The assessment mainly aims in formulating adequate portfolio, which could help in producing return to MS B, who is ultra-high net worth individual investing in Singapore. In addition, the portfolio could help in supporting the financial requirement of MS B, where it might generate high rate of return from investment. The portfolio mainly focuses on developing high return from investment, which reduces the negative impact of inflation on investment capital.
The above figure mainly depicts the investment opportunity, which is presented to MS B, who intends in investing in property market of Singapore. In addition, financial performance of the company and REIT is mainly identified from the above values. Moreover, from the valuation investment opportunity in stocks and REIT can be detected, which might be included in the portfolio. This relevantly indicates that the detection of financial performance could help in selecting the adequate investment opportunity to improve portfolio returns (Baum & Crosby, 2014). The use of dividend yield, price earnings ratio, net book value is mainly used in identifying investment opportunity. Furthermore, the financial performance of REIT and shares is used in identifying the investment opportunities, which could be used in formulating the portfolio.
The above figure helps in depicting the overall real property, which could be used in the portfolio formulation process. This helps in detecting the minimum and maximum returns, which could be provided from investment. The use of mortgage can also be conducted to accommodate real property in portfolio, where 2.5% of the mortgage rate will be used to increase return from investment (Kim et al., 2015). This accommodation of real property could allow investors to gain from annual rent and rising property price in Singapore. Both the investment option has adequately, as prices and demand for commercial and residential property has exponentially increased in Singapore.
|
Particulars |
Per sqft |
Price per sqft |
Amount |
Return |
|
Commercial Office |
1200 |
SGD 2,800 |
SGD 3,360,000 |
SGD 114,000 |
|
Residential Condominium |
1200 |
2800 |
SGD 3,360,000 |
SGD 33,600 |
|
Mortgage loan |
SGD (1,720,000) |
SGD (43,000) |
||
|
Total |
SGD 5,000,000 |
SGD 104,600 |
||
|
Return |
2.09% |
|||
|
Inflation rate |
3.00% |
|||
|
Actual return from investment % |
-0.91% |
The above table mainly represents the overall investment, which needs to be conducted in property market for generating the required rate of return for MS B. However, the evaluation indicates that retune from the real estate investment is not adequate, where the investment would not be conducted by the investor. The financial performance of the portfolio is not adequate, where inflation present in Singapore nullifies the gains, which is been made from property rent. The utilisation of mortgage method could help in accommodating both the property, where returns does not compensate the rising inflation. Hence investment solely in the property market is not adequate, where return does not compensate the loss from inflation (Haila, 2015).
|
Particulars |
Share price |
No of Shares |
Amount |
Return |
|
Crystal World Ltd |
12.8 |
49,888 |
SGD 638,566 |
SGD 9,578.50 |
|
Jade Inter- National Ltd |
1.8 |
2,423,019 |
SGD 4,361,433 |
SGD 152,650.17 |
|
Total |
SGD 5,000,000 |
SGD 162,229 |
||
|
Return from investment |
3.24% |
|||
|
Inflation rate |
3.00% |
|||
|
Actual return from investment % |
0.24% |
|||
|
Actual return from investment amount |
SGD 12,229 |
The evaluation of share in the property market mainly helps in generating adequate return, when both the investment option is utilised. The investment in Crystal World Ltd and Jade Inter-National Ltd could help in generating adequate return of 3.24% in dividend over the period of one year. This could allow MS. B to compensate for the rinsing inflation in Singapore and generate adequate returns. Moreover, the actual return that will be generate by the investment is 0.24% after deducting the inflation rate, which amount to SGD 12,229. However, the investment in shares would result in high risk, as both companies have high gearing ratio (Hutchinson, 2015). This indicates that debt in the companies are high, which increases investment risk for MS. B.
|
Particulars |
Share price |
No of Shares |
Amount |
Return |
|
F-REIT |
2.9 |
100,000 |
SGD 290,000 |
SGD 13,050 |
|
P-REIT |
1.5 |
900,000 |
SGD 1,350,000 |
SGD 91,125 |
|
Total Investment |
SGD 5,000,000 |
SGD 104,175 |
||
|
Return from investment |
2.08% |
|||
|
Inflation rate |
3.00% |
|||
|
Actual return from investment % |
-0.92% |
|||
|
Actual return from investment amount |
SGD (45,825) |
The last investment scope is presented in REIT, which could allow MS. B to increase the level of returns from investment. In addition, the investment in REIT is also risky, as gearing ratio of the investment is relatively high for both P-REIT and F-REIT. Moreover, the investment in REIT would portray a loss for MS. B, as actual return from investment is at the levels of -0.92% after deducting the inflation rate. Therefore, inflation in Singapore would nullify the gains, which will be presented from the investment in REIT. Therefore, investment solely in REIT would result I loss for MS. B and could reduce the valuation of investment capital (Lee et al., 2017).
Hence, after the evaluation of all the three investment criteria it could be assumed that relevant portfolio comprising of REIT, shares and real-estate could be drafted for MS B, which might help in nullifying the negative impact of inflation. This portfolio could allow MS. B to increase the relevant returns from investment and tap into the rising property market of Singapore. The concentration of the portfolio needs to the conducted-on shares, as it provides the highest return and has low debt (Newell et al., 2015). Therefore, investment in commercial office, Crystal World Ltd and F-REIT could allow MS. B to accommodate low risk in her portfolio and generate adequate return from investment.
Conclusion:
The above created portfolio could allow MS B to tap into the rising returns, which is been provided by the property market of Singapore. In addition, the financial performance of the REIT and companies is being evaluated to formulate the portfolio, which might help in generating high-end profits from investment. Moreover, the detection of financial performance helps in pinpointing the investment opportunity, which could be listed in the portfolio. The drafted portfolio could nullify the impact of inflation rate and protect the investment capital and returns.
Reference
Baum, A. E., & Crosby, N. (2014). Property investment appraisal. John Wiley & Sons.
Downs, D. H., Ooi, J. T., Wong, W. C., & Ong, S. E. (2016). Related party transactions and firm value: evidence from property markets in Hong Kong, Malaysia and Singapore. The Journal of Real Estate Finance and Economics, 52(4), 408-427.
Haila, A. (2015). Urban land rent: Singapore as a property state. John Wiley & Sons.
Haila, A. (2017). Institutionalization of ‘the property mind’. International Journal of Urban and Regional Research, 41(3), 500-507.
Hutchinson, F. E. (2015). Mirror Images in Different Frames?: Johor, the Riau Islands, and Competition for Investment from Singapore. Institute of Southeast Asian Studies.
Kim, H. M., O’Connor, K. B., & Han, S. S. (2015). The spatial characteristics of Global Property Investment in Seoul: A case study of the office market. Progress in Planning, 97, 1-42.
Lee, C. L., Newell, G., & Kupke, V. (2017). Australian Institutional Investors and Residential Investment Vehicles. In Proceedings of the 20th International Symposium on Advancement of Construction Management and Real Estate(pp. 709-720). Springer, Singapore.
Newell, G., Pham, A. K., & Ooi, J. (2015). The significance and performance of Singapore REITs in a mixed-asset portfolio. Journal of Property Investment & Finance, 33(1), 45-65.
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