Happy & Sad - My First REIT encounter

Yesterday, I made a huge decision and sold off my entire holdings of First REIT at a price of $0.86 (17,000 shares) giving me $14,569.55 in proceeds to deploy elsewhere.

My foray into First REIT first began on 05 Jan 2007.

05 Jan 07 - Buy 2 lots @ $0.765
15 Jan 07 - Buy 5 lots @$0.765
05 Mar 08 - Buy 3 lots @ $0.725
02 Apr 08 - Buy 5 lots @ $0.70
02 Sep 08 - Buy 1 lot @$0.70
14 Oct 08 - Buy 1 lot @$0.425

I sold all on 07 Jan 2010 @$0.86.

Any feelings?

I have been happy about getting the dividends that are given every quarter. I will miss those dividends badly. Everytime, I get the dividends, it brings a smile to my face. Now those days are gone.

When I clicked on the SELL button yesterday, the feeling of earning a nice ROC of 18% also brightened my day for a while. Today, I have no more special feelings about this stock.

Through the 2 over years that I have held on to this stock, it has given me more heartache than joy. The price has always been depressed and hovered below my average buying price. Everytime I looked at the stock market, my heart sank when I noticed that First REIT kept getting cheaper and cheaper.

All in all, I would like to think that First REIT has caused my heart alot more pain than joy.

That is even after I exit this REIT with a return on capital of 18% and not to mention the 2 years of dividends that I have enjoyed.

The reason I sold was because I felt that it was trading quite close to its NAV and even though its fair value should be around $1.00, I still did not see First REIT living up to its expansion plans be it in China or the rest of asia. It has been two long years and they have only expanded into Singapore. I guess any future expansion will increase their gearing and even though that would bring their yield up, their price will be depressed because of the high gearing.

At such a time like this, I felt that it would be good to lock in some gains now.

I do not deny the possibility of re-entering this stock since it is one of my favorites.

First REIT Insider Trades & Valuation

Looking at First REIT insider trades, here are my observations:

1. Director Tan Key Poo has been selling in 2009. He has been buying First REIT over the years but in September 2009, his holdings dropped from 947,000 shares to 462,000 shares. Of course, nothing can be determined from this as he could be merely selling to buy himself a new house or car. His average sell price is around $0.68 to $0.69

Now looking at valuation, there are a few ways REITs can be valued.

Firstly is looking at their Net Asset Value. First REIT has a NAV of $0.9255. It is currently trading at $0.86 representing a price/NAV of 0.929. This is still a discount to its NAV but I do not believe that First REIT has ever been valued above it NAV. This could be likely due to its operations which are mainly located in Indonesia.

Secondly, is their dividend yield which is currently 8.802%. Compared to Parkway life REIT which is in a similar industry whose yield is only 5.84%

Thirdly, is based on FFO or Funds From Operation which I guess is their net property income since there does not seem to be any depreciation costs factored in. Looking at their total comprehensive income after tax and their Distributable amount, I cannot understand how their distributable amount to unitholders can be higher than their comprehensive income after tax. Someone care to enlighten me?

Debts and Projects

Based on gearing, it has a relatively low gearing of 15.6% compared to PLife REIT of 23.2%. First REIT has also no refinancing obligations till 2012.

Based on its project pipelines, it is seeking to do improvements to the Adam Road Hospital and Lentor Residences. Its Tech-link healthcare logistics and distribution centre project is also in the pipeline.

This is totally mind boggling. First REIT based on my initial analysis seems to be undervalued based on NAV, pays out a high yield, and has an extremely low gearing. Why is it trading at such a low price? Is there something that I do not understand?

Can the main reason why it is valued as such be due to the fact that a large portion of its asset is located in Indonesia?


Read Related Articles:
1. Dumping One REIT for Another

Dumping One REIT for Another

I have been thinking of liquidating my First REIT to another REIT.

First REIT has served me well over the years but as its price has gone up quite a fair bit, I feel compelled to ditch the passive income it has been giving me over the past 2 years and to lock in some gains.

This is especially so because First REIT's share price is quickly riching its Net Asset Value.

I am not expecting First REIT share price to exceed its NAV as that has not happened before (correct me if I am wrong).

What I like about First REIT:
1. Good stable dividends that are slowly growing
2. Super Defensive as it is in the hospitality sector
3. Good gearing

What I don't like about First REIT:
1. Highly focused on Indonesia
2. No big "sponsor"
3. Trading close to NAV

The decision whether to cash out or not will ultimately depend on whether I can find another REIT or high dividend yielding stock to purchase. I have been thinking about Cambridge Industrial Trust but it seems that after the takeover debacle, their price might still trade at significant discount to NAV for some time..

Decisions, decisions, decisions

Saving Money on Coffee

While doing some Christmas shopping a few weeks back, I bought some nice roasted coffee from Marks and Spencers that cost me $11.90. It is also Fairtrade coffee which means the farmers of the coffee beans are being fairly compensated. (You can read about their fairtrade stories here)

I figured that it would replace my daily cup of coffee from the coffee shop downstairs which costs me $0.70 per cup.

I cannot kick the habit of drinking coffee so I have no choice but to make my own coffee.

The roasted coffee should be able to make me at least 30 to 40 cups of coffee based on my estimations. 40 cups of coffee would cost me $28.00.

We will just have to see how disciplined I am in making my own coffee instead of buying coffee from coffee shops or Starbucks.

The coffee is pretty nice but it does not taste like the Robusta coffee beans that are commonly used in Singapore coffee shops. It lacks the aroma and is slightly acidic. I am guessing it is Arabica beans - the kind which westerners like to drink.

Perhaps I need to use some condensed milk in the cup I am drinking now.......

Consolidated Stock Picks for 2010

It will be perhaps difficult to find good bargains for 2010 as we will probably not be seeing broad based sector price rises for the stock market. "Pockets of Strength" is the keyword here.

I have consolidated a list of the stock picks for 2010 for your viewing pleasure. It includes those from Analysts and might not be very comprehensive. Nevertheless, it is a good starting point.

Another point to note is that when people are buying again, it is perhaps time for us to start selling. The best time to buy stocks were in 2008 and 2009. Now, it will be hard to get the gains that we are looking for and we should stick to the leaders in each sector.

Anyway, here are the stock picks for 2010:

Telecos
1. StarHub
2. SingTel
3. Mobile One

REITs
1. Ascott REIT
2. CDL Hospitality Trust
3. Ascendas REIT
4. MapleTree Log Trust
5. CapitaMall Trust

Property
1. SC Global
2. Kepland
3. UOL Group
4, Bukit Sembawang

Shipping
1. Sembcorp Marine
2. Ezra

Commodities
1. Noble
2. Olam
3. Wilmar

Others:
1. Hyflux
2. Genting
3. Midas
4. SMRT
5. Keppel Corp

I Need Advice

I need some advice from all the masters and gurus out there.

The first is regarding a potential US dollar crisis. How do you buffer yourself against such a crisis? Or how can you potentially profit from it if you do know that the US dollar is going into decline in the next few years?

The second is regarding my own stock portfolio:
My wife and I have cash of close to $100,000.

I have the following stocks amounting to $85,000 ++
1. Ascott REIT
2. First REIT
3. Suntec REIT
4. NOL
5. Kingboard
6. Pac Andes
7. Innotek
8. Unifood
9. China Aviation Oil
10. Citigroup

Other than my REITs, all the rest are still in the RED. I don't wish to sell them at a loss.

But Gohsip (a fellow blogger) suggested that my focus should be on building my capital (going for capital growth) instead of increasing my so-called "passive income" through dividend yielding assets like REITs.

Can anyone give any suggestions on what I should do especially with the stock market soaring currently?

Should I liquidate all my positions and start afresh with some good stock picks for 2010?

Or should I liquidate some of my positions and then get into new positions?

I know many of you are unwilling to share in detail because you might think that I would blame you or stuff if I lose money. Don't worry..I won't =)

I just need to hear from you: What would you do if you were me? Which stocks would you sell? Which stocks would you keep? And Which stocks would you buy?

S$90 Parking Per Month is Too Expensive

Parking at a covered multi-storey carpark costs me a whopping $90 a month!

I know that is not a lot of money to some of you out there but it is to me.

Considering that over 12 months, that adds up to be $1080... I can only imagine the kind of things that I can buy with that money. I could easily subscribe to StarHub HBO channel and stuff with money to spare!

Why do I need to pay for carparking when there is so much carparking space available?

Where does the money collected go to? To pay HDB to hire carpark attendants?

Why not give us free parking? Surely I am entitled to free parking at my "home" right? Unless you are telling me that it is not my home afterall.....

Shucks...I know I am getting nowhere with this ranting but just felt that I needed to let some hot air out regarding parking fees.

I know it is not expensive compared to other countries but other countries...people own their houses and park free of charge there. Why penalise me if land is scarce in Singapore? I live in a HDB. Surely that is enough? Aren't conservancy charges enough to cover whatever costs that is needed.

Paying $90 a month for parking is equivalent to $3 a day.... Can eat 1 pack of chicken rice everyday.

Anyone feels the same pain that I do?

Anyway, I wrote about the decline of the US dollar in this article over here and I really wish to hear some views (especially from those who are more experienced in this matter). Hope to see all the comments rolling in soon!