Category Archives: YZ-PROPERTIES

Isn’t this similar to the 90s?

The spate of events that happened in the last six months reminded me of what we had experienced in the 90s. More than 20 years have zoomed passed us and how many of us remember those events that had taken place. In fact, many of us would have, either forgotten what happened or too young to know what had happened then. Based the historical time-line, it is likely that those in the Generation Z or Generation Y may not have really experienced the times of high interest rate environment, let alone making comparison between now and then.

By today, that business environment of the 1990s seems to be re-surfacing itself each passing day. There are just too many similarities. Let me quickly bring out a few examples. First of all, in the past few years, we had enjoyed a phenomenal economic growth, and as such, the stock market index was pushed to its high (second only to the all-time high of 3,875 in made on 11 October 2007). Whether regionally, or Asia as a whole, we were all doing well. This was a complete copy of what happened in the early 90s. The regional growth was so phenomenal that many economies were given names, namely, five tigers and four dragons. At that time, the local stock market index or STI raced from about 1000 in 1990 to about 2500 in 1994. Back then, there was a Dr M, who was holding the post of the prime minister of Malaysia, and by today, he returned as a prime minister after having left the office for many years. In between his two terms of office were two prime ministers, Abdullah Bidawi and Najib Razak. Then, in the year around 1994, the FED hiked up the interest rate several times. Is it not that what we are seeing now – in the midst of an increasing interest rate environment? The US economy at that time under the Clinton administration was so strong that the US stock market powered from 4,000 at the beginning of the administration to about 10,000 when Bill Clinton handed over the US presidency. That was also the period when the FED chair, Mr Alan Greenspan, coined the term “irrational exuberance” to describe the crowd madness of the stock market. The economic environment was so brisk that even the Lewinsky scandal could not derail Bill Clinton’s presidency term. Towards the 2nd half of the 90s, many people were expecting the Dow Jones to crash as it continued breaking new highs. On the contrary, it was the Asian stock markets that crashed leading to the Asian Financial Crisis (AFC) while the Dow Jones was pretty unscathed. Isn’t it that similar to what is happening in US now. For many years, many people were expecting the Dow Jones to fall, but at the moment, we are seeing the Asian stocks markets spiraling downwards more than the Dow Jones. Look at COE prices. In 1994, the COE price hit all-time high of $100k and then started to decline to hit a low of $50 in January 1998 (though in different category). In a similar way, COE prices are likely to continue to decline as business prospects gloom. Then, there was also a sudden property curb on May 1996 to stem property prices. Isn’t it similar to what the government announced three days ago regarding property prices? Since the property curb in 1996, property prices never really recovered until the recent years.

Frankly, all these are not for the sake of digging up the old history. By drawing out the similarities, it helps us get a glimpse of what we could expect going forward. If history can be the guide, what we had seen in the past 6 months or so, could even be only the prelude to a series of events that lead to more difficult times some time later. As earlier mentioned the 1st half of the 90s were the good years of phenomenal growth, and everybody became complacent. Many governments were taking on mega-projects that worth millions of dollars (millions of dollars is like billions of dollars in today’s terms). Just like today, many Asian economies, apart from Japan, were comparatively small back then. (China, itself, was focusing on its internal development and was less exposed to the outside world at that time.) To keep economies stable, both for internal control and export, many Asian countries pegged their currencies to the USD.   In response to the increasing interest rates, funds were moving out of Asia causing Asian currencies to fall. Isn’t it what is happening to the Philippines peso and Indonesian rupiah reported recently? At that time, the Indonesian rupiah was about 2,900 against one USD before the AFC and then spiraled to 16,000 rupiah against one USD at the peak of the crisis, shrinking 5,500%. Imagine, an Indonesian company originally owed a debt of US$10m before the AFC, the debt would have ballooned to a USD debt of 55 million without any wrong-doing on the part of the company. Really, how many companies can withstand such onslaught? To stem fund outflow, Asian economies were correspondingly forced to increase their interest rates. This, ironically, further stifled the lifeline of many Asian economies, which is to export their way out of recession. Increasing interest rates makes it more expensive to export and cheaper to import. The trickiness in such a falling currency avalanche often leads to more falls because of concerted speculations, causing many governments to dip into the reserves in an effort to maintain their currency peg to the USD. Before long, many government found their coffers depleted and had to let their currencies into free-falls by unpegging against the USD. One-by-one, the economies succumbed to the AFC, and had to be rescued by the IMF. Apart from the currency turmoil, there is another knock-on effect as well – a political instability in the region. Within a period of 2 to 3 years, Thailand and Indonesian respectively changed their prime minister and president several times.

By today, the Asian economies are generally stronger and have stronger financial muscles to ward off a similar financial tsunami that had wiped out the Asian economies back in the late 90s. The unpegging of their respective currencies to the USD acts as a counterbalance to the trade mechanism, which is vital for many small Asian economies. Unfortunately, based on past historically, increasing interest rates has never been beneficial to small open economies including Singapore. Added to this gloom is the increasing stakes in the trade war between the world’s two largest economies. The trade war and the retaliation actions put up by the trading partners are likely to push small open economies into difficult times. Personally, I think the 2nd quarter results will not reflect the full impact yet, but it could surface by year-end. Unless there is some kind of breakthrough in the negotiations, the worst is yet to come. The end results could be recessions and job losses. It’s time to put on our seat belts!

A video clip on the expectations in the coming months has been posted in the private group discussion for the students of “Value Investing – The Ultimate Guide.”

Disclaimer – The above arguments are the personal opinions of the writer. They do not serve as recommendations to buy or sell the mentioned securities or the indices or ETFs or unit trusts related to it.

Brennen has been investing in the stock market for 28 years. He trains occasionally and is a managing partner for BP Wealth Learning Centre. He is the instructor for two online courses on InvestingNote – Value Investing: The Essential Guide and Value Investing: The Ultimate Guide. He is also the author of the book – “Building Wealth Together Through Stocks” which is available in both soft and hardcopy.


Why are the stock prices of developer stocks rising?

During times when there are impending interest rate hikes, the property counters almost always respond with a downward trend. We all know that it is a no-brainer response. In the last few months, we have also been bombarded with pockets of news that there will be three interest rate hikes in the year alone. Certainly, the local interest rates, Swap offer Rate (SOR) and Singapore Interbank Offered Rate (SIBOR) that track the US interest rates will also follow suit. Given that they are the benchmark rates for housing and business loans, it is only a matter of time that the local interest rates will rise as well. Of course, a rising interest rate would not be good for property related companies. But recently, it appeared that the stock prices of many developer property counters were making at least their 12-months high.

Just look at the chart of the several developers.  City development share price closed at $9.48 today, but for the whole of 2016, the share price had been less than $9 per share. As its worst, it was even below $7.00 per share. Similarly, the share price of Capitaland ended today at $3.65, but for the whole of 2016 and even into the last quarter of 2015, the share price did not even pass $3.20. Only on some isolated occasions, the share price went above $3.20 momentarily, but only to drop back below $3.20. In fact, during this period of 15 months or so, it had been so range-bound that one could have made some trading gains by buying below $3.00 and selling at $3.20 earning about 8% to 10% in the process. Same story goes to OUE, it had been staying below $1.80 for the whole of 2016. Today, it ended at $1.96 per share.


Now the question is why are share prices of these counters defying gravity in spite of the fact that there would be likely three interest rate hikes. First, of course, the market tends to react very quickly, often without rationality, to market news – Sell first, then talk later. The news about interest rate hikes is not new. It was conceived as early as in May 2013 when the previous FED chair, Mr Ben Bernanke, first spoken about it although there wasn’t much conviction at that time. For nearly four years, there were a few scares, but in reality, there were only two hikes. But that was good enough to suppress the property stock prices as it was always uncertain when the next interest rate hike would come. While the downward trend remains relatively orderly, nobody wants to buy them for fear of being caught on the wrong side of the curve. Perhaps, it is a matter of undershoot, as mentioned in my book. The general pessimism was further depressed with the local long-drawn property curbs.

However, the recent financial results of these companies seemed to change all that. The generally good results suggested that the situation was probably not as bad as anticipated. Well, as we know, aircraft do not crash on ground. The market started to realize that their 2016 performance justify a higher valuation after all. It is one of the situations that the market can sometimes be very wrong for a long time. But does that mean that share price will continue to be at this level? Well, not quite. As the days draw nearer to a hike, there is a good chance that there will again be a fall in the stock price in anticipation of the hike. That’s why stock prices movement can never be in a straight line. Today’s slight fall may be the beginning of that as there are no more uncertainties from now till the nearest interest rate hike. Meanwhile, enjoy the rising tide.         

Brennen has been investing in the stock market for 27 years. He trains occasionally and is a managing partner for BP Wealth Learning Centre. He is also the author of the book – “Building Wealth Together Through Stocks” which is available in both soft and hardcopy.

Yield hungry? We need to change of our investing paradigm

The much anticipated interest rate hike in December had caused a sharp recent drop in the price of REITs recently. Many REITs are now trading at the 2016 low, retreating generally about 7-10% from its peak level at 2016 high and around 15-20% from their all-time high. During the low interest rate environment like in the past few years, many have seen buying into REITs as a no-brainer investment, with yield of between 5% and 8% of passive income, depending on the type of REITs. With the recent falls, many people see them as opportunities. Whether, these REITs are going to be good investments…well, seriously, I do not know. It is too early to tell. There are actually several other factors apart from the REITs price itself to determine if one is buying into a gem. The income of a REIT can fall drastically because state of economy or a change in the customer mindset, resulting in a drastic fall in the DPU going forward. The REIT manager could also take advantage of the generally depressed property price to add more properties into the REIT portfolio or it could be the REIT has some issue with re-financing such that it has to issue rights at depressed price to get existing unit-holders to support the corporate action. All these could happen with swipe of a pen, to get existing unit-holders to fork out more funds instead of the note-holders getting passive incomes out of the REIT.

In fact, by now many bond-holders or note-holders have experienced rude shocks of bond prices falling off the cliff. Several offshore and marine notes are now trading 35-40 cents on a dollar, erasing two-third of the value. Yes, the note holders had enjoyed 6%-7% in the last one or two good years of coupon distribution, but these returns simply are not able to offset the huge fall in the bond price. Many note-holders are now having legal tussles with the note-issuers. These tussles will take months and even years to resolve with no guarantee that note-holders can get their money back.  After all, it is a situation of a willing buyer and a willing seller when the transaction was made. The promise of high return is bundled together with the risk that the issuer could get into a default.

With the local low interest cycle apparently coming to an end, there came a herd of companies trying to tap into pockets retail investors by issuing notes and perpetual bonds with seemingly high coupon rate ranging between 4.5% and 6% in the first half of the year. These companies are highly indebted. The reality came when Swiber Holdings default its coupon payment in July 2016 and all these bond prices are now trading below the IPO issued prices. Even before the first coupon was issued for all these bonds, the yield has already shot up showing that retail investors are probably paying too much in exchange for the risk assumed. In fact, those that missed the over-subscribed IPOs enjoyed a better yield by buying from the open market. However, the crux of the matter is whether any of these companies will default. It is still too early to know. But we do know that these companies are highly indebted and may get into serious financial trouble when the interest rate perks up.   


With the spectre of interest hikes coming up soon, investors are now off-loading interest rate–sensitive financial assets in exchange for safer assets such as bank stocks, which are said to benefit when interest rate rises. After all, the bank stocks just one week ago, were trading either below book value or close to book value. But again, this is just a flight to safety. While the banks delivered fairly good results in this quarter, it is not expected that they would perform extremely well going forward given the state of the economy and their exposure to the offshore and marine sector. But still, over a short span of a few days, the banks shot up between 3.5% and 8%. While I am generally happy with this situation due to the components of my portfolio, the interest rate increase may be a double-edged sword for the banks. It’s not the time to be too aggressive.

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Brennen has been investing in the stock market for 26 years. He trains occasionally and is a managing partner for BP Wealth Learning Centre. He is also the author of the book – “Building Wealth Together Through Stocks” which is available in both soft and hardcopy.

Understanding brokerage charges

Brokerage has come down significantly. I remember in the 90s, when I bought my first blue-chip bank, Overseas Union Bank, which had since been subsumed under United Overseas Bank (UOB), I paid something like $100 in additional fees including brokerage, trading fees and so on. I was a rookie investor back then. I did not know the exact fees structure, but I know it was very expensive, something like 1% each way, when buy or sell. With the advent of the internet trading, the brokerage fee is now a fraction of what it used to be. Furthermore, with the possibilities of trades going across borders, to far places such as US and Europe, trading fees charged by stock exchange are also relatively small due to the global competition. Then, with the introduction of script less trading, things have become so convenient. As clients, what does it mean to all of us? All these developments have made it so cheap and so convenient now compare to twenty years ago.

Based on brokerage fee of several broking houses, it typically starts off with a flat fee of $25 up to a certain amount. Then it becomes a percentage, typically 0.275% or 0.28% up to $50k, and then a smaller percentage between $50k and $100k, and then an even smaller percentage beyond $100. (View the attached video on the percentage based on the minimum of $25 broking charge.) There may be some subtle differences between broking charges of the broking houses, but by and large, the difference is not likely to be significant given the competitive nature of the business. Actually, being a customer of a bank, I could get as low as 0.18% for all my trades. However, I used it partially as I have remisier friends, who still find it hard to make ends meet due to the slump in the brokerage rates. After all, they are in an honest business trying to carve out a living. It was unlike 20 years ago, when remisiers are highly sought-after professions, whereby we have to go and look out for them before they consider signing us up as clients. Certainly, paying a tiny fraction for brokerage to remisier friends is much better than incurring heavy losses in the penny stock clash, just like that of October 2013, or buying into ‘unwarranted headaches’ such as buying into junk bonds of offshore-related companies.

That said, still it is important to be watchful of the cost that comes along with our stock transactions. It should be treated the same way as if we are doing a business, and therefore, we have to be watchful of the costs incurred when we buy or sell or stocks.

From the video, it can be seen that if we trade at a very small contract value, then the flat broking fee of $25 would translate to a significant percentage. But as the trade amount get bigger, the flat fee of $25 becomes a smaller percentage. The same methodology can be applied if there are differences in the percentage charges for the first $50k.  Enjoy and hope you can learn something out of it!

Brennen has been investing in the stock market for 26 years. He trains occasionally and is a managing partner for BP Wealth Learning Centre. He is also the author of the book – “Building Wealth Together Through Stocks” which is available in both soft and hardcopy.

REITs: From an investor’s perspective

Yes, Real Estate Invest Trusts (REITs) are attractive. With about 6-8% yield, they are certainly mouth-watering investments in view of the paltry low bank interest rate. When REIT was first introduced as SingMall Property Trust in early 2000, it was unsuccessful and was forced to scrap. It was then re-packaged and launched in the following year with great success. Since then, REITs did not look back. In total, REITs have been in the local market for about 15 years. To date, there are about 40 REITs trading on SGX.

If one were to look at the performance of REITs for the past 5 years, they had generally advanced about 10-15%. And if we extend the reference point further back to the Global Financial Crisis (GFC), the increase should be about 30-40%. Given the unit price growth and the relatively high yield, the investment is considered decent (though I can’t say they are absolutely fantastic). Disregarding the business factors that affect each individual REIT, the two macro-economical factors that fuelled this growth were the state of the economy and the falling interest rate.

Needless to say, the state of economy is a key factor to fuel REIT prices. It is this factor that pushes up rentals in general, be they in the retail, office or industrial sectors. This translates to higher rental income of REITs, thereby benefiting the unit-holders.

The other factor is the falling interest rate. Falling interest rate tilts the balance in favour of borrowers at the expense of savers. Borrowing gets cheaper, and so is the depositor’s return. Unlike in a traditional company when management can decide to pay off the debts using their cash hoard or profits, REIT managers have less propensity to pay off their debts compare to increasing the distribution to unit-holders so long as the debt falls within the statutory requirement. Hence, at any one point in time, a REIT is likely to have some kind of borrowing. With a distribution of 90% of its taxable income to unit-holders, a REIT is essentially an “asset-rich cash-poor” legal entity. So, when there is an opportunity knocking at the door to purchase a property, the REIT manager would either have to look for new bank borrowing, and if the expected borrowing goes beyond the borrowing ceiling, they have to go to investors for more fund. So the 6-8% distribution that was given to unit holders over the past few years can be negated by just one single right exercise bringing down the distribution to be the same as blue-chip shares in the region of 3-5%. This may still be acceptable as there would be a bigger expected rental income as a result of the new real estate investment, the problem arise when the there is a general decrease in the real estate prices. This may cause the debt to exceed the permissible gearing ratio, and the REIT has no choice but to raise equities through rights issue in order to bring down its debt to meet this requirements.

For the last 5 years or so, these two factors have benefitted the REITs, that is, pushing up the price of REITs. But can these two factors continue to fuel REIT prices? Frankly, I think we need to be extremely careful going forward. When the previous FED chairman, Ben Bernanke, first spoke about the possibility of tapering in bond purchases during May 2013, the REIT prices fell between 15-25% across the board in the next few days that followed. Now, with the interest rate hike on the cards, it is also likely that REIT yield would also increase as well, meaning that REIT prices may become toppish, and possibly be on its way down depending on the aggressiveness of the interest rate hike. In fact, if one were to examine carefully, most REIT prices did not actually increase since his speech in May 2013. They have been quite range bound and to certain extent, exhibited significant volatility as central bankers were deliberating on interest rates movements. Most of the advances in REITs prices have actually been during the recovery after the GFC as well as between September 2012 when the QE3 (US$80b monthly bond-purchasing program) started and end May 2013 when Ben Bernanke conceived the idea of bond tapering.

Frankly, I am neutral about REIT investments. The high yield is there for a reason, and it should not be used as an absolute yard-stick to buy a REIT. In fact, going forward, the yield can get even higher if the interest rates are on the rise. The way I see it is that the danger is, generally, not about individual REIT as each should be studied based on its own merits. The real danger is when we get too obsessed with high-yield investments and hold too many REITs (or any high-yield instruments) and this can result in capital losses when the tide turns.

Remember this. Interest rates have been at historical low even before the GFC. Anything can happen in future.

Happy investing!


Brennen has been investing in the stock market for 26 years. He trains occasionally and is a managing partner for BP Wealth Learning Centre. He is also the author of the book – “Building Wealth Together Through Stocks” which is available in both soft and hardcopy.

CapitalandMall Trust

It has been more than 5 months since I presented the value of stocks. I had used an example on the stock CapitalandMall Trust (CMT) whose former name was CapitalMall Trust.

During that time, the stock was trading at about $2.22 per share. Using the software which I had written, the distribution per unit (DPU) growth rate was about 2.04%. By plugging the growth rate of 2.04%, I obtained an intrinsic value of $2.22 per share which was exactly the Friday closing price the day before. The software is not a forecasting tool used to predict the share price or to do magical wonders to tell us what price to buy or sell. It is a convenient tool to carry out calculations that might be complex in nature to help us in our stock valuation process. And if need be, we can simply change some parameters to help us assess the value of share price in more realistic circumstances.

Figure 1: Intrinsic value using DPU growth rate of 2.04%.
Figure 1: Intrinsic value using DPU growth rate of 2.04%.

However, I had warned that we had used a DPU growth rate of 2.04%, and we had obtained a price of $2.22. It is important to note that circumstances might change and the DPU growth rate might no longer be possible, for example, an increase in interest rates might result in less rental collection by CMT. Hence, assuming a DPU growth rate of 2.04% may be dangerously optimistic. Even at this growth rate the price was $2.22 and there seemed to be little upside as the on-going trading price was already at $2.22. Unless we are sure that CMT can continue to increase its DPU, my view was there was little upside. To be on the safe side, I would conservatively input my DPU growth rate as zero. (Of course, I could go into the other extreme of using a negative growth rate, but I think it would be not be realistic as rental tends to increase over time. Furthermore, how negative do we want the input to be as it could never end). Given that the general interest rate environment was perking up, I would input a zero DPU growth rate.

Figure 2: Intrinsic value using a zero growth rate.
Figure 2: Intrinsic value using a zero growth rate.

When I changed the DPU growth rate to zero, and I obtained a value of $1.75. I explained that if I want to buy CMT, I would at least wait for the price to sink to $1.75 to pick up the stock in order to buy the stock below intrinsic value. Otherwise, I would not be picking a stock below intrinsic value. At that time, it was trading at a premium. Pehaps, at that time in early April 2015, the time was still very good. There appeared to be a wide disbelief because the price difference was a whopping $0.47 difference. It meant that the stock has to sink about 21% from $2.22 to $1.75 going forward before we could pick it up at good value.

With the rout in the stock market in China as well as uncertainties around the world, the share price of CMT had sunk about $0.33 and closed at a price of $1.89 last Friday, a decrease of about 15%. While the stock price was still about 14 cents above the obtained intrinsic value, it showed that value is emerging as stock prices fall.

(Brennen Pak has been a stock investor for more than 26 years. He is the Principal Trainer of BP Wealth Learning Centre LLP. He is the author of the book “Building Wealth Together Through Stocks.”) – The ebook version may be purchased via

Stamford Land – consistent dividend

Stamford Land  enjoyed a reasonably good year for FY 2015, end Q1 2015. The revenue increased 80% from S$62.2m to $112m which resulted to a net profit increase of 87.5% from $2.9m to $5.4m.  The positive operational cash flow that doubled from $54.3m to $108.1m has once again enabled the management to give away a 3-cents dividends per share, comprising 2-cents final dividend and 1-cent speial dividend. The total dividend payout should be $25.9m which is the same as that of last year. This reinforced what I mentioned in my previous blog on stamford Land, it is like what Warren Buffet termed as equity bond.


Possible risks face by Stamford Land going forward:

a.   A current debt of $192m to be paid within this calender year. But I think it can be resolved as it has a cash hoard of $144m, and with re-financing, the current debt should be worked out.

b. The weak Aussie dollars may pose some issues. However, this is offset by greater buying interest in Australian properties as the Aussie dollar weakens. It depends on the real dmand out there.

c. Government curbs may affect the sales of the Australian properties. Hopefully the effect is not significant.

(Brennen Pak has been a stock investor for more than 25 years. He is the Principal Trainer of BP Wealth Learning Centre LLP. He is the author of the book “Building Wealth Together Through Stocks.”) – The ebook version may be purchased via

OUE – Shifting properties to REITs

Over the last two years, OUE has been making significant changes. Two REITs were set up and several properties have been sold into two REITs, namely OUT H-REIT and OUE Comm Trust, to unlock the values. Last year, the Orchard Hotel and Manadrin Gallery as well as very recently, the Crown Plaza Changi have been sold into OUE Hospitality Real Estate Investment Trust (OUE H-REIT). Then there was also another tranaction, transfering OUE Bayfront and Lippo Propoerty in Shanghai to the OUE Comm REIT.



The changes have helped to unlock property values and reduce OUE’s gearing. The share price has been quite muted amidst all these changes. In fact, it has been trading at a steep discount of 50% at $2.18 against the NAV of $4.35.

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(Brennen Pak has been a stock investor for more than 25 years. He is the Principal Trainer of BP Wealth Learning Centre LLP. He is the author of the book “Building Wealth Together Through Stocks.”) – The ebook version may be purchased via

Keppel corp share price well supported by generous dividend

Slide6Keppel Corp share has been trading at the low $8 as the oil price was oscillating around $50 per barrel. Following the annoucement of the generous final dividend of $0.36 per share, the share price of Keppel Corp has been on an upward trend. At the point of writing, it is trading at $8.79, a significant increase of about 8.6% from $8.10 before the dividend annoucement. Based on the curent trading price, the dividend yield is still good at about 5.4%. With the ex-dividend on 24 April, which is more than 2 months away, it certainly helps in stabilising the Keppel Corp share price as the market digests new developments associated with the sinking oil price during the past 6 months.


(Brennen Pak has been a stock investor for 25 years. He is a chief trainer for BP Wealth Learning Centre LLP. He is the author of Building Wealth Together Through Stocks.)