I always enjoy reading Kyith’s blog posts and also watching Graham Stephen’s Youtube videos.
The below post resonates with me.
The Beauty of Having Low Essential & Basic Expenses (read here)
In fact, I am sure many of the financial bloggers share similar philosophies with what Graham and Kyith mentioned.
“What is the point of owning these things if you are obligated to work the next thirty years or eighty hours a week just to pay for it?”
“This was the path to eventually living life on your own terms, around your own schedule, doing the things that you want to do, when you want to do them. All of a sudden, it is not crazy to want to save all my income.”
As I looked across the blogosphere, I could see the similarities.
The blogger from TFI whom recently left his job and is probably between Stage 7 Security (including interest from CPF) and Stage 8 Independence, according to Kyith’s 11 Stages of Wealth.
The Psychology of Money IV: Freedom and Reasonable > Rational (read here)
Brian Halim, who has a blog, 3Fs . Who is currently (if I am not wrong) happily holidaying in Norway with his family (as per his recent Facebook posts).
To quote him from his blog: It is true because the onset of planting a tree takes hard work, efforts and most importantly patience but as time goes by, you’d be able to enjoy the fruits of your hard work.
Not to forget the blogger from Happy Reit Investor. He is able to find a job according to his own terms and is aware of the importance of spending time with his family.
LIFE IS SO MUCH EASIER WHEN YOU JUST CHILL OUT. (read here)
Personally for me with my family of 4 (me, my wife plus 2 kids), my annual spending is not as low as Kyith’s (eg. $10,040 as the expense he wishes to secure the most), but not as high as the blogger from Happy Reit Investor’s – read here (eg. April expenditure came up to around $4,822). Actually, I find his expenses rather high, probably because he has a car and due to his expenses as a part-time real estate agent. He also has 2 kids if I am not wrong. Then again his active income and passive income are much higher than mine.
My monthly passive income from my bonds and dividend stocks is approximately $3000, which works out to about $100 per day (see above for the breakdown by month). In fact, this passive tax-free income alone is more than sufficient to cover my monthly expenses (for me and my contribution to my family’s expenses). That to me is what really matters. The high-expense items are literally my insurance premiums and my kids’ insurance premiums (which I receive from the mailbox – typically annually – in the thousands) and maybe the occasional overseas trips. My daily transport and food expenses, or weekend shopping spendings are typically low. I do enjoy the almost daily tea with milk (Teh siu dai) from Ya Kun or Toast Box.
This year, the increasing dividend payouts from my DBS holdings and the fact that HSBC has resumed dividend payouts are good news for me.
I haven’t been actively buying stocks this year. Somehow with the high-interest rates, I feel that we are ‘paid’ to wait. There are good places to sock away your excess cash (SSB, T-bills, FD, money market funds, low-cost brokerage cash funds, etc), or for my case, I just leave some of it in my bank accounts (if I just don’t want to deal with the hassles) while waiting for good opportunities. These days I am not in a hurry to DCA or add to my dividend snowball, and instead like to wait for market cycles to play out.
The recent corrections in US bank stocks (esp. those regional banks) did not appeal to me much, as I don’t see them as dividend plays but more as short-term cash reserve put options plays (eg. Put options of BAC, JPM, KRE, etc). In addition, I don’t get much premium from these. Singapore and HK banks are relatively unaffected. HK-listed big international banks like Standard Chartered or HSBC are also generally unaffected.
Nevertheless, I see value in many HK-listed bank stocks with a P/B ratio of less than 1 and a dividend yield of more than 5.5% (in contrast with their SG and US-listed peers). With issues in China properties (debt crisis) issues slowly resolving, better days might be ahead.
However, no hurry. I can wait for the opportunity to allocate my cash for the best bang (returns) for my buck.
With the recent S&P 500 (AI/Tech stocks) bull run, I am not actively looking for value there. However, I was able to capitalise on this to sell covered call options using my Tencent and Alphabet holdings.
In general, I see more value in HK-listed dividend plays, although I am also aware of the risks involved (which is why it is always good to have a diversified portfolio). However, I am currently in the war chest accumulating phase, so am in no hurry to add.
Another point to note is to be selective of dividend stocks with low/medium payout ratios. Preferably below 75%.
I have recently started watching some Youtube videos regarding Hong Kong-listed dividend stocks (watch here, here and here). Unfortunately, I do not understand Cantonese, so have to rely on the subtitles to understand.
For the month of May 2023, I have added (a bit) to my holdings in BOC Hong Kong and CK Asset Holdings Limited.
Work has been getting much busier. I was recently promoted and was given much more responsibilities (and the pay increment was not much). I can see that the company is not doing well, and the recent turnover rate is high.
I have been actively sourcing for new job opportunities (has been a while) and occasionally would get Linkedin messages from recruiters asking if I am interested in some job openings. When my schedule allowed, I would go for the (physical or online) interviews. I actually have a lot of annual leaves unused and used some of these to go for interviews. After all, they say the best time to look for a new job is when you are employed. Ultimately, it is important to try. I am middle-aged, so it is not easy for me to change jobs, and I am keenly aware (of my human capital fading away). Some interviewers are just curious why a senior guy like me is keen to join them.
Maybe for some, they find ‘hope’ for a better life by queuing up and spending money to buy 4D or Toto. I find my ‘hope’ for a better work-life balance by spending my annual leaves and free time taking public transport and going for interviews…kinda awkward :p. Also, it is not easy for me to find time as I have regular meetings almost every weekday.
However, with my war chest slowly accumulating and my passive income hopefully possible to tide me over if the worst happens; I feel I owe it to myself (and my family) to keep searching.
I will be going on a trip to Australia with my family this June holiday. It is a good time to destress/chill and bond with the family.
Oh yeah, I shall be trying out the WISE card. If you planning to get a card too, please use my referral link to sign up for one.
Thank you for reading.
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Gemini
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I have been busy with work recently; hence less time for reading. Less time and energy in fact for blogging. The most recent article(s) that caught my attention was Kyith’s post.
I Don’t Write All These Retirement Income Bullshit Just for Clicks. (read here)
9 Strong Points to Why I Say, the Dividend Income Retirement Mindset is Not a Good Retirement Risk Management Model. (read here)
Personally, I believe anyone has the right to post their views. They are personal opinions. Kyith backed up some of his points with historical data which is great. Nevertheless, what works for him may not work for you or me. It is great that he shared his views. Unfortunately, when we air our opinions in public we do occasionally get negative comments.
Let me share my opinion. From a very layman’s retail investor point of view. FYI I am not working in the financial sector and I don’t really have much time to analyze ETFs.
First off I am not saying I disagree with what Kyith mentioned. I really appreciate his effort for sharing his thoughts.
I believe I have an unbalanced barbell investment portfolio. A significant portion of my portfolio are in dividend stocks. Perhaps I subscribe to Alvin Chow (from Dr. Wealth)’s notion that the fewer stocks you have, the more work you do, while the more stocks you have the less work you do (Watch here, forward to 14.45). This made me think of the word ‘char-pa-lang’ in Kyith’s post (see below). I hope my portfolio is not too ‘char-pa-lang’ (or ‘rojak’, a phrase he used before) :p.
Nevertheless, I would like to highlight some points. I think it is good to back up points with historical data, but often history is not representative of the future.
In addition, I will just limit this discussion to a couple of the REIT ETFs mentioned in Kyith’s post titled, “A Review of Singapore-Listed REIT ETFs Returns, Dividend yields and 34 Years of Global REIT Rolling Returns.” (read here), which kind of led to queries and consequently the subsequent posts.
For me, I see some psychological hurdles (personal doubts) if I am to really invest heavily in the REIT ETFs.
The relatively Short history of the REIT ETFs mentioned
Of the 5 above ETFs mentioned, the earliest inception date (among the 5 of them) is on 20 Oct 2016. Moreover, the inception dates of 2 of the ETFs are in 2021.
The pandemic: The World Health Organization officially declared COVID-19 a global pandemic on March 11, 2020. In Singapore, earlier in 2020, there are three phases of planned reopening were announced, which is only relevant to the zero-COVID strategy. These were however ended on 8 May 2021 because of the Delta variant.
So the relatively short historical price performance of the ETFs would have been impacted by the pandemic (to quite a great extent).
As much as I would like to lean on historical data to give confidence (or recency bias) or extrapolate into the future, I personally would not trust the data. This is unlike the other index ETFs eg. S&P500 Index ETF etc.
Fee matters
I think we can all agree that although initially, the fees (percentage-wise) appear small. However, they can add up to a substantial sum over time, especially when the investment amount snowballs over a long period of time. With local stocks, you typically pay the initial brokerage fee and that’s it. With local dividend stocks – there are no taxes; no custodian fees, etc.You pay fees when you buy and sell, not for holding.
ETFs have fees.
“In investing, you get what you don’t pay for. Costs matter. So intelligent investors will use low-cost index funds to build a diversified portfolio of stocks and bonds, and they will stay the course. And they won’t be foolish enough to think that they can consistently outsmart the market.” John C Boyle
Vanguard founded by John C Boyle pride itself on its low fees. For example, the Vanguard S&P 500 ETF has an expense ratio (as of 11 April 2023) of 0.03%.
What about these REIT ETFs?
Lion-Phillip S-REIT ETF Expense Ratio: 0.6%
NikkoAM-Straits Trading Asia Ex-Japan REIT ETF Expense Ratio: 0.6%
BTW the expense ratios here for some of the REIT ETFs are slightly different from the total expense ratios stated in the table above from Kyith’s post.
Anyway, the REIT ETF expense ratios are not as low as the Vanguard S&P 500 ETF expense ratio, and yeah… no fees by holding individual local stocks. In fact, with so many low-cost brokerages available to local investors here, many of these brokerages do not charge custodian fees for holding selected foreign (eg. Hong Kong or US) listed stocks.
When there are variations of the haystack
I think Index funds or ETFs, in general, have come a long way since John C Boyles (aka Father of ETF) created the index mutual fund in 1975. In 1976, influenced by the works of Paul Samuelson, Bogle created the First Index Investment Trust (a precursor to the Vanguard 500 Index Fund) as the first index mutual fund available to the general public. (Anyway, there are some differences between an ETF and an index fund – but shall not go into specifics).
One investing ethos that many retail investors believe in is as per below:
“Know what you own, and know why you own it” Peter Lynch
Yes, although I do not have time to be very thorough in my investing research, minimally I need to know why I buy certain stocks and what is the company behind the stock.
“If you’re prepared to invest in a company, then you ought to be able to explain why in simple language that a fifth grader could understand, and quickly enough so the fifth grader won’t get bored.” Peter Lynch
I basically need to have conviction. Yes, the historical data of the REIT ETFs are there for all to see. However, essentially I need to have a simple liner to let me understand what is within the product.
Active vs. Passive Investing: Which suit you? (read here)
Adam Khoo has a more simplified way of saying why he prefers to invest in individual stocks rather than in a basket of stocks. Eg. S&P500 consists of 500 companies, but not all are good companies/stocks. If you know how to analyze the good from the bad companies, you could just invest in the good (rather than the basket of good and bad). Then again – I personally must confess I am not as good at analyzing. However, I seriously have doubts about some of the smaller cap ‘bad’ (or just have not heard of them) companies within the S&P500.
But basically, for me, I need to have some reasons to convince myself to hold on to my investments when the tide turns. Hence I can’t help but find out what is behind the stocks, or in this case the ETFs. As much as I hate going down the rabbit hole.
Frankly, for many of these mega-cap stocks, the companies behind them are already conglomerates. Large companies made up of independent entities that operate in multiple industries. Tencent and Alibaba come to mind. Investing in Tencent is basically like investing in an ETF by itself. And since we are talking about REITs, there are also many big cap diversified REITs (consisting of retail, office, industrial, and logistic assets; diversified across many regions geographically), not that many pure REITs.
So a REIT ETF is basically a basket of a bunch of entities….(ok going down the rabbit hole again)…
It is also not as diversified as the S&P500 but not as concentrated as a retail investor’s own diversified dividend portfolio. There are now many sub-categories/sector ETFs. Like a hybrid entity between a market index ETF (eg. Vanguard 500 Index Fund ETF, VOO or an income/dividend ETF) and a diversified portfolio of stocks.
Hmm.. maybe one day (or has it been created), someone will create an ETF consisting of a basket of the ‘best, large-cap, most liquid’ ETFs…… :p
So basically, from the original haystack of the low-cost S&P500 ETF, we now have many many other ‘subset’ haystacks (ETFs).
Anyway if I am to invest in a REIT ETF, I need to know what are the principles that guide the selection of the various REITs that form part of the basket of REITs, and what’s the rationale behind the percentage/proportion for each REIT.
I know the components /weightage are reviewed regularly (probably quarterly)…
For instance, among the 5 REIT ETF, the ETF with the biggest fund size is NikkoAM-Straits Trading Asia Ex-Japan REIT ETF. The investment objective of the Fund is to replicate as closely as possible, before expenses, the performance of the FTSE EPRA Nareit Asia ex Japan REITS 10% Capped Index (“Index”).
“The FTSE EPRA Nareit Global Real Estate Index Series is one of many benchmarks tracking the performance of S-Reits and property trusts.
The index series, jointly developed by FTSE Russell with the European Public Real Estate Association (EPRA) and the National Association of Real Estate Investment Trusts (Nareit), is a widely followed global benchmark with an estimated US$340 billion of assets under management actively benchmarked or passively tracking the indices.
According to the latest index factsheet (as at May 20, 2021), there are 19 S-Reits and property trusts in the FTSE EPRA Nareit Global Index. Quarterly index reviews are in March, June, September and December, based on data at the close of business of the Monday four weeks prior to the review effective date.
Based on the index methodology, index inclusion is subject to but not limited to, meeting various requirements such as sector, size, liquidity and free float. These include being listed on an official stock exchange, companies in the core business of real estate or deriving at least 75 per cent of Ebitda from relevant real estate activities and having a minimum free float of 5 per cent.
Securities are tested for liquidity semi-annually in March and September and non-constituents must meet a minimum liquidity turnover at least 0.05 per cent of their shares in issue based on their median daily trading volume per month, in 10 of the 12 months prior to the review.
The size rule is a relative measure expressed as a percentage of the regional free float index market capitalisation.”
Ok as mentioned in the article… after reading it, yes I (who am not from the financial industry or studied finance) roughly have an idea behind the index methodology. However, to be frank, it is still quite vague. I am not sure how the percentage holding of each component was derived. Ok…but is investing based on sector, size, liquidity, and free float; deriving at least 75 percent Ebitda from relevant real estate activities – giving me enough conviction to hold?
Most investors don’t beat the market… but would you invest in a REIT ETF?
That is true, most people can’t beat the market.
However, as mentioned before, ETFs have come a long way. Today, there are many variations of ETFs. Would holding a REIT ETF beat the market?
Like just take the example of NikkoAM-Straits Trading Asia Ex-Japan REIT ETF. It is incepted in March 2017, so it does not tell us much if we compare it to the S&P500 or even the STI Index.
But just for the sake of curiosity (see below):
The NikkoAM-Straits Trading Asia Ex-Japan REIT ETF price performance is way below S&P500’s and in recent years its price trended below the STI Index’s price (probably because REITs in general are under pressure due to the rising interest rates).
And then again would a REIT ETF beat a small basket of REIT counters?
Again taking the example of NikkoAM-Straits Trading Asia Ex-Japan REIT ETF, the biggest component within this ETF is Link REIT followed by CapitaLand Integrated Commercial Trust and CapitaLand Ascendas REIT. See below for their share price performance.
Share price-wise, the REIT ETF unperformed CapitaLand Integrated Commercial Trust and CapitaLand Ascendas REIT. However, we should also consider dividend payouts.
I am not so sure about Link REIT, but I am sure many local retail dividend stock investors would probably have CapitaLand Integrated Commercial Trust and CapitaLand Ascendas REIT in their investment portfolios.
So let’s say you sold these two REITs and then invest in NikkoAM-Straits Trading Asia Ex-Japan REIT ETF at the end March 2017 (around the time of the REIT ETF inception) and held on until now.
From the end of March 2017 until now, the cumulative profit/loss of a S$1000 initial investment, inclusive of dividend payouts of holding these counters (but not considering reinvestment of the dividends into the same counters) are as per below.
You would have made more overall by investing in CapitaLand Integrated Commercial Trust and CapitaLand Ascendas REIT, as compared to NikkoAM-Straits Trading Asia Ex-Japan REIT ETF.
I mean we can be very detailed in our thinking, philosophical about our investment strategies, and sanguine when there are minor volatilities. However, when over a long period of time, as we see that underperformance continues, would we not second guess our initial thought process? I understand not all of us go and tabulate the overall cumulative profits or losses, but over the years, as you look at the share price underperformance, you would probably start having some self-doubts.
Then you think back about some Youtuber influencer saying “I made X million, did you? Anyone can make money in this type of market, only donkeys don’t”…
Or you think back about what you really know about the index methodology… and what you know (or actually do not know). As mentioned by Kyith in his post, “Access to risk and returns that are outside of your usual accessibility. If the REITs in a certain region perform better than Singapore REITs, you have access to that region.” Perhaps some of the components are really shitty REITs dragging down the ETF performance – so well this ‘outside of your usual accessibility’ is kind of double-edged. No issue when all things are going smoothly, but no control when things are not going smoothly. Can’t individually manage (good and bad).
But the fact is, in investing you can be wrong and still make money in the short to mid-term period… So what is right or wrong? Should you sell, buy or hold?
“Everyone has a plan until they get punched in the mouth.” Mike Tyson
Now, (having vested for the past 5 years or thinking about investing now for the medium to long term) would you have the conviction to hold on to the ETF for another say 5 years or 10 years?
In gist
Investing can be simple or hard, and it is also personal. So yeah…these are just some of my thoughts. Let me know your comments if any.
Thank you for reading.
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Gemini
As stated by MoneySmart on Jan 22, if you’re looking to optimise trading your crypto with relatively low fees, simple-to-grasp expert UI and ease of purchase with Singapore dollars. then the best crypto exchange in Singapore is Gemini,
If you do not have an account, you can sign uphere using my referral link. After you have signed up, once you buy or sell US$100 or more (or 100 USD equivalent of your domestic currency) within 30 days of creating your account, your account will be credited US$10 (or 10 USD equivalent of your domestic currency) worth of bitcoin.
This post is a continuation of the journey down the rabbit hole from my previous post. Again in this post, I strive to present the data as it is. I leave it for you, to form your own judgment.
A brief recap of the unfortunate events that occurred to the Reit post-IPO.
Digital Core Reit, the only pure-play data centre Singapore Reit sponsored by a global pure-play listed data centre owner and operator, Digital Realty was listed on SGX on 6 Dec 2021.
As stated prior to the IPO (read here), Digital Core Reit’s customers consist of cloud service providers, colocation & interconnection providers, social media companies, and IT service providers. Particularly, as measured by base rental income, sector contributions are cloud (50.0%), colocation providers (23.9%), social media (18.5%), IT services (7.4%), and connectivity (0.3%).
Overall, Digital Core Reit’s portfolio comprises of 12 unique customers. However, the REIT’s top 6 customers contribute 99.9% of the portfolio’s base rental income. The prospectus disclosed the top six customers without identifying the customers (see chart below). We now know that these customers are Microsoft, Cyxtera, Facebook (or Meta), IBM, Sungard Availability Services, and Amazon Web Services (AWS).
DIGITAL CORE REIT: ANOTHER FOREIGN REIT ON A BUMPY RIDE (read here)
On 11April 2022, it was announced that DCR’s fifth-largest tenant – Sungard Availability Services – has filed for bankruptcy protection in the US, Canada and the UK. Sunguard occupies about 40% of the power capacity at DCR’s data centre in Toronto and contributes slightly more than 7% of DCR’s rental income.
DBS lowers Digital Core REIT’s TP to $1.30 amid tenant bankruptcy, UOB KH downgrades to ‘hold’ (read here)
Shortly after, Digital Core Reit’s sponsor, Digital Realty, announced that it is committed to guaranteeing the cash flow to Digital Core Reit in the event of any near-term shortfall arising from tenant bankruptcy.
On 16 March 2023, The Edge highlighted that last month, Bloomberg reported that Cyxtera is attempting to refinance a revolving credit facility that matures in November this year. “Fresh concerns on Cyxtera’s ability to service their debt obligations have surfaced, and most recently, Moody’s downgraded the company’s corporate family rating from B3 to Caa2. Moody’s cited that although they believed in Cyxtera’s underlying business fundamentals, they are concerned with the firm’s ability to service debt obligations in the medium term,”
Cyxtera Technologies is one of DC REIT’s top 10 tenants accounting for 22.6% of gross rental income. It is Digital Core Reit’s second largest tenant to be exact. Cyxtera Technologies is a data centre owner and operator in the US, and Asia-Pacific.
Is this why Digital Core REIT’s unit price has been weak? (read here)
On 16 March 2023, Digital Core Reit highlighted that Cyxtera Technologies announced that it entered into an agreement with its lenders to extend the maturity date of its 2023 debt maturity to April 2024. Cyxtera Technologies remains current on its rental obligations and has not requested any rent deferments, rental reductions, or contraction of the space it occupies.
Cyxtera’s long term debt of US$853 million matures in 2024 (read here)
Shortly after the 16 March 2023 “The Edge” article about Cyxtera Technologies was out, there were a number of analysts’ articles.
One by DBS dated 16 March 2023, titled: “Digital Core REIT: News Analysis: Key tenant’s operations remain healthy, but financial health has been called into question” (read here)
To quote the above article by DBS:
“DCREIT has demonstrated their ability to navigate similar risks previously.
We understand from management that Cyxtera continues to be current on all their rentals, and have not received any new updates from the tenant. Based on our estimates, Cyxtera is DCREIT’s second largest tenant, accounting for c.22.6% of DCREIT’s revenues. Although this may seem like a concern for DCREIT, we take comfort from its Sponsor’s commitment to the REIT. Similar to what we saw with SunGard previously, DCREIT’s Sponsor was quick to step in and provide support for the REIT. Moreover, DCREIT has already successfully backfilled almost half of the space that was vacated by SunGard as demand for DC space remains robust.”
One by UOB Kay Hian dated 20 March 2023: “Digital Core REIT – UOB Kay Hian 2023-03-20: Rebalancing Towards Investment Grade Tenants” (read here)
To quote the above article by UOB Kay Hian: “Cyxtera is Digital Core REIT’s second largest-tenant, accounting for 22.6% of annualised rent as of Dec 22. The exposure to Cyxtera is straddled across six data centres. Cyxtera remains current in rents and has not defaulted. Sponsor Digital Realty could provide support through a cash flow guarantee in the event that Cyxtera files for chapter 11 bankruptcy protection.”
Quick fact: DBS is the joint issue manager, global coordinator, book-runner and underwriter of Digital Core Reit IPO, with UOB as Co-manager. See below.
To the above articles, I took it with a pinch of salt: Sponsor Digital Realty could provide support through a cash flow guarantee in the event that Cyxtera files for chapter 11 bankruptcy protection.
Well, yes and no. If we can infer from what happened with Sungard.
Shortly after the news of Sungard bankruptcy, Digital Core Reit announced on 21 April 2022, in their Business and Operational Updates for the First Quarter 2022, the below-mentioned. This was also made known via the various analysts’ reports.
Perhaps to reassure investors worried about the impact on the dividend payout.
However, shortly after the above news (about 3 months later), in an article posted on the Reit website under the Newsroom section dated 28 July 2022, titled “CASH FLOW SUPPORT AGREEMENT“, the below was mentioned:
So the cash flow guarantee was meant to be temporary and repaid back to Digital Realty from 1 Jan 2024 to 31 Dec 2028. Wonder why there were no analysts’ reports on the above-mentioned.
So with the impending bankruptcy of Cxytera, and if we are to infer from the example from the Sungard episode (7% of DCR’s rental income), any cash flow guarantee from Digital Realty (if any for Cxytera situation to begin with) would also be temporary. Hence, yes and no to support through a cash flow guarantee.
Another point to note pertaining to DPU (which investors are anxious to know), is that as stated on its website, Digital Core Reit’s distribution policy is to distribute 100% of Digital Core Reit’s Distributable Income from the listing date to the end of the projection year 2023, and at least 90% thereafter. The distributions will be made on a semi-annual basis.
So what will be the DPU after FY 2023?
It is anyone’s guess.
What happens when a tenant goes bankrupt?
Now what happens when a tenant goes bankrupt and what can the landlord do? In the case of Digital Core Reit, we do not need to look too far back. We can perhaps track what happened to Sungard. However, in gist, I have yet to find any news of the permanent conclusions/solution. Nevertheless, knowing the sequence of events might perhaps be useful in anticipating the situation with Cxytera.
Actually, it is not the end of the road for landlords. Although, I am sure most landlords would want to avoid the lengthy and cumbersome process.
However, before we begin, here are a few fun facts:
1) The April 2022 bankruptcy is Sungard Availability Services 2nd bankruptcy. Sungard first declared bankrupt in 2019. Sungard emerged from its pre-negotiated Chapter 11 restructuring in less than a day,a US record for a deal of this kind.
In May 2019, Sungard Availability Services completed a pre-packaged Chapter 11 filing. Through this action, Sungard reduced its long-term debt by more than $800m and received $100m of new liquidity from the company’s creditors.
Sungard files second Chapter 11 bankruptcy (read here)
Tech company Sungard files second bankruptcy in three years (read here)
Sungard AS completes bankruptcy restructuring in record time, appoints new CEO (read here)
2) Mapletree Industrial Trust was also impacted by the 2022 Sungard’s bankruptcy, though the extent is not as significant. MINT is more diversified, and it has a larger market capitalization (SGD 6.55 billion), as compared to Digital Core Reit (USD 539.03 mil or SGD 718.26 mil).
To quote the below article: “Sungard is estimated to contribute c.1.1% of revenue and depending on the outcome of the company’s restructuring plan, this could be at risk in the medium term.”
Mapletree Industrial Trust: Looking for growth within the portfolio (read here)
To quote the below article: “Sungard comprised 6.7% of gross rental income (GRI) in the 29-data center Sila Realty Trust portfolio, which Mapletree acquired for $1.3bn“
Sungard Availability Services Files for Chapter 11 Bankruptcy (read here)
The sequence of events relating to Sungard Availability Services:
On 11 April 2022, it was announced that Digital Core Reit’s fifth-largest tenant – Sungard Availability Services – has filed for bankruptcy protection in the US, Canada and the UK. (read here)
Overall, Sungard Availability Services expects to complete the Chapter 11 bankruptcy process in four to six months, by mid- to late-summer 2022. Notably, less than one month ago, the company’s UK subsidiary initiated an administration (i.e., insolvency) proceeding for its business in the United Kingdom.
371 Gough Road, Suite 110 – Markham, ON
Sungard Availability Services leases 40,000 sqft of gross area / 20,000 sqft of raised floor space from Digital Realty’s entity Digital Toronto Nominee, Inc. at its facility located at 371 Gough Road, Suite 110 in Markham, Ontario (Canada). In terms of layout, this data center has two data halls across one floor.
Digital Core Reit (Digital Realty-sponsored company), owns 90% of Digital Toronto Nominee, Inc., and, in turn, 90% of the underlying operating property at 371 Gough Road. Whereas Digital Realty retains the remaining 10% interest in the underlying operating property at 371 Gough Road. (read here)
So what comes next?
To quote this article: Sungard Availability Services Files for Chapter 11 Bankruptcy (read here)
Sungard’s Next Steps – Sale or Equitization Scenario
Sungard Availability Services’ restructuring support agreement (RSA) contemplates that the company will implement a restructuring either through:
i) a sale of all, substantially all, or one or more subsets of its assets, known as the Sale Scenario, or
ii) the equitization of Sungard’s prepetition-funded debt through a chapter 11 plan, known as the Equitization Scenario.
On 22 June 2022, Digital Realty filed a limited objection, in the United States Bankruptcy Court for the Southern District of Texas, to Sungard Availability Services’ possible assumption and assignment of certain executory contracts and unexpired leases, as part of Sungard’s ongoing Chapter 11 bankruptcy process.
In total, Digital Realty’s various agreements with Sungard require a total cure amount of at least $1.15m to account for outstanding monetary defaults.
Note: Cure Amounts means all amounts, costs and expenses required by the Bankruptcy Court to cure all defaults and other amounts outstanding under the Assumed Contracts and Additional Assumed Contracts to the extent required so that they may be assumed by the applicable Selling Entities and assigned to Buyer pursuant to Bankruptcy Code Sections 363 and 365 and the Confirmation Order.
Digital Realty Files Objection to Sungard Availability Services in Bankruptcy Court (read here)
However, I was unable to find news of the outcome of this filing.
Subsequently, Sungard opted for the sale scenario.
On 2 Aug 2022, it was reported that 365 Data Centers is to acquire a majority of Sungard’s US colocation and networking business.
365 Data Centers to acquire the majority of Sungard US (read here)
On 3 Nov 2022, the following was reported in the article below: “Sungard Availability Services announced the successful completion of the previously announced Asset Purchase Agreements (APAs) with 11:11 Systems (“11:11”) and 365 Data Centers (“365”). 11:11, a managed infrastructure solutions provider focused on cloud, security, and connectivity solutions, has acquired Sungard AS’ North American Recovery Services (RS) business, as well as its North American Cloud and Managed Services (CMS) business and Consulting business. 11:11 will operate essentially all of Sungard AS’ IT systems and provide services back to 365 and Sungard AS. Also, as part of the transactions, 11:11 will operate four data centers previously part of Sungard AS. 365, a leading provider of network-centric colocation solutions, acquired a majority of Sungard AS’ U.S.-based Colocation and Network Services business. As part of the 365 transaction, eight data centers including network assets, will become part of the 365 portfolio of infrastructure assets.
Sungard AS Successfully Completes Transactions with 11:11 Systems and 365 Data Centers (read here)
11:11 Systems Completes Acquisitions of Sungard Availability Services’ Recovery Business and Cloud Managed Services Business (read here)
It is worth noting that unsecured creditors will recover nothing from Sungard’s $60 Million Asset Sale to 11:11 Systems.
Sungard Wins Approval of $60 Million Asset Sale to 11:11 Systems (read here)
If a tenant goes bankrupt, a tenant can make one of three elections with respect to its unexpired leases, subject to the approval of the bankruptcy court and so long as the tenant satisfies certain applicable requirements under the Bankruptcy Code. The tenant can:
1. assume the lease in accordance with Sections 365(a) and (b) of the Bankruptcy Code;
2. assume and assign the lease to a third party in accordance with Section 365(f) of the Bankruptcy Code; or
3. reject the lease.
Lease Defaults and Restructuring: The Impact of Bankruptcy on Commercial Landlords and Tenants (read here)
Top 10 Questions For Landlords to Ask When a Tenant Files for Bankruptcy (read here)
Typically in a sale scenario (sale of the business to a third party), option 2 (assume and assign the lease to a third party) will be chosen. If the third party, assumes the lease, all rents owed – pre-petition and post-petition – must be paid. But the Landlord should not count his chickens quite yet – there is often a negotiation. The tenant or proposed assignee typically will agree to assume the lease only if there is a renegotiation of its terms. (read here)
However, on 2 Feb 2023: Digital Core Reit issued the article: “Digital Core REIT Reports Results for the Full Year 2022” (read here). See the below extract:
On 6 Feb 2023: As per UOB Kay Hian article it is also stated that Sungard vacated the Toronto data centre on 1 Jan 2023.
It appears that Sungard has opted to reject the lease and vacated the premise. Digital Core Reit was able to temporarily lease out half the area. See below.
Note: Rejection of lease -The bankrupt tenant has the right to reject the lease within the same 60-day period. If the tenant does not assume the lease, it automatically rejects, or cancels, the lease. A tenant can reject a lease before the 60-day period expires. The landlord cannot do anything to stop a tenant from exercising the absolute right to cancel a lease. The landlord and the tenant, however, can negotiate a new lease that will be valid and binding if approved by the Bankruptcy Court. When the debtor rejects the lease, the landlord can obtain an immediate order from the bankruptcy court to force the tenant to vacate the premises. This can be far more expedient than the conventional unlawful detainer. Additionally, in this situation the bankruptcy court is the tenant’s last resort, whereas in the usual unlawful detainer, the tenant has a variety of tactics that can delay eviction (including filing bankruptcy). (read here)
The question remains if the rental rate of Sungard lease at 371 Gough Road is above the market rate.
It was also previouslyreported by DBS Research & UOB Kay Hian that Digital Core managed to backfill almost half the space vacated by Sungard. Who is the new tenant?
What happened to the limited objection filed by Digital Realty in June 2022?
To quote this article: “In some circumstances, it will make sense for the tenant to file bankruptcy if it cannot reach a workout agreement with the landlord, particularly if the tenant has substantial other debts that it is unable to pay, if it wishes to sell its assets to a third party that wants to purchase the assets “free and clear” of liens and claims, or where the lease is at a below-market rental rate. If the tenant files bankruptcy, in addition to the right to reject the lease described above, the tenant will typically have the right to assume, or assume and assign, its lease. To the extent that the tenant wishes to sell its assets to a third party, the tenant will be able to assign its lease to that party.
The threshold question for the tenant to answer is whether it can make a credible threat to the landlord that it will actually file bankruptcy. This will depend on the tenant’s particular facts and circumstances. Even financially solvent tenants can file bankruptcy, because insolvency is not a requirement for a bankruptcy filing.”
With the issues surrounding Cxytera, many investors would probably be anxious to know what happened to the Sungard vs Digital Realty/Digital Core situation.
Cyxtera Technologies has announced that it has entered into an agreement with all of its revolving lenders to modify certain terms of its $120.1 million revolving credit facility, including an extension of the maturity date from November 1, 2023, to April 2, 2024.
“As the Chinese like to say, if you borrow 100,000 yuan from the bank, you are a bit scared; if you borrow a million yuan, both you and the bank are a little nervous; but if you take a 1 billion yuan loan, you are not scared at all, the bank is,” Jack Ma (read here)
In addition, as stated in my previous post, there was a notable exodus of key members of Cxytera’s board of directors and audit committee in late March 2023, and fundamentally the business of Cxytera is unsustainable.
What comes after April 2024 is anyone’s guess.
In the event that Cxytera Technologies goes bankrupt and if we are to infer from Sungard’s episode, a possible scenario is that Digital Core Reit and the analysts will let it be known (and blast it online / via presentations to investors) that it will not impact DPU to allay investors’ fear. Shortly after (perhaps 3 months later), an article will pop up on DC Reit’s website (Newsroom section) stating that the cash flow guarantee was meant to betemporary and repaid back to Digital Realty. Subsequently, Cxytera may proceed to sell off its assets and business (unsecured creditors recover nothing), and Digital Realty/Digital Core and third party will renegotiate the lease (depending on the market rate and circumstances).
UOB even has a scenario on the DPU impact (read here):
However, I am scratching my head as to the below statement from UOB Kay Hian. Would DC Reit have much say in who the third party would be? Eg. To whom Cxytera sells its business? Unless Cxytera rejects the lease and Digital Core Reit takes over the premise, and a new tenant lease the space.
Thank you for reading.
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So much promise at the start, only to start seeing worms post-IPO. That was my initial thought when news of Cyxtera’s refinancing woes surfaced in March 2023.
Cyxtera Technologies is one of DC Reit top 10 tenants accounting for 22.6% of gross rental income. Cyxtera Technologies is a data centre owner and operator in the US, and Asia-Pacific.
Although I am currently vested in Digital Core Reits, I am fully aware that one has to be impartial when it comes to catching a falling knife and admitting it, disposing of it, and moving on. Overall, the DC Reit holding occupies approximately 2% of my overall stock and bond portfolio.
I typically do not read too much into the details of my investments if things are going smoothly. However, when stock price starts crashing and negative news hit the headlines, I tend to put them under a ‘microscope’ to try to find out what I have missed. There could be lessons to be learned and to avoid in the future.
In most cases, it is like going down a rabbit hole. There are tonnes of information.
However, in this post, I would like to refrain from stating my opinions and strive to present the data as it is. I leave it for you, to form your own judgment.
Revenue and Dividend
For the FY 2022, DC Reit’s gross revenue at US$107.7 mil exceeded the forecast gross revenue of US$105.9mil.
At its recent stock price, DC Reit has a current yield of 9.43%.
In its full-year 2022 presentation dated 2 Feb 2023, the Full Year 2022 Distribution is at 3.98 US Cents per share. As stated on its website, DC Reit’s distribution policy is to distribute 100% of Digital Core REIT’s Distributable Income from listing date to the end of the projection year 2023, and at least 90% thereafter. The distributions will be made on a semi-annual basis.
The FY 2022 distribution at 3.98 US cents fell short of what was stated in the IPO prospectus (eg. 4.18 US cents) – See below. Given the evolving situation, it is also doubtful if they can meet the target of 4.4 US cents for FY 2023.
DIGITAL CORE REIT IPO PROSPECTUS
There are many glaring questions.
For this post, let’s just look at the management (or rather the changes in management).
Management playing the game of musical chairs
Typically I do not read too much into change of management. However, when there appear to be sudden and increasing numbers of changes… It could signal troubles ahead.
1) Cyxtera Technologies: Digital Core Reit’s 2nd largest tenant
Is this why Digital Core REIT’s unit price has been weak? (read here)
There has been some weakness in the price of Digital Core REIT in early to mid March 2023. According to DBS Group Research, Cyxtera Technologies is one of DC REIT’s top 10 tenants accounting for 22.6% of gross rental income. Cyxtera Technologies is a data centre owner and operator in the US, and Asia-Pacific.
It was reported that Cyxtera posted a $355m net loss for 2022, and canceled its earnings call.
Cyxtera Technologies announced that it has entered into an agreement with all of its revolving lenders to modify certain terms of its $120.1 million revolving credit facility, including an extension of the maturity date from November 1, 2023, to April 2, 2024; and it is actively attempting to extend the maturity on, or refinance or repay, its revolving credit facility and long-term debt that mature in April 2024 and May 2024, respectively.
However, its business is fundamentally unsustainable (as stated in the post below) and its end appears to be imminent.
Cyxtera Technologies: Unsustainable Business Model (read here)
Cyxtera Technologies was already downgraded by Moody’s Investors Service from B3 to Caa2 on 17 Feb 23. Its outlook was also changed from stable to negative. Moody’s cited governance weakness and difficulty in refinancing revolving credit facilities of US$120m as basis for their downgrade. Moody’s believes Cyxtera is at high risk for default without an equity capital infusion and full refinancing over the next few months.
The recent exodus of key members of the Company’s board of directors and audit committee in late March could be a sign of imminent troubles.
– On March 28, 2023: Resignations of Melissa Hathaway and Michelle Felman from the Company’s board of directors and audit committee, effective on March 28, 2023.
– On March 27, 2023, Jeffrey C. Smith resigned as a member of the Board of Directors (the “Board”) of Cyxtera Technologies, Inc. (the “Company”), effective immediately.
– On March 22, 2023, Cyxtera Technologies, Inc. announced that Mr. Randy Rowland will step down as the Company’s Chief Operating Officer, effective March 31, 2023.
– On November 10, 2022, Raymond Svider resigned from the Board of Directors Company. Mr. Svider’s resignation was not due to any disagreement with the Company. In addition, on November 10, 2022, the Board elected Benjamin Phillips to serve as a member of the Board to fill the vacancy created by Mr. Svider’s resignation.
CYXTERA TECHNOLOGIES, INC. : Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing (form 8-K) (read here)
2) Digital Realty
Talking about the musical chairs game played by the management, recently there were changes in the key roles of Digital Realty Management.
Digital Realty, the largest owner, operator, developer, and acquirer of data centres globally (and Digital Core Reit’s Sponsor), recently issued mixed 2023 guidance after Q4 earning miss in Feb 2023.
Digital Realty issues mixed 2023 guidance, after Q4 earning miss (read here)
a) In Dec 2022, it was announced that Digital Realty CEO Bill Stein was terminated from his role as CEO, effective immediately. The current president and chief financial officer, Andrew P. Power was appointed as its CEO.
Digital Realty CEO Bill Stein leaving company, CFO Andy Power takes helm (read here)
b) In Jan 2023, Digital Realty appointed Matt Mercier as Chief Financial Officer. He succeeded Andrew Power, who was recently named Chief Executive Officer.
Digital Realty Appoints Matt Mercier as Chief Financial Officer (read here)
c) In Jan 2023, Serene Nah was appointed as Managing Director, Head of Asia Pacific. Serene graduated from The Nanyang Technological University Singapore with a Bachelor’s degree in Business and has an executive MBA from Kellogg-HKUST. She will be based in Singapore.
Digital Realty Appoints Serene Nah as Managing Director, Head of Asia Pacific (read here)
New regional leader takes charge at Digital Realty (read here)
3) Digital Core Reit
DIGITAL CORE REIT: ANOTHER FOREIGN REIT ON A BUMPY RIDE (read here)
Mr Mak, in his post (above), highlighted the following points:
“Unlike its sponsor REIT, which is internally managed as is the common practice in the US, DCREIT is externally managed. We have in various editions of GIFT mentioned our strong preference for the internally managed model as it is better mitigates conflicts of interest between the manager and unitholders….
Another issue we raised is that the five-member all-male board of the manager includes an independent director who “spent 30 years with DBS Bank until his retirement in 2019 and was responsible for the bank’s equity markets business in Singapore”. While he may meet the technical requirements for independence, it is surprising that an independent director who has such a close relationship with DBS Bank – one of the three issue managers, global coordinators, bookrunners and underwriters – was appointed. This does not reflect well on the search and nomination process and raises questions as to whether those involved in assembling the board had adequately considered whether this particular director would be perceived to be independent.”
While going through the biodata of the management team, I just can’t help finding this interesting information.
Daniel Tith (Chief Financial Officer) – Read here. An impressive set of appointments. Prior to joining Digital Realty Trust in July 2015 (and last served as Vice President), he served as Vice President, Product at Peloton Document Solutions LLC (for 2yrs and 7 months as per his Linkedin Profile), and prior to that, he was an Investment Banking Associate at Bank of America Merrill Lynch (for 5yrs 10 mths).
Mr Tith holds a Bachelor of Arts from the University of California, Los Angeles.
Digital Core Reit has a market cap of US$510.96 million. And in FY2022, generated gross revenue of US$107.7mil.
Peloton Document Solutions LLC (from data online), is an enterprise-level web application for the finance industry that allows investment banks and other financial institutions to market deal opportunities in a dynamic new way.
Peloton Document Solutions LLC has a revenue of US$5.4M (read here) and has less than 25 employees (read here). In another article, it states: “Based in Los Angeles, CA, Peloton Document Solutions is a small technology company with only 50 employees and an annual revenue of $580,000.” (read here)
In Dec 2022, Digital Core Reit announced the resignation of Ms Yvonne Ang Ruey Shya as Joint Company Secretary of the Company and in her place, the appointment of Ms Maureen Low Meimei and Ms Sheena Han RuiYun as Joint Company Secretaries of the Company with immediate effect. (read here)
As mentioned earlier, this post is to present the data as it is and share what I have read.
Management is one aspect I looked to when evaluating a stock/company. However, it is highly subjective and not at the top of my list. Basically, I view the fundamentals and business moat as more important. How the system is structured.
However, if the fundamentals are flawed and there is no strong moat, good management that is capable, experienced, and ready to listen, enforce pro-business actions, and steer the company (away from being a bad business) is critical. If the business remains as fundamentally flawed (bad), it is the manager that eventually loses (terminated/resigned).
“Choose a business any idiot can run because sooner or later one will.” Warren Buffett
“Whenever a bad business comes up against an excellent manager, the business invariably wins.” Warren Buffett
Thank you for reading.
Webull
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If you do not have an account, you can sign uphere using my referral link. After you have signed up, once you buy or sell US$100 or more (or 100 USD equivalent of your domestic currency) within 30 days of creating your account, your account will be credited US$10 (or 10 USD equivalent of your domestic currency) worth of bitcoin.
I am not sure about you, but I have been feeling the impact of inflation on my daily/monthly personal expenses and our family expenses.
Trips to work have been getting more expensive even though I am traveling via public transport. The food in the food court and restaurants has risen (not to mention the rise in GST).
The $300 CDC Vouchers issued to each household on 3 January 2023 did help, but their effects are minimal.
I am glad that I have a fully paid-up HDB apartment and am not affected by the rising rents (which are probably felt by many ex-pats who are renting). We don’t have an investment property, so unless we can find a way to monetize the apartment we are staying in, the rise in property asset prices in Singapore does not really benefit us.
This year our family decided to go on a trip to Australia in June. So we have to set aside some money for that as well.
So yeah, expenses, expenses, and more expenses.
8 in 10 Singaporeans Affected by Inflation, Finds Seedly and Milieu Insight (read here)
Still, I have made every effort to build up my war chest. Nevertheless, this has been getting harder, especially in 2023.
Singapore Inflation Rate
Directionless Stock Markets
A war chest that has yet been deployed since…. let me see…since the beginning of Feb 2023. Frankly, I have not been that active in investing. The shadows of the dark clouds of high-interest rates and lacklustre markets are ever-present.
Perhaps I have lost interest, or perhaps that just isn’t any attractive ‘proposition’.
This might sound controversial, since didn’t we just recently witnessed the second-biggest bank failure in American history. The news dominated headlines as Silicon Valley Bank (SVB) was placed into receivership on 10 March 2023. This failure was then followed by the closure of Signature Bank on 12 March 2023.
Credit Suisse, the second-largest bank in Switzerland, collapsed on 19 March 2023 and was bought by rival UBS for 3 billion CHF (about $3.3 billion USD).
However, in finance, things are not always that straightforward, and for a lack of a better word, there are simply too many moving parts. These days, with the high inflation and rising (and high) interest rate hikes by the US Federal Reserve, bad news (bank failures) could mean good news (eg. hints that the Federal Reserve could be nearing the end of its interest-rate hiking cycle).
Across the Pacific, in China, where Beijing abruptly ended its draconian property tightening measures and the unpopular zero-Covid policy, and Alibaba Group Holding’s massive overhaul plan to split its US$220 billion (S$292 billion) empire into six business units promises to yield several initial public offerings (IPOs), together with the hints that Federal Reserve could be nearing the end of its interest-rate hiking cycle, led to a short rally in Chinese tech stocks.
While US bank stocks plunged (esp. the regional banks and their ETFs) due to the headline news of the banks’ failures, the plunge was nevertheless brief. In fact, it fizzled out rather quickly.
In hindsight, at one point, there were articles discussing and fanning the fear that the banks’ failures might lead to a contagion of banking system collapses at a scale similar to what we have seen in the 2007-2008 global financial crisis.
SVB collapse: Will 2008 Financial crisis repeat? Here’s what experts say (read here)
Year-to-date, the S&P500 is up 7+% (not down, despite the ‘shocking’ headline news). See below.
Chinese Tech stock fell since the start of the year and has recently rallied (probably due to the news of Alibaba’s massive overhaul). However, it is essentially flat. See below.
At home, in Singapore, the stock prices of the major bank stocks (major components of the STI) did not exhibit major volatilities. Unsurprising the STI Index is year-to-date, essentially also flat.
As an investor sitting on the sideline with a ready shopping list of stocks, hoping for a major ‘sale’ for stocks, I just do not feel the adrenaline pumping. All the build-up of ‘hype’ from the second-biggest bank failure in American history to the collapse of the second-largest bank in Switzerland, ended in a slightly up-trending market.
And so much promise in the Chinese tech sectors since the end of last year….ended so far in a range-bound market.
Or have I missed something? Perhaps. Or perhaps I just need to be more patient. After all, it is not easy saving up for a war chest this year. An uphill task with the ‘hill’ getting steeper so to speak.
“The stock market is a no-called-strike game. You don’t have to swing at everything – you can wait for your pitch.” Warren Buffett
In Gist
Did Inflation Just Kill The FIRE Movement? (read here)
As the blogger from Mr. Tako Escapes mentioned in the above post: “Saving has always been something of a difficult prospect, but it’s even more of a challenge in 2023.”
However, stock market-wise, I would not say we are in a sinking stock market. Still, I do not find compelling bargains (well at least for the stocks that I have been eyeing), and I do find the markets somewhat directionless and range-bound. It is no secret that the persistently high inflation has ended the era of a low-interest rate environment (which was a boost for stock prices for the past 15 years or so).
On another note, a point mentioned by Mr. Tako is that there seems to be a positive correlation between FI (not just FIRE) readership and bull markets. For instance, it probably goes down when there’s a bear market, but it will pick up again when there is a bull bear. Given that high inflation (and rising interest rates) has sort of cast a gloomy cloud over the markets, it has led to a drop-off in reader web-traffic to the financial independence blogs.
It is perhaps a tad too negative to state that inflation has ‘killed’ the FIRE movement, and I am sure despite the many challenges, many are still working hard towards it.
With lesser savings and a lack of compelling bargains, I reckon for now I am contend to just focus on saving up and tallying up my passive (and active) incomes.
Thank you for reading.
Webull
Sign up for a Webull account via my referral link and get 5 shares worth between US$50 ~ US$500, before 28 April 2023!
StocksCafe
FYI I find StocksCafe useful for the tracking of my own portfolio, and I especially like to use it to track my portfolio stock dividend/bond interest payouts (projected and due). You can use my referral code: apenquotes. Just click here. Upon signing up using the referral code, you will get to enjoy being a Trial Global Friend of StocksCafe and test out all features for free for one month!
For the Singapore market, Tiger Brokers currently waive the minimum fee and only charge a 0.08% trading fee. This drastically reduces your cost as the minimum fee from other brokers (ranging from SGD 8 such as FSMOne and SCB, to SGD 25 for local brokerages) does add up and can eat into your returns.
Tiger Broker Referral Code:: GPE59H
I would like to invite you to start investing with Tiger Brokers so you can claim your welcome bundle. You will get 2.88 free stocks worth up to SGD 360* and enjoy up to 365 days of unlimited commission-free trades*. You simply need to deposit SGD 1,000 in your newly approved account and make 5 new BUY trades*.
Typically I use FSMOne.com to invest in funds & ETFs (including money market funds).
If you do not have an account, you can sign uphere. Please use my FSMOne referral code: P0031127, when you sign up.
Shopee
I have been using Shopee for a while and think you will like it as much as I do.
Get $10.00 off your first purchase using my code DARREB52. Download Shopee now and enjoy hot deals at the best prices! Click here.
Happy shopping!
Gemini
As stated by MoneySmart on Jan 22, if you’re looking to optimise trading your crypto with relatively low fees, simple-to-grasp expert UI and ease of purchase with Singapore dollars. then the best crypto exchange in Singapore is Gemini,
If you do not have an account, you can sign uphere using my referral link. After you have signed up, once you buy or sell US$100 or more (or 100 USD equivalent of your domestic currency) within 30 days of creating your account, your account will be credited US$10 (or 10 USD equivalent of your domestic currency) worth of bitcoin.
One of the advantages of using Webull is that you can buy fractional shares. This post will show you how.
What are Fractional Shares?
A fractional share is less than a full share in a company.
In other words, it’s a fraction of a share.
Fractional Share trading gives you the ability to purchase an equity position with a quantity of less than one whole share. Instead of having to buy a security in full share increments, this allows you to purchase a piece of stock for an amount that you feel comfortable with. Webull offers fractional shares for most stocks and ETFs that are available on our platform.
Why do people trade fractional shares?
There are many high-priced stocks that are trading for hundreds and even thousands of dollars per share. Someone with a limited amount of capital may have difficulty choosing which investments make sense for them. Fractional share investing eliminates this constraint by allowing you to invest with as little as $5. The ability to purchase fractional shares lowers the barrier of entry into the stock market which creates opportunities for investors at every level.
To maybe extrapolate this a bit, for people with a limited budget to invest, but want to construct their own diversified portfolios (based on the stocks that they are interested in), this is made possible by purchasing fractional shares.
For example, the current price of an Apple Inc Stock (APPL), at the time of writing cost US$151.03 (S$203.17). This may be too high a price for some retail investors. They can instead choose to buy 0.1 shares at US$15.10 or even 0.01 shares at US$ 1.51.
Fractional shares also make it easier for people to invest the desired amount in a company’s stock.
Another advantage of Webull is that trading Stocks, ETFs, and Options on Webull are commission free, except for certain index options which are assessed a contract fee. Relevant and regulatory and exchange fees also apply.
Investors can enjoy access to trade US and HK stocks in fractional shares with zero commission fee, plus there are no minimum requirements, no limits on commission-free trades, and no platform fees.
Step-by-Step Guide to buying Fractional Share:
First, find the stock you want.
Click on the red highlighted symbol below.
Key in the name of the stock.
Click Trade.
You will notice that if the Order Type is “Limit”, and when you try to key in the Quantity, there is no decimal “.” next to the “0”.
What you need to do now is to change the Order Type to “Market”. This step is critical.
Now under Amount in Share, you can key in a value that is less than 1 (eg. 0.1 or even 0.01).
Check the details and then if it is ok, click confirm. You can check your Webull portfolio to check if the fractional Share is indeed in your portfolio.
There you have it. Easy-peasy.
Thank you for reading.
Webull
Sign up for a Webull account via my referral link and get 5 shares worth between US$50 ~ US$500, before 15 March 2023!
StocksCafe
FYI I find StocksCafe useful for the tracking of my own portfolio, and especially like to use it to track my portfolio stock dividend/bond interest payouts (projected and due). You can use my referral code: apenquotes. Just click here. Upon signing up using the referral code, you will get to enjoy being a Trial Global Friend of StocksCafe and test out all features for free for one month!
For the Singapore market, Tiger Brokers currently waive the minimum fee and only charge a 0.08% trading fee. This drastically reduces your cost as the minimum fee from other brokers (ranging from SGD 8 such as FSMOne and SCB, to SGD 25 for local brokerages) does add up and can eat into your returns.
Sign up and open an account with Tiger Brokers (Singapore) during the promotional period to receive a free GoPro Share (NASDAQ: GPRO), 365 Days of unlimited commission-free trades for HK, SG, and China A stocks, 180 Days of unlimited commission-free trades for U.S stocks, 5 commission-free trades for options within 30 Days and 1 month Ryde+ subscription.
Typically I use FSMOne.com to invest in funds & ETFs (including money market funds).
If you do not have an account, you can sign uphere. Please use my FSMOne referral code: P0031127, when you sign up.
Shopee
I have been using Shopee for a while and think you will like it as much as I do.
Get $10.00 off your first purchase using my code DARREB52. Download Shopee now and enjoy hot deals at the best prices! Click here.
Happy shopping!
Gemini
As stated by MoneySmart on Jan 22, if you’re looking to optimise trading your crypto with relatively low fees, simple-to-grasp expert UI and ease of purchase with Singapore dollars. then the best crypto exchange in Singapore is Gemini,
If you do not have an account, you can sign uphere using my referral link. After you have signed up, once you buy or sell US$100 or more (or 100 USD equivalent of your domestic currency) within 30 days of creating your account, your account will be credited US$10 (or 10 USD equivalent of your domestic currency) worth of bitcoin.
StocksCafe is a great tool to track and monitor your portfolio, discover interesting stocks, and understand the companies behind the stocks.
Benefits of StocksCafe
1) Track & monitor portfolio With StocksCafe you can measure and understand the true performance of your portfolio.
StocksCafe is one of the best portfolio management tools available for the Singapore market. Besides having the standard metrics for portfolios such as P&L, beta and cost breakdown, the risk of a portfolio is also calculated.
Key monitoring tools include Alerts and Market Update emails. These emails allow you to easily keep track of your portfolio, your watchlist, and the market in general.
Personally, for me, as I have a dividend and Singapore Saving Bond portfolio, I find it extremely useful for me in tracking the upcoming / projected dividend and bond interest payouts, tabulating the dividend and interest received (and comparing it to previous months or years) as I slowly snowball my dividend machine. There is also an email alert tool to inform you of your dividend payouts.
3 reasons for me to keep track of my investments (read here)
StocksCafe review (effortlessly track your investments) (read here)
Top 5 Performing Shared Portfolios in StocksCafe (read here)
“Do you know the only thing that gives me pleasure? It’s to see my dividends coming in.” John D. Rockefeller
2) Discover interesting stocks Within StocksCafe, there are discovery tools that aim to assist us in our buy and sell decisions.
It also has a Screener, which we can use to discover stocks among the ten of thousands of stocks listed in Singapore, Malaysia, Hong Kong, Tokyo, the United States, London, Shenzhen, and Shanghai by filtering stocks based on a wide variety of fundamental and/or technical metrics.
Step by Step guide on how to screen for SG Reits with low debt/equity ratios, high interest coverages, and high dividend yields using StocksCafe (read here)
“The person that turns over the most rocks wins the game. And that’s always been my philosophy.” Peter Lynch
3) To better understand a company After identifying interesting stocks, we naturally want to learn more about them. StocksCafe collects and presents comprehensive financial information about any company listed in SG, MY, HK, JP, and US.
“Never invest in a business you cannot understand.” Warren Buffett
Free Trial or be a paid member
You can sign up for free.
In fact, you can try it for free for one month (read here). Nothing beats experiencing it for yourself.
Nevertheless, as a free trial user, there are certain limitations as compared to being a paid member, Friend of StocksCafe (eg. portfolio transactions limited to 100, limited screener, limited stock financials, etc). Read here. You can enjoy the full benefits and features of StocksCafe by being a Global Friend of StocksCafe, but fees apply (read here).
5 years and 4 months subscription will set you back by approximately S$237:
a) 3 years subscription fee: S$125
b) 2 years subscription fee: S$90 (S$45+S$45)
c) 4 months subscription fee: S$22 (4 x S$5.5)
The Hack
No… Not using your CDC vouchers. :p
Actually, there are hacks to lower such fees to be a Global Friend of StocksCafe and enjoy the full feature of StocksCafe.
Evan Koh, the founder of StocksCafe is always finding partners to collaborate so that they pay for it and you can use StocksCafe for “free” (usually by trying out their products). A win-win proposal.
For people who are not yet Friends of Stockscafe or have not registered with StocksCafe.
Technically, they can get 5 years and 4 months of Global Friend of StocksCafe, with just S$2 (originally worth SGD 237); provided that they are not already registered with some of the below-mentioned low-cost brokerages. Then again, for all brokerages, it is perfectly fine to ask your friends/families to sign up and claim the benefits as long as they are willing to give the benefits (eg. StocksCafe Subscription) to you.
Below is what I found out after checking with Evan.
Via Referral
1. If they sign up using a referral link to be Trial Global Friend of StocksCafe and test out all features for free for one month. You can use my referral code: apenquotes. Just click here.
This should be the first step before you do the below mentioned; to get that one more extra free month.
Moomoo
2. If they sign up with Moomoo using the StocksCafe referral link and fund their Moomoo account (with at least S$100), to get 2 years of Global Friend of StocksCafe subscription. (read here)
Note: This promotion is until 28 Feb 2023.
Moreover, you can withdraw the S$100 from your Moomoo account once Moomoo account is successfully funded and you have obtained the 2 years of Global Friend of StocksCafe subscription. Of course, I do not recommend that as you should at least try out Moomoo a bit.
Anyway, with the withdrawal, technically, your eventual cost outlay here is $0.
WeBull
3. If they sign up with WeBull via StocksCafe referral link and fund their account with at least SGD 1 and keep their account for 30 days to get USD 50 to 500 worth of shares (into your Webull account) and 2+1 years of Global Friend of StocksCafe subscription. (read here)
Note: This promotion is until 28 Feb 2023. Next month onwards (March 2023), likely will drop to about 1 year.
Tiger Brokers
4. If they sign up with Tiger Brokers using the StocksCafe link, and fund it with S$1, they will 3 months of Global Friend of StocksCafe. (read here)
Note: This promotion is until 31 Dec 2023.
Well, 3 to 5+ years is a good enough period to thoroughly monitor and back-test your portfolio with unlimited transactions. You also now have a powerful tool to check out the stocks you are interested in (full access to the screener and stock financials). And you can set up multiple portfolios (could be your family members’ portfolios), and track them separately too.
While keeping track of the dividend income (past, present, anticipated).
All these by being a Global Friend of StocksCafe, a paid subscription service that is almost free (via the above-mentioned). In addition, you also get free shares by signing up (via StocksCafe) with Moomoo and WeBull during the period.
At one time, I do enjoy tracking my income and portfolio. Keying in the dividends and bond interest payments. While researching stocks and reading news. However, over the years as the portfolio gets bigger and diversified with more stock holdings, bonds, T-bills (and the occasional covered call options and crypto), it becomes quite time-consuming. So in a way, StocksCafe does help me save time and effort. From time to time, I can also look at the time-weighted returns and XIRR performance of the various portfolios via a few clicks of the buttons. In gist, offload the hard work of tracking and leave me with more time to research and read the news.
Sign up for a Webull account via my referral link and get 5 shares worth between US$50 ~ US$500 and Paynow of up to S$300, before 1st March 2023!
StocksCafe
FYI I find StocksCafe useful for the tracking of my own portfolio, and especially like to use it to track my portfolio stock dividend/bond interest payouts (projected and due). You can use my referral code: apenquotes. Just click here. Upon signing up using the referral code, you will get to enjoy being a Trial Global Friend of StocksCafe and test out all features for free for one month!
For the Singapore market, Tiger Brokers currently waive the minimum fee and only charge a 0.08% trading fee. This drastically reduces your cost as the minimum fee from other brokers (ranging from SGD 8 such as FSMOne and SCB, to SGD 25 for local brokerages) does add up and can eat into your returns.
Sign up and open an account with Tiger Brokers (Singapore) during the promotional period to receive a free GoPro Share (NASDAQ: GPRO), 365 Days of unlimited commission-free trades for HK, SG, and China A stocks, 180 Days of unlimited commission-free trades for U.S stocks, 5 commission-free trades for options within 30 Days and 1 month Ryde+ subscription.
Typically I use FSMOne.com to invest in funds & ETFs (including money market funds).
If you do not have an account, you can sign uphere. Please use my FSMOne referral code: P0031127, when you sign up.
Shopee
I have been using Shopee for a while and think you will like it as much as I do.
Get $10.00 off your first purchase using my code DARREB52. Download Shopee now and enjoy hot deals at the best prices! Click here.
Happy shopping!
Gemini
As stated by MoneySmart on Jan 22, if you’re looking to optimise trading your crypto with relatively low fees, simple-to-grasp expert UI and ease of purchase with Singapore dollars. then the best crypto exchange in Singapore is Gemini,
If you do not have an account, you can sign uphere using my referral link. After you have signed up, once you buy or sell US$100 or more (or 100 USD equivalent of your domestic currency) within 30 days of creating your account, your account will be credited US$10 (or 10 USD equivalent of your domestic currency) worth of bitcoin.
Recently there has been much discussion in Singapore about Budget 2023. There have been recent debates by various MPs on the various measures implemented, with DPM Wong highlighting it is a delicate balancing act amid a tight fiscal position. He explained in Parliament how the Finance Ministry planned to balance the Government’s books while responding to MPs who had called for more cost-of-living support or more help for certain groups or areas.
Now, wouldn’t it be great if there is one more avenue that tax revenue can be raised? In fact, we need to look no further than our neighbour across the causeway, Malaysia.
Well, should it then be if we can’t beat them, earn from them?
On 24 Feb 2023, Malaysia Prime Minister Anwar Ibrahim unveiled an expansionary 2023 budget of RM388.1 billion (US$87.50 billion), the largest in the country’s history. Likewise (to Singapore), he announced a slew of measures aimed at lowering the cost of living amid high inflation as well as more progressive taxes.
While reading the news, one measure, in particular, caught my attention.
Although the Premier did not offer more details on these measures but said in his speech that a tax on luxury goods, as well as e-cigarettes and vaping,would be introduced.
Budget 2023: Excise duty on vape liquid, gel to be implemented (read here)
Now the market value of vaping in Malaysia is not small, and worth more than RM 2 billion (or S$609 million). A duty on that would be a boost to the country’s tax revenue no doubt. After all, the vape industry and its popularity are moving quicker than regulation can catch up.
To quote: Prime Minister Datuk Seri Anwar Ibrahim said although vape with nicotine is still illegal, the product is still being sold widely and is estimated to be worth more than RM2 billion.
“Would it not be great if it is monitored and taxed to discourage the usage of vape,” said Anwar, who is also the finance minister, during the tabling of Budget 2023 in Dewan Rakyat.
Now, why didn’t Singapore think about that?
In the past, prior to the opening of casinos in Singapore, there was much debate over whether to bring in integrated resorts and casinos to Singapore. Mr Lee Kuan Yew (when he was still alive) stood up to state that he was against gambling. He had initially resisted the move to bring casinos into Singapore but he eventually changed his mind because he saw the benefits that it could bring to the country.
In his own words: IRs needed for S’pore to keep abreast of the top cities (read here)
Perhaps given the size of Malaysia as compared to Singapore, despite vape with nicotine being illegal, it is still widely sold and used.
Hong Kong relaxed the use of e-cigarettes, allowing them to be used as a pharmaceutical product since 2009. However, in 2021, Hong Kong lawmakers passed a bill banning the import, sale and manufacture of electronic cigarettes and heated tobacco products. Still, in Oct 2022, it was announced that Hong Kong authorities were considering amending the law, with an eye on the billions of dollars that electronic cigarettes and heated tobacco products trade generate annually.
In Singapore, under section 16(2A) of the Tobacco (Control of Advertisements and Sale) Act (TCASA), it is illegal to possess, purchase and use vaporisers in Singapore as of 1 February 2018 (read here). Persons found guilty of this offence can be fined up to $2,000.
Thriving Black Market
Despite the ban, there is a thriving black market. This is especially so among the youths in Singapore. Through videos on YouTube that there was a movement overseas, with people claiming that vaping was healthier than smoking. They were also doing tricks with vape smoke. The reasons for young people picking up vaping and smoking overlap, one of which is the “challenge” factor, in which teenagers try to smoke or vape in school without getting caught.
In a 2018 Health Promotion Board survey of 600 youth, over 70 per cent of youth were unaware that e-cigarettes contained nicotine and cancer-causing chemicals, and their vapour contained fine particles (also known as PM 2.5) that could cause respiratory diseases.
Inside Singapore’s Thriving Black Market: Is It Time To Rethink The Vape Ban? (read here)
To quote the above article:
“Channel News Asia reported that there is a plethora of digital avenues to access illegal vaping devices and accessories. In fact, if one knows where to look, it isn’t hard to find them at all. Sellers mostly hawk their wares on Telegram (which has end-to-end encryption), but listings for vape products have popped up on Carousell, Lazada, and Shopee too. Non-encrypted technologies and online public marketplaces are easier to police, and in 2020, the HSA collaborated with social media platforms to remove over 2,000 of these listings.
What exactly is the scale of the black market, though? CNA mentioned there were several groups with up to 10,000 members, which RICE has verified in our own investigation. At press time, some groups have grown closer to 20,000 members. Inside these group chats, new listings and offers are posted every second. Clearly, the removal of listings by HSA (presumably off non-encrypted platforms) has not significantly dented the black market activity on Telegram and WhatsApp.“
And there have been debates to rethink the vape ban and instead regulate it. Perhaps, like the casinos, Singapore needs this tax revenue to keep abreast of the top cities around the world.
Should Singapore regulate vaping instead of banning it? | Heart of the Matter podcast (watch here)
Bans Aren’t Stopping Singapore’s Vapers. So What’s Next? (read here)
Making sense of the growing vape problem: Is regulating its use the solution? (read here)
Still, Singapore is keeping up the fight against vaping.
Significant increase in vape cases in Singapore; HSA steps up enforcement (read here)
As explained in the article above: “In Singapore, the importation and sale of e-cigarettes have always been banned under the blanket prohibition on imitation tobacco products. In 2017, Singapore extended the ban to cover purchase, use and possession.
If we have our way from early on, we probably would have banned cigarettes at the outset. But it would be very challenging to do it now…
Let’s be clear. E-cigarettes are harmful.”
Nicotine is the primary agent in regular cigarettes and e-cigarettes, and it is highly addictive. It causes you to crave a smoke and suffer withdrawal symptoms if you ignore the craving. Nicotine is a toxic substance. It can harm parts of the brain that control attention, memory and learning, and may result in a permanent lowering of impulse control.
Nicotine can also adversely affect the heart, reproductive system, lungs and kidneys.
As Nicotine is highly addictive, it is difficult to quit smoking cigarettes and e-cigarettes. You can get hooked to e-cigarettes and later on, other tobacco products.”
Having said that, beyond e-cigarettes and vaping, the Singapore government has implemented a 15 per cent increase in tobacco excise duty across all tobacco products, which took effect on Tuesday (Feb 14). Taxes for cigars, cheroots, cigarillos and cigarettes, and other manufactured tobacco will be raised from S$427 per kg or 42.7 Singapore cents per stick of cigarette, to S$491/kg or 49.1 cents per stick. The increase is expected to generate about S$100 million in additional revenue per year.
We would probably be better off not getting this tax revenue
Personally, I do hope that Singapore wins its fight against e-cigarettes and vaping. No doubt the tax revenue would be a helpful boost to the country’s budget and allow the country to be in a more sustainable fiscal position (if e-cigarettes and vaping are instead allowed and regulated, instead of it being banned).
However, the health problems caused to people, especially the youths, hooked onto its nicotine. In the end, a lifetime of health issues. It would not be beneficial to the well-being of the broad middle of society.
Thank you for reading.
Webull
Sign up for a Webull account via my referral link and get 5 shares worth between US$50 ~ US$500 and Paynow of up to S$300, before 1st March 2023!
StocksCafe
FYI I find StocksCafe useful for the tracking of my own portfolio, and especially like to use it to track my portfolio stock dividend/bond interest payouts (projected and due). You can use my referral code: apenquotes. Just click here. Upon signing up using the referral code, you will get to enjoy being a Trial Global Friend of StocksCafe and test out all features for free for one month!
For the Singapore market, Tiger Brokers currently waive the minimum fee and only charge a 0.08% trading fee. This drastically reduces your cost as the minimum fee from other brokers (ranging from SGD 8 such as FSMOne and SCB, to SGD 25 for local brokerages) does add up and can eat into your returns.
Sign up and open an account with Tiger Brokers (Singapore) during the promotional period to receive a free GoPro Share (NASDAQ: GPRO), 365 Days of unlimited commission-free trades for HK, SG, and China A stocks, 180 Days of unlimited commission-free trades for U.S stocks, 5 commission-free trades for options within 30 Days and 1 month Ryde+ subscription.
Typically I use FSMOne.com to invest in funds & ETFs (including money market funds).
If you do not have an account, you can sign uphere. Please use my FSMOne referral code: P0031127, when you sign up.
Shopee
I have been using Shopee for a while and think you will like it as much as I do.
Get $10.00 off your first purchase using my code DARREB52. Download Shopee now and enjoy hot deals at the best prices! Click here.
Happy shopping!
Gemini
As stated by MoneySmart on Jan 22, if you’re looking to optimise trading your crypto with relatively low fees, simple-to-grasp expert UI and ease of purchase with Singapore dollars. then the best crypto exchange in Singapore is Gemini,
If you do not have an account, you can sign uphere using my referral link. After you have signed up, once you buy or sell US$100 or more (or 100 USD equivalent of your domestic currency) within 30 days of creating your account, your account will be credited US$10 (or 10 USD equivalent of your domestic currency) worth of bitcoin.
In this post, let’s think about the need for cash by Reits in recent times.
Starting with Mapletree Logistics Trust and the fundraiser it launched in Nov 2021.
Mapletree Logistics Trust(SGX: M44U)
In Nov 2021, Mapletree Logistics Trust (MLT) launched a S$700 million fundraiser for 17 assets acquisition.
The Reit announced late on 22 November 2021 that it was acquiring 13 assets in China and three properties in Vietnam from subsidiaries of its sponsor for about S$1 billion. Separately, MLT was also acquiring a logistics asset in Japan from an unrelated third party for S$416 million.
New units were offered on the basis of 37 new units for every 1,000 existing units at a unit price of S$1.84, which was a 5.6% discount to the volume-weighted average price (VWAP) of S$1.9485 per unit.
Key acquisition rationales:
1) Deepen Presence in Attractive Logistics Markets 1 of China and Vietnam
2) Capture Opportunities from Structural Trends Accelerated by the COVID-19 Pandemic
3) Strengthen MLT’s Network Connectivity across Key Logistics Nodes
4) High-Quality Portfolio with a Strong and Diversified Tenant Base
5) Attractive Value Proposition
During the announcement, the intention is that after the acquisition, aggregate leverage remains the same (at 39%), while NLA, AUM, and NAV increase, but WALE and occupancy rate drop. See below.
However, the question on many people’s minds is, whether has it been fruitful or profitable for the unit-holders.
Post-late Nov 2021 till today, the share price of MLT has been generally trending down, and it seldom (or did not) go above $1.84. See below. In hindsight (which is always one hundred percent clear), you could have waited a few months later to purchase the new units at a much lower price.
Nevertheless, MLT’s dividend performance has been respectable. See below.
The year 2022
In 2022, unlike in previous years, Singapore Real Estate Investment Trusts (S-Reits) did not acquire assets and raise capital regularly. Against a background of rising interest rates and rising costs of capital, Reits scaled down their acquisitions. It is likely that the acquisitions may have been unlikely to help the distributions per unit (DPU) of the Reits to outpace the rise in their interest cost.
Apart from a placement, preferential equity fundraising, and perpetual securities issuance by Lendlease Global Commercial Reit (LREIT) for the acquisition of Jem which cost around $2 billion in total, S-Reits were doing the opposite instead, divesting properties to raise funds.
ESR-Logos Reit(SGX: J91U.SI)
Another Logistic Reit listed in the Singapore Stock market is ESR-Logos Reit.
On 16 Feb 2023, ESR-Logos Reit’s manager announced a S$300 million equity fund-raising exercise to fund future acquisitions, redevelopments, and asset enhancement initiatives (AEIs). This will be accomplished through a private placement and a preferential offering, which will raise $150 million each.
The manager will use around S$293 million in gross proceeds from the fundraising to fund any future potential acquisitions and finance any redevelopment or AEIs of ESR-Logos Reit’s properties. The remaining S$7 million will be used to pay any fees and expenses incurred by the Reit in connection with the fund-raising exercise.
The rationale for the fundraising as stated by the manager is that as logistics continues to form the backbone of consumption (be it in traditional forms of physical stores or in e-commerce supply chains), portfolio rejuvenation remains a key focus of the Reit to tap into the growth of “in-demand” sectors such as logistics, high-specs, and cold storage. The Equity Fund Raising enables E-LOG to continue executing its growth strategy focused on:
(i) Rejuvenating the Asset Portfolio, (eg. AEIs)
(ii) Recycling of Capital, (eg. Divestments of non-core assets unlock value and allow E-LOG to recycle its capital towards rejuvenating its portfolio)
(iii) Recapitalising for Growth and (eg. Lower aggregate leverage from 41.8% to 38.0%; Increase debt headroom to S$1.1 billion)
(iv) Reinforcing the Sponsor’s Commitment (eg. e Preferential Offering is fully backstopped by the Sponsor)
Note: On May 5 2022, ESR-Logos Reit (E-LOG) started trading on the Singapore Exchange, replacing ESR-REIT. E-LOG was formed from the merger of ESR-REIT with ARA-LOGOS Logistics Trust following the merger between ESR Group and ARA Asset Management.
Existing unitholders of ESR-Logos (or rather unitholders of ESR-Reit and ARA-LOGOS Logistics Trust), should not be surprised by such an announcement. After all, from 2018 till Feb 2023, excluding 2022, there has been a yearly announcement on Preferential Offering. See below.
Note: A Preferential offering is an exclusive invitation for existing shareholders to purchase new shares at a discounted pricing. If the shareholders are unwilling to purchase new shares, they are unable to sell away that invitation to another party and would have to let the invitation expire.
Perhaps the pandemic has accelerated the need for logistics and prompted the need for expansions and AEI, hence further cash injection.
However, again, the question on many people’s minds is, whether has it been fruitful or profitable for the unit-holders. Was it really a ‘discount’.
A quick glance at the dividend per share over the years (see below), shows that since 2015, the dividend per share has been trending down. For unit-holders who have managed to cough out the cash by avoiding dilution of their shareholding, the payout has in fact (and unfortunately) decreased over the years.
Similarly (as per MLT), ESR-Logos Reit share price has been trending down over the years. After the March 2020 crash, price rose to around $0.485 in Nov 2021 and then trended down thereafter.
In July 2021, ESR-Logos Reit launched a $50 mil Preferential Offering. The issue price is S$0.400 for each Preferential Offering New Unit. 32 Preferential Offering New Units for every 1,000 existing Units, fractional entitlements to be disregarded.
The Preferential Offering closed on 10 Aug 2022.
For example, if you own 5,000 units of ESR Reit, you will be entitled to subscribe for 5 x 32 = 160 new units of the Reit at S$0.400 per unit.
This means that you have to cough up S$64 (S$0.4 x 160 units) for your entitlement.
Now, again, in hindsight, you could have waited a few months later to purchase the 160 new units (or rather 200 new units to avoid odd lots) at a much lower price. Since, after late August 2022, the share price of ESR-Logos did not trade higher than $0.4. See below.
So in terms of share price and dividend payout (absolute amount), I do not see how has it been a profitable investment for existing unitholders.
Link Real Estate Investment Trust (0823.HK)
Link Reit is technically not a Singapore-listed Reit (but a Hong Kong-listed Reit). Perhaps the most surprising announcement is from Link Reit (Asia’s largest real estate trust).
There have been a couple of ‘firsts’ for this Reit in recent months.
On 28 December 2022, it said it will enter Singapore’s market for the first time by acquiring Jurong Point and Swing By @ Thomson Plaza for S$2.16 billion from NTUC Enterprise.
Subsequently, Link Reit announced on 10 Feb 2023 (read here) that it is raising a whopping HK$18.8bn to pay down debt and to fund its next phase of growth, which will include the formation of partnerships with global capital partners. This is Link Reit’s first-ever rights issue.
Link REIT plans HK$19bn rights issue to help reduce debt and fund growth (read here)
Link Reit seeks US$2.39 billion in fresh funds via rights issue as it looks to pay debts, acquire new investments (read here)
The rights units will be issued at HK$44.20 each, representing a surprising 29.6% discount to Thursday’s close (9 Feb 2023) of HK$62.80 per unit before a trading halt.
The rights issue will lead to the unitholding base expanding by 20% and diluting its dividend per unit for the fiscal year ending March 2024 by about 14 percent.
As stated by the management, the fundraising is to strengthen Link REIT’s capital base and position it for the next phase of growth:
1) Immediately strengthen Link REIT’s capital base with net gearing ratio decreasing to below 20%
2) Position Link REIT to capture accretive investment opportunities amid real estate markets’ repricing
3) Facilitate Link REIT’s next phase of growth under the Link 3.0 strategy to grow its AUM together with capital partners
4) Solidify Link REIT’s position as a leading Asia Pacific real estate investor and manager
5) Allow Qualifying Unitholders to participate in Link REIT’s new growth journey on a pro-rata basis and to apply for excess Rights Units at the Subscription Price of HK$44.20 per Rights Unit
Some have questioned the move. To quote this article:
“It is a bit awful,” said Sam Chi-yung, chief strategist at Patrons Securities, who said he personally has held Link’s shares since its IPO. “Purely from a financial perspective, debt financing generally has a lower cost than equity finance. But this time it unexpectedly used the rights issue.”
“Their explanation is about first raising the capital without concrete projects for acquisition. The impression to people is quite strange. Is the market so good?”
Personally, this is quite unexpected.
Beyond the surprising rights units price (29.6% discount), what is perhaps strange is that relative to many S-Reits, Link Reit’s gearing is relatively low. Even upon completion of the acquisition, Link’s ratio of debt to total assets will change from 23.2% to only 27.1%, based on its consolidated financial position as of 30 September 2022. Approximately 40% to 50% of the net proceeds will be used to repay HK$7-8 billion of existing debt and around HK$1-2 billion will be used to rest revolving credit facilities.
Post fundraising the net gearing will go down to below 20%. Unheard of among S-Reits for the longest time.
As per Link Reit’s presentation in Feb 2023 (see below), for the 1H2022/2023 results, there is nothing alarming about their Capital Structure: Fixed-rate debt ratio is 56.1%, average borrowing costs are at only 2.5%, and the average debt maturity is at 3.4 years.
Nevertheless, I do recall that some of the better S-Reits have higher fixed-rate debt ratios and longer average debt maturity. In addition, for Link Reit, HK$9 billion (US$1.15 billion) in bank loans are maturing in 2023/2024, and another HK$9 billion in medium-term notes, convertible bonds, and bank loans are maturing in 2024/2025.
For example, in the case of CapitaLand Integrated Commercial Trust (CICT), about 81% of the Trust’s total borrowings were on fixed rate borrowings, with an average term to maturity of 3.9 years. CICT’s average cost of debt as of 31 December 2022 was 2.7% per annum.
Looks like the fundraising is to strengthen what looks alright currently.
To quote the notice issued on 13 Feb 2023: “Approximately 40% to 50% of the net proceeds from the Rights Issue will be used (a) to repay existing debt of (i) a total of approximately HK$7 billion to HK$8 billion existing bank loans falling due in 2023; and (ii) approximately HK$1 billion to HK$2 billion revolving bank facilities maturing beyond 1 January 2024; and (b) for general working capital.”
As to the next phase of growth, I can only guess what they have in mind (after the mega acquisition in Dec 2022), which to quote: “The balance will be deployed for pursuing future investment opportunities, with a focus on retail, car park, office, and logistics sectors across Asia Pacific.” That’s a very broad stroke or casting a wide net: encompassing a lot of assets in Asia.
Link REIT’s share prices plummeted by as much as 16%– the biggest one-day loss since 2008 – after it resumed trading following the rights-offering announcement to seek fresh funds. The Reits’ share price ended the day down 12.8%, the most since 2008.
Perhaps the Reit management felt that the real estate market in Hong Kong is at a bottom now and that there may be some opportunities for global real estate.
The rights unit price of HK$44.20 does look tempting, although from a valuation aspect, it is not a big discount. In addition, with the unitholding base expanding by 20%, the dilution is considerably big, if unitholders do not subscribe to the rights issue.
In gist
Post pandemic with global economies normalizing, buoyancy over China re-opening, construction industry gradually recovering to pre-pandemic levels, as with signs of an easing pace of interest rates, Reit managers may be looking at raising cash to give themselves a first mover advantage that could be critical ahead of a potential upturn in the market.
On the other hand, for retail investors, currently, there is no lack of places to park their spare cash given the high yields offered by fixed deposits, Treasury bills, and Singapore Saving Bonds (SSB). In addition with less disposable cash due to rising inflation (rising cost of living) and higher mortgage repayment as a result of rising interest rates, they may now approach the Reit sector with more wariness and perhaps with more cash buffer, for fear of the call from them for more cash input, after a hiatus in 2022. Post-pandemic, we have ‘revenge travel’, and ‘revenge spending’… for Reits, will they have ‘revenge fundraising’?
This is perhaps contrary with what some expected. Some retail investors may be expecting more passive income (dividend payout) from their Reits holdings post-pandemic, given that many Reits have cut their dividend payout during the past 2 to 3 years; and people can now travel and spending has increased. In short, more income instead of more outflow.
The Big Read: With inflation putting the squeeze on families, some give up the frills while others cut back on basics (read here)
The Big Read: Singapore households, businesses not spared from global inflation storm as GST increase looms (read here)
For seniors/retirees dependent on the dividend payouts from their Reit portfolio, it might be a difficult time to cough out more cash for the new units (via rights issue or preferential offers, etc).
Some seniors bear brunt of inflation as children give them less money (read here)
Commentary: Inflation is a silent killer of retirement planning. Here’s what you can do (read here)
Think about it, if a well-capitalized and low-gearing Reit such as Link Reit is seeking fresh funds (to the tune of US$2.39 billion or S$3.21 billion) via a rights issue, what about the other much smaller S-Reits with much higher gearing (see below), lower fixed loan rates, and perhaps with more dated assets in need of urgent renovations and AEIs?
Some of these Reits are perhaps fighting for survival rather than growth. During and after the pandemic, work culture has changed (hybrid work arrangements became prevalent), logistic assets require resilience measures against supply chain disruptions, e-commence adoption has accelerated, etc. Buildings need to adapt or become obsolete.
Comparing the 2H2022 financial results of Prime US REIT, Keppel Pacific Oak US REIT (KORE) & Manulife US REIT (MUST) (read here)
Prime US REIT – current yield is at 18.11%. Value trap or value buy? 4 things you need to know now. (read here)
Link Reit’s announced rights issue is at around S$3.21 billion. For context, the biggest market capitalization Singapore-listed Reit is Capitaland Integrated Commercial Trust at S$13.52 billion. S$3.21 billion (Link Reit’s fresh fund) is approximately one-quarter of S$13.52 billion (CICT’s market cap).
Moreover, with the share prices of Reits still relatively depressed and volatile (with the relatively high-interest rates and high inflation environment we are in), and from the examples of ESR Logos and MLT, investors might be better off waiting for lower share prices after the fundraising ended. Well, then again, nobody can predict short-term price fluctuations and interest rate movement.
It is ultimately dependent on the individual Reits’ fundamentals and overall narratives as well as the value derived from the new unit price. Price is what you pay, and value is what you get. No two Reits are the same.
Shall leave you with this cute little song. We are always learning and moving forward in our investing journey…. we will trip and fall. Investing in Reits, feel like taking 2 steps forward, and 3 steps backward at some time, doesn’t it?
Note: I am currently vested in Mapletree Logistics Trust and Link Real Estate Investment Trust.
Thank you for reading.
Webull
Sign up for a Webull account via my referral link and get 5 shares worth between US$50 ~ US$500 and Paynow of up to S$300, before 1st March 2023!
StocksCafe
FYI I find StocksCafe useful for the tracking of my own portfolio, and especially like to use it to track my portfolio stock dividend/bond interest payouts (projected and due). You can use my referral code: apenquotes. Just click here. Upon signing up using the referral code, you will get to enjoy being a Trial Global Friend of StocksCafe and test out all features for free for one month!
For the Singapore market, Tiger Brokers currently waive the minimum fee and only charge a 0.08% trading fee. This drastically reduces your cost as the minimum fee from other brokers (ranging from SGD 8 such as FSMOne and SCB, to SGD 25 for local brokerages) does add up and can eat into your returns.
Sign up and open an account with Tiger Brokers (Singapore) during the promotional period to receive a free GoPro Share (NASDAQ: GPRO), 365 Days of unlimited commission-free trades for HK, SG, and China A stocks, 180 Days of unlimited commission-free trades for U.S stocks, 5 commission-free trades for options within 30 Days and 1 month Ryde+ subscription.
Typically I use FSMOne.com to invest in funds & ETFs (including money market funds).
If you do not have an account, you can sign uphere. Please use my FSMOne referral code: P0031127, when you sign up.
Shopee
I have been using Shopee for a while and think you will like it as much as I do.
Get $10.00 off your first purchase using my code DARREB52. Download Shopee now and enjoy hot deals at the best prices! Click here.
Happy shopping!
Gemini
As stated by MoneySmart on Jan 22, if you’re looking to optimise trading your crypto with relatively low fees, simple-to-grasp expert UI and ease of purchase with Singapore dollars. then the best crypto exchange in Singapore is Gemini,
If you do not have an account, you can sign uphere using my referral link. After you have signed up, once you buy or sell US$100 or more (or 100 USD equivalent of your domestic currency) within 30 days of creating your account, your account will be credited US$10 (or 10 USD equivalent of your domestic currency) worth of bitcoin.
With the proliferation of low-cost online investment brokerages in Singapore, Webull is the latest launch in this growing market.
Launched in 2022, Webull Securities (Singapore) Pte. Ltd. aspires to expand and serve the Asia-Pacific (APAC) region having Singapore as the APAC regional headquarter.
Originally founded in 2017, Webull is owned by a Chinese fintech company, Fumi Technology. The brokerage was subsequently launched in the United States (US) in 2018 and entered Hong Kong (HK) in 2020.
Having incorporated in 2021, Webull is currently regulated by the Monetary Authority of Singapore (MAS) and holds a Capital Markets Services (CMS) Licence under the Securities and Futures Act 2001.
Let’s take a look at its pros and cons.
1. No commissions or platform fees
To be frank, there are many online brokerages that offer the so-called “zero commissions” to acquire new customers. However, there are often certain requirements that are attached, to achieve these.
Webull appears to be a “true” 0 commission brokerage with no minimum requirements or limits on commission-free trades. Nor does it charge platform fees, membership fees, or settlement fees.
However, trading on Webull isn’t completely free of charge. Your trades will be subject to prevailing fees levied by various regulatory bodies, including GST in Singapore. 8% Goods and Services Tax (GST) will apply on all the below-mentioned fees and charges as levied by the Singapore Government.
There may also be bank handling fees, depending on the method you choose for depositing or withdrawing your funds. In addition, its promotional 0% fee is subject to changes with a new update.
Fun fact:
In Feb 2021, Webull became the second most popular app in the US, the day online brokerages imposed restrictions on retail investors buying GameStop, AMC Entertainment, and several other volatile stocks.
Webull’s app was installed about 100,000 times worldwide on Jan. 28 from the App Store and Google Play, a 270% week-over-week increase, according to data provided by market analytics firm SensorTower.
GameStop turns little-known China firm Webull into No. 2 app in US (read here)
Robinhood’s GameStop restrictions were a rocket boost for Webull (read here)
2. Options trading(Zero commission)
Personally, I am not into Options trading. I find it highly risky and it is not for beginners. However, if you’re a seasoned investor and ready to explore options trading, Webull has educational resources to get you started.
Seasoned Options traders will probably like Webull’s 0 commission for Option trades. Webull charges no contract fees, commission fees*, assignment fees, exercise fees or even a minimum deposit.
3. Trade fractional shares
Investors starting out with a low budget are often deterred by quality stocks with prices beyond their reach (often in US dollars) E. Apple, Alphabet (Google), Meta (Facebook), Tesla and Amazon. Perhaps this is also a reason why many beginner investors are lured by penny stocks.
Fractional shares provide a solution to this price hurdle. Fractional Share trading gives you the ability to purchase an equity position with a quantity of less than one whole share. Instead of having to buy a security in full share increments this allows you to purchase a piece of a stock for an amount that you feel comfortable with. Webull offers fractional shares for most stocks and ETFs that are available on our platform. Eg. you are able to invest US$20 and get one-fifth of a US$100 share.
Currently, fractional shares are not very common in Singapore.
However, 2 main points to note:
1) Fractional share trading is only available for certain stocks and ETFs. The fractional share (F) logo will be displayed on the detail page indicating if a particular security is supported for fractional trading.
2) There is a $5.00 minimum when purchasing a fractional share position and the number of shares must be greater than 0.00001. For selling a fractional position there is not a minimum dollar amount however the number of shares must be greater than 0.00001.
4. User-friendly interface
Like Moomoo and Tiger broker, Webull’s trading platform provides a similar user experience. The design is modern and easy to navigate around.
The mobile platform also serves as an analysis tool without any initial deposit requirements. Users can access stock-specific financial information and news. This allows new investors to familiarise themselves with the application before committing to an investment.
Well, the above are the good points about Webull.
Let’s look at the downsides.
1. Limited financial products
Perhaps the biggest downside (for now), is that Webull currently only offers access to the US and HK markets. Investors are only able to invest in companies listed in the two selected markets at the moment.
This limitation might be temporary as its US counterpart does offer a wider range of financial products. Hence, there is a high chance that Webull will allow its Singaporeans users to diversify into other trading products in the future.
2. Lower currency exchange rate as compared to its competitors
Although Webull offers zero currency exchange fees, the currency exchange rate is slightly lower as compared to its competitors.
This may not be an issue for retail investors who trade in smaller quantities and less frequently, as the savings from the trading fees could be more than the difference in exchange rates.
However, for traders that trade frequently and in higher volumes, the difference in exchange rates has an impact on the returns.
In gist
Having said that, Webull has all the “must-haves” of a digital brokerage. Webull key features include true zero commission, free real-time quotes, full extended hours trading and a 24/7 in-app help centre.
With its intuitive user interface, fractional shares, and zero fees, it is easy to see why Webull is so popular in the US among newbie investors. It also seems to have some great features for those who want to dabble in options trading at a minimum cost. If you are looking to trade in the US and HK markets, Webull Singapore might be a good option for those with more basic trading or investing needs.
For the moment, it is perhaps hampered by the limited financial products with no access to the Singapore Exchange (yet).
Account Opening
For Singapore Citizens, Permanent residents as well as foreigners living in Singapore who are holding permits or a pass, Webull allows you to create an account using MyInfo via Singpass. There is no need to go through the hassle of manually filling up your personal information on to the online form. The overall sign-up process is fast and hassle-free. The account can be expected to be ready within a day.
You can use my referral link to get 5 shares worth between US$50 ~ US$500.
Thank you for reading.
Webull
Sign up for a Webull account via my referral link and get 5 shares worth between US$50 ~ US$500 and Paynow of up to S$300, before 1st March 2023!
Welcome Gifts:
1. Between US$50 ~ US$500 in Stocks when you deposit at least SGD$1 and hold for 30 days.
2. Open an account and make your first deposit of at least SGD $1 (hold the deposit for at least 30 days)
3. S$45 ~ S$300 via Paynow / PayLah
StocksCafe
FYI I find StocksCafe useful for the tracking of my own portfolio, and especially like to use it to track my portfolio stock dividend/bond interest payouts (projected and due). You can use my referral code: apenquotes. Just click here. Upon signing up using the referral code, you will get to enjoy being a Trial Global Friend of StocksCafe and test out all features for free for one month!
For the Singapore market, Tiger Brokers currently waive the minimum fee and only charge a 0.08% trading fee. This drastically reduces your cost as the minimum fee from other brokers (ranging from SGD 8 such as FSMOne and SCB, to SGD 25 for local brokerages) does add up and can eat into your returns.
Sign up and open an account with Tiger Brokers (Singapore) during the promotional period to receive a free GoPro Share (NASDAQ: GPRO), 365 Days of unlimited commission-free trades for HK, SG, and China A stocks, 180 Days of unlimited commission-free trades for U.S stocks, 5 commission-free trades for options within 30 Days and 1 month Ryde+ subscription.
Typically I use FSMOne.com to invest in funds & ETFs (including money market funds).
If you do not have an account, you can sign uphere. Please use my FSMOne referral code: P0031127, when you sign up.
Shopee
I have been using Shopee for a while and think you will like it as much as I do.
Get $10.00 off your first purchase using my code DARREB52. Download Shopee now and enjoy hot deals at the best prices! Click here.
Happy shopping!
Gemini
As stated by MoneySmart on Jan 22, if you’re looking to optimise trading your crypto with relatively low fees, simple-to-grasp expert UI and ease of purchase with Singapore dollars. then the best crypto exchange in Singapore is Gemini,
If you do not have an account, you can sign uphere using my referral link. After you have signed up, once you buy or sell US$100 or more (or 100 USD equivalent of your domestic currency) within 30 days of creating your account, your account will be credited US$10 (or 10 USD equivalent of your domestic currency) worth of bitcoin.
A Pen Quotes 