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AIMS AMP Capital Industrial REIT: XR.

Thursday, September 16, 2010

This REIT went XR today. Closing at 22c, it shows a great deal of resilience and is much better than the expected TERP (theoretical ex-rights price) of 21c. If we look at the trade summary, of the total 3,307 lots which changed hands today, most of these, 2,487 lots to be exact, were bought up at 22c.  There is still a great deal of demand for this REIT.  In fact, anyone who went ahead and bought some at 22c or 22.5c when the counter first went CR would be in the money now.

We will get 7 rights for every 20 units which we currently hold. If we had bought these 20 units at 22c, we could sell these 7 rights when the nil-paid rights start trading on 23 Sep.  Since the price to pay to convert these rights is set at 15.5c, theoretically, they are worth 6.5c a piece (22c - 15.5c = 6.5c).  This would bag a gain of 6.5c x 7= 45.5c.  Based on an initial investment of 22c x 20 = 440c, 45.5c represents a gain of  more than 10% if we sell away the nil-paid rights! Detractors' aplenty but I believe the numbers here speak for themselves. Of course, bear in mind that these calculations are done assuming that this is a perfect world (which it is not).  So, it would be realistic to expect some deviation.

The question some might have on their minds is whether this is still a good time to enter?  Well, the estimated DPU, XR, is 2.08c per year.  This gives a yield of 9.45% at the current price of 22c.  If that is good enough for you, why not?

Personally, I would wait to see what the the nil-paid rights might be trading at come 23 Sep. I do not expect the nil-paid rights to trade below 5.5c since 5.5c + 15.5c = 21c which is the expected TERP and would enjoy a yield of almost 10% per annum.  However, if I were proven wrong and the nil-paid rights do trade at 5c or less, I would probably end up buying more. The yield would be simply irresistable at more than 10% per annum.

See slides from EGM here.

Related posts:
REITs: Simply explained?
AMPS AMP Capital Industrial REIT: Sell the rights.

22 comments:

Newbie said...

Hi AK71
I do not own any of the share for AIMS. Say if I buy in the 5000 Rights and make payment of 15.5c for 5000 Right, will I own 5000 share of AIMS?

Giggs said...

Hi, may I know if I'm currently not vested in Aims, can I convert the nil-paid rights purchased over the market when it's being traded? Or is it a prerequisite to at least own the shares first?

AK71 said...

Hi Newbie,

Yes, if you buy 5000 rights from the stock market and pay 15.5c for these at an ATM, you would own 5000 units of AA REIT. :)

AK71 said...

Hi Giggs,

Yes, you could convert any nil paid rights purchased in the market when they start trading on 23 Sep. It is not a prerequisite to be an existing AA REIT unit holder to do so. :)

Newbie said...

Hi AK71,
In such scenario, do we still eligible to apply for Excess Rights?

Paul said...

Hi!

I did not buy it with CR, and now, i am waiting for the rights. Hoping to get at lower price, so if the rights trade at below 5cents, i would be happy, if buying at 23c would give me an average px of around 21.5cents. just wait and see, since there is still time before the next dividend payout and i think it was in the overbought region =)

Zac said...

Hi buddy,

1) How do you derive the expected TERP (theoretical ex-rights price) of 21c?

2) Understand we can buy the rights at 15.5c, when can we do so? and the price now trading at 22c and not 15.5c, how do we do so? (Nil holdings of AIMS REIT shares currently)

Appreciate ur reply

AK71 said...

Hi Newbie,

I believe that only existing unit holders are allowed to apply for excess rights.

This is what I understand from pages 18 and 19 of the circular dated 24 Aug. I hope I have not misunderstood it. :)

AK71 said...

Hi Paul,

If the rights trade at 5c or lower, they would be a steal! At 5c, it would mean a unit price of only 20.5c (5c + 15.5c). I would buy more too. :)

AK71 said...

Hi Zac,

The formula for the TERP is found on page 8 of the circular dated 24 Aug. ;)

Market capitalisation of AA REIT based on the closing price + gross proceeds from the rights issue / units outstanding after the rights issue = TERP

If you do not own any units of AA REIT yet and would like to do so, you could either buy at 22c (the current price) or wait for the nil-paid rights to start trading on 23 Sep, like what Newbie, Paul, Giggs and many others are doing and buy the nil-paid rights at whatever price they are being offered by sellers. Then, go to an ATM and pay 15.5c for these rights to convert them into regular AA REIT units. The last date for payment at the ATMs is 7 Oct. :)

If you choose to wait for the nil-paid rights to start trading, you would want to buy at a price which would give you some savings over buying the units outright at 22c now. Good luck. :)

Anonymous said...

Hey AK,
All this talk about the rights issue is getting a bit technical for me...i.e. confused.

Heh, simply put, as you know I own AIMS currently. How do I subscribe to my entitlement and how do I purchase the excess rights?

Sorry blur...

Thx a bunch!

~K

Giggs said...

Thanks for the clarification AK71!

AK71 said...

Hi K,

As you are a current unit holder of AA REIT, wait for a package which you should be receiving in the mail soon. It will tell you how many rights you are entitled to. Instructions on acceptance and payment as well as how to apply for excess rights would be included. Don't worry. :)

AK71 said...

Hi Giggs,

Hey, no problem. Hope you get some nil-paid rights at a good price. I hope so for myself too. ;)

Zac said...

Hi AK71,

Just to be certain. When you mention
Quote
wait for the nil-paid rights to start trading on 23 Sep, like what Newbie, Paul, Giggs and many others are doing and buy the nil-paid rights at whatever price they are being offered by sellers. Then, go to an ATM and pay 15.5c for these rights to convert them into regular AA REIT units. The last date for payment at the ATMs is 7 Oct.
Unquote

1) Where do I takeup the option to purchase the nil-paid rights after 23 Sep?
2) So if I go to ATM and have paid at 15.5c per share to convert to regular AA REIT Share, and currently it trades at 23.5c, wldn't I make 8.0c immediately? So easy money?
3) Suppose in (1) I have taken up the option to purchase on 23 Sep but I've not paid at ATM, then can I contra off like regular shares do?
4) Any ATM to pay? And is ATM the only way to pay for the nil-paid rights?

Sorry for the length of qns as I have no prior understanding on rights issue. Pls do not mind that they seem ignorant.

AK71 said...

Hi Zac,

1. You could buy nil-paid rights in the open market when they start trading on 23 Sep. The last day of trading is 30 Sep. In other words, nil-paid rights could be bought and sold like any shares from 23 Sep to 30 Sep.

2. It depends on what price you pay for the nil-paid rights in the open market when the time comes. I doubt you would get them for free. ;) So, if you pay 7c for the nil-paid rights, for example, plus the 15.5c you must pay at the ATM, your total price would be 22.5c.

3. Yes, you could contra off the nil-paid rights within 3 days of purchase like any regular shares. I don't see why not. If you were to buy in the last two days of trading (29 and 30 Sep), you would not have the full 3 days to do a contra, I guess. :)

4. I think any of the big three should be OK (DBS/POSB, UOB and OCBC). To be sure, check the online announcement which should be available at SGX when the information package is made available to unit holders. You could also drop off a cashier's order at SGX to convert the rights into regular AA REIT units. You would have to call up SGX for the proper envelope since you are not an existing unit holder. Too much work, I think. ATMs are easier.

Hope my replies are clear. Information correct to the best of my knowledge. ;)

Zac said...

Thanks lots. It has been clear.
Enjoy your day.

AK71 said...

Hi Zac,

I'm glad.

Good luck to us all. :)

Anonymous said...

Hi AK71,

I have just received the package from AIMS to apply for rights. If we are going through the ATM method, do we still have to fill in and send in the ARE form? First timer and thus rather confused now.

Hope that you can help :)

jt

AK71 said...

Hi JT,

If you are going to the ATM to accept and pay for the rights + apply for excess rights, you do not have to fill up any forms. Just remember that the last day to do this is 7 Oct. :)

Anonymous said...

Hi AK71,

Thank U so much :)

jt

AK71 said...

Hi JT,

No problem. I hope all of us get some excess rights. 15.5c is a steal! ;)

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