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Accordia Golf Trust: A distribution yield of 12.16%?

Tuesday, December 9, 2014

Some time in August this year, I was a trader for a day. The stock traded was Accordia Golf Trust. I got in at 78c a unit because I thought I saw a positive divergence in the chart and I subsequently divested at 82 and 82.5c in the same day.


The unit price went higher to touch 92.5c a month later. Some asked if I regretted selling too soon. Well, I entered for a quick trade and I had minimal risk holding on to my position for only a few hours. I made pretty good money when I exited. My action matched my motivation. What's there to regret?

Today, I became a unit holder of Accordia Golf Trust's again. This time, at 74c a unit and it is not a decision based on technicals. This time, it is a decision based on what I think is a safer entry price for the level of income the Trust is expected to distribute to unit holders.


Some might remember that I mentioned 74c in a blog post in July when I wondered at what price was Accordia Golf Trust a buy. The IPO price of 97c a unit was unpalatable to me for various reasons although the Trust promised a 7% distribution yield. I said then that 74c a unit seemed like a more reasonable price to pay for the Trust.

For the 8 months from its listing date, the Trust is expected to distribute 6c per unit to unit holders. Subsequently, the estimate is for a DPU of 6.8c per year. I am of the opinion that the first income distribution is probably safe but I am not so sure about subsequent income distributions. This is the main reason why only a much lower entry price would interest me in the Trust.

The first income distribution will happen in 2Q 2015. It is likely to be in May or June. So, there are still many months before that happens.

Click to enlarge.

Technically, unlike in August when I turned trader for a day, there is much weakness in Accordia Golf Trust's chart. The downtrend that started in late September is very much intact. There is no sign of a positive divergence. There are no reversal signals.

So, it would not surprise me if the Trust's unit price should go lower although it is testing its channel support. 74c is, coincidentally, where we find the 150% Fibo line but support could break and if it should break, the next support is at 72.5c where we find the 161.8% Fibo line.

Related posts:
1. Accordia Golf Trust: A hole in one.
2. Accordia Golf Trust: At what price to buy?
3. How to size our more speculative positions?

40 comments:

yeh said...

hi ak
how do you think of keppel dc reit?

Sillyinvestor said...

Hi AK,

I am looking at this closely too.

There is also room for growth since the parents will at opportune time dump the remaining the golf courses to the trust.

However, at what price such assets are injected is key.

The next worry I have is further yen Japanese weakness

The funny thing is: STI is at almost strong position of 3300.

But I see sales almost everywhere.

I wondered if my eyes are playing tricks on me.

Lee metals, Keppel, ST, SCI, lippo mall etc

AK71 said...

Hi yeh,

I usually give IPOs a miss. They are usually better for the issuers. ;p

At 93c a unit and a prospective distribution yield of 6.8%, I am not really excited by it although its reported gearing level of 28% provides some comfort.

Given how the placement tranche is 24x subscribed, I think the IPO could do quite well but I will wait and see. I remember Croesus Retail Trust's placement tranche was 48x subscribed for its IPO. ;)

AK71 said...

Hi Mike,

Depending on how good the managers are at hedging currency risk, we could see DPU in S$ terms declining with the JPY.

We could see a 10% decline in DPU now, all else remaining equal, if the managers did not hedge against forex risk since IPO. This is because the JPY has declined by about that much in value against the S$ in the same time period.

Well, I buy when I think there is a good deal. I hardly ever pay any attention to the STI now. ;p

Rebel said...

Hi yeh,

I applied.

Was dying to ask mr ak abt it. But i decided to give him some breathing space. . . Do my own homework and applying for it like a big boy/girl.

yeh said...

hi sillyinvestor
my broker said even though sti index is up, but most company shares ( include blue chip, eg FNN,STE,keppel corp, semb ind,semb corp etc) are hitting 52 weeks low.

so singapore market now is bear market.

OT83 said...

hi ak,

I didnt research on this company. being curious, base on your post alone, 6.8cents / 0.74 = 8% plus. how do you get 12%?

OT83 said...

hi Ak,

haha dont need answer my question. I did some search and find out. 8 month :)

thanks!

AK71 said...

Hi OT,

Good to hear from you. :)

I cannot remember if Accordia Golf Trust has a hedging policy. Without any hedge against forex risk, DPU in S$ terms would have reduced by some 10% since the JPY has weakened against the S$ by about that much since the Trust's IPO.

So, a more realistic DPU for the 8 months mentioned is probably 5.4c today. That gives us an annualised yield of 10.94%. Of course, what is paid in 2Q 2015 will depend on the exchange rate then. :)

Nightmare_Angel said...

Hi AK,

Any input on Lippo Mall Tr which was one of your heavyweight in the past? :p

Personally, I'm pretty disappointed with the decision undertaken by the management to issue private placement at S$0.34/share. :(

Regards
Qin Liang

AK71 said...

Hi Qin Liang,

Well, there are good reasons why LMIR is no longer one of my biggest investments. ;)

I still retain a fraction of my original investment in LMIR but it is mostly free of cost and I am not really bothered by the price weakness.

So, I just collect dividends regularly, whatever amount they might be.

LMIR will be able to do better again naturally if the Rupiah strengthens. Of course, let's cross our fingers and hope that the management do not destroy value for unit holders in the meantime.

The Sun said...

Hi Ak,

Is there any fundamental aspects of this golf trust (apart from the current projected yield) that attracted you to purchase units in it?

AK71 said...

Hi Sun,

The high distribution yield appeals to the income investor in me. There are weaknesses and risks in the Trust and a higher yield is necessary as compensation even though a big risk in the form of land ownership is mitigated by a 10 years indemnity provided by the sponsor.

I think the distribution yield is now at a level which I am more comfortable with. Still, it is a small initial investment for me. :)

Richard Heng said...

hi AK,

may i ask how do you determine where to place the 100% fibonacci line when you are drawing it?

pardon me as i have only just started learning it.

Thanks

AK71 said...

Hi Richard,

It depends on what we are looking for. Choosing a higher lowest point will show us shorter term supports or resistance. Choosing a lower lowest point will show us longer term supports or resistance.

You might also be interested to learn that to see whether a support or resistance is strong, we could overlay sets of Fibo lines, some longer term and some shorter term. I came across this technique before and it was called "Harmonics", if I remember correctly.

We have to make our own judgement calls, really, and TA is always about approximations and probabilities, never certainties. :)

AK71 said...

Got more Accordia Golf Trust at 74c a unit today.

With the JPY weakening, the distribution yield for the first year could be closer to 10% than 12%.

I would like to collect at lower prices from here on. 72.5c could be the next significant support if the immediate support at 74c should break.

AK71 said...

I just checked. My buy order at 73.5c was filled today. :)

AK71 said...

AGT’s first distribution includes a non-recurrent annualised distribution of JPY1,829m. This distribution relates to restructuring-related savings from the establishment of a special-purpose company in Japan.

For the period from 1 August 2014 to 31 March 2015, we estimate that this one-time distribution is JPY1,219m, or SGD0.0125/unit (based on our exchange-rate assumption).

Throughout this report, we have assumed a JPY/SGD exchange-rate assumption of 89 for FY15 and all subsequent financial years. This rate is much higher than the assumption of 81.19 used in AGT’s prospectus of 21 July 2014

In summary, we forecast AGT’s DPU for FY15 (its maiden distribution) to be SGD0.0540, comprising a recurrent DPU of SGD0.0416 and a non-recurrent DPU
of SGD0.0125.


Source:
DAIWA Capital Markets

redponza said...

If Daiwa is correct, the underlying yield (excl. the non-recurrent part of the yield) will be only SGD0.0416.

That will translate to a 5.6% yield only (0.0416/0.74)?

That seems quite low

AK71 said...

Hi redponza,

You have to annualise the figure. :)

AK71 said...

Singapore, 12 February 2015 – Accordia Golf Trust Management Pte. Ltd. (the “Trustee-Manager”), the trustee-manager of Accordia Golf Trust (“AGT”), is pleased to announce that AGT has posted operating income of JPY 23.6 billion and operating profit of JPY 5.2 billion for the period from 1 August 2014 to 31 December 2014 (the “Period”).

Income available for distribution is 1.0% higher than initially forecasted, amounting to JPY 3.9 billion. This translates to a distribution per unit (“DPU”) of 3.91 Singapore cents for the Period.

Distributions to unitholders will be on a semi-annual basis for every six-month period ending 30 September and 31 March. The first distribution is for the period from 1 August 2014, being the Listing Date, to 31 March 2015 and will be paid by the Trustee-Manager on or before 30 June 2015.


Source:
http://accordiagolftrust.listedcompany.com/newsroom/20150212_072708_ADQU_RSJ2SJ578NXKG258.2.pdf

Dividend Simpleton said...

hi ak,

Calculating based on the recurring distribution, the yield works out to be only 8% plus, do you think AGT has greater growth opportunities ahead? The gearing is substantially high, so its difficult to do further acquisitions without raising more funds.

AK71 said...

Hi DS,

A distribution yield of 8+% is good enough for me to take up a long position as I feel that it gives me enough margin of safety as I want to take into consideration a possible continual decline in business as well as a weakening JPY.


When the Trust had its IPO (97c a unit), it waved around a distribution yield of 7% to attract investors but I thought it was not attractive enough. Well, I guess Mr. Market agrees.

I cautiously estimated that 74c a unit would be a fair entry price if we were to have a more sustainable 7% distribution yield. So, anything higher than 7% is a bonus to me.

As for gearing, I believe that a reader explained before why it should not be as high as it is. He wrote an article on this and I have taken relevant bits from it:

"Taking a closer look on the trust’s liabilities, apart from bank borrowings, there are two other items that made up a large proportion of its liabilities.

"First, as at 31 December 2013, membership deposits totaled JPY16.9 billion over JPY89.5 billion in the trust’s total liabilities.

"Next, the trust has reported JPY19.7 billion in deferred tax liabilities. AGT clarified that this amount is mainly due to the mismatch of depreciation expenses during the acquisition of assets particularly, golf-related assets.

"After these two items are adjusted accordingly, the trust’s gearing level would fall sharply to 36.1 percent, a level that comes closer to the investment trusts listed on the Singapore Exchange (around 30 to 35 percent) and ultimately making it a more viable option for investment."

Read the full article:
http://www.sharesinv.com/articles/2014/08/04/3-takeaways-from-accordia-golf-trust%E2%80%99s-financials/

AK71 said...

Accordia Gold Trust Insider Trades:

23 Feb 2015 - Goldman Sachs GSIP Master Company (Ireland) Limited (SSH) - Bought 761,000 units for a consideration of S$580,492 (excluding brokerage and stamp duties).

AK71 said...

In its maiden earnings release since its initial public offering, Accordia Golf Trust (AGT) posted a distribution per unit (DPU) of 3.91 Singapore cents for the period from Aug 1 to Dec 31, 2014.

This was 9.6 per cent lower than its forecast of 4.32 Singapore cents due to the weakening Japanese yen.


Source:
http://www.businesstimes.com.sg/companies-markets/accordia-golf-trust-dpu-from-aug-1-dec-31-is-96-below-forecast

AK71 said...

ACCORDIA Golf Trust (AGT) - which debuted on the Mainboard last August - on Tuesday posted a distribution per unit (DPU) of 5.16 yen (5.71 Singapore cents) for the period from Aug 1, 2014, to March 31, 2015 (FY2014/2015).

This is 7.2 per cent lower than AGT's forecast DPU of 6.15 Singapore cents, figures from AGT's financial statement showed.

For FY2014/2015, net profit attributable to unitholders came up to 2.6 billion yen. Total operating income stood at 33.4 billion, 2.2 per cent below AGT's forecast, due to "unfavourable weather conditions and discounts given during winter season to attract more visitors", said AGT.

The first distribution will be paid to unitholders on June 15, 2015.


Source:
http://www.businesstimes.com.sg//companies-markets/accordia-golf-trust-posts-516-yen-dpu-for-eight-months

AK71 said...

Update on land and building issues.

The Trustee-Manager will continue to make periodic announcements to provide updates on the Land and
Building Issues.

The Sponsor has also agreed in the Indemnity Letters to provide an update to the Trustee-Manager on a quarterly basis on the progress of the process in relation to the issue referred to in the above table.

lim wee ee said...

The 4th quarter result posted an operating loss. Will this be a concern going forward ? Yours thoughts on this will be greatly appreciated. Thanks

PE

AK71 said...

Hi PE,

One quarter does not a full year make. I will wait and see.

Overall, I would say that the Trust has more or less delivered what I expected for now. So, I am satisfied. :)

Mangozq said...

Hi AK,

Going forward do you think it is good to hold for a long term? The dividend payout is pretty good.

AK71 said...

Hi Mangozq,

Well, they have some issues they have to sort out but I like that they have indemnity provided by the sponsor for 10 years after IPO. So, there is some assurance that income distribution, all else remaining equal, is sustainable during that time.

SeeKay Go said...

Hi AK,

Accordia drops drastically to $0.710.

Any insight what is the main cause of such a drastic drop in price?

AK71 said...

Hi SeeKay,

I saw and I added to my position. ;)

I will blog about it later today. :)

Wei Xiong How said...

today is the ex-div date right? 5.71cents. So a drop of 7.5cents is quite normal i guess.

seefei said...

dear AK
the counter had gone on a southern path after XD. what's your view? Is this a good time to load up more? I have some at 71 ct. Think of buying more.

Thanks.

AK71 said...

Hi seefei,

I don't know about others but I have been nibbling. ;p

All else remaining equal, a lower price means better value. ;)

Peter said...

Hi AK,

I am watching AGT. As I know, AGT will buy some asset from its sponsor in the next three months either by units or debt.

What is your opinion about the assets acquisition soon?

Peter said...

Hi AK

Is there a way to get all message notification from
your blog?

AK71 said...

Hi Peter,

Acquiring assets from the sponsor should increase distributable income. If the acquisition is fully debt funded, which I think could be the case, then, it should be DPU accretive.

For all the ways available to follow my blog and the comments generated in my blog, please check the left side bar of my blog. There is a section with the heading "Following My Blog".

AK71 said...

I shared this on my FB wall:

"Golf courses which are not well managed and not well located will go kaput in an economy that basically had not one but two lost decades. Invest in the market leader if we want to invest at all.

"My strategy is to accumulate on weakness which I have been doing. A floor seems to have been formed at 63.5c. If that breaks, the next support is at 62c."

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