Wednesday, September 23, 2020

Barbells, Pyramids And Your Portfolio

If you have been investing for some time, you may have heard or read about some other portfolio strategies. Two that were often mentioned would be the barbell portfolio strategy and pyramid investing strategy, which I will call them barbell and pyramid respectively.

Most investment portfolios and funds come in the form of a pie chart, denoting the various asset classes, geographical locations, sectors and industrials, companies, and their respective make-up, usually in percentages. Some argued that such charts do not necessarily convey an important component of portfolio management, and that is risk. I can show a pie chart that is made up of 60% tech stocks that had gone way above their valuations and 40% junk bonds, but to the novice (or even a seasoned investor if he/she is not careful) the risks are not clearly defined. The barbell and pyramid enable a viewer to see the risk factor of each financial instrument roughly in their respective places.


Let us take a closer look at these two.




In the mainstream barbell portfolio strategy, securities and financial instruments are grouped into either low-to-no-risk or high-risk categories, and there is no middle ground. An example would be to have government bonds and defensive counters at the low-to-no-risk part, while placing those highly valued tech stocks on the other. If a 50-50 split is adopted, it would look something like this:


We could see an asymmetric-looking barbell, depending on the risk appetite and profile of the investor. If an investor prefers more safe instruments than riskier ones, then the bottom triangle would look larger; or for an aggressive, high-risk taker, the top would be larger instead.


Some variations of the barbell included a middle ground, with medium-risk securities making up the middle (e.g. corporate bonds), forming the “handle” of the barbell. This portion kind of give a “best of both worlds” scenario of having counters between the risk spectrum.




The pyramid investing strategy, or sometimes called the risk pyramid, labelled investments into three main tiers: low-risk forming the wide base (typically 40% to 50%), medium-risk as the body (30% to 40%) and high-risk being the apex (10% to 30%), as shown below:


Usually low-risk assets such as cash, government bonds, etc. are at the bottom, followed by the typical dividend-paying equities, corporate bonds, REITs, etc. in the middle, and volatile counters at the top. In some combinations, the pyramid is further split into more than three, especially in the middle part where the medium is further classified into lower-medium, medium-medium or upper-medium, much like our current description of the current social middle class (e.g. lower-upper middle class).


Side Note: Defining Risk


The very first issue on using such strategies would be the definition of risk, since it is this very parameter that you are classifying your investments. Risk is subjective: it means different things to different people at different times. We could say about government bonds being low risk, since it is after all the debt of a country, but different countries have different risk profiles, and some provide yields that are comparable to those of our local REITs’. Also, some counters which are deemed defensive in nature years ago may not appear to be so now (case in point: a telco counter that had went to a 12-year low recently).


We could use numbers to define them, such as standard deviation on measuring volatility, a typically used risk metric, or ratios like Sharpe and Sortino. The main problem in using them is they are not easily found online, and even if available, they may not be free, especially figures of local counters. The other way is to calculate them out, and spare time and Excel know-how is needed.


Another easier way is to use the beta coefficient (or beta for short), which is the measure of a security’s return relative to the general market. With the market’s beta as 1, a counter with a lower beta is seen as less volatile than the market. Beta numbers are easily searched; Yahoo Finance has them. The problem of beta is due to its relativity to the market returns, and a low beta does not mean it is not volatile by itself.


In addition, these statistics are based on the past, not the future, so the risk definition is at best backward looking. While it is understandable to use past data as an indication, it is not foolproof, but we have to make do with whatever information is at hand at least to have a clear set of criteria.


Application On Investment Portfolios


Summarizing my views, which I would elaborate below, in terms of visualizing risk, the barbell is good for looking at one portfolio, while the pyramid is more for looking at multiple portfolios and a risk overview of your total finances.


Let us take a look at the barbell. Using the balanced Bedokian Portfolio (35% equities, 35% REITs, 20% bonds, 5% commodities and 5% cash), I would place the cash and government bonds at the low-to-no risk portion; corporate bonds, low volatile/defensive equities and REITs at the middle (by the way I am using the handle model, which I will state why later); and the higher volatile/growth counters and commodities at the top. If I have other portfolios using my Central Provident Fund, Supplementary Retirement Scheme monies and/or with my disposal income (investment or trading), I can convert them to barbells, too.


With the few barbells, I will create a pyramid by corresponding their risk levels from each barbell: the high-risk parts will form the apex, the financial instruments in the handles will form the middle (here is the reason why I used the handle model), and the low-to-no-risk parts at the base. To make your pyramid more holistic, you may want to include all other holdings outside of your investment and trading portfolios, such as your emergency funds, cash savings, insurance savings plans, etc.




The barbell and pyramid models work well for investors who diversify their portfolios by risk and/or follow the simple equity-bond portfolio. As for myself, I will view them as risk-perspective models that I can transform my pie-chart to for a better understanding. However, I still hold my diversification belief in the order of asset classes, regions/countries, sectors/industries and individual companies and organisations, that would reduce risk.

Sunday, September 20, 2020

Inside The Bedokian’s Portfolio: Keppel DC REIT

Inside The Bedokian’s Portfolio is an intermittent series where I will reveal what we have in our investment portfolio, one company/bond/REIT/ETF at a time. In each post I will briefly give an overview of the counter, why I had selected it and what possibly lies ahead in its future.

For this issue, we will look at Keppel DC REIT.




Keppel DC REIT (KDC) was (and still is) the only locally listed, dedicated data centre REIT. Listed in 2014, it began with eight data centres in Singapore, Malaysia, Australia, United Kingdom, Netherlands and Ireland. Fast forward to 2020, KDC had expanded, holding 19 assets spread across eight countries. 


Let us look at some key statistics of KDC1, 2, based on its closing price of SGD 3.03 on 18 Feb 2020:

  • Trailing Dividend Yield: 2.66%
  • Price-to-Book Value: 2.59
  • Gearing: 34.5%
  • Weighted Average Lease Expiry: 7.4 years


Why KDC?


Back in 2014 while researching on the viability and future trends of E-commerce using associative investing, I had identified a few areas where I could tap onto this potential, and one of them was data centres. The opportunity came around that time when KDC was about to be listed and I had managed to secure some shares at the IPO phase.


Over the past six years, the developmental direction of the internet was not just moving along the E-commerce route, but other areas as well, such as cloud storages, the explosion of various social media platforms, and recently due to COVID-19, the push for the mass adoption of digital and virtual solutions. It was also mainly because of these factors that KDC showed resiliency, and its price went to an all-high time, despite suffering a slouch during the market’s dive back in March 2020.


The Future


With the current trends that I am observing, internet-based technologies and usages (including those that were mentioned in the previous paragraph) are on an upward trajectory, and data centres (and subsequently the REITs that are owning them) will benefit from this. Proving their importance, Mapletree Industrial Trust had completed its acquisition of their remaining interest in 14 data centres in the United States3, and is looking to acquire one more4, setting themselves for the potentiality of data centres.


There are challenges to be faced by data centres themselves, majority of which comes from the things that keep them going. Infrastructure issues like power management and efficient cooling need to be addressed constantly. Couple this with the increasing awareness of being green (data centres are known to be power guzzlers), these could form make-or-break factors in a tenant’s selection criteria.


Nevertheless, data centres in general (not just KDC’s) are the way to go.




Bought Keppel DC REIT at: 


SGD 0.93, Dec 2014 (IPO)

SGD 1.155, Nov 2016 (Rights issue)

SGD 1.71, Sep 2019 (Preferential offer)




1 – Yahoo Finance. Keppel DC REIT. 18 Feb 2020. (accessed 19 Feb 2020)


2 – Keppel DC REIT. First Half 2020 Financial Results. 21 July 2020. (accessed 19 Feb 2020)


3 – Mui, Rachel. Mapletree Industrial Trust completes acquisition of 14 data centres in US. The Business Times. 2 Sep 2020. (accessed 19 Feb 2020)


4 – Mui, Rachel. Mapletree Industrial Trust to buy US data centre for up to US$262.1m. The Business Times. 14 Sep 2020. (accessed 19 Feb 2020)

Monday, September 7, 2020

Frasers Centrepoint Trust’s Acquisition Of AsiaRetail Fund’s Singapore Assets

In what is to be one of the recent biggest news in the REIT scene, Frasers Centrepoint Trust (FCT) is going to acquire the remaining 63.1% of the AsiaRetail Fund (ARF) assets in Singapore, which comprises of Century Square and Tampines 1 in Tampines, Hougang Mall in Hougang, Tiong Bahru Plaza and Central Plaza in Tiong Bahru, and White Sands in Pasir Ris. Also announced in the news is the divestment of Bedok Point to their sponsor Frasers Property for about SGD 108 million.

Finance wise, FCT is proposing to raise about SGD 1.39 billion via equity, in the form of private placement and/or preferential offering, to fund the acquisition and to repay existing debt. Post-acquisition and divestment, on a pro forma basis there would be an 8.59% distribution per unit accretion and the net asset value of FCT would be at SGD 2.21.


The acquisition also marks FCT’s first foray into offices in the form of Central Plaza, which contributed about 4.9% of the net property income (NPI) of the ARF Singapore assets in the financial year (FY) of 2019.


More information can be found in the official presentation slides here.


The Bedokian’s Take


What interested me is the two maps which were shared in the abovementioned presentation slides, which showed the catchment area (or “location of influence” in my write up here) of the malls (Figure 1) and their proximity to the MRT stations (or “location of complements” in the same said write up) (Figure 2). I had just written a piece about FCT a while back here where I had described them as the King of the North. With the full acquisition of the ARF properties, FCT is poised to have a huge retail influence and foothold not just the population centres in the north, but in the north-east and east, too.

Fig.1 - 3km catchment (or radius) of FCT and ARF malls

Fig.2 - Locations of FCT and ARF malls and their walking distances to the nearest MRT stations

Despite competition coming in for retail businesses in the form of online shopping and e-commerce, and the recent COVID-19 situation which saw a decline in footfall due to prevention measures such as circuit breaker and social distancing, the crowds are still there. Just visit any shopping centre (FCT’s or others’) during the peak periods and you can see for yourself. The additional advantage of FCT’s malls is that most of them are situated at the residential heartlands, which traditionally act as a hub for nearby home dwellers to run their errands, have their meals (dine-in or take-away) and/or fulfilling other social and recreational needs such as meet-ups. Malls and shopping centres, in our local context, do fill a special place in our way of life. Factoring in the new phenomenon of work from home, I do see potential in this enlarged REIT.


The divestment of Bedok Point is seen as a good move, since it was not ideally located due to its proximity to the much bigger and nearer-to-the-MRT-station Bedok Mall (owned by CapitaLand Mall Trust), and it contributed only about 1.91% and 1.85% of FCT’s NPI in FY2019 and FY2018 respectively (note: NPI did not include those from Waterway Point and ARF malls)1


An extraordinary general meeting will be convened on 28 September 2020 to pass the resolutions which include the proposed fund raising and the divestment of Bedok Point.




The Bedokian is vested in FCT.


1 – FCT Annual Report 2019 p31. (accessed 6 Sep 2020)


Further references:


FCT Circular dated 3 Sep 2020. (accessed 6 Sep 2020)


Lee, Marissa. Frasers Centrepoint Trust to raise up to S$1.39b to take over AsiaRetail Fund. Business Times. 3 Sep 2020. (accessed 6 Sep 2020)

Sunday, August 30, 2020

The Accounting Equation And How It Helps In Your Fundamental Analysis

Those who had studied accounting or have had an accounting subject back in school would have encountered the accounting equation, which is:


Assets = Liabilities + (Owners’ / Shareholders’) Equity




A = L + E


For the uninitiated, the accounting equation shows that a company’s assets are made up of debt (liabilities) and shares issued to shareholders (equity). The equation forms the basis of the double entry accounting system which is universally used by accountants worldwide.


The practical application of this equation is shown in a balance sheet, which is one of the three financial statements reported by companies. Here is an example of the A = L + E in real life:

Fig.1: Balance Sheet (excerpted from Singtel 2019 Annual Report, p139)


From Figure 1, you can see that 48,914.1 (A) is equal to 19,105.1 (L) plus 29,807.7 (E).


So how does it help in my fundamental analysis (FA)?


As you can see from the balance sheet, there are many details and things that made up the assets, liabilities and equity parts. For this post I will not go into their intricacies, but instead I will provide an overview with a few pointers and nutshell explanations, which could be useful for people who do not know where and how to start their FA.



Two ratios can be derived with this accounting equation alone, and that is debt-to-asset and debt-to-equity ratios, which are L / A and L / E respectively. A high number in both ratios indicates that the liabilities portion is large, especially so when the L / A ratio is closer to 1. For L / E, it is common for some companies to have liabilities larger than the equity portion, depending on their sector and industry.


On a related note, you can roughly tell the constituents of the assets of the company by just looking at the liabilities and equity numbers. Still, a thorough FA is required to look deeper into the nature of these components so as to form a better opinion of the whole scheme of things.

Calculating Net Asset Value


From the accounting equation, you can also see how the net asset value (NAV) of a company share can be calculated. By knowing the number of shares outstanding (which can be found in the company’s annual report), NAV is simply:


A = L + E


E = A – L

NAV = (A – L) / number of shares outstanding


Bear in mind NAV alone may not give a full picture of the true value of a company share, and other valuation methods may have to be taken into account, like price-to-earnings, discounted cash flow, etc.

Rights, Bonds, Bank Loans, Perpetual Bonds And Preferential Shares


A company has three main ways of raising additional capital; rights, bonds and bank loans. In the accounting equation, rights are considered equity, while bonds and bank loans form the liabilities part. The addition of rights meant that equity will increase, which translates to having more shares being issued and thus creating a dilution effect, i.e. more “slices” of the company pie are being created. For bonds and bank loans, their additions will increase the liabilities part, and along with it a rise in the debt-to-asset and debt-to-equity ratios.


The tricky part is there are some types of securities that may be considered either as liabilities or equity, depending on how one views them, like for instance perpetual bonds and preferential shares. While conducting FA, there is no hard and fast rule on how to treat such securities, though some prudent investors may treat them as liabilities in their calculations, while the more optimistic ones may take them as equity.


Sunday, August 16, 2020

The Work From Home (R)Evolution

In the last four months, we are seeing the rise of the telecommute, now better known as work from home (WFH) phenomenon. This is a result of simultaneously keeping a semblance of economic activity and staying safe from COVID-19. The WFH concept is not new and it has been popularized for the past two decades, particularly when the internet and its related technologies took off. However, the proportion of WFH in a general populace is dependent on the management or even societal culture and attitudes toward it, e.g. typically Asian management tend to be more reluctant to allow WFH than their Western counterparts. Other factors, such as data security and productivity, are also oft-highlighted obstacles to WFH.

Recently there were surveys conducted and opinions reported that WFH was slowly gaining traction and it could see a shift towards it. Tech firms such as Twitter had already declared their workforce to be able to WFH completely. Granted that not all jobs can be fully done on WFH only, but it could probably be the next new norm or paradigm shift that may affect the way we work, or work-style as I call it.


There is a general consensus that if WFH is getting prevalent, the concept of the office would gradually become moot and there is an increased utilization of home spaces doubling up for work purposes, like probably having a home office corner. In this case, the first concern in most investors’ minds is likely the slowly diminishing importance of office and commercial properties, resulting in their oversupply. 


The impact of WFH goes far beyond offices and shift of home property use; there will be changes to the entire ecosystem that supports the traditional work-style. Suddenly the notion of waking up early to prepare oneself for work would be of less relevance. The human traffic that makes up the familiar peak hour squeeze on public transportation and roads would be reduced tremendously. The peripheral services (depending on where they are located) that support the old work-style such as the go-to coffee shop for a quick cuppa during teatime and the friendly stationery shop owner that sells you the much needed blue-ink pens may be affected. Human resource attitudes and practices may also change, and this will bring us to a whole new dimension. I could go on and on, and the material thought of may qualify as a standalone book.


Just imagine a simple shift of norms will create a butterfly effect all around, highlighting the symbiotic and fragile relationships in the whole scheme of things.


However, norms and things do change all of the time, mostly gradual while others are almost overnight. Viewing from the COVID-19 perspective, it did hasten some styles (life and work) and technologies that would perhaps be thought of as not implementable in the near future. The rise of teleconferencing (or Zooming or Skyping, depending on what one uses), increased volume of e-commerce and the accompanying delivery services of goods and foods, and the popularity of using virtual or pseudo-virtual concepts that mimic or replace physical ones like using the Mural app for online group brainstorming, to name a few.


Some elements of society do want to go back to the good old days when the whole COVID-19 thing is over, which in my view is that probably they are not ready to adapt or think the whole new norm could be just a fad and may die down. Thing is, we may be already heading to the new norm, just that it will be creeping in subtlely and sub-consciously. Humans are a contradicting species; sometimes we may be resistant to change and sometimes we are open to it, whether known or unknown, overtly or covertly. Adaptability and improvisation are key at such times.


If you are an active investor, you will need to consider and think deep on the abovementioned points. They may provide some clues and indications to work out on your next “guesstimate” in determining where the next growth (capital and dividend wise) areas would be. Viewing things from different facets are required if you want a glimpse of the next big thing to invest in.


So how will the WFH (r)evolution pans out? 


We shall see.

Saturday, August 15, 2020

Kings Of The North And South

If you think this article is about a fantasy saga series that was popular in the past decade, no, it is not. Rather, the two kings in this article had lived harmoniously together for the past ten years and thank goodness no war had erupted between them (except probably the “war” in your mind on who to invest on).

The two mentioned “kings” are actually two REITs, namely Frasers Centrepoint Trust (FCT), the “north”, and Mapletree Commercial Trust (MCT), the “south”. Why they were given these monikers was because of the location of their respective properties (directly owned, indirectly owned and/or potential) in the geographical regions of Singapore. If you take out their annual reports and read up on their assets, the geographical concentration was obvious.


In this post, we shall take a brief look on these two REITs.


FCT: The Northern King


Seasoned REIT investors would have known about FCT; a retail REIT that included Northpoint, Causeway Point, Changi City Point etc. as part of its portfolio. On top of these, there are also indirect and minority stakes in other malls such as Waterway Point, Century Square, White Sands Mall, etc. Its only international holdings are a 31.15% stake in Malaysia-listed retail Hektar REIT.


From Figure 1 (below), FCT’s malls are like everywhere, but the key area is in the north, where it held a near-captive share on the category of heartland malls in the estates of Woodlands, Yishun and Sembawang. Causeway Point and Northpoint themselves in FY2019 had a combined footfall of 83.8 million1, a very high number indeed.


Fig.1 – Locations of FCT-related malls2.


Besides being dominant in the north, most of FCT’s malls are situated just next to MRT stations and this is a huge benefit (PS: for more information on the analysis of retail REITs based on location, you can read up my post here). These factors had contributed to the premium of FCT, which most of the time was trading above its NAV.


FCT’s sponsor, Frasers Property Limited (FPL), is no stranger to the real estate business; it has multiple properties that spans across sectors like hospitality, office, logistics, etc. and in several countries like Australia, China, Singapore, etc. Retail wise in Singapore, Centrepoint and Northpoint City’s South Wing are under FPL and there may be a possibility of them being brought into the FCT family.


MCT: The Southern King


All of MCT’s six properties are situated in the southern part of Singapore; Vivocity, Mapletree Business City (MBC) I, MBC II, PSA Building, Mapletree Anson and Bank of America Merrill Lynch Harbourfront (MLHF) (see Figure 2 below). Unlike FCT which is mainly retail, MCT has a sizable office and business park component.


Fig.2 – MCT properties3.


The crown jewel of MCT is its retail asset Vivocity and it contributed to about 42% of the REIT’s net property income ($158.7m/$377.9m)in FY 19/20. MCT’s office and business park properties deserved a mention as well. Their top tenant, Google Asia Pacific Pte Ltd, is situated at MBC and contributes 10.1% of the gross rental income for MCT.


MCT’s sponsor, Mapletree, is a leading real estate development and management company, and they have a slew of properties that could be injected into MCT5.  The said properties include Harbourfront Centre, the neighbouring Harbourfront Towers One and Two, St James Power Station, etc., and they are literally next to the Vivocity and MLHF. Hence, if they are brought into MCT, their kingship for the south is undisputable, even more so with the development of the Greater Southern Waterfront to come.


The COVID-19 Impact


When mandatory measures to curb the spread of COVID-19 was declared in early April 2020, retail properties took a big hit with the suspension of non-essential businesses, effectively reducing the footfall to malls. Though after Phase 2, shopping centres are starting to see crowds coming back, but it may not reach its previous peaks since crowd controls are in place. Judging from my view of our local culture, malls (especially heartland ones) are still very much part of our lives and in my opinion, they are here to stay. 


Office properties may be affected, too, in the future, as their relevance is being questioned with the increasing trend of telecommuting, or better known now as “work from home” (WFH). No doubt some businesses and sectors still require offices, but there may be a shift to a new norm with regards to work styles and locations. Only time can tell on how this aspect will develop.


Addressing The Elephant In The Room


Very much was written on these two REITs, but if you are observant enough, I may be missing the proverbial “elephant in the room”, and now I am going to address it.


Yes, that elephant would be the merger of CapitaLand Mall Trust and CapitaLand Commercial Trust. By their properties combined, they could be classified as the third king with the title “king of everywhere else in Singapore”. They also have malls right next to MRT stations and office spaces in the heart of the Central Business District. The upcoming combined CapitaLand REIT is also a good consideration, but maybe we will leave it for another post.



The Bedokian is vested in FCT.


1 – Frasers Centrepoint Trust. Fact Sheet. 19 Nov 2019. (accessed 14 Aug 2020)                


2 – Frasers Centrepoint Trust. Financial Results Presentation for the Second Quarter ended 31 March 2020. 23 Apr 2020. (accessed 14 Aug 2020) 


3, 4 – MCT Annual Report 2019/2020.{6DA58A79-7E05-4128-A7B0-9CCAEF92B959} (accessed 14 Aug 2020)        


5 – Mapletree Commercial Trust Investor Presentation. 22 Jun 2020.{24EE051C-C206-4DFC-9153-A1BF12CD0E1C} (accessed 14 Aug 2020)           


Thursday, July 30, 2020

We Shall Go Fo(u)rth, Regardless

Today marks the fourth anniversary of the Bedokian Portfolio blog.


Dark clouds of (technical) recession are already upon us, and the effects of it are already being felt, with businesses closing and retrenchments beginning. All these can be attributed to the prevalent economy-slowing COVID-19 pandemic, which at this point is still showing no signs of abatement. Second or third waves were already reported in places where it was brought under control previously, prompting the reinstatement of containment measures such as lockdowns and limited gatherings. Though the rush for the vaccine was on, there is none yet approved for use by the mass population. Governments around the world have or have had rolled out stimulus packages to get the economy going and temporary reliefs to tide things over, such as the lowering of interest rates and asset purchases in the United States, and locally the introduction of the four budgets (Unity, Resilience, Solidarity and Fortitude).


Despite the doom and gloom of these times, there are still some silver linings amongst the dark clouds. Several sectors and industries are experiencing a boom, noticeably those which present alternatives or substitutes to the normal (or pre-COVID-19) way of things. A good example is video conferencing tool Zoom, one of the get-arounds of physical meetings; its stock returns year-to-date (YTD) was about 270%. Another was e-commerce giant Amazon, seen as a proxy to physical shopping, had a YTD returns of 64%. 


Adding on, sectors and industries that support the ones mentioned in the previous paragraph are also showing resilience, like for instance representing data centres is Keppel DC REIT, which gave a YTD performance of almost 45%, even though its price nosedived during the first half of March. Mobile payment ETF IPAY stood firm at 6% YTD, after experiencing the same nosedive as Keppel DC REIT back in March, too.


Unlike the Global Financial Crisis back in 2008/2009, this current situation is not a liquidity crisis, where there is not enough liquidity or cash and credit flowing around the economy. Rather, it is a fall of demand and supply of goods and services resulting from the countermeasures, regulated or not, towards COVID-19. This could explain why there was a sudden rush for goods and services at some countries the moment the stringent measures were lifted or eased (e.g. our transition to Phase 2); the so-called “pent-up demand”.


However, as per my economic machine analogy herethe longer the economic slow-down, other segments of the economy will slow or worse, grind to a halt. This causes a lagging downstream effect that we are feeling now. A good associative example: viral outbreak > reduction of travelling > tourism reduced > air travel reduced > airline profits down > aviation sector hit. This was why some countries would want the economic machine to keep going, albeit with safe practices such as safe distancing, work-from-home and donning masks. Short of a vaccine, which may probably take at least half-year more for mass usage, this would be the best way going forward to get things back to normal (old or new).


No matter what life throws at us, we shall go forth, regardless.