Top Stock Market Highlights: Charlie Munger, Manulife US REIT and Sembcorp Industries

Welcome to this week’s edition of top stock market highlights.

Charlie Munger

Charlie Munger, the right-hand man of Warren Buffett at Berkshire Hathaway (NYSE: BRK.B), passed away peacefully at the age of 99.

Munger would have lived for a century come 1 January 2024.

Both Buffett and Munger were born and brought up in Omaha, Nebraska.

They met as adults in 1959 and forged a friendship and partnership that lasted more than six decades.

When he passed, Munger had a fortune of around US$2.6 billion, though most of his wealth had been donated to charity throughout his lifetime.

It was Munger’s influence that taught Buffett to look beyond “cheap” stocks and, instead, focus on quality companies that can compound earnings for many years to come.

Charlie Munger was also known for his sharp wit and his candour when it came to various topics about life and investing.

He advised investors to constantly learn and become wiser over time.

“I constantly see people rise in life who are not the smartest, sometimes not even the most diligent, but they are learning machines. They go to bed every night a little wiser than when they got up and boy does that help—particularly when you have a long run ahead of you.”

He even has advice for people on how to lead a successful life.

“It’s so simple. You spend less than you earn. Invest shrewdly, and avoid toxic people and toxic activities, and try and keep learning all your life, etcetera et cetera. And do a lot of deferred gratification because you prefer life that way. And if you do all those things you are almost certain to succeed. And if you don’t, you’re gonna need a lot of luck.”

Rest in peace, Mr. Munger. You will be dearly missed.

Manulife US REIT (SGX: BTOU)

Manulife US REIT, or MUST, has announced a comprehensive recapitalisation plan to address the REIT’s financial covenant breach.

As a recap, MUST announced in July that a decline in portfolio valuations as of 30 June 2023 caused it to breach a financial covenant with the banks that requires the ratio of total unencumbered debt to total unencumbered assets to be 60% or less.

As a result, distributions were halted for the first half of 2023 as the REIT manager undertook negotiations with MUST’s lenders to resolve this breach.

The proposed recapitalisation plan comprises several steps.

• The divestment of Park Place to MUST’s sponsor, Manulife Financial, at US$98.7 million,

• Securing a six-year unsecured US$137 million loan from the sponsor at an interest rate of 7.25%,

• Utilisation of US$50 million from MUST’s cash reserves,

• Further asset sales to raise a minimum of US$328.7 million,

• Half-yearly distributions are to be suspended until 31 December 2025

Both the board and management of MUST had considered other alternatives but deemed them as not adding value or having a high level of risk.

The rising interest rate environment and continued headwinds in the US office sector result in limited financing options and weak leasing demand.

An extraordinary general meeting (EGM) will be held on 14 December to vote on three resolutions to effect the transactions above.

The manager has reiterated that these resolutions are conditional on one another and all three need to be approved for the recapitalisation plan to go ahead.

Should any of these resolutions not be approved, the loan facilities will remain in breach and the lenders have the right to demand the repayment of all of MUST’s loans.

If such a scenario plays out, the liquidation of MUST’s property portfolio at distressed levels may be required.

Sembcorp Industries Ltd (SGX: U96)

Sembcorp Industries, or SCI, has signed two separate agreements to acquire 428 MW of wind assets in both China and India.

These assets will be acquired from Qinzhou Yuanneng, which owns 200 MW of operational wind assets in Guangxi, China, for around S$130 million.

SCI’s wholly-owned subsidiary will also acquire 228 MW of operational wind assets in Madhya Pradesh and Rajasthan for around S$70 million.

Since the group’s Investor Day announcement that it is targeting to achieve 25 GW of gross installed renewables capacity by 2028, it has been busy snapping up assets.

To date, SCI has secured 673 MW of renewables and upon completion of this series of transactions, the group’s gross renewables capacity will reach 12.6 GW globally.

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Disclosure: Royston Yang does not own shares in any of the companies mentioned.

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