Purchase: Croesus Retail Trust

Croesus has been a stock I've looked at for quite awhile, ever since my other J-Reit, Saizen, was taken over and I needed to redeploy the capital. However, there were always more compelling buys, until I finally put in an offer at $0.84 for 3000 shares. Including the commission and numerous fees, average price came in at $0.844 per share. Considering that the price before its recent XD was $0.88 with a declared dividend of $0.036, I more or less came out even.

Now, what do we get with Croesus?

1) 11 retail malls, of which 9 is freehold
2) P/B ratio of 0.863, meaning a discount of 14%
3) P/E ratio of 6.405
4) An attractive trailing dividend yield of 7.89%
5) Good recent results with Net Property income, Distributable income and Distribution per Unit all increasing.
6) Enhanced cost savings coming from internalising the management team
7) Higher interest cover ratio from 3.7 to 4.2. This is important as Croesus is quite highly leveraged, with a gearing ratio of 46.1%.
8) A conducive macroeconomic situation as the BOJ is unlikely to increase interest rates within Japan in the near term, keeping the cost of money to remain low. This is unlike Singapore Reits whereby they are affected by interest rate fluctuations coming from the Federal Reserve of America.

All in all, Croesus is likely to be a good dividend growth stock for me, and I will likely be keeping it for the long term.

An Alternative Approach to CPF

As a citizen, 20% of my pay is credited into my CPF account each month, together with 17% from my employer. Now the CPF is touted by the Government as a retirement tool, with the annuity plan CPF Life which is supposed to give you a monthly payment till you die. This post is not to discuss about the pros and cons of the scheme, which would definitely generate a long debate which would not be conducive to the point I will be discussing below.

As the title says, this post will be about an alternative approach to CPF. What do I mean? As of current rules (which are highly subject to changes though), there are two ways to cash out the monies in your CPF account. Firstly, we have the annuity plan as discussed above, a slow drip of cash meant to supplement (note: not solely depend on) your retirement. The cash amount varies, and will be deducted from your account. If you pass away before the amount is depleted, the leftover monies will be dispersed to your surviving family members. If you pass away after depleting the amount, your family will get nothing. 

Secondly, and more appealing to me, is the cash withdrawal that is allowed upon reaching 55 years old. This allows a one-time withdrawal of $5,000 or whatever sum of money that is above the current minimum sum (standing at $161,000), whichever is higher. Bear in mind that the minimum sum is set to increase year to year, based on some ad hoc metric that is not shared publicly, so the minimum sum that has to be kept aside could be a problem in the cash withdrawal. Singaporeans could also struggle to hit the minimum sum as significant funds from CPF are utilised for housing purposes, which empties your OA, essentially rebooting the savings process. While there are other schemes that make use of CPF monies, housing is likely to be the largest expense that Singaporeans will use their CPF on. We then have the accrued interest problem, where you have to pay back to your CPF account the interest that would have been earned if you hadn't used the funds for your housing. Essentially, paying interest on nothing. 

Some good news though, if you own a property, you could pledge it to the CPF board in order to reduce your minimum sum commitment by half (ie from $161,000 to $80,500), which would help in reducing the burden. This would help to ensure that a considerable windfall can be obtained at age 55.

So what would be my strategy in getting to that windfall? First things first, I have yet to purchase a property, so a certain sum of money will have to be left in the OA, which attracts a 2.5% interest rate. I will likely to be leaving around $50,000 which should be enough to provide for the 20% downpayment (combined with my future wife). Excess monies after that will be shunted into the SA, which attracts an interest of at least 4%. This will allow the monies to accumulate at a faster rate. I will also be looking to make voluntary contributions into my MA, as once the Basic Healthcare Sum ($52,000 as of 2017) is hit, all excess monies will be funnelled into the SA. Do note that funds in the MA get an interest of 4% as well. By doing these, the hope is that half of minimum sum (after pledging the property) will be reached as soon as possible, after which I will make voluntary contributions into my CPF (limited to $12,500 per annum if I'm not wrong), and transferred into SA. What I'm essentially doing then would be to treat my SA as an AAA rated bond with a 4% coupon rate, and maturity date in the year I turn 55.

So there, an alternative approach to CPF.  

TL:DR Two ways of making use of CPF, I will be aiming for the cashout at age 55, by pledging my property and making use of higher interests of SA and OA.

Summary for Jan 2017

So the first month of 2017 has passed us by, and its time for another portfolio review. Nothing's much changed, other than the addition of Singtel into the portfolio (see my analysis and decision making process here). Glad to say that my previous analysis was right, and the share price has risen by about 5% from my entry price.

Without further ado, here's my portfolio update:

Name	Port%	Shares	A.Price	Div (Total)
OCBC Bank (SGD)	19.45%	508	9.46	145.44
First Reit (SGD)	17.54%	3,332	1.24	365.873
SoilbuildBizReit (SGD)	12.65%	4,900	0.67	145.481
SingTel (SGD)	10.95%	700	3.68	6.8
Keppel DC Reit (SGD)	9.19%	1,900	1.04	155
Hock Lian Seng (SGD)	7.23%	4,000	0.39	142
Accordia Golf Tr (SGD)	6.04%	2,200	0.61	139.43
Tai Sin Electric (SGD)	3.17%	2,000	0.33	32
KingsmenCreative (SGD)	2.93%	1,200	0.79	41
Lippo Malls Tr (SGD)	2.89%	1,800	0.34	54.35
AIMSAMP Cap Reit (SGD)	2.73%	500	1.32	50.8
ST Engineering (SGD)	2.70%	200	2.82	30
IREIT Global (SGD)	2.09%	700	0.63	45.79

For now it's unlikely that I will make any moves on the market, but I might start a RSP with POSB, just to have a bit of exposure to the ABF Bond ETF for hedging some of the volatility that I predict with Trump's presidency.