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AIMS AMP Capital Industrial REIT was trading at $1.74 per unit this morning. Nice. The REIT will be distributing 3.14c per unit on 18 June 2013.
This is the income distribution for the period of 1 January to 31 March 2013.
For a more accurate estimate of regular quarterly distributions, we have to remove 0.3c which is from the capital gains that comes from divesting 31 Admiralty Road. We also have to remove 0.09c which is what is left of distributable income in the preceding 9 months. The REIT typically pays out all residual distributable income in the final quarter.
So, this gives us 2.75c a quarter and a more regular annualised DPU of 11c. At $1.74, the distribution yield is 6.32%. This is not very high but obviously attractive enough for Mr. Market, especially when compared to some industrial S-REITs which do not even offer a 5% distribution yield.
20 Gul Way (Phase 1) has begun contributing to the REIT's income. The contribution is better than expected. 20 Gul Way (Phase 2) will begin contributing to the REIT's income in 2H 2013. Then, there is also the redevelopment of the property on Defu Lane.
With many more properties with plot ratios to be maximised, there could be many more catalysts for re-rating the REIT in future. The management have, after all, proven themselves competent in the redevelopment department.
They have also renewed another 16 leases with a weighted average rental increase of 18%. This will have a positive effect on future DPU.
Expecting further boosts to the REIT's income is probably the reason why Mr. Market is willing to pay more for the REIT.
Related post:
AIMS AMP Capital Industrial REIT: 3Q FY2013 DPU 2.58c.
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19 comments:
"the Manager is proposing to carry out a private placement of new
units in AIMSAMPIREIT (“Units”, and the new Units, “New Units”) to institutional and other
investors at an issue price (“Issue Price”) of between S$1.575 (the “Minimum Issue Price”)
and S$1.625 per New Unit (the “Issue Price Range”) to raise gross proceeds of at least
S$100 million (the “Private Placement”)."
"The New Units to be issued pursuant to the Private Placement will increase the
number of Units in issue by 63,492,000 Units (based on the Minimum Issue Price),
which is an increase of approximately 14.1% of the total number of Units in issue as
at 17 April 2013."
What are your thoughts?
Thanks
Hi JCK,
This will lead to a 12.3% discount in value. So, if Mr. Market is rational, we should see unit price declining by the same percentage from $1.74 to $1.53.
Of course, this is assuming that everything else remains constant.
If the management is able to use the funds from the private placement to deliver growth in DPU in excess of 14.1%, then, no harm is done.
Use of proceeds:
Approximately 75.0% of the gross proceeds to partially fund the Phase Three development of 20 Gul Way, Singapore 629196 and the
redevelopment of 103 Defu Lane 10, Singapore 539223.
As the Development Projects are expected to be financed progressively over the next
15 months, the Manager may use the proceeds to partially repay outstanding borrowings in the interim.
Approximately 22.0% of the gross proceeds to partially fund future potential acquisitions, asset enhancement initiatives and/or other redevelopment opportunities
that may be identified by the Manager.
Seems legit to me. Should benefit all unit holders over time.
However, upon lifting of the trading halt, some weakness in unit price should be expected. :)
If only we can participate in the new units subscriptions. Perhaps too much cost & efforts when dealing with the retail investors ?
At the lower band of $1.53, will you enter the market for more lots ?
Hi SnOOpy168,
Actually, the proposed share placement is not cheap. So, it is all as well that minority unit holders like us won't get to participate.
As per my calculations, everything else being equal, a price of $1.53 gives us the same value, post placement, as the price of $1.74, pre placement.
However, post placement, if the management of the REIT is able to bump up DPU by a percentage to more than compensate for the dilution which is caused by the placement, then, buying more at $1.53 would have been a fortunate move.
I think you can tell that I don't have a definite answer for you. ;)
Noted that the fund will be used to pay down the debt temporarily, meaning lower interest cost.
If the Phase 2 Development of 20 Gul able to obtained TOP by 2nd Quarter of 2013, as indicated in the private placement announcement, then the DPU might be able to be maintained at around 2.75cts?
However, noticed that there are 2 dates of TOP for 20 Gul Phase 2 mentioined:
1. 2nd Quarter 2013 - in private placement announcement
2. 1st Quarter 2014 - in unaudited financial statement for 4Q2013
Hi Poh Soon,
Apparently, they will be able to obtain TOP for 20 Gul Way Phase 2 by middle of this year. Plus the three months rent free period, Phase 2 should start contributing to the REIT's income in the quarter Oct - Dec 2013.
So, realistically, post private placement, we should expect a proportional decline to DPU until then.
A quarterly DPU of 2.4c is not too bad especially when we remind ourselves that it is going to be only temporary.
I still remember the time when AimsAmp had the reverse split from 20 cents to a dollar. Look at how its price has run up from that time.
As for the placement, seems like perfect timing to have one when the stock is at a high.
Hi IzyData,
No question about it. Equity fund raising makes a lot of sense with unit price being where it is. :)
All reits run like crazy. I wanted to clear my CPFIS of my sabana at 118cts recently and fortunately found no buyer. Capital appreciation of 33% and annual dividend of about 9%, sabana is my best performing REIT so far.
that reverse split resulted in a 600 shares odd lot in my CPF-IS. Insufficient funds to top it up or too expensive to sell. Duhhh... Took the broker advice and sit on it.
Hi seefei,
My investment in AIMS AMP Capital Industrial REIT has outperformed my investment in Sabana REIT. Of course, this is really because I have been invested in the former since the time it was recapitalised and renamed. So, not strictly comparable. ;p
Investments in First REIT and Saizen REIT have also been very rewarding for me.
Sabana REIT could play catch up this year. So, not being able to sell your stake in the REIT could be a stroke of luck. ;)
Then again, with almost half of its leases expiring by end of the year and no news of renewal with positive rental reversions remains a concern.
Hi SnOOpy168,
Oh, definitely nothing wrong or bad with keeping odd lots and collecting regular income. :)
"Then again, with almost half of its leases expiring by end of the year and no news of renewal with positive rental reversions remains a concern."
Already the first qtr and no reduction of the 44% expiration yet by the Manager.
That's a real concern....
We initiate coverage on AIMS AMP Capital Industrial REIT (AAREIT) with a BUY rating.
Based on our DDM model, by assuming a terminal growth rate of 2.0% and a COE of 7.8% (with a risk-free rate of 1.6%, 0.8x beta and 6.8% equity risk premium), we arrive at our target price of
SGD1.90.
We believe the direction the trust’s manager is currently taking will benefit the unitholders, thanks to its long-term growth potential.
Going forward, AAREIT’s manager has dedicated to redevelop several of its properties with an underutilised plot ratio.
Recently, its management estimated that up to 50% of the total portfolio has underutilised plots that could be developed. Through this, the REIT will be able to unlock the values of its existing properties while avoiding the risks of overpaying for an asset,
particularly when the capital values of industrial properties in Singapore are currently at their historic highs.
OSK DMG, 23 April.
Hi AK71,
Enjoy reading your blog and I have one question on AIMSAMP.
It has a distribution reinvestment plan for unit holder. In your view, should a unit holder choose to take dividend as cash or dividend as units?
My preference is to take cash. No hassle in dealing with odd number of units. What could be the strong reasons that one should take units instead?
Ronald
Hi Ronald,
I invest in AIMS AMP Capital Industrial REIT for income. So, I will choose to have cash distributions.
People who believe that units in the REIT are undervalued and would like to buy more could do so using the reinvestment plan. Will save on brokerage fees.
Of course, you are right about odd lots but that is a minor inconvenience. :)
AAREIT announced that it received the Temporary Occupation
Permit (TOP) for Phase Two of 20 Gul Way on 7 May.
Although we had expected early completion for this phase, the
announcement is a pleasant surprise as it beats our expected
date by two months.
We maintain our positive view on AAREIT as it is set to announce plans for Phase Three of 20 Gul Way in the near future.
Target price: S$1.90
OSK DMG, 8 May 2013.
AIMS AMP Capital Industrial REIT (AA REIT) and CWT Limited have agreed to add another 496,944 sqft of development at 20 Gul Way via a Phase 2 Extension (2E) and Phase Three.
The total development cost is estimated to be $77.2 million which will be funded from the $110 million raised by AA REIT in a private placement in April.
Upon satisfaction of certain conditions estimated to be completed by August or September, AA REIT and CWT Limited will enter into a design and construction contract and agreement for lease. Construction will start thereafter and is expected to take 17 months.
Nick McGrath, AA REIT Management’s Chief Executive Officer, said: “We are pleased to enter into this development agreement with CWT Limited. Once completed, Phases 2E and Three are forecast to add $89.41 million to 20 Gul Way’s value, creating an asset valued in total at $306.42 million and will be the largest asset in our portfolio. By undertaking this further development at the property, we expect to deliver superior returns to our investors, with the net yield on cost of this further development estimated to be around 8.3%.”
Upon completion of the development, CWT Limited will lease the Phase 2E and Phase 3 warehouses over a period of five years and two months on the ground floor, and 32 months for levels two to five, with an annual rent escalation of 2%.
THE EDGE, 6 June 2013.
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