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Sabana REIT: Recent developments.

Friday, August 12, 2011


The REIT has proposed the acquisition of 39 Ubi Road 1. The property has a remaining tenure of about 40.4 years and is valued at $32m. The vendor, Ascend Group Pte. Ltd., will take a master lease of the entire premises for a term of 5 years. Extension works is ongoing and will add approximately 41% to the building's existing gross area. The acquisition will be funded by debt and will increase gearing level from 25.1% to 27.7% upon completion. My thoughts? With what information is available at this point in time, I like it as it would probably bump up DPU marginally for unitholders without asking us for more funds while gearing level remains very comfortable.  See announcement here.

Al Salam Bank Bahrain BSC increased its investment in the REIT by 1,909 lots at a price of 94c per unit on 2 August 2011. It now holds a 5.14% stake in the REIT. See announcement here.


The REIT received a 'BBB-' long term corporate credit rating from Standard & Poor's Rating Services. This reflects "Sabana REIT’s moderate leverage with good access to diversified funding channels and stable cash flows. The ratings also take into account the quality of Sabana REIT’s industrial property assets in Singapore and minimal capital expenditure needs. The stable outlook was based on the REIT’s balanced business risk profile as well as its adequate cash flow protection measures" and "is a significant first step that will allow Sabana REIT to access investment grade Shari’ah compliant debt and capital markets." See announcement here.

16 comments:

Hwang said...

AK,

I can't help but to notice that Cache weathered the selling pressure pretty well compare to Sabana and recover faster too.

Because the manager is ARA? Then wouldn't holding some ARA interesting too?

Anonymous said...

Motley:

Thank you.

Good stuff.

AK71 said...

Hi Hwang,

Cache Logistics Trust has more of a pedigree than Sabana REIT. A good pedigree always helps. ;)

I have a long position in the former as well and would not hesitate to add if its unit price should weaken further.

As for ARA, I am looking forward to initiating a long position in the company. I am eyeing it. ;)

AK71 said...

Hi Motley,

Hey, no problem. Just sharing what is already available online. It is more for my easy reference but if anyone else finds it useful that I did this blog post, I am happy too. :)

INVS 2.0 said...

Hi Ak71,

I maybe asking an irrelevant question but what do you think of Starhill Global?

AK71 said...

Hi INVS 2.0,

I have not looked at Starhill Global REIT in a very long time as I feel that industrial properties S-REITs provide better returns.

However, if we look at the numbers which matter, Starhill Global is a decent investment at the current price of 61c/unit for anyone who is happy with a distribution yield of 6.82% per annum.

NAV/unit: 93c.
Gearing: 30.2%
Rated 'BBB' by Standard & Poor's.
Interest cover ratio: 4.4x.

See presentation slides here.

INVS 2.0 said...

Hi Ak71,

Thanks for the reply. :)

I am in fact using Starhill as my 3rd counter (I only have 3 REIT counters since I am a small investor) to diversify my portfolio. I just feel unsafe channeling my money all towards industrial REITs. My 3 counters are now diversified between industrial AIMS, healthcare First and retail Starhill.

Hope my strategy is right. Wish us luck in more uncertain days ahead. :)

AK71 said...

Hi INVS 2.0,

I have AIMS AMP Capital Industrial REIT and First REIT as well. They make good investments if we are after regular income, imo.

Yes, good luck to us all. :)

Hwang said...

Good to know that you're eyeing ARA too.

That been said, ARA has a nice run up these couple of days. And it turned out to be because of Suntec. I guess the larger the asset pool being managed by ARA, the higher their income will be and the higher their share price.

AK71 said...

Hi Hwang,

I believe that ARA is a good company. It has a very good business model.

However, given the recent market volatility, it is my guess that we could see lower prices.

I shall wait and see. :)

Marco said...

Bought Sabana REIT at 88c today. It closed at 87.5c, and lowest was 87c. It was sold down approx. 20 minutes before closing. Wish me luck!

AK71 said...

Hi Marco,

Welcome to the Sabana REIT club. Good luck! :)

Hwang said...

ARA queue filled at opening hours. Keeping fingers crossed :P

AK71 said...

Hi Hwang,

Wow, ARA opened at $1.31. In the money! Congratulations. :)

SnOOpy168 said...

New baby in the pipeline

"PROPOSED ACQUISITION OF 6 WOODLANDS LOOP, SINGAPORE 738346"

http://sabana.listedcompany.com/newsroom/20111127_220519_M1GU_32E2AD32B73271B848257955004B8CDA.1.pdf

Hopefully financed by debt or rights issue. Not private placements.

Huat ah....

AK71 said...

Hi SnOOpy168,

I believe the purchase will be fully funded by debt. It will therefore be DPU accretive. Gearing is expected to be at 34.2% after this acquisition.

In the coming quarters, expect higher DPU from Sabana REIT as a result of all its recent acquisitions. Huat ha. ;)

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