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Wednesday, October 23, 2019

Bad week for AIMS APAC and Eagle HTrust

When it rains it pours, as the cliche goes.

AIMS APAC REIT (AA REIT) suffered a correction earlier this month when its Manager (AIMS Financial) decided to unload shares amounting to around 10% of the float via private placement.

The private placement was done at 1.35, which is a significant discount from the last traded price 1.48 prior to the placement.

The reason given by the Manager was ostensibly to increase the liquidity of the share.  Seems more like a blatant cash grab to me.  Perhaps investors should have foresaw this cash grab when AIMS acquired the AA REIT shares from AMP Capital earlier this year, and became the sole sponsor. 

Expectedly, the market reacted by selling down the stock, and it is now hovering pitifully around the 1.35-1.37 mark, wiping out a good 30k off my AUM.

If there is a silver lining, it would be that this divestment is not the same as a rights issue. The total number of shares remain the same.  It is merely the Manager reducing its ownership in the REIT which it manages.  So, all else being equal, i.e., assuming DPU is consistent, you could say that this correction presents an opportunity to load more AA REIT shares at a discount.

What should be of concern, and rightfully so, is whether the manager's reduction in alignment with AA REIT would adversely impact the REIT's future performance.  IMO, too early to tell. 

For now, I am still keeping my faith. And may buy small chunks at the "right price" to average down.


Eagle HTrust has also seen some downward pressure on hits share price. Its intraday low today was 0.635.  Unlike AA REIT, my research yielded no answers as to the potential reasons for the sell down. Based on Eagle's last report, its earnings came in modestly better than forecasted.  See: https://www.businesstimes.com.sg/companies-markets/eagle-hospitality-trusts-maiden-dpu-beats-forecast

At current price, its expected yield is near 10%.

But it would appear that Madam Market knows something that I do not yet know. 

My view is that this share might be unpopular amongst investors due to its lack of big name institutional investors, and such sentiment may also be driven partly by investor short-termism (Eagle is not distributing any income until Q1 next year). 

Again, I am going to keep the shares for now. My position in Eagle is small relative to my portfolio and that allows me to tolerate a bit more risk. 

No pain, no gain.

Onward to FI friends!















Monday, October 14, 2019

On finding purpose

There was a sincere and introspective post on A Millennial's Attempt at Adulting recently.

The post explored the writer's inner thoughts on the purpose of her job (life?) and invoked the oft-cited Japanese concept of ikigai,  which may be summarized as doing something, which you love, which you are good at, which is useful to society, and which pays you.

Ikigai seems to be the elusive holy grail that many are seeking. I do not pretend that I understand why this is so.

"Purpose" is itself a rather loaded word in my opinion. Is purpose a mantle you choose to wear on your shoulders; is purpose foisted upon you by others; or is purpose simply a malleable thing which is constantly shaped and reshapened by what you think others expect of you?  I suspect the answer lies somewhere inbetween, ironically, not unlike the famous ikigai Venn diagram.

I have never felt that there was any purpose in what I do. But more importantly, I have never felt compelled to seek out purpose.  What would be the point I wonder? Perhaps I am quite happy to not be particularly skilled in something. Perhaps there is insufficient altruism in me to want to do things for the greater good.  Perhaps I have no great lasting love for any chore. Or perhaps I am just a plain old hedonist. 

Hedonism, I feel, is a much maligned way of life.  I shall not attempt to explore whether hedonism can be a moral philosophy to live life by. I generally do not think that people should have to justify their outlook on life to others.  After all, was it not Epicurus who said that the greatest good is to seek sustainable pleasure in a tranquil life that is free of fear.  To me, that alone, is a persuasive justification for being. No metaphysical explanations required. No need to sprain any brain muscles.  If it is good enough for one of the greatest Greek minds ever to walk the planet, I suppose, it would do just fine for me.

Indeed, I feel like the whole FI movement is predicated on Hedonism or, if you want to split hairs, Epicureanism. Why do I say that?  You would find that each tenet central to Epicureanism finds a parallel in a FI philosophy:

Sustainable pleasure - Nothing says sustainable pleasure more than a constant, recurring stream of passive income.

Tranquil life - No bosses, no clients, no deadlines, no politicking colleagues. Does it get more tranquil than that?

Free of fear - You know what I fear the most, the thought that I might be trapped forever in a job I detest just because of the need for survival.  No other solution comes close to resolving or removing this fear than becoming FI.  Furthermore, he who has FI-ed fears neither competition, retrenchment, nor retirement. I would argue that this is true freedom from fear indeed. 

So to all those who might be suffering from a bout of mid-life crisis, or who suddenly feel like their life is devoid of purpose or meaning, verily I say to you: Abandon your false prophets, and disabuse yourself of vacuous notions like ikigai.

To seek happiness, through whatever is applicable to you, is what counts. If that means waking up at 11 AM every morning with no where to be, and nothing to do, so be it. 

Onwards to FI my friends!






Wednesday, October 2, 2019

Added Cromwell REIT

The BUY

72000 shares @ 0.500 EUR a share

Expected yield: 8.2% based on last half yearly payout


Accordingly, this investment may yield around SGD 4,300 a year in dividends, or around SGD 360 a month.  Yet another step towards breaking 100k a year passive in 2020.

Why?

Diversification

Wanted some geographical diversification.  I currently have exposure to Singapore, UK, and Australia (AA REIT +  FCOT + Starhill), China  (CRCT), US (Eagle HTrust), ID (First REIT).

Ultimately, it was a toss up between IREIT and Cromwell.  Overall, I preferred Cromwell REIT because I feel there is less tenant concentration risk compared to IREIT.


ECB money printing quantitative easing bond purchases

This is a double edged sword.

On the one hand, low interest rates is always a boon for REITs. It provides cheap financing for the REIT to acquire new assets, and further boosts the NAV of the underlying assets.  Cromwell REIT is already trading at a discount to NAV.  Any further boosts to the NAV would make the share price more attractive.

On the other hand, for Singapore-based investors who receive their dividends in SGD, any signficant devaluation of the EUR would adversely impact the dividend income.

With ECB tiered rate cuts expected in October, it is any one's guess what the future holds. I can't imagine the Fed or Trump not responding to this.

Strong Sponsor

The Sponsor, Cromwell Property Group, has 3.7B Euros of assets under management in Europe alone. Sponsors with a ready pool of assets are always good since it represents a pipeline for future injection.

Reasonable Yield 

As long as the DPU is sustained, I am not expecting the share price to perform phenomenally. DBS has a TP of 0.59 on this share.  I am happy for it to trade side ways while collecting a 8% payout.

IMHO, it makes far more sense to put money in this than a recently IPO-ed, (basically 1 Orchard mall) REIT with a forecasted 5.8% yield (and this is at 100% payout mind you), and where one of its top 10 tenants by Gross Rental Income  (Forever 21) just declared bankruptcy.

Struggled to understand why it was 14 times, sorry, 14.5 times oversubscribed. I mean, have you ever been to Somerset 313 and went: wow, this place is dope. Not me.

Furthermore, the WALE of Someret 313 is a pitiful 1.8 years, and 35% of its leases by GRI is expiring in 2020. Awesome. It almost feels like Sky Italia was injected so that the overall WALE looks more palatable to investors. 

Perhaps I am missing something. Who knows. After all, so many people, can't all be wrong right.

DYODD.

Onward to FI friends!