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Saizen REIT: Daily share buy backs.

Thursday, December 20, 2012

A friend told me he is waiting for Saizen REIT's unit price to weaken before he buys some. I informed him that Saizen REIT has been buying back units from Mr. Market. So, there could be some support for its unit price in such a situation.

Daily share buy backs:
14 Dec 12 - 330,000 units @ 17.2 c
13 Dec 12 - 310,000 units @ 17.332 c
12 Dec 12 - 310,000 units @ 17.36 c
16 Nov 12 - 360,000 units @ 16.78 c
12 Nov 12 - 400,000 units @ 17.2 c
9 Nov 12 - 400,000 units @ 17.3 c
16 Oct 12 - 350,000 units @ 16.73 c
15 Oct 12 - 900,000 units @ 16.6 c
12 Oct 12 - 350,000 units @ 16.6 c
8 Oct 12 - 900,000 units @ 16.6 c
3 Oct 12 - 330,000 units @ 16.48 c
25 Sep 12 - 680,000 units @ 16.4 c

Although Saizen REIT's unit price has advanced since hitting a low in the middle of this year, I feel that it is still rather undervalued.

Fundamentally, the only negative I see for unit holders now is the weakening JPY which is probably going to decline further in value against the S$.

In a recent blog post, I made some assumptions which could be useful for anyone thinking of parking some funds in this REIT. See: REITs: When to buy?

It is, perhaps, also worth taking note that the units bought back from the open market were cancelled instead of being held as treasury stock (for possible re-issue in future). With less units in issue, the expected lower DPU in S$ terms due to a weakening JPY, everything else remaining constant, could be less of a concern.

Technically, the rising 100d MA should provide some support at 16.7c. Failing to hold could see price testing the 200d MA for support which is rising and approximates 15.5c now. If unit price should go that low, I could possibly add to my long position.


Andy said...

Hi AK,

Thanks for your info!

Any idea how much more shares does the mgmt have the mandate to buy back?

AK71 said...

Hi Andy,

Maximum 10% of total units in issue, I believe.

AK71 said...

Saizen REIT: November 2012 presentation.

SnOOpy168 said...

Certain wished that they could deploy the cash on more acquisitions to generate better returns and more DPU, then a share buy back and then use debt to fund acquisition.

While there is a rule that they have distribute 90% of income, is there anything to say that they cannot hold XX% of issued capital in cash ?

Hoped that they won't make a cash call that soon.

AK71 said...

Hi SnOOpy168,

Actually, I rather they do share buy backs when the unit price is at a big discount to NAV. It is a cheaper way to improve DPU for unit holders.

When they buy new buildings, it is improbable that they would be able to buy them at a 30 to 40% discount from their valuations.

Saizen REIT is not required to distribute 90% of their income because their properties are not based in Singapore. During the GFC, they suspended income distributions to unit holders.

I am quite pleased with Saizen REIT's management thus far.

AK71 said...

The Bank of Japan on Thursday ramped up its offensive to power the world's third-largest economy as it faced heavy pressure from the country's incoming government to loosen its policy grip.

The BoJ's move to expand an asset-buying programme -- its main policy tool -- by 10 trillion yen ($119 billion) to 101 trillion yen came days after Japan's conservatives won an election promising to boost spending and pressure the central bank for aggressive action.

The BoJ's last scheduled policy meeting of the year had been widely seen as a test of whether it would stand pat, shrugging off the outside easing pressure which had weighed on the yen in recent weeks.

However, the bank said that its fresh easing was tied to fears about the slowing global economy and made no direct mention of a two-percent inflation target demanded by incoming Prime Minister Shinzo Abe, which is designed to drag Japan out of the deflation that has haunted its economy for years.

The bank kept interest rates unchanged at between zero and 0.1 percent, but said it would look at reviewing its target inflation rate.

"Overseas economies remain in a deceleration phase," it said in a statement issued after the meeting, adding that it "judged it appropriate to undertake further aggressive monetary easing policies" to boost Japan's sagging economy.


opal said...

On the topic of share buy back, I prefer that they use it to pay us the dividend. We will then decide if we want to buy more of the shares.

AK71 said...

Hi opal,

Haha... Perhaps, you could suggest this to the management. ;)

I would be quite happy if they continue to pay out a minimum 90% of income to unit holders.

SnOOpy168 said...

Thanks for the clarifications AK. Yes, at a discount to NAV is very tempting.

AK71 said...

Hi SnOOpy168,

You are welcome. :)

At 30+% discount to NAV, it is quite mouth watering. ;p

opal said...

Well, I am not a shareholder of saizen and have no intention of being one. Its management will not listen to me. :)

EY said...

Hi AK,

Thanks for the updates for Saizen. Been waiting for a pull back to get into this counter. Will keep a close eye on this one after missing the entry for Sound Global due to my overseas trip. :)


AK71 said...

Hi opal,

Indeed, unless we are a substantial shareholder, I doubt any listed entity's management would pay us any attention. ;p

AK71 said...

Hi Endrene,

You are interested too? Haha.. Yes, it would be nice to see a retracement to supports before going long. :)

As for SoundGlobal, it would have to break resistance approximately at 60c in order to go higher. Otherwise, a retracement to supports at 56.5c and 54c is on the cards.

Desmond said...

Hi AK,

I would like to seek your opinion on 2nd Chance Properties. This is a company which has performed consistently well in the past 10 years (except for 2009). It has also been very friendly towards investors and rewarding them with bonus issues and a very decent dividend yield in excess of 9%. In recent years, it has sucessfully diversified into the property business. Bulk of the group's profit is now contributed by it's property business.

2nd Chance Properties seem to me like a very well-managed Company. Appreciate your opinion on this.

Thank you and Merry Christmas.


AK71 said...

Hi Desmond,

I looked at Second Chance many moons ago but, somehow, I cannot locate the blog post. I think it could be lost in the comments sections. So, I am going to do a proper blog post as a reply to your comment to make it easier to locate in future. Look out for it. :)

Merry Christmas!

Desmond said...

Thanks. Eagerly awaiting your comments. :)

AK71 said...

Hi Desmond,

I looked at the company before and kind of forgot about it. So, it is really to satisfy my own curiosity too. :)

Otherwise, I would usually just express my ignorance since it is very time consuming to research a company. ;p

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