Letter To Shareholders (9) - Performance Review 2017Q4

Performance Highlights
The stock market continue its relentless ascend - The DOW is at all time high and cryptocurrency is all the craze nowadays. You know we are in a bubble when even uncles and students are trading cryptos. Humans never learn, do they?

“Bitcoin has no underlying rate of return,” said Bogle, 88, who started the first index fund in 1976. “You know bonds have an interest coupon, stocks have earnings and dividends, gold has nothing. There is nothing to support bitcoin except the hope that you will sell it to someone for more than you paid for it.” - Jack Bogle

Our portfolio underperformed this time, growing only 4.2% compared to 5.7% of the index. This is largely due to the lack of banks in our holdings. (greatly regret not buying OCBC/DBS last year). Nevertheless, we were able to ride on the growth of our REITs.

In the final quarter, we paid out about $600 in dividends (base on pay-date, hence excluding the massive injection from Singtel). We also became friends of SGXCafe in order to more accurately track our performance - look out for more statistics in our annual report!

Operating Highlights - Income
Overall income for the quarter was more than 50% higher compare to same period last year, making up for the 40% drop in Q1. Salary-wise, 2017Q4 was roughly equal to 2016Q1 due to shift in bonus period.

Aside from the bonus, income this quarter was pushed up by many factors:
- Passing with incentive for IPPT
- Birthday red packets from family
- Side "job" allowance
- Passive income a record for Q4.

Operating Highlights - Expenses
Our big purchase this quarter was a Lenovo laptop, which we brought after much consideration. This is our first laptop purchase after nearly 10 years (last brought in 2008 for University). It has better specs (8th Gen i5) compared to the Microsoft Surface and come in at a much lower price (with Pen, Keyboard all inclusive). Overall, we think it is a good value deal that would make our life at work easier.

Otherwise, regular expense is 20% lesser than last year. We did not spend much except for a couple of clothing/shoes brought mostly during 11-11 sales.

Acquisitions
We subscribed to CCT rights and add on to Singtel again on its continued weakness. Interestingly, we also brought Singtel during the same period last year.

We continue to believe that Singtel is currently at an attractive price and would buy more if we were not already heavily vested in it. Largest company in Singapore, 20 years dividend track record, mere 60+% payout ratio and a stable 4.8% yield.

Topping Up CPF
We seriously evaluated the possiblity of topping up our CPF to reduce tax - more specifically medisave. This is something we have been contemplating since 2014. The critical factor once again came down to our long term goal - do we want to retire after 55? Or earlier?

If your decision is to retire after 55, there is no doubt that topping up CPF is extremely attractive. In fact, we would advocate pumping as much as you can so that you can hit FRS by early 30s.

In the end, we still conclude that topping up contradict too much with our FIRE goal.

Outlook
More details to come in our Annual Report.

Quarterly Results Review - 2017Q3

M1

Results continue to dip, but IMO it is actually not bad. There are signs of it bottoming (for now), with net profit declining 5% year on year. For 9 months it is down 13.5% (9M EPS from 12.6c to 10.9c), which seems to be in line with the stock price ($2 to $1.8). Service revenue increase 5% and mobile ARPU remain stable at $55. Mobile customers base fall due to shutdown of 2G network, and overall their market share is still stable at 25%.

They launched lots of initiatives this past quarter like malware detection solutions, nationwide IOT, smart sensors etc which would all take time to materialize. Yield at $1.8 is 6.1%, based on trailing results. The million dollar question is if they can sustain the current DPU.

Afternote: More news of first "intelligent" waste management system, cloud offering of digital startups. I might consider averaging down if I sell other position.


CapitaCommercial Trust
DPU still went up 2.6% despite selling away 3 buildings. This is the definition of a well managed REIT. Subscribed for their rights. Main catalyst now is Golden Shoe redevelopment and how they can bring Asia Square Tower 2 forward.

Afternote: For some unknown reason, CCT had a crazy run-up after the rights issue to over $1.8. The pro-forma NAV is $1.76 and 1H2017 DPU is 4.23 cents (annualized 8.46 cents). Considering a 9c DPU yearly, the yield is barely ~5%. This makes me really tempted to just sell it.

I believe it would be more fairly valued at $1.65 for a 5.5% yield.


CapitaMall Trust
A very flat quarter with regards to DPU, shopper traffic and tenants sales. Expect stable 11c DPU (5.4% yield at $2.04) until the launch of Funan in 2019.


Frasers Centrepoint Trust
Full-year DPU rose 1.2 per cent to 11.90 cents, the highest since the FCT's listing in 2006. Integration with Northpoint City North Wing is in its final stages.

My crown holding - low debt level (29%), 11 years of increasing DPU, NAV grown from 1.78 to 2.02 since I first vested in 2014, best management, super resilient. Every single quarter the results is good. What more can you ask for?

Stock price has reached an all time high (>$2.20) that sometimes, I am tempted to sell it in hope of getting it back at a lower price.


Far East Hospitality Trust
DPU falls 8% to 1.03c but the stock keeps going up - probably in anticipation of recovery next year (revenue for hotel rooms went up). There is also the acquisition of Oasis Downdown mid next year which is expected to be slightly accretive.


Sembcorp Industries
Saw a 37.7% drop in net profit due to several one off items - non-cash impairment charges and 11m of doubtful debts write offs. Marine show small profits again after losses last year.

Overall I think the company is stabilizing (Operation Profit up 11% for 9 months) and management indicate strategic review will be completed soon. NAV is up from $3.58 to $3.86.


Singtel
Only 3c special dividends (from about 14c gain) from Netlink IPO, on top of standard 0.68c (60% payout) dividends. Excluding Netlink, earnings fell 4% mainly due to intense competition in India.

Still feel confident that it should trade between $3.6 to $4.

Afternote: Fair results, down trending price? Singtel is the number 1 stock in Singapore by market cap, and deserve to at least trade at a "fair value". I strongly believe $3.6 can hold and increased my position again seeing the continued drop. Look forward to my 9.8c dividends in January next year.


Frasers Centrepoint Limited
Dividends maintained at 8.6c per year (60% payout ratio) and delivered yet another solid quarter with revenue/profit increasing 17%. NAV is now at $2.46.

Like that they are diversifying their income to now over 50% outside Singapore, and concentrating on growing their recurring income. This is the best "ETF" I ever brought.


Accordia Golf Trust
Ah! The big surprise this quarter. DPU plunged over 30% due to "unusually large return of members' deposit" despite profits and revenue going up. Hopefully this is a one time event.

To add further uncertainty, golf utilization fell ~15% as they were closed for 10 days due to typhoon in October. It does not sound good for their next quarter in view of the harsh winter ahead.

Given that I am comfortably in the money, I will hold and see.


Netlink Trust
Nothing much to say - everything according to forecast results and on track to meet target DPU.


Watchlist
Comfort Delgro - $1.9 and below would be extremely tempting.

SGX - Closer to $7.

Raffles Medical Group - Closer to $1.

Starhill Global Reit - 6.5% yield at $0.75.

Mapletree Comm Trust - Below $1.5, camping at 6% yield. NAV is $1.37.

ST Engineering - Would likely bite at 5% yield (closer to $3)

Capitaland - Look closer to $3.3 or below.

Mapletree Greater China Trust - $1.1 or when it retract to more than 7% yield.

Letter To Shareholders (8) - Performance Review 2017Q3

Performance Highlights
STI inches up slightly in Q3 by 0.8% while the Dow Jones continue to break historical high despite tensions with North Korea. Our portfolio grew by 0.5% with most coming from dividends. No major acquisitions in Q3 except for a very small stake in Netlink Trust gotten from IPO. Our assessment is still that the SG Market is fairly valued now, although some blue chips are falling into bargain territory.

We paid out dividends of over $1500, the highest ever for a single quarter. This is almost doubled the same period last year.

Operating Highlights
The most important milestone is that we have officially secured our revenue source, extending our lease expiry by another year. It comes with a good positive renewal, affirming the board's strategic decision last year.

Income for the quarter was about 23% higher largely due to mid year bonus in July. Other one-time revenue came from the numerous IPT sessions in August. We expect income to be higher in Q4 as well from the year end bonus, which should make up for the loss in Q1 this year.

Overall, total income this year should be comparable to last year.

Expenses were about 5% lower, with the only major expense being our traditional parents gift in August. August expenses would almost always be the highest in the year. If we exclude that, our fixed expenses would probably be some of the lowest 3 month period.

We do not foresee any major expense coming up for the rest of year, except the slight possibility of getting a laptop for work purposes.

Acquisitions & Divestments
We came very close for a few purchases but it always seem to slip us by, and now our cash holdings are almost back to Q1 level. The only purchase this quarter is a very small stake in Netlink Trust.

CapitaComm Trust would be doing a rights issue soon and while we are slightly doubtful of the acquisition (non DPU accretive), analysts claim it will be beneficial in the long term. That said, we see no reason not to sign up for it. Closing date is 19th October.

The general intention would be to once again deploy more into investments in the next 3 months, especially since we anticipate more cash inflow.

This is a first world problem. We are still deciding if we should make do with a little less margin of safety and make more "fair value" purchases instead of waiting for huge bargains.


Outlook
We have a long list of potential acquisition targets and prices that would warrant us to "take a closer look".

Comfort Delgro - This transport giant has fallen >30% from its $3 peak. Management guided declining revenue in almost all segments, and it is plagued by competition from Grab. However, we must know that only 30% of revenue comes from Taxis. Buses and MRTs are still largely profitable, and there must come a point where valuation is cheap enough to worth it. $1.9 and below would be extremely tempting.

SGX - Closer to $7. Monopoly business with a stable and safe 28c DPU per year. The problem is how much yield is sufficient to reduce capital-loss risk? We think 4% is fair while not being over excessive.

Raffles Medical Group - Closer to $1. Despite crashing near 40%, it is not really that cheap based on historical valuation (its PE is around 23, right around the 5 year mean). More investors are cutting back expectations after management guided "3 years turnaround time" for China operations. We are lacking healthcare exposure and still largely believe in RMG growth story in the long term (5 to 10 years). However, we need a good margin of safety, especially when this is not a dividend stock (1+% yield).

Starhill Global Reit - DPU was about 10% lower last quarter due to large number of AEIs. DPU per year should range around 4.92c to 5c range, which gives around 6.5% yield at $0.75.

Mapletree Comm Trust - Below $1.5, camping at 6% yield. Vivo City is a shopping paradise (well-managed and diversified, especially with the upcoming AEI) and Mapletree Business Centre is just icing on the cake. NAV is $1.37, so the key is just to not pay too high a premium.

ZZ Financial Education Series 3 - Assets Classes

Now that you know what are assets and why you want to buy assets, it's time to learn how to use assets to grow your money.

For starters, you need to know what is "risk free interest", the 3 main factors that differentiate assets and what are the common assets.

What is Risk Free?

First, we need to understand the concept of "risk free asset".

There is technically nothing in this world that is risk free. Countries can go bankrupt, currency can become worthless, a nuclear bomb could strike your city, aliens could invade Earth and everything could go to zero.

Hence, by risk free, we mean 99.9999% risk free. In case the unimaginable happen, it would be a doomsday scenario and you would have more to worry about than your assets becoming worthless.

The most common risk free asset in Singapore context would consist of things such as Singapore government issued bonds, CPF, etc. Think about it, if these things ever become worthless, that would mean the entire SG currency would be worthless.

Three Main Factors That Differentiate Assets

They are Returns (how much rewards you get), Risk (how much and what probability you stand to lose) and Liquidity (how easy it is to access/sell your asset without penalty).

It all seems very vague, but you will get an idea once I list some common assets.

Asset	Returns	Risk	Liquidity
Cash	None	Risk-Free	Very-High
Bank Savings	Very-Low	Risk-Free	High
CPF-OA	Low	Risk-Free	Low
CPF-SA	Med	Risk-Free	Very-Low
Singapore Saving Bonds	Very-Low	Risk-Free	High
Blue Chips Bonds	Low	Low	High
Blue Chips Shares	Med	Med	High
Penny Stock Shares	High	High	High
Investment Linked Policies	Low	Low	Low

As you can see, there are always trade-offs between the 3 factors. There is no assets that gives you high returns, risk-free (capital guaranteed) and let you withdraw anytime.

Think about it this way:

Suppose your bank saving account guarantee you super high returns similar to shares. Would anyone in their right mind invest in shares then?

Suppose CPF-SA grants you the ability to withdraw anytime. Would anyone in their right mind put their savings in banks? The logical thing would be to top up everything into CPF.

The "market' always adjusts itself.

Suppose you can choose to loan money to POSB Bank, or to a hardcore gambler. Both offer you 5% interest. Would you loan your money to the gambler? I guess not.

But what if the gambler promises you 20% returns? 50%? 100%? At what point would it be enticing enough for you to make the switch?

As you can see, the market will "correct" itself until the risk-returns (and liquidity) factors are balanced. This is how all free-markets (including stock market) works.

What Are Good Assets Then?

How good an assets is would greatly depend on your risk tolerance, how important is liquidity a factor for you, etc... Generally, a good asset should score highly in 2 of the categories.

For instance:
Blue chips gives you good returns with moderate risks and are highly liquid (sell anytime).
CPF gives you reasonable returns and are risk-free, but are non-liquid (many conditions).

A typical bad asset are investment linked policies.

While risk of it going kaput is low, it gives low returns (many just average 2 to 3% returns, much worse than stocks) and are highly non-liquid (you must keep paying premiums, once you stop you lose a lot, and you can't withdraw the money as you like).

Quarterly Results Review - 2017Q2

Frasers Centrepoint Trust	Revenue dipped 1%, mainly due to AEI at Northpoint. Phase 2 is expected to complete in September, so I expect the next result to be similar. Shopper traffic is up ~3% if we exclude Northpoint. All is well except Bedok Point, but I guess it can't be help at this time. All eyes are now on the grand opening of Northpoint City. Rejoice Frasers shareholders!
Netlink Business Trust	Really small position due to IPO allocation. Nothing much to say except this stock is not meant for flipping. This is a 5.7% yield dividend machine. I expect very small fluctuations and investors to treat this more like a bond. If in the unexpected case that it gets sell down harshly (to 70c), I will consider unleashing a full bullet. Otherwise, it'll probably just occupy a small position on my portfolio for a long time.
Sembcorp Industries	I thought the results was okay, considering the several one-offs deductions. Marine continue to be down in doldrums. For Utilities, it is mainly supported by Singapore (50% of net profit) now. India's might continue to make losses for 2 to 3 years as they secure the power purchase agreement. Interim dividend goes down to 3c, from 4c last year to build up their cash reserves. Strategic revamp of the company will complete in 4Q.
M1	M1 posted another bad quarter (-20% profit) and is my most concerned counter at the moment. DPU has fallen to 11c, below my previous worst case estimate of 12c. I am strictly monitoring its performance. Revenue is stable, fibre customers is climbing up slowly ($8K), data exceeding basic bundle is raising, and yet their profits keep falling. They are really squeezing their margins to retain their customers as can be seen from the falling ARPU. My interpretation is that major shareholders refuse to sell at ~$2.1 due to low ball offers. Hence, the majority shareholders must felt that M1 is worth more than that. I really have no confident in their CEO. Temasek selling is not a good sign as well. They are diversifying into data analytics, smart nation and IOT initiatives, but these all take time to become profitable. Yield at $1.9 is 5.8%, based on trailing results.
Capital Commercial Trust	CCT has always been worry free for me. DPU inch up 4.6% despite office sector headwinds. I don't even pay attention to this due to confidence in its management and assets. Main catalyst now is the redevelopment of Golden Shoe Complex. The problem is I believe the fair value is $1.6, and now the price has gone up as high as $1.75. First world problem.
Accordia Golf Trust	This quarter gave me a confidence boost, being one of the better earnings for a while, with utilization and player numbers going 2 to 3% above 3 year average. Profit went up 10%. NAV dropped from 0.89 due to weaker Yen. I really like their asset enhancement initiative slides which was pretty cool. GPS navigation systems, junior and ladies programmes, special events, collaboration with partners like car rentals. It gave a more 'story' perspective to their business instead of all numbers.
Far East Hospitality Trust	Property income dipped slightly to 1%, while DPU slide by 4%. It will continue to be challenging in 2017 until hotel supply taper off and hopefully recovery in 2018.
Singtel	Singtel proves its resiliency compared to the other 2 Telco, and profit would have been up 3% if not been for intense competition at Airtel. While ARPU is lower (a macro trend), it is much higher at $65. Its $2 billion profit from Netlink will be recorded in Q2. Very safe 4.6+% yield and my largest position.
Frasers Centrepoint Ltd	Another good set of results. Frankly, I'm treating this like a property ETF so I am not reading much into their individual segments. 70% of the assets and 50% of net profits are from recurring sources (i.e REITs), which provides a good "baseline" of dividends. Dividends has been maintained at 8.6c for the past 3 years and I expect it to continue.
Capitaland Mall Trust	Capitaland Mall once again erases all rumors of "death of retail malls" in Singapore you see all over the news. Glad I did believe myself and brought in a substantial position. Its all about asset quality and location. Despite the absence of Funan, they still manage to maintain their profits, shopper traffic and most importantly DPU. Quite confident that their 11c, 5.5% yield is very safe until the grand opening of Funan. I am not a professional investment guru; I'm a income machine builder.
Straits Times Index	DPU is back to 48c (2015 level). At current prices, yield is ~3%.

ZZ Financial Education Series 2 - Assets VS Liabilities

“The rich buy assets, the poor buy liabilities”

This is the foundation and fundamental concept towards financial freedom.

Putting aside lottery and inheritance, there are only 2 ways you can make money:

1.     Exchanging Time/Energy for Money, or Human Capital
2.     Making Money From Money, or Financial Capital

Unfortunately, human capital is limited. We cannot work forever, and we only have 24 hours a day. Unless you are a super-high earner who can amass a fortune during your productive age on your job, you can never achieve financial freedom by the first method alone. This is because once you stop working, so does the cash inflow.

Most "commoners" are forever stuck with the first method. We were never taught other ways. If you do so, you will work until the day you die.

Take a moment to consider what would you rather have?

1.     20 Years of food in the warehouse
2.     A farmland of livestock and crops that can produce enough food to feed you every year

1.     $1 million dollars in the bank
2.     Assets that can generate $50K per year, every year, forever.

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The Chinese have a saying - "Even if you have a mountain of gold, it'll eventually dry up when you stop working." (做吃山空)

Hence, the way to financial freedom is not to accumulate a mountain of gold, but to collect things that can generate gold for you perpetually.

The ordinary man work for 40 years, save up loads of money and then hope it'll last him through his retirement until the day he leave Earth. The financial literate person accumulates assets until his assets generate enough cashflow to cover his expenses.

What's the difference?

The second method has some clear advantages: You are never afraid that you would “live too long”. There is no risk of you having to return to work when you are 80 years old cause your retirement fund run out. There is no risk of spending too much when you first cashout your retirement lump sum.

In other words: Grow apple trees, not collect apples. Buy cows, not milk. Buy chickens, not eggs.

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So, what are assets? Assets are essentially anything that produces money/value. An asset generate cash inflow for you.

A simpler definition: If this thing gives you money, it’s an asset. If this thing takes money from you, it’s either an expense or liability.

A good dividend stock? It’s an asset.
A coupon-paying bond? It’s an asset
A milk-producing cow? It’s an asset.
Food that you need to eat? Expense.
Movie and entertainment? Expense.
Student loan? Liability.

Some often misinterpreted ones:

Your insurance/healthcare plan? It’s a liability.
Monthly car installment? It’s a liability.
A house you’re paying mortgage for? It’s a liability.
A house you rented out and collecting money every month? It’s an asset.

Certain things (like house) can be both an asset and liability at the same time. It's a complicated topic with many views but that's beyond the scope of this article. In essence, anything that does not give you money is an expense or liability (food, gadgets, clothings, etc...)

Remember this: The rich buy assets, not liabilities.

Everything is summarize by this guy.

The path to financial freedom is to have your money work for you.

The easiest to do this, for a typical Singaporean, is to use the first method (your human capital) to accumulate your first pot of gold. Save a lot, then invest it into assets.

Let your assets generate income, and use the income to buy more assets. (i.e 钱生钱)

In this diagram below, Poor Dad refer to the financially illiterate and majority of the population. Rich Dad is the path towards financial freedom.

Summary: 
1) Work -> Income -> Buy Assets -> Repeat
2) Assets -> Generate Income -> Buy Assets -> Repeat

In your early years, most of your money will come from the first method. It can only be so for people who aren't born with a silver spoon, for commoners like us.

Thus, you need to make hay while the sun still shine. When you are young, your passive income will be pathetic compared to your active income. As you grow older, your human capital will eventually plateau and go into decline. You have less energy, are at greater risk of being fired, of becoming obsolete, of losing out to fresh graduates. That is the time when your financial capital should take over your human capital to generate money for you.

Eventually it will snowball to the point where income from the 2nd method covers your entire lifestyle expense.

And that, my friends, is financial independence.

A Side Note On Debt

Many young generation today live a "YOLO" lifestyle, thinking they should enjoy all they can, spending all their salary or worse, getting into debt.

Debt and liabilities are the greatest obstacle to financial independence. Debt is borrowing from your future self. Interests on debt are "reverse passive income" that will compound against you. Never get into debt.

Finally I leave you with this video from OnePercentBetter. This article covers Chapter 2.

Letter To Shareholders (7) - Performance Review 2017Q2

Performance Highlights
Market continue its upward trajectory for the year and our portfolio went up by 5.2% for the quarter, compared to 3.8% of the STI, thanks to a couple of purchases we made. Our assessment is that Singapore Market is quite fairly valued now.

We paid out dividends of over $1000, slightly lesser than the same period less year due to the absence of ST Engineering & China Merchant Pacific. It is incredible that we have grown our passive income from less than $1K per year in 2014 to $1k every quarter in just 3 years.

Operating Highlights
Income for the quarter was about 10% higher than last year due to higher revenue and couple of mini items such as credit card cashback.

Earnings is expected to improve significantly in the 2nd half due to presence of bonus items.

Expenses were much lower (~40%) compared to same period last year, and just 5% higher compared to 2015. The only major expenses were as follow, which was really minimal:
- Father's A&E cost in April
- Niece's birthday, good quality replacement chair in May
- Friend's wedding in June

We do not forsee any major expense coming up except for our traditional gift to parents.

Acquisitions & Divestments
We went on the biggest acquisition spree ever (as guided) - firing 3 bullets which all were profitable as of now.

Singtel: We doubled down on this "bluest of blue chips" Telco when it went on sale due to fear from their Australia operations and 4th Telco entry. This is one investment where we have no fear piling on and it has now become our biggest holding (20%). A solid 4.8% dividend yield with Netlink IPO as a major catalyst.

Far East Hospitality Trust: We fired a medium-sized bullet for this and it went up despite the less than stellar results. This is a speculative bet we added mainly to gain exposure to the hospitality sector (which we do not have) which is pose for recovery. We can expect 7% yield or at least 6.5% in the very bad case.

Capitaland Mall Trust: The boat returns again for the trust and we were able to top up our partial fulfillment last quarter to turn this into a full solid position. We have confidence in their grade A malls, all conveniently located beside MRTs. While the fear of online shopping (Amazon, Alibaba) taking over is real, we think Plaza Singapura, Junction 8, Bugis Junction, Westgate, etc... will always have a place in our society. Retail will be transform to become more F&B and service oriented, and friends will still meetup for KTVs, movies, dinner at shopping malls. The ultimate catalyst for this is the transformation of Funan shopping Mall in 2019. For now, we expect a stable 5.8% yield.

For the first time in 3 years, our cash holdings actually went down for a quarter and our equities portfolio have crossed a major milestone.

Financial Strength
We are extremely comfortable with our level of warchest now, and will try to channel as much as possible all future income to investments. We expect to recover 2 bullets from our parent company in the next quarter, and a minor bonus in July, which will help refill our ammunition.

In May, we applied for SCB unlimited card with 2 year fee waiver until May 2019. Expected benefits: Spending $300 on OCBC365 would have gotten $1.0 cashback compared to SCB $4.50 now. We also got $100 vouchers on top of the $138 cashback!

We also just learnt that you can actually top up EZLink card using Credit Card. That's about $1.50 (enough for a free trip) every month, with even greater convenience. While people may laugh at this being negligible. remember that these are practically "free money" with almost no effort.

Outlook
The company will slowdown its expansion in the next quarter with at most 1 or 2 purchase. Currently, Netlink IPO, Comfort Delgro and SGX are on our watchlist.

August is another strong dividend month and Q3 will definitely be a great harvesting quarter.

Quarterly Results Review - 2017Q1

Frasers Centrepoint Trust	NPI dipped 3% while DPU is maintained, largely due to Northpoint AEI. Northpoint will be complete in the later part of this year, and in my opinion its integration with Northpoint City will bring FCT to new heights. Average rental revision at 4.1% which is impressive when you compare it to other REITs which are either incurring negative revision or flattish revision. A slight concern to me is the 3.5% dip in shoppers traffic. We have to observe to see if this forms a trend.
Super Group	Divestment completed at $1.30 per share.
Sembcorp Industries	Profit goes up slightly thanks to land sales from Urban Development, but this is one off. Marine continue to suffer and Utilities was unexpectedly bad, particular the overseas segment. Big news is new CEO plans to take 6 months for a strategic revamp of its operations.
M1	Profit continue to suffer (6th consecutive quarter) another 14%, with the usual culprits such as falling international call. 1Q EPS at 3.9c, down from 4.5c. M1 is sacrificing average revenue per user (ARPU) in exchange for maintaining/slightly increasing subscribers. Losing faith with its management as they won't commit on dividend/profit guideline, sticking with "80% Payout". FY 2015 DPU: 15.3c, EPS: 19c FY 2016 DPU: 12.9c, EPS: 16.1c Worst case, I am expecting 15c EPS and 12c DPU. At $2, it will be 6% yield. Stock price is heavily influenced by the ongoing "shareholder review".
Capital Commercial Trust	Once again defy all expectations with 10% higher DPU despite the office rental headwinds. Main catalyst now is the redevelopment of Golden Shoe Complex. The price has run up a fair bit now, and I think it's now fairly valued at around $1.6.
Accordia Golf Trust	Unexpectedly bad results, with current DPU dropping over 14% to 4.71 yen for the whole year. Annual dividend (SGD) dropped 9% from 6.63c to 6.04c This is attributed to higher snowfall in Feb. Remains at a steep discount to book value of 0.91 and supported mainly by its yield.
ST Engineering	NA. Crazy run up in prices!
Singtel	Showed resilliant results (net profit up 2%) when its peers are down in doldrums (both M1 and Starhub down 30 %). Nothing much to say except I'm confident. Looking forward to Netlink IPO later this year.
Frasers Centrepoint Ltd	Really surprising results with net profits up 90% due to profit recognition from Suzhou, China and Singapore. FCL currently has about 46%, 33%, 9% and 7% assets in Singapore, Australia, China and Europe respective - and they are looking to increase investments in overseas assets for long term growth. It's a good diversification from SG for me. 70% of the assets and 50% of net profits are from recurring sources (i.e REITs), which provides a good "baseline" of dividends. Despite the relatively high level of debt, I am quite confident in its management. Dividends has been maintained at 8.6c for the past 3 years (5.8% yield at $1.495, very high for a property developer).
Capitaland Mall Trust	Not much comments as position is extremely small. Rental revision is almost flat. Expect DPU to be stable around 11c until the return of Funan Mall in 2019.
Straits Times Index	NA

ZZ Financial Education Series 1 - No One Care About Your Money Except Yourself

If you ask the butcher if you should have meat or veg today, what would he say?

If you ask the salesgirl if the shoes look good on you, what would she say?

If you ask the insurance agent if you are sufficiently covered, what would he say?

If you ask the property agent is it better to invest in stocks or property, what would he say?

If you ask the broker if it is a good time to buy stocks now, what would he say?

If you ask the barber if you need a haircut, what would he say?

...

DON'T ASK STUPID QUESTIONS LAH!

A property agent agent job is to sell house, not to take care of your finances.

An insurance agent job is to sell insurance & earn commission, not to take care of your finances.

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In the first post of this series, I'm going to debunk why you should never grow your money with insurance companies, banks, managed funds, etc...

It's actually VERY SIMPLE.

Just ask yourself: Why are they wasting their time to help you manage your money? You think really got people so free? Why do you think there's always random strangers at the MRT stations offering to help you "earn more money"?

It doesn't take a genius to figure out - because they get a cut in the process. Commissions, management fees, you named it. If they don't earn anything, you think people got so much free time to waste on a  stranger?

Always remember: Their purpose is to earn from you.

This immediately puts their interest and your interest in conflict.

Supposed there are 2 equal investment products, would they recommend you the one that cost less or more fee? If they take more percentage in fee, that means less returns for you. So are they working in your interest, or their interest?

It's nothing personal - it's just business.

It's just how the world of capitalism works.

Have you ever wonder why no insurance agents/financial consultant would ever recommend you to buy Singapore Saving Bonds (risk free 2%), or to buy term insurance (they get almost no commission), or putting your money in CPF?

Imagine how dumb that is.

It's like the meat-seller telling you "Don't eat meat already. You are overweight."

It's like housing agent telling you "Prices are high now you should wait."

It's like the shop uncle telling you "This item if cheaper if you get it from next door."

See the point?

I'm not saying what they recommend doesn't make sense. I'm saying 99.99% of the time (unless you have a saint for a financial consultant), what they recommend isn't optimal. Agents got to eat, you know?

It is inevitable that they will skew their recommendations towards higher commissioned products; Products that have much better alternatives. The same products that you can purchase elsewhere.

Suppose you want to buy Bread + Peanut Butter. You can:

1. Head to your local mart and buy them individually for $2 and $3.

2. Have your agent packed it in a hamper as 1 item, and sell it to you for $10.

This is investment-linked policies for you.

This is bank structured deposits for you.

This is managed funds for you.

They packaged everyday, simple financial products and sell you at a steep premium.

You still want to buy from them?

Up to you lor.

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To add on, these people aren't necessary more savvy than you in the first place.

Every now and then you see news of agents themselves getting scammed.

What these agents know are how to sell to you, not how to make good investments.

Those agents (sometimes fresh graduates) often know nothing more about investments than you.

So two points:

1. Their financial interests are in conflict with yours
2. They are not much better than you in investments in the first place

Don't believe? You will soon as we get further in this series.

It is like paying an ignorant person a commission to help you "grow" your money. You lose in 2 ways - You make lesser than you would have, and they get to take a cut of your capital with it.

So why are there still so many people who let people managed their money?

Mostly because they don't want to take responsibility for it. They are scare of losing when they make their own investments. They prefer someone else losing it for them, and thus having someone to blame for it.

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In Summary:

1. No one care more about your finances except yourself.

2. You lose in multiple ways when you get someone to manage your money.

3. Financial ignorance will cost you much more over your lifetime than a few years of salary will.

Letter To Shareholders (6) - Performance Review 2017Q1

Performance Highlights
The market went on a crazy bull run since the start of the year with STI exploding 300 points. Rising tides lift all boats and our portfolio leapfrogged 9.5% into positive territory after 2 years.

Looking back, we can only regret not pumping more capital into the market during the downturn, even though we are intrigued with the crazy run-up in US.

On a positive note, we paid out dividends of over $1000 (base on pay-date), highest ever for Q1 since inception.

Operating Highlights
As forecasted, income for the quarter were almost 40% lower than the same period last year. This was mainly due to:
- Absence of bonus in January and March.
- No Chinese New Year winnings (compared to Feb last year)

Earnings is expected to catch up in the following 3 quarters.

Expenses were about 16% higher compared to last year, but inline with 2 year average. This was mainly due to:
- Gambling losses during the CNY period (charged in January).
- Wedding events in February.
- Mayday Concert and board game purchase in March.

Acquisitions & Divestments
The market run-up means less opportunities, although we managed to nibble a tiny bit of CapitalMall Trust due to partial fulfillment. Lesson learnt: Do not be afraid to just buy at market value if we strongly believe in the purchase. In this case, we missed a substantial run up due to wanting to save $50.

Super Group was finally privatized and we let go of our holdings at a overall loss of 25%. A lesson for blindly buying at high prices and not having the conviction to average down after the shares plummet 50%. Thankfully, this is the smallest holding in our portfolio and the damage is minimal.

Bank Accounts
The unexpected bad news was yet another downgrade of OCBC360 account. Fortunately, we have maxed out our Maxigain counter (our plan 1 year ago finally bearing fruit) at 1.2% bonus interest. With rising US interest rates, SIBOR rate is also expected to trend up.

Considering these changes, our cash account rankings are as follow:

1. Citibank Maxigain: 0.55+% for the first month, ~1.75+% subsequently. Withdrawal conditions.
2. OCBC 360: 1.55%, 1.85% on certain months.
3. CIMB Fastsaver: 1% unconditional.

We are saddened by the change and have explored other options, but have not find any with a definitive advantage over OCBC360. This is because we are unable to the meet the $500 spending in most months which most other banks require.

For now, our immediate action is to reduce reliance on CIMB Fastsaver and direct more into our stock holdings to meet this year dividends goal. Any long term reserves will go straight into Maxigain, and OCBC360 will store our bullets.

We applied for the SCB Unlimited Cashback card with 1.5% rebate, which we believe present the best value for us at the moment. We will be closing the Bank of China account.

Financial Strength
DBS Vickers is currently having a major promotion with reduced commissions (0.12% with min $10, down from 0.18%) until June.

In other news, Budget 2017 announced tax rebate of 20% up to $500 this year, which would result in slightly lower tax expenses.

Our financial strength is at an all time high with more than 5 years of emergency funds and 10 years of warchest.

Outlook
Our immediate priority is to deploy cash as soon as reasonable opportunities come along before the strong dividend months of May and August arrive. Hopefully we can see some market corrections soon.

Barring unexpected circumstances, we expect higher dividends for the next 3 quarters.

Every Singaporean Life?

Come across this fascinating article about the supposed life of every Singaporean, and the author rebuttal against it.

My thoughts?

When you want 5 star hotel wedding, take 30 year loan for million dollar condo, buy big car, go annual vacation to Europe/US, change latest iphone every year, how to save for retirement?

Chinese have this saying: No so big head, don't wear so big hat. If you are a peasant (and earn a peasant income), don't try to live an elite life.

No doubt there are people truly living in poverty in Singapore (don't earn enough to even put 3 meals on table, much less save), but also got lot of cases is people die die want to buy something they can't afford (throw all their savings/take on big debts for car and house) and then claim they nothing left for retirement.

I don't deny the cost of living in Singapore is extremely high, but I think that gives us even more reason to be prudent with our earnings.

"Rich people stay rich by living like they're broke. Poor people stay poor by living like they're rich."

I can only shrug my shoulders when I see people who are lazy to even write a form to credit their salary to a higher interest account (a one time effort and gets you free money).

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Instead of the article, I would like to propose an alternative.

The below assumes you have the privilege to pursue financial independence. Generally, this means:

- You and your dependents (family), are generally healthy and does not have long term and huge medical bills.
- Your family does not depend on you for survival, and you do not have to spend a huge portion of your income on them.
- You income is not too low (Subjective, but I would say below 2.5K)

In my opinion, most graduates from middle income family would have no problem meeting these criteria.

1. Study hard, get a good degree, earn a median income and try to have as high of a saving rate as possible, especially in your 20s (the first 5 year is crucial).

2. If applicable, clear all your debts ASAP, do not rack up credit card or any other debt, and do not waste money on useless shit. Do not take debt to go on vacation, buy liabilities and other non-income producing crap.

3. Save up emergency fund of 6 months, and put them in a high interest account. Then start saving for your warchest. Try to hit 1 year annual saving before 30s. This immediately gives you passive income of $1.2K per year (or ~$100 per month).

4. Start investing properly and correctly. Even if you are extremely conservative, you should get around 5% return over the long term.

5. Earn money -> invest -> collect dividends -> re-invest your dividends. Keep repeating this for the next 10 years.

6. If you decide to get married, have a simple wedding, simple honeymoon, buy an affordable house. Do not buy a car. If you have a child, be prepare to delay your retirement if you want to send your kid to expensive enrichment and tuition. If you really want to leave a legacy for your child, try starting a portfolio for him/her instead. He/she will have additional 20 years of compounding.

7. If you follow this diligently, by the time you're in your 40s, your investment (passive income) can easily cover more than half of your expenses (saving rate ~50%). If your saving rate is truly insane (>70%), you might even reach financial independence here. If you haven't, continue doing step 5 for the next 10 years and you would achieve the same. It's all up to your saving rate at this point.

8. As a guideline, aim to have minimum 1 year annual income of savings by 30s. 5 by 40s, 10 by 50s.

If you are willing to even put in a little effort to learn right investing, optimize your savings, and don't over indulge in luxuries, I am very sure most can achieve FIRE within 20 years. Many local bloggers have achieved it much much earlier on median income, in their 30s even. So 20 years is a really conservative estimate already.

Problem is, are people willing to put in the effort?

Quarterly Results Review - 2016Q4

Frasers Centrepoint Trust	DPU is maintained despite the fall in revenue due to corresponding fall in expenses. Northpoint revenue down 25% dude to ongoing AEI. Slight increase in debt due to acquisition of Yishun 10 retail podium. Occupancy is stable at its 2 jewels, but show signs of decreasing at the smaller malls - especially Bedok Point. It 's amazing they are still getting positive rental revision (+6.9%) in the current retail climate, proving just how resilient their malls are. NAV is $1.93 and I expect full year DPU of 11.7c. At current price, yield is 5.9%.
Super Group	Awaiting takeover at $1.3. Expected to cash out in April.
Sembcorp Industries	Full year dividend has fallen to 8c, a far cry from the >16c when I first got vested. Utilities is stable and net profit would be up 4% excluding one-time items. Marine is finally back in (slight) black after taking huge write-downs last year. This is really one of the better quarterly results in a long time. Full year EPS is 19.9 (I expected 19c worst case) and DPS is 8c (I expected 10c). Their payout ratio dropped from ~50% to 40%, signifying they are preserving cash. Management guided a challenging 2017, but I believe the worst is over for Sembcorp.
M1	Profits for the year fell 16.1% mainly due to lower international call, roaming (even I cancelled this) and increased depreciation of 4G network assets. Only saving grace is their fibre, postpaid and prepaid customers are still growing. This comes at a cost of ARPU as they really "offer gao gao". Even I switched to M1 Fibre. Full Year DPU is 12.9 cents (down from 15.3), and EPS is 16.1 (down from 19.0). Yield at price of $2 is 6.45%. Management guided challenging environment, and growth in other "business areas" (IOT, data analytics) as they always do. I might consider averaging down if it comes down to 7% yield.
Capital Commercial Trust	Surprising Q4 results with a 10% increase in DPU due to full acquisition of CapitaGreen, resulting in full year DPU of 9.08c. Management expects slight negative rental revision in the future, but this is already well known. 80% fixed interest debts with AEI of Golden Shoe as its main growth catalyst going forward. At $1.57, this is yielding 5.8%. Holding for the long term.
Accordia Golf Trust	DPU fell from 2.16 to 2.09 (3.2% lower) due to slightly lower revenue ("warmer winters") and higher expenses. While they claim it's due to weather, profits does seem to be gradually trending down. I have to observe this for a few more months but thankfully, the yield is consider high. Price to book is 0.68 (book value: 0.93). I'm expecting yearly dividend of 4.8c which yields around 6.8% at current price of $0.7. This is a fall from the 7.4% expectation previously.
ST Engineering	Much better than expected results with a surprisingly strong Q4. I am looking to get back if the chance arises.
Singtel	Showed resilliant results (net profit up 2%) when its peers are down in doldrums (both M1 and Starhub down 30 %). Nothing much to say except I'm confident. Looking forward to Netlink IPO later this year.
Frasers Centrepoint Ltd	Really surprising results with net profits up 90% due to profit recognition from Suzhou, China and Singapore. FCL currently has about 46%, 33%, 9% and 7% assets in Singapore, Australia, China and Europe respective - and they are looking to increase investments in overseas assets for long term growth. It's a good diversification from SG for me. 70% of the assets and 50% of net profits are from recurring sources (i.e REITs), which provides a good "baseline" of dividends. Despite the relatively high level of debt, I am quite confident in its management. Dividends has been maintained at 8.6c for the past 3 years (5.8% yield at $1.495, very high for a property developer).
Straits Times Index	Distributions actually went up to 53c! This was a huge surprise given the drop to 42c previously.

End The Comparison Game

I just want to jot down this awesome article from 4th Pillar, a financial blog I've been following because it resonates so much with me.

If you're chasing after Financial Freedom to impress others, you've got it all wrong.

Contrary to popular belief, FF is never about comparing. Maybe when we were younger, we tend to believe that. 

We buy the latest iPhones and gadgets not so much because we use the features, but because of the "emotional reward" of "impressing others". The same for buying a bigger car, a bigger house, a luxurious vacation to post online, etc...

As you grow older, you'll realized the cruel/fortunate fact - No one cares.

No one is keep tab on what phone you're using, what car you're driving, how much you're making, etc... No one has the effort to do that. No one except yourself.

"Making purchases for the sake of impressing others is a never-ending process. There will always be someone who has a bigger, better, shinier new consumer item than you and the only way to compete with them is to buy, buy, buy.

There is no one to impress. There is no one to compete with."

This might be the secret towards not just financial freedom, but true freedom.

Financial Literacy - Chinese New Year Conversations

Over the CNY, I've had conversations with some relatives about the importance of saving for the future and on the topic of insurance.

On investments, the old generations (especially those who were burnt before) are still full of distrust and fear. They told me to "never invest in stocks and bonds because it's dangerous". Even when I tell them about Singapore Saving Bonds (SSB), which are guaranteed by the Government, they tell me "Bonds are just dangerous. It might collapsed."

I really don't know want to laugh or cry. They even believe their insurance policies are safer than SSB.

I don't know how to explain to them that if the SSB does default, your insurance companies would have long gone bankrupt and your entire bank savings and Singapore Currency (SGD) will be worthless.

They still equate "investing" to "gambling" - trying to time the market, buy penny stocks, etc... They had a look of disbelief when I tell them I almost never sell my stocks - even after they have gone up a lot.

What? Buy and hold forever? What kind of sorcery is this?

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Fueled by the lack of internet/financial education in their days, and of course gospels spread by insurance companies and agents, this led to the older generation becoming overly dependent on insurance.

This belief is so deeply entrenched (根深蒂固) that they believe insurance is the safest and best form of saving. They can pour their entire life savings (and retirement hope) into life plans, endowment plans, etc...

They are extremely skeptical of other form of investments. In fact, just the word "investment" turn them away. I think it's no longer possible to convinced these people otherwise.

I'm not saying insurance is not important, but it just isn't an optimal way of saving.

You use a hammer to hit a nail, and you use an axe to chop a tree. There's an appropriate tool for a job. And Insurance is a protection tool, not a wealth accumulation tool.

You need to diversify your wealth - For protection, for emergency, for capital expenditures, for wealth growth, across a wide variety of assets. I doubt their 20 year-old fresh graduates sons and daughters doing insurance know all these (90% of these "financial consultants" are equally clueless, the remaining 10% just want to sell insurance for their own commissions).

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In the end, I know I'm just grumbling to myself here. It's hard to convinced them.

Argue further and you will be seen as rude, or they will give you the "I eat salt more than you eat rice, what do you know" look.

Anyway...

This is really "inspiring me" to write a beginner series to consolidate the main points on financial literacy.

Years To Financial Independence

Came across this article recently in our local Business Times.

I purposely posted this in Social Media stating that if you are only able to save 10% of your income and put them all in the bank, you can retire in about 460 years.

I do not know what people who "like" the posts think.

Do they think this article is funny, the truth, or it's a joke?

The financially savvy will know this is true, the non-believers will be skeptical.

...

Is this really accurate? I'll prove it.

Notice in this chart that we're referring to Financial Independence (FI) - which is different from Retirement. Being FI means having enough assets to generate enough income for your current standard of living.

Really? I can attain FI in 10 years if I save 50% of my income and invest them at 7%?

How is that even possible?

I'll do a back of the envelop calculation here:

To make things simple, assume you earn $2K a year and spend $1K a year.

In 10 years, you'll save $10K. Compounded over 10 years, this $10K will grow to roughly $14K.

From that point forward, you can stop working: 7% of $14K generates about $1K of passive income (i.e your yearly expense)

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It doesn't matter whether you earn $20K and spend $10K, or earn $1 Million and spend $500K. The math is all the same. The only thing that matters is your saving rate and yield.

This is, of course, assuming your expense remains the same.

Which is why I said FI = Current Standard of Living.

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An interesting case:

Assuming we save 20% of our pay (e.g we actually save 37%, but let's assume 17% of it is use to pay for house), at the rate of 4% (roughly what the CPF retirement account pay), guess how long you need to retire?

Consult the chart, it's 40 years. Pretty accurate.

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I think this chart brings "fear" and "relief" at the same time:

Fear because it shows how you'll never achieve FI if you have a pathetic saving rate and yield.

Relief because it shows how quickly you can achieve FI with the right strategy.

If you decide to involve yourself in the race to "haolian", to show off on social media, to chase after other people's lifestyle, then you deserve the mental stress and debts.

Buying and maintaining a car adds 10 years to your retirement for the average person. Ask yourself if it's worth it.

Do you want to forever be a slave to your own greed?



Word of advice from the Oracle of Omaha:



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That said, don't ever save at the expense of denying yourself a comfortable life. I believe in accumulating wealth through saving, not scrimping. Eating dirt cheap, no nutrition stuff is a classic case of penny wise pound foolish - but that's story for another time.