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Best. February. Ever.

OK, not exactly. It’s more like best YTD ever. And that’s only for US/Global portfolio.

But I wanted a title for this post that’s a continuation of:

Best. January. Ever.

You know… kinda like how some stamps come in a set or a series.

A picture speaks a mod-zillion words:

841) Feb Options ROI.jpg

I’ve said at the 22% mark that I’d be happy to close the year with that sorta returns.

Then, I’ve said at the 28% mark at end Jan, that I probably should close out all positions and do nothing for the rest of the year.

Yet, as of end Feb 2019:

842) Account Overview.jpg

US/Global Portfolio ROI is a very pleasing 29.50% YTD.

NAV gain YTD till end Feb 2019, taking into account a withdrawal of USD 22,088.60 made, is USD 128,387.87.

As seen in the chart above, the benchmark indices’ ROI are all hovering just below the 12% mark, with EFA being the worst and SPX doing the best amongst the 3.

So the outperformance is an amazing errr 17-18% or so.

And let’s not even bother to talk about the perennially under performing STI (which is like <5% I think)

I always prefer to look at SPX since that’s the broadest barometer of the US market and is pretty much the index itself (it’s an ETF of the S&P 500 index).

I’ve already previously discussed about my positions that have resulted in this outperformance:

Best. January. Ever.

The 1 bugbear that hasn’t done well is CTL, and it continued to underperform and drag onto my returns. The position is sizable, so the other guys in there must’ve done so amazingly well so as to mask CTL’s drag.

I continue to hold onto that position, and continue to sell CTL options on both sides of the equation, depending on the market conditions.


As seen in the chart above, it hasn’t been 1 way up.

There was a period where there was a massive drop from a +27% or so, down to a +10% or so, in pretty much just a couple of days. 2 horrible days specifically.

843) benchmark comparison.jpg

The reason for that lies in a new position I’ve initiated: Wirecard.

You see, I’ve been taking profit in most of my positions, and as of the end Jan 2019, held a substantial amount of USD. Since then, I’ve been looking out for stuff to deploy capital into.

Yet I’m cautious, cos the markets have rallied relentlessly thus far in 2019. Everybody seems to have forgotten the world’s problems. China’s data hasn’t been great, US employment numbers are worrying, and their debt numbers aren’t even starting to improve despite Trump’s promises. Volatility and VIX have been trending down down down. Everybody’s happy.

I’m happy too. But it’s more like errrr happy-skeptical.

After looking long and hard enough, I decided to deploy a substantial bit of capital into Wirecard, with their recent troubles.

And as always, I don’t always get to buy at the absolute lows, and as Wirecard shares continued plunging, it dragged down the overall ROI.

All’s well ends well though, and the subsequent recovery provided a significant boost to bring the overall ROI to the all time YTD high of 29.50%.

Now, when I talk about Wirecard shares here, I’m really talking about a direct equity position in the germany DAX listed company, not the ADRs of the company. So it’s listed in Germany, and there’s currency exposure risks to Euros in this instance.


Now, I continue to hold onto a sizable long exposure to WDI (Wirecard), but I’ve already started selling some far OTM calls on those positions, taking into account the strong recovery.

I’d have really wished to have a Cinderella fairytale ending here whereby the allegations are completely false, FT reporter goes to jail or something, and the price shoots up to 250 euros (the target price for some analysts).

Yet, I’ve SOME reservations.

I do think the next earnings release on the 4th April will surprise the markets and provide a further catalyst/boost to the share price. And I’d normally have the guts and capital to plonk down for the long run (or however long it takes for a recovery)… but in this instance, I’ve my reservations cos of the…

Singapore Police Force.

Yep. When the CAD department of SPF is involved, it lends a lot of weight to the short side.

And as always, I don’t say this or put undue emphasis on this without having done the necessary DD and having some real concrete data to back up my thoughts.

In this instance… what better way to understand the thought process and how it works…. than to check with someone within the CAD itself?

I reached out to a friend who’s sufficiently high ranking enough within the CAD:

844) whatsapp.jpg

845) whatsapp.jpg

846) whatsapp.jpg

There’s other info like the approximate duration of an investigation and the processes etc but that’s not going to be shared here.

Basically, I do have faith in the way CAD conducts an investigation and this kinda puts a dampener on my wirecard long thesis.

I might be right in my long thesis, but I can’t be sure how the markets react to new developments when CAD probes deeper.

As mentioned, I’m currently still deeply long as I think the odds are still in my favor. Any investigation of wrongdoing, would more likely impact on the individuals involved, rather than the company itself.

In any case, if you’ve been following, BaFin (which is Germany’s equivalent of MAS), has stepped in to ban short selling of wirecard, putting the German authorities firmly behind Wirecard’s management.

We’re only in the early innings of a long drawn out battle, so it’s interesting to watch.

Already, wirecard has added almost 10k in euros to  my portfolio (paper profits), and I expect this to further increase in March and April.

Yes, it’s not a plain vanilla straightforward long case here, but…. well, if I wanna add any further to the 29.5% ROI this year, I figured I’d have to find really unique situations and take concentrated positions and come out the better of it.

Also, I’d like to give a shoutout to Southern Investigative Reporting Foundation, for their amazing investigative journalism. OK, they did a negative piece on Wirecard, and that places them on the other side of the equation from me… but it’s still amazing work.

Check it out:

http://sirf-online.org/2018/01/23/wirecard-ag-the-great-indian-shareholder-robbery/

Plus, I think they can be right… and I’d still be profitable in my investment due to the option premiums arising from the volatility created from their work. LOL.

OK, that’s about it. I’d have written more about my wirecard DD, but others before me have done similar if not better work, and I thought the only thing I have to add is my understanding and investigations on the CAD side, since not 1 wirecard report/post/analyst report/journalist’s piece has spoken about that. And it’s understandable why, cos these ang mohs don’t even know what’s CAD to begin with.

(Plus I’d like to keep some aces up my sleeves myself. Heh)

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APAC Realty – Acquisition Of ERA Centre Is Cashflow Negative

Well, at least until October 2023.

But first, let me state that this post is not exactly a discussion on APAC Realty. I don’t own APAC Realty’s shares, I traded it twice, and was fortunate to walk away with a mere couple of grand in profits, but that’s about it.

This is specifically, a discussion of APAC’s recent acquisition of Hersing Centre. (And the numbers behind it)

On the 10th Sept 2018, APAC completed the acquisition of Hersing Centre, situated in Toa Payoh, and renamed it ERA Centre.

The plan is to use ERA Centre as the headquarters, while simultaneously generating rental income from leasing out the retail units.

“The Property is a leasehold commercial property with a site area of approximately 1,392.4 square metres and a gross floor area of 4,121.4 square metres. Its 99-year lease from the Housing and Development Board (“HDB”) commenced on 1 August 1970. The Property has three levels: the first and second levels are currently leased to retail businesses, while the third level and the mezzanine are currently leased out as office space. There are also two auditoriums on the third level which are leased out. Total lettable floor area is approximately 2,155.3 square metres, excluding auditorium space of 441.34 square metres.”

ERA Centre’s location is not too bad actually. It is just a little off the main road, but enjoys pretty good frontage. It’s also not exactly smack in the Toa Payoh town hub per say, where all the buzz is, but is pretty close… I’d say, just 5 mins walk away.

Aside from using it as a HQ, the company plans to use the auditoriums in the 3rd floor for internal training and lectures for their own agents. (that’s what I’m told by an agent that I checked with)

The consideration for the acquisition is a cool $72.8 million, of which $58 mil is a property loan from DBS bank (according to FY18Q3 earnings release).

“The loan bears interest at the prevailing 1-month SIBOR plus 0.9% per annum for the first 2 years and 1-month SIBOR plus 2.0% per annum thereafter. The loan is repayable over 59 equal monthly instalments of $241,667 per month with a final bullet principal payment of $43,741,647 on the final maturity date, 19 October 2023. The first monthly instalment repayment of the loan is on 19 November 2018.”

Yup. So APAC has to cough up repayments of $240k every month, all the way till Nov 2018.

Being the curious cat, I rolled up my sleeves to investigate as I wanted to figure out if ERA Centre is going to be cashflow positive every month.

TBH, it’s not so much cos of interest in APAC Realty… but rather…. hey, if commercial premises in TPY town centre was going to be CF positive, I might jump in (on a much smaller scale of course), and pick up a few units somewhere there as well. I happen to be offered another commercial unit that’s even closer to the town centre than Hersing Centre.

It’s been almost half a year since the completion of the acquisition of ERA Centre though, and thus far, it doesn’t look good.

The ground floor is leased out to the “Hawker Chan” restaurant, which is famous for being the 1st 1 Michelin starred hawker. That certainly does brisk business, so they’d probably be around for a while longer.

837) ERA.jpg

That’s where the good news end.

After almost 6 months, the building is still terribly empty, with little traffic. Many units are empty too.

Even the road facing unit on the ground floor, which certainly enjoys pretty good roadside frontage, is empty.

I’d let the pictures do the talking.

838) ERA

I’d certainly think this should be the easiest unit to lease out.

Ground floor, just beside the road that many people use to cross to reach the HDB hub.

But it’s empty.

And empty for several months already.

I’ve been down to assess twice. Cos the 1st time was right after their announced acquisition and… well, maybe the company needed more time right?

But these pictures are recent. And it’s kinda disappointing I think (not to me, I’m not a shareholder!) that they still can’t get it leased out.

The 2nd floor is worse. There’s a hairdresser and a law firm on the 2nd floor.

These 2 are the only 2 non-F&B businesses in the entire building I think. I won’t put pictures of these cos the staff faces are in it, and it’s maybe not very nice if they suddenly find themselves plastered over an investing blog.

The rest are all small sized eateries selling F&B.

And yes, there are yet some more vacant units.

839) ERA.jpg

And finally, THIS.

I actually found this to be quite funny.

840) ERA.jpg

LOLOL! Check that out.

The sign btw, says “ACCESS TO LEVEL 3 ARE STRICTLY FOR TENANTS ONLY”

OK, firstly, it should be “is” and not “are”.

And they didn’t need to put that sign up. I wouldn’t have dared to go up anyway!

LOL!

The escalator was not working, and it’s almost like a pathway to hell with the darkened corridors and the eerie red light! Maybe they can lease this part out to film ghost movies.

Anyway, I’m told that it’s just 2 auditoriums on level 3. They certainly don’t have retail units there since the public is not allowed to go up.

Initially, I thought that since the total lettable area is a known fact, I’d just have to guesstimate occupancy rates, and crunch in the average psf numbers (can call agents to find out easily)… but looking at how unoccupied it is, I think we can safely conclude that ERA centre sure isn’t going to generate $240k in rent every month.

In other words, expect this to be CF negative every month until the end of the lease. (unless they find tenants)

I’d also point out that with this acquisition and the accompanying loan, the company no longer has an “asset light” model. As a matter of fact, they further increased their exposure to rate hikes, as the loan is pegged to Sibor.

Rate hikes are of course, always going to be a dampener for the property market, both price and volume wise, but with this loan, APAC would also be further directly impacted by rate hikes, or the lack of it.

Again, this by no means, indicates the current investment merits of APAC Realty.

I’m just sharing some observations, thoughts and photos of their acquisition of ERA Centre.