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Cambridge Industrial Trust: Fails to deliver.

Wednesday, October 20, 2010

I have blogged about how I dislike CIT's share placements which dilute current unitholders' shares of the REIT.

On 14 August, I blogged that "Due to the acquisitions, total distributable income is expected to increase 5.7%.  However, in order to fund the acquisitions, the private placement would lead to an increase of 10.15% of units in issue.  This effectively dilutes the DPU of CIT, post acquisition. DPU is estimated to fall from 5.36c to 5.14c.  NAV per unit will also fall from 60c to 58c."

The 3Q2010 results released today show the following changes quarter on quarter:

1. Net assets increased from S$522.8m to S$554.1m.

2. Number of units in issue increased from S$873.2m to S$962.1m.

3. NTA per unit decreased from 59.9c to 57.6c.

4. Net property income decreased from S$16.1m to S$15.9m.

5. Distributable income remains unchanged at S$10.8m.  This is despite expectations that it should increase 5.7% due to acquisitions announced in August!

6. DPU reduced from 1.238c to 1.187c.

Although the REIT has grown in net asset value by 5.99%, the number of units in issue has grown by 10.18%. NTA per unit has, naturally, suffered a decrease in value.  Although net assets increased, the REIT suffered a decrease in net property income.  Overall, DPU which is what matters to most unitholders suffered a 4.1% decrease.

The annualised DPU has decreased to 4.709c.  This is much worse than the estimates in August which was for the DPU to fall from 5.36c to 5.14c. A DPU of only 4.709c gives a yield of 8.33% based on the last traded price of 56.5c before trading was halted at 3.08pm.  This pales in comparison to AIMS AMP Capital Industrial REIT's DPU of 2.08c which translates to a yield of 9.24% based on a unit price of 22.5c.

Although the REIT's gearing has been reduced to 39.2%, it is still much higher than AIMS AMP Capital Industrial REIT's 34.8%.  Its interest cover ratio of 3.8x is also lower than AIMS AMP Capital Industrial REIT's 4.21x. With NTA per unit at 57.6c, it is trading at less than 2% discount while AIMS AMP Capital Industrial REIT is trading at a 13.5% discount to NTA per unit of 26c.

If I have to choose between the two industrial S-REITs, it is quite clear to me that CIT is a distant second to AIMS AMP Capital Industrial REIT.  Indeed, I have chosen, having divested all my interest in CIT while increasing the size of my investment in AIMS AMP Capital Industrial REIT.

See presentation slides here.

Related post:
Office S-REITs VS Industrial S-REITs
Cambridge Industrial Trust: Acquisitions and private placement.
AIMS AMP Capital Industrial REIT: Buying more?


Anonymous said...

Ak. I see the point about CIT. Now they are following AA in issuing preferential - 1 for 25 @ S$0.531.

Somehow, i noticed that this counter has got it's price up & up in the recent weeks.

Didn't say if there is any excess rights available. Hopefully yes, as I liked to round up the odd lots.


AK71 said...

Hi SnOOpy88,

CIT is not issuing rights like what AA REIT did. They are issuing "preferential units". Not the same thing.

Perhaps, now, we know why CIT's unit price has been going up and up recently. So that the new placement and preferential units could be offered at a higher price. ;)

I will be blogging about CIT's latest equity fund raising. Look out for it. :)

Anonymous said...

Thanks AK.

The freedom of choice to sell the rights, will be a good thing. Not all time, i have idle fund waiting.

Perhaps I should have been more bold with the recent AA rights offer, but I wasn't familiar with the steps and the tools available.

Usually I don't, but for once I have a not so good opinion about this counter. Perhaps it is time to look else where, once I rounded up my odd lots.


AK71 said...

Hi SnOOpy88,

The rights issue by AA REIT was a good money making opportunity for unitholders. It made me more of a believer in the management that they care about unitholders' interests.

Let's see how things turn out for CIT. It could turn out well despite my negativity since Mr. Market has never cared for what I think. ;)

Anonymous said...

Just realised that I have odd lots on hand due to the acceptance of units, in lieu of cash, for the last dividend. Now want to run also cannot. Bo Pian, die die have to take the PU and round up.

Hopefully, the prices still holds by the time the exercise is over.


AK71 said...

Hi SnOOpy168,

I remember rejecting the scrip dividends from CIT because the discount to the traded price was so teeny tiny. I chose cash.

The only counter I ever accepted scrip dividends for was Healthway Medical as the discount to the traded price was quite high.

Good luck. :)

Anonymous said...

CIT kena lim kopi @ SGX


AK71 said...

Hi SnOOpy168,

I just took a look. Wah, SGX is staying vigilant. Good. :)

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