Saturday, August 30, 2008

My 50% loss

Readers will noticed that I have updated a silly investment (SAIZEN REIT) made 1 year ago in my current holdings. I balloted for it through ATM for 10 lots and was given 2 lots, fortunately! I invested the REIT for dividends and since then, it has tanked about 50%. This is probably my worst investment paper loss till date. It doesn’t help as it reported a net loss of $50m for FY 08. The old saying of not investing into unfamiliar territory holds true for all investments.

The reasons I invested in this REIT was because Japanese Yen has been undervalued for many years. I was hoping that its appreciation will bring about interest in Saizen Reit. The fact is, Japanese Yen can continue to be undervalued for another 20 years.

Secondly, the housing ownership cost in Japan is too high (land scarcity) and risky (frequent earthquakes), hence renting accommodation in Japan is a more viable option in my opinion. This is a valid point as the annual report shows growing revenue and higher occupancy rates.

Thirdly, I was also inexperience and gullible to believe the prospectus of the 6.5% annualized yield! In actual fact, the yield will only be 4.67%.

Fourth point, based on historical records on Singapore listed REITS (at Sept 07), many did not incur losses upon IPO launches. I thought it was a “safe” investment. Again, Japanese property was an unfamiliar property play compared to Suntec, Capitalmalls and F&N commercial properties. It was a poor historical comparison on hindsight. The greed of selling it for a quick gain also did me no good.

Saizen Reit issued units as management fees which means that there will be large horde of selling the units for cash. This is a bad move by the management. This is one of the reasons I can think of for its share price volatility, other than the current bear market.

The good thing is that I will be receiving dividends. I will not be selling it as I want to remind myself of this mistake and also to hold it for its miserable semi-annual dividends. To be fair, the loss is less than $1000 dollars, representing only about 0.3% of my overall portfolio. The loss is unnecessary but I believe I will learn, grow and move on. Also, as long as the return on this investment is higher than 0.5%, it is better to keep it than realise the loss. Afterall the $2,000 I had invested last year will probably be idling in UOB current account anyway. Some consolation for me!

NO IPOs for me for the next 2 years!


la papillion said...


Hoho, IPO troubles eh? I've never kena any IPO before, no matter how many times I bid for it. As such, I no longer invest in IPO. In fact, my criteria is that it must have a market history of 4-5 yrs before I even invest.

For IPO, there is no way the owners of the business will sell their holdings at fair valuation. In fact, there is no reasons why they will sell at cheap or fair valuation, otherwise they will not want to sell off partial interests of their company. As such, IPO prices are overvalued to me.

Companies might also 'prepare' their books for listing to make it look more enticing for investors. As such, the pre-listing books cannot be relied upon totally as unscrupulous management might do short term measures to prettify their books for listing, at the expense of longer term prospects.

Stupidbear put up a posting on IPO, maybe you can take a brief look :)

Sgbluechip said...

Hi LP, thanks for the comments. Indeed, the point on only overvalued IPOs is truely valid. But in a bull market, generally all IPOs soar. It is really a bet on market sentiment, which I lost terribly!

I read stupid bear's blog and though I agree most of his points, I think we also cannot take the extreme approach of avoiding all IPOs.

I would have subscribed to VISA IPO if possible!

Even the best listed business begins its days as an IPO stock right?

la papillion said...


Haha, yes, i agree. Some IPO stocks grew and never reach its IPO price again. But for the majority others, I've seen IPO rise up only to dip lower than it's IPO price. I'm saying that there are a few ways to play IPO:

1. In bull market, sell to the next fool who is willing to buy it from you at a higher price. Just don't be the last fool standing when the party ended.

2. Don't chase after IPO. To chase the price, I mean that after the debut, we buy from open market in anticipation of the price rising up. If you really like the business, buy it from the open market at the price you want, not at the price others want to sell you at.

3. Wait for 3-5 yrs for the company to prove itself. There are so many companies out there with proven track record, I think it's like wanting to strike a Coca cola or a Microsoft with IPO. What's the chances?

Sgbluechip said...

Well said LP. Even if I manage to ballot for the next Microsoft or Coke, I will probably sell after making a 100% profit gain.

However, I think we should not close all doors to IPO. Some companies have long operating history and consistent profits but do not need the capital to expand. These companies though few and far may just prop up a couple of times in our lifetime.

For instance, if our PSA or Mediacorp were to launch IPO, I will definitely subscribe to it.