The best time to plant a tree was 20 years ago. The second best time is now.

Saturday, August 17, 2019

REITs Valuation

Previously, I shared about Quantifying REITs Fundamental, which we analyze REIT as a whole and come out a factor value, instead of using common filtering method for REITs selection. For this post, let's explore how can we make use of those factors for REITs Valuation.
Before we start, let's go through again some common methods for REITs valuation:
i) Reversion to Mean Approach
- This is a concept in which stock price would move back to its long term average price, over time. Instead of solely look at "price", investors look at metrics like historical P/NAV, historical dividend yield or historical yield spread for the mean price. For detail, you could refer to my previous post, Relative Valuation for REITs

ii) Dividend Discount Model, DDM
As REIT is more for income play, dividend discount model (DDM) is more suitable than discounted cash flow method. This is based on the concept that stock intrinsic value is sum of future dividends which discounted back to present value. For detail, you could refer to The Babylonians - Using Dividend Discount Model in REITs.

iii) Net Asset Value (NAV) Approach
This method is using the NAV to value a REIT. E.g. a price lower than net asset value is considered cheap where as price higher than NAV is considered expensive. You can read more from Investopedia - Is NAV the best way to assess the value of a REIT?

iv) Technical Analysis
This method analyze the past price and volume movement to forecast future price direction. This can be done through candlestick chart and multiple indicators. You could refer the following sites which have preset indicators for buy/sell/neutral.
1) Trading View
2) MarketScreener
If you haven't read my previous post of Quantifying REITs Fundamental,  now will be the time before you continue. Let's refer back to previous examples where we get the following factors:
i) Far East Hospitality Trust = +14.5
ii) Keppel DC REIT = -33
iii) Manulife US REIT = -4
iv) Parkway Life REIT = -21.5
v) Starhill Global REIT = +9.5

Now, convert the above factor to %, whereby 0 value equal to 100%. It would look like below, let's call it yield factor:
i) Far East Hospitality Trust = 114.5%
ii) Keppel DC REIT = 67%
iii) Manulife US REIT = 96%
iv) Parkway Life REIT = 78.5%
v) Starhill Global REIT = 109.5

Next, we will set a benchmark yield and min. yield for each REIT sector. Benchmark yield is the yield that we would like to have if a REIT fundamental is within our expectation. Minimum yield is our required minimum yield irregardless of how perfect the REIT is.
Minimum Yield
Benchmark Yield
* for educational purpose only, different people would have different requirement

As some REITs get income from different sector, so we would need to calculate the benchmark yield with its sector contribution %.
Minimum Yield
Benchmark Yield
Far East Hospitality Trust

Keppel DC REIT


Manulife US REIT


Parkway Life REIT

Starhill Global REIT



Next, we multiply the benchmark yield with yield factor to get target yield; then divide DPU with target yield to get target price.
Yield Factor
Target Yield
Past Year DPU
Target Price
Far East Hospitality Trust
3.87 cents
Keppel DC REIT
7.55 cents
Manulife US REIT
6.08 cents
Parkway Life REIT
13.06 cents
Starhill Global REIT
4.48 cents
* Not a buy/sell recommendation, for educational purpose only

Please do not perform any transaction based on the above examples. The above is just my personal idea without any backtest. Moreover, different people would have different criteria and yield requirement. I've also found my idea is very similar to Reality Inversion - Decomposing Dividend Yield, you could refer to his post for more detail. Hope the above sharing is useful to you all. 

Thursday, August 08, 2019

Quantifying REITs Fundamental

Following previous posts on "How to DIY a REITs Data Collection Spreadsheet" and "How to Come Out a Basic REITs Analysis Summary", this time let's see how can we make use of those figures for REIT selection. Some people and paid course provider would have their own checklist for filtering REITs based on criteria, e.g. gearing < 35% or interest cover ratio > 4 times, etc. You could refer following sites for examples:
1) The Morley Fool - REIT Investing Made Simple: A Checklist to Pick Out the Best REITs
2) Lazy Singaporean - How to evaluate and value REITs
3) ZUU Online - Investing in REITs? Understand How to Read These REITs Data First

Instead of filter or select REITs based on common metrics like gearing, interest cover, NAV and others, can we analyze REIT as a whole and quantify its fundamental ? I have found some bloggers employing this idea through way of scorecard, which you could refer their examples below:
1) Passive Peon - A Peon Analysis - Starhill Global REIT
2) T.U.B Investing - The Tech Powerhouse Face-off
Theory without practice is just as incomplete as practice without theory
So let's list out all the quantifiable criteria, refer below spreadsheet:

This may look complicated at first glance, but it is actually simple which based on the following concepts:
- Every criterion consists of 2 rows, 1st row is benchmark setting, 2nd row is corresponding factor. 0 value is is the base for a criterion. Negative value refers to better condition than base benchmark and vice versa. The higher the value, the higher the risk.
- Different criteria will have different importancies, which separated into color red, orange and green. Red being the more important and green being least important. Therefore, red criteria would come with a bigger factor gap compared to green criteria.
- This spreadsheet is only for educational purpose; different people would have different ideas for criteria, factor as well as importancies.
Now, let's try to apply the above criteria to a few SREITs. I have added this at top right part of data collection page. You could choose between different REITs to see its criteria benchmark.

As mentioned above, 0 is the base benchmark for all criteria. In another word, a REIT which performance is within expectation should have a factor of close to 0. If a REIT fundamental is good, then it would have a negative value, the bigger the negative value, the better fundamental. Vice versa, a REIT with undesired fundamental would have a positive value. From the above spreadsheet, we can see factors for the following REITS:
i) Far East Hospitality Trust = +14.5
ii) Keppel DC REIT = -33
iii) Manulife US REIT = -4
iv) Parkway Life REIT = -21.5
v) Starhill Global REIT = +9.5

It seems that Keppel DC REIT fundamental is best among the 5. But should we just buy it at any price ? If no, how could we determine our entry or exit price ? Some common ways are:
i) Reversion to Mean Approach (Relative Valuation for REITs)
ii) Dividend Discount Model, DDM (The Babylonians - Using Dividend Discount Model in REITs)
iii) Net Asset Value Approach
iv) Technical Analysis

Besides the above common ways, could we make use of above total factor for REIT valuation ? I will leave it to another post to explore this area. Finally, if you are interested, you could make a copy of this spreadsheet through here.

Friday, July 26, 2019

Healthy Habits for Credit Card Users

Previously, I've share about A New Tool to Maximize Cashback & Miles, which is about a new website call which you could key in merchants that you always buy from, and find out which credit cards offer cashback or miles.

I believe everyone love cashback or miles from credit cards, however, credit card is a double edge sword, if you are not careful enough, you would end up in debts before you knowing it. For this post, let us explore some healthy credit cards habits.
Use credit card to you advantage; not to you demise
1) Check Your Credit Card Statement
Always check your credit statement for any errors or financial charges like annual fee or late payment fee. Generally, banks are willing to waive off these financial charges. There was once I found out annual fee charge after 2nd billing cycle, which I have already paid for both billing cycles. I called the bank, and yes, they waived it off and credited back the amount. However, should banks rejected your waiver request on annual fee, you could just cancel it and there will be no charge for this annual fee.
Check Carefully
2) Pay Your Bills on Time
Always pay all your credit card bills before payment due date to avoid any late payment charge. Different credit cards would have different billing cycles which could cause confusion. One way to overcome it is to check online and pay your outstanding amount in 2 different dates every month, e.g. every 1st and 15th of a month. Should you miss out payment due dates and get late payment charge, do call the bank to waive it off.
Pay Timely
3) Pay Your Bills in Full 
Besides paying your bills on time, you should also pay you bills in full sum. Most credit cards in Singapore charge interest of 24% p.a., which is a very high rate. If you only make minimum payment, then your debt would snowballs with compound interest. If you really having difficulties to pay credit card bills, you could consider to make a balance transfer. Do note that balance transfer is still debt, it merely is a tool for you to reduce unpaid credit card interest. For more detail about balance transfer, you could refer below:
i) SingSaver - Unpaid Credit Card Bills? Here’s How A Balance Transfer Can Help
ii) GoBear - What You Need to Know about Balance Transfer
iii) Dollar and Sense - Pros And Cons Of Taking A Credit Card Balance Transfer
Pay Fully
4) Spend on What You could Afford
Spend only on things you could afford and on the amount you could pay back within the same billing cycle. If you are buying big ticket items with interest free installment, do double check and ensure those purchases are really "interest free". Some banks would charge a processing fee, and in most case, you would not get any cashback or miles from these installment purchase. Also note that if banks charge you annual fee during your installment period, you can expect that most banks would not waive this annual fee off.
Spend Wisely 
5) Optimize Rewards
a) Use credit cards that match your spending habits, which you could check from
b) Take note of minimum monthly spending requirement and cap on those rewards. Also take note on weekend and weekday reward rate, it could make a big difference. If you are close to minimum spending, buy some groceries vouchers to top up.
c) Choose credit cards which provide extra interest on your saving accounts; or vice versa, change your saving accounts to those banks in which provide extra interest when using their credit cards. You could refer below for more about Singapore saving account interest rate:
i) Seedly - Cheat Sheet: Best Savings Accounts in Singapore For Working Adults 2019? – Highest Interest Rates
ii) Dollar and Sense - [2019 Edition] Best Savings Accounts for Working Adults in Singapore
iii) MoneySmart - Your Savings Account Sucks, Here Are Some That Don’t – 2019 Edition
Reward Handsomely
Do you also have any other good credit card habits to share? Feel free to leave you comment. 

Friday, July 19, 2019

Sell HDB and Buy a Condo or Two ?

Not too long ago, one property agent came to my house doorstep and offered to assess my family financial situation. I was thinking, what is my family financial situation got to do with a property agent? After I asked further, he explained that through his assessment, maybe we are "able" to afford condo instead of staying in HDB. He mentioned that he helped a lot of clients to realize their dream for owning multiple condominiums in Singapore. He only needed a little bit of our time to discuss and "help" us. And of course, he wouldn't share detail unless I've agree to arrange for meet up. Being skeptical, I rejected the "offer" in the end.
Hmmm..Maybe I am being too skeptical
I am very curious on how one can sell HDB and buy TWO condo, without using much from saving as mentioned by property agent. So in order to satisfy my curiosity, I decided to search with Google and below is what I got:
Top 5 results from Google
After some reading, this can work with certain conditions and risks. Refer below calculator for a case study.

Based on the above calculation, below are the conditions:
i) You own a HDB (crap, else how to sell HDB?)
ii) Your family must consist of 2 persons over 21 years old, commonly one condo under husband name and one under wife name
iii) Your could receive cash from HDB sales proceed, else you would need to use a lot of your saving
iv) Your are able to take up loan amount for condo, or else you would have to pay more down payment with CPF or Cash.
v) You must continue to work so that you are able to pay up the installment with CPF and cash.

And below are the risks that you would have to take:
i) No tenant in which you would have no rental to cover partial portion of installment
ii) Difficult to pay up monthly installment due to loss of job or salary cut.
iii) Margin call from bank to top up the difference should property value drop below loan amount
Do consider both risk and reward when making investment decision
For me, this would definitely be a NO, as costs like installment, maintenance fee, property tax are certain, but the rental is not. In simple word, money outflow IS 100%; money inflow IS NOT 100%. If you are interested, you could make a copy for above calculator through here. Note that this calculator is only for educational purpose and would not be comprehensive enough. Do look for professionals to assess your situation if you keen to this buy or sell any properties.

Saturday, July 13, 2019

A New Tool to Maximize Cashback & Miles

When I've just graduated and started my first work, I am not eligible for credit card application due to annual income less than $ 30,000. Back then, it was 11 years ago, $30,000 income per annum was a challenge for fresh graduates, but as of today, it is not considered a high income. I am quite surprise that most banks do not adjust their income eligibility to match the inflation and salary increase in Singapore.
For my first credit card, I had to surf through individual credit card websites to look for its benefits, which is very tedious and time consuming. But with the boom of financial sites, we could easily read  other's review today, below are some useful sites:
1) Seedly - The Complete Guide To The Best Cashback Credit Cards In Singapore
2) MoneySmart - The 7 Best Rewards Cards in Singapore (2019)
3) MoneySmart - 8 Best Credit Cards in Singapore for Online Shopping (2019)
4) SG Budget Babe - Save more money in 2019 with the best cashback credit cards!
5) SG Budget Babe - Goodbye CIMB, Here's the next best Credit Cards in Singapore for 2019

What if I want to search by merchant that I always buy from and find out which credit card provide maximum cashback? Is it even possible ? Now, there is a site call which could provide such function. Basically you could key in merchant and choose whether either cashback or miles, refer below for screenshot:
This site is just launched on May and is still in beta phase. They are currently working on to include more merchants and credit cards. They have also plan to do stuff like reward calculator which could calculate rewards based on different cards and credit card recommender which could select a card with max. benefits.

I find this tool useful to me and I hope this could benefit to my readers too, let's go and try it out. Finally, note that this is NOT a sponsored post.

Sunday, July 07, 2019

Added SREITs Data Page and Revamped Blog Design

It has been 2 months since my last post in May, due to my work. Recently, I finally get to have some times to revamp blog design. Thanks to the guidance from K C from 30 Year Old Investor Blog, I have learnt how to download a template and modify basic html to make the blog to what you seeing now.
Also thanks to readers who have been patiently waiting for my blog updates
For those who are blogging with blogger or interested to start blogging with blogger, you could visit Gooyabi Templates and download templates for your blog. There are really a lot of templates by different styles/features for you to choose from. There are instructions to guide you for templates installation and configuration.

Besides revamped blog design, I have also added 2 pages which are:
i) SREITs Data
Adopted from previous post How to Come Out a Basic REITs Analysis Summary. I would update each SREITs data within a week whenever quarter report is released.

Due to those live prices are imported from yahoo finance, you may have "loading..." or "#N/A" problem. If you know any permanent solution, please share with me. You could make a copy through here if you are interested.

ii) SREITs Result Date
This page consolidatie SREITs result releasse date. I would update it at least once a week. Main source would be from Investing Note.

The main reason I added these 2 pages is because I would like to make this blog a one stop for my readers. I would slowly blog more about my idea of analysis. Thanks for continuous support from all my readers. Hopefully my blog is useful to all of you.

Saturday, May 11, 2019

How to Come Out a Basic REITs Analysis Summary

After previous post about data collection, now I would like to share out how to use those data to generate a Basic REITs Analysis Summary through Google Spreadsheets. I will use 3 REITs examples, which are SPH REIT from previous post, First REIT and Ascott Residence Trust.

This summary would require consolidation of a few google spreadsheets that I have shared previously. Below are the post of spreadsheets used, I would suggest you to go through first before you continue this post:
i) How to Create Your Own Basic REITs Screener
ii) Relative Valuation for REITs.
iii) How to DIY a REITs Data Collection Spreadsheet
We have data now, time to make it into information
This summary require more formula work, therefore I have added SREITs Basic Screener as overview page for formula link up. I have added a few more columns as compared to previous version, which are:
i)  Shortname - For formula to link up with specific sheet name
ii) Dividend Ex-Month - To indicate rough ex-dividend month, more useful to semi-annual type
iii) Latest Financial Period - Result quarter is by formula; annual report to be updated manually.
iv) Support / Distribution % - To know whether particular REITs come with income support

Here is the link for this google sheet. You could refer below for the overview:
Once you completed particular REIT data collection, you could copy formula from the any of 3 examples and paste into empty cells. Make sure you name the tab according to short name in order for formula to work. If you find any formula showing N/A, try delete and undo it to refresh.

Next, let's look at the analysis summary.
You would need to make a copy so that you could select the REIT counter from cell A1. Once you select, it would summarized all information from particular REIT data page. You could see some graphs where data range is at cells A61 to V72. You could print this 2 pages summary to pdf or hardcopy, I have already set the page break.

Feel free to make a copy, modify it and suit to your own use. Note that I am not a good designer on the layout, so for those who can re-design the summary into nicer layout, please feel free share with me. This is the first google spreadsheet that come with links between different tabs, you may require a bit more time to digest and familiarize. Let me know if you find any error or need any help on this spreadsheet.
And now, I have a bad news
One bad news would be, my work which is on project field, is at peak period since 2 months back. This would required me to work long hour weekday and sometimes weekend which expected to last for another 2 months. I would still try to squeeze time for writing, but I couldn't do that on weekly basis as of now. For all the readers, really thanks for your support all the way, if you have anything would like to contact me, I would definitely reply you.