Friday, November 26, 2010

Suntec Reit

The shareholders have already approved the motion to purchase 1/3 the interests of MBFC. Funding will be through a mix of debt and equity. But existing shareholder will be bypassed as a private placement will be made.
I sincerely hope the management will take existing shareholder's interests to heart and not succumb to too large a premium on the private placement just for the sake of executing this deal.

I also expect DPU for Suntec Reit to decrease next year due to rental reversions. The MBFC deal, if it go through, will not accrue too much benefit in 2011, at least.

 I am also concern that gearing will hit 37% after the MBFC deal.

Two Trillion Dollar Meltdown

I have been reading the book "The two trillion dollar meltdown"  by Charles Morris recently.

Quite a good book that explains how complex financial instruments can be built layer upon layer to squeeze every ounce of profit for greedy bankers and hedge funds. Instruments that are created to spread out the risk of debt ended up being the percolated to every aspect of daily life and almost pushing the world economy to the point of collapse.

I am convinced after reading the book that banking should be kept boring and exotic innovation should be kept out of our banks.

In banking, I rather they earn less (and my dividends of course) but play it safe.

Friday, November 19, 2010

DBS Pref Shares

I applied for 500 lots of DBS Pref Shares. I allocated 20 lots. Right now, I own Pref Shares for UOB. OCBC and DBS. Together, they make up about 30% of my portfolio. I treat them like bonds as I am not looking at the capital appreciation but rather the regular interest payment bi-annually.

I have look at the balance sheet of local banks and come up the conclusion that they are still conservatively managed. Right now, the local banks cannot pool mortgages into collateral debt obligations that can be sliced into multi-tier bonds and offloaded from their balance sheets. During March 2009, during the depths of the recession, NPL peak around 3%.

These Pref Shares may not be risk free but they are probably the "best" fixed income instruments you can get locally next to holding SGS bonds. I do own some SGS bonds but the yields have come down quite a bit over the last one year. In addition, at least I am not exposed to currency fluctuations as opposed to holding fixed income instrument denominated in other currencies.

I should be receiving dividends for the following this month:-

China Merchant Pacific
First Reit
Suntec Reit
Starhill Global

Tuesday, November 9, 2010

First Reit

The suspense is finally out. First Reit is acquiring two additional properties in Jakarta (MRCCC and SHLC) via a 5:4 rights issue at 50 cents per share. On top of that, it will raise a $50million debt from OCBC. Implied TERP is $0.70.

First Reit sponsor, PT Lippo Karawaci Tbk will be the master tenant for both properties.

I view this deal positively as the funds raised are used to acquire additional yield-accretive assets and not to par down existing debt. In fact, First Reit gearing, after this acquisition is still low relative to peers.

The main thing is do you trust the business environment in Indonesia? Will it degenerate to the days in 1998? After watching it for more than a decade, I think it would be worthwhile to make some small bets in the country especially in business that support domestic consumption. About 70% of the economy is domestic and it was hardly scathed by the financial crisis in 2008/2009.

I will be going for the rights.

Meanwhile , I have divested Cosco and vested some additional lots in SMRT.