Sell @ $0.40
Cleared the balance of my holdings, no more left.
Made the decision to clear after reading what Ben Koh of Lighthouse Advisors (link from David) had to say about LMIR profit being 2-3% lower than the Indonesia Govt Risk Free (10-Yr Bonds) rates of ~9%. The problem is,
- Indonesia Risk Free Rate = 9%+
- LMIR Profit = 6%+
Ben Koh stated that this must be due to either,
- LMIR Mgmt is Inefficient and / or
- LMIR NAV is overstated
After some quick checks, some observations
- Indonesia 10-Yr Govt Bond Rate was aro 6% for 2012 till Q113 before it shot up towards 9%
- LMIR Tenancy agreements suffers a time lag of likely 1-2 years at least or longer eg. Q313 ~ +20% higher rental reversions
So, Ben Koh is not wrong as he's likely looking at figures at a point in time ie. 30-Sep-13, which he used to do his calculations for his conclusion. But, as Indonesia had suffered severe economic problems in recent times, we see drastic changes over a few months' time frame… This is therefore the Economic (Emerging Economy at that) Risks and FOREX risks which we thought we'd be comfortable with… when weighed against the 8% Yield, Discount to NAV, Low Gearing,… previously.
Lastly, my selling is not due to the Ben Koh article as I was already selling prior to that. If anything, it reinforced my decision to sell.. and at a faster pace.. as I'm trying to make decisions based on Opportunity Costs… even if I have to take a huge individual loss.. 😀
For eg, my thoughts were,
- LMIR Yield = 5-6% for next 2-3 Quarters if INR don't strengthen
- Indonesia economy may stay weak for at least the next 1-2 years
- Elections this year means potentially higher Political Risks
So, if I were to hold, I'm projecting a likely holding period of 1-2 years. In the meantime, the Yield (based on mkt price) is 5-6%. It's lower if we use Cost but that'd not be useful for comparing Opportunity Cost. Thus, my decision to sell is based on switching to other opportunities which I think has a more than even chance of doing better than LMIR..