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Year of the 🐶 Portfolio

I am a long time subscriber to the Edge Singapore and every lunar Chinese New Year, they will put up a portfolio of 10 stocks which they believe will outperform the market index over the next 12 months.

I myself manage a live portfolio and I can understand how difficult it is to "predict" the market.

Of course, in this case, there is no real money involved but to get the stars aligned is no easy feat as the portfolio is measured only on two pricing points - @ the last Friday before the CNY and the last Friday of the next CNY. You can't "rebalance" or "sell at anytime" during the period.

The Edge Singapore's 2017 portfolio above outperformed the STI benchmark by 2.1%. I would say the performance is pretty good.

The Edge Singapore stock picks for 2018 is presented below. Let's see if it can beat the benchmark again next year!

Passive Income Update - February 

SRS Portfolio - addition 

Since the last update, I added another 20,000 shares of Starhill Global REIT @ 73.5 cents. The addition adds another $946 each year to my passive income. 

I bought it for the following reasons:

• NAV is $0.91 vis-a-vis the current price of $0.73 
• Projected yield of 6.4%
• To round up my existing position to 50,000 shares. The total dividend expected from Starhill is now $2,365 each year. 

Non-SRS Portfolio - addition

I convinced Mrs. IPO to part with her "private savings" to buy 25,000 shares of Capitamall Trust at $1.98 each. I have been "convincing" Mrs. IPO to invest gradually. Starting from Aspial Bonds to Netlink and now Capitamall. 

The price has corrected from its recent high of $2.16 in early Jan and is now trading close to its NAV of $1.92. 

The projected yield of 5.62% will mean that it is adding $2,790 each year to her passive income. 

The current criteria I used to select stocks for Mrs IPO is:

• Large cap Company, REITs or Bonds
• Predictability of distribution 
• Quarterly payout or half yearly distributions 

While I would have preferred to buy at below NAV, it's usually quite difficult to do that for a "blue-chip" stock like Capitamall Trust unless it's the GFC. 

With the addition of the above positions, the portfolio I have curated is well positioned to meet my 2018 goal of generating $60,000 per year. 

Hyflux Perps  - My thoughts 

Some readers asked for my views on the Hyflux Perps, so let me share some of my thoughts as a perp holder (not shareholder of Hyflux):

How I view the Management and Board of Hyflux. 

One word - disgusted. 

Why disgusted ? Let me explain. 

On 28 Dec 2017, Hyflux announced that it will distribute 70% of its stake in Hyfluxshop to equity holders and retain a 30% stake. 

The distribution in specie is recently completed where Hyflux investors received one Hyfluxshop share for every 10 Hyflux shares held. Note that Hyfluxshop is an unlisted company with the ELO brand and wellness business. 

The intent is to list Hyfluxshop in future and investors can have direct shareholding in two distinct companies. 

Company usually don't do a dividend-in-specie unless the underlying "specie" is a listed security where shareholders can benefit from either holding the stock or selling them directly in the market place. 

Even the private equity fund managers globally don't distribute shares in private companies to their investors until the underlying investment is listed and even then, they hardy do so. 

In other words, the balance sheet of Hyflux just "lost" 70% in its value of Hyfluxshop. 

Questions I have for Hyflux Board:

Why distribute an unlisted company to existing investor in the first place if the company is not listed? 

If the intent is to list Hyfluxshop, why do they have to do it now? Can't Hyflux do it a later stage when Hyfluxshop is listed and instead incur all these unnecessary expenses?

Who is the biggest loser in this distribution in specie ? 

I probably wouldn't have been so upset if Hyflux is doing well but the fact is the business performance of Hyflux is horrible with declining profitability and widening losses and Hyflux is highly levered. In addition, they have not indicated whether they will redeem the RPS this coming April. 

The big loser in this entire episode is probably the Hyflux CPS and Perp holders. Why? That is because 70% of the value in Hyfluxshop shop has been "leaked out" via the distribution. If Hyfluxshop turn out to be something valuable, then that value is lost and no longer "protects" the Perps holders. Or push it to the other extreme, if Hyflux is to go belly up, the value of Hyfluxshop is no longer in the hands of the creditors (including the Perps holders) of Hyflux. 

Is Hyfluxshop worth something? 

Well, if you ask Olivia, it is definitely worth something. After all, she is willing to pay $0.1783 for each Hyfluxshop share that she doesn't already own. Of course, if you take the half full view, she is "helping" to provide an exit option for investors who don't know what to do with the unlisted shares. She is helping to pay "dividend" to Hyflux shareholders out of her own pocket even when SIC ruled that there is no need for her to do so. 

Why did the Board permit the distribution in specie? Did the Board ask any questions on whether such action is detrimental to Hyflux Perps holders. 

I have no idea. You may want to write to them and ask. 

According to MAS Corporate Governance guidelines clause 3.1, it is not recommended to have the same person acting as both CEO and Chairman of the Board. Usually this role is kept separate but based on the Annual Report 2016, Olivia is holding the dual role. This means she is the boss deciding. 

When I look at the 2016 Annual Report (note I based my writing below on the 2016 report), Teo Kiang Kok is the lead independent director and he was first appointed since 19 Dec 2000! A whopping 17 years and counting. After 17 years can still be independent? 🤣 

Let's see who are the rest of the so-called independent directors:

Gay Chee Cheong is there since Aug 2001. 
Lee Joo Hai since Dec 2000. 
Christopher Murugasu since Feb 2005. 
Gary Kee since May 2011. 
Simon Tay since May 2011. 
Lau Wing Tat since Jul 2014. 

While there is no restriction on the tenure, perhaps the board needs to be refreshed in view of what's happening to Hyflux? 

Who benefits most from the distribution in specie ? 

Why not you tell me which shareholder will benefit the most... 🙄

Will Hyflux redeem the CPS that is maturing in April 2018. 

The market is telling you quite clearly that Hyflux is not going to redeem. Which is why the share price of both the CPS and perps crashed in February. In fact, there is a recent article suggesting that it is even cheaper for Hyflux to pay 8% after the step up in interest as it will not be able to raise new funds at that interest rate. 

Will Hyflux go belly up ? 

Your guess is as good as mine. Probably not in the near term or the Board wouldn't dare to approve the distribution in specie. However, if the fundamentals does not improve and continue to worsen, then there is a chance of this happening. 

If Hyflux goes belly up in the next 12 months, I would be quite worried if I am an independent board member. 

I guess one telling sign will be when the board members start to resign for no good reasons. So use that as your E2C (not ELO, punt intended) early warning system. 

Is Mr. IPO still vested and whether he will cut loss? 

Yes I am still holding. As I wrote before, I regretted not taking a more active stance on this position. I probably won't do it now but may consider later when sentiments improve. I am keeping my fingers crossed and see what's next. I am sure I will get at least get my April 2018 payment. 

Hope the above thoughts are useful for you. 

Mr IPO's Passive Income Portfolio (Non SRS as well)

One reader left a comment on what my "non-SRS" positions are in the portfolio is that generated the $50,708 passive income, so let me break it down for you (even though i have blogged about the various holdings in piece-meal) . . .  Note that this post only includes holdings which i hold for the long term and for the passive income. It excludes IPO punts and positions which are not intended for passive income.

The investment cost of the portfolio (both SRS and non SRS) is around $788,681 and is not marked to market (e.g. UMS holdings went up but Hyflux Perps crashed and the SGD fluctuates quite a bit against the USD) and it generates a blended yield of 6.4%. The USD/SGD rate used is 1.32

The monthly "cash flow" pattern is as follows where i managed to create a portfolio that gives me some cash every month.

I have shared with you my SRS portfolio yesterday. So what is not inside my SRS portfolio that helped generated part of the passive income?

Bonds and Perps
  • 100,000 shares of Perenial Real Estate Bonds yielding 4.65% where i got it through the IPO. My IPO write up is here and the bond matures on 23 Oct 2018. I will get $100,000 back this Oct where i can redeploy into other assets
  • 100,000 share of Hyflux Perps yielding 6% and my IPO write up is here. The share price has since crashed by 30% and i complained about the poor management team several times in my SRS blog so i will not repeat them. 🙄. The perps will "theoretically" mature on 27 May 2020, otherwise the interest will step up to 8%
  • Mrs IPO managed to get 49,000 shares of Aspial Retail Bond yielding 5.3%. My IPO write up is here. The bond matures on 1 April 2020
  • A US$200,000 bond that yields 6.5% and maturing in July 2021
Stocks and REITs 
  • Mrs IPO 50,000 shares in Netlink Trust yielding 5.43% for its initial year
  • 50,000 shares of Keppel KBS US Reit yielding 6.8%. My IPO write up is here.
What are the few key takeaways for today?

Mr IPO always eat what he cooks (write)

You can see that i eat what i cook (write), so a lot of the stock and bond positions are actually acquired around the time of IPO or shortly after its debut. Ironically, the stock and REITs portfolio is actually yielding 7.1% while the pure bonds and perps portfolio is yielding a blended 6%.

The portfolio is slowly built up over time

This portfolio is not build up overnight but painstakingly over a long period of time. For example, the SRS portfolio grew to where it is today because i started contributing to the SRS portfolio since 2006. It has been a long 12 years! Of course, having two people working as well as some luck in property investments helped paved the way as well.

Over time, we used the capital gains, savings and bonuses to build up the initial portfolio and keep adding on with savings and distributions received. Once it reached a certain scale, a virtuous cycle can be created where you can use the income generated to continue building up the portfolio. 

You can do it too and the younger the better!

I started dabbling in stocks since my army days and then investing more seriously when i moved into my working life. The younger you start, the less school fees you pay and the more time and runway you have to do something right. So if you are in your 20s and early 30s reading my blog, start saving and investing today. You will do fine and hopefully my blog will help provide you with answers or inspiration! 

SRS Portfolio and CPF Update - Feb 2018

The last 2 weeks turned out to be very "exciting" where the US markets crashed and in turn, causing the Asian markets to follow suit. It was ironic that the markets crashed on a set of good news but this has always been the case - "sell on news".

For my SRS portfolio, I added another 15,000 shares of Frasers Commercial Trust at $1.40 this week  . . . you can see that the portfolio i have constructed below is pretty "boring". It won't move up dramatically (other than UMS) and hopefully, it doesn't "move down" dramatically as well and it has proven to be so over the last one week. 💤

and with this addition, my projected passive income for 2018 (including the bonds and stocks in non SRS account) increased to around $50,708. This works out to be an average monthly income of around $4,225.


For the non SRS portfolio, I also bought some trading positions in AAPL and Singtel this week, but this are purely for short term trading where i am expecting a rebound once this mayhem is over. 


I have previously blogged about using CPF as a retirement tool back in April 2017 and that i repaid the CPF balances drawn for my property as i rather the government pay me interest than i pay myself interest. I also topped up my 2 kids CPF Special Account using their own Ang Pow money in April 2017.

My elder son received his first CPF statement ever in January and was pretty excited to see $333.28 interest credited into his account. He told me this year he is going to do the same for CNY this year and i told him i will "match" dollar-for-dollar for his Ang Pow money if he does that. 

So how much interest did i get for 2017 after repaying the CPF balances drawn for property (light shaded green pie)? I got about $20,225.02 in interest. 

Hope this can provide some inspiration for your own retirement (or plan for your family). 

Two comments on how i see the CPF for those in the 25-39 age bracket (the "young"): 
  1. I am at a different stage of my life, so if you are young and need to use the CPF to help finance the property, just do it. It helps in alleviating the cash flow needs for a young couple starting up a family. Of course if you can use cash instead of CPF, that would be better  
  2.  I am pretty disturbed that the government intends to a lower the Eldershield age to 30 years old. The article is here. This is making the young fund the old. I think it is not quite ethical to do this at their age. They would need to change the scheme to "Youngershield" ?? 🙄 Even though the young can "opt out", i am not sure if that is still the right thing to do.  
That is all for now, wifey is complaining why i am on the computer all afternoon and not helping out with the chores. 😀

Happy SRSing. Did you buy any "stocks" during the pre-CNY sale? 

What is your personal credit rating in Singapore?

I previously mentioned that i have changed job recently and was asked by my PA to submit a credit report on myself to the authorities . . . 🙄 . . . wouldn't the authorities already have access to them already . . . ???

Anyway... what is this credit report? Well... it is your credit profile with the banks here and in the report, you will be given a credit score that shows your potential "default rate". 🤔

And the factors affecting your credit profile are as follows:

Looking at my own credit report, i realised the banks have been diligently uploading all my credit card, loans, stocks margin account repayment records onto the system . . .

and the banks which i have applied credit cards for, have also been diligently assessing those reports as well.

So what is Mr. IPO's credit rating .... ??

Mr. IPO's score is 1975, enough to get a AA rating, better than most sovereign's debt other than Singapore's AAA rating. 😂 Would you like to place some money with me? 

Well, i have given you 4 digits to buy for this weekend but if you want your own 4D number, you can get your own credit report online here.