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LMIR: Excess rights.

Monday, December 5, 2011

It seems that LMIR's management has the same approach towards excess rights as First REIT's management.



Smaller unitholders would see more of their application filled compared to larger unitholders. I make this statement after exchanging notes with some friends and readers.

For me, excess rights alloted as a percentage of the units I was holding before the rights issue is about 17%. A friend's percentage is closer to 80% and he has much less invested in the REIT than I do.

Although a bit disappointed even though I kind of expected this since LMIR is controlled by Lippo just like First REIT is, I shan't complain since successfully getting excess rights is like getting free money. It's a bonus. :)

49 comments:

SnOOpy168 said...

Free $ and bonus. Nice & positive words to describe excess rights. At least for the right reason (for rights issue).

The value of my 83%, may be much lesser than your 17%. In the rare occassion that small investors, like me, has a better gain.

Enjoy it while I can.

Huat ah.

Temperament said...

Hi AK71,
Congratulation for getting the excess rights. i did not apply for i only have NIL PAID RIGHTS. Till today no one seems to know whether only having NIL PAID RIGHTS can also apply for excess rights. What happens to our money for applying excess rights when we do not have mother share? i am tempted to try at the ATM. i wonder how the ATM's excess rights software will react?
Has anyone tried?

Ray said...

Hi AK,

How did u register for excess rights?

Ray said...

And also, its free money because you didn't need to fork out money to buy the nil-paid rights right?

AK71 said...

Hi SnOOpy168,

Haha.. Yes, I am happy for you. Huat ah! :)

AK71 said...

Hi Temperament,

I do not know of anyone who has tried.

I guess the ATM would still accept your application money. If you were not eligible for excess rights, the money would be refunded to you at a later date.

AK71 said...

Hi Ray,

At the ATMs, they will prompt you to enter the total number of rights you are accepting. Then, there is another screen where you enter the total number of excess rights you want to apply for.

Yes, it is like free money because you would be getting extra rights units without having paid for nil-paid rights in the open market.

You could immediately sell these rights units at 35.5c and nett a gain of 4.5c or 14.5% capital gain. Or with an estimated DPU of 3.26c annually, everything remaining constant, you could keep the rights units for a 10.5% distribution yield. Not a bad deal however you look at it. :)

Ray said...

Hmm, thats when trading using SCB becomes so "unknown". Not only are we investors unsure how to register for excess rights , their consultants are pretty unsure too.
Lousy brokerage house but pay peanuts get monkeys so cannot complain.

Informative Blogger said...

I called up CDP .... They said no if not invited and when buy nilpaid rights cannot apply excess rights

bummy said...

Hi Temperament,

I had nil paid rights on my cash account. I paid for my rights and in a seperate screen applied for excess rights. I did not get any excess rights and my money for excess rights was refunded very early this morning.

AK71 said...

Hi Ray,

People come to ASSI do not pay even peanuts. What do they get, I wonder? ;-p

AK71 said...

Hi Informative Blogger and bummy,

Thank you for sharing your experience. :)

Ray said...

"People come to ASSI do not pay even peanuts. What do they get, I wonder?..."

You cant put a price on art - in this case the art of investing. :)

bummy said...

Allocation result on my and my friend's SRS account.

SRS 1 - 15k mother share, applied 15k rights shares + 60k excess shares, got 15k shares + 18k excess shares

SRS 2 - 10k mother share, applied 10k right shares + 20k excess shares, got 10k shares + 13k excess shares

AK71 said...

Hi bummy,

Wow! You and your friend got more excess rights than the number of units held! >100%! Lucky you!

I am jealous now.

AK71 said...

Hi Ray,

Wow! Well parried and quick too. ASSI is a priceless piece of art. Nice! :-D

Ray said...

So can I confirm my understanding:

1) you can only apply for excess rights if you own the mother share before XR?

2) if you are allocated excess rights, you still need to pay $0.31exercising price to convert it into shares?

AK71 said...

Hi Ray,

1. Yes.

2. You have to pay at the point of application. You will be refunded for any unsuccessful application, if any.

SnOOpy168 said...

Wow Bummy

Your friend really hit the jackpot with >100% excess allocation. Impressed.

This is my 3rd Rights + excess rights subscription. Why stop at 100% excess, it is because I always do it within my spare cash budget. Not borrow or rolling over any bills.

ASSI & peanuts. Now that I know you do get something per click on the ads. I will make it a point to click on the ads, whenever I visit.
Plus, I have VPN access, so it is double bonus clicks for you. But to buy something, thats a different story.

Huat ah.

AK71 said...

Hi SnOOpy168,

Yes, I think bummy and his friend are sooo lucky too. I am sooo jealous. Haha.. :)

Thanks for visiting my sponsors. ;)

bummy said...

Hi AK & SnOOpy168,

Yes I am surprise and happy that our excess rights allocation is over 100% of our mother share holdings. This will be a nice dividend boast to our SRS account.

Let’s see the allocation for other readers

vulcan said...

Hi folks,

Just to share. I did not own any of the mother shares, but have purchased the 'nil-paid' rights from the market.

Subsequently exercised and applied for excess rights (100% more coz I thought no harm trying my luck). The application went through, the money was deducted. But I was not allocated any excess rights at all and the excess amount was refunded.

Conclusion: If you dun own the mother before ex-rights, you will likely not receive any excess rights (even though the ATM still accepts your application). Rightly so, coz I guess it is the company’s way of ‘rewarding’ existing shareholders.

AK71 said...

Hi Vulcan,

Thanks for sharing your experience here. :)

Ray said...

Hmm... which means I should have bought one lot of mother share and apply for excess rights. That would have been truly wicked :)

AK71 said...

Hi Ray,

You truly have a devious mind!

Ray said...

only hindsight, no foresight. Which explains why I'm still a pauper :(

Btw AK, you mentioned you had a reader Kingston who made mistakes between nil-paid and excess rights and lost money. Can you share the details? I wanna learn not to make similar mistakes. Cheers.

AK71 said...

Hi Ray,

Kingston? Hmm.. That was so long ago. After digging through my old blog posts on Healthway:

History here.

Developed here.

Sorry, I am unable to trace Kingston's comments on his nightmarish experience losing quite a bit of money in the rights issue. Basically, instead of keying in accepted rights, he keyed everything under excess rights application. :(

vulcan said...

Hmm...

Was mulling over Bummy's post... even with the excess rights, one would be much better off selling off the mother share just prior to XR in this instance.

Assuming one holds 10k of mother shares just before XR.

Total investment: 0.52 x 10k = 5,200
Rights allocated: 0.31 x 10k = 3,100
Excess rights: 0.31 x 13k = 4,030
Less off dividend for mother = -106

Net = 33k shares total value 12,224
~ 0.37/share

vs price of 0.355 now. Theoretical loss is ~ 495.

If one had not applied or was not allocated any excess rights at all, based on the same set of calculations, you will end up with 20k shares at ~0.41/share. A loss of 1.1k.

Despite all the glee about the excess allocation, this rights issue is definitely damaging for existing shareholders.

Well... just blabbering. :) Hope I made sense.

Actually, in my view, SGX ought to enforce better disclose on the allocation excess rights.

AK71 said...

Hi Vulcan,

Hindsight is always perfect. If only we could see how Mr. Market would have behaved with certainty, I would have sold away the mother shares and bought back at a lower price now. In a world of imperfect knowledge, we try for the best results with what we know. ;)

Temperament said...

Hi AK71,
May i thank you and all who share about applying for excess rights without owning mother shares. i think it's only fair that those don't own mother share will not get any excess rights share even when they apply for them.

AK71 said...

Hi Temperament,

I believe you got in at a distribution yield you are comfortable with. Who knows if price could weaken further in future. Could LMIR trade at 31c or lower in future? It is possible, of course. ;)

Then, those of us who got alloted excess rights and decide to hold on to them for the expected 10.5% distribution yield might not be so happy. ;p

Cyclops said...

it seems to be everyone is getting some excess. I thought it was heavily over subscribed?

verbatin said...

i have 12 lot. apply for entitlement and 17 excess and got 10 excess

verbatin

Temperament said...

Hi AK71,
i had come across a book on RISKS MANAGEMENT. It says i can run but i cannot hide from RISKS no matter what i do. The longer i am in the Market the more chances i will be caught in a sudden Bear or worse "SEPT 11" Market.So? I must always hedge.

Actually i like to put all my $ in
equity. Which i did when i just started investing. i fell in love with the Market without control.
Ha! Ha!
i still do but my love has
mellowed.

What do you think about short-term traders?
How they hedge?

AK71 said...

Hi Cyclops,

Well, if larger unitholders are given proportionally less excess rights and smaller unitholders are given more, it is believable. That is currently the case, it would seem.

AK71 said...

Hi Verbatin,

Congratulations although I am surprised you were not given more excess rights.

Bummy's comment suggests that anyone in a similar situation would have gotten more excess rights than what was initially held in mother shares.

Seems a bit arbitrary.

AK71 said...

Hi Temperament,

Thanks for inspiring a new blog post. :)

Please see: Risks, risks and risks.

hydrogenperoxide said...

Wah you all get more.. :( I shouldn't be that stingy :(

AK71 said...

Hi pero,

You know what they say about beauty being in the eyes of the beholder. ;)

Do what you are comfortable with. :)

Anonymous said...

Hi AK
Here are the results of the excess rights.

Self:
Entitlement: 90 lots
Excess Applied: 40 lots
Alloted: 15 lots

Son:
Entitlement: 20 lots
Excess APPLIED: 10 lots
Alloted: 10 lots

It appears that my son who has fewer lots are given a bigger share of the excess rights (in term of %)

Cheers

CSTan

AK71 said...

Hi CS,

Thanks for sharing the results. It confirms my suspicion once again that LMIR's excess rights allocation favors smaller unitholders. Lippo could be a socialistic organisation in disguise. ;p

Congratulations. :)

Cyclops said...

Hi AK,
What I meant was with the large allocation of excess other readers and yourself are getting mean that many did not exercise their original rights allocated.

If everyone had exercised all their rights, no one would have gotten any excess.

AK71 said...

Hi Cyclops,

About 3% of rights alloted to eligible unitholders were not taken up. These were distributed amongst those who applied for excess rights.

I do not think getting 10 lots or 20 lots of excess rights per applicant is a large number.

I applied for 400 lots of excess rights but was given a paltry XX lots. Pretty sad for me and people like myself probably contributed to the heavy over-subscription. :(

So, if each applicant were given only between X to XX lots of rights, 3% of the total rights issue is about enough to go around. Purely a guess.

Cyclops said...

Hi AK,
Where did you get the number of 3% from? I only recall seeing an overall of 160++% subscription.

That 3% may be able to explain why so many people are getting some excess units

AK71 said...

Hi Cyclops,

2.7% to be exact.

See the link here.

;)

Cyclops said...

Hi AK,
I am trying to make sense of the numbers here. Do let me know if you agree with the following logic:

There are 4512 individual investors (based on the 2010 annual report [http://lmir.listedcompany.com/misc/ar2010.pdf], page 110.

There was a balance of 29,373,598 rights shares that were allocated to excess subscribers [based on the SGX announcement you provided].

Assuming everyone over subscribed heavily and the number of investors remained unchanged, each investor will be allocated 29373598/4512 = 6510 excess shares.

That is about a 6.5 lots per investor. Considering some investors do not even apply for the allocated, the number of investors who actually applied for the excess is lower than the 4512.

So I think the numbers do make some sense seeing that some investors do receive 10-20 lots of excess. :)

AK71 said...

Hi Cyclops,

I know for a fact that my sister did not apply for any excess rights and she only had 10 lots of mother shares. She would easily have been alloted 10 lots of excess rights. Silly girl.

We could just as easily assume that many investors did not apply for excess rights like my sister and that those who did, many were like me. Then, the numbers would make a lot of sense. ;p

I can tell that you enjoyed yourself digging through the numbers. ;)

Cyclops said...

Yeah. Had some fun digging through those numbers. =)

AK71 said...

Hi Cyclops,

Yes, that is the spirit! Never forget to have fun, even in investments. :)

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