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2Q 2018 passive income from S-REITs.

Saturday, June 30, 2018

Regular readers know that AK is usually pretty inactive as an investor, preferring to do nothing most of the time and just collect dividends.

Well, in 2Q 2018, in the S-REITs space, there was a bit of action.






There was the 1 for 10 rights issue by Frasers Logistics & Industrial Trust (FLT) in which I took up my entitlement and applied for a small number of excess rights.

To be honest, I did not think that the rights issue was very attractively priced. 

Perhaps, it was fairly priced.

We have to take note that the massive deal weakened the REIT's balance sheet significantly while delivering very little increase to DPU and NAV per unit.






I must say that I feel that the deal was better for the sponsor than it was for the REIT.

We shall see if the REIT's DPU grows in future, everything else remaining equal.

Having said this, the REIT should still be a fairly safe and stable investment for income that keeps me happy enough to stay invested.

Even after the rights issue, the REIT is still only one of my bigger smaller investments (under $100,000 in market value but more than $50,000).








Another thing I did in 2Q 2018 was to nibble at Starhill Global REIT as its unit price declined.

As its unit price declined by 5%, I pointed out to a friend that the drop in unit price did not really make the REIT absolutely more of a bargain than it was before.

Of course, I was not interested in adding to my investment then.


If you remember, I mentioned in an earlier blog that with the new tax levied by Malaysia, I estimated a 5% reduction to the REIT's DPU.

So, with a lower DPU, it is only logical that the REIT's unit price took a 5% hit as well.






However, when its unit price declined by much more than 5% later on, I decided that the selling was probably overdone.

In fact, unit price has declined by more than 10% compared to my initial entry price and I couldn't resist nibbling.

After all, there is reason to be hopeful that Starhill Global REIT could do better in future and that buying at a big discount to its NAV is a very tempting proposition and probably provides a decent margin of safety.







The REIT's portfolio of commercial buildings has intrinsic value.

As an investment for income right now, however, it is really nothing to shout about.


Although I feel that there is nothing fundamentally wrong with the REIT, it is really one for investors who are very patient and who are OK with being paid while waiting.

As I bought more in 2Q 2018, Starhill Global REIT has just crossed the line to become one of my larger smaller investments like Frasers Logistics & Industrial Trust (under $100,000 in market value but more than $50,000) but it is on the smaller side compared to FLT.









I like to think that all investments are good at the right price.


At such a big discount to NAV, it is just too hard for me to ignore but without a clearly stronger income investing angle here, I reminded myself not to take too big a bite.

I don't like choking.







Regular readers should not be surprised that the two largest contributors to my passive income from S-REITs are:

1. AA REIT

2. FIRST REIT






DBS recently did a piece on AA REIT, suggesting that it could be a target for takeover and suggested a target price of $1.55 to $1.65 per unit.

• Resilient industrial gem that offers above-average yield of 7.4%-7.6% over FY19-FY21

• Extraction of value from greenfield projects and addition of c.600,000 sqft of untapped GFA could drive revenues by c.16%

• Potential takeover target amid global hunt for quality assets








Frankly, I am not too enthusiastic about this, having lost quite a few good income generating investments in similar fashion already (with Saizen REIT and Croesus Retail Trust being the largest).


Quite honestly, unless there is another bear market, it is not easy to find robust replacements as more meaningful investments for income.





OK, enough grumbling.


Total passive income from S-REITs in 2Q 2018:

S$ 18,715.33

The next blog will be on my passive income from non-REITs and we will have the full picture for 2Q 2018 then.

Related post:
1Q 2018 passive income from S-REITs.

4 comments:

My Investment Machine said...

Hi ASSI,

your portfolio is massive!!!

AK71 said...

Hi MIM,

It is all relative.

Look at Warren Buffett's. ;p

Investminds said...

AK, nice passive income for 2Q18. Really inspire me. Thanks for sharing AK shifu.

AK71 said...

Hi IM,

If I have inspired more towards financial freedom, I am happy.

Thank you for the positive feedback. :)

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