$3m bet on Reits pays off

Posted by luxuryasiahome on May 31, 2009

Full-time retail investor Isaac Chin, 60, was waiting on the stock market sidelines with $3 million in cash when the local benchmark Straits Times Index (STI) sank to a record low in March.

He decided that the market had bottomed out and backed his judgment by investing the full $3 million in four real estate investment trusts (Reits) that month.

‘When the STI hit 1,457, I bought heavily into A-Reit, CapitaMall Trust (CMT), Suntec Reit, and CapitaCommercial Trust (CCT),’ he said.

‘At that time, my friends advised me to wait for better bargains should the STI hit the 1,260 level. My rationale was that a further ‘discount’ of 200 points was good but unnecessary as the STI had dropped from about 3,900 a year ago. I was proven correct.’

The sum of $3 million came from loans from two banks in August last year against his three condominium units, which were valued at about $6 million then.

Based on the interest charge of 2 per cent on the loan, the monthly instalment works out to about $20,000. This amount includes the principal and interest repayment for 14 years.

‘I pay a 2 per cent interest on the loan based on the reducing balance. The four Reits were bought at very attractive prices with dividend yields averaging 10 to 12 per cent. Simple mathematics taught me that I can make a difference of at least 8 per cent per annum with a further potential for enormous capital gains when the economy and share prices recover in a few years’ time,’ he said.

He said that he had bought A-Reit at $1.03, CMT at 97 cents, Suntec Reit at 65 cents and CCT at 62 cents apiece. He added that he liked the four Reits as their dividends are non-taxable and they represent prime real estate here.

As of Friday, the prices of A-Reit, CMT, Suntec Reit and CCT were $1.52, $1.33, 95 cents and $1.13 respectively. He has made $800,000 in the last two months.

A chartered accountant, Mr Chin decided to become a full-time investor a decade ago. Prior to this, the father of two was working as a chief financial officer in an international school. His wife is a polytechnic lecturer.

Source : Sunday Times – 31 May 2009

30 STI component stocks

For your easy reference, someone has tabulated some data from the 30 STI component stocks, comparing their current price to the lows reached during economic downturns of 2002/2003 (SARS) and 1997/1998 (Asian Financial Crisis).

Other than SPH whose last closing price is already lower than 2002/2003 low (see table highlighted in red), the current price levels of the rest of the component stocks are still above the lows registered during the 2 economic downturn periods.



They have updated more information this time round to compare the relative decline (peak to trough) of previous economic downturns to the current one.

For a brief summary and conclusion to our findings:

5 counters has in the current downturn declined more in percentage terms compared to Asian Financial Crisis downturn (highlighted in red), and

14 counters has in the current downturn declined more in percentage terms compared to SARS downturn (highlighted in blue).


Great Summry! For those stocks that has N/A in the table, they have not been listed at that point in time.