3Q 2018 passive income (non-REITs): AGT.

Some might remember that I reduced my investment in Accordia Golf Trust many moons ago at slightly more than 70c a share.

Since then, Accordia Golf Trust has seen its unit price gone down a slippery slope.

It finally got to a point where I just had to hit the "accumulate" button.

I remember sharing before but I just cannot remember was it here in my blog or during an "Evening with AK and friends" that my own research (with the help of Google Translate) found that PGM, Japan's second largest golf course operator at that time, made an offer to buy Accordia Golf's assets a couple of years or so before Accordia Golf Trust was listed in Singapore.





PGM's offer back then, roughly, translated to a present day unit price of 56c a share.

The offer was rejected by Accordia as being too low then.

Of course, we know that Accordia Golf Trust listed in Singapore later at a much higher price of 97c a unit.

With this in mind, I simply could not resist buying at a price that Accordia Golf's shareholders rejected as being too low or at more than 30% discount to its NAV.





Putting this figure in perspective, a more recent development was the sale of Accordia Golf Trust's parent to MBK, a Korean private equity firm, in a deal that valued the parent at a whopping 60% premium to NAV!

If we give this a moment to sink in, it would seem that Accordia Golf Trust has been hugely undervalued by Mr. Market.

It reminds me of the time when Saizen REIT was able to sell its assets at a premium to valuation.

It reminds me of the time Croesus Retail Trust was sold at a premium to valuation.

To be sure, income investors should be concerned with the stability of Accordia Golf Trust's income distribution as it still has quite a bit of membership deposits which have yet to be claimed.





By my estimate, if redemption remains elevated as seen in the last financial year, DPU could stay at about 3.8c to 4.0c a year and it could take about 5 years for this to be fully purged from AGT's books, all else being equal.

Of course, if redemption should be even higher in some years, DPU could be even lower and if redemption is lower, DPU could be higher but, eventually, membership deposits should be fully redeemed.

This matter of membership deposits is a legacy issue and once they have been fully redeemed, it will no longer be a drag on AGT's DPU but, realistically, it would take some time before this issue is all in the past.






Some might remember that I put forth one reason for reducing my investment in Accordia Golf Trust late last year as the worrisome uncertainty surrounding its loans.

However, they have since managed to refinance their debt with a new 5 year loan and with a lower interest rate to boot.

This is very good news, of course, and has provided me with the confidence to accumulate as Mr. Market remains pessimistic about AGT.





There is intrinsic value in Accordia Golf Trust and once all the membership deposits have been redeemed, all else remaining equal, we could see DPU at around 6c or higher again.

I think a prospective distribution yield in excess of 10% is pretty attractive, especially when we remember that AGT's gearing is relatively low.

We just have to make sure we pay a low enough unit price for AGT.

Sometimes, I forget but I try to remember what Buffett said before:

"Have the purchase price be so attractive that even a mediocre sale gives good results."





The advantage of being a retail investor and not a fund manager is that we only have to account to ourselves.

Unlike fund managers, we don't have to worry about dealing with investors who might only be interested in seeing their investment increasing in unit price, quarter to quarter.

Our actions are not motivated by a need to appease other investors.

In this respect, retail investors are a fortunate bunch and we should not forget this.

However, remember not to ask barbers if we need a haircut and, of course, nobody cares more about our money than we do.





I remind myself from time to time that all investments are good at the right price.

Once I have identified an undervalued investment, and it should preferably pay a meaningful dividend, I buy some.

So, what did I do?

I bought more Accordia Golf Trust at between 52 to 54 cents a piece recently.

Now, all I have to do is sit back, relax and get paid while I wait.

Well, if Mr. Market makes me even better offers, I would probably be buying more.