My name is Brian and I am the author of this blog you are reading which touches on personal finance and investing related matters. Thus far, I have written over 650 articles since I started back in 2011 and my passion towards educating to become a better investor remains strong.
I thought I'll provide some quick updates on my situation in case anyone thinks I've gone missing.
The past week has been one of the most stressful case as my Dad was down with an ischemic stroke on the left side of the brain which paralyses him on his right arm, leg and the ability to speak.
We were on our usual routine one morning when suddenly he was down with a stroke. We panicked and called the ambulance to send him to the nearest hospital before transferring him to Singapore the day after via an International SOS plane to transfer him to Dr. Timothy Lee at Gleneagles. He is one of the most sough renowned brain and neurological doctor we were recommended.
Over the next 7 days he was in ICU, and whilst his condition is stable now, there is plenty of post therapy and changes in the living conditions that was necessary to adjust.
If that is not the only stress, the costs of the medical fees were another one to give plenty of headaches.
The International SOS costs us close to SGD20k while the hospital bill should come somewhere in the 6 digits. He has an insurance back in Jakarta which wasn't adequate to cover the high medical costs in Singapore hence I will have to bear that costs right from the pocket (the "difference").
With this unexpected situations, there is an immediate change in my plan to take a sabbatical too.
I am in the look out for an immediate role (please refer me if you have any roles in your company that are available) and have begun searching for one intensively.
I am also planning to rent out one room in the place we are currently staying in so if there's anyone that needs a room, I'm more than happy if you could recommend it to me.
Within the next few months, what this means is that the priority would change drastically so I will definitely spend lesser time on blogging and even likely lesser time on prospecting companies to invest. Chances are I will update the blog from time to time but am still unsure yet if I should take a sabbatical time away from it.
I guess that's all the updates I have from now. Its going to be a long battle both mentally and physically so I have to keep my powder mental strength dry during this period.
I thought I'll do a quick update on the portfolio while I am still out of town and travelling and had a bit of time to sit down to do some quick calculation.
Jun was mostly a muted month of transactions, mainly because I was busy having a holiday and did not had time to monitor the market as much as I usually did.
I did a quick trade for in and out of Suntec Reit nevertheless, buying them at $1.85 and then selling them at $1.89 a couple of days later for 100,000 shares. Not exactly the ideal scenario I was hoping for but I was initially hoping it will catch up with the other retail Reits like FCT and CMT who went up a lot in this month. Still, it was a decent couple of thousands profit after commissions on contra afterwards.
I had also took the opportunity to divest my Netlink Trust at 88 cents after it went up quite a bit in recent couple of days. There has been a lot of targeted focus on defensive stocks recently which pushed up the price which I wanted to take the opportunity to divest and see if there are any other opportunities elsewhere with the banks or other blue chips. At this rate my best situation is to wait for the second half to unravel itself with some opportunities.
The networth portfolio took a slight dip in month of May before rebounding back strongly in the month of Jun with a new record high.
The overall networth of the portfolio increased from the previous month of $918,285 to $937,874 this month (+2.13% month on month; +39.7% year on year).
Warchest has now increased to a staggering 77% of the overall portfolio, so I'll continue to look for opportunities on the go.
In terms of performance this year, things are still holding up relatively well against the benchmark index of the STI, which is barely sideways after a strong performance in the first few months before going sideways thereafter.
I am still waiting to see if there are good opportunities in the STI blue chips in particular the banks and HK Land so will be keeping a close lookout to utilize my warchest if I found one.
Most people aspire to achieve financial stability to enjoy their retirement with peace of mind. My dream is no different from others. Since I entered the workforce, I have been working towards achieving financial independence before the age of 35 and having an early retirement. The journey which I took has pushed me out of my comfort zones at times, and it’s tough.
Thankfully, my wife has been supportive of my decisions and goal.
When we had our first child in 2014, my wife had to quit her job to care for our son and deal with the household chores. This decision had a direct impact on our savings and lifestyle. It was not easy to manage the additional expenses with a single income.
We began to tweak our strategies. Unnecessary spending was reduced. We also started to save aggressively and managed to save about 40% of the income over time.
But savings alone will not be enough to achieve our goal.
The various investments I had made were relooked at to find ways to grow our income. For it to be sustainable, we need our income to grow at a rate of 8% per annum. I looked at the various options that were available and performed allocations based on prevailing market conditions.
These are some of the investment tools which I currently have on top of my current equity portfolio:
SPDR Straits Times Index ETF
The SPDR STI ETF was introduced in 2002 and is managed by State Street Global Advisors, while the Nikko AM STI ETF was introduced later in 2009 and is managed by Nikko Asset Management.
The main benefit of investing in the STI ETF is that the investor gets to gain exposure to the 30 blue chip constituents of the benchmark index through a single purchase at a very low cost.
Looking at the table below, STI generated annualised total returns of 9.2% from 2009 to the end of 2018. This is a very respectable return compared to the rest of its peers across the region.
However, the market cycle is unpredictable and may not be suitable for those with low-risk appetite.
Take 2018 for instance, the total annual return for STI was negative 6.6% while other similar investment funds fared worse.
Singapore Savings Bonds (SSB)
The Singapore Savings Bonds (SSB) is a special type of Singapore Government Securities that is suitable for individuals.
There are plenty of benefits in having the SSB in your portfolio.
Firstly, investing in the Savings Bonds is safe as they are fully backed by the Singapore Government, which has received the strongest “AAA” credit rating from International credit rating agencies.
Secondly, the SSB is flexible such that you can choose to exit in any given month with no penalties. This is especially useful as a tool to park our emergency funds, as we do not know when we might need to use them.
Thirdly, the SSB offers a step-up interest for longer term investment, up to a maximum of 10 years for each tranche of issuance. This means that you will receive slightly less interest at the start, but the interest offers a step-up over time that will increase your effective return.
This is also useful for someone who wants to strategise by constructing their portfolio using the bond ladder methodology with different maturities period.
One of the main disadvantages of SSB, in my opinion, is the relatively low returns it offers to investors with higher risk appetite. Since the likelihood of a payment default is virtually close to none, it offers a risk-free rate that closely matches the government bond securities, which might not be suitable to investors who are seeking higher returns to compound their wealth.
The minimum investment amount is S$500 and the maximum amount of SSB a person can hold is S$200,000.
CPF Retirement Sum Topping-Up Scheme (RSTU)
The CPF Retirement Sum Topping-Up Scheme (RSTU) allows CPF members to build up their retirement savings by topping up their own or loved ones’ Special Accounts (SA) if they are below age 55 or Retirement Accounts (RA) if they are aged 55 and above. They can do this via cash or CPF transfers.
There are 2 main advantages that I can relate to by doing this.
First, CPF savings in the SA and RA currently earn base interest rates of 4% per year. The first S$60,000 of a member’s combined CPF balances, of which up to S$20,000 comes from OA, will earn an extra 1% interest. An additional extra interest of 1% is paid on the first S$30,000 of combined CPF balances for all members aged 55 and above.
The second advantage is that you can enjoy tax relief up S$7,000 per calendar year by topping up your SA or RA with cash. If you are also making cash top-ups for your spouse, parents, parents-in-law, grandparents, grandparents-in-law and siblings, you can enjoy additional tax relief of up to S$7,000 per calendar year.
I did exactly that in Dec 2018, making a cash top-up of S$7,000 into my SA. A quick back-of-the-envelope calculation showed that I will be able to “save” about S$7,000 x 11.5% (my tax rate) = $805 right away, in addition to the 4% per annum interest that I will be earning subsequently.
For terms and conditions on tax relief, please refer to the section on the benefits of topping up here.
You can find out how to make a CPF transfer or cash top-up in this write-up here.
Voluntary Contribution (VC) To MediSave Account (MA) For Your Healthcare Needs
Apart from retirement and housing, our CPF savings also helps us meet our healthcare needs.
We may become more vulnerable to illness and other complications as we age, hence it is important to ensure we have adequate savings in our MA.
MediSave provides a safety net for our healthcare needs. We can use our MA savings to pay for our personal or immediate family’s hospitalisation, premiums of approved medical insurance schemes like MediShield Life or Integrated Shield Plan (IP), and a variety of other treatments, including day surgery and certain outpatient treatments.
My wife and I have chosen to make voluntary contributions to our MA to set aside savings for our family’s healthcare expenses when the need arises. We also enjoy tax relief* for voluntary contributions to our MA. (Any voluntary contributions above the CPF Annual Limit will be refunded to members without interest and will not be eligible for tax relief. Personal income tax relief cap of $80,000 applies.)
Having said that, there is a cap on how much we are able to contribute to our MA. Voluntary contribution to MA is subject to the CPF Annual Limit or Basic Healthcare Sum (BHS), whichever is lower. To find out the allowable contributions to your MA, you can use the e-Cashier on the CPF website.
CPF Annual Limit
The CPF Annual Limit is the maximum amount of mandatory and voluntary contributions to all three CPF Accounts that a CPF member can receive in a calendar year. The current CPF Annual Limit is $37,740.
The Basic Healthcare Sum (BHS)
The Basic Healthcare Sum (BHS) is the estimated savings required for basic subsidised healthcare needs in old age. The BHS is adjusted yearly for members who are below 65, to keep pace with expected growth in MediSave use by the elderly. Once members reach the age of 65, their BHS will be fixed for the rest of their lives.
For 2019, the BHS has increased from $54,500 in the previous year to $57,200 this year. This means that if you have already hit the cap for your MA in the previous year, and your total contributions have not reached the CPF Annual Limit, you can voluntarily top up $2,700 (the difference between $57,000 and $54,500).
MA savings above your BHS (from subsequent working contributions or interest earned on MA savings) will be transferred to your SA or RA to increase your retirement savings. If you are below age 55 and have already saved the current Full Retirement Sum (FRS) in your SA, the interest earned on your MA top up monies will be transferred to your OA. If you are aged 55 and above and have your Basic Retirement Sum (BRS) or FRS in your RA, the interest earned on the amount you topped up to your MA will be transferred to your OA.
Currently, I have allocated a higher proportion of my savings to my equity portfolio because I think the valuation of the market is still attractive.
But I do realise that this trend will not go on indefinitely.
Equities as an asset have their own risks and are volatile in nature. Their value could drop drastically when the global economies are weak.
Because of that, I have chosen to allocate most of my emergency funds in the SSB, which will give me an effective interest rates of 1.9% per annum. Furthermore, it allows me greater flexibility in terms of liquidity should I need the money urgently.
For a longer horizon to build up my retirement fund, I have also chosen to top up my SA to enjoy attractive interest. At the same time, I get to benefit from tax relief.
We believe the steps we have taken so far are bearing fruits and that we are on the right track to achieve our financial independence.
7.5x PER and 4% dividend yield, but why isn't the market providing more love to this company by re-rating them higher?
This was the exact question running through my mind when I purchased this company and then divested it thereafter, within a short period of time.
I'll go through some of my thought process, as well as collating the research I've done on this company in this article.
THG has been a well-known luxury retail name for a number of years now.
Founded in 1979 by husband and wife, Chairman Henry Tay and Mrs. Jannie Tay, the first store was opened at Lucky Plaza in some 40 years ago.
Over time, they branded themselves as one of the world’s leading luxury watch retail groups with established presence of 40 boutiques in 11 key cities in the Asia Pac region. THG’s network of multi-brand and standalone boutiques are strategically located in key markets such as Singapore, Kuala Lumpur, Bangkok, Phuket, Ho Chi Minh, Hanoi, Hong Kong, Tokyo, Sydney, Melbourne and Brisbane.
The Group is also one of the key official retailer for luxury brands such as Rolex, Patek Philippe, Audemars Piguet, Hublot, Richard Mille, A. Lange & Sohne, Breguet, Cartier, Jaeger-LeCoultre, IWC, FP Journe, Omega, Tagheuer, Tudor and many more.
Industry Demand For Luxury Goods
In a research report from Bain & Co (Source here) on the rising demand for luxury segments, they mentioned that demand for luxury goods is set to grow at to a market size of €366-390 billion in 2025. This represents a 4-5% growth per annum from the current spending of €276-281 billion worldwide.
The report, in collaboration with the Luxury Goods WorldWide Market Study, focuses principally on personal luxury goods including watches and jewellery, the second top performing segment in value terms after cars.
The reports shed interesting insight on the various demand outlook for luxury goods, in particular from the perspective of China. Currently, China accounts for just 9% of the global luxury spend but is expected to grow by 18% in 2019. The growth for the other regions include "Rest of Asia" at 7%, Japan at 3%, Europe at 1% and Americas at 0%.
The Chinese consumers are and will be the largest contributor to this lion share, as the rising middle income group will tend to drive the growth of this market over time.
Online channeling and exchange rate fluctuations are also one of the factors driving the volume of the global luxury market.
According to Bain & Co, by 2025, e-commerce will go from the current 10% of market value to 25%, increasing by double digit growth year after year.
There will be a segment on e-commerce at the bottom below which I will discuss more about it.
The Group has a pretty substantial portfolio of investment properties in their book which they purchased it for lease and shophouses for rental.
They have been increasing it over the years as a double up for their leases in countries where they operate in.
The value of these investment properties as of 31 March 2019 financial year stands at $55m.
Investment in Associates
The Group accounts for its investment in associate using the equity method and recognized $3.32m as its share of results of associates in 2017, down from $6.5m back in 2016. Specifically, THG Prima Times Co. Ltd, which the Group has a 50% effective stake, reported a 22% drop in revenue and 50% drop in profits in 2017 in what a sign to be a challenge in the Thai market. In 2018, this number dropped further to $2.8m, before rebounding in 2019.
In Mar 2018, the Group incorporated an associate company, THG S&S Indochine Ltd (50% effective interest), in a joint venture collaboration with Hublot to open its first standalone boutique in Hanoi, Vietnam to meet the rising needs of the Vietnamese market. The boutique is housed in the historic Sofitel Legend Metropole Hanoi, a historic Old Quarter icon in its own right.
It is unknown how the Vietnamese market will perform over time but I am guessing since they have a retailing distribution in Ho Chin Min, they have probably worked out the risk reward return using that as a reference to gauge the demand of the Vietnamese market.
Overall profits from the share of associates have increased from $3.3m in 2017 to $2.8m in 2018 to a strong $6.7m in 2019.
When we think of watches as inventory, we don’t usually think of them as raw goods or materials that can go bad and decay very quickly like food if they remain unsold. Plus, there is always a perception that most luxury watches tend to appreciate in value over time, thus there is an intent to build up inventories as much as possible to meet the rising demand.
But this is not entirely true.
Chairman Henry Tay has repeatedly stressed in his Chairman statement on the annual report on the needs for his team to focus on rightsizing the level of inventories turnover to meet the right needs of demand, not too much and not too little. He specifically mentioned the swiftness of market recovery in late 2017 that caught many watchmakers and distributors by surprise, as they ended up with lesser supply and a shortage for most of the desired watch models.
On the other hand, holding too much inventories will not be optimal and good for the company as well.
The Group recognized stocks / inventories sold as an expense in the cost of sales and they charged any movement in stock allowance and write-down in their income statement as part of the requirement to estimate the gross value of the inventories.
Not only will this affect the working capital and cashflow turnover for the Group, but the company will also recognize a “loss” in their income statement should they decide to shelve off aging inventories to the secondary market which will result in a drop in value of the watches.
Auction houses and online marketplaces like Chrono24 and YNAP have frequently been mentioned as the bigger players to serve the secondary market.
The recent FY19 full year results that they announced was a really strong one.
Not only does topline revenue increased by 4%, but they managed to keep their cost of goods expenses very close to last year, which means Gross Margin has increased to 26.98% in FY19, the strongest performance they have exhibited since they were listed.
In fact, if we look across the performance over the past 10 years, the management has done a good job in growing all aspects of the financials.
Revenue grows from $483m back in 2010 to $721m in 2019 while they managed to boost their GP margin from 20.1% in 2010 to 27% in 2019. NP margin has also improved from 6.9% in 2010 to 9.9% in 2019 at the same time.
The profits from the share of associates also increased over the years as they expanded into regional investing in more JV and Associates with some of the luxury watch retailers names. The partnership they have with Hublot in 2018 is the latest JV they’ve partnered.
From a cashflow perspective, the company has also done really well, generating good amount of cashflow over the years.
In FY19, even after setting up the JVs with Hublot for their exhibition in Hanoi, they are still generating almost $48m in free cash flow, with translates into a 9% fcf yield.
Based on the table appended below, you can see that they generate a lot of cashflow in an uneventful years where they do not have to fork out a lot of capex. But the chances of that happening should be low. I think they would want to capture more market share given the rising sentiments of the middle income group across Asia, hence they would be growing.
In some years where their free cash flow tend to dip is when they bought an investment property like the case in 2016 or when they invest in JV or Associates in 2018.
From a balance sheet point of view, it looked really healthy as well.
From a meagre $50m cash back in 2010, the company has grown the cash and cash equivalent to $181m in 2019.
Borrowings have also dropped in 2019 to $14.9m as the company's generation of free cash flow enable them to repay most of the borrowings in 2019. The borrowings should be paid off likely by next year.
Net cash equivalent is at $166m, the highest since they are listed.
NAV is at 79 cents, which majority consists of the cash, investment properties, inventories and property, plant or equipment, all really good assets type.
Based on 9.99 cents EPS for FY19, this translates to 7.5x PER based on the last closing price of 75 cents.
This definitely looks cheap from a historical perspective but the bigger question remains why isn't the market re-rating them with higher valuation and with more love.
The reason I suspect is because the company has done a really good job on all fronts in 2019 but we do not know if this will be the new norm. That is to say, we don't know if the margins will be maintained at 26.98% or better for FY20 or will it drop given the cyclical demand of the luxury goods tied to the economic condition of the market. If the Trade War continues to persist for a longer period of time, will this dampen the demand and hence impact the margins for the company? I believe these are all valid questions that an investor can run through and ask themselves.
Second, the company has not been very generous with the dividend payout despite generating a good amount of cashflow for a number of years now. The management has tried to maintain the payout at 30% based on earnings and you can see why they are paying 3 cents this year. I believe that if the management is willing to payout more than what they've been doing, the market will re-rate them higher immediately. I think this is one of the reason for the lack of movement in share price in recent years, despite the share price appreciation by about 10% this year.
The only way for investors to get a decent yield on this company is to wait for the share price to come down, which I think has a higher probability than expecting management to increase the payout.
I tried to play around and angle it from the future cashflow perspective, knowing that this company must be worth much more, given the way they have grown over the years.
First, I took their past 10 years cashflow to see how much they've grown and found that they've grown by 12.3% per year up till 2019. Since they are now at a much higher base, it is a lot harder to maintain this 12.3% growth over their next 10 years, so I've taken a conservative 12.3% divided by 2 to assign 6.2% instead.
As correctly predicted, this company is worth much more when we use future cashflow as a basis to determine their intrinsic value. At an earnings multiple of 8x and a discount rate of 8%, the intrinsic value will be at 98 cents. If the earnings multiple is higher and the market decides to rate them higher, then their value will be even higher.
E-Commerce Digital Future
The E-Commerce online digital distribution channel is definitely one area of growth gaining momentum over the past couple of years due to increasing connectivity with the digital age.
This area of growth is specifically mentioned in the Chairman’s Statement in the Annual Report 2018, particularly mentioning e-commerce as a new epicentre emergence and relevance to their business. He had special mention for French retailer Richemont, who had acquired YNAP as an integration online distributors to their omni-channel distributions. Sales for YNAP increased by double digits growth rate and alone contributed 2 billion euros in sales just through this channel.
Interestingly, there was an earlier interview with the Managing Director, Michael Tay in January 2017 where he mentioned for THG going into online retailing will not help to scale up their businesses due to the lack of pricing disparity amongst the Asia region. He felt that online retailing will pick up in the market only if there are global pricing parity in bigger countries such as UK, USA and Australia. In a dense urbanscapes like Singapore, he doesn’t feel that it will be a major contributing factor to sales pick-up.
Following that interview, on Jul 6, HK based Sincere Fine Watches, the third largest authorized watch retailer in Singapore, rolled out its digital online platform.
Adding on to that, on Aug 29, another competitor Cortina Watch, who is the second largest authorized watch retailer in Singapore, similarly took the same route and rolled out its own digital online platform as well. Cortina feels the online market will bring sales to the internet-savvy people who will give shoppers peace of mind (fake goods) in the online arena when buying luxury watches.
Given all that into considerations, it is likely that THG will focus their attention into this area of potential organic growth which will boost their sales and margins even further, especially after being tailed by competitors Cortina and Sincere respectively.
I wonder if they regret not going into it earlier to boost their market share.
For companies that are listed in SGX, the only available information for competitors is Cortina Holdings, which is the second largest luxury watch distributors after The Hour Glass.
Cortina appears to have the upper hand in maintaining a higher gross margin than THG but net margin seems to be lower.
Apart from that, all other metrics are almost similar to THG, and they've similarly done really well in terms of performance this year.
Interestingly too, Chairman Henry Tay is the second largest shareholder of Cortina Holdings.
From the way the management has stinge on the dividend payout policy, I believe it is only a matter of time before the management decide to delist the company.
One of the main reason for companies to get listed is to be able to access public funds in order to grow.
For THG case, it doesn't seem like they will have any issue with this since the company is generating a lot of cash flows year on year and the cash keeps on accumulating on the book.
Management also doesn't seem to have an intent to distribute the excess cash out to shareholders.
Secondly, the obvious corporate action shows that the CEO has been increasing his controlling of the shares, which now stands at 66.39%.
Earlier in April this year, he bought over 500k shares at the price of 67 cents and then added another 9m shares soon thereafter.
Third, the balance sheet has never looked better than before.
My guess is that in the next financial year, they will repay all borrowings that they have on the book, which is about $14m, then be debt free thereafter.
My hunch is then the management might initiate a GO takeover in after 2020 since there is no reason to keep the company listed with that much cash that they are not willing to distribute out.
The offer is likely to be using a methodology of premium to book value rather than the intrinsic value of the company using DCF which is much higher.
As investors, it's hard to keep on guessing on whether this catalyst will play out given that their dividend yield to wait is not high enough to entice, plus the uncertainty of the earnings if it will keep up.
That is just some of the random thoughts I have in my head when I decide whether to keep or to sell.
Obviously, with tantrum on the market, it's important to keep cash powder dry and the last thing you want is to get stuck to a company that does poor return on your capital and you suffer either a capital loss or an opportunity loss elsewhere.
I'll continue to monitor this company along with the other companies I have in my watchlist and may look to enter again once there are better margin of safety.
This month has been a brutal month as we see increased risk volatility in the market due to the US-China trade war, which pushed most major indexes and sectors down.
STI is now back to the 3,150 level, which I deemed as attractive. Still, it can always go lower for as long as the risk remains.
You can see from my portfolio that I made more sell than buy transactions during the month.
It was done as part of the strategy to be nimble as I was almost fully invested in the previous month, since there are other more interesting sectors to watch out for and I wanted to take on a more risk-on attitude with some sectors dropping near my target buy level, such as banks.
The first thing I sold was First Reit, which I divested in full at $0.98 after the company went ex-dividend (I will be entitled to the dividend). This was a recent purchase which I made not too long ago back in March so the ROI on this is a slight gain, almost flat if you consider the commissions in and out.
I also divested my biggest holding in Starhill Reit at $0.75, again after the company went ex-dividend (I will be entitled to the dividend) as part of my strategy to conserve cash and go risk-on mode on banks sector later on. Like First Reit, this divestment was not a fundamental issue with the company but an overall balancing strategy with the situation going on, and thus a decision was made.
I also divested my recently purchased holding for Keppel Infra Trust at $0.47 for the same reason, hence I won't repeat it again.
Last but not least, I had also divested all my holdings in The Hour Glass on the immediate day after they announced their full year results. In fact, earlier this month, I managed to double up my position on THG but the full year result thesis did not work out as expected.
Nevertheless, I will share my compilations of research on THG in the next posting for future reference which I will continue to keep a close look out on.
With most divestment, my portfolio is essentially left with Vicom and Netlink Trust as the two major holdings, with Far East Hospitality Trust and Ho Bee Holding taking up consolation third and fourth places.
Warchest has gone up drastically, and now suddenly I am looking at influx of cash amounting to 55% of the overall portfolio.
Since I am closely eyeing on banks and companies like Genting and HK Land, which I previously shared, I am sure the capital will be allocated sooner than expected, especially if the Trade War escalates.
The portfolio, while defensive in nature, did not survive the onslaught from the Trade War as it sees a dip this month.
The overall networth of the portfolio dropped from the previous month of $932,505 to $918,285 this month (-1.5% month on month; 27.3% year on year).
The portfolio shed around $14k in value overall.
This also means that my trend of 16th consecutive record increase month on month is also broken, ending the momentum this month.
In terms of returns year to date, the portfolio is still beating the index by a margin so I think the overall impact drop in index is more felt than the drop in the portfolio.
I guess there is no need to hit the panic button just yet.
When the US and China sneeze, you can't help but catching some sort of cold regardless how defensive your portfolio is.
But this also spells for opportunity in the market to capitalize when you see some mispricing that happens.
I hope that opportunity will come soon, and I will be sure to be on my alert to capitalize on it.
No, I'm not talking about my portfolio, that would be extremely sad.
After 24 years of residing in Singapore, I finally had my Singapore citizenship transition done, approved and granted.
I had applied them together with my immediate family members so all of us were granted the citizenship and we turned red together.
This afternoon was the second last agenda as we were presented with the Singapore passport.
When receiving them from the ICA officer, I had a lot of emotions that run through my mind.
It was a feeling of happiness and gratitude as I looked back at how far we've come to get to this stage.
For years, I have been in and out of the ICA for countless times, maybe more than 100 visits in total, as I looked to renew my student pass, then dependant pass, then employment pass, then the permanent residence and now finally the citizenship.
Our profile wasn't the easiest and most direct to qualify for the application and it is incredibly hard to get to this stage that it is hard to dream that we finally succeeded.
With this decision we have called Singapore our home and it is a place where we think it will best suit our children's needs and vice versa.
This post, like all other journal articles relating to financial independence, are meant to be written to commemorate this moment, an important moment in our lives and one that will change the direction of our lives forever.
As usual, I'll try to document the process step by step for as much as I can remember so it will help those who are applying with some information they can find.
Below are the details:
Singapore Citizenship Application
Make appointment online for intent to apply for the Singapore citizenship (Aug 2017).
The next available appointment is 6 months away, so we managed to get the appointment only in Mar 2018.
We went to ICA to submit the application form with all the necessary required information (payslip, notice of assessment, education cert, marriage cert, etc) and pay $100 for each person using NETS/Cashcard.
We waited for a long time, exactly 12 months before receiving a notice in Mar 2019 that we were accepted!
Note: Approval in-principle outcome letter by post (usually between 6 to 18 months after submission of the application).
Accomplish tasks (within 2 months):
Singapore Citizenship e-Journey (can do later, book the other 2 tasks first).
Singapore Experiential Tour (book quickly as slots are quite limited for the next available).
One of the experiential visits I have to complete
Community Sharing Session (book quickly as slots are only once a month)
Next, arrange an appointment date for citizenship registration with ICA (can change date up to 5 times).
Next, make an appointment with Notary Public lawyer firm to help you declare your intention to renounce your original citizenship renunciation (in our case, it's Indonesian).
You will be asked by admin staff to sign a printed Declaration Letter in front of the Lawyer. Your Declaration Letter will be sent to Singapore Academy of Law (SAL) for legalization. (Overall fee was $176.75)
Document to prepare before meeting with Notary Public lawyer:
Original and Photocopy of Approval letter from ICA
Original and Photocopy of Current Indonesia Passport
Original and Photocopy of Indonesia IC (KTP)
Original and Photocopy of Birth Certificate (Akte kelahiran)
Original and Photocopy of Indonesia Citizenship certificate (SKBRI)
Original (optional) and Photocopy of Family Card (Kartu Keluarga)
Original and Photocopy of Singapore PR
We used the public notary which was recommended below:
Public Notary address & contact no:
Tan, Lee & Choo Advocates & Solicitors
1 Park Road #04-04 People’s Park Complex Singapore 059108
Tel: 6535 6077
Collect an envelope at Notary Public after 3 working days.
Bring the envelop to Ministry of Foreign Affairs (The legalisation will be done on the spot and costs another $10 pay by Nets/Cashcard only)
Finally go to the Indonesian Embassy in the morning to submit the renunciation forms (Those taken from notary public) together with those legalized documents. Take a queue number and go to the counter at the second floor on the right side after stair.
You will be asked to sign one of the renunciation form with the materai at the cost of $2 which you can pay on the spot. You will be given an acknowledgement receipt after all the process is done and being asked to make payment on first floor ($32). We had trouble because we didn't bring enough cash at that time but thankfully we managed to exchange with another person there by transferring to him via PAYNOW.
It will take roughly 5-7 working days for the Renunciation Letters to be ready for collection.
Collect your formal Renunciation Letters & birth cert from Indonesian Embassy in the afternoon.
Singapore Citizenship Registration
Submit the formal Renunciation Letters (plus a copy of each) and 4 photos (taken from 1st floor) to ICA on the appointed date at 6th floor.
At the first round you will be registering Citizenship, pay $70 and been given a form to apply for Singapore Passport at level 2.
After waiting, you will be served to register your IC and pay $10.
The last part will be the taking of the Oath.
In one week time, you will received a Passport Collection Notification Card (that looks like a postcard), which for us is today.
The last part will be the Citizenship Ceremony, which will be in a couple of months time for us to get our IC. Meanwhile, they had given us a temporary IC to work with and bring around.
And that's the whole process and the finally long awaited result is done and dusted.
I wrote an article on Bukit Sembawang some time in March recently which you can find here.
Bukit Sembawang has recently announced their full year 2019 results which impresses on earnings, with full year NOPAT increasing by 100% year on year despite taking a hit in their Q4 earnings.
On the topline, revenue and cost of sales increased by 265% and 451% respectively as compared to previous year. This resulted in Gross Profit increasing by 164% year on year.
This is attributed to the higher development sales for profits recognized from 8 St Thomas, Nim Collection Phase 1 and 2 and Watercove. Comparing to the previous year, majority of the profits were only recognized from Nim Collection Phase 1 and Watercove.
There is a huge impairment loss that they recognized in the 4th quarter which bumped up other operating expenses on properties relating to Fraser Residence Orchard and Makeway View. This is quite interesting because they had only recently bought Makeway View for $168m in March 2018 at around $1,600 psf and already by the financial year end they are recognizing $10m worth of allowance for foreseeable losses. It could be that the RNAV was already lower than what they initially purchased.
I wonder if they are doing that prudently because they always clawed it back the following year. For instance, in the previous year FY2018, they had clawed back their allowance of foreseeable losses on their development properties of $35m.
From a cashflow perspective, it didn’t look good this year as we already know that they are buying up the two tender enbloc deals for Katong Park Towers for $345m and Makeway Views for $168m. These properties will yield profits and cashflow eventually for them so it’s a matter of time before their cashflow would ballooned again.
In terms of dividends, I was expecting lower for this financial year because their cashflow look a bit tight but I thought 22 cents (4 cents + 18 cents) was a nice gesture from the management. It would require them around $57m to pay out the 22 cents to shareholders which will be reflected in the next financial result.
At 22 cents, this would translates to about 3.9% yield at the current share price of $5.66 so I think it’s a decent play for shareholders to wait.
This is assuming we are looking at the property cycle to get better. Otherwise, we should be expecting lower margins and further impairments in the future financial results.
To keep track on the “Mini-Retirement” series which I started a few months ago, I’ll try to update as much as possible as I can on any resulting movement and direction from the impact taken on this action.
For those who are new to this series, the background of the story started when I made a decision to take a mini-break from my current role around three months ago by deciding to hand in my resignation for my current role, walking away without the next job lined up in hand.
Since my plan was to take a break to allow myself to recuperate and to think about where I should be heading next on my future direction, it was imperative that I shouldn’t have anything lined up before I think properly on what is best for me.
The goal here is to retreat a step so I can take a longer leap in the future.
There’s no point in just going aggressive forward on things year after year, which I pretty much have done so until I was burned out.
Still, the decision wasn't easy to make and I had repeatedly reconsider other options.
Going back to the current role, I still had to serve the usual notice period when I handed in my resignation.
The official notice was one month but the company decided that three months was optimal and I did not reject the proposal.
Three months notice period is probably the longest time I’ve ever served in a working environment in my lifetime, and that is done purposely to allow the company to find a suitable replacement as well as to allow ample time for myself to transition over from a period of employment to unemployment. I had it also timed so that it will coincide before the school holiday starts in June, so I can start spending some quality time with my children.
After what seems like an eternity period of time waiting for this transition, this week is finally the week that will all come to an end.
Personally, there is something inside me that can’t wait for this week to end quickly because I think I’ve given myself ample time to prepare mentally, which is a good thing. Also, I’ve planned for some traveling which coincides with the school holiday so there is something immediate to look forward to in June. We will take this opportunity to travel around the summer so we’ll most likely be out of town for the whole period of the month.
The challenge will be in July, when all things had settled down and the school resumes and that is probably when I can properly take a deep breath and think through things.
The other frustrating thing that I foresee will happen will be on the lack of documentation to kickstart certain things given the lack of proof of employment or notice of assessment required.
I think Chris from Tree of Prosperity has some encounters of that in his recent post on his application with his FDW and I can totally understand his frustrations.
What is the use of showing proof of salary income when you can clearly show your bank statement or dividend income through CDP that is more powerful than the former.
Knowing this struggle, I quickly submitted for my FDW application to have this settled last week, since technically I am still "employed" under the eyes of the government.
In any case, being the last week at work, this is probably the week where I’ll be doing most handover to my seniors at work and also to wind down on some of the things that used to be under my care.
The usual farewell lunch will probably also apply and already I had a couple of appointment for lunch this week. It'll be a good time to say goodbye to the cbd area and I wonder if we had a good chance to meet again some time in the future.
Following my previous post on the Reits Symposium, the day has finally arrived for all Reits investors.
The event was held on level 4 at the MBS Expo Convention which has a good full house crowd they have been raving about.
They give pretty good kits goody bag once you have signed in which includes door gifts and a water bottle, sponsored by Share investor, Money 89.3 and First reit respectively.
The event kicked off with Sgx Ceo, Loh Boon Chye, addressing the full house crowd on how the Reits sector has come a long way since the listing of the very first Reit in 2002. He particularly mentioned the success was due to Singapore being an early mover in this space, and our government putting in place an effective regulatory and tax framework.
In 2013, SGX has entrenched themselves as a true Reits hub with over 35 listed Reits and property trust and from 2014 onwards, there is on growing demand listing from overseas sponsors.
Over the past 10 years, the market cap from the reits sector has grown at a compounded annual growth rate of 22%, that's just crazy numbers.
He ended off by reminding the crowd that whilst Reits is one of the investment tool, Sgx offers a wider range of other investment tools such as stocks, bonds, etfs, warrants and dlcs.
The lunch sessions break was a good opportunities for people to visit the booth in particular talking to the investors relation of the various Reits.
I didn't manage to stay too long in one booth as I was just browsing around the different booth at different speed to see what the booths have to offer.
I can see there are more crowds stationed at Reits for Cromwell, First Reits and the Capitaland Group, while the rest were quieter. Perhaps it has to do with the sentiments of the Reits status itself.
After lunch break, Uob Asset Management presented their slides which promotes their active asset funds in particular the Japan Sumitomo asset funds. This is one particular which I find it rather interesting to find out what UOB Asset funds have to offer.
They are overweight on the Japanese market due to accommodative monetary policy. They are also bullish in the Singapore sectors.
They are underweight Hongkong and Australia.
You can also see from the third slide below on the various property outlook they are bullish or bearish on their positioning.
The funds gave an annualized dividend yield of about 5% which they pay out on a monthly basis.
Unfortunately, I didn't stay too long as I left right after the Ascott Reit presentation.
But this was a pretty insightful event for Reits investors in a heavy-weight Reits day.
With all the earnings announcement finally done and underway (Netlink was the last to report yesterday), it's my favorite time of the year where I get to tally the amount of dividends I will be receiving this quarter.
Please do note that this 2nd quarter covered the period of the dividend cashflow from the period 1st April 2019 to 30 June 2019.
For readers who are new to this blog, this is a sequence of exercise that I've been doing for the past few years usually after the earnings season ended.
This tracking not only allows me to keep abreast of any development in the payout dates and the quantum amount but also more importantly reminds me of how far I’ve come since I embarked on this journey of dividend investing which is coming to almost a decade now.
Since we are a household of 4, the incoming dividend also comes much handy when dealing with our increased household day to day spending, especially with the current situation now that income will be bare in the next quarter due to unemployment/sabbatical period.
For those who are new to the dividend investing strategy, I'd encourage you to try it out.
Singapore has a plethora of dividend investing companies that has not only good fundamentals but also pays out good dividend yields at a decent valuation. We are also a country where dividends are exempt in the hands of shareholders because of the 1-tiered tax system.
From a shareholder's point of view, this means you get directly whatever the company announces and good companies are usually pretty generous at that.
Dividend investing also possesses an autonomy that will allow us to retire from our job one day because they replaces the cashflow from our job. This is in contrast to growth investing where you need to time your exit in order to "take the profit" eventually and find an alternative.
Without further ado, here's the dividend income I will be receiving this quarter.
The dividend income this quarter in Q2 FY19 amounted to $23,172.
I see this as a good cover for our next 4-5 months worth of expenses, and then we'll be having an income again in the next quarter and this keeps rolling on.
With Q1 being the weakest of all the quarter, this Q2 appears to be the strongest of the quarter as we have companies paying out their final dividends after resolution was approved.
With the Trade War going on and equities look like there will be a bargain once more, it will be a great time to scoop up some good companies once again.