tag:blogger.com,1999:blog-8488305785096287326.post519512523535533568..comments2024-03-28T15:28:28.391+08:00Comments on A Young Investor's Diary: SPH REIT - A Lesson on Financial Engineering 101sgyounginvestorhttp://www.blogger.com/profile/02036598665471392859noreply@blogger.comBlogger24125tag:blogger.com,1999:blog-8488305785096287326.post-25009764819960487292014-04-15T12:01:47.922+08:002014-04-15T12:01:47.922+08:00Hi, firstly congratulations on the track record an...Hi, firstly congratulations on the track record and I really like the work you are doing, you have a good analytical process and look forward to reading more of your posts.<br />Just a minor comment on your statement about the difference in value between a freehold vs 99yr property. It may seem ridiculous that the premium is so small but if you actually discount the future NPI into perpetuity (freehold) vs 99yrs, you would realize the difference is really about that amount. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8488305785096287326.post-26061002745897829402014-01-03T10:10:27.261+08:002014-01-03T10:10:27.261+08:00Check the latest postCheck the latest postsgyounginvestorhttps://www.blogger.com/profile/02036598665471392859noreply@blogger.comtag:blogger.com,1999:blog-8488305785096287326.post-49026397799076838012013-12-24T01:13:56.383+08:002013-12-24T01:13:56.383+08:00Hi there just browse through your portfolio , any ...Hi there just browse through your portfolio , any reasons why you sell silverlake axis and hour glass ? Just curious as i am vested in silverlake and hourglass under watchlist.<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8488305785096287326.post-16906260942580204972013-12-15T20:30:45.938+08:002013-12-15T20:30:45.938+08:00The main purpose of REITs is to create a platform ...The main purpose of REITs is to create a platform for developer and asset owner to unlock the market value of their assets and recycle their capital. In addition, they also stand to gain from the lucrative recurring management fee which requires low capital outlay. These assets produce stable income which caters to a specific group of people that are looking for stable income and a lower rate of return. However, it differs from bond in that the unitholders stand to benefit from any increase in net property income coming from rental reversion or AEI.<br /><br />That is not to say that REITs are unable to add value. If you have observed the retail malls, those owned by REITs are likely to undergo AEI and offers a better shopping experience to those not under REITs. Developers are more concerned with the higher margin development project than to be concerned with enhancing the current investment properties. CMT bought iluma, enhanced it and Bugis + offers a much better shopping experience and has been able to attract stronger shopper traffic.<br /><br />The main problem with REITs often lies with the incentive of the management and the stance of the sponsor or major shareholder. Some are perpetually keen on acquisition deals and often acquire assets that are not truly yield accretive. To some sponsor, REITs is an ATM where there are able to push through deals regardless of the opposition of the unitholders. Many have also learnt the lesson from GFC 2008 on the importance of not being over-leveraged and to have a diverse source of funding and well-spread debt maturity profile. Sadly, some have still not learnt the lessons.<br /><br />I will say whether REITs can create values really depends on the management team involved. The track record often can show who are the better ones and the market seems to have been rather efficient as seen from the differing dividend yield that REITs in similar sector trades at. <br /><br />Lastly, I will say that the current management structure of REITs incentivize the management to acquire more assets given that they often earn base fee as a % of asset regardless of whether there are growth in DPU for unitholders. My personal opinion is that the internal management model adopted by The Link and many other REITs in US is probably a better management structure. sgyounginvestorhttps://www.blogger.com/profile/02036598665471392859noreply@blogger.comtag:blogger.com,1999:blog-8488305785096287326.post-87826336072422010892013-11-22T12:10:35.574+08:002013-11-22T12:10:35.574+08:00I always have this lousy feeling that REITs are li...I always have this lousy feeling that REITs are like scams by developers/sponsors to hive off their assets at inflated prices without much value add. They retain control of the assets and charge a new layer of management fees, which puts pressure on rental rates. Can you see significant value add by any of the existing REITs?Anonymoushttps://www.blogger.com/profile/03224654049912428747noreply@blogger.comtag:blogger.com,1999:blog-8488305785096287326.post-38762548828977813262013-11-16T16:47:13.112+08:002013-11-16T16:47:13.112+08:00Sorry, but I am not. If any, I am a student of val...Sorry, but I am not. If any, I am a student of valuebuddies. hahasgyounginvestorhttps://www.blogger.com/profile/02036598665471392859noreply@blogger.comtag:blogger.com,1999:blog-8488305785096287326.post-19907429627404838942013-11-05T23:08:38.486+08:002013-11-05T23:08:38.486+08:00Just a wild guess but looking at your portfolio &a...Just a wild guess but looking at your portfolio & the way you analysis companies, must be an analyst or student from 8I, MIP. =]<br />Like your work though. Lots to learn.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8488305785096287326.post-65957970139989993492013-10-01T18:55:21.321+08:002013-10-01T18:55:21.321+08:00ocbc, cimb and philip accept ppl below age of 21. ...ocbc, cimb and philip accept ppl below age of 21. Commission charges is similar across banks with few exception like DBS upfront and standard charteredsgyounginvestorhttps://www.blogger.com/profile/02036598665471392859noreply@blogger.comtag:blogger.com,1999:blog-8488305785096287326.post-37681915445897229832013-09-28T03:30:08.019+08:002013-09-28T03:30:08.019+08:00as a young investor when you were 20, which bank a...as a young investor when you were 20, which bank account or service did you go to for your purchasing of sg listed stocks? and do they charge fixed price per trade or is it commission-based? thanks alotAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-8488305785096287326.post-58577913744899230372013-09-24T19:33:29.557+08:002013-09-24T19:33:29.557+08:00you are right that market will adjust accordingly ...you are right that market will adjust accordingly to reflect the price at income of 60. But the price matters as it determines the number of shares that the management will get in lieu of management fee and hence the dilution.sgyounginvestorhttps://www.blogger.com/profile/02036598665471392859noreply@blogger.comtag:blogger.com,1999:blog-8488305785096287326.post-76029637805877825412013-09-22T11:18:15.687+08:002013-09-22T11:18:15.687+08:00if your income has gone up from 50 to 60, and assu...if your income has gone up from 50 to 60, and assuming the market is perfect (meaning price = value), your price should increase to reflect the higher income. <br /><br />unfortunately the market is usually not perfect, but that would be a separate discussion on price versus value. <br /><br />so the yields discussion is not entirely made on a comparable basis. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8488305785096287326.post-44490792993449234422013-09-12T16:20:19.289+08:002013-09-12T16:20:19.289+08:00Guess you miss out one variable called the share p...Guess you miss out one variable called the share price and no of share<br /><br />Let say that the share price is $5 and there are 100 shares in the market giving a market cap of $500. net distribution income is $50 and management fee is $10.<br /><br />If management fee is not claimed as units, dividend yield will be 10% (50/500).<br /><br />If management fee is claimed as units, the $10 management fee will give the asset manager 2 shares. Total dividend yield will now be [$60/(102*$5)] = 11.8%.<br /><br />Does this means that it is best for management fee to be claimed as units? Personally, I feel that this is a last resort move by management to increase the dividend yield when bad times hit. Thus, the main point is to compare against the peers to ensure that the dividend yield has not been falsely inflated against the peers. For e.g. it will not been fair to compare dividend yield of CMT and SPH REIT given the disparity in amount of management fee claimed in units. When the bad times hit (for e.g. interest rate goes up), CMT will be able to stabilise its dividend yield by using this last resort measure whereas unitholder of SPH REIT has to suffer a cut in dividend yield as the last resort has been utilised.sgyounginvestorhttps://www.blogger.com/profile/02036598665471392859noreply@blogger.comtag:blogger.com,1999:blog-8488305785096287326.post-50209366936971860212013-09-12T12:22:23.011+08:002013-09-12T12:22:23.011+08:00Hi,
Regarding the last point about financial eng...Hi, <br /><br />Regarding the last point about financial engineering, could you elaborate a little more?<br /><br />The management fees were added back into the distribution income, and the total distribution units increase as result, how would this impact the yield? <br /><br />For example management fee is $10, and distribution income is $50 (before adding the $10 back). There are a total of 10 units that the $50 will be distributed to, so each unit receives $5. <br /><br />Now we add $10 back to $50 = $60, and subsequently, distribution unit also increases from 10 to 12 units. Each units still receives $5.<br /><br />Is this what that is happening? I'm not familiar with REIT, so any explanation / clarification would be helpful.<br /><br />Thanks!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8488305785096287326.post-67855183910625110062013-07-27T23:11:09.544+08:002013-07-27T23:11:09.544+08:00thank you.
it is based on CAGR. In any case, isol...thank you.<br /><br />it is based on CAGR. In any case, isolated investment return is insignificant. There will only be a meaningful purpose when compared against the benchmark index over 1 market cycle (for e.g. trough of a bear market to the next trough of another bear market). This will probable take at least another 8-10 more years. sgyounginvestorhttps://www.blogger.com/profile/02036598665471392859noreply@blogger.comtag:blogger.com,1999:blog-8488305785096287326.post-57689221992124527762013-07-27T22:55:58.493+08:002013-07-27T22:55:58.493+08:00Just to add on. what I mean is the returns that yo...Just to add on. what I mean is the returns that you wrote on your blog ending 2012. Is it based on XIRR or CAGR?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8488305785096287326.post-9710059336905293452013-07-27T22:11:26.832+08:002013-07-27T22:11:26.832+08:00like your analysis. Could I ask since you are so g...like your analysis. Could I ask since you are so good in fundamental analysis, could you shed some light on your portfolio return? Thanks.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8488305785096287326.post-25908041178080674222013-07-24T08:09:47.784+08:002013-07-24T08:09:47.784+08:00I will consider your suggestion. ideally, one shou...I will consider your suggestion. ideally, one should only invest if it is within his circle of competence. Investing in something that you don't understand is very dangeroussgyounginvestorhttps://www.blogger.com/profile/02036598665471392859noreply@blogger.comtag:blogger.com,1999:blog-8488305785096287326.post-49255471534108785452013-07-23T20:55:13.598+08:002013-07-23T20:55:13.598+08:00Very good analysis. For laymen it is heartening to...Very good analysis. For laymen it is heartening to know that you have broken down the hard to understand details to more or less easily digestable facts. I hope you can also add some basic examples in explaining some of the financial jargon (even if it is in a separate article) so that many people not necessarily the elderly/retired share owners will be educated to understand future IPOs better...and hopefully better judge and invest. Thank youAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-8488305785096287326.post-68156459823888382122013-07-23T20:45:33.851+08:002013-07-23T20:45:33.851+08:00hospitality reit is more complicated than retail r...hospitality reit is more complicated than retail reit and is not within my circle of competence. <br /><br />i think the main problem should be the short land lease and that there's only 2 properties like SPH REIT. yet, hospitality reit derives more variable rental as % of the operator's revenue and operating income. During tough time, occupancy rate and revpar will fall which makes the distribution less stable and predictive. Thus, investor should demand a higher yield to compensate for the faster depreciation (due to short lease term) and the inherent fluctuation according to economic conditionsgyounginvestorhttps://www.blogger.com/profile/02036598665471392859noreply@blogger.comtag:blogger.com,1999:blog-8488305785096287326.post-31235567297045104672013-07-23T20:41:46.564+08:002013-07-23T20:41:46.564+08:00thank you. i will if there is time and there's...thank you. i will if there is time and there's interesting iposgyounginvestorhttps://www.blogger.com/profile/02036598665471392859noreply@blogger.comtag:blogger.com,1999:blog-8488305785096287326.post-79165885913182241422013-07-23T20:41:16.023+08:002013-07-23T20:41:16.023+08:00thank youthank yousgyounginvestorhttps://www.blogger.com/profile/02036598665471392859noreply@blogger.comtag:blogger.com,1999:blog-8488305785096287326.post-81690675596024105052013-07-23T16:46:27.850+08:002013-07-23T16:46:27.850+08:00Thanks a lot for putting in a 'financial engin...Thanks a lot for putting in a 'financial engineering' perspective to this. I wonder if you have done a similar review for OUE R? It will be interesting to see if any engineering work was done to it.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8488305785096287326.post-10914343575605207862013-07-23T12:52:48.927+08:002013-07-23T12:52:48.927+08:00Agreed. Will need to follow you more closely on f...Agreed. Will need to follow you more closely on future IPOs to see how they should be analysed.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8488305785096287326.post-24473874255910132242013-07-23T09:26:22.301+08:002013-07-23T09:26:22.301+08:00I like your analysis, impressive...I like your analysis, impressive...Anonymousnoreply@blogger.com