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Cambridge Industrial Trust: 1 for 8 rights issue.

Friday, March 11, 2011

As a retail investor and minority shareholder, I prefer a rights issue to private share placement as it allows me to participate in the enlarged capital base of the business entity. Cambridge Industrial Trust (CIT) is having a rights issue to help fund three acquisitions in Singapore. I won't go into the details. You can get all the details here.

Foremost on my mind is how can I benefit from this rights issue. Although I am no longer invested in the REIT, I will not let my past experience stop me from a possible money making opportunity. Rights issues have, so far, been profitable for me.

The rights are at an issue price of 42.9c each. 1 rights unit for every 8 units of CIT owned.

Current price is 50.5c/unit. 

Current DPU is 4.89c. Current NAV/unit is 61c. Current gearing is 34.7%.

Post rights, DPU will be 5.07c. NAV/unit will be 58c. Gearing will be 35.9%.

Therefore, if we are after a 10% distribution yield, getting units in CIT at 50.5c or lower would secure that for us. So, we could either buy some units at the current price and take part in the rights issue or we could wait to see how much the nil-paid rights would go for when they start trading later this month. Since the rights are at an issue price of 42.9c, the nil-paid rights should go for 7c at the highest. It would not make sense to pay more for them.

If the unit price of CIT were to be hammered down for some reason or if the nil-paid rights were to be sold at very low prices when they start trading, we could have ourselves a bargain.


Important dates:
Last day of CR: 15 March 2011.
Trading of nil-paid rights: 23 March to 31 March 2011.
Last date for acceptance and payment: 6 April 2011.

4 comments:

Anonymous said...

Rights Issues are always nightmares for retirees. I am going to have sleepless nights soon.

CSTAN

Drizzt said...

one of the worst managed company i feel.

AK71 said...

Hi CSTAN,

You could sell away the nil-paid rights when they start trading. Don't worry too much about it. Don't have nightmares. :)

AK71 said...

Hi Drizzt,

From my past blog posts on this REIT, you know that I agree with you. Hahaha... :p

However, if it could make me some money, I am willing to look beyond its failings... for now. ;)

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