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"E-book" by AK

Second "e-book".

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An opinion of Soilbuild REIT.

Friday, March 31, 2017

This came about because of my comment on Facebook that "There are sponsors who are mainly interested to use their REITs to sell their assets to. REITs are their ATMs."

Reader:
Soilbuild owner also use the REIT to sell property right?

AK:
Must see how it is done. 😉
If sponsor sells property with rental support, usually, it is a sign that the property is overpriced.

Reader:
hmmm
Because I haven't heard many favourable talk about soilbuild owner

AK:
Oh, neither have I 😜
But if we are on the same side, it is OK.
LOL
If he hurts me, he hurts himself. 😉

Reader:
Haha I thinking just buy in those with solid management
at good prices
Less headache

AK:
Now, difficult.
So, I settle for good management at OK prices.
Or OK management at good prices. 😜
OK management at OK prices, I also take a bit.

Reader:
Because what I read so far is similar to OUE, soilbuild owner treat the reit as dumping ground to unlock cash

AK:
Eh... I dun see it leh... They do sell but they dun dump. No financial engineering as compared to OUE or Keppel.
Selling does not equal dumping.

Reader:
Sponsor is weak also

AK:
OK. If you say that, OUE and Keppel are strong sponsors. 😉
I like to see what they do and decide.
Saizen REIT didn't have strong sponsor.

Reader:
(Some concerns with valuations of assets.)

AK:
Book value and market value har?
The best way of looking at whether valuations are realistic is to look at market prices.
When a property like XXXXXX was delisted (together with Soilbuild) many years ago, it was undervalued. Of course, when relisted, they want to list at market value.

Reader:
haha I more conservative just worried owner play punk
if own also carry small position only

AK:
I think Soilbuild towkay has business savvy but not crooked.

Reader:
me KIV until better, I also don't like the heavy exposure to O&G

AK:
I remember the towkay has a 25% stake in the REIT. That is not a small stake.

Note:
Although Soilbuild REIT's business parks are attractive assets to own, it is true that their exposure to the O&G sector is a cause for concern.
 

With Technics going bust, I estimated that 10% of their income is affected. I believe that Mr. Market has priced this in. 

If the entire O&G sector goes kaput, I guess that is when we might see Soilbuild REIT being punished by Mr. Market and its unit price could decline another 20%, maybe. This is improbable but possible.

Related post:
AA REIT, Soilbuild REIT and VIT.

8 comments:

ScOpIoN said...

Vested in Soilbuild REIT so my views might be a little biased. I've been through something like this discussion with a friend, on how the REIT is a dumping ground for the sponsor(SB). Personally feel SB is business savvy too, they unlocked the cash liquidity to further their construction business. Both REIT and main biz are still profitable, though the REIT is going through a rough patch, the management are doing their best to maximise the REIT's yield. As your concern for Technics property, they have done something to it and cut up the place and rented out a portion of it. Even if it's not the best or favourable outcome, at least they were busy seeking for tenants instead of sitting at the office doing nothing much. So still optimistic about SB REIT but not as secured as your most favourable AA REIT.

AK71 said...

Hi Scopion,

With the founder holding a pretty substantial stake in the REIT, I would be quite surprised if the manager doesn't work as hard as they do. In fact, they should work harder. ;p

Kevin said...

Hi AK and ScOpIoN,

With Technics going bust, there is still existing 4 to 5 months of rental deposit being withheld and it will enable the REIT to tie over this period without instant loss of rental income.

I feel the REIT manager is doing alright whereby the last rights issue exercise was a 10-for-1 offering(not a deeply discounted one like a fellow industrial REIT starting with the letter S) :P

Moreover, Mr Lim is the top shareholder for the REIT at over more than 25% and also a PBM holder. I think he have more to lose than to gain if he were to have ill intentions.

AK71 said...

Hi Kevin,

I also believe Soilbuild REIT isn't doing too badly. :)

Of course, some might say that I am bias. ;p

xiang said...

Hi. What is the problem with OUE and keppel management?
Able to share any previous post about them?

AK71 said...

Hi xiang,

Aiyoh. I anyhow talk to myself one lah.

1. OUE C-REIT will see DPU declining.

2. DPU plunged at Keppel DC REIT.

desmondsph said...

Expecting PDU to drop after may, will the price drop then or already priced in? the price increase quite steadily this week

AK71 said...

Hi Desmond,

Aiyoh, I anyhow estimate the DPU de. ;p

Will the price drop? -.-"

I tell you if I can find a working crystal ball, ok? ;)

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