Wednesday, March 15, 2017

Summary Of Changes Relating To Residential Property

The Ministry of finance made an announcement last week on the changes relating to residential property. Most people who own private properties would be happy to hear about this news as some measures have been relaxed.

Summary of changes:

1. Additional Buyer’s Stamp Duties (ABSD) and Loan to Value (LTV) Limits

While many people hope for the ABSD and LTV limits to be relaxed, the government is not doing so yet. This ABSD and LTV limits has been a pain point for people who want to purchase a second residential property. Sometimes the additional stamp duties and cash down payment required just makes it senseless to purchase another property. Interest rates are still low now so they will certainly not relaxed these measures. I would think when interest rates goes up further, then these measures will be relaxed.

2. Seller’s Stamp Duties (SSD) 

The SSD will be relaxed in this round of announcement. This SSD was introduced to prevent people from flipping properties (ie buying and selling within 4 years to make money). HDB has a minimum occupational period (MOP) of 5 years while private properties do not have thus the SSD was in place to prevent speculations.

For the changes, the SSD will only be imposed on properties which are sold less than 3 years, down from the current 4 years. The % will also be reduced by 4% for each tier. Do refer to the below image for the breakdown of the %.

Click to enlarge

3. Total Debt Servicing Ratio (TDSR) 

The TDSR will be tweaked too. The current TDSR is 60% where all the monthly loan instalments we pay should not exceed 60% of our monthly gross income. This 60% will remain the same for most of the loans except for mortgage term/equity withdrawal loans for cashing out of private properties. 

The TDSR will no longer apply for mortgage equity withdrawal loans with LTV ratios of 50% and below. This means if your net property value is 1 Million and you get a $500,000 or less cash out from your property, you'll not be subjected to the TDSR anymore. Simply said, it is easier to cash out of your private properties now. 

If you're interested to cash out of your private property, you can contact me through this form and I'll assess your situation and advise you accordingly on the best way to do it. 

4. New stamp duty on the purchase and sale of equity interest in property holding entities (PHE) with effect from March 11 2017

An Additional Conveyance Duty (ACD) will be introduced. This is aimed at significant owners of equities interest in PHEs that can include partnerships, trusts and companies. This means that those entities whose residential properties in Singapore form at least 50 per cent of its total tangible assets will be captured in this new requirement.

This ACD is quite confusing but doesn't affect most of us anyway unless we have equity interest in PHEs. You can read more about this here

Moving Forward

Many property developer stocks moved up last week in response to some of the measures being relaxed. In my opinion, I don't really see much impact unless the ABSD and LTV limits are relaxed as well. This is just a minor change to the residential property market. However, with the relaxation of the mortgage equity withdrawal loans, I think there will be more cash flooding our economy soon. 

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Saturday, March 11, 2017

Unlimited 1.5% Cashback With This New Credit Card

I love good deals so when I heard of this new credit card by Standard chartered, it seems too good to be true. Standard chartered bank always try to come up with good deals to attract consumers. From a consumer point of view, this is definitely good news. For example, many years back they had this savings account which gives 2% cashback on any spending if we use the debit card. I used it to pay for my university course fees and got quite a lot of cashback in return.

The time round, they have just launched a similar card with unlimited 1.5% cashback on all spending. There is no cap and no minimum spend required. This is very different from the other credit cards in the market which only gives you points or cashback for certain types of spending. There is often a minimum spend too to be eligible for the cashback. This is not the case for this new unlimited cashback card. This card can also be used for public transport with automatic EZ-reload top up function.

For the month of March, they are running a promotion to give new applicants the following choice of gifts:
  1. Up to $138 cashback; or
  2. $150 Caltex StarCash card; or
  3. $150 Uber Credits
I have found another additional promotion where you can get $100 Takashimaya Voucher on top of the gifts SCB is giving. 

The $100 voucher will only be given if you apply by clicking on the above image. Be sure to follow the instructions on the page to claim your free voucher. One more thing, the card has 2 years annual fee waiver so we don't have to worry about paying for the fees upfront.

If the SCB unlimited card does not suit your needs, there are other cards having promotion as well.

If you want to get more cashback, consider the Citi SMRT card. This card has the following benefits:

  • 5% savings on groceries (7.3% for FairPrice Xtra Kallang Wave)
  • 5% savings on fast food, movies and coffee
  • 3% savings on online shopping

This card has a sign up promotion of up to $120 cashback plus $100 NTUC voucher if you apply through the below link (Applicable for New Citi Customers only):

If you're a frequent traveler, the Citi Premier Miles card is a must have. You can collect "miles" and exchange it for a free air tickets later. I checked Citibank's website and it seems like they are giving out $120 cashback for new card members. On top of that, if you apply through this link, you'll also get additional $100 NTUC vouchers (Applicable for New Citi Customers only).

There are many other cards on promotion too. Check out this link for more details. Remember, you'll not get the vouchers if you apply through the bank directly. The promotion is only valid till 31st March 2017. 

Credit cards are useful but never spend more than what you can afford. Spend smartly and wisely. 

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Wednesday, March 8, 2017

Multiple Streams Of Income - Can It Be Done?

The fear of having not enough money or losing our job makes one think about how to create multiple streams of income. It has been a popular topic since many years ago in this uncertain world we live in. Just these few months, I've heard a few people got retrenched. This makes me wonder when will I be next?

However, when we are already so busy with our work, how do we even have more time to create more streams of income? Its quite impossible to take up another part time job or even do freelancing when time is so tight for everyone. So, how can we create more streams of income using the least amount of time and is this realistic? Let's take a look at how it can be done.

Dividends from Stocks as an Income Source

If you're thinking of whether dividends from stocks can possibly be a source of income, the answer is yes. There are real life examples of people who manage to create $10k or even $100k of dividends through stocks. A few of my financial blogger friends have already achieved that.

However, nothing comes easy. Through my conversations with some of these friends who have already done that, let me share what did I find out.

1) Save Save Save

The first step to creating dividends from stocks is to save up. Without any investment capital, there is no way we can get dividends. Maybe you think you can invest $1000 and get $10,000 easily. The reality is not the case.

2) Look out for opportunities when its gloomy

Many people make their first pot of gold when a crash happens. This greatly increases our investment capital which will be useful for dividend investing.

Many multi baggers are made during a market crash. This means we could make more than 100% return on our investment on a single stock. This kind of opportunity doesn't come all the time so take advantage of it when you see it. How to know which stock to buy? This brings me to the next point.

3) Learn how to value companies

Buying stocks at the right price is all about knowing how to value a company. How much is the company really worth?

There are many variations on how valuation can be done If you read it up on your own, most probably most beginners will get confused. The most basic form of valuation is the PE ratio. There is no one fixed number we should look at. A PE of 20 for one company compared to another company with PE of 10 doesn't mean much if we do not understand what is it about. The PE ratio is calculated by taking the Price (Stock Price) divided by the Earnings (Earnings per share) of the company. If the Earnings of the company drop sharply and price remains the same, PE ratio will be a very high number. Similarly, if stock price goes up a lot while earnings remain the same, the PE will be very high. As such, a low PE is generally better than a high PE.

One way to look at PE is to compare the PE of companies in the same industry. The company with lower PE is more attractively priced than another company with higher PE. Let's take for example 3 companies in the Telecommunication industry namely Singtel, M1 and Starhub. Here's their PE:

Singtel PE: 16.46
Starhub PE: 14.39
M1 PE: 13.12

If we just base on PE from the above, M1 seems to be most attractively priced. Does it mean we buy M1 straight away? The answer is no. Previously I wrote an article about how Starhub went wrong as an investment. It is a lesson that if we buy at the wrong price, the whole investment can suffer.

Valuation has a second part where we try to project the future PE. We have to ask ourselves if we buy M1 at current PE ratio, is it really attractive? The PE ratio is low now base on current price and earnings. If earnings of M1 drop further, the PE will shoot up again. Most of the time, the stock price will also drop to reflect a fairer PE ratio. Earning drop and price drop will re-balance back the PE.

Another scenario is where the PE is not that low now but we predict that earnings will go up. If earnings really go up, the PE will be lower thus making it more attractive. The most ideal scenario is where the PE is low now and we also predict that earnings will go up. Most of the time, the stock price will go up thereafter to reflect the valuation.

In summary, PE ratio is useful for valuing a company base on its price and earnings. A PE of 1 means the company is making a profit that is equal to its price. Let's say a company has $100,000 worth of stocks (investors money) and it made earnings of $100,000 that same year, its PE ratio is therefore 1. PE ratio can also be described as the number of years it takes for investors to get back their money.

There are many other valuation methods such as using the price to book ratio which is a valuation of a company's assets. Some investors use other models such as calculating the intrinsic value or looking at the cash or free cash flow. It will be confusing if we're not finance or accounting trained but all these can be learnt if we are really determined to do so.

4) Don't be fooled by high dividends

Getting dividends from stocks doesn't mean we just go for the stock which has the highest dividend yield. Since we are investing into these stocks to get a second source of income, we want the income to be stable as well.

When companies pay out dividends, they have to get the money from somewhere. If a company has a payout ratio of 100%, this is unsustainable in the long run. It is likely the company will reduce its dividends later on. A company who pays out 100% of its profits in dividends do not have money to continue growing and expanding.

Another thing to look at is whether the companies' profit will be stable? If profits are not stable, it is likely the dividends will be affected later too when earnings drop.

Other multiple streams of income

With limited time, it is honestly quite hard to create more sources of income. We can build websites, publish books, sell items, do freelance etc. But, all these take time and effort.

To me, I would think dividends from stocks is an achievable stream of income. The hard work is certainly needed at the start but as time goes by, we will get more and more familiar. We can buy a company and hold it for the long term while monitoring its financial results only once every quarter. If you realise, there are some very stable stocks which gives good dividends in Singapore. In that case, we don't even have to monitor much.

Take the first step to invest and create a second stream of income!

New to Dividend investing? These articles will get you started:

The Power Of Dividend Investing [Part 1]
The Power Of Dividend Investing [Part 2] - Choosing the right stocks for dividend investing

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Monday, February 27, 2017

The Future Is Female Conference - A Women-only personal finance, empowerment and lifestyle conference

Did you know there are more and more female investors now in Singapore? With women's earning capabilities going up to be similar to that of men now, many are looking at alternative ways to manage and grow their money.

For the first time in Singapore, there will be a women focused financial conference for all the females out there. Often, investment seminars are packed with men and this may be a turn off for a woman who attends. This will be a game changer conference.

The Future is Female conference, taking place on April 8 2017, Saturday, is organized by The New Savvy and supported by the Singapore Exchange (SGX). The New Savvy is Asia’s leading women-focused financial literacy and career platform. SG Young Investment is a partner for this conference.

*Look out for FREE tickets to this conference at the end of the post

The speakers for the conference include CEOs, senior representatives from financial institutions, successful women entrepreneurs, venture capitalists, FEMALE Ironman triathlete, fashionistas… and inspirational movers and shakers!

The conference is for those who are…

… struggling to manage their finances…
… dreaming of taking their financial position to the next level…
… feeling intimidated by the various investment options and financial markets out there…
… trying to take full control of their finances but you have no idea how or where to start…

Through this conference, you will…

Be introduced to the concept of Personal Finance Management
Learn about investment products, money management, and financial know-how.
Be provided with a structure on how you can manage your finances effectively.
Hear from men and women from across industries and generations who have redefined conventional pathways to success.
Explore common issues in the personal and professional lives of modern women.
Figure out how you can uncover your inner genius to overcome gender discrimination and thrive a male-dominated environment.

Some of the confirmed speakers to date are:

- Lynn Gaspar, Senior Vice President, Head of Intermediaries & Retail Clients at SGX
- Nels Friets, Board Member, Fullerton Fund Management Company and Vice Chairman, tryb Capital
- Bernard Lim, Executive Director, Senior Fund Manager, Asian Equities, Columbia Threadneedle Investments
- Ted Fang, CEO, Tera Capital, Frontier Group
- Junie Foo, Head of Corporate Banking Singapore, Global Subsidiary Banking, Asia Oceania, Bank of Tokyo-Mitsubishi UFJ Ltd
- Rachel Lim, Founder, Love, Bonito
- Shao-Ning Huang, ex co-founder, JobsCentral
- Tamara Singh, Business Manager, Portfolio Execution Group, GIC
- Andy Lim, Executive Director, JL Family Office, Straits Real Estate, Lim Hoon Foundation

More details can be found on the conference website --

Date: Apr 8, 2017 (Saturday), 0830-1900
Venue: SGX auditorium

FREE ticket giveaway (Contest has ended)

I've tied up with the organiser to have a FREE ticket giveaway (Worth $220) for readers of my blog. To participate in this contest simply click here to answer 3 simple questions. One lucky winner will stand a chance to win a free ticket to the conference. This contest is open to females only. Contest ends on 6th March 2017. The winner will be notified by 7th March.

In addition, the organiser have kindly given a unique discount code for all readers here. This will entitle you to a 12% discount. Simply use the code: TNSSGYI. This will be valid till 7th April 2017. 

For early birds, do take note you'll get a 20% discount until 8th March 2017 using the promo code: IAMSAVVY. Use this promo code first before 8th march.

The conference registration is open to both males and females but it'll be weird if you're a guy and go alone for this as the contents are catered more for females. You can certainly go with a partner though. 

*SG Young Investment is the official partner for The Future Is Female Conference 2017

*This is not a paid advertorial

Tuesday, February 21, 2017

Starhub - Dividend Investing Gone Wrong

There are many developments in the Telecommunication industry with the entry of a fourth operator soon in Singapore. As we all know, Singapore has 3 Telcos here namely Singtel, Starhub and M1. The 4th Telco which is coming will be TPG telecom. Let's take a look at Starhub in this post and see what went wrong with the share price falling from a high of $4+ to $2.80 now.

Starhub was once a favourite with its defensive nature and good quarterly dividends. If we had invested in Starhub back in 2005 and hold it all the way to 2016, we would be getting a dividend yield of 15.4% (based on a price of $1.30) and also the value of the stock price has increased by 3 times. $5000 invested in 2005 would become about $15000 in 2016 and we would still be getting about $800 dividends annually from the initial $5000 invested.

However, those who invested at a high of $4 were in for a surprise when it tumbled all the way to $2.80 now.

Here's a look at the chart of Starhub:

As we can see, the share price has dropped over the years, most drastically when the 4th telco was announced by the government. M1 share price has also dropped but Singtel is still strong. I've not invested in Starhub or M1 but have shares in Singtel instead. Working in the telecommunication industry previously, I do know that it is a very competitive market with little growth if the companies are only in the traditional telco business in Singapore. Singtel on the other hand has expanded overseas with most of its profits from its associates and subsidiaries in other countries and also went into other businesses such as digital marketing and cyber security.

Starhub is a favourite among many shareholders because of its quarterly dividends of 5 cents which they give out for many years since 2009. A 5 cents dividend per quarter translates to a yield of 7.14% at current price of $2.80. However, in its latest FY 2016 results, Starhub announced it will lower its quarterly dividends to 4 cents for FY 2017. After 7 years, they decided to lower its dividends. Why is this so?

Let's dive in deeper into the business of Starhub to understand why its share price has dropped so much and moving forward how it will perform.

Mobile is the largest of its business

Revenue from its mobile business is at 50.7% of its total revenue. Pay TV is at 15.8%. Mobile revenue came in at $1.21 Billion for the whole of FY 2016 with $2.3 Million subscribers. This means averagely, each subscriber pays $43.87 a month to Starhub for their mobile plan subscription. The fourth telco, TPG telecom, will only come in about 2 years later where we will see the real impact. If for example 500K of Starhub subscribers switch over to TPG telecom, we will see about $263 Million revenue gone. This is 9.8% of its total revenue now.

Investing at the wrong time?

Investing is all about the business and how it will grow moving forward. In the case of Starhub, it is obvious there will be impact to its business thus the reaction of the share price. If we had bought at $4+ when the PE ratio was about 18x-20x, we would have thought it was only slightly expensive. Even at $4, the dividend yield was 5% then.

However, as business sentiments changes with the introduction of new competition, the valuation changes as well. For this case, it is quite easy to see the impact as its reported all over the news for the new 4th telco. For other industries, it may not be so straight forward. Any companies' revenue and profit can be eroded anytime. As such, it is important that we always have a forward looking view for our investments and monitor the financial performance of a company. Remember the valuations will change according to the business environment. Stock price also tend to be forward looking where it will drop before the actual profits gets affected.

Is it a good buy now?

The fourth telco will certainly make the telecommunication industry more competitive and take away market share from the existing incumbents. I believe the market is trying to make sense of what is going to happen and is pricing in the impact now. The current PE ratio of Starhub is 14x. If we see the Earnings per share (EPS) drop by 10%, the PE ratio will be at about 15.7x. This looks like its trading at fair value with a slight discount at current price, taking into consideration the impact in the future.

The dividend yield, if the company maintains its dividend of 4 cents every quarter, will be at 5.7%. This is quite fair but the question is whether the company will continue paying this dividend or drop it even further? The real impact has not come in yet so everything is just speculation now. It may turn out that the 4th telco impact may be just 5% instead of 10%. If that's the case, PE will be at 14.9x which is more attractive. This is an interesting space to watch for the next 2 years. Will you invest in Starhub at current prices?

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