Croesus Retail Trust and Perennial China Retail Trust.

I had a discussion with a friend over dinner last night regarding Croesus Retail Trust (CRT) and why I feel relatively good about it as an investment for income. 

In the conversation, one of the things I did was to compare it against Perennial China Retail Trust (PCRT).

When PCRT had its IPO, I said that only "Red Star Macalline Global Home Furniture Lifestyle Mall, Shenyang, which was completed on 30 Sep 2010 is income contributing at listing date. The rest of the initial portfolio is expected to be completed from 3Q 2010 to 2Q 2014. If we are investing for income, this is not very reassuring."

And I also said that a "distribution yield of 4.88% to 5.51% in the years 2011 to 2012 also does not provide enough compensation for the risks which investors are being asked to bear, in my opinion."
See: Perennial China Retail Trust.

Mr. Market sent PCRT's unit price down 12.86% on its first day of trading from its IPO price of 70c to just 61c. See: PCRT: Weak debut.

Unit price went on a continual decline and was under 40c at one stage. Pua Seck Guan increased his stake while Kuok Khoon Hong and Martua Sitorus became substantial shareholders. I initiated a long position some time later at 47.5c a piece.

"I initiated a long position in PCRT at 47.5c because the distribution yield of 8+% at that price offered a more acceptable level of compensation for the risk I would be asked to assume."
See: PCRT: 1H 2013 DPU 1.9c.

Mr. Market is rather efficient in pricing PCRT's stock. The latest reported NAV/unit is 77c which means PCRT's stock is now trading at a 31.2% discount to NAV! 

Why? Mr. Market has priced in a risk premium.

Although annualising the half yearly DPU of 1.9c will give us a distribution yield of 7.16%, most of the distributable income is from earn out deeds and I highlighted that "current DPU is being sustained by earned out deeds which will be exhausted by end 2014". 

So, what happens then? Income distributions to investors will most probably take a hit. 

See: PCRT: Progress in Q3.

Now, for readers who have been following my recent blog posts on Croesus Retail Trust, they will be able to see the difference I am trying to point out between CRT and PCRT easily. 

CRT's portfolio consists properties which are mature and generating income, all of them. The level of risk which investors are being asked to assume here is very low compared to PCRT's.

Having said this, investing in CRT is not without its risks and I blogged about it briefly before. See: Croesus Retail Trust: Motivations and risks.

I am invested in both PCRT and CRT. So, to some, it might appear silly that I am talking down PCRT but, in my opinion, I am not talking down PCRT or talking up CRT, for that matter. I just say it as it is.

PCRT could do better over time but unit holders must be prepared for a much lower DPU next year as earn out deeds are depleted by end of this year and if the properties completed are not able to pick up the slack fully by then.

CRT offers a much higher level of certainty for the next 2 to 5 years for anyone investing for income and although it is a business trust like PCRT, it is not the same as PCRT. This is why my investment in CRT is about 8x bigger than my investment in PCRT now.

Both PCRT and CRT are business trusts. Same but different. We should not over-generalise.

Related posts:
1. Croesus Retail Trust: What is my plan?
2. Croesus Retail Trust: Overnight BUY order filled.
3. Croesus Retail Trust: Initiated long position at 87c.

Second Chance Properties Ltd: REIT timing.

When I blogged about Second Chance Properties Ltd in December 2012, I said:

"As an investment for growth, we have to be prepared for some headwind as real estate prices have very likely peaked. With more supply coming on stream, rental rates and property values could face downward pressure in the coming years."

Well, the company has done something very clever! They are selling "all 45 properties in its portfolio to REIT manager Celestine Management Pte Ltd for $175.4 million with the intention of listing the property fund as a REIT."

And this is what they said in a press release:

"Going forward, the board thinks that it is prudent to significantly reduce the group’s exposure to its investments in properties. Additionally, the opportunity to sell the properties en masse is a rare one and provides the group with an easier and more expedient means of disposing the properties as compared to selling each property individually." Source: The EDGE.

To me, it is quite obvious that they are exiting at a high. Do you think that the proposed REIT will be good value for money for investors like you and me at its IPO? I wonder.

Related post:
Second Chance Properties Ltd.

SMRT: Breaking every support.

The one and only time I ever blogged about SMRT's stock was in January 2012. Back then, I said that the downtrend was intact and that we could see the share price go lower. That was really a reading of the short term charts. Nothing could have prepared me for what I see today.

SMRT's share price is breaking every single support level and I won't be surprised if it should test the next support at $1.035 soon.

Click to enlarge.

If Maybank Kim Eng is right, SMRT's stock is now only worth $0.60 a share and they arrived at that target price using a PE ratio of 14x. So, even at $0.985 a share which is another support level, SMRT's stock is way too expensive. Yikes!

In the short run, there could be a bounce in the share price as I see higher lows in the momentum oscillators. Selling pressure could ease a bit for a while but the downtrend is very much intact.

Short sellers could renew their efforts in the event of a rebound in share price and they would probably do so as close to the resistance as possible. They could use the 20d MA as a guide and that is at $1.16 now.

Looks like it is going to be a long and bumpy ride down for SMRT's loyal shareholders.

Related posts:
1. SMRT: Downtrend intact.
2. Do not love unless it is worth the loving.
3. When to BUY, HOLD or SELL?

Distribution Reinvestment Plan: First REIT and CIT.

I received a few enquiries from readers as to what I am doing with regards to the Distribution Reinvestment Plans (DRP) offered by First REIT and Cambridge Industrial Trust. I think readers who have been following my blog for a long time would have guessed my answer.

I invest in REITs for income and I will take the distributions in cash, usually. Usually? Yes, usually and I would have said "always" if not for the single instance when I took part in the DRP of AIMS AMP Capital Industrial REIT's.

So, why did I do it then? Was I being inconsistent?

Well, if I could make money out of a situation and yet not stray from my original intention of investing for income, I am being consistent. That was the case then. So, it was a case of having my cake and eating it too. Why wouldn't I do it?

For those who are unfamiliar with the circumstances surrounding the DRP I am referring to, please read: AIMS AMP Capital Industrial REIT: DRP.

As for the DRPs offered by First REIT and Cambridge Industrial Trust now, I don't see how they are compelling offers apart from the fact that unit holders who take part will be saving on brokerage fees and other costs which would be incurred if they were to make the purchases in the open market instead.

First REIT is offering to allot new units at a price of S$1.0163 per unit. Market price is now $1.02 per unit.

Cambridge Industrial Trust is offering to allot new units at a price of S$ 0.6737 per unit. Market price is now $0.68 per unit.

As anyone can see, there is only a very slight discount to the current market price in both cases.

So, unless we are thinking of increasing our exposure to the REITs at current prices anyway for some reason, it would not make much sense to take part in the DRPs.

I have shared the reasons why I am not adding to my investments in S-REITs in earlier blog posts but those reasons are good for me. They might not be good for everyone.

Having said this, I still think that REITs are relevant investments for income and would not hesitate to add to my long positions if Mr. Market were to make me offers too good to refuse.

Related posts:
1. 9M 2013 income from REITs and more.
2. 2013 full year income from S-REITs.
3. Strategy to grow wealth and augment income.

A pleasant surprise from Nuffnang.

Today, I received a pleasant surprise from Nuffnang. I got a cheque from them in the mail!

Almost one year's worth of ad income from Nuffnang.

Although the amount is lesser than what I expected to be paid when I made the cash out more than 2 months ago, it is better than not being paid at all. Am I good at consoling myself or what?

A good sign, you think?

Gong Xi Fa Cai! Wan Shi Ru Yi!

Related post:
Accused of fraud and denied payment.

Croesus Retail Trust: The EDGE.

A reader kindly informed me that the latest issue of The EDGE has a write up on Croesus Retail Trust. The Trust is, of course, my latest investment and one of only two stocks I have bought in the last three months. So, what has The EDGE got to say?

"... amid the improved sentiments as Abenomics works its way through the world's third biggest economy, one counter considered to be the best proxy in Singapore to Japan seems to have gone unnoticed amongst investors."

1. The Trust's current distribution yield is amongst the best in the world of business trusts and REITs in Singapore and Japan. Current unit price: 87.5c.

2. Business trusts have not been well received in Singapore for various reasons, including their heavy use of debt and less predictable payout.

3. Books revenue in JPY but pays investors in S$.

4. Expects to charge higher rents from this year and the Trust plans to replace more than half of expiring leases with bigger brands.

Some other points were also made but, to be fair to the publication, you might want to get yourself a copy of The EDGE. Article is on page 16. The price went up recently: $5.00 a copy now.

If you want to find out more about Croesus Retail Trust right now, I have been blogging about the Trust lately. Just search for the articles in my blog. Free of charge. Wink, wink.

Actually, I believe that the current malaise in the Trust's unit price has also partly got to do with the fact that the initial euphoria we saw at the Trust's IPO and the eventual bursting of that bubble hurt many retail investors. I know some who were caught. Once bitten, twice shy or so the saying goes.

Well, I rather like to look at out of favour stocks with very attractive attributes for income investors (perhaps, with a dash of growth potential) and Croesus Retail Trust seems to fit the bill.

Related posts:
1. Croesus Retail Trust: What is my plan?
2. Croesus Retail Trust: Initiated long at 87c.
3. Croesus Retail Trust and Saizen REIT.