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Croesus Retail Trust: Why some were burnt and burnt badly.

Tuesday, January 28, 2014

Some have asked me if it is safe to buy into Croesus Retail Trust now. It has to be safe since I am putting my money where my mouth is, right? Sorry, but the truth is I don't know.


Well, I feel that at the current price level, Croesus Retail Trust offers fairly good value for money and I explained why I thought so in earlier blog posts. I also said that 87c represents immediate support from a technical analysis perspective and this support seems to have strengthened today.

Sounds good, doesn't it? Yes, it does but it also pays to remember that Croesus Retail Trust has quite a number of substantial shareholders who most probably have their own agenda. There is no guarantee that they won't sell even at prices lower than 87c, for reasons unknown to us.

The lowest unit price ever was 84.5c but that was probably just some retail investor who threw in the towel. It happens, I am sure all of us know.

Anyway, I went through the filings of insider trades since the Trust's IPO last year in May.

AR Capital Pte Ltd acquired 7.54 million units from 10 May to 10 September 2013 at an average price of 96.3 cents per unit. Strangely, they sold 3.576 million units from 14 to 16 October 2013 at an average price of 86 cents each. Then, they sold 1.286 million units on 28 November 2013 at 87.9 cents each. Now, they still retain a stake of  28.757 million units or 6.73%.

Why would they sell at a loss in October and November? Did they make a mistake increasing their stake from May to September? Perhaps they had to do some portfolio balancing?

DBS Group Holdings Ltd became a substantial shareholder on 10 May 2013 after it acquired 34.929 million units or 8.21% of the issued capital via placement at 93 cents each. The group sold 12.84 million units from 28 May to 27 November 2013. The highest sell price was $1.07 and the lowest was $0.86.

While they were selling, DBS Vickers was issuing BUY calls with target price of $1.14. Now, try to reconcile that.

The only substantial shareholder who has been consistently increasing their stake is Target Asset Management. They bought another 1.9 million units on 30 May 2013 at 98 cents each. Then, they bought 530,000 units on 28 June 2013 at 95 cents each. The last time they bought more was on 27 July 2013 when they bought 450,000 units at 96 cents each.

They now hold 29.79 million units which places them ahead of AR Capital Pte Ltd.

Plenty more happened where insider trading is concerned at Croesus Retail Trust and it is obvious that many substantial shareholders took the opportunity to sell soon after the IPO as the unit price retreated from a high of $1.18 a unit.

Nikko Asset Management Asia Limited with a 22.25 million units stake then started selling on 14 May 2013 at $1.10 a unit. On 15 May 2013, they sold again at $1.09 a unit and on 17 May 2013, again at $1.08. At some point in May, they ceased being a substantial shareholder.

Similarly for Hwang-DBS (Malaysia) Berhad, they ceased being a substantial shareholder after selling from $1.08 to $1.10 a unit in May 2013.

The Amundi Group only started selling at the end of May 2013 and by 5 June 2013, they ceased to be a substantial shareholder. The prices they sold at were from 98c to 99c a unit.

Now, I didn't spend the last hour and a half going through all these and presenting them in a blog because I had a morbid fascination for SGX filings. It is very obvious that there are lessons to be learnt from this and I think I don't have to spell them out.

I also do not want to spell them out in case trouble comes knocking on my door.

I have no doubt that some people were burnt and burnt badly. Imagine getting in at $1.10 or higher. However, if I were in their shoes, I might want to look at Croesus Retail Trust again as it is a more attractive proposition at 87c now.

Oh, my goodness. I have been sleep blogging again. I need to see a doctor before my condition worsens.

Related posts:
1. Stock market analysts. (I was just beginning to blog.)
2. When to BUY, HOLD or SELL?
3. Buy Japanese real estate. (Another oldie from 2009.)
4. Croesus Retail Trust: Overnight BUY order filled.
5. Nobody cares more about our money than we do.


Leonard Ng said...

Factors that may affect DPU in the short term

1. Japan's consumption tax rate will increase from 5% to 8% in April

2. Yen Inflation...less SGD$ payouts if inflation continues?

AK....wouldn't it be wiser to invest in Singapore Commercial REITs where office rents are projected to rise this year?

AK71 said...

Hi Leonard,

I am, in fact, not worried about DPU in S$ being affected in the short term and, by short term, I mean 2 years or less. If you remember, I explained why this is so in earlier blog posts on the Trust.

Well, there are also some analysts who project industrial property rents to improve this year in Singapore.

"Rents across all industrial space are predicted to increase this year given the expected growth in the manufacturing and externally oriented industries as well as the moderate supply of available space."


So, why not invest more in Singapore Industrial REITs? ;)

Of course, some Singapore Commercial REITs could be good investments for income. I am not dismissing that. Just have to choose the right ones and like in all investments, this is the difficult bit. :)

Jimmy Ng said...

Gosh, you had the patience to shift thru those PDF announcements. Many thanks for doing this for us.

AK71 said...

Hi Jimmy,

You are welcome. :)

Took me quite a bit of time. I hope I didn't leave anything out.

David & Thi said...

For me, why i invest in CRT.

1. 2 years hedge for forex and long term lease in excess of 10 years.With the 2 years in the bag, we are looking at about 9.3% @$0.875 in my case. So i will have recovered about 18% in term of dividend by the end of 2 years.

2. I am buying at discount to NTA of $0.906.

AK71 said...

Hi Yee,

Nice numbers! ;)

I believe Croesus Retail Trust is going to announce results in another couple of weeks.

It is reasonable to expect DPU to come in higher than initial forecast.

I wonder how Mr. Market will react then? Hmmm....

SGYI said...

Hi Ak,

Thanks for all these info. If it drops more wouldnt it be a chance for investors to buy more? At the current price, it is a fair value. If it drops more, it becomes even more attractive. I'm not really worried about the stock price movement. More concern on the fundamentals of CRT and the development of Japan's economy. So far so good now.

AK71 said...


All else remaining equal, yes, a lower unit price will present much better value for money. If Croesus Retail Trust should see its unit price decline from here, it will also mean a bigger margin of safety for anyone who buys then. :)

For me, I am corrupted by Technical Analysis. So, I do look at price movements, trying to peek into Mr. Market's mind. ;p

David & Thi said...

I am seeing this as a replay for AIM REIT or perhaps also First REIT....

In their early day, both REIT are paying over 10% in dividend but no one buy.... then now at 7-8% yield... analyst are calling a BUY.

We buy CRT first and later sell to the analyst... :)

AK71 said...

Temasek's deemed interest through DBSH: 5.93%. Includes holdings by Hwang-DBS (Malaysia) Bhd which has been reducing their stake.

AK71 said...

Hi Yee,

It is hard to say what will happen in the future, of course. As long as we get in with a margin of safety given the current day circumstances, we cannot be too far wrong. :D

Recruit Ong said...

margin of safety can also disappear very quickly in volatile times, of cos still better than no safety. i am reminded of sabana during those days when it dropped to 90c and still went lower haha.

there is also a reason why yields are higher for some reit and lower for others. imo is trade off between risk and peace of mind. YMMV!

AK71 said...

Hi Ong,

Yes, I remember. That time, I bought more at 80+ c a unit. The importance of having a war chest ready. ;)

YMMV! (What is this har?)

E H said...

Your Mileage May Vary.

AK71 said...

Hi E H,

Thanks for telling me. :)

Cheem! I don't quite understand how it is applied. So, it is cheem to me. Young people's lingo?

veronika said...

I think an important reminder is the difference between a business trust and a real estate investment trust.

At the most basic level of interest:

A business trust is not required by law to distribute dividends. If it does distribute, the money comes from operating cash flow.

A real estate investment trust is required by law to distribute its income which is collected from rent.

So Croesus Retail Trust is a business trust, and if you are buying its shares now, you are hoping for capital appreciation in the near term perhaps 2 years or shorter.

Read more about business trusts & real investment trust at

AK71 said...

Hi Veronika,

I think I have mentioned that Croesus Retail Trust is not a REIT before but it is always good to have reminders. See: Croesus Retail Trust: Initiated long position at 87c. :)

As for my motivation for buying into Croesus Retail Trust, I am doing it primarily for income. They will pay 100% of all distributable income in the first 2 years and at least 90% thereafter. Although it is not a REIT, it aims to behave like a REIT. Of course, there is always a risk that they might not keep their promise. ;p

If there should be capital appreciation, I would be quite happy too, naturally. However, in 2 years or less? I don't know.

AK71 said...

Laurence said...
I recently read AK's post where he wrote: " ... don't ever ask a barber if we need a haircut."
I have since borrowed his sentence to remind my friends to be more prudent when seeking advise.
When I first started using my CPF money to invest in SGX stocks in the late 1990s, I often asked my broker for advise. Very quickly, I lost tens of thousands of dollars and just a couple of years later, decided to stop investing my CPF money in stocks and shares altogether.

AK said...
Hi Laurence,
Credit goes to Warren Buffett. ;)

Brokers tell us to buy but are they buying too?

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