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Sabana REIT: After the 4Q 2013 results, am I buying or selling?

Thursday, January 23, 2014

Someone asked me why I didn't blog about Sabana REIT's latest results.


There isn't much to say, really.

I did a piece on 17 October 2013 shortly after its 3Q results were released. In that blog post, there was a paragraph which said:

"Taking the DPU of 0.18c from 24 Sep to 30 Sep 13 as a guide, I estimate a DPU of 2.16c for 4Q 2013. This is a 10% reduction from 2.38c for 3Q 2013."

To find out how the estimate was made, read:
Sabana REIT: 3Q 2013 results and outlook.

Sabana REIT announced a DPU of 2.19c for 4Q 2013 which is 0.03c, some 1.38%, higher than my estimate. Not a good enough reason to bring out the lion dance troupe, perhaps, but at least it did not fall below my estimate.

The REIT is now trading at its NAV of $1.07 a unit and I would not be surprised if its unit price were to fall by a few cents upon the REIT going XD. Mr. Market is not feeling optimistic about REITs lately and Sabana REIT's performance has been disappointing.

Although it would be too optimistic to think that Sabana REIT could achieve 100% occupancy again in the near future from the current 91.2%, to think that there would be no improvement over the next 12 months would be too pessimistic.

So, if Mr. Market expects at least an 8.5% yield from Sabana REIT which is some 2% higher than what market leader Ascendas REIT gives, then, it would be reasonable to expect Sabana REIT to trade at $1.03 a unit upon going XD, annualising its current DPU.

Sabana REIT's unit price could recover in the course of the year if the management could fill up some of the vacant space and improve its DPU, everything else remaining equal.

So, although I do not see any compelling reason to add to my long position in Sabana REIT at current price, I will remain pragmatic. There is no compelling reason to reduce exposure too.

Related post:
Added more Croesus Retail Trust and reduced Sabana REIT.


Anonymous said...

Hi AK,
Same frequency... Cheers to the rare occasions when our opinion overlap.

I think we blog about it the same time too. Haha

AK71 said...

Hi Mike,

Really? LOL.

I remember telling people how Sabana REIT was difficult to mess up at the time I got in at a price which was some 11% below its IPO price of $1.05. Its NAV/unit was 99c in those days. DPU 8.63c.

Now, its NAV is $1.07/unit and with the latest DPU, annualised it would be 8.76c. Things have improved marginally.

Then, when we realised that gearing has gone up from 26.5% at IPO to 36.9% now, it helps to put things in proper perspective.

Huge amount of resources used with marginal benefits generated.

Well, hopefully, the management will focus on improving occupancy from now on and not go and buy another building.

Betta man said...

Hi AK,

on a side note, would you care to comment on K-Green Thrust's latest earnings announcement? Thanks!

AK71 said...

Hi betta man,

Maybe, I will do a quick one on this later. :)

Capricon said...

Sabana DPU dipped 22% for Q114. Looks like headwinds ahead and notice they have 177m debt maturity next year too.

Good idea to accumulate if the price dip below $1?
I got none now.


AK71 said...

Hi Capricon,

I was going through the numbers just now and working on a blog post. :)

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