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Sabana REIT: An 8.14% yield even now!

Friday, January 18, 2013

Sabana REIT's unit price rose today as expected. It closed 3c higher per unit. Annualised, anyone who bought at $1.185 today would be looking at a distribution yield of 8.14%.

UOB KayHian has a BUY recommendation on the REIT and a target price of $1.30 which means a yield compression to 7.42%. Don't ask me how they determined the target price. I have no clue. However, their call could help push the unit price of the REIT higher if there are enough people who believe the recommendation.

What do I think?

Well, I wrote a piece not too long ago in response to a friend's question as to whether he should buy into Sabana REIT. Anyone who is thinking of buying into Sabana REIT or any other REIT for that matter might want to read that blog post: 5 steps to take in REIT investment.

What about my opinion on Sabana REIT in particular?

Well, although an 8.14% distribution yield is relatively high even when compared to AIMS AMP Capital Industrial REIT which currently yields some 6.4%, I would say that we should exercise caution as almost half of Sabana REIT's leases by gross revenue would be expiring this year.

Although I am optimistic that most, if not all, of the leases would most probably be renewed and with some positive rental reversions to boot, there is always a chance that things could go wrong. Mr. Market will be Mr. Market. Or am I wrong to say this?

For anyone who is attracted to the distribution yield and we can understand why this is so especially in the extremely low yield environment which we find ourselves, having a long position as a hedge even at the current price could be considered. However, bear in mind that we could see unit price retracing once the REIT goes XD in a few days from now.

You know yourself best (I hope). So, if seeing the unit price decline by a few percentage points would cause you anxiety, please think twice about buying now. Of course, there is no guarantee that a decline would take place but the probability is for this to happen than for price to go higher when the REIT goes XD.

For those who already have a long position in the REIT, buying when there is a retracement to support would seem like a more logical thing to do. Buying last month when unit price was at about $1.10 instead of now at $1.185 would give you an idea of what I mean.

Anyway, I will leave you with this technical picture and let's see if you can spot the signs which would suggest that caution on the part of bulls would be rather wise.


Have a good weekend.

Related posts:
1. Sabana REIT: 4Q 2012 DPU 2.41c.
2. 5 steps to take in REIT investment.

11 comments:

Anonymous said...

Hi AK,

Thanks for the chart. I see a MACD divergence.

Had bought Sabana last year at 95c after following your blog for sometime, but I sold all when everyone seems to be buying into REITs. It looks heated up even until now.

AK71 said...

Hi HPB,

I am assuming that you made good money on Sabana REIT.

Congratulations! :)

Art Collector in SG said...

Hi AK, have you researched into US reits? I found S-reits are getting lower yields now and looking into us reits.

AK71 said...

Hi Tony,

The last I looked, US REITs' distribution yields were rather low. The ones with higher yields had very high gearing and that turned me off.

Having said this, I am no expert on US REITs. So, you might want to seek opinions from others. :)

SnOOpy168 said...

not forgetting that non-US entities or persons will have to pay withholding tax, handling & remittance fee on dividends received.

AK71 said...

Hi SnOOpy168,

Good points. Thanks for this! :)

Dividend Tech Warrior said...

Hi AK,

Looking forward to your reviews for AIMS, First REIT and CACHE. ^^

FoodieFC said...

I am vested in this at ard $0.91

I have been waiting for it to drop back to this lv to vest more. But well.. never got the chance..

I hope their lease holders will renew the contract. else DUP will go down quite a fair bit

Huat to us!

AK71 said...

Hi DW,

I will definitely do it if I have the time and inclination. :)

AK71 said...

Hi FoodieFC,

Indeed, that could be the storm in the teapot!

In the near term, I suspect Sabana REIT could retrace to $1.12 upon XD. ;)

JCK said...

http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_5349FB8431794D8A48257B4A00311512/$file/Sabana_AGM_Presentation.pdf?openelement

Wonder how's the lease renewals going?

At end 2012, leases expiring in 2013 impacting revenue was pretty high at 44.7%.

Did anyone attend their AGM? :)


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