Sunday, December 29, 2019

2019 Review, 2020 Preview And Bob

2019 is coming to a close, and we are soon entering the third decade of the twenty-first century. It has been an eventful year, and the best is always yet to come.

2019 Review

After suffering a scare during the Christmas period of 2018, the markets had recovered when 2019 began. For the U.S. markets, using the S&P 500 as a gauge, its year-to-date (YTD) performance up till 26 Dec 2019 stood at about +29.08%1, despite the trade war roller coaster ride that prevailed throughout the year. The STI’s YTD was about +6.17%1, which was not that bad despite the lower than expected local GDP figures for 2019.

I had used 3 ETFs that represented my long-term trend views for cybersecurity (HACK), payment solutions (IPAY) and alternative energy (ICLN). Let us see how these three perform YTD for 2019 (as at 27 Dec 2019):

HACK: +23.64%2
IPAY: +42.58%3
ICLN: +44.57%4

2020 Preview

The known fact is that we cannot really predict the future, but based on factors and indicators, and sans black swan events like the Hong Kong protests, we may be able to derive some “educated guesses” to guide us in our decision. Let me share with you some of my “guesstimate” opinions.

I would see some volatility in the U.S. markets given that it is an election year. Although a new challenger has yet to be nominated to challenge the incumbent, the candidates’ various stands on policies and opinion polls may swing several sectors or the markets as a whole. If you are an active investor, stay close to the news and use the ups and downs to your advantage on your buy or sell decisions.

In the local scene, the S-REITs run-up that was experienced during the whole of 2019 had showed signs of tapering, but with interest rates likely remaining low and there might be a chance of the gearing limit increasing from 45%5, we may see a boost in this asset class again in 2020 if both of these fall into place.

On the technology front, though there will always be new stuff and concepts invented and created respectively, the mainstream ones that were seen as disruptive a few years ago (such as e-payments, ride sharing, etc.) are, using the technology adoption cycle, at the border of early adopters/early majority, based on my personal observations in the developed world. This is good news for growth investors as there is still room to go, but not so much for value and dividend investors as most of these companies are still burning cash to sustain the growth. Hence, in my opinion it is better to use ETFs for exposure to the emerging technology sectors, and/or identify matured sectors/companies that provide upstream or downstream support to the former.

I would like to reiterate (again) that it is prudent to stay diversified (e.g. The Bedokian Portfolio’s asset class allocations) in order to optimize your gains and ride out the losses while maximizing capital protection and minimize risks.


As at 27 Dec 2019, Bob’s Bedokian Portfolio had grown to slightly above SGD 59,000 (excluding the cash component which is not shown) and gained a dividend amount of SGD 1,955.89. All asset classes (except cash) had shown healthy growth for 2019. Bob will rebalance on 2 Jan 2020 with another SGD 5,000 injection, so stay tuned to his portfolio.

Happy 2020!


The Bedokian is vested in ICLN.

1 – Yahoo Finance. 2 Jan 2019 – 26 Dec 2019 (accessed 29 Dec 2019)

2 – ETFMG Prime Cyber Security ETF. (accessed 29 Dec 2019)

3 – ETFMG Prime Mobile Payments ETF. (accessed 29 Dec 2019)

4 – iShares Global Clean Energy ETF. (accessed 29 Dec 2019)

5 – Meixian, Lee. MAS seeks views on raising 45% leverage limits for S-Reits. Business Times. 3 Jul 2019. (accessed 29 Dec 2019)

Sunday, December 8, 2019

The Fraser REITs Merger

By now there were a few blog posts written about this merger, so I will give my perspective as a Frasers Commercial Trust unitholder.


On 2 Dec 2019, Frasers Logistics & Industrial Trust (FLIT) had announced that it would merge with Frasers Commercial Trust (FCOT), with the new REIT to be subsumed under the FLIT banner. In this merger deal, FCOT holders will get 1.233 FLIT units plus SGD 0.151 in cash for each FCOT unit, which meant that for every 1,000 FCOT units, one would expect to have 1,233 FLIT units and SGD 151.00 in cash. The pricing was based on FLIT’s price of SGD 1.24 per unit and FCOT’s price of SGD 1.68 per unit, which were at or around the prices prior to their trading halt.

In addition, FLIT would be acquiring a 50% stake of Farnborough Business Park in the United Kingdom from its sponsor, Frasers Property Limited. The remaining 50% belonged to FCOT, so the whole property would eventually become 100% owned by FLIT.

The Bedokian’s Take

In a way, this merger had somewhat blurred the lines of REIT sectoral divisions. With this “enlarged REIT” (the actual term used in the announcements), we will have office, retail, business parks, logistics and industrial, a very diverse mix. In fact, some of the reasons provided for the merger included: to enhance diversification and resilience of the property portfolio, and to have a broadened investment mandate to invest in a wider spectrum of REITs sectors.

But first, let us look at the numbers.

Post-merger and proposed asset acquisition, the net asset value (NAV) of FLIT will be SGD 1.04 on a pro forma basis, gearing of 37% and a distribution-per-unit (DPU) accretive of +4.2% on a pro forma basis (from FCOT unitholder’s point of view). This meant that FCOT unitholders would get FLIT at a price-to-book (P/B) ratio of 1.19 (1.24/1.04), with a higher gearing (enlarged REIT of 37% > FCOT’s 28.6%) and almost the same dividend yield between 5.6% and 5.8% (assuming the pro forma figures stand and the prices remain as at the offer).

In return, FCOT unitholders will have additional logistics and industrial properties in Australia, plus exposure to Germany and Netherlands (from FCOT’s 6 to the enlarged REIT’s total of 98). Also, the weighted average lease expiry and occupancy will increase to 5.8 years (from 4.9 years) and 99.5% (from 95%) respectively.

So now begs the question: is it a good deal for FCOT unitholders, like me?

The answer is: it depends on how you view it.

In my opinion, this is a good starting or refresh point for FCOT unitholders to have a different perspective of their holdings. With the size of the enlarged REIT and given the number of properties the sponsor has around the world that could possibly be injected, the potential for growth and diversification (sectoral and geographical) is there. This I felt could be a justifying factor for getting FLIT at a higher P/B. 

The big gripe that I have is the eventuality of getting odd lots (number of units/shares not rounded up to 100), though this is more of an administrative issue. With a ratio of 1:1.233, the minimum number of FCOT units to have in order to get the nearest 100 FLIT units would be 100,000 (100,000 x 1.233 = 123,300). Fortunately, you can transact units (or shares) of less than the lot size of 100, but it is advisable to contact your brokerage(s) about unit share or odd-lot market.

The merger is still subject to the approval of the unitholders of both FCOT and FLIT, which is expected to be in February or March 2020, so there is still time to ponder over it.


Bought FCOT at:

Bedokian’s Portfolio:
SGD 0.165, Aug 2009 (before 5 to 1 consolidation)
SGD 0.165, Sep 2009 (before 5 to 1 consolidation)
SGD 1.51, Apr 2015
SGD 1.255, May 2016
SGD 1.24, June 2016
SGD 1.26, Mar 2017
SGD 1.47, Mar 2019

Bedokian’s CPF Portfolio:
SGD 1.39, Feb 2018 (sold SGD 1.72, Dec 2019)
SGD 1.37, Jun 2018 (sold SGD 1.72, Dec 2019)


Frasers Logistics and Industrial Trust. Proposed Merger with Frasers Commercial Trust and Proposed Acquisition of the Remaining 50% Interest in Farnborough Business Park. 2 Dec 2019. (accessed 6 Dec 2019)

Frasers Commercial Trust. Proposed Merger with Frasers Logistics & Industrial Trust. 2 Dec 2019. (accessed 6 Dec 2019)