Building Your Own ATM Machine !

image credit to uob.com.sg

Sometimes my friends or even relative just wonder how I could survive without working or having “active income” for the past 4 years.  I told them that I have my own “ATM Machine “ that will generate consistent cash flow, quarter by quarter, of course sometimes I can withdraw more money from this ATM and sometimes less.  It has consistently given me the cash without fail even during GFC ( Global Financial Crisis), it just a matter of giving out more or less.

Yes, it is dividend payout from my shareholding which I’m depending on since 2016 to pay for my monthly expenses and holidays. Of course, I’m not saying is easy to build this ATM Machine, it takes a long time ( very long, almost 20 years for me ) with hard work and saving, investing and reinvesting on the dividend received…taking advantage of the power of “compounding effect “ as well as spend within your mean ( try to avoid “Lifestyle Inflation “ ).

The Sacrifice We Made To Obtain $1.5 Mil of Dividend (link)

Every quarter , SPH Reit is the first REIT to kick-start the results announcement and follow by the rest….. you may find the announcement date  as below:

2019 March Quarter S-REIT Earnings Schedule <from SG investors>

I have just done a quick calculation of how much my ATM machine will allow me to “withdraw”  the cash from it in the next quarter: $49,697 ( just an estimation base on past DPU/Dividend trend ).  :D

Your ATM Machine may just give out smaller cash amount now, but I’m sure it will grow eventually so long as you continue with the path of saving, investing and re-investing the dividend, taking advantage of “Mr Market” emotional swing in his mood and of course don’t do any blunder on “speculative “ or chasing the hype. Have a diversified portfolio and some war-chest ready, patiently waiting for any opportunities to strike.

Recent Trade :

1)      OUE- Commercial REIT ( Sold )

I have decided to sell off my OUE-Comm REIT with XIRR of just 4.9% in 5 years of investing.  In fact, it was a capital loss of -$6.7K without counting the dividend received.

OUE-Comm and OUE HT decided to merge in the recent announcement, although the rationale seems to make sense that bigger REIT may have the advantage of getting lower finance cost and be able to have more debts with enlarging asset base.

I am more concern about the remaining $375 Million CPPU which will expire in Oct 2019. Without the merger, OUE Comm would have to fork out these amount of money to redeem this CPPU as the sponsor is not going to convert it at $0.71 cts/unit vs current share price. $375 Mil might be too tough for OUE-Comm alone to swallow as the gearing is already close to 40%. Either way of fundraising (equity or debt ) to redeem this CPPU will be very dilutive and costly, but with this merger and enlarge asset base and units, the $375 Mil to redeem this CPPU may look less dilutive. Yet to see how things turn out eventually on how they are going to redeem the CPPU.

Well, at least the 4.9% XIRR is better than interest from CPF SA if this made me feel better.. :D

1)      Lippo Mall REIT ( Sold )

This is another counter related to Lippo Kawarachi/OUE group. 

Lippo Malls Indonesia Retail Trust to buy a retail mall in West Jakarta for $354.7m <Straitstimes.com : March 2019 >

With this announcement, I am sure there will be another round of fundraising.

This is a stock that could perfectly characterize as “ value trap” as the price and DPU keep dropping after many rounds of asset acquisition. I am considered as “lucky” for this one as few round of buy and sell, ended with capital lost of -$3K but with a total dividend received, it still gave me an XIRR of 22.9% after holding for more than 8 years.

1)      China Aviation (sold)

From time to time, I will try to make a quick punt on certain stocks. China Aviation is one of them and also Yangzijiang where I will try to trade and speculate when their price falls to a certain level.

I will just nimble and continue to collect dividend if the price goes sideways. I have decided to let go of this since this price has gone up by more than 30% in just 3 months.

Am I a trader or investors :D, Yah… human nature, as usual, we like to gamble and speculate, but make sure that this is just a small portion of your portfolio.

Is REIT In “ Bubble” and Going to Burst Soon?

There was an ongoing discussion whether REIT is in the bubble (in one of the chart group I joined) that make me nervous as I am holding more than 40% of REITs in my portfolio.

I try to figure out what is the valuation for overall SG REIT at this point of time and see if is really overvalue. No doubt, we may find some REITs are in high and rich valuation base on dividend yield but for the market as a whole, I think we are just slightly above mean, of course not that “cheap” enough that make one go “all in”. Yield spread and PB valuation also hovering at the mean level.

Excluding exceptional extreme valuation in 2007-2009 during boom-bust kind of situation, the market is not that high as 2013 or as low as in 2012 / 2016.

FTSE ST REIT Index moved along the +/- 0.5 SD tightly since 2013. There were only two occasions whereby Index fell below -0.5 SD, one in 2013 ( European Debt Crisis ) and of course the other one would be the 2008/09 ( GFC ) Global Finance Crisis.

What I would like to point out here is that when REIT dropped by more than -20%, there would have distress in the overall financial market and not even STI could avoid it or spare from the plunge. Calling just REITs to drop by -20% to -30% would need a very good justification as market normally move in tandem, of course with some small variation. 

For sure, we don’t have “crystal ball” to predict the market’s direction, it may continue to move upward or plunge tomorrow, without exception for market or sector like REITs. It would be wise to have a more diversified portfolio and some war-chest ready. Remember that market always move in "cycles ", last year my portfolio was down by more than -16% and has rebounded by almost +13%  YTD since Jan 2018. 

Everything seems in "bubble" when we have 10 years of "bull run ", but  “The market can stay irrational longer than you can stay solvent.” as quoted from the great economist John M. Keynes. We might have the chance to enjoy another 10 years bull or market may just collapse tomorrow. You may want to try adjusting your portfolio ( cash/bond vs equity ) to a point that you could sleep well at night.

Cheers !!

Quote Of The Day:

 “To buy when others are despondently selling and to sell when others are avidly buying requires the greatest of fortitude and pays the greatest ultimate rewards.”John Templeton

PS: I would like thank @ZY (a member in one of the chart group I joined) in providing me with the data for FTSE ST REIT.