Analysis of investment in Accordia Golf Trust

Accordia Golf Trust (Accordia) is a business trust which assets are golf courses across Japan. It forms a small portion in our portfolio. Accordia’s financial year ends on 31 March. For the latest financial year (FY16/17), it distributed S$ 6.04 cents DPU (distributable Income per Unit). Based on current price of $ 69.5 cents, this represents a distribution yield of 8.7%. The ultimate questions here are:

  1. Is the DPU sustainable?
  2. Based on current price, is there any possibility for capital gain?
  3. What is its future prospect?

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Company Background

Accordia owns 89 golf course (and related assets) located across Japan, valued at approximately S$1.9 billion. Close to 90% of the initial portfolio golf course are located in three largest metropolitan areas in Japan. An investment in Accordia provides exposure to Japan golf course industry. The increase in number of senior golfers in Japan and the coming Olympic Games 2020 in Tokyo are two main factors that will enhance Accordia value. Another catalyst would be the potential for privatization as Accordia’s sponsor (Accordia Golf Co.,Ltd.) was recently taken private by South Korea private equity firm MBK Partners in late 2016 for US$760m (its stock got delisted from Tokyo Stock Exchange in March 2017). The business strategy of Accordia is primarily focused on the middle class, loosening the strictures of golf in Japan and encouraging the “casual golfer” with the promise of a cheaper day out.

Revenue and Cost Structure

Accordia derives its revenue from three sources: golf course revenue (~65%), restaurant revenue (~25%), and membership revenue. While majority of its costs incurred are labour & outsourcing expenses (~37%), golf course management fee & maintenance fee (~20%), SG&A (~18%),  and merchandise & material expenses (~8%).

Listing History

Accordia Golf Trust was listed in Singapore Exchange (SGX) back in August 2014. Ever since it got listed (IPO price of S$ 97 cents) till today, its share price has dropped 28% (~S$ 27.5). On the other hand, those IPO investors have received S$ 18.38 cents of distribution from IPO to date. Hence overall, IPO investors are still 9.4% underwater. The lesson learnt here is IPO may indeed stand for It’s Probably Overpriced. With close to 1.1 billion outstanding units, the IPO valued Accordia Golf Trust at S$1.1 billion.

Distribution Analysis

Income varies based on seasonality.  Unlike the normal REITs which are able to collect rental fees from their tenants rain or shine, Accordia’s performance may be detrimentally affected by weather condition, such as earthquake, heavy rains or typhoons. Distribution is paid on semi-annual basis. The DPU tends to be higher on 2H (Oct – Mar period) due to better weather. The 2H DPU is usually distributed in the month of June. FY16/17 dividend (S$ 6.04 cents) is 8.9% lower than the previous fiscal year FY15/16 (S$ 6.63 cents). A 2.4% decrease of operating income at the same period causes a 25.6% drop in operating profit. Accordia only has 3 year history of distributions – hence it cannot provide sufficient data whether future distribution will be stable.

Entry Price

The decision of entry price can make or break the investment. During IPO times, the company provided guidance of 7.0% distribution yield (~S$ 6.79 cents) based on normalized DPU excluding non-recurring items (based on IPO price S$ 97 cents). Since the latest FY distribution only stood at S$ 6.04 cents, we can’t be sure whether next year distribution can be maintained. Although the company has a policy to distribute 90% of its distributable income, and assuming that SGD/JPY exchange rate doesn’t fluctuate that much (currently it stands at 80.2 Yen vs 81.52 Yen during IPO Prospectus time), we still need to put some buffer assuming our case goes wrong.


Is current share price worth it to add position in Accordia? At current price S$ 69.5 cents per unit and distribution yield of 8.7%, there’s still likelihood that distributable income may fall another 10%. Looking at how operating profit drops 26% although top line only marginally decreases by 2%, we need to be realistic in setting the valuation. Assuming “stabilized” distribution at S$ 4.65 cents (or equivalent to its EPU) and expecting 9% minimum annual return (purely from distribution), we arrive at calculated entry price of S$ 51.5 cents. Price has to drop another 26% to reach our target entry price. In summary, a prudent investor would wait until the share price has reached or even dropped below his target entry price. Meanwhile for existing unit holders who bought at current market price (S$ 69.5 cents), it may be prudent to exit the position (and forgo the 8.7% yield) while waiting for price to further drop before re-accumulating at lower price.

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This year’s EPU is much lower than DPU – there’s a likelihood that DPU is not sustainable

Suggestion: SELL (Accumulate at S$ 51.5 cents or lower)


Chris’ approach in managing personal finance

20170623 budget

Back in 2007 when I first started tracking my personal finance, I created a simple excel file called “Monthly Personal Budget.” It was meant for me to track my monthly spending in more systematic way. I did not realize it back then. But later on I discovered that the method I used was actually mimicking how corporations, big and small, manage their financial health too.

In the corporate world, every division lives by its own P&L (Profit & Loss). Every team is given its own budget to manage every year. How much to spend, how much sales target they need to achieve. Performance is measured based on what they achieve (actual) versus the initial target set at the beginning of the year. To summarize the ultimate benefit of doing budgeting: it helps you plan & prioritize your spending. After all, you cannot control what you do not know.

Looking back, these are the steps I took:

  1. Start from something, then improve it – my starting point was one simple table that shows how much I earn monthly versus how much money spent. Subsequently, I started to categorize the type of earnings: whether it comes from salary, or from other sources (such as interest, dividend, so on). On the expenses side, I tried to split the expenses into four categories: Fixed, Other Committed, and Discretionary. Recently I’ve added one more category: Child Related & Education. “Fixed” are basically all expenses that we can’t live without (housing, food, tax). While “Other Committed” refers to those that we always spend monthly but we have certain degree of control to reduce it (such as groceries, electricity bill, clothes, hand phone bills, medical bills, and transportation cost). “Discretionary” refers to expenses that we can live without. They are things that make us feel good, such as: eating out, cinema, books/magazine subscription, vacation, personal care.
  2. Be disciplined – This rigorous method might not work for other people. But I receive some degree of comfort by knowing that I do not overspend each month. By tracking how much $ I spent on each purchases, I’ll have some idea why on certain month I tend to splurge and on which items I splurge. After doing this for a year, I knew that I used to spend a lot on eating out in fancy restaurants especially during birthday months.
  3. Keep exploring other areas – Monthly budgeting is the foundation. Then I move on to other areas: preparing my personal balance sheet and calculating my net worth (by listing all assets & liabilities), creating the investment portfolio, tracking their performance, calculating the tax payable, planning for house purchase, etc.

In short, we all know that someone is sitting in the shade today because someone planted a tree a long time ago. It’s never too late to start. Start tracking, or start saving. No matter how small it is our effort, with time and effect of compound interest, it will grow bigger and bigger.

20170623 oak tree

My Investment Objective

I always believe that things happen for a reason. I still remember back in  year 2005 – 2007 when I purchased a huge sum of Chinese Renminbi (huge sum for a penniless fresh graduate back then). That was right after I came back from my four month stint in Beijing for language study. Back then in late 2004, 1 RMB can buy approximately 1000 worth of Indonesian Rupiahs. As of today, RMB has strengthened so much that 1 RMB now can buy IDR 2k.

My reason to invest in RMB back then, was because I felt things in China were so cheap. I remembered on my first day in Beijing, we went for dinner at a fancy Chinese restaurant, just opposite our campus, BLCU in Wudaokou area. When I stepped in, I could almost feel the sense of regret. Regret knowing that this could be a huge mistake. Imagine, a penniless young graduate with limited budget had to spend some huge amount for money for a dinner. In my mind, I always thought that such a fancy dining like that would cost us easily close to S$15-$30 per head. After our sumptuous dinner, I was shocked to read the total bill. My share of dinner was less than RMB 8 (equivalent to US$1) back then.

Ever since, I discovered that Chinese Renminbi were definitely extremely undervalued. That’s when I decided to buy a lot of Renminbi. Hoping that I could just keep it and perhaps use it again the next time I return to China.

I discovered the world of investing from reading various books. It started with Rich Dad Poor Dad (by Robert Kiyosaki) during my university days. Then Unlimited Power (by Anthony Robbins), then Think And Grow Rich (by Napoleon Hill). And subsequently, I discovered Intelligent Investor (by Benjamin Graham) back in 2008. Ever since, I’ve read more books on value investing & other various investment methods.

My investment objective is simple, to make money. The objective can be simple, but the execution cannot be too simplistic. In other words, we also need to consider all the pitfalls of various investment methods. The key here is to simplify the complex world of investment without losing the essence. You don’t have to invest in a complex investment vehicle. You also don’t need to have an IQ of 160 in order to be successful in investing. But it takes a huge dose of common sense. Understand the business model. How does the company make money. Understand time value of money and compound interest. Understand that time is money.

My medium term goal is to generate passive income large enough to cover our family’s annual expenses. There are many ways to generate passive income, however what I will cover in this blog is mostly on generating passive income from stock investing. Why do I need to generate passive income enough to cover the annual expenses? Because that is the definition of being financially independent. This is the first step towards being financially free.

I’d like to leave you with this note… “Success is a process not a destination.” By enjoying the process along the way, we won’t lose our soul when reaching our destination some day.

Tortoise and Rabbit

Review of Current Portfolio – June 2017

The objective is to keep track performance of current fair value of stock portfolio on hand. Doing regular review, half yearly or yearly is a good way to understand how our portfolio fares compared to the market.

The portfolio consists of mostly (~90%) Singapore stocks, while the remaining are US stocks. Stocks listed in Singapore are relatively lesser-known and give higher dividend yield. While stocks listed in US (NYSE or NASDAQ) are generally well-known, bigger companies (market capitalization >$5B). These companies are more stable & tend to be valued at higher P/E ratio.


Based on snapshot above, we can see that:

  1. Most of the portfolio (>50%) are invested in small to medium companies (with market cap <US$1B).
  2. Portfolio invested in US market tend to be of those more stable, larger corporations with higher market cap.

Comments on each counter:

  1. Hotung – is a consistent performer. It steadily gives high dividend year in-year out (>8%yield). I’m treating this almost like a fixed deposit. Mr Market has slowly recognized its value – especially since beginning 2017.
  2. Stamford Land – is an asset play & I was expecting privatization some time back (which didn’t materialize). Yield has been so-so. They cut the dividend a year ago and now it gives $0.01. In the long term, holding cost / opportunity cost might prove too big. Has been holding for >3 years now.
  3. Penguin – is a cyclical stock. All shipping and O&G companies are. I just happend to learnt this a bit late. The share price peaked in August 2014, when it was traded at $0.275 (price before share consolidation).
  4. Lippo Malls Trust – Exposure to Indonesia large middle class population. The counter has been consistently giving ~10% yield annually since 2015 due to we purchased it at low cost base. Need to monitor if the dividend can be maintained. Political situation may detrimentally affect. Especially with the Indonesia presidential election coming in 2019.
  5. New Toyo – is a stable performer. The company is a packaging manufacturer supplying to cigarettes companies. Consistently gives annual dividend since 1998 (>5% yield). Expecting EPS increase due to its recent acquisition of PT Bintang Pesona Jagat (from Bentoel group) in Indonesia.
  6. Keppel Corp – purchased at around $5.2 during the oil price turmoil in Jan’16. Sitting on paper gain. On hindsight, good decision to buy. Plan to accumulate when price dips.
  7. Pollux Properties – was impressed by its property when visiting Semarang 3 years ago during our holiday trip. I also like the Louis Kienne serviced residence in Havelock Road. Like the serviced residence even more after staying there for a couple of nights. The stock is definitely undervalued. However it remains to be unknown when the value can be unlocked. This is extremely illiquid counter with no dividend. Patience will (may) get rewarded
  8. Accordia Gold Trust – attracted by its high yield (>7%). The counter pays dividend semi-annually every June & December. Purchased Accordia when I was taking golf lesson weekly. I like the idea of getting my golf lesson paid by the Accordia dividend.
  9. San Teh – initially purchased based on expectation on one-time large dividend. This is an asset play.
  10. Frasers HTrust – wife’s pick… exposure to hospitality sector with hotels & residences spread across Asia & Europe.
  11. Global Investment – it is linked to Temasek Holdings. Purchased mainly for its dividend. High dividend yield ~10% at our cost base.
  12. Casa Holdings – initially thought to be undervalued stock. The company then decided to expand into property development in Malaysia. With the oversupply situation in Iskandar Malaysia, on hindsight the company should’ve just stick to its expertise as home appliances distributor.
  13. Shell – High yield (7%, before US withholding tax). Dividend has been stable. Big multinational oil & gas company with long history. Expect increasing demand for LNG and energy in the near future.
  14. Teva Pharmaceuticals – purchased as price was close/at 5 year low. Initiated coverage to Pharmaceuticals companies.

Overall, the portfolio is a mixed bag of consistent performers and some counters which can be considered for divestment. Total of 14 counters in the portfolio remains manageable. There is opportunity to reduce the number of counters & concentrate into few strong players.

On a separate note, I’m also on-board the idea of having child’s portfolio. The portfolio focuses on long term. This is meant to be buy-and-hold strategy. Hence, the companies selected is a mixed combination of relatively-safe high yield counters and large companies with high potential or catalyst.

table Savio

The long term objective of this child’s portfolio is to cover 100% full year tuition’s fee with annual dividend. Hopefully, by the time he’s entering primary school age, the annual dividend would be sufficient to cover his school fees. Until then, dividend received will be automatically reinvested into the portfolio.