Suntec REIT, The Upside From $400m Of Asset Enhancement Initiatives

RECENTLY, THE price of Suntec REIT units dropped dramatically - from the $1.50 level in August 2011 to close at $1.175 last Friday - and is one of the poorer performers among commercial REITs.

As a result, Suntec REIT is currently trading at a whopping 35% discount to its Net Asset Value (NAV)! Why has it fallen out of favour with investors?

Suntec City Mall and Convention Center which makes up approximately 80% of the asset base is more than 10 years old. It’s one of those places I used to hang out at when I was a student.

I remember the days when lots of people would queue up to go into the fountain area and touch the water and take photographs. Now, it is no longer the hip destination it once was.

There are many other new cool spots to replace it such as ION Orchard and Vivocity.
Asset Enhancement Initiatives (AEI)
I thought it's about time they did something about Suntec! So they did, with an announcement of a $410 million makeover.

The project which will take place from mid-2012 to 2015 will increase the net lettable area for retail by 14%, increasing Distribution Per Unit income from the retail segment.

Newer, hipper tenants will be introduced, and more F&B and watering holes which will definitely be more attractive.

Overall stabilized rentals are projected to increase by 25%. Best of all, the capital expenditures on the Asset Enhancement Initiatives (AEIs) will be supported by the proceeds from the sale of CHIJMES and from borrowings, with no equity raising expected.

We have all seen how AEIs conducted by CapitaMall Trust and Fraser Centerpoint Trust can revitalize malls and boost rental DPU, I expect no less from Suntec REIT.

Managed by Listed Management Firm ARA
Suntec REIT is currently managed by listed company ARA Asset Management, which is also the manager of other REITs such as Prospertiy REIT, Fortune REIT, Cache Logistics Trust and more.
ARA is established and was recently named one of “Asia’s 200 Best Under A Billion” by Forbes Asia in September 2011. It is an affiliate of Cheung Kong (Li Ka Shing).

Attractive Valuations, High Dividend Yields, Sound Financials
As I pointed out earlier, Suntec REIT is trading at a deep discount of 35% to NAV. Its dividend yield of close to 7% is very high for a retail/office REIT in Singapore, compared to CMT at 5.4%, FCT at 5.6%, MCT at approx. 6%.

Leverage ratio is at approximately 40%, which is comparable to other REITs. As a hybrid, retail income contributes 53% while office income contributes 47%, giving it a good balance of defensiveness and growth.

Occupancy is very high for both retail and office, exceeding 97%; which is better than most of the other grade A offices. While average passing rents for Suntec City has only increased slightly over the past few years, the AEI will provide a significant upgrade to rent.
Infrastructure Improvements, Developments Nearby To Boost Suntec City Profile
Suntec City is now served by the newly opened Circle Line which will bring more and more traffic to a more easily accessible Suntec City as compared to last time where one had to walk a long distance from City Hall MRT.

Its proximity to new developments at Esplanade, Marina Bay Sands and Marina Bay Financial Center will also boost the profile for Suntec City. When fully developed, Suntec City will be a part of a new vibrant shopping, financial hub at Marina Bay.
I initiated a long position on Suntec REIT last week at $1.155, confident of the future prospects of the REIT. While it depends on how effective the AEIs are, I believe that ARA will do a good job.

While Marina Bay Sands has a new Expo center, Suntec Expo can still cater to the smaller and niche Expos. It will be a long wait until at least 2013 to see results from the AEI, but I think current valuations already look rather attractive to include Suntec as a small part of my Singapore Stock Portfolio.

--Nextinsight

3Rs – the right business run by the right people and selling at the right price

IT’S NOT often, if at all, that a fund manager declares that his company has made mistakes in a third of its investment decisions. But that’s what Mr Cheah Cheng Hye, 54, said in a matter-of-fact way during a recent teleconference with Singapore journalists from his Hong Kong office.

“We are far from infallible. I’ve done a study of our decision-making process going back to 1993 and found that one third of the time, we made mistakes. One third were good moves and one third were neutral.

“If you isolate the mistakes of Value Partners, the single largest reason we find is our poor judgment of management’s integrity and quality. We thought the guy was honest but he turned out to be a crook.”

Yes, and the bad guys also come up with new ways to fool you!”

“We are talking about a generation of people who are in their 40s and 50s now and are captains of industry. They came out of the Cultural Revolution when values collapsed. These are people who don’t necessarily want to play by the book.”

It’s something that could go away, or diminish, over time. “As they get richer and have more at stake – in terms of reputation and wealth – they would be less and less naughty. They want to be more and more respectable, which means our stock investing risks go down.”

And among the important things that he is sure of, it is that the renminbi is going to resume its rise. “It will go up because America wants it to go up and because it’s in China’s self-interest for it to go up. You don’t want to go out of your way to annoy the US and if it’s not against your self-interest, why not let it rise? This is also one of the ways that China can help stimulate domestic consumption.

Mr Cheah added: “I’ll buy you lunch if the renminbi is not higher next year than where it is today.

For the last 10 years, he has meditated for an hour almost daily before going to sleep. On plane journeys, and that’s pretty frequent, he would meditate too.

For his part, Mr Cheah said that unlike most people who sought to make as much money as possible, he “had always come from the opposite angle - that you must be passionate about what you do and be very good in it. The money will come naturally.”

Cheah Cheng Hye, co-founder of Value Partners.

This article appeared recently in Pulses magazine and is produced as a form of record.

Hongkong TVB Drama Actress Girl Photos

Hongkong TVB Drama Actress Girl Photos:

'via Blog this'

ARA (S$1.28, BUY, TP: S$1.67): In our view, ARA is Asia’s finest asset manager with a high cashflow generating business model and little earnings downside since its fee income is based on a % of property value and % of net property income, which has proven to be resilient in previous crisis.

Following a set of strong 3Q11results which beat expectations, near term catalysts for the stock includes the formation of a new fund - Asia Dragon fund II aiming to raise US$1bn by 1Q12 - and a potential new REIT listing in 2012, with potential AUM of over S$2bn, which would add 10% to current AUM.

Fees from these potential assets under management are poised to bolster fees growth in 2012 and 2013.

Our target price of 18x FY12 AUM earnings for ARA is pegged to the higher end of global asset manager peers (PE ranging from 10x-18x), justified by its superior ROE, strong earnings visibility and multi earnings growth drivers over the next two years in our view.

--DBS VICKERS

Richard Rhodes’ 12 Trading Rules

The first and most important rule is – in bull markets, one is supposed to be long. This may sound obvious, but how many of us have sold the first rally in every bull market, saying that the market has moved too far, too fast. I have before, and I suspect I’ll do it again at some point in the future. Thus, we’ve not enjoyed the profits that should have accrued to us for our initial bullish outlook, but have actually lost money while being short. In a bull market, one can only be long or on the sidelines. Remember, not having a position is a position.
Buy that which is showing strength – sell that which is showing weakness. The public continues to buy when prices have fallen. The professional buys because prices have rallied. This difference may not sound logical, but buying strength works. The rule of survival is not to “buy low, sell high”, but to “buy higher and sell higher”. Furthermore, when comparing various stocks within a group, buy only the strongest and sell the weakest.
When putting on a trade, enter it as if it has the potential to be the biggest trade of the year. Don’t enter a trade until it has been well thought out, a campaign has been devised for adding to the trade, and contingency plans set for exiting the trade.
On minor corrections against the major trend, add to trades. In bull markets, add to the trade on minor corrections back into support levels. In bear markets, add on corrections into resistance. Use the 33-50% corrections level of the previous movement or the proper moving average as a first point in which to add.
Be patient. If a trade is missed, wait for a correction to occur before putting the trade on.
Be patient. Once a trade is put on, allow it time to develop and give it time to create the profits you expected.
Be patient. The old adage that “you never go broke taking a profit” is maybe the most worthless piece of advice ever given. Taking small profits is the surest way to ultimate loss I can think of, for small profits are never allowed to develop into enormous profits. The real money in trading is made from the one, two or three large trades that develop each year. You must develop the ability to patiently stay with winning trades to allow them to develop into that sort of trade.
Be patient. Once a trade is put on, give it time to work; give it time to insulate itself from random noise; give it time for others to see the merit of what you saw earlier than they.
Be impatient. As always, small loses and quick losses are the best losses. It is not the loss of money that is important. Rather, it is the mental capital that is used up when you sit with a losing trade that is important.
Never, ever under any condition, add to a losing trade, or “average” into a position. If you are buying, then each new buy price must be higher than the previous buy price. If you are selling, then each new selling price must be lower. This rule is to be adhered to without question.
Do more of what is working for you, and less of what’s not. Each day, look at the various positions you are holding, and try to add to the trade that has the most profit while subtracting from that trade that is either unprofitable or is showing the smallest profit. This is the basis of the old adage, “let your profits run.”
Don’t trade until the technicals and the fundamentals both agree. This rule makes pure technicians cringe. I don’t care! I will not trade until I am sure that the simple technical rules I follow, and my fundamental analysis, are running in tandem. Then I can act with authority, and with certainty, and patiently sit tight.
When sharp losses in equity are experienced, take time off. Close all trades and stop trading for several days. The mind can play games with itself following sharp, quick losses. The urge “to get the money back” is extreme, and should not be given in to.
When trading well, trade somewhat larger. We all experience those incredible periods of time when all of our trades are profitable. When that happens, trade aggressively and trade larger. We must make our proverbial “hay” when the sun does shine.
When adding to a trade, add only 1/4 to 1/2 as much as currently held. That is, if you are holding 400 shares of a stock, at the next point at which to add, add no more than 100 or 200 shares. That moves the average price of your holdings less than half of the distance moved, thus allowing you to sit through 50% corrections without touching your average price.
Think like a guerrilla warrior. We wish to fight on the side of the market that is winning, not wasting our time and capital on futile efforts to gain fame by buying the lows or selling the highs of some market movement. Our duty is to earn profits by fighting alongside the winning forces. If neither side is winning, then we don’t need to fight at all.
Markets form their tops in violence; markets form their lows in quiet conditions.
The final 10% of the time of a bull run will usually encompass 50% or more of the price movement. Thus, the first 50% of the price movement will take 90% of the time and will require the most backing and filling and will be far more difficult to trade than the last 50%.
There is no “genius” in these rules. They are common sense and nothing else, but as Voltaire said, “Common sense is uncommon.” Trading is a common-sense business. When we trade contrary to common sense, we will lose. Perhaps not always, but enormously and eventually. Trade simply. Avoid complex methodologies concerning obscure technical systems and trade according to the major trends only.
By Barry Ritholtz - November 20th, 2011

Big Lie

Profits Are at Record Levels, So Why Aren't Stock Prices?

So if stock prices are a reflection of future earnings, why hasn’t the U.S. benchmark returned to this record high yet? Currently, the S&P 500 is 20 percent below that 2-year old peak.

“The expectation is that earnings may decline if Europe can’t get out of its own way,” said Karen Finerman, president of hedge fund Metropolitan Capital Advisors.

In other words, investors aren’t willing to pay as much for these earnings this time around with a possible European recession set to depress the future profits of U.S. multinationals, not to mention gum up the international banking system. The S&P 500, at a price-earnings ratio of 12.1, is near its lowest valuation of the last decade.

--CNBC