22 July, 2017

A Comparison between HDB loan and Bank loan for your new BTO

As most of us would know, HDB charges around 2.5% for their loans while we can find a lower rate by taking a bank loan despite the risk of fluctuation in interests. Here is a list of offers we can get from a bank loan. In most of the cases, the difference between both HDB loans and bank loans is about 1%+. Never forget that the extra 1% is paid monthly and it will compound for years. 

The main difference in terms of payment will be its down payment. You can choose to pay 10% of your HDB value using CPF if you are taking a HDB loan or split them into two 5%. In bank loan, you will have to pay 15% of your HDB value with CPF while paying 5% with cash. Below are two scenarios to look at:

1.     Couple A is evaluating on which loan to take for their new HDB flat. They would like to know the amount they can save by taking a bank loan instead. Below is an illustration:

Yes, at pure glance the couple can save around $13,000 at the end of the debt. This is taking that the bank loan averages around 1.35% (assuming there are fluctuations in the interest rates). However, there are still considerations not shown in the illustration.

·        Under bank loan, the extra $34,000 of CPF money paid in 2017 will not be earning the CPF interest (2.5%) as compared to the HDB loan option, where your $34,000 still sits in CPF OA account. That will amount to a difference of more than $2,500 over the 3 years till 2020 before your CPF gets whipped off.
·        Under bank loan, the extra cash payment of $17,000 in 2020 means you will have less cash on hand. If you are an investor, you can grow $17,000 over the long period of paying up your loan.
·        Taking these factors into considerations, couple A can save about $10,000 or less by taking up a bank loan. Of course, with some risks by doing so.

Now, let us take a look a couple B:

2.     Couple B is also looking at the same comparisons. The only difference is that they are also investors.
·        Couple B’s illustration will be the same as couple A’s shown above.

·        We take it that couple B’s rate of return in their investments is about 5% annually as seen above. By taking a HDB loan, they can make use of the extra 17,000 cash on hand to invest over the 12 years loan payment period. At the end of the 12 years period, they will be able to beat the difference/saved  amount of $13,173 shown in the earlier illustration. We have to note that this is a mere calculation of dividends returns. There are still stock price appreciations to account for.
·        Moreover, by taking HDB loan- Couple B is able to enjoy the CPF OA interests of 2.5% from the less CPF money forked out for down payment in 2017.

     From the two illustrations, it is obvious  that there are more considerations to think about when it comes to financing a new flat. Savings are not solely reflected on the difference between loan interests and there are deeper factors to dive into. Ultimately, the 2 scenarios showed that good investors can not only enjoy beating the bank loan savings, they can also at the same time earn better returns while taking HDB loan and with a greater peace of mind!   

01 July, 2017

ComfortDelGro: Below its 3 years low

This week, ComfortDelGro Corporation Limited (C52) is selling below its 3 years low. Fundamentally, it is not entirely a good stock and neither is it poor. Personally, I have bought some. This is the first stock in a long time I placed some doubt in a transaction. This is because averaging down may not be a good idea if the price were to drop even lower. Yesterday, its RSI has hit below the 30 range.

Here are some of the characteristics observed of C52:
1.     Despite the recent loss of ride-hailing market share to Grab and Uber, the net income of C52 has remained resilient. Its net income has been consistently rising over the past few years showing no signs of hindrance.
2.     It is a company with diversification of multiple countries and it does not solely depend of its taxi revenue (despite that it is what they are best known for)
3.      Dividends are attractive at around 4.4%. Payout history was continuous since 2003.
4.     P/E ratio is slightly above 15 while it is trading less than 2 times its book value.
5.     It is a company with adequate size: Around USD 3 billions in terms of capitalization.

The market has been negative about C52 as reflected in its price. We are not sure if sellers are letting go due to panic or due to ignorance. One possibility is that they may have bought it too high a price and can no longer tolerate the loss. As for me, I hope this is not a falling knife which I have caught. There is always a possibility to do a stop loss to avoid bigger losses. At the same time, I believed the price will recover soon enough. There has been some efforts made by C52 as shown in the news but is it enough?

Last but not least, the recent hype was on the IPO of Netlink Trust this month and I am interested to find out more if it is worth the risks. 

FCL and the Ascending Scallop Pattern - Part 2

In the end, the Ascending Scallop mentioned for FCL did not materialize as per TA may have suggested. This is one example that Technical Analysis along with a hopeful mind can lead us believing the price will go higher. Instead, FCL has dropped to 1.865 before rebounding itself.  Due to my small holding size, I felt that it is a good price to sell and have let it go at 1.895. This translates to about 20% gain from my buying price, not including the dividend received during the holding period. The risk is now passed to the new buyers. Good luck with that!

14 June, 2017

FCL and the Ascending Scallop Pattern - Part 1

For long-term investing, we usually look at fundamental analysis. It may also be useful to combine FA with technical analysis (TA).

A pattern was observed in FCL and the "uptick" or ascending scallop pattern may materialize with an uptrend. Neither am I speculating here nor an expert on TA, my prediction is that it will go even higher like most past scallops. Nevertheless, it might go the other way by falling. This will be further updated in a Part 2 post.


-Any comments made in this blog are solely based on opinions
-The writer/author of this blog does not accept any liabilities or losses that arises from the writings/contents of this blog
-Information shared in this blog does not guarantee completeness or accuracy
-Any companies' names mentioned in this blog does not imply a "Buy", "Hold" or "Sell" recommendation. They are simply just for discussion purposes.

09 June, 2017

Are you Tired of your job and considering a change of industry?

Work life balance, does it still exist here? Singapore is a "global central hub", which means we are very busy at what we do. Competition is high while human resources are scarce given how vast an environment we lived in. Staffs who work at banks often stay back late, same for many else. Even at government jobs, you cannot deny how slow the services are due to the heavy work load. However, government jobs may have the luxury of taking it slow unlike private sectors.

At your current job, you may face the similar heavy tonnage of workload and do you feel the time to time urge to throw in the towel? Nevertheless, any jobs that are relaxing in Singapore are also often low waged. This creates another type of dissatisfaction. Of course there are exceptions with highly paid jobs and “reasonable” workload. These posts are usually niche or highly skilled.

Recently, my colleagues and I have pondered if we really want to remain in our industry. In the future, we will have a family and our own houses to maintain. Your parents may no longer be staying with you to clean your houses or wash your clothes. The already limited personal time will be further reduced. At that point of time, you will treasure your time more and question the amount of time you spent at work can better be spent elsewhere with your kids or chores. If one is still near its early working life , they still stand a better chance  to pick another career path. At most, you have to accept a pay cut or a same pay slip. Never forget that when age catches up with us, employers will rather hire young chaps who can learn faster, are more alert and willing to accept the lower start pay. When we are old and looking back, it will be then too little too late to change our fate while the resistance to change becomes even stronger.

We understand that nobody really wants to work. If you really hate what you are doing for 5/7 days of each week, it may be time to consider looking elsewhere like what I am pondering now.