Investing for income

By Centauri78

This article isn’t about property, but I thought since I’d written about property shares and REITs previously, this may be relevant to some of our readers.

While I am a proponent of investing for income, one thing that irritates me to no end when I read it in articles written by income investors is the concept of yield over original cost.

I read an article a while back by an ex-financial advisor. In it, he was saying how while he was still a rookie, he advised his client to switch from a low-yielding share to another counter having a higher yield. The client refused, saying that while the yield is low, it is actually giving her more than her original buy price each year, or more than 100% yield over original cost! The author, unjustly shamed, took this “lesson” and presented it as a truth of income investing.

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Investing in Property: Property Shares

Now that the government has clamped down on buying and selling of property, perhaps it is time to look at other ways you can invest in property. One of these ways is to buy shares of companies that deal with property, whether as developer, contractor or owner-manager. Some such counters are Capitaland (developer), Ho Bee (developer), Wee Hur (developer, contractor), Suntec REIT (owner-manager).

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SC Global Privatisation Update

Image courtesy of SC Global via The Straits Times

Here’s an update on what has happened since my post on the subject:

1. On 19 Dec, the offer documents were despatched to shareholders
2. On 26 Dec, SC Global’s IFA, PrimePartners Corporate Finance, released a statement to offer their opinion that the offer was fair and reasonable, being 15 – 20% discount to their calculated RNAV
3. On 30 Dec, Simon Cheong released a statement that he has no intention of raising the offer. As such, the Takeover Code forbids him from subsequently changing the offer.
4. In response to an analyst’s speculation that there may be a chance for the privatisation to go through with joint privatisation of Wheelock, the Board of SC Global released a statement affirming that there are no talks with Wheelock and that the Code forbids any such transaction.

Talk about throwing a spanner in the works! Well, now we know 2 things. The first is that $1.80 is the only game in town for now with no chance of increase. The second is that the privatisation will fail, assuming that Wheelock stick to their guns.
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SC Global Privatisation

Straying slightly away from straight property market commentary, I’d like to weigh in on Simon Cheong’s bid to take SC Global private. For those who haven’t been paying attention to the news, here are the terms of the offer:

The all-cash General Offer price is $1.80, representing:

49.4% premium to the last transacted price before the announcement; and
39.5% premium to the highest closing prices in the 12 months prior to the announcement.

Reasons given for privatisation were the usual generic few: low liquidity, no requirement for market access, management flexibility and savings on listing costs.
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