Since my last blog on Eagle Hospitality Trust, I have not looked at it.
I am looking at it again in response to a reader.
The reader who invested in Eagle Hospitality Trust left me a comment but requested that I do not publish it so as not to reveal his identity.
He bought into Eagle Hospitality Trust at 70c a unit this year in July, thinking that he got a pretty good deal.
He bought more when the unit price declined to 66c a unit later in October.
That time in October, he invested for his children using the money in their savings accounts.
When the unit price plunged later on in the same month, he looked on in horror.
Imagine his consternation as the unit price went on to hit new lows soon after.
The massive wealth destruction in such a short time would make any grown man cry.
It must have been horrible.
When the reader bought more at 66c a unit in October, he was unaware that Eagle Hospitality Trust's insiders were already paring down their investments in the Trust in August.
He is more vigilant now.
He has been closely following the news since the Trust's unit price crashed.
The following is the reason why he wrote to me.
Apparently, on 3rd December 2019, Compass Cove Assets Limited which is wholly-owned by Norbert Shih Hau Yuan, sold 35 million units at 52 cents per unit in a married deal, in the process ceasing to be a substantial unitholder as his stake became less than 5%.*
The reader was hopeful when Eagle Hospitality Trust's unit price rose from the depths but he is now in distress once more.
He believed that the Yuans would stop selling their stakes in Eagle Hospitality Trust.
With this latest news, he doesn't know what to believe anymore.
It seems that Norbert Yuan has taken full advantage of the recent recovery in Eagle Hospitality Trust's unit price to sell a rather big chunk of his remaining investment.
From here on, any further sale on his part need not be reported as he has ceased to be a substantial unitholder.
Will the selling continue?
Of course, henceforth, there is no way the reader or anyone of us, for that matter, will ever know.
Obviously, my blogs on Eagle Hospitality Trust last month did not provide the reader with any comfort.
So, why write to me?
What can I say to comfort him now?
Why did I not invest in Eagle Hospitality Trust?
Will I ever invest in Eagle Hospitality Trust?
Is there something wrong with the Trust?
Is that why AK is not investing in it?
Well, to be perfectly honest, I don't know if there is definitely something wrong with the business.
However, I do know that I feel uncomfortable about what has happened which caused the unit price to crash.
I don't know if I will ever feel comfortable enough to invest in the Trust but usually if I am uncomfortable with what the insiders do, it will take a lot to change my mind.
I am not an insider and I don't know more than what has been made public.
For my own sanity, I am just staying out of something I am doubtful about.
Yes, when in doubt, I should stay out.
(If you have yet to read my past blogs on Eagle Hospitality Trust, they are hyperlinked at the end of this blog.)
Here in ASSI, please remember that I am only talking to myself about my perspectives on things.
I am not making any recommendations.
I am as fallible as anyone else.
Please read the disclaimer at the end of this blog page.
What readers do after listening to me talking to myself is up to them.
I will say that if an investment is causing us to lose sleep, we are probably overly invested or using money we should not be using to invest with.
Don't let investments drive us insane.
It isn't worth it.
Trust me when I say we cannot put a price tag on peace of mind.
It is absolutely priceless.
Finally, this blog is not just about Eagle Hospitality Trust.
It is more than that.
I like to think that it is about philosophy which we can apply to all other investments we make in life as well.
Don't let something like this haunt us.
Related posts:
1. Is Eagle Hospitality Trust worth it?
2. Eagle Hospitality Trust: Financial engineering.
Also recently published:
1. Accordia Golf Trust: A 60% premium?
2. Accordia Golf Trust: Offer must be way above valuation.
*See Eagle Hospitality Trust's SGX announcement: HERE.
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12 comments:
Good article. I invested in the eagle trust as well and lose big. In fact, I have another counter I lose up to 80%. The tuition fee I paid is just too expensive.
Hi Unknown,
We cannot always be right.
As long as we are right more often than we are wrong and if we make more money than we lose, over time, we should do well enough.
Investing for income has been very rewarding but I am sure there are lemons too.
See:
A step towards achieving ZEN as an investor.
"In this business, if you're good, you're right six times out of ten. You're never going to be right nine times out of ten." - Peter Lynch
Everything is a learning experience. :)
Wise words, AK! I read your blog so that I dont have to learn too many painful lessons on my own X)
Hi Bananamint,
As long as we are in the market, it will be hard to avoid making mistakes from time to time.
Of course, some will say that not being in the market is a worse mistake.
How like that? ;p
I don't think I will ever stop learning. :)
yes, someone should write a book about these dangerous stocks, what are the potential red flags?
1. the sponsor is important - who are these 2 founders from US and what plans do they have to grow and develop the REIT?
2. Business Times did a very good report investigating the relationship between the founders and the Reit, including the price that the Reit paid for hotels purportedly purchased from Yuan? and this price became the "benchmark" valuation for the hotels
3. other financial bloggers were very astute and sharp, pointing out that operational metrics reported in Business Times e.g. occupancy rates were comparable for ARA and Eagle Reit, yet appraised valuation per key for Eagle Reit was double that for ARA
4. master leases are actually meant to provide Reit with stable and recurring cashflows, yet, it really depends on the strength of counterparty
5. could we rely on the NAV as a reliable valuation for Eagle Reit?
6. perhaps more could be done by SGX before the listing of such a Reit?
however, all these are on hindsight, i was only lucky that i did not invest as i must admit the yield was very tempting
Hi sginvestor,
Thanks for sharing your thoughts.
Following Warren Buffett's quirk of avoiding IPOs could be a simple solution.
"I'm not saying that what we're buying is going to work out better, but there have to always be better things than one single issue," Buffett said.
Buffett told Berkshire Hathaway shareholders that IPOs are almost always bad investments.
I have been avoiding IPOs for many years.
It has made life easier for lazy AK. ;)
Hi Ak
Thank you again for the blog.
It seems that there are many "new" method of "scamming" investor in the form of REITS. Nobody knows about Eagle and their financial engineering even after the stock has been trading for 2 months or so.
It is better for investor to wait until they have shown steady dpu and share price.
I didn't know Ak avoid ipo. Is there an old blog on this ?
Hi YKK,
Some forms of financial engineering are pretty obvious but some are less so.
Given enough time, however, the effects of financial engineering, more obvious or not, will become clearer to see.
This was the case with Sabana REIT and I blogged about it in early 2017:
History with Sabana REIT and current thoughts.
Investing in REITs for income is not as simple as many people think.
Simply plonking down money into any REIT that offers a relatively high yield thinking that everything will be OK is probably not OK.
See:
Remove Sabana REIT manager FB page.
I agree that waiting for more clarity is probably a good idea.
That was what I did before investing in Ascendas Hospitality Trust so many years ago.
"I did not invest in AHT during its IPO as I found the financial engineering to boost DPU distasteful."
See:
More income from Ascendas Hospitality Trust expected.
I was in no hurry to invest in Ascendas Hospitality Trust.
I am in no hurry to invest in Eagle Hospitality Trust either.
I don't think I have a blog on avoiding IPOs per se but I have mentioned it several times over the years here and there.
"Wu and the auditors noted that the company’s debt balance was paid in full in May when Urban Commons, under the name Eagle Hospitality Trust, went public on the Singapore Stock Exchange in an effort to generate up to $566 million for its portfolio of 13 hotel properties it owns or manages, including the 1930s-era ship.
"But the financial information Eagle Hospitality provided to investors prior to the offering has raised new questions with city officials, who are concerned about discrepancies with the latest audit.
"In a report to potential investors, the Queen Mary is listed as the most lucrative property in Urban Commons’ hotel portfolio, with a total profit of $11.2 million in 2018, up from $6.5 million in 2017. Key drivers included the reopening of newly-renovated restaurants, increased concert revenue and more visitors. It made no mention of the 2018 operating losses noted by the independent auditors.
"City Auditor Doud in an interview Thursday said there appear to be “inconsistencies” between the information in the 2018 financial audit that was recently provided to the city and information in the financial statements that was provided to potential investors earlier this year."
Read full article at:
Long Beach Post News, 5 December 2019.
"EHT clarified that the over US$6 million in net losses on operating costs and interest payments by UCQ refers to a net income statistic which takes into account all expenses of UCQ.
"This includes depreciation and amortisation – a significant non-cash expense, interest expense, and certain operating expenses relevant to UCQ as a property owner, which would not be incurred by the Queen Mary as part of the IPO portfolio, EHT said.
"It added that the interest expense noted in the 2018 audit corresponds to a debt facility that has since been extinguished as part of the IPO.
"EHT further clarified that UCQ's 2018 operating performance was hit by US$23.5 million of renovations and operational disruptions. The disruptions hurt revenue drivers Ghost and Legends tour and the Sir Winston's Restaurant and Lounge, which were out of service for significant parts of 2018, but have since become operational in 2019.
"In addition, EHT flagged a statement in the article on "substantial doubts" about UCQ's ability to continue as a going concern. It added that the "loss" referenced is less applicable to EHT as the 2018 debt held at UCQ had been repaid in full."
Full article in:
The Business Times, 9 December 2019.
Basically, funds from EHT's IPO saved the sponsor, Urban Commons.
Crossing fingers that Urban Commons will do a good job henceforth.
After today, I feel very sorry for EHT investors. It just sounds so much like a well-planned scam i.e. Ocean's Eleven style
We have seen public-listed SGX companies blow themselves up time and time again , for example S-chips, Noble Hyflux etc etc
Shouldn't SGX RegCo b*** do something about it? It is the people's hard earned money, for goodness sake
Hi SmashMuncher,
It has not even been a year. :(
Eagle Hospitality Trust wins hands down.
Reference:
Eagle Hospitality Trust: In danger of extinction.
It is just sickening. :(
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