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AIMS AMP Capital Industrial REIT and Sabana REIT.

Sunday, May 15, 2011

(Something is wrong with Blogger. This blog post appeared on 12 May 2011, not 15 May 2011.)
In life, good and bad things happen. We just have to hope that more good things than bad things happen. If good things happen, we have to know it when we see it and take advantage of them. If bad things happen, we must know to take remedial action and not sink deeper. Easy to say and hard to do? Probably.

I believe that a good thing is happening now with Sabana REIT. OK, it is a matter of perspective. For those who bought it at $1.05 a unit at IPO, it might not look good at all. However, look at it from a different angle and it is a chance to accumulate more on the cheap. Well, some might say cheap could get cheaper. Indeed, it could.

I indicated in an earlier blog post where I think the supports for Sabana REIT's unit price would be if 91c were to be compromised as immediate support. You might want to read the blog post here. Today, price went to a low of 90.5c.

Regular readers know that Saizen REIT was my single largest investment until the recent partial divestment as its unit price rebounded from a serious bout of panic selling. AIMS AMP Capital Industrial REIT is now my largest investment.

At today's price of 20.5c and an annualised DPU of 2c, AIMS AMP Capital Industrial REIT has a distribution yield of 9.756%. Comparatively, Sabana REIT has an annualised DPU of 8.81c and at today's closing price of 91c, the REIT has a distribution yield of 9.68%.

AIMS AMP Capital Industrial REIT has a gearing level of 32% and an interest cover ratio of 5.7x while Sabana REIT has a gearing level of 24.9% and an interest cover ratio of 7.9x.

I also like Sabana REIT for having 44% of its portfolio in high tech industrial buildings. This compares favourably against AIMS AMP Capital Industrial REIT's 17.7%.

I could very well do some re-allocation of funds through a partial divestment of my investment in AIMS AMP Capital Industrial REIT and increasing my investment in Sabana REIT if the latter's unit price should weaken further, everything else remaining equal.

See presentation slides for AIMS AMP Capital Industrial REIT here.

See presentation slides for Sabana REIT here.


hydrogenperoxide said...

At first I thought it sounds a bad deal.. Aims have higher yield.. but after doing the calculation, realized that they're that close.. Definitely with lower gearing, it'd sounds like a form of hedging?? :D

AK71 said...

Hi Peroxide,

At the current price, Sabana REIT looks like a more attractive proposition. I am just sharing my plan if Sabana REIT's unit price should decline further. ;)

Edward said...

I agree with all your comments. I did some research and reached the same conclusion about lower gearing while still achieving similar yield % with AIMS reit.

But AIMS reit leases expiring 2011, 2012, 2013, might 'reset' at higher rents given the weak 2008-2010 rental agreements.

Sabana is locked in till 2013, at rents that might be 'inflated' to push through the IPO pricing.

What do you guys think. I just bought 500 lots today at 91c. But i am seeing more sellers now so will hold back on further buying. I think Moore Capital might still be selling some remnant holdings.

How do you guys compare this with Hutch Ports = lower yield% but has a growth component. I am also holding HPH Trust at 92.5c.

AK71 said...

Hi Edward,

You have a valid point although most of the properties of AIMS AMP Capital Industrial REIT are not of the high tech variety which commands the highest rental psf.

I am not comfortable comparing AIMS AMP Capital Industrial REIT and Sabana REIT with HPH since they are essentially different types of businesses. Personally, I do not have any vested interest in HPH.

Hutchison Port Holdings Trust: A weak debut.

Ray said...

Hi AK,

Sorry to comment on your old post again. I have been reading comments and discussion on REITs.
Tenure length have been discussed and seem to be an issue but I just couldnt make sense how.

1) Can you share what I should look out for in Tenure Duration of the properties?

2) Also, how does a newbie know if the management of a REIT is capable or not?

Thanks alot in advance

AK71 said...

Hi Ray,

I think it is an issue that has been blown out of proportion by some people and in some quarters. You might want to read this:

REITs, depreciation and FFO.

I also recently replied to a comment from a reader on land leases:

Land leases.

As for how do we know a management is good or not, the only way is to look at their track record. See how the REIT has been performing so far. They have quarterly reports. Examine them. That's what I do.

You can refer to my blog's right sidebar and look at how I go through quaterly reports of REITs to start you off. :)

Ray said...

Thanks alot AK

AK71 said...

Hi Ray,

You are welcome. :)

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