Properties with expiring lease

From Straits Time, 14 May 2011

Banks are more stringent on loans for properties that are less than 60 years lease left. Maybe we can get a low price from these properties since the demand for them will be lesser? To find out, I extracted the PSF from propertyguru for reference.

Project / Location / Years left on lease/ PSF

Peace Centre Mansions / Sophia Road / 58 / $731
One Tree Hill Mansions / One Tree Hill / 61 / $1120
Orchard Court / Oxley Road / 61 / $1219
Lutheran Towers / Tan Kim Cheng Road / 62 / $757
Hillcrest Arcadia / Arcadia Road / 63 / $1066
Hollandswood Court / Holland Park / 63 / $745
Townhouse Apartments / Cavenagh Road / 65 / $916
The Arcadia / Arcadia Road / 67 / $1319
Horizon Tower / Leonie Hill Road / 67 / $1237
Orchard Bel Air / Orchard Boulevard / 68 / $1457
Chancery Court / Dunearn Road / 69 / $998

Finance Minister Tharman says Global Economy is BAD

http://www.youtube.com/watch?v=jA5MIBazp1c

Key points:

- Problems of Household debt

- Problems of Govt debt

• Europe
• US & Japan over-borrowed before crisis. Spent a lot more during crisis. Debt shot thru the roof. Major risk of credit downgrade.

- Problems of Bank debt

• 1/3 of european banks are short of capital in significant amounts
• Significant proportion of global banks need to renew their debts of $3.5T over the next 2 years

- Inflation all over the world. Commodity, oil prices (middle east unrest).

- China becoming very competitive, not just in the low cost arena, but also high value added arena. China wages rises up rapidly, and productivity, skills, knowledge rising up even faster. India, brazil and eastern european countries also catching up. This increases the risk of stagnation in developed economies

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Recommended Investment Management Companies

Recommended by my Prof for their low fees:
1) Vanguard
2) Fidelity
3) Schwab

The context of his recommendations is a discussion on diversification using plain vanilla index ETFs. He had been using these 3 investment houses for decades (yes, he is an old man).

Although not discussed, I think liquidity of the sponsored ETFs, as well low tracking errors played a part in his preference.

Equity Shortlists

Given that equity prices had gone up substantially, it is time to prepare ourselves for the next downturn by shortlisting some counters with good potential.

Mining Equipment Makers
- Caterpillar Inc.
- Bucyrus International
- Joy Global

Medical
- Medtronic

Indices
- Vanguard FTSE All-World ex-US ETF

World Earthquake and Tsunami zones

In view of Japan 2011's major earthquake, I'm curious about the earthquake zones around the world. In areas where earthquakes are prone, damages to properties and economies could be substantial. We may need to keep this in view when we go about our investment decisions.

Source: http://geology.about.com/library/bl/maps/blworldindex.htm

Hutchison Port Trust IPO - Updates

Some key figures:
- Indicative pricing = US0.91 to US 1.08

- 2010 profit margin = 26.46%. Proforma for unitholders around 18.8%

- 2010 EPS = US$0.0315. Thus PE Ratio (using US1.08) = 34.29. 2011

- Current Asset = US 937M. Current Liability = US 1447. Net current liability.

- Total Debt = US 5469M. Total unitholders = Us 9405M

- Expected payout ratio for 2012 about 150% of profits

- Total TEU handled by listed entities = 21.174M

- Base Fee is a fixed fee of US$2.5 million per annum, which is subject to increase each year by such percentage representing the percentage increase (if any) in the Hong Kong Composite Consumer Price Index. This is about 3.6%. The Trustee-Manager has elected to receive 100.0% of the Base Fee in cash for the Forecast Period 2011 and the Projection Year 2012

- The Trustee-Manager is entitled to receive a Performance Fee in relation to the Forecast Period 2011 and the Projection Year 2012 as follows when the DPU of HPH Trust exceeds the seasonally annualised 20111 forecast DPU of HK45.88 cents (the “Base DPU”):
a) a fee of 3.0% of the first 25.0% of excess DPU as compared to the Base DPU;
b) an additional fee of 6.0% of the next 25.0% of excess DPU as compared to the Base DPU (i.e. excess DPU above 25.0% and up to 50.0% of the Base DPU);
c) a further fee of 12.0% of the next 25.0% of excess DPU as compared to the Base DPU (i.e. excess DPU above 50.0% and up to 75.0% of the Base DPU); and
d) an additional further fee of 18.0% of any excess DPU above 75.0% of the Base DPU.



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