Sunday, March 27, 2022

Going Back To The Good (New) Old Days

Over the course of next week, we are going to see the beginning of the return of pre-COVID-19 normalcy, to a certain extent. To name a few, up to 75% of employees who previously work from home (WFH) could return to their workplaces, mask-wearing is not required at certain places, accommodation of up to 10 pax at eateries, and fully vaccinated incoming visitors would only require a pre-departure COVID-19 test within two days before departure for Singapore1. Not forgetting, of course, land travel between Malaysia and Singapore is finally allowed for fully vaccinated persons without the need for quarantine and tests2.

And the market reaction is instant. When the announcement of the relaxed measures came out after 11:00 am on 24 March 2022, prices of several retail, commercial and hospitality real estate investment trusts (REITs) received a boost. A few examples: Frasers Centrepoint Trust went up from SGD 2.36 to a high of SGD 2.45 before settling to SGD 2.41 at the close of the week3. Suntec REIT moved up from SGD 1.72 to SGD 1.753, and Frasers Hospitality Trust climbed 5.3% from SGD 0.47 to SGD 0.4953.


With COVID-19 slowly taking a backseat in our lives, are we really going back to the good old days?


Same Same, But Different…


For almost two years, COVID-19 had caused disruptions in many people’s lives all around the world, but the period also introduced a new paradigm on how we work, which is WFH. Though nothing new, the concept of WFH took the pedestal during the period where people were told to stay at home for their health’s sake, yet maintain a semblance of economic activity. According to a survey by Randstad, 41% of respondents would prefer remote working to having bigger bonuses4. Putting this in context, a substantial minority of workers would prefer to WFH, if the job allows. Employers, whether they like it or not, would now need to factor this to attract better talent for their organisations.


Coming on an investment front, this may bring up some concerns on the viability of office and commercial REITs going forward. On the other hand, however, some analysts are seeing an improvement in office rentals this year due to an opening economy and tight supply of office spaces5. Whether good or bad for such REITs, in my opinion it is too early to have a conclusion.


…But Still The Same


Oftentimes, a lot of analysts and investors heralded e-commerce as one of the harbingers of the “retail apocalypse”, where physical brick-and-mortar shops and malls were closed down due to consumers’ preference of buying things online. COVID-19 had brought about a further boom of e-commerce, due to more people mostly staying and/or working from home, and coupled with a long-standing consumer habit known as “showrooming”.


This naturally led to the deemed negative prospects of retail REITs, and no investor would like to see malls with sparse or no crowds. Still, we need to contextualise the whole thing. At least in Singapore, malls, especially those situated in the heartlands, still has a place in our culture and society. With the reopening of borders, visitors would start to visit malls in the tourist belts (and it is improbable for a visitor to do e-commerce fully from a hotel room while in a foreign country). My take would be retail malls are here to stay, for at least a decade.


Stay safe, stay vested.




The Bedokian is vested in Frasers Centrepoint Trust and Suntec REIT.




1 – Sue-Ann, Tan. Singapore eases Covid-19 rules: What you need to know – from mask wearing to gathering rules. The Straits Times. 24 Mar 2022. (accessed 26 Mar 2022)


2 – Prime Minister’s Office Singapore. Joint Press Statement by PM Lee Hsien Loong and Pm Dato’ Sri Ismail Sabri Yaakob on the Reopening of the Land Border. 24 Mar 2022. (accessed 26 Mar 2022)


3 – Yahoo Finance as at 26 Mar 2022.


4 – Cheah, Megan. 4 in 10 Singapore employees would choose remote working over bigger bonus: Randstad. The Business Times. 15 Mar 2022. (accessed 26 Mar 2022)


5 – Ramchandani, Nisha. Singapore office rents poised to improve in 2022. The Business Times. 28 Jan 2022. (accessed 26 Mar 2022)

Sunday, March 20, 2022

Passive Income With Options?

I had encountered the idea of using options for passive income from online discussions and acquaintances. Being a passive income advocate, I would naturally be interested in this, and decided to find out more. 

What Are Options?


Options are a type of derivative financial instrument, which derives its value from an underlying security. An option is a contract which gives the holder the right, but not the obligation, to exercise a transaction, with the other party.


There are two types of options: call and put options. A call option is a contract which gives the holder the right, but not the obligation, to buy a set number of shares at a set price (or strike price) within a given period. A put option is the opposite, i.e., a contract which gives the holder the right, but not the obligation, to sell a set number of shares at a strike price within a given period.


Since options are contracts, there are generally two parties involved: the buyer of the call (or put) option and the seller of the said option. Buying the option involves a premium to be paid upfront to the seller, who sells or writes the option.


There are three main variables in an option: the premium, the strike price and the expiration date. The premium would be the price to pay for the options contract, but this amount could go up or down depending on the market. The strike price is the agreed-upon price to purchase the underlying security, while the expiration date is the end-date of the option, after which the contract would either be exercised or become a worthless piece of paper.


Do note that there is no options trading on local counters, only overseas securities (especially in the United States). 


Call Option Example


Let us take two parties, B (buyer) and S (seller), and share counter X, with a current share price of $100. B bought a call options contract from S that enables him/her to buy 100 shares of X at $120 in a month’s time from S, at a premium of $5 per share (for a total of $500). Assuming B held the options till the expiration date, we shall see the following three scenarios then:


Scenario #1: Share price of X hits $110 – Since the current share price is less than what B can buy for, he/she decided to let the options lapse (and S gets to keep his/her 100 X shares and the paid premium of $500).


Scenario #2: Share price of X hits $140 – Since the current share price is more than what B can buy for, B decided to exercise his/her option and S is obliged to sell B 100 shares of X at $120 each. B saved [($140 - $120) x 100] - $500 = $1500. For S, his/her gains are the $500 premium and the difference between $120 and his/her initial purchase of X, if any.


Scenario #3: Share price of X hits $120 – Although the current share price and the strike price is the same, B is very likely not to exercise the option as the total cost per share is $125 instead, with the $5 being the premium paid for each share.


Put Option Example


Using the same settings as the previous section, with share X currently at $100, B bought a put option from S at a premium of $5 per share (for a total of $500) to sell his/her 100 shares of X at $80 to S at the expiration date. Assume B held the options till then, and visiting the three scenarios:


Scenario #1: Share price of X hits $90 – Since the current share price is more than what B can sell for, he/she decided to lapse the option (and S gets to keep the $500 premium and need not buy the X shares from B).


Scenario #2: Share price of X hits $60 – Since the current share price is lower than what B could sell for, B decided to exercise the option and S is obliged to buy the 100 shares of X from B at $80 each instead. B saved [($80-$60) x 100] - $500 = $1500. For S, his/her potential loss would be [($80-$60) x 100] - $500 = $1500, since he/she could get a better price in purchasing shares of X from the open market. 


Scenario #3: Share price of X hits $80 – Although the current share price and the strike price is the same, B is very likely not to exercise the option as the total selling price per share is $75 instead, with the $5 being the premium incurred for each share.


American-Style And European-Style Options


To make things more complicated in the world of options, there are two different option styles out there, namely American and European. American style options could be exercised any time before the expiration date, while European style ones can only be exercised on the expiration date itself. The naming of the styles does not mean that they are carried out at those locations, rather it is a form of describing them. Thus, not all American securities practice American style.


So Where Does The Passive Income Part Comes In?


Typically, the basic source of passive income comes from the premiums of selling the options, which is done by S in the above scenarios. Provided the options were not exercised, we could just sell options non-stop and get the premiums. However, things are not so simple as the other side (i.e., B) may exercise the options depending on the current price of the underlying security, and the previous premiums earned may go up in smoke. 


As we all know, the markets (and price) are unpredictable in nature. While some options traders rely on technical analysis to forecast price movements, others would employ some strategies in preventing losses from options being exercised by the holders, and this involves selling and buying options at the same time. There are many strategies around, and they have interesting names (“iron condor”, “iron butterfly”, “long strangle”, etc.).


The Bedokian’s Take


To a beginner, all these may look intimidating. An acquaintance of mine who dabbled in options mentioned that it’s just like learning a new skill: learn, get one’s feet wet, and soon one will get the hang of it. In my opinion, it depends on the comfort level of the investor himself/herself, and whether he/she is open to options trading to augment additional income. Options trading do require some time taken to monitor the markets and prices, sometimes on a regular basis, akin to active management.


If you are interested, and if you already have an investment portfolio, treat options trading separately in a trading portfolio (as I had stated here). Any gains from it could be funneled back to your investment portfolio’s cash component as a war chest or be used to fund your day-to-day expenses if required.


For passive investors, options trading could be tricky, but there’s a way to go about it, which I would share in the next post (or maybe the next, next post, see how it goes).


Ultimately, and following my standard advice, it is a “know what you are doing” thing for options. You have the right, but not the obligation, to follow my take.



Wednesday, March 9, 2022

Commodities Price Shock

The Russian-Ukrainian conflict had somewhat brought about further turmoil for the markets, on top of global supply chain issues, accelerated inflation and the imposition of higher interest rates. Exacerbating the above conditions is the commodities price shock that is already happening and/or may happen in the future assuming the events are going along the trajectory of the current situation.

Commodities price shock happens when there is a quick rise or fall in commodities prices over a short period of time due to the dynamics of the simple economic demand-supply model. If there is a sudden huge rise in demand of a commodity with a given supply, a sudden fall of supply with a given demand, or a sudden rise/fall of demand coupled with a sudden fall/rise in supply, we will have this shock.


The effects of such shocks are huge across markets and the economy as commodities are seen as the “basic ingredients” of industry and society. A lot of sectors and industries, which means numerous companies and workers, are involved in the conversion of commodities from basic items to finished products. Commodity price shocks would send costs increasing and/or profits decreasing, and eventually inflation will rise further (and interest rates would go up to counter this, and so on).


Let us look in detail on the various commodities price shocks happening now:


Crude Oil


The biggest observable shock would be crude oil. Though the price is on an uptrend for the past few months due to the faster than anticipated post-Covid recovery (and the threat of hostilities between Russia and Ukraine), it jumped at least 28% between 24 Feb 2022 (the beginning of hostilities) and now (for Brent and West Texas Intermediate, both widely used benchmarks of crude oil prices). Russia is currently one of the world’s top three oil producers, and the conflict threatened an embargo on its oil, thus the spike.


The impact of the increase was obvious, with the most immediate being the pump prices of petrol and diesel increasing frequently. Further downstream consequences may result in the worsening of global inflation, since oil is used heavily in the transport of goods (cargo aircraft, ships and vehicles) and will directly and indirectly raise the costs of goods and products.


Wheat And Corn


The increase of wheat prices is inevitable since both Russia and Ukraine are among the top ten wheat producers in the world. Soaring 65% year-to-date (YTD), this came due to the potential harvest disruption in the two countries. Furthermore, the price of corn had also gone up slightly above 27% YTD, as Ukraine is also one of the top five producers.


Wheat and corn are staples in many diets, and they are also used for livestock feeds. The surge in prices will result in rise of food costs and, like oil, amplify the global inflation situation.


Platinum And Palladium


By general definition, platinum and palladium are classified as precious metals, along with gold and silver. Both metals are mainly used in catalytic converters, which are devices used in motor vehicles to convert toxic gases in exhaust gas to less-harmful pollutants. In addition, both are used for jewellery and as investment in the form of bullion (bars and coins).


Russia is ranked within the top two world producers of platinum and palladium. Both YTD prices of platinum and palladium had skyrocketed about 18% and 64% respectively. This could put a dent in the prices of cars running with internal combustion engines.


Gold And Silver


An honourable mention, gold and silver, though their prices are not really considered a shock (increase of around 5% for gold and 6% for silver since 24 Feb 2022), they have been traditional “go-tos” in times of market and economic crisis due to their status as safe havens. The inflationary environment also favours these two since they are usually viewed as hedges in such times.


Takeaway Points


As I had mentioned earlier, such price shocks would worsen the global inflationary situation, and the follow-up interest rate hikes, which may in turn affect the financial markets further. Socio-economical and geo-political events are beyond (almost) anyone’s control, but it must be factored in when one is doing fundamental analysis of a company, sector/industry and country/region.


The conflict may signal the beginning of an economic and market dichotomy, which we could see economic blocs forming, partially due to the embargo and sanctions in place, and western companies (and their products and services) pulling out. Whether the pre-conflict economic status quo of Russia be restored is anyone’s guess, though my take would be likely yes, with some minor sanctions in place.


In lieu of the above points, it is important to keep one’s investment portfolio diversified. This also meant the inclusion of commodities asset class, as shown in the preceding sections, in the portfolio, while not meant for earning a quick profit, could provide a dampener effect to reduce volatility.

The percentage increases stated here are as of 7 Mar 2022. Price references are obtained from 

Tuesday, March 1, 2022

Lendlease REIT’s Jem Acquisition

Lendlease Global Commercial REIT (Lendlease REIT) had announced to its unitholders of their intention to acquire the remaining 68.2% interest in Jem, a large sub-urban mall cum office complex located in Jurong East. An extra-ordinary general meeting would be held on 7 Mar 2022 with regards to this acquisition.


Post-acquisition wise there will be dramatic shifts in the entire Lendlease REIT’s portfolio. Here are some selected highlights:


  • The acquisition would increase Lendlease REIT itself by 157% by valuation (from SGD 1.4bn to SGD 3.6bn).
  • The Jem property (both retail and office) would form a substantial part of the portfolio by valuation (59.7%).
  • Local exposure would be increased from 76.5% to 88% by valuation.
  • Top ten tenants’ contribution by gross rental income (GRI) would be reduced from 57% to 41%.


The advantages of the acquisition include:


  • A potential distribution-per-unit accretion of up to 10.5% (for 1H FY2022 pro forma effects).

  • A 0.5-year increase of weighted average lease expiry (from 8.4 to 8.9, based on net lettable area as at 31 Dec 2021).

  • Improved diversification of trade sector mix by GRI.


The Bedokian’s Take #1: Jem


Jem is located next to Jurong East MRT station, deemed as one of the busiest MRT stations in Singapore. Its competing malls nearby are Westgate, JCube and IMM, which all are, ironically, owned by CapitaLand Integrated Commercial Trust. As such, having good quality tenants and tenant mix is important to maintain the mall’s competitive advantage. In this aspect, Jem has some unique brand names not in the other three malls like Ikea, Books Kinokuniya, Courts and Din Tai Fung.


Jem’s office space is fully leased to the Ministry of National Development under a 30-year master lease, with a rent review of every five years. This will bring a stable rental cashflow as the ministry is one of the top ten contributing tenants by GRI.


The Bedokian’s Take #2: The Jurong Area


Usually seen as “just a huge industrial estate”, the Jurong area has transformed/is transforming into a huge residential (Jurong East, Jurong West and the upcoming Tengah), commercial (Jurong Gateway, Jurong Lake District) and industrial (Jurong Innovation District and Tuas extension) locations. These developments give Jem (and the other malls around Jurong in general) a slight advantage over other suburban malls in terms of potential footfall. In summary, the malls in Jurong are having pluses of suburban and prime retail ones.


The Bedokian’s Take #3: Lendlease REIT’s Potential Growth


While the taking over of Jem will pose a huge change in Lendlease REIT’s make-up in terms of geographical and the retail/office proportion, it is still a “young” REIT with room to grow, with potential new properties being added in the future. The sponsor, Lendlease Corporation Limited, is a part of Lendlease Group, which is a global property developer and manager, and this ensures a stable pipeline.


Though there are other known Lendlease properties here in Singapore, the REIT’s principal investment strategy is global in nature, hence we may see the REIT’s geographical and retail/office make-up change again with a new acquisition.


As our Bedokian Portfolio contains Lendlease REIT, and given the above three “takes”, we would be inclined in adding our positions, should the preferential offer/rights option be given.




Bought Lendlease REIT at:


SGD 0.88, Sep 2019 (IPO)

SGD 0.91, Jan 2020

SGD 0.55, Mar 2020





Circular to Unitholders in relation to the Proposed Acquisition of the remaining interests in Jem. 14 Feb 2022.