First REIT part II

Referring to my previous post titled: First REIT Oct 2013

OCBC research's take on First REIT below:
First REIT: Upgrade to BUY on valuation grounds

Summary: We visited five of First REIT’s (FREIT) properties (four hospitals and one hotel and country club) in Indonesia over a two-day period last week. The hospitals are operated by Siloam International Hospitals (subsidiary of Lippo Karawaci) and are generally well-maintained and equipped with modern medical equipment from international brands such as Siemens and Philips. Meanwhile, FREIT recently lowered its floating rate exposure from 72% to 46% of its total debt following a refinancing exercise. Its next refinancing need will only come in 2016. We believe that FREIT’s sharp share price correction has been overdone, as it has minimal exposure to the volatility in the IDR thanks to its lease structure. Hence we upgrade FREIT from Hold to BUY on valuation grounds, with an unchanged fair value estimate of S$1.20. FREIT also offers an attractive forecasted distribution yield of 7.6% in FY13 and 8.3% in FY14. (Wong Teck Ching Andy)


I have to agree with the above, based on valuation First REIT is quite attractive. In fact i really like their aggressive strategy in Indonesia plus they are doing a good service to the people by building more hospitals around the country. From an ethical standpoint, I like their business model. It is also going to give 7-8% returns looking forward into the near future. Obviously there are risks involved. Key risks would be volatility in the Indonesian Rupiah and rising interest rates for borrowing. Hmm... i wish had more money to invest, cannot really free up any cash from other investments just yet. 
Remember you can't just buy and sit on your investments, If it gets cheaper, buy another equal part or if it rises by 20%, sell half for profit and keep the rest. Key strategy is not to be greedy. 

First REIT Oct 2013

So here we are again in familiar territory, after the August sell Off which happens almost every year by the way. Stocks come down, Banks and financial institutions adjust their target prices. History keeps repeating in front of our eyes. Anyway lets look at First REIT, I enjoyed the ride from 90cents to $1.25, sold if off to early. Now i am taking a second look at this because it is more attractive now after plunging by >40cents. But i did not excecute the order after looking at the following graph.

If my memory serves me right. Fibonacci retracement will show us significant levels in a bull run. usually prices will correct to 50% level after a good bull run, that means a good place to buy into First REIT again would be in the $0.855 region. 

Hmm,,, what to do? just wait and see.

Cache REIT Oct 2013

Happen to look into Cache REIT chart today, seems interesting to do a bit of technical analysis on it. Here it is below:

 


I see an Ascending triangle formation, This is an explanation found on "Incredible Charts":

When an ascending triangle is formed by equal highs and higher lows. It is a bullish signal, whether encountered in an up- or down-trend. It is most often observed as a continuation pattern in an up-trend but is a strong reversal signal when witnessed in a down-trend.

It seems to have a good clean support line for continuing its uptrend. Lets look at it logically, even if i buy at $1.16, i'm going to get 7.36% returns/yr. Hmmm... If you have money sitting idle in the bank like me, your hands would be itchy too. It is best to do it in stages, buy one part now, then if it drops to <$1.00, buy another part. And if all hell breaks loose, be patient while you enjoy yearly dividends.

  

Market Sentiment vs My Sentiment

Past few weeks I am finding it difficult to adjust my sentiments to how it is being played in the stock markets. Referring to my previous post in mid August "Final Push", It is getting harder to stand my ground or belief that there will be a final bull swing before another major crash. Since the month of August has been a bloody one, markets all around the world taking a huge hit. If there is one thing i still do believe in, its that always stick to valuations. 

Chinese stocks for me seemed undervalued with a lot of upside. My timing has never been perfect but my investments in China Life Insurance and BYD have yet to drop below my buying price, which tells me that I bought them at strong support levels. 

On the other hand, Singapore stocks have not fared well in the past few weeks. Mixed feelings arise as prices drop reducing my profits but also creating opportunities to add into my portfolio. 
As for REITs, where do i begin? Sabana REIT has fallen by almost 20cents/share. Cache REIT (see pic below) It has become even more attractive at $1.10 - $1.20 range. Since their dividend payouts will give you >7% for just holding onto it at those prices. I am happy to hold onto my shares of CACHE but not going to buy at those levels. Since the last drop broke through their supporting trendline, technically there is no way i can say with confidence that it has reached a bottom. I have a feeling it will keep falling to the dollar region before news around properties and interest rates are not looking good. People (investors) are anxious about REITs and the smart ones are pulling their money out of it. As for me, It would make sense to buy more below $1.00.

 Ascott REIT also tells a similar story but it has not seen such a big drop. Maybe the investors of Ascott REIT know what a great investment it is. Especially since they are expanding strategically into rest of Asia. I like their business plan, and their dividend payouts even more. Its a steady stream of income. Just a note of the price levels. It has been trading around $1.20 this week, going forward, I think it will come back up to >$1.35, no doubt. 
Those people who missed the opportunity to get a piece of this REIT should do so before its too late (*Of course do you own research first and then make an informed decision)
Here the graph of Ascott REIT below:

Yes it has crossed the supporting trendline (that is worrying me) but it is being supported by a resistance turned support line at $1.15. Also note the volume being traded. Comparing it to CACHE REIT above, volumes being traded are below low. At $1.20 it is still very attractive to me. I have to say, still not worth add onto my position unless i get it at close to a dollar. 

I suppose my investment philosophy is simple. Always reserve money for further reinforcements. Usually break up your investments into 4 parts. Buy in more as it gets cheaper. Sell it higher to reap the benefits if the stock is not worth holding onto. Don't speculate and dont surround yourself with negative thoughts. There will also be people telling you negative things, "Get out now, while you still can" and "I told you so". You decide when its time to get out. Patience is a virtue, so be patient.  If you have been following my blog posts, you will realise that we are still in the late stages of a 3 year bull market. I would start to worry in the 1st quarter of 2014.  

End-of-Life Medical Expenses

Came across an interesting study done in the US.  I think most people are worried about having enough money to support ourselves in the last few years before death. Given that medical advances have increased life expectancy of the average person in Singapore to 81.89, just behind Japan @ 82.59. Medical bills during the last 5 years of our existence on Earth has also increased over the years. I understand the study was done in the US but basic principles will remain constant in other parts of the world. 
In this article mentioned, The correlation between Income and Medical expenses(out of pocket, not covered by insurance) were studied for the last five years of a group of people. To be blunt, the study is questionable to say the least. However I do agree that insurance will not cover everything and we still need to prepare a sum aside for other expenses. 

From the article, the average comes to about US$39,000 for medical care in the final five years of life, or about US$7,800 a year. It also says the number varies greatly with income. How much different is our Medical expenses in Singapore? Last time i checked, medical expenses should be cheaper for those on government subsidy. It is very hard to gauge how this will translate to cost in Singapore. So after doing some research on my own came up with these numbers:

Procedure (Cost in USD)	USA	Singapore	% Savings
Coronary Angiography	6,000	1,500	75%
Coronary Angioplasty	42,000	11,500	73%
Coronary Artery Bypass	55,000	13,000	76%
Hip Replacement	24,000	16,000	33%

source: http://www.expatmedicare.com/healthcare-singapore-expats-guide

Surgery in Singapore seems to be significantly cheaper than US. For my own sake, i will just take worst case scenario and say S$50,000 average for last 5 years of life or S$10,000/yr now, or in 50 years time (if i live that long) at 5% inflation rate: it will cost S$114,674/yr or S$573,369 over the last 5 years of my life if i live till 80. Of course this calculation is riddled with uncertainties and variables, but roughly i guess one should set aside 1/2 Million bucks. damn! Now that is something to worry about.

Here is the weblink of original article.

Credit Score

For some time now, i have been wondering what is my credit score. In this post, I try to answer some questions plus its an excuse to whine about some negative aspects of having certain cards.

Credit Score:
1. How  does it affect my ability to take loans?
2. How do banks make use of this information?
3. Lastly, how to get the best score and maintain it?

I knew for sure that my credit score would not be the best since i missed payments several times on my Diner Club either because i forgot about it, couldnt find an AXS machine or couldnt be bothered to queue up behind people who clearly don't know how to use one. 
However there seems to be too many SAM machines out there but they only take bill payment for Visa cards.

I even missed some payments on my AMEX cards before but their customer service is really too good, not only did i managed to reverse any late payments but also got my card renewal for free including supplementary card.

(Tell you what Diner Club in my opinion is the most useless card i carry around. Checking online statements is a horrible experience in the past, not sure how it is now since they upgraded their online platform. But i am convinced that i will cancel the card once by renewal time next year)

Anyway paid the $6.42 (incl GST) for the report through Credit Bureau Singapore and to my astonishment I got AA score. I think most people who make an effort to pay their bills on time would also get AA grade.

I still have to be careful because a score of 1933 is in the lower end of the AA, If it falls below 1911, i might have gotten a BB score. Must make sure I pay my bill on time every time from now on. 

To answer the questions just now: 

1. How did they come up with the score?

Obviously there is a formula but i don't know which one the credit bureau used. you just have to remember that credit score is reflecting several things:
a. Payment History
Measures how responsible you are at paying what you owe 
b. Amounts Owed
Also important. It looks at how much of your available credit you are using. Also known as credit utilisation ratio, it assesses how close you are to maxing out the credit that has been given to you.
c. Length of Credit History
Looks at age of all your accounts, individually and averaged together, and assesses how much time has passed since you opened the accounts.
d. Types of Credit Used
Considers the kind of credit you have, from credit cards to installment loans on your car, home or student loan.
e. New Credit
This looks are the number of accounts you have recently opened. In addition to the amount of inquiries that have been made lately by those checking your credit for purpose of lending you money.

2. How do banks make use of this information?

Payment History
Banks will look at payment history as an indication of how  you'll handle future debts. If you have met your obligations responsibly then lenders will think you'll continue to be responsible paying back your debt.

Amounts Owed
If you use alot of your available credit, lenders may think you are over-stretching and you might not be able to make future payments. Banks usually look at credit utilisation ratio of 30% for housing loans in Singapore. *Ever wondered why banks in Singapore usually give out 3/4 times your salary as credit limit? thats why. but some like UOB/OCBC gave me 4 times - good for me cos i can maintain a lower ratio.

Length of Credit History
Banks will see your track record of repaying debts. The longer you have used credit wisely, the better because they will trust your ability and determination to stay current on your accounts.

Types of Credit Used
Banks like variety of course. Different kinds of credit, both cards and loans.

New Credit 
Taking on too much new credit is a warning sign to lenders. They will want to know why you suddenly need so much new credit, maybe cos you are in financial trouble?  

to your payment history as an indication of how you’ll handle future debts. If you've met your obligations responsibly, lenders will think you'll continue to be responsible paying back your debt. - See more at: http://www.onyourown.org/blog/anatomy-of-a-credit-score.aspx#sthash.NnUmL5JT.dpuf

Lenders look to your payment history as an indication of how you’ll handle future debts. If you've met your obligations responsibly, lenders will think you'll continue to be responsible paying back your debt. - See more at: http://www.onyourown.org/blog/anatomy-of-a-credit-score.aspx#sthash.NnUmL5JT.dpuf

3. Lastly, how to get the best score and maintain it?

Payment History
Make payments on time, every time. If you have missed a payment, pay it off as soon as you can. If you cannot remember (like me) then set up reminders on your phone or use Giro services.

Amounts Owed
Try not to spend more that 25% of your credit limit. If you need more money, ask for limit increase. Maintain a good ratio, do not take it as a license to spend.

Length of Credit History
If new to credit, there's nothing you can do. Just let time go by and your credit history will build up over the years. But be careful not to open too many accounts at once because you will lower your average account age. Also keep a 1 or 2 of your oldest credit card open even if not using them, this will bring up the average age.
 
Types of Credit Used
Do not get unnecessary credit but pay attention to the different kinds of credit/loan available in the market. Remember Car loan is a liability, Home loan is a liability (unless you are renting it out with profit), Studen loan is a liability (However necessary if you want to make it on your own, but start paying it off as soon you land a job).

New Credit 
Opening new accounts can help your credit score, but everytime you do that, there will be an inquiry that will remain there for 12 months. If you are planning to get a home loan, avoid opening smaller accounts beforehand. 
I am guilty of this. Applied too many credit cards when i got my first job. Slowly realising that actually no need so many cards. Wish someone wise would have told me back then. 

4. I discontinued a few cards since last year and will stop renewing Diners Club. Will it affect my credit score?
My guess is cancelling a card does not result in an inquiry, but will affect length of credit history. I will still hang on to my favourite cards so on average i believe score will improve if you have lesser cards. What do you think?  

**I am no advertising for any banks or their cards here. But i never did regret taking up the OCBC Platinum, UOB One, AMEX Platinum and Citibank SMRT card. These are by far the most useful to me. 
 

Final Push

I have been very quiet the past few weeks for 3 main reasons: 
1. There was little movement in the stock market
2. Been away for business trips past 2 weeks 
3. Time to relax and enjoy the double combo holiday: Hari Raya + National Day

However the timing seems to be right, everything seems to be setting up as expected. Its nearing the final push for the stock market. I expect to see a perfect bull trap being set up by 1Q 2014. Hopefully by then I will have the opportunity to divest 60% of my portfolio in preparation for the next bear market. 
(refer to previous article for chart:
http://hiddeninvestor.blogspot.sg/2013/07/hectic-june-but-quiet.html )

One fine example is ExxonMobil, I am waiting for the final push in the next half year because i expect oil prices to increase, and oil producers to benefit in the short term. Exxonmobil has the potential to break into the $100+ region, being supported by both the bullish trendline and resistance turned support at $90 region. I am hoping their final push will be fruitful for all invested in its share. But be weary of what is to follow after the next peak is reached.

Disclaimer: The above estimation of market movement/direction is solely based on my opinion. Please conduct your own research or engage in a professional financial expert before making any investment decisions.