. 

Top 10 Profits Based on Absolute Gains (2017)

Other than analyzing it from percentage point of view,  I also try to look at it from an absolute gain angle.

This is the part that actually matters more to the portfolio.

The top 10 absolute gains are the stocks that "moves" my networth and it is vital to the portfolio. 

This year,  most of my absolute gains are coming from FLT,  Guocoland,  CDLHT and Ireit.  These top 4 contributed almost 80% of the gains.

Having a bull year really helps to push the market and hence valuation higher.

Top 10 Loss based on % Loss (2017)

I'm going to be transparent with this because I believe there's always something which I could learnt about from this exercise.

Like almost anything in life, I'm going to have the good and bad things so it is now time to detail on the red side.

Comfortdelgro took the number one position in unrealized losses so far and it has been the biggest drag to the portfolio for this year.

It started with me taking a convincing look that the market was pricing it wrongly when it first dropped from $3+ to $2.40+ and that's when I started to believe it looks like a value steal. Obviously,  things start to turn for the worst and have gone south further. If there was anything I could learnt from this is that I didn't act fast enough to cut first and relook at the whole thesis again. Anyway, I feel like the valuation is rather fairly valued at this point, which is why I'm still keeping it as a keep for now.

I managed to do that with Straco,  FEO, Sabana, Katrina and ISO Team and emerge much better out of it.  The first 3 ended up breakeven while the latter they still ended up in a loss,  the amount is very immaterial and I could have made another re-entry once I have established enough justification for a re-entry.

The other unrealized position loss is M1, which I think is still bearable. 

Ho bee is another positing which I am currently sitting in an unrealized losses but am looking to add more to the position.

Top 10 Loss based on Absolute Loss (2017)

In terms of absolute loss, my concentrated strategy means that I usually win big and lost big and I need to ensure the latter is not more than the winning.

Comfortdelgro, M1 and Hobee remain my largest loss to date and they are still in my portfolio list as I am expecting valuation to bottom out.

Networth Portfolio (2011 to 2017)

I do not grow my wealth the way a fund manager grows his funds.

I went through the stage where I am single, a fresh grad looking out for jobs, then getting married, having a kid one after another and then pursuing my master degree and so on. 

What this means is I do experience a volatility of income and it becomes clear to me that there are 3 levers in this life which I would contributed it most important in my life.

Much of the dependencies has to be accounted for when I started building up my career years ago when this becomes a lever for me to accelerate the path to a financial independence. What this means is the greater I can compound and leverage on this lever, the faster I can generate the capital and put it to good use. 

The other lever has got to do with the building up of habit for savings.

While it may seems pretty obvious that we need to spend less than what you earn, it is actually not that easy until we get that habit designed in our mind and body. You'd be pretty surprised to find that there are many people who spent most of their income and left with no savings at the end of the day.

The final lever is our ability to compound the money through investing. This is done through building up years of competencies in the area of interest where we would excel most and the experience accumulated over the years would count over time.

All things equal, crazy amount of capital + high savings rate + great compounding = financial stability

I believe for as long as we excel in 2 out of the 3 levers, we can be successful.

There are different bloggers who accounted for different ways to compute their networth. My good friend, LP from Bullythebear shares his not too long ago here.

For me, it includes pretty much my equity portion and cash for investment.

I do not include my emergency funds, home equity loans, CPF, gold, other currencies, insurance and 1 month of working capital use. I also excluded my wife and children's portion in the investment as I wanted to track them separately.

I've been using this way of computing my networth since I started this blog, so I'm more comfortable with this.

As much as I had trailed the market returns for this year,  I still think 2017 was a successful year for me as not only my networth continue to increase,  but this comes at the back of higher expenses this year (second kid,  hospital fees and school tuition fees onboard).

I'd like to see that continuing into 2018 so the next post would probably see me gearing up for some of the goals and achievement I'd like to achieve in 2018.

Finally,  I'd like to wish everyone a great Xmas to all readers as we began winding down towards the new year. 

How has your 2017 returns been so far?

Thanks for reading.
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Friday, December 8, 2017

"Dec 17" - SG Transactions & Portfolio Update"

No. of Shares
Market Price (SGD)
Total Value (SGD) based on market price
Allocation %
Fraser Logistic Trust
Ho Bee Land
ST Engineering


We are finally at our final month of the year.

I also did some window dressing to the portfolio going into 2018, knowing that I will be busy in the month of Dec. In fact, I was just back from work traveling this week and will be flying again for holiday next week, so I think this will be my last portfolio update for the year before I round it up with my overall xirr portfolio return updates after I come back from my holiday.

From portfolio movement, you can see that I trimmed away some of the companies such as FEO, Straco and Sabana Reit out of the portfolio after their recent financial results which does not meet my expectations.

For Straco, the untimely cut in their visitors arrival due to limit on their Xiamen Aquarium means that growth expectations will need to be reconsidered again. There are still expectations about Straco M&A some time in the future but I decide to allocate the funds elsewhere.

For Sabana, their recent strategic announcement news meant that I would need to reconsider the thesis, especially nos that they are restructuring the organization with new management and faces so I have also decided to allocate my funds elsewhere. 

I added more Ho Bee Land into the portfolio as I believe this is still a nice sector play which has not been fully appreciated by the market yet. Going into the commercial sector up cycle, I think Ho Bee will benefit massively for the next few years, and with more cash in their hands, I think another acquisition in the UK is on the table. 

I also added ST Engineering after they had secured a record contract which would almost secure an EPS for this year and next of about 16 cents. Given their pattern of paying out almost 90%, a 15 cents dividend would translate into near 4.7% on this company, which I think is decent enough for my grade equity bonds. 

I also added more Comfortdelgro after they plunged into recent 52 weeks low. This is a company which I am still comfortable with its value and proposition so it's a slow add for me as they get cheaper.

There was news about its strategic acquisition with Uber for the LCR stake on their rental business. Collaboration like this usually benefits the incumbent party more but without further detailed information, it will be difficult to distill if this is a good collaboration. On the surface however, it appears that it will result in more bookings for the Comfort driver since users are now able to book using Uberapps which means more revenues for drivers.

The portfolio ended the year with $613,516 which is down from the previous month. I've been struggling to keep up with the trend since the beginning of the second half of this year and the stagnant movement of the portfolio has mostly sum up the whole situation. 

In terms of cashflow,  I was able to add more to my position as I received my AWS this month and savings rate continues to be strong as I continued to allocate them into some companies that I believe in.

In my next update,  I will break down my overall 2017 xirr performance in detail with specific breakdown of the profits and losses in the company that I own and the lessons that I've learnt out of it from this year.

Happy holidays!  

Thanks for reading.
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Monday, December 4, 2017

Bringing Accountancy To Life

I know that we are all finance geeks when it comes to life hence it may be easier to look at it the philosophical way when it comes to it.

Life on the other hand is a bit more fragile and often people questions the existence of decision that has an impact in our lives.

This is the Balance Sheet of Your Life.

The day you were born is the day you IPO-ed yourself to the public. While you may own the majority of ownership in yourself, often we are shaped by how the public would view and vote for us. There would be decisions that you would have to depend on others to make for you and you just have to accept it regardless of the decision.

The day you die is the day you get delisted from the public offering of the stock market. The goal here is to accumulate ownership (experience) from the day you were born to the day you leave the earth. There are ample time to do that, so make the buyback counts.

Your ideas are considered an asset while your bad habits will become your liabilities. What goes in is a debit to your assets and what comes out is a credit to your liabilities. Your character will shape out over time due to experiences accumulated, so over time it is clear if you become an asset cow company or one with net debts when you die.

You will get plenty of noise everyday in your life. These are the temptations that will increase your liabilities over time if they are handled improperly. But by now I assume you already know that.

Your happiness and sorrows are your Profit and Loss. They tend to be more volatile than your balance sheet as our emotions undergoes a steer of emotions everyday and are tested vigorously each time they meet a situation. Over time, as you accumulate more happiness, part of it will be retained and go back to your assets, ensuring you live a "rich" life while you are still alive.

Your knowledge is an investment to your assets. They build up over time and compound to such levels that it will raise a bar level to your own game.

Love is your dividend while children are your bonus-issue. They do not change the fundamental and foundation of your life but they have a tremendous impact to strengthen it.

Your age is your depreciation. Time waits for no one regardless you are working, sleeping, accumulating experience or just drunk wasted in the back alley of your bar. Everyone gets depreciated on a straight line basis across a new standard GAAP of between 70-90 years. No exception.

Every year, it is important that you engage an auditor, preferably the big 4 auditor firm, to look at your financial statement. They are slightly more expensive but they can give you an open and critical feedback on how you can improve. These are your friends and families.

If you are a little frugal in nature and want to reduce these expenses, the new IFRS standard allows that you be your own internal auditor and we trust that you would be compliant to the standard through proper self reflection.

You are your own management to your life.

You have control on how you would like to lead or shape them, and to go beyond to influence the people around you.

A good company gets recognized over time from the public and the share price would eventually follows the performance.

A good life gives you the edge.

Now, start building up your balance sheet the proper way.

Thanks for reading.
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Friday, November 24, 2017

Sabana Reit - Update On Strategic Review

I wrote on Sabana just a couple of days ago (Link Here) and wanted to update on their latest announcement.

The update on the strategic review is finally out on Friday morning.

This explains why the share price has been sliding down in the past couple of weeks since they announced their Q3 results, perhaps there are insiders who already knew about the news.

I wanted to summarize the update in a nutshell to give us fellow investors some train of thoughts on what we need to do with this.

1.) Talks with ESR Reits have ended.

This is probably the most concerning news for investors if you are buying on the thesis of a successful review.

We'll probably never know the real reason behind this but it appears neither ESR nor Vibrant Group can reach out to a conclusion on this.

It'll remain to be seen if ESR will reduce its substantial stake in Sabana after this outcome.

2.) Selective Divestment of Properties

The management decides to go via this route of selective divestment of assets that they have.

This route is obviously a lot slower and more difficult, but they'd be able to be selective on the non-performing asset that they want to divest.

After a successful divestment earlier in the year for 218 Pandan Loop for 13.8% premium to the book value of the property, the company now has 20 properties under their radar.

Already, they have identified 6 Woodland Loop as their next selected divestment of choice as they have moved this into the short term property held for divestment in their balance sheet. This property amounted to $12.2m, which would translate into 1.1 cents which would either go into the working capital, repayment of loans, or returned back to the shareholders.

Given that they used the earlier divestment of 218 Pandan Loop to reduce much of their gearing, I suspect they may return the proceeds back to shareholders for this one.

3.) Expiring Master Lease Extended

They have managed to successfully renewed the expiring master leases for the 3 Sponsor linked properties (51 Penjuru, 33&35 Penjuru and 18 Gul Drive) on a one year term for an aggregate rental of about $8.8m. This is about what they are getting in terms of the rentals right now.

4.) Step Up Search for new Management and Appoint New ID

With the unsuccessful talks with ESR, this means it is business back to usual and they will need to search for a new CEO after Kevin will leave at the end of this year.

They have also appointed more Independent Directors to replace the old few who has resigned and it seems after the history saga, we may see a clean state of new board members in the company for 2018.

Final Thought

I think given that the news is out public, we may potentially see an overhang in the share price in the short term.

There are obviously people like me who buys into this on the thesis of hoping the strategic review that will work out in favor and there are another group of people who are buying this for dividend purpose.

I think valuation of the company at 0.76x P/BV and a near 8% dividend yield is about rather fair for such industrial sectors. The key for this really if you are holding for longer term is to hope for the new management to rebuild the trust of the public back and increase the value of the shareholders by doing their job well. It's not all done and dusted of course and we need to give them time to prove their worth over time. So this can be a successful investment pending this outcome.

To divest or keep, it depends on your objective ultimately on why you are buying this company in the first place.

Thanks for reading.

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Wednesday, November 22, 2017

Recent Action - Sabana Reit

The recent downtrend of the company puts me into the buying radar zone and I managed to purchase 230,000 shares of the company today at a share price of $0.415.

This purchase immediately made this into my top 3 holdings.

You might have recalled that earlier in the year I managed to purchase this at a lower discount at 34 cents (Link Here) when there is still all the ongoing saga about the revolt of the management, and since then a lot of things have happened.

This is a special play situation.

My main thesis of buying into this stems from the fact that E-Shang Redwood (ESR) has now emerged into a substantial shareholder with more than 5% stake.

And of course I think valuation came to an attractive level too.

Do note that ESR currently holds 80% stake in the formerly known Cambridge Industrial Trust and Warburg (largest shareholder of ESR) has a plan to grow and consolidate their industrial properties into one, most notable injection into the currently known ESR Reit.

While the strategic review is still ongoing and we are kept waiting for the outcome, I feel the recent downtrend of the share price presents a solid opportunity for investors to enter.

First, the current price represents a 33% discount to the nav of 56 cents (based on latest quarterly results). Given that ESR is a substantial shareholder for both Sabana and ESR Reit, the buyout would be considered a related party transactions. In order for that to take place under the arm's length agreement which is usually a lot more stringent, the buyout would have to minimally be offered at least to the nav price. That to me tilts the rewards highly in the favor of those who are vested at this valuation.

If there are anything to add, the last divestment of the properties they made at 218 Pandan Loop was transacted at 13.8% higher than the book value of the properties. 

Second, the fact that ESR holds a substantial shareholder stake in Sabana is also a strategic move for the fact that they are able to call for management to convene an EGM. If they are not a substantial shareholder, it would be a lot harder for them to do that. There is a purpose for them to become a substantial shareholder with an agenda.

Third, there are many similarities in the shareholder profile with Sabana and ESR, with Tong JinQuan being one of those who holds both substantial stake. That makes it easier for ESR to convince key stakeholders for a buyout offer.

Fourth, from a technical point of view, we see a much stronger support based on $0.415 while volume sell today is winding down. The next best support would have been at 34 cents (the price I originally bought).

Fifth, the gearing of the company has since reduced from the earlier of 42% to the current of 36%, which means in terms of gearing debtroom, they are able to take more loan to fund the next property purchase, which I deemed unlikely at this point because I feel they would sell the assets.

Sixth, the current share price is trading at an 8% yield. What this means is for as long as the strategic review is not concluded, we would be sitting with a 8% yield while waiting.

Seventh, while 4 of the master leases are expiring this year, 3 of them are coming from sponsor related, so the risk is virtually much lower.

Point 5 to 7 are not something I am after too much at this point so it's a relatively consolation factor for me.

Thanks for reading.

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Sunday, November 19, 2017

Factor Based Investing Course (by Dr. Wealth) - Review

I had the opportunity to attend Dr. Wealth 2.5 days course which spans across the weekend thanks to the invitation by the team.

This was my second time attending their courses and it is a very much expanded and improvised course than the first one I attended, which touches only on the CNAV (Conservative Net Asset Value) concept. You may want to read my earlier review on the course here.

I'll try to cover as much as I can without detailing too much of what they teach because I believe if you want to become a successful investor, you've got to put an effort to it, not a spoonfeeding and that's what this course is all about.

The course is divided into 3 broad strategies in general, namely the CNAV concept, the GPAD concept and lastly the momentum concept.

Day 1

On day 1, we were taught on how to value a company using a CNAV concept.

This is basically using book value as a core to identify companies who has assets and are trading lower than their book value, which implies as undervalued.

What is different with this CNAV concept is that they teach you on how to pick the good and better assets from the other assets. For example, cash is a better asset than receivables and hence have to be valued a bit more differently because receivables can turn into bad debt in a likely scenario.

Once the list of companies has passed the CNAV criteria, they are being further checked for their other factors, which they named it in house as their POF score. The POF score is basically standing for the Profitability, Operating Efficiency Cashflow and Financial Leverage. The idea of doing this is to ensure that we are buying a legitimate company who is not making losses after losses which are burning cash. If they do, that'll only be a value trap, not a value buy.

The course teaches the students a clear signal of when to enter (buy) and to exit (sell). So they've made it into a system that's easy for the students to follow.

Personally, I like the strategy of the CNAV concept and I have used a bit of the same strategy in general to mostly my developer companies, with the caveat difference that I am looking for a bit of extra catalyst or events driven news before I enter. One such example is Ho Bee Land which I am currently vested.

For the exit strategy, it is always more of an art than science.

Personally, I have different strategy myself but so does everyone and I understand how difficult it can be to design a system where it signals you when to exactly sell at an optimum price.

Day 2

On day 2, we were taught a new strategy in the form of GPAD.

I do not want to delve too much into the detail but this is rather new to me and I've hardly heard about combining the two ratios together between Gross Profit and Dividend. 

Apparently, this was backed by a research study by Novy Marx who's done a quantitative research based on past data in search for ratios which would synergized into a value metrics.

There are several reasons on why the Gross Profit was used instead and they are not much different from what I had written in the past about Bruce Greenwald's EPV (Earnings Power Valuation) method which adds back certain "good" expenses such as marketing and R&D because it takes into account future benefits.

Alvin further teaches the class on how to read companies that are able to sustain their dividend through the free cash flow and payout ratio which adds more value in the form of education.

While it is great to know, I'm just not sure how much these students can absorb because it's a bit more abstract and relative, not as direct as the CNAV concept taught on the first day. I get the feel that the students are taking the 2nd day a lot tougher than the first.

The class also played an investing game which touches on real life example of companies using the CNAV and GPAD concept, which I think everyone enjoyed it.

Day 3

While I'm not able to join the third day due to other appointments, I understand that there is another form of strategy in the momentum concept.

I'm still not sure why they introduce the momentum concept after a rather heavy two strategies which  think it's sufficient for the students to succeed. The momentum concept is relatively short term and hinges much on momentum flow hot money is flowing. In my opinion, this can be seen a bit more speculative rather than investing, and I personally would avoid this altogether if I know nuts about it.

What I like is they have also touched on risk management, portfolio allocation as well on how to mitigate risk using stop loss and orders.

Final Thoughts

I think overall it's a very fruitful 2.5 days if you would like to learn about the different strategies and what value investing is all about.

Personally, I learned a great deal of information myself which would surely be helpful in my future assessment of the companies I prospect.

The class is also conducted in a fun way as Alvin and Louis were both expert in their field of studies and have many real life stories to share. For one, I particularly liked the part where Alvin touches on the vertical and horizontal expansion, using simple example like chicken rice stall where everyone would understand.

If you'd like to explore, you may want to attend their free preview course which you can find over here and signed up in the eventbrite link.

They are free to attend for the preview upon which you can then decide if you'd like to sign up for their extensive 2.5 days course.

Thanks for reading.

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Saturday, November 18, 2017

IFRS 16 - New Leasing Standard

If you are working in an accounting department, you should already be aware that this is one of the next major changes on the new leasing standard that will kick into effect from January 2019. While we still have more than a year to go, many companies are already preparing to shift into the new leasing standard as they start to look into their leasing activities from 2018 onwards to meet the criteria later on. 

The End of the Operating Lease

Under the existing rules, lessees generally account for lease transactions either as an off-balance sheet operating lease or as on balance sheet finance leases. 

The new standard requires the lessees to recognize nearly all leases on the balance sheet in their PPE and then capitalize this by depreciating the items for the remaining useful lives of the assets. 

Who Will Be Affected? 

Many companies uses rentals for their offices or machines as well leasing for access to some machinery or software assets so industries across will be impacted by the new standard. 

Currently, many leases contracts embedded both the operating lease and non-lease (e.g maintenance) components and they do not separate them. Under the new leases standard, it is imperative and mandatory that they separate between the two because the leases will have to be recognized on the balance sheet. 

For example, telco companies that are leasing network equipment or fibre optic cables need to unbundle elements that are between lease, service and maintenance. The discussion will then take place on whether the capacity it provides can outweigh the revenue that they can earn (also subject to the new revenue recognition standard in 2018). 

For the real estate industries, the discussion will then take place on whether lessees are going for shorter term leases rather than longer term and the way they’d like to split between the rentals and the services (inclusive of furniture and fittings). 

What Will Be Exempted?

There are 2 scenarios where the lessees may be exempted from the new IFRS requirement. 

The first is a short lease term that are lower than 12 months. In this case, the lessee is able to recognize the lease payment straight in the PnL over the lease term without needing to touch the balance sheet. 

The second is for lessees that leases for low value assets that are less than $5k. This usually involves components such as laptops, tablets and parts of the assets. 

What This Means In Terms of Financial Impact?

If you owns a company that is impacted by these changes, you should notice a heads up on this. 

The new standard will gross up balance sheets and impact pnl and cashflow. 

Rent expenses will be replaced by depreciation expense in the income statement which results in a front-loaded lease expense. This should translates into lower earnings especially if the depreciation is taken at an accelerated rate. EBITDA would also be virtually higher but NOPAT lower. Operating cashflow should also be higher, since depreciation is a non-cash items but this will be offset with the payment made on the investing cashflow. Balance sheet should also swell, which means gearing may go up.

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Tuesday, November 14, 2017

Dividend Income Updates - Q4 FY2017

With earnings completed this quarter, I can finally tabulate my dividend income for the 4th quarter and also consolidate them for the full year.

I have been reliant on much of my dividend income over the years as it gives about a state of stability and predictability in terms of the cashflow that is much needed in my space so far.

I continue to invest in an arsenal champion of profitable companies who would then declared part of their profits as dividends to reward the shareholders. Having a stake in these companies mean having part of the pie when these companies reap good returns from their business.

I think this year has been a great year for the most part of investors.

Not only do they get to receive dividend income from the businesses they own, but also reap the benefits in terms of better striving business and higher profits, hence translating into higher share price for the shareholders.

Reits in particular have also been very resilient this year and will continue to be for the longer term.

If you are following my portfolio, you'd know that I don't hold a lot of companies on hand. Thus, the 4th quarter is a rather barren month in terms of dividend.

The only company that declares dividend in the 4th quarter is FLT, which pays out sometime in Dec later this year.

CountersAmount ($)Payable Date
FLT1,344.00 19-Dec-17

This brings the reporting for the dividend income for the year comes to an end.

The full year dividend income comes to $26,292, which to me is largely disappointing because I have a goal of achieving a dividend income of above $32,000 for the year. But again, that's because I killed much of my golden goose ahead and have them allocated elsewhere. So perhaps I should see that as a level playing field.

I'll try again next year to see if I can improve anywhere from here.

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Sunday, November 12, 2017

"Nov 17" - SG Transactions & Portfolio Update"

No. of Shares
Market Price (SGD)
Total Value (SGD) based on market price
Allocation %
Fraser Logistic Trust
Far East Orchard
Ho Bee Land
Total SGD

We are closing down on the final 2 months of the year and it seems like the market is doing good for everyone, except me :D

As such, it is difficult to keep up with the returns of the market especially if your portfolio does not include the bullish industries alike such as banks, properties, oil and gas or bitcoins.

For this month updates, I initiated a position for Far East Orchard for 20,000 shares at $1.51. I thought it was a decent position as we wait for the company to go back to a net cash position. I last wrote my thoughts on the latest results here. I'm just going to wait for a few development to play out before deciding what to do next.

I also re-initiated a small position in Ho Bee Land for 10,000 shares at $2.51 which I blogged here. The company announced a solid Q3 results which I reviewed here and I am still deciding if I should add to my position in the company.

I also divested my position in First Reit at $1.395 after it hits a high before it went xd a few weeks ago. I just don't feel too comfortable with the current valuation of Reits in general at the moment and there are better options out there so this is more an allocation choice to divest.

I also bought a new position in Straco Corporation for 50,000 shares which I blogged over here. Straco is scheduled to report its results on the 14th Nov so will be one which I am looking forward.

I had also taken a small position in Cosco for 25,000 shares at $0.33 for a speculative position after it announced that it will take Cogent private. Given the recent industries bullishness lead by YZJ and the strong economy bounce back, I took the gamble to test my hypothesis.

Net Worth Portfolio

The portfolio has increased from the previous month of $613,980 to $615,318 this month (+0.2%  month on month; +34.8% year on year).

I guess the from the graph itself it should sum up my whole performance in the second half of the year. After a strong performance in the first half, the second half of the year proves to be extremely disappointing as it failed to follow the general bullishness of the market and is lagging the general market by a long mile. The YTD performance is about on par with the STI index so far, if there's any consolation at all.

I don't think we'll see any surprises as we close the year so it'll be business as usual.

I'll report the year performance once I have concluded them next month.

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