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The last time I blogged about this REIT was on 28 April and I was so negative about it that some readers divested their shares in the REIT straightaway. Read blog post here.
In a reply to a reader, OT, I mentioned that I would wait to see if I could divest my investment at 52c just to close a chapter (again). Even with mediocre investments, there could be a better time to sell.
Fundamentally, with a 2Q DPU of 1.036c, it translates to an annualised distribution yield of just 7.97% at the unit price of 52c.
Gearing at 32.7% and interest cover ratio at 5x are similar to AIMS AMP Capital Industrial REIT's.
The difference? AIMS AMP Capital Industrial REIT has an estimated distribution yield of 9.09% at the unit price of 22c. Money should go to where it is treated best.
Technically, the resistance as provided by the 200dMA at 51.5c was taken out convincingly today as price closed at 52c, forming a long white candle in the process.
A breakout? It seems to be the case and we could see price test 53c in the near future. I have entered my sell order.
See presentation slides here.
Bloggy Award
6 comments:
"Money should go to where it is treated best."
well said.
SnOOpy168
Hi SnOOpy168,
I cannot take credit for this. I read it somewhere before but can't remember where and when. ;)
Hi AK,
I noticed that debt has been drawn down to fund acquisitions in late June. Wouldn't the yield be much higher in 3Q 2011 ? In addition, they have a development project which should be both DPU and NAV accretive. In addition, C-REIT cash is equivalent to 26.5% of its debt while AIMS REIT cash is only 6.5% of their total debt. So it is clear which one offers more growth. Ultimately, CIT (and AIMS) both over-leveraged themselves at the height of the industrial property bull run so investors then are still paying the price. I would say both have similar level of risk and rewards. Perhaps AIMS would edge out with a stronger sponsor but that too doesn't count much judging by what happened in 2008 when Babcock and MacArthurcook collapsed. Not vested in either REIT.
Nick
Hi Nick,
CIT has more cash on its balance sheet due to a failed acquisition which it raised funds for which, of course, resulted in DPU being diluted. That says something (again) about the quality of its management.
Potential for growth aside, remember how Chris Calvert squandered away the REIT's funds in a foolhardy attempt to take over the then MI-REIT and we have cause to be wary as to how he might utilise the excess funds now.
There are other examples of how CIT has disappointed under Chris Calvert and I have blogged about them.
Quality of management is definitely an important factor that should affect investment decisions and I would rather throw in my lot with George Wang than Chris Calvert.
Hey AK
I can agree more about what you have to say about GW and CC. In fact, I've decided on a risky gambit to make sense of my investment in AIMS. I'm going to divest my Cambridge stake (think about break even after factoring in distributions) and channel the funds to AIMS. This will bring down my average price for AIMS; and hopefully it will pay off in future.
Wish me luck!
Hi Paul,
Given your past reservations about George Wang, I am sure you have given your current decision much thought. I need luck too. So, good luck to both of us. :)
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