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AIMS AMP Capital Industrial REIT: $1.425.

Monday, April 21, 2014

There is no accounting for Mr. Market's behaviour and the recent strength in the unit price of AIMS AMP Capital Industrial REIT is, to me, inexplicable.

At a pre-rights unit price of $1.415, the REIT was trading at a discount to NAV which was at $1.52 per unit. Post rights, however, the NAV is closer to $1.29 a unit. So, the recent high of $1.43 is actually a 10.85% premium to NAV.

Of course, with the funds raised from the rights issue not being used for yield accretive purposes, I also expect a 15% dilution to DPU in the near term. Not very supportive of a higher unit price, wouldn't you say? Eventually, DPU should recover but probably not to the pre-rights level and not in a jiffy.

Having given due consideration to all the above reasons, I decided to reduce the size of my long position in the REIT which is now larger after the recent rights issue. How big was the divestment? Not a big one but a rather small 14% or so. Who knows? Unit price could go higher.

The units divested are those I bought in late 2009 and mid 2010. Time really flies.

I estimate the return on investment, including income distributions over the years, to be about 17% to 18% per annum.

With this divestment, I have taken back the money I used to participate in the recent rights issue (at $1.08 per rights unit) and a bit more. A bit more? With a theoretical ex-rights price (TERP) of $1.365 then, it means that my partial divestment has a nice little capital gain to boot.

After this, my war chest will be beefed up but, everything else remaining equal, my passive income from S-REITs this year will be lower. I will have to wait patiently for opportunities.

Post recent rights issue, NAV/unit should be about $1.45. A thousand apologies. My brain no good. Thanks to Louis and Capricon for the nudge. So, it means that at $1.43, there is still a 1.5% discount to NAV.

Related posts:
AIMS AMP Capital Industrial REIT: Rights.
AIMS AMP Capital Industrial REIT: Good price?


Zaanan said...

Perhaps some people switching from Sabana to AIMS?

AK71 said...

Yikes, then, I hope that this blog has not given them reason to worry. -.-"


Hi AK,

My sentiments exactly and why it has risen to such heights, not only AIMS but quite a number of REITS is beyond my guess too.

I've fully divested my AIMS and Cache long positions, securing a lesser annual profit of roughly 12%, in the light of raising interest rates, increased supply of industrial units and the traditional "Sell in May and go away" trend.

Again, I'm also currently beefing up my war chest, increasing my savings % and patiently waiting for the large fish to take my bait.

Waiting is also an action and now my action is to wait.

Louis Goh said...

Hi AK, i think the post rights NAV should be ((40*1.52)+(7*1.08))/47 = $1.45?

AK71 said...

Hi Solidcore,

You are a more aggressive seller than I am! I am impressed! :)

AK71 said...

Hi Louis,

Oops. An oversight on my part? A thousand apologies. -.-" said...

Hi AK,

I fully divested my AIMS as well @ 1.425 last week ... This fund raising goes to my war chest :)

AK71 said...

Hi boonchin,

Wow! You too? I wonder how many more readers have sold or are selling. Now, I wonder if selling 14% of my position in the REIT is too little. -.-"


Hi AK,

As long as it helps you to sleep at night. :)

Anonymous said...

Hi AK,

I am holding. I only have total 1500 units post rights hehe... Bought 1 lot when it was 1.385 this year

Cory said...

AK, i have divested full on this one. I hope to find reasons to come back.

Dividend Tech Warrior said...

Hi AK,

I am still keeping mine. ^^

INVS 2.0 said...

How to you calculate a 15% dilution in DPU? :P

AK71 said...

Hi Capricon,

Yup. Louis gave me a nudge on this one. Oversight on my part. -.-"

As for DPU, there should be a 15% dilution from the rights issue. Optus and Defu should bump up DPU but I think it would be by some 5% only. So, we might see a distribution yield of roughly 7% based on unit price of $1.42. All back of envelope calculations.

AK71 said...

Hi aceirus,

Oh, new shareholder. Welcome. :)

AK71 said...

Hi Cory,

Oh, ex-shareholder. Farewell. ;)

AK71 said...

Hi DW,

Oh, existing shareholder. Haha. ;p

AK71 said...

Hi INVS 2.0,

If $1 in income was shared between 40 shares before, it has to be shared between 47 shares now, post rights. So, where it was $0.025 per share, now it is $0.0213 per share. That is a 15% reduction. Simple proportion. :)

PY said...

Personally i think 1.425 still within NAV (though discount to NAV is smaller now). I am still fully vested in this one. George Wang and team has been doing good job so far, creating values for shareholders. Most importantly, he is also vested in this stock and his interest is more aligned with ours. Drop in DPU should be short term. Happy Investing.

PSTan said...

Hi AK,

Where did you find out that the coming div is 2.13 cts?

Sanye ◎ 三页 said...

Hi AK,

I am keeping mine under the pillow. :)

PSTan said...

I thought that the div for last 2 quarter is about 2.75cts per share?

AK71 said...

Hi PY,

I believe that the management has done a good job so far as well and I also like the fact that George Wang is rubbing shoulders with minority unit holders. ;)

This partial divestment of mine is more a trimming of my long position which has grown bigger after the recent rights issue.

Unlike Sabana REIT where I divested more than 80% of my long position, with AIMS AMP Capital Industrial REIT, I still retain more than 80% of my investment. :)

AK71 said...

Hi PS Tan,

I was just trying to demonstrate how DPU has been diluted by 15%. The numbers were random. ;)

AK71 said...

Hi Sanye,

Pillow stock? Hahaha.. I like that.

My idea of a pillow stock is one that is free of cost. I have yet to recover all my cost of being invested here. So, it has yet to become a pillow stock for me. :)

Recruit Ong said...

wah lao some ppl really never do homework leh!
last quarter dpu 2.75c, but coming quarter sure will drop bcos of the dilution.
u mean u dunno this? chum liao lor hahahaha!
in fact the reit already give us agar agar pro forma annualised dpu in their previous financial announcement, from 10c drop to 9.2c.

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