Looks like it is pretty tough to get Excess Rights for Manulife REIT. I applied for 2000 excess, but only received a mere 200.
Anyway, here are the numbers. All prices in USD.
Price before annoucement: 96c
Average Price on Day after (4th Sep): 93c (approximate)
Buying 10000 shares on Day After: 10000 x 0.93 = 9300 USD
Rights Entitled: 4100
Excess Awarded: 200
Total New Units: 4100 + 200 = 4300
Cost per Unit: 69.5c USD
Rights Cost: 2988.50 (ATM fees excluded)
Cost Total: 9300 + 2988.50 = 12,288.50 USD
Average Price on First Day of Trading (26th Oct): 91c (approximate)
# of shares to sell back to 9300 cost: 2988.50 / 0.91 = 3285 ~ 3300 (rounded up to avoid odd lots)
Total Shares left: 10000 + 4300 - 3300 = 11000
Now, the dividend numbers are a little more complicated due to the distribution for the acquisition done in June. Regardless, i will use the previous distribution at face value.
Using latest Dividend numbers
Dividend per unit (DPU): 3.2c
Total Received on 10000 shares: 320 USD
Original yield (annualized): 320 x 2 / 9300 = 6.9%
Diluted Dividend (assuming no increase in income): 3.2 / 1.41 = 2.27c
Total with 11000 shares: 11000 * 2.27c = 249.65 USD
New yield (annualized): 249.65 x 2 / (12,288.50 - (3300 x 0.91)) = 5.4%
Obviously, the income in this case is going to rise as the rights issue was done to acquire another property. Rough calculations gave me a 0.80c contribution by the new property after rights issue.
Adding that in, and doing the last set of calculations.
(2.27 + 0.8) x 2 / (12,288.50 - (3300 x 0.91)) = 7.3%
I am honestly surprised by this result. I checked my 0.8c estimate a couple of times but the only portion that might be overstated is the Rent Free Reimbursements.
If this is the case, i might be trimming down some of my stake. Anyway, i have the yield that i need.
Did i make a mistake in the calculations somewhere?
Friday, October 27, 2017
Tuesday, October 17, 2017
Follow Up on Cache Rights Issue
2 posts ago, i set out to investigate if subscribing for excess rights, and subsequently, maintaining your cost, would result in a maintained or slightly lower yield.
So i had friends who participated and got around double the entitled rights. One had, 1062 entitled, applied 2000 in total, and got full 2000. The other had 1422 entitled applied 7000 in total, and got 2900. So i am assuming that getting 2000 shares in excess is common. This is very bad as data points but i work with what i have.
Here's the maths.
Price before annoucement: 88c
Average Price on Day after (5th Sep): 86.5c (High + Low, divide by 2)
Buying 10000 shares on Day After: 10000 x 0.865 = 8650 SGD
Rights Entitled: 1800
Excess Awarded: 2000
Total New Units: 1800 + 2000 = 3800
Cost per Unit: 63.2c
Rights Cost: 2401.60 (ATM fees excluded)
Cost Total: 8650 + 2401.60 = 11,051.60 SGD
Average Price on First Day of Trading (10th Oct): 84c (High + Low, divide by 2)
# of shares to sell back to 8650 cost: 2401.60 / 0.84 = 2859 ~ 2900 (rounded up to avoid odd lots)
Total Shares left: 10000 + 3800 - 2900 = 10900
Using latest 2Q Dividend numbers
Dividend per unit (DPU): 1.8c
Total Received on 10000 shares: 180 SGD
Original yield (annualized): 180 x 4 / 8650 = 8.3%
Diluted Dividend (assuming no increase in income): 1.8 / 1.18 = 1.525c
Total with 10900 shares: 10900 * 1.525c = 166.22 SGD
New yield (annualized): 166.22 x 4 / (11,051.60 - (2900 x 0.84)) = 7.7%
There you have it. At the same cost, there is a slight decrease in yield. Definitely better than the initial dilution.
Obviously i excluded the cost of the transactions which will impact the numbers a little bit.
Also, the whole price movement cannot be predicted. There are plenty of examples where the price did not recover like it did here between announcement date and trading date. This recovery is broad based because STI went up and even the FTSE ST REIT Index went up.
That aside, you could have gotten Cache at a cheaper price from the 2nd day after the announcement was made. So you might luck out a bit more there as well. Again, this cannot be predicted. And most importantly, the amount of excess cannot be predicted. You may not get much excess for you to make it even worthwhile to consider this move.
Final point, you may see a slightly higher DPU in the coming quarters than the one i calculated as there would be cost savings due to the paying down of debt and that might go in favor of maintaining the yield.
Like all good scientific, data-based studies, here's a conclusion. Maintaining or slightly lower yield is possible. But my personal take is this, there are far too many factors that can screw with you to even make this viable.
So i had friends who participated and got around double the entitled rights. One had, 1062 entitled, applied 2000 in total, and got full 2000. The other had 1422 entitled applied 7000 in total, and got 2900. So i am assuming that getting 2000 shares in excess is common. This is very bad as data points but i work with what i have.
Here's the maths.
Price before annoucement: 88c
Average Price on Day after (5th Sep): 86.5c (High + Low, divide by 2)
Buying 10000 shares on Day After: 10000 x 0.865 = 8650 SGD
Rights Entitled: 1800
Excess Awarded: 2000
Total New Units: 1800 + 2000 = 3800
Cost per Unit: 63.2c
Rights Cost: 2401.60 (ATM fees excluded)
Cost Total: 8650 + 2401.60 = 11,051.60 SGD
Average Price on First Day of Trading (10th Oct): 84c (High + Low, divide by 2)
# of shares to sell back to 8650 cost: 2401.60 / 0.84 = 2859 ~ 2900 (rounded up to avoid odd lots)
Total Shares left: 10000 + 3800 - 2900 = 10900
Using latest 2Q Dividend numbers
Dividend per unit (DPU): 1.8c
Total Received on 10000 shares: 180 SGD
Original yield (annualized): 180 x 4 / 8650 = 8.3%
Diluted Dividend (assuming no increase in income): 1.8 / 1.18 = 1.525c
Total with 10900 shares: 10900 * 1.525c = 166.22 SGD
New yield (annualized): 166.22 x 4 / (11,051.60 - (2900 x 0.84)) = 7.7%
There you have it. At the same cost, there is a slight decrease in yield. Definitely better than the initial dilution.
Obviously i excluded the cost of the transactions which will impact the numbers a little bit.
Also, the whole price movement cannot be predicted. There are plenty of examples where the price did not recover like it did here between announcement date and trading date. This recovery is broad based because STI went up and even the FTSE ST REIT Index went up.
That aside, you could have gotten Cache at a cheaper price from the 2nd day after the announcement was made. So you might luck out a bit more there as well. Again, this cannot be predicted. And most importantly, the amount of excess cannot be predicted. You may not get much excess for you to make it even worthwhile to consider this move.
Final point, you may see a slightly higher DPU in the coming quarters than the one i calculated as there would be cost savings due to the paying down of debt and that might go in favor of maintaining the yield.
Like all good scientific, data-based studies, here's a conclusion. Maintaining or slightly lower yield is possible. But my personal take is this, there are far too many factors that can screw with you to even make this viable.
Wednesday, October 11, 2017
All You Need is a Nudge
One month on from the previous post.
This time my excuse is that shift work has begun for me and it threw my personal schedule a little out of whack. News came out today that Richard Thaler was awarded the Nobel Prize in Economics for his work on Behavioural Economics. I don't think i have read his books but i certainly have read a couple on Behavioural Finance.
http://www.channelnewsasia.com/news/business/commentary-nobel-prize-winner-richard-thaler-changed-economics-9295828
Thaler in his works, argued that people should not be forced to do things with bans or laws. Instead, small interventions, or nudges, that make the right choice easier are the best way to go.
I think this theme is rather similar to the notions delivered in Malcolm Gladwell's Tipping Point. My memory is vague but i recall a story within Tipping Point that talks about how adding a map on to a pamphlet resulted in marked increase in attendees for an event. Here, Thaler thinks that making automatic enrollment into retirement should be the default choice rather than opt-ins and that without help, most people would never retire. This auto-enrollment is also used in our HOTA act.
https://www.bloomberg.com/news/articles/2017-10-10/thank-richard-thaler-for-your-retirement-savings
I fully agree with him on this point. Our version of 401(k) would be CPF. Due to our mental accounting, if we didn't have compulsory contribution in CPF, many people will struggle with retirement.
The rest of that bloomberg article has a couple more gems including auto-escalation - a notion to gradually increase a nudge rather than a forceful change. Another that stood out for me was investing too much into your company's stock is risky. It might come across as confirmation bias where i read only those points that agree with me. But i do appreciate that there could be people who worked for Apple, Amazon or Google. I guess, if you think the company you are working for will become half as big as those 3, you could invest in your company as much as you want.
This is not a post to idol-worship him. In the CNA article, they list 3 areas of work that Thaler did and i am going to throw some suggestions out here to nudge some readers to overcome these behaviours.
Limited Rationality
Nudge yourself to not think in buckets. See money as a tool and where it came from does not matter. A windfall is the same as a salary. Where to use the tool depends on where in your life needs it most.
This tool can be used now or in the future, can be used to buy experiences for immediate pleasure, or pay off debts to ease stress, or even saved for delayed gratification. This might be tough for people who are used to envelope budgeting to do. But budgeting should just be a guide for you to watch your spending and not overdo it. I don't practice envelope budgeting myself, but i do have separate accounts for savings and spending.
Social Preferences
Nudge yourself to not inflate lifestyle when you get a pay raise. You just got a pay raise, and you feel like you could afford to go luxury just a bit more. Not denying a one-off treat here, but who you are is not determined by the kind of lifestyle you lead. You may now be mingling with people who only dine at posh restaurants because they can afford to, but you don't have to forsake the kopitiam just because now you are part of the clique and have a fatter pay check. My expenses has hardly increased since the day i started working. What changed was that my savings rate increased.
Self-Control
This is a tough one. Yet, it says self. Nudge yourself to say no to just one bad temptation or bad choice for a start. Don't pay for that self-control. Exercise what is within you for self-control. It takes a lot of willpower and if you believe that willpower is finite, it's good that you also know that it can be strengthened. I don't believe willpower is finite but going with that train of thought, cut desserts on weekdays and only allow yourself to have a cake on weekends might be a way to strengthen self-control. You don't have to cut it out completely unless you are hugely motivated to lose extra weight.
There you go. Start nudging yourself to make slightly better decisions than you did yesterday. Now, i am off to nudge myself to pen down more of my thoughts on this blog.
This time my excuse is that shift work has begun for me and it threw my personal schedule a little out of whack. News came out today that Richard Thaler was awarded the Nobel Prize in Economics for his work on Behavioural Economics. I don't think i have read his books but i certainly have read a couple on Behavioural Finance.
http://www.channelnewsasia.com/news/business/commentary-nobel-prize-winner-richard-thaler-changed-economics-9295828
Thaler in his works, argued that people should not be forced to do things with bans or laws. Instead, small interventions, or nudges, that make the right choice easier are the best way to go.
I think this theme is rather similar to the notions delivered in Malcolm Gladwell's Tipping Point. My memory is vague but i recall a story within Tipping Point that talks about how adding a map on to a pamphlet resulted in marked increase in attendees for an event. Here, Thaler thinks that making automatic enrollment into retirement should be the default choice rather than opt-ins and that without help, most people would never retire. This auto-enrollment is also used in our HOTA act.
https://www.bloomberg.com/news/articles/2017-10-10/thank-richard-thaler-for-your-retirement-savings
I fully agree with him on this point. Our version of 401(k) would be CPF. Due to our mental accounting, if we didn't have compulsory contribution in CPF, many people will struggle with retirement.
The rest of that bloomberg article has a couple more gems including auto-escalation - a notion to gradually increase a nudge rather than a forceful change. Another that stood out for me was investing too much into your company's stock is risky. It might come across as confirmation bias where i read only those points that agree with me. But i do appreciate that there could be people who worked for Apple, Amazon or Google. I guess, if you think the company you are working for will become half as big as those 3, you could invest in your company as much as you want.
This is not a post to idol-worship him. In the CNA article, they list 3 areas of work that Thaler did and i am going to throw some suggestions out here to nudge some readers to overcome these behaviours.
Limited Rationality
Nudge yourself to not think in buckets. See money as a tool and where it came from does not matter. A windfall is the same as a salary. Where to use the tool depends on where in your life needs it most.
This tool can be used now or in the future, can be used to buy experiences for immediate pleasure, or pay off debts to ease stress, or even saved for delayed gratification. This might be tough for people who are used to envelope budgeting to do. But budgeting should just be a guide for you to watch your spending and not overdo it. I don't practice envelope budgeting myself, but i do have separate accounts for savings and spending.
Social Preferences
Nudge yourself to not inflate lifestyle when you get a pay raise. You just got a pay raise, and you feel like you could afford to go luxury just a bit more. Not denying a one-off treat here, but who you are is not determined by the kind of lifestyle you lead. You may now be mingling with people who only dine at posh restaurants because they can afford to, but you don't have to forsake the kopitiam just because now you are part of the clique and have a fatter pay check. My expenses has hardly increased since the day i started working. What changed was that my savings rate increased.
Self-Control
This is a tough one. Yet, it says self. Nudge yourself to say no to just one bad temptation or bad choice for a start. Don't pay for that self-control. Exercise what is within you for self-control. It takes a lot of willpower and if you believe that willpower is finite, it's good that you also know that it can be strengthened. I don't believe willpower is finite but going with that train of thought, cut desserts on weekdays and only allow yourself to have a cake on weekends might be a way to strengthen self-control. You don't have to cut it out completely unless you are hugely motivated to lose extra weight.
There you go. Start nudging yourself to make slightly better decisions than you did yesterday. Now, i am off to nudge myself to pen down more of my thoughts on this blog.
Subscribe to:
Posts (Atom)