The latest 6 months T-bill auction saw a cut-off yield of 3.78% p.a.
Sabana REIT: Internalization pains.
Have a more secure financial future in an uncertain world by creating a stream of reliable passive income with high yields.
Ever since the CPFB introduced a colorful pie chart of our CPF savings a few years ago, I would look forward to mine every year like a teena...
The latest 6 months T-bill auction saw a cut-off yield of 3.78% p.a.
Posted by AK71 at 3:19 PM 2 comments
Labels:
bonds,
Sabana REIT
When Sabana REIT's unit holders voted for the internalization of the REIT's manager, some readers asked me what I thought of it.
For the record, I didn't vote for the internalization.
I sat on the fence.
From past experience with Croesus Retail Trust, I guessed that internalizing the manager would be a costly exercise.
I said as much here in reply to readers' comments.
However, if successfully executed, it would result in significant cost savings and greater alignment of interests.
The exercise was smooth sailing in the case of Croesus Retail Trust although it was pretty costly.
That was partially because the REIT's sponsor suggested the internalization themselves.
It was not a demand made by activist investors.
It was suggested partly to unlock value and to address the persistent underperformance of the Trust's unit price.
Later on, Croesus Retail Trust was sold to an institutional investor at a premium to valuation.
I had mixed feelings about the sale.
I lost a reliable passive income generator but I did enjoy an attractive return.
Whether the internalization of the manager played a part or not in the sale of Croesus Retail Trust to the institutional investor is anyone's guess.
Anyway, looking at Sabana REIT, from what has transpired so far and at the recent EGM, it is obvious to me that we are not seeing another Croesus Retail Trust here.
To me, the entire process in Sabana REIT's instance seems to be far more challenging.
It is going to take way longer and cost way more than expected.
Regular readers know that I increased my investment in Sabana REIT significantly in late 2020 and early 2021 after the lowball offer to buy the REIT was rejected.
Sabana REIT was and still is pretty undervalued.
However, I don't like investing in businesses which keep me guessing.
Peace of mind is priceless.
My investment in Sabana REIT has paid me attractive dividends in the last few years.
However, with so much uncertainty now, I have decided to reduce my investment in the REIT significantly while I am still in the money.
Taking back my capital, I will have a stronger war chest to take advantage of other investment opportunities.
So, with this decision, Sabana REIT is no longer one of my largest investments.
I still retain a legacy position from donkey years ago which is free of cost.
Posted by AK71 at 9:15 AM 4 comments
Labels:
Croesus Retail Trust,
Sabana REIT
One month ago, I blogged about the offer of 46.5c a unit by Volare Group to increase their stake in Sabana REIT by another 10%.
I have looked at the offer documents yesterday and it seems that those who decide to offer some or all of their investment in Sabana REIT for sale will get 45.04c a unit instead of 46.5c.
The very first section of the offer documents explains what "you will get for your units."
"S$0.465 in cash - S$0.0146 distribution = S$0.4504."
So, it seems to me that Volare Group is using the incoming income distribution from the REIT to help fund their purchase.
Is this offer still attractive?
Well, there are many ways to look at this and if we are to only look at the numbers, netting 45.04c a unit is still pretty attractive.
We don't have to incur any brokerage fee.
Sabana REIT was trading at 42.5c a unit the last I checked.
So, we could offer to sell all or some of our investment to Volare Group and buy an equivalent number of units from Mr. Market if we wished to retain the same level of exposure to the REIT.
This is an arbitrage opportunity to make some pocket money, if we want to take advantage of it.
There is risk, however.
The offer will only succeed if 10% or more of Sabana REIT's units are tendered.
If the offer should fail, this arbitrage strategy would saddle us with more units of Sabana REIT than what we started out with.
So, think carefully.
If I were to do this, I would remind myself of a couple of points.
1. Use only money which has been earmarked for investing for income.
2. Do not buy more Sabana REIT units than what I am comfortable holding in total in case the offer fails.
Personally, I won't be doing it.
Don't I want to make some extra pocket money?
Well, it isn't going to be that significant a gain unless I take a huge gamble.
A huge gamble?
A difference of 2.5c a unit = $25 per 1000 units.
So, I would have to buy some 100,000 units from Mr. Market while tendering the same amount to Volare Group if I wished to make $2,500.
I would have to fork out $42,500 before fees.
I don't have that money in my war chest now and even if I have that money, I would not do it because I am happy with how my portfolio looks now.
If I had a smaller investment in Sabana REIT, I might do it if I had the money but I feel that my exposure to the REIT is appropriately sized.
Appropriately sized?
Mustn't just look at the size of my investment in Sabana REIT.
I remind myself that I already have a very large exposure to industrial REITs with AIMS APAC REIT being my largest investment in this space.
Anyway, this is just me talking to myself as usual.
If anyone is thinking of arbitrage, good luck.
Huat ah!
Reference:
Offer of 46.5c per unit.
Posted by AK71 at 9:38 AM 12 comments
Labels:
investment,
Sabana REIT
This blog is in response to a reader's comment on Sabana REIT being taken over by a substantial shareholder.
I was replying to the reader's comment but it got pretty long.
So, I am publishing the reply as a blog instead and more people can eavesdrop as I talk to myself.
AK talks to himself:
It seems that Volare Group isn't buying the entire REIT.
Just a partial offer for 10% of the REIT at 46.5c a unit.
It is at a rather big discount to Sabana REIT's NAV but, given the much higher risk free rate today, it is probably not too bad a price.
I remember blogging about what I thought a fair price might be for a buyer to offer for Sabana REIT.
That was in relation to the low ball offer made by ESR REIT at the time.
I suggested a price of 48c a unit.
46.5c isn't too far off and back when I suggested 48c a unit, interest rate was way lower too.
For anyone who is interested, you will find my take on the matter in the following blog:
The fact that Volare Group is going to pay 46.5c per unit in today's high interest rate environment for Sabana REIT supports the argument that ESR was really trying get Sabana REIT for a song back in 2020.
Shame on ESR.
Shame on all the people who said it was a good deal and that Sabana REIT's minority shareholders should accept the scheme.
Yes, that's what they called it.
A scheme.
So scheming.
This offer by Volare Group is an affirmation of Sabana REIT's attractiveness as an investment for income even in today's environment.
Most of my investment in Sabana REIT, around 80%, was made at 35c a unit with the balance made up of a small legacy position and also around 15% added more recently.
So, if the REIT should be 100% taken over at an offer price of 46.5c a unit, I suppose it would not be a bad outcome for me.
To be quite honest, however, I wouldn't be celebrating.
It would most likely be a bitter sweet moment as it would remind me of Saizen REIT, Croesus Retail Trust, Accordia Golf Trust and Religare Health Trust.
All of them were pretty good investments for income with my entry prices but I was forced to take the capital gains as they were all delisted at one point or another.
I am still keen on keeping Sabana REIT as an investment for income.
I don't want to have to look for replacement investments for income.
After having spent too much time in 2022 reallocating resources, I am looking forward to being lazier in 2023.
Reference:
Largest investments updated.
Posted by AK71 at 9:45 PM 12 comments
Labels:
Sabana REIT
Sabana REIT was trading at a huge discount to NAV when I increased my investment significantly at the end of 2020 and the start of 2021.
Today, it is still trading at a 13.5% discount to NAV.
If we think a 3.1 cent DPU is sustainable, then, at 45c a unit, we are looking at a distribution yield of 6.89% which isn't too bad.
It isn't too bad because we could see DPU increasing in the not too distant future as Sabana REIT's portfolio is under rented.
Of course, there is a possibility that the portfolio could remain under rented.
However, I have a feeling that things are more likely to improve.
I like to see what insiders are doing and I find it very interesting that Donald Han, Sabana REIT's CEO, bought 100,000 units at 45c a unit in late April.
Being under rented means that Sabana REIT does not have to depend too heavily on acquisitions to grow its income.
From their presentation dated 21 May 2022, this could give income a boost:
Sabana REIT's financials are relatively strong and this is important as peace of mind is priceless.
It is very fortunate that Sabana REIT did not fall prey to the low ball offer by ESR REIT.
A gem in the rough that is still in the process of being polished, I hope that Sabana REIT will shine brighter in my portfolio.
Of course, whether Mr. Market agrees or not is something else.
If Mr. Market agrees, then, we should see Sabana REIT trading closer to its NAV of 52 cents per unit in time to come.
My bowling ball that thinks it is a crystal ball says a unit price of 48 cents or even 49 cents would not be unreasonable.
The information shared in this blog is taken from Sabana REIT's latest presentation dated 21 May 2022.
See complete slides: HERE.
Having positive vibes about Sabana REIT has nothing to do with the $20 shopping vouchers they sent to me.
Honest!
I hardly leave home but I guess I will make a trip to look look see see.
Recently published:
1. CLCT: Another largest investment.
2. FLT: Another largest investment.
Related post:
Sabana REIT's lesson.
Posted by AK71 at 12:28 PM 10 comments
Labels:
investment,
Sabana REIT
A few years ago, I blogged about lessons from my journey as an investor with Sabana REIT.
Posted by AK71 at 11:18 PM 28 comments
Labels:
investment,
Sabana REIT,
Wilmar
When I found out that Croesus Retail Trust could be privatised, I had a feeling of deja vu.
It wasn't too long ago that something similar happened to Saizen REIT and, because of that, I lost a significant income generator.
Now, it seems that I may lose another significant income generator.
As I invest primarily for income, this creates a headache for me, especially when it is a relatively big investment in my portfolio.
Posted by AK71 at 2:38 PM 14 comments
Labels:
Croesus Retail Trust,
Sabana REIT,
Saizen REIT
As we grow older, feelings of deja vu might become a bit more common. It is probably due to accumulated life experience or maybe the mind is just degenerating.
Posted by AK71 at 10:35 AM 3 comments
Labels:
AIMS-AMP Capital Industrial REIT,
CIT,
MI-REIT,
Sabana REIT
This blog is in reply to Jerry Low's comment:
Source: HERE. |
Posted by AK71 at 7:18 PM 9 comments
Labels:
REITs,
Sabana REIT,
Saizen REIT
The last time I had a substantial blog on Sabana REIT was in October 2015. It was titled "Sabana REIT: What is a fair price and what could they do?"
Actually, I thought I would never have another substantial blog on the REIT again but a rights issue happened. Never say never, as the saying goes.
Despite all the bad stuff that we have heard about Sabana REIT and, yes, I contributed to the noise too, it is reasonable to think that all investments are good at the right price. I try to keep an open mind (and hope that not too much rubbish gets in).
Anyway, it is no secret that Sabana REIT was, once upon a time, a very big investment in my portfolio. It was one of my big 5 investments in S-REITs. When I first invested in the REIT, it was in the pink of health and not ailing like it is today.
I didn't get in at its IPO because it was priced at $1.05 a unit and its NAV was 99c a unit. I got in a few months later at 11% lower than its IPO price which meant I got in at a discount to NAV and also with a higher distribution yield of about 9.3%. Gearing was a conservative 26.5%. (See related post #1 at the end of this blog.)
I was, honestly, waiting for a chance to accumulate Sabana REIT on further weakness as the numbers were good. That chance came a few months later in the form of the Fiscal Cliff in the USA. I increased my investment in the REIT, paying 88c and lower per unit which meant getting a higher distribution yield and an even bigger discount to NAV. (See related post #2 at the end of this blog.) This was in 2011.
Two years later, I remember UOB KayHian was particularly bullish in 2013 and had a target price of $1.30 for Sabana REIT. By that time, I had turned cautious although I was enjoying a distribution yield on cost of between 10.3% to 11.1%. In fact, at that time, I said this:
(See related post #3) |
Source: Sabana REIT & Innotek Limited. |
http://www.straitstimes.com/business/angry-investors-want-reit-manager-kicked-out |
Posted by AK71 at 12:02 AM 20 comments
Posted by AK71 at 11:31 AM 3 comments
Labels:
AIMS-AMP Capital Industrial REIT,
REITs,
Sabana REIT
The last time I blogged about Sabana REIT was in February this year.
I suggested that we might want to view some assertions in cyberspace that Sabana REIT offered great value for money because of its relatively high yield and rather big discount to NAV with a dose of scepticism.
What I was most concerned about was the matter of expiring master leases, 11 in all.
Posted by AK71 at 8:55 AM 11 comments
Labels:
Sabana REIT