AyG
Crazy Mango Extraordinaire
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Post by AyG on Mar 9, 2016 11:42:24 GMT 7
I've written previously here and elsewhere that TMBAM's property fund sounds like a good idea, investing in commercial property, half in Thailand, and half in Singapore. I subsequently became disconcerted that after paying dividends every 3-4 months, they stopped back in July of last year. Well, they've just announced a dividend of 0.12 baht/unit covering the period of 1 July last year to 2 March - effectively 8 months. This corresponds pro rata to an annual income of 1.74%/year (based upon an NAV of 10.3469/unit). (The income from the holdings is pretty regular across each quarter.) WTF? The top 10 holdings have dividend yields of 4.69% to 7.52%, with a weighted average of 6.0%. I presume that the other holdings will have similar yields. Deduct 1% for fees and expenses and I'd have expected an annual yield of roughly 5% - a far cry from less than 2%. Something is very, very wrong. And I'm more than a little p**sed off by TMBAM's lack of transparency. ---------------------------------- Edit by Admin: Here's one of the original threads on this fund referred to bigmango.boards.net/thread/2764/understanding-property-fund-dividends
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Post by Fletchsmile on Mar 9, 2016 14:10:05 GMT 7
Yes I've been monitoring this one as well. We also hold TMBPIPF. A few years back I tended to hold only accumulation/non- dividend paying units in Thailand for unit trusts/ mutual funds for our holdings. In more recent years I've started to add income/dividend paying units. Particularly in the wife's name as she can elect to receive them without the deduction of 10% WHT and as she's a non-tax payer there's no tax disadvantage. I've noticed overall that dividends are less predictable (for me at least) in Thai unit trusts/ mutual funds than I'm used to in UK and other countries. Not just this fund but on others, where we've received dividends that seem below the natural yield of the holdings, and in some cases quite above. Generally individual shares follow similar principals to UK shares. But when it comes to unit trusts holding these shares, as a collective scheme this doesn't necessarily always translate into dividends in the same way as it would in the UK. Two of the key factors I think of might be at play here: 1) Certain Thai companies including the one I work as a SET listed company can't pay a dividend in a year when they make a loss. So I wonder to what extent and in what way this concept might carry forward into collective investment schemes like unit trusts when they look at individual reporting periods. this may then get combined with the second observation 2) The way the unit trusts run. The distinction between capital account and income account for a unit trust/ mutual fund doesn't necessarily seem to be the same in Thailand. In the UK, most unit trusts collect income from dividends, interest etc and charge expenses to the income account. The capital account is for the capital side of things like the value of the investments held and price movements for these investments plus purchases/ sales outstanding settlements etc. (Some unit trusts also deduct charges from capital) The unit trust generally pays its own distributions from the income account. Which is separate from the capital account. So what happens is that unit prices go up and down based on the underlying shares held and create capital gains/losses, whereas the income from the unit trust is paid out based on income received minus expenses. So units could go up or down in capital value but the income paid out is still based mainly on the income account, regardless of capital appreciation or depreciation. In Thailand, it seems that distinction may not be there. I think dividends may be factoring in capital movements as well somehow. Plus combined with the point 1) this could explain what is happening I had a brief look at the latest 2 sets of accounts for this fund, although haven't had much time to study in detail (they also seem only in Thai which makes reading slower) www.tmbam.com/v6/en/mutual-fund-detail.php?f=42330 June 2014 to 31 May 2015 (inception was 30 June 2014 so less than a full first year "annual accounts"); and 1 June 2015 to 30 November 2015 (half year accounts) For the first annual accounts: income exceeded expenses and units appreciated in value. Dividends seem to flow reasonable freely, being mindful that it was a new fund and not a full year so may have a few distortions For the 6 month period: income exceeded expenses but units fell in value. Dividends haven't been flowing regularly These two being the only reported sets of accounts so far. They are at least consistent with the point 2) above So it's possible they are "smoothing" dividends based on overall return rather than just return from the income account (income - expenses), i.e. just a different way of doing things / different approach. Instead of income - expenses, they're looking at income - expenses adjusted for capital appreciation/decrease
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Post by Fletchsmile on Mar 9, 2016 14:25:44 GMT 7
Just to add a couple of points: - The first time I came across this was for ING's Thai Big Cap Dividend Fund in May 2011. It surprised me on the upside. It paid a dividend at a rate of 1.2/ unit when the unit price averaged around 15 or so. The yield was 7% - 8% and quite a way above the normal SET yield or even what seemed to be the main underlying shares, even allowing for them being big cap and larger yields. 2010 had also been a stellar year for Thai funds, and the other non-distributing ING Thai funds I held had gone up over 40%. So I think 2010's strong run and capital gains might have been reflected in the dividend pay out. - I'm actually not that bothered about TMB PIPFs dividend payouts. As we're not reliant on the income, what isn't paid out simply rolls up as capital gains so its the overall return that counts. In some ways it's nice to know that they are preserving your capital by paying out less in weak years and more in good years based on overall return if indeed that's what they are doing. Perhaps to your average Thai investor that seems normal, or perhaps they don't care. - I do wish though, they'd explain exactly how they're doing things, or make it a bit more obvious in the accounts, so it was a bit more predictable and transparent to anyone looking in The annoying part is that it's not clearly stated anywhere. The only reason I get this far is after having a background working with unit trusts in the UK and knowing how they work there inside out. Then applying that to Thailand, plus other related experiences and working out for myself what might be happening That said we could always just sell units in years they pay out less
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AyG
Crazy Mango Extraordinaire
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Post by AyG on Mar 9, 2016 15:01:38 GMT 7
I queried their dividend policy for this fund with them. They told me that the policy was only available in Thai, but then (much to their credit) had it translated into English for me within a few days. (I can't imagine a UK fund translating documents into Thai for Thai investors.) I attach the translation. To be honest, I can't really make much sense of it. Apparently the reason for the lack of a dividend for so long was "the dividend payment must not cause more losses to negative accumulated retained earnings for the period". I'm not exactly sure how a fund like this can have "negative accumulated retained earnings".
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Post by Fletchsmile on Mar 10, 2016 10:28:21 GMT 7
Good job on getting that AyG. Did they send you a Thai version you could post? Some of the English isn't that well translated, but it sort of clears it up for me. It's as suspected that they take into account capital movements on the units as well as having restrictions if there are negative retained earnings. A UK unit trust doesn't normally take into account the "net asset value" when setting dividends as this is derived from the capital account. Dividends come from the income account. So a UK unit trust could halve in value but still pay out a dividend if income exceeds expenses. Similarly if the units doubled in value you wouldn't get a massive extra dividend. The Thai way of doing things is more like a normal company. It takes account of both If you look at the "full year accounts" for the first "year", as mentioned income exceeds expenses and units increased in value. Hence there are positive retained earnings so a dividend can be paid. If you look at the last half year accounts, income was 266mn expenses 60mn leading to an excess of income over expenditure of 206mn. In the UK this would allow a dividend to be paid. However, in Thailand capital movements are also considered "รวมรายการกําไร(ขาดทุน)จากการลงทุนที$เกิดขึ นและที$ยังไม่เกิดขึ น" is a net loss of 627mn driven mainly by losses on investments (falls in value). This then creates a situation where there is a net loss from operating activities of 421mn. (capital + income = -627 + 206) This is then added to retained earnings brought forward and other items within unit/shareholder funds. กําไรสะสม = retained earnings becomes negative so no dividend can be paid. Makes sense now. On the implications: A long established unit trust which has risen in value since inception will be less restricted in what it can be paid out, and can broadly pay based on income - expenses like a UK unit trust. If it has had a particularly good year it looks like it can even pay out some of the capital appreciation which a UK unit trust can't do. However, a new unit trust or one that has fallen in value, may be restricted in dividends it can pay, as although income may exceed expenses, if the unit value is below the issue price it will have a capital loss from that that needs to be taken into consideration. So if seeking dividends and that's very important to someone, they're better off with longer established funds that have had time to increase in value So my take away for TMB PIPF: Once it is comfortably above the 10 baht issue price, we can expect dividends similar to UK, and expect in line with the underlying shares But if it dips below 10 baht a share, this capital loss will affect the funds ability to pay dividends. Makes sense in some ways. Just a different way than what we're use to in UK. Cheers Fletch
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Post by Fletchsmile on Mar 16, 2016 14:03:21 GMT 7
Saw we'd received our dividends yesterday for this. With 5 dividend payments to date and the info above the picture is becoming clearer. www.tmbam.com/v6/en/mutual-fund-detail-type4.php?f=423Looks like an average of around 0.013 per quarter on a price of around 10 baht/unit = just over 5% per annum. Seems reasonable given the yields on the underlying shares/REITs and then deducting around 1.19% in expenses. The caveat being broadly if the unit price drops below the 10 baht level, then you won't get a dividend. All in all a reasonable yield, with some upside for capital growth. Some comfort also in a way that if I'm not around, and we use this as part of an income paying portfolio for the wife, then there are some restrictions on preventing capital erosion in the form of restricting dividends in bad times.
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AyG
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Post by AyG on Mar 16, 2016 14:53:15 GMT 7
The caveat being broadly if the unit price drops below the 10 baht level, then you won't get a dividend. This does appear to be right. The fund was below 10.0 from 18 August 2015 through 15 February 2016 (apart from a couple of brief, small blips) and no dividend was paid. Is it clear what then happens to the income received during the periods when the unit price is below 10? Is it reinvested in further stock? Or just kept as cash to be paid out when the unit price rises? I do find this sort of arrangement rather unsatisfactory. If I consider one of my investments, BRWM, it lost something like 70% of its NAV, but at least I was made to feel better that I was receiving a high dividend income as its NAV went down and down. With TMBPIPF, if something like this happened I could be left waiting for years or even decades before getting income restored. I also think it disingenuous describing this as an income fund when the income distributed can so easily disappear.
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Post by Fletchsmile on Apr 8, 2016 14:19:22 GMT 7
It seems they look on an overall basis - very similar to what happens for normal companies that aren't investment vehicles. When the unit price is below 10 baht, that means the fund has a (overall) retained loss, and negative retained earnings. The capital loss on units exceeds the income received. The distinction between income and capital account isn't there to the same extent
For me it's just swings and roundabouts. Different to what I've been used to. The counter argument on something like BRWM is that in many ways if a fund has suffered large falls it might be better to keep the money in the fund re-invested to take advantage of cheaper prices in the market. Paying out a dividend is akin to selling at the bottom of the market. Selling units at the bottom of cycles is what quickly erodes portfolio survival rates. eg 1) fall 70%, pay out 5% on original, you now have only 25% left. That has to quadruple in value to get back to where you were. vs 2) fall 70%, retain div, you have 30% left. That has to increase 3.33x to get back to where you were.
If the market rose 50% next year: 1) would have 37.5 % of original and 5 div 2) would have 45 % of original and no div
OK someone has the 5 extra div in the first case, but what would they do with it? In theory they could buy more shares, but that incurs transaction costs. In the second case if they really need the money they just sell some extra units.
Swings and roundabouts really. The Thai way is more conservative, but the UK way more consistent and predictable for income schemes.
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Post by Fletchsmile on Apr 8, 2016 14:19:34 GMT 7
I also bought some of the TMBPIPF RMF version last month. As an RMF it can't pay out dividends so the above issue goes away and it's total return I'm looking for with tax benefit..
As an investment I liked the tax relief and the addition of property exposure to diversify my (small) RMF portfolio is useful. Online thru TMB was very easy.
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AyG
Crazy Mango Extraordinaire
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Post by AyG on Apr 28, 2016 17:31:27 GMT 7
With 5 dividend payments to date and the info above the picture is becoming clearer. Looks like an average of around 0.013 per quarter on a price of around 10 baht/unit = just over 5% per annum. If only things really were becoming clearer. I've just received a letter through the post (dated 21st) informing me of a dividend for the period 3 March to 18 April. Book close date is tomorrow. No mention of the amount, or the actual payment date, though it's probably going to be in the first week of May based upon previous timings. Incidentally, the letter is completely in Thai. Not great customer service. Similarly, there's no mention of this on the TMBAM website in English or Thai.
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Post by Fletchsmile on Apr 28, 2016 21:43:21 GMT 7
With 5 dividend payments to date and the info above the picture is becoming clearer. Looks like an average of around 0.013 per quarter on a price of around 10 baht/unit = just over 5% per annum. If only things really were becoming clearer. I've just received a letter through the post (dated 21st) informing me of a dividend for the period 3 March to 18 April. Book close date is tomorrow. No mention of the amount, or the actual payment date, though it's probably going to be in the first week of May based upon previous timings. Incidentally, the letter is completely in Thai. Not great customer service. Similarly, there's no mention of this on the TMBAM website in English or Thai. The NAV is now well above 10. So that means they have positive retained earnings. So probably trying to make up for the absence in the past. Makes sense to me. Yes, their customer service could be a lot better. I like their systems though relative to most others I've seen in Thailand, and the more I can do online the less I need them. My RM at Stan Chart gives me great service, but everything is manual and their systems poor. Between the two I can now choose: systems or service )
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AyG
Crazy Mango Extraordinaire
Posts: 5,871
Likes: 4,555
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Post by AyG on Apr 29, 2016 10:27:06 GMT 7
This fund continues to provide revelation after revelation. I'd assumed that it provided exposure to property companies investing primarily in Singapore and Thailand. And indeed that was the case until recently. However, I now see that the 5th largest holding at just under 6% is Mapletree Greater China Commercial Trust which only has 3 properties, in Hong Kong, Shanghai and Beijing. This irks me because (a) I don't want significant exposure to Chinese property, (2) the trust isn't well-diversified, (3) it yields much less (3.4%) than the other investments in the fund. I can't think of any other investment that has given me so many surprises.
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Post by Fletchsmile on Apr 29, 2016 14:16:42 GMT 7
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AyG
Crazy Mango Extraordinaire
Posts: 5,871
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Post by AyG on Apr 29, 2016 15:10:26 GMT 7
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Post by Fletchsmile on Apr 29, 2016 15:51:59 GMT 7
Your not missing anything, it's Morningstar's mistake. Just checked: Morningstar has it wrong and is missing some data. It only shows divs declared for 2013 and 2015, and only one for the relevant year.
Bloomberg and Mapletree's own website are consistent between the two. The webiste also shows the first half and second half divs for the last 3 years.
Also just looked on the Stan Chart online trading I use and it's 7%+. FWIW The latest analyst snapshot on there feeds from Dow Jones and has DBS Vickers house view as a buy with a target of 1.11 for it
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