Far East Hospitality Trust:

It has been about a month since Far east hospitality trust has listed. Today, it hit its all time high of 1.04 today and closed at 1.035. I was quite surprise by the huge jump of 3.5% from its closing price of $1 last Friday. As I mentioned in some of my previous posts, I was only expecting Far East Hospitality Trust to trade between $0.97 and $1. The volume was similar to that of Friday.

At this price, it has increase by $0.105 from its IPO price of $0.93. That is more than a 10% increase. Its yield has dropped to 5.39%. Comparing to other similar hospitality trusts, Ascendas H Trust is giving 7.445% and CDL H trust is giving 5.773%. This makes them more attractive in terms of yield. Perhaps I should relook at Ascendas H Trust and see if it is worthed buying.

 

Related posts: 

Far East H Trust: 2nd week

Far East H Trust: 1st week of trading

First REIT: new acquistions

First REIT will be acquiring 2 new properties:
1) Siloam Hospitals Manado & Hotel Aryaduta Manado
This is an integrated hospital and hotel in Manado.
Average of 2 independent valuation: S$93.7M
Purchase consideration: S$83.6M
Discount to valuation: 10.78%
Financing: combination of committed debt and proceeds from a proposed private placement.

2) Siloam Hosppitals Makassar
This is a hospital in Makassar
 Average of 2 independent valuation: S$65.8M
Purchase consideration: S$59.3M
Discount to valuation: 9.81%
Financing: drawdown of committed debt

SGX Annoucement:
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_6A307D9D5C9C15AF48257A80001B4DEF/$file/FR_MM_21Sep12_Final.pdf?openelement


Some pro forma numbers:
Before acquisitons:
DPU: 7.01c
NAV per unit: S$0.81


After acquisitons:
DPU: 7.45c
NAV per unit: S$0.84

A longer weighted average lease to expiry of 11.7 years as compared to the original 10.8 years will be observed.

Looking at the DPU of 7.45c and the last done price of 1.03, we will be looking at a yield of 7.23% per year. This is attractive as compared to other reits which has an average yield of 6.356%. Another advantage to take note is that the properties are being purchased at a discount as compared to its valuation.

It is a pity that there is no rights issue for existing investors to increase their stake in First REIT. The increase in yield from 7.01 to 7.45 is somewhat disappointing as it is only 6.25% increase in DPU. With the additional debt it is incurring, gearing will increase from its low 15.9%. I will need to relook at its increase in gearing as compared to its increase in yield again to assess if it is still a good buy.

In an earlier announcement, some of the calculations assumed the private placement being taken place at a price of $1. I guess if First REIT goes to $1 or lesser, I will top up on my stake in it. But for now, I will wait and see.

Young working S'poreans will have enough CPF savings by retirement: MOM study

I came across this article today. Based on an independent study by the Ministry of manpower (MOM), young Singaporeans in the workforce today will have adequate savings in their Central Provident Fund (CPF) accounts by the time they retire.

http://www.channelnewsasia.com/stories/singaporebusinessnews/view/1226849/1/.html

The article went on to state that "the median male earner who enters the workforce today will be able to achieve an IRR of over 70 per cent through his CPF savings" and "For the female median earner, the equivalent IRR is 63 per cent. "

So what is this IRR (income replacement rate) ?
Based on investopedia, the definition provided is as follows:

Definition of 'Replacement Rate'

The percentage of a worker's pre-retirement income that is paid out by a pension program upon retirement. In pension systems where workers get substantially different payouts due to their differing incomes, replacement rate is a common measurement which can be used to determine the effectiveness of the pension system. In some cases, workers can use replacement rates to help estimate what their retirement income might be from the plan.

Investopedia explains 'Replacement Rate'

Replacement rates are commonly mentioned in the debate over the U.S. Social Security system. Under the current Social Security law (as of 2010), replacement rates are at about 45% for the average worker. The replacement rate can allow for individuals to plan for retirement. For example, a worker with pre-retirement income of $100,000 their can estimate their pension at around $45,000 at the current 45% replacement rate.

Read more: http://www.investopedia.com/terms/r/replacement-rate.asp#ixzz26uyWq8AL


Basically, IRR is a ratio of the retirement income to the pre-retirement income. The article mentioned that a median male earner can achieve over 70% through his CPF savings.

So how much is a median income earner earning today?

 Based on MOM statistics:
 http://www.mom.gov.sg/statistics-publications/national-labour-market-information/statistics/Pages/earnings-wages.aspx

  


With a median monthly income of $3249, it works out to be $38,988.
A 70% IRR will mean that he will take home $27291.60 per year after retirement.

I find these numbers unbelievable. So I did a bit more on the number crunching.



Retirement calculator (CPF)
Based on a retirement calculator on the CPF website:
https://www.cpf.gov.sg/cpf_trans/ssl/retirement/Ret_Est_home.asp?chkDis=1

 This calculator has an option to "calculate the amount required to have a 70% of last drawn salary for the next 20 years"

I input some numbers to test the above scenario. The results are as follows:

Is the CPF minimum sum going to increase to s similar amount of $500k in 32 years time? In one of my earlier posts, I only estimated the minimum sum to hit $348,934.93 by 2042. However it was only based n an inflation rate of 3% per year. The above estimates are much lower as it is based on income levels now and not 30 years later. It seems that I could have underestimated the projections earlier.

Related posts:
CPF Minimum Sum to be raised to S$139,000
CPF minimum sum for Jul 2012 [predicted]
What if CPF minimum sum continues to increase at its current rate

Lessons learnt from the recent interra resources rights issue

Interra resources is currently having a 1 for 2 rights issue. When I was trying to apply for the rights yesterday, I got a nasty shock when I didn't see the rights for interra on the DBS atm machine. When I checked back on right offer information statement, I realized that only OCBC and UOB are the participating banks. I do not own any account with these 2 banks.

I could not use my friend's ATM card for my application as the account had to be the same as the applicant's or it will be deemed invalid. The good thing was that I still have some time to react as the application must be done by 21st September


I had a few options.  
1) Pay via a cashier order.
Using this approach, I could either
a) apply for the cashier order via internet banking. In my case, for the DBS bank, I was told that if the application is made before 12pm, I will be able to collect the cashier order after 12pm the following day. Collection can only be done at selected branches.

•  I did not have the luxury to collect at their selected branches on a weekday. The rights application closes on the coming Friday.

b) Apply for the cashier order at the branch itself. This can be done at any branch. However, this adhoc application comes with a $5 processing fee if it is paid to a 3rd party.

• Using this approach, I can still get my cashier order for the payment. However, I bear the risk of my cashier order and application failing to reach CDP if the mail gets lost. 

2) Open a savings account with UOB or OCBC
This approach requires me to withdraw an amount to deposit into a new account consisting of
a) My rights + excess + application fee
b) Enough cash to fulfill the minimum balance criteria.

• Using this approach, I need to maintain one more account and ensure that the balance stays above the minimum balance required.

In the end, I decided to go with approach 2. My new account is with UOB and the ATM card was issued and activated within the same day. I thought that this scenario may occur again in the future. Having a different bank account will be useful in situations like this.


Lessons learn
1) Always check the offer information statement
One should always check the details of the offer information statement in detail within the first few days upon receiving it. In the event that your bank accounts are not one of the participating banks, you still have time to react to this.

How much can you legally pay in coins?

I came across this article today talking about how much one can legally pay in coins.

http://uk.finance.yahoo.com/news/how-much-can-you-legally-pay-in-coins.html

The article (from UK) gave the following figures:
What coins can you pay with:

• 1p - for any amount not exceeding 20p
• 2p - for any amount not exceeding 20p
• 5p - for any amount not exceeding £5
• 10p - for any amount not exceeding £5
• 20p - for any amount not exceeding £10
• 50p - for any amount not exceeding £10
• £1 - for any amount
• £2 - for any amount

We have came across situations where some shops refuse to accept multiple 5 cent coins or even coins in higher denominations. Some of us may argue that the coins are legal tender and the shops have to accept them. However, what most of us do not know is there is a "limit" to how much one can pay in coins to be considered "legal tender".

After reading this article, one question came into my mind: What about Singapore?

We can go on to ask similar questions:

Can I pay for a copy of The Straits Times using all five cent coins?

Can I pay for my $4 chicken rice with twenty cent coins only?

How about paying that 42" LED TV with one dollar coins?

I did some searching and found the following information on the MAS website:
http://www.mas.gov.sg/en/Currency/Act-and-Regulations.aspx
(click on "Currency Act, Currency Regulations and Penal Code")

Extracted from the currency act:

Coins issued by the Authority, if the coins have not been illegally dealt with, shall be legal tender up to their face value in Singapore as follows:
(a) in the case of coins of a denomination exceeding 50 cents — for the payment of any amount;
(b) in the case of coins of a denomination of 50 cents — for the payment of an amount not exceeding $10; and
(c) in the case of coins of a denomination lower than 50 cents — for the payment of an amount not exceeding $2. 

Applying these "rules" on the above scenarios, we have:

Can I pay for a copy of The Straits Times using all five cent coins?

Yes. See part c above.

Can I pay for my $4 chicken rice with twenty cent coins only?

No. See part c above. 

How about paying that 42" TV with one dollar coins?

Yes. See part a above.

Applying my own common sense on the above examples, I find some of the answers ridiculous. I guess we should still apply some common sense when making payment with lots of coins to prevent rude stares and unnecessary conflicts.

 

How to read an IPO balloting ratio table

In several of my posts on the recent IPOs, I listed the IPO balloting ratio table. Some people might not understand what the table actually means. I will share here on what each column actually means.

Using the recent Ascendas hospitality trust as an example,

Range of stapled securities/shares applied per ('000)

The actual balloting occurs in "bands". For example, if you applied for 15 lots. You will be balloting against other investors who applied between 10 to 19 lots.

Balloting ratio

This refers to the chance of getting successful allocation. For example, for the 10 to 19 lots band, the chances of successful allocation is 66% (33/50).

No. of stapled securities/shares allocated per successful applicant

This refers to how many shares are allocated if one is successful. Being allocated shares/units does not mean you are allocated the full amount which you applied for. In the example above , if you are the 66% in the 10 to 19 lots band, you will be allocated 3 lots only.

Percentage of total number of stapled securities/shares available under the public offer

The number here is of little significance to the individual investors. It shows the percentage of total units allocated across each of the bands. It provides a general view on how the allocation is like across the different bands. In the example above, we can see more than one quarter of the total units are taken up by the 100 to 199 lots band.

Number of successful applicants

This refers to the number of successful applicants on the same band. If you use this number with the balloting ratio, you can figure out how many investors balloted for the band.

_______________________________________________________________________

How the above information can help you.

1) There is no need to apply or too many units.

The typical banding is quite consistent among the different IPOs. Instead of applying for a 15 lots in an IPO, you can consider applying for 10 or 11 lots since you will still fall into the same band.

2) Applying for more than what you actually intend to keep

In a "hot" IPO, you will only be allocated a small percentage of what you applied for as seen in the example above. Since the application fee is flat, you can want to apply for more if you have the additional cash on hand.

However, do note that this can go against you if the response for the IPO turns out to be poor. For example, in the Genting perpetual security IPO, the allocation ratios were as follows:

 

If you had applied for 10 lots thinking that you will only be allocated 3-5 lots, you will be surprised to be allocated a full 10 lots in this IPO.

_______________________________________________________________________

With the understanding of how IPO allocation works, investors can better decide on the number of shares they would like to apply in future IPOs.

Far East H Trust: 2nd week

Far East hospitality trust has been listed for 2 weeks already. The volume is now much lower and it seems that the IPO fever has subsided. Prices should remain between $0.97 and $1.00

Other notes.
There as been a few reduction in stake in the major unit holders. These has been reflected on the SGX announcements. The details are as follows:


1) NOTICE OF A CHANGE IN THE PERCENTAGE LEVEL OF A SUBSTANTIAL SHAREHOLDER'S INTEREST



2) NOTICE OF A CHANGE IN THE PERCENTAGE LEVEL OF A SUBSTANTIAL SHAREHOLDER'S INTEREST



3) NOTICE OF CESSATION OF SUBSTANTIAL SHAREHOLDING
 
 

There shouldn't be any major cause of concerns for now. If we see another drastic reduction in stake on the counter,  we should relook at the counter to review if it is a counter worth keeping. The first distribution should be in December.