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Sabana REIT: 1Q 2012 DPU 2.26c.

Saturday, April 21, 2012



The REIT's yield accretive purchases of five properties last year has helped to push DPU to 2.26c for 1Q 2012. Annualised, this would give us a DPU of 9.04c. Based on the REIT's last closing price of 97.5 per unit, we are still looking at a distribution yield of more than 9%. 9.27% to be more exact.

With a NAV/unit of $1.04, the REIT is still trading at a discount to NAV even though its unit price has risen significantly in the last few months.

Gearing: 33.9%.

Interest cover ratio: 5.5x.

Occupancy: 96% to 98.4%.

WALE: 2.6 years

Weighted average remaining land lease: 39.9 years.

The REIT will go XD on 25 April and income will be distributed on 29 May.



I would like to see the managers working to increase occupancy and negotiate lease renewals with positive rental reversions this year. If successfully executed, we could see DPU improving marginally in the next few quarters.

For anyone interested in investing in an industrial S-REIT for regular income, Sabana REIT would appear to be an attractive proposition even at current prices.

Related post:
Sabana REIT: 4Q 2011 results.

See presentation slides: here.

47 comments:

spinfire said...

About half of Sabana's leases expire in 2013. If interest rates do start to rise, I wonder how it will affect lease prices.

INVS 2.0 said...

Hi Ak71,

Finally Sabana is the kingpin. AIMS now becomes a follower behind it. :D

Unknown said...

Hi AK, great post.
Thinking of switching one of my stock which has gained 60% to sabana. The stock has been giving me yield about 18% based on my purchase price.
As paper profit isn't consider real gain, am looking at whether should i realized it or not. Would u consider realizing it to change from a higher yield to a lower one ?
Appreciate your advice. Thanks.

Regards
William

FoodieFC said...

you should go to their AGM and ask them what they going to do to increase occupancy rate.

I was reading up on a food blog today. Then i realised all our reits, where we are getting high dividends, it caused our food prices in e.g. food courts to increase!

Rent higher--> more dividend for you and me in reits but food prices higher too

AK71 said...

Hi Spinfire,

With the Fed committed to low interest rates till at least 2014 plus the efforts of the ECB to improve liquidity plus the efforts of Japan to lower the value of the JPY, interest rates are likely to stay low in the next 2 years.

When interest rates rise as they would one day, cost of borrowings would go up. Distributable income would be affected if landlords are not able to increase asking rents then. Rental is, of course, a function of demand and supply.

AK71 said...

Hi INVS 2.0,

Sabana the Kingpin! Haha.. Has a nice ring to it. Are you planning on writing another movie script? ;p

AK71 said...

Hi William,

We have to compare using current day numbers to make any meaningful comparison.

If you are interested only in yields, then, look at the yield of the current stock you are vested in based on its current day price. Compare that to Sabana REIT's current day distribution yield.

A simplistic example: Mr. A bought a condo for $500K which is worth $1m now. He rents it out for $50K a year. His yield is 10% based on cost but 5% based on current market price. Should he sell the condo to buy another one which is worth $1m but is able to command $80K worth of rental a year? ;)

AK71 said...

Hi FoodieFC,

Yes, of course. Rent is one of the cost of doing business.

Being unitholders of REITs, we benefit from increasing rentals. That is the way it is. :)

Unknown said...

Hi AK, got it.

Tks for the enlightenment.
;)

Rgds William.

JCK said...

Great going for Sabana!

Thanks for this AK! :)

AK71 said...

Hi William,

Om Amitabha. ;)

AK71 said...

Hi JCK,

I am happy if you have found this blog post helpful. :)

JCK said...

AK mate....

you are my Oracle for SREITs!

:)

AK71 said...

Hi JCK,

Oh my, that hat is way too big for my head. Haha.. ;p

JCK said...

AK

Ok. Be my reporter then.....:)
A great reporter at that!

Thumbsup*

AK71 said...

Hi JCK,

Think of me as just another blogger in Singapore. A blogger just as human and with failings like any other. Oracle or reporter would have to shoulder far too heavy responsibilities. I definitely do not have such grandiose dreams nor am I inclined towards having more responsibilities. I am a lazy one. ;)

Unknown said...

Hi AK,

Haha :)
Btw, took the gain and switched to sabana today @ 0.975, may not be the best price but after factoring in the gains to switch over, the average cost for sabana was about 0.75.
Thanks for educating us.

Cheers
William

AK71 said...

Hi William,

I am sure you have a well thought out strategy for yourself. I am just happy to share what little I know here in my blog. :)

sw said...

Hi AK,

Is the dividends from Sabana REITS taxable by IRAS for individuals?

Regards,
SW

AK71 said...

Hi SW,

Nope, all income distributions from S-REITs are tax free for individuals residing in Singapore. :)

sw said...

Hi AK,

Appreciate your reply. Thanks! :)

Cheers,
SW

AK71 said...

Hi SW,

You are welcome. Hope you enjoy the feeling of having tax free income. ;)

INVS 2.0 said...

Hi Ak71,

I got Sabana once again at 0.95. At the DPU of 9.5% accordinng to REIT Data, it is impressive. :)

AK71 said...

Hi INVS 2.0,

Annualising the DPU of 2.26c gives us 9.04c. At a unit price of 95c, you get a distribution yield of about 9.52%. Nice. :)

INVS 2.0 said...

Hi Ak71,

I bought more of Sabana and AIMS when their prices retreated to $0.960 and $1.18 respectively. However, I used my broker's money (buy limit) instead of mine. :) Let's see what is the consequence. Hmm...

Ah John said...

Seems Euro debt crisis worsen, but anyway, can't predict market move, just think have to wait at this moment. Current stocks are not cheap, although not very expensive too.

AK71 said...

Hi INVS 2.0,

So, this is a margin account or do you still have to pay at T+3?

INVS 2.0 said...

Hi Ak71,

I have no idea whether it is a margin account or not. But your reminder here sends a chill down my spine. I heard a lot of horror stories about margin account.

I guess I better ask my broker for further info.

But the difference between using my cash is a higher commission and settlement date is typically 3 working days.

AK71 said...

Hi Ah John,

Yes, keeping the status quo is what I am doing too although I did buy some stocks like Yongnam, Wilmar and China Minzhong in recent weeks. ;p

AK71 said...

Hi INVS 2.0,

Well, unless your broker is Santa, I doubt that he would let you use his money for buying shares, reaping the benefits indefinitely without a bigger benefit for himself. ;p

INVS 2.0 said...

Hi Ak71,

Well, if it is really a margin account. What's next? I know AIMS and Sabana are experiencing a shock today, would I not be penalised as long as I don't sell anything to incur losses? :/

AK71 said...

Hi INVS 2.0,

I have a margin account but I use it more as a tool of convenience because I do not have to pay T+3. Sometimes, I am a bit slow and could pay 4 or 5 days later. So, it is still my money.

If you are using a margin account to finance your purchases, you usually have to incur some fees or borrowing cost. You really should check with your broker. I know if prices are down a lot, there could be a margin call. Not nice.

INVS 2.0 said...

Hi Ak71,

In its first reply, the broker only attached a document that states the difference between the cash upfront account (using your own money to buy shares) and the cash account (using the trading limit aka broker's money to buy shares).

These people ah, always give technical answers. Need to push them further to squeeze out the answer that I am seeking. :(

INVS 2.0 said...

Hi Ak71,

The DBSV's cash account works like a normal top-up cash upfront except that it has higher commission and is based on trading limits.

I used it now as I am "testing the water" to see what are the consequences of using trading limits to buy instead of my cash top-ups but I never thought it could be a margin account in disguise. Blame my inexperiences. :(

Now waiting for reply from my santa broker...

AK71 said...

Hi INVS 2.0,

I only use my own money to buy stocks. I don't use borrowed money. Borrowed money must ultimately have a higher cost than my own money. That is logical to me. :)

However, some people would use borrowed money too. If they are able to secure higher returns than the cost of borrowings, good for them. I know many savvy investors who are doing this. I am definitely not savvy. :(

INVS 2.0 said...

Hi Ak71,

Oh well, let's hope the AIMS and Sabana shares that I purchased using the "test water" money can be sold at a profit later on. I have no guts to play margin. :)

AK71 said...

Hi INVS 2.0,

Mr. Market does not like the election results in France and Greece. Let us hope it is not going to be a contagion.

If things should do a Titanic, it would be time to roll out the war chests. ;)

INVS 2.0 said...

Hi Ak71,

And also time to clean up the mess that the margin causes. :(

Hope I won't be asked by the bank to pay up. My warchest is reserved for a time like this, not for margin call ups.

AK71 said...

Hi INVS 2.0,

Hope that everything turns out OK for you. :)

INVS 2.0 said...

Hi Ak71,

Got a reply from DBSV that my cash account is not a margin account and does not incur penalties when prices are down. :/

AK71 said...

Hi INVS 2.0,

I have no idea how it works but that is good news! :)

Kah Hwee said...

INVS 2.0, i think is just like normal trading where you need to make paymet by T+3, after which the broker will force sell for you if you did not make payment. Then depending on price, you will get contra wins or pay contra losses.

Most brokers allow until T+5 though

AK71 said...

Hi Kah Hwee,

Officially, all trades have to be settled T+3 but brokers could look the other way if payment is a day or two late. Some don't give face though and would just close your position...

William said...

Hi AK
Do you know how long do we need to wait to receive sabana's dividend ?
Remember I mentioned earlier in the post that in purchased sabana on 23-apr. Till now I have not received the dividend credited to my account yet, so far all my dividends are credited on same date.
Who should i check with ? Any advice appreciated.
Thanks.

Rgds William.

AK71 said...

Hi William,

The REIT went XD on 25 April, iirc. So, you should be eligible for income distribution. I got paid a couple of days ago.

I think you should give your broker a call.

William said...

Hi AK,

I am using dbsvickers. My broker ask me to just wait and never tell me how long ? Hmmm... 1 week, 2 weeks ? Guess I will just wait for 1 week and see. If still not received, I will ask again next week.
Anybody using dbsvickers and having the same issue ?
It's Friday again, enjoy your weekend. :)

Tks.

AK71 said...

Hi William,

It doesn't matter which broker you use because it should be credited into your bank account on the day it is payable.

However, if you are using a margin account, then, it could take a few more days because the money goes into your broker's account and they have to issue a cheque to you or bank it in for you.

Have a good weekend. :)

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