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IREIT Global: 214 for 1000 rights issue.

Wednesday, June 23, 2021

Earlier in April, IREIT Global announced that they were looking at acquiring 27 of Decathlon's assets in France.


In reply to readers' comments, I said that it wasn't a fantastic deal but it wasn't a bad deal either as IREIT Global's relatively high distribution yield makes it harder for them to make yield accretive acquisitions.


The deal comes with a relatively long lease to a blue chip sporting goods company and that makes it more appealing with stability being the name of the game.


Lovely pun, that.


I also said that in today's very low interest rate environment, we are probably being well compensated for any risk that comes with the deal.


I would think of the rights issue as an invitation to invest in more properties in Europe which are leased to a big corporate tenant for a 7+% rental yield.


So, it should be interesting to anyone looking to increase their passive income in the form of rental income.




In April, after the intention to acquire those 27 assets was made known, I said that a rights issue was almost certain to take place.


I prefer a rights issue to a private placement because I most certainly would not get invited to participate in private placements.


I also made a guess that a rights issue would probably be relatively small and that it could be a 1 for 5 or 1 for 4 issue.


Well, a rights issue was announced yesterday.


A 214 for 1000 rights issue means it is closer to 1 for 5 than 1 for 4.


Priced at 59.5 cents per rights unit, it is a fairly good price especially when compared to the private placement price of 61.55 cents per rights unit.


The private placement being offered at a higher price although relatively small in size helps to keep the rights issue smallish.




IREIT Global's gearing level is conservative in comparison to many other S-REITs and using more debt to fund the purchase in a low interest rate environment is probably an interesting idea.


However, IREIT Global's manager might be keeping some powder dry by staying more cautious.


Whatever the case may be, I rather fancy being a landlord to Decathlon, given the numbers.


So, I will be taking part in the rights issue, taking up my entitlement and also applying for excess rights when the time comes.


This will make IREIT Global the largest investment in my portfolio.




If you are interested in my replies to comments from readers back in April, please see the blog: HERE.


See rights issue announcement: HERE.


You might also be interested in this blog:
REITs and rights issues: Dilutive or not?

62 comments:

FellowInvestorForIncome said...

Hi Ak,

Thank you for your insights! How dilutive do you think this will be and any chance the stock prices will head southwards post rights?

foolish chameleon said...

how much excess rights are you applying? =)
whats the chances of getting excess?

merxantia said...

Thanks AK for sharing your thoughts on this. Nice to hear from you from time to time. Please do stay safe and healthy :)

AKMI said...

ASSI, It's a non-renounceable rights issuance, which means rights won't be available for purchase right? So the only way to get more than the entitled amount is by oversubscribing, right? Or have I missed the plot?

AK71 said...

Hi FIFI,

I don't know what Mr. Market will do, unfortunately.

Mr. Market will do what he will do.

All I know is that if the unit price should decline much further from 59.5 cents a unit, it means better value for money and I would probably be buying more then, all else being equal. ;)

AK71 said...

Hi FC,

If we are applying for excess rights, just apply for an amount that we feel comfortable holding although it is unlikely that we will get everything we ask for.

Not telling you how much I am applying for. Secret. ;p

AK71 said...

Hi merxantia,

Thank you. Hope everyone stays safe and healthy. :)

#SteadyLah

AK71 said...

Hi AKMI,

Non renounceable means existing investors cannot sell their nil paid rights in the open market.

So, if we are interested in the rights units, we must be existing investors by the time the REIT goes CR (i.e. cum rights) to be offered any rights units and a chance at excess rights (or rights which have not been picked up by some investors.)

SC said...

Hi AK,
A newbie who has started the journey of investing for dividends last year after knowing your blog. I have been inspired by many of the useful (and practical) articles and have since vested a small interest in IREIT when the price was attractive.

Would like to ask 2 questions regarding the rights issue :
1) Currently, I am holding 10 lots (10,000 shares), so my entitlement is 10x214 = 2,140 shares. Will there be rounding to the 2,140 so that I do not end up with odd lots? It depends on the broker?

2) If I intend to acquire a total of 10 lots for this exercise, for the excess I will need to subscribe another 7,860 (2,140+7,860 = 10,000)? Or do I subscribe for 36,728/9 shares so that I will end up with 7,860 (36.728 x 214). Yes, I know the excess is subjected to any remains and allocation. But let’s assume one will get it.

Not sure if I am over complicating things myself but hope the questions are clear enough. Thank you in advance, AK.

SC

C said...

hi Ak shifu, as this is first time for me, may I know how do we subscribe to the rights issue?I was reading up and assume we can subscribe to rights issue online via DBS website ? Hopefully don't have to go to physical ATMs. Thank you for sharing this important update.

Ok said...

Hi AK,is Decathlon financially sound,why would it be disposing of so many properties at one go?

FellowInvestorForIncome said...

Hi AK,

Thank you! Yeah I’m also hoping it does drop to below 59.5 cents post rights :D

AK71 said...

Hi SC,

Apply for excess rights so that you will not have odd lots after the rights issue concludes.

Anyone who might have odd lots will be given priority when excess rights are being handed out if past experience is reliable.

One lot is 100 units these days and not 1000 units, of course. :)

If you want 10,000 rights units, just apply for 10,000 rights units when the time comes.

You will be given your entitlement and whatever excess rights is available for you which might not be everything you applied for but rounding up of odd lots is almost a given. :)

AK71 said...

Hi C,

I have always applied for rights units at the ATMs.

So, I cannot share any experience using other methods.

In any case, you should be receiving a package from the CDP in due course regarding this matter.

If in doubt, best to give your stock broker a call. :)

AK71 said...

Hi Ok,

27 properties in France might sound like a big deal but it really isn't for a MNC like Decathlon.

From what I know, Decathlon is exploring the asset light path too.

Sometimes, it is better to rent a property than to buy one as it frees up financial resources to generate more income in other areas.

After all, when we stay in a property, that property does not generate any income.

Some similar ideas here:
1. To rent or to buy: Rule of 15 revisited.
2. They chose financial freedom over home ownership.

AK71 said...

Hi FIFI,

If it happens, it happens. ;)

Good luck to us all. :)

Rookie said...

Just to share, i recently subscribed to the preferential offering for Mapletree Ind Trust via Paynow. Very easy to do so.
All you need is to scan the QR code with paynow and enter the exact amount you want to pay for the shares.

garudadri said...

Thanks for the reminder
I was anticipating this rights issue later this year around August but pretty soon this will be up
I feel that the postrights price might end up at around 60 to start with and thereafter drift either way depending,g upon the interest rates plus their office portfolio leasing and lease renewals
Will apply for excess but unlikely to get much more as I feel it will be significantly oversubscribed
Best wishes
Garudadri

Qiongster said...

Hi AK,

Big development for Sembcorp Marine and rights issue again before potential merger with Kep O&M. Will you be able to talk to yourself on this topic to enlighten us? Thanks.

Cheers,
Qiongster

KJ said...

Good Evening AK,

The ex date for Ireit Global right issue subscription is 28th June 2021, it’s mean that need to subscribe the right issue before 28th June 2021 right?

KJ

AK71 said...

Hi Rookie,

Ah, I think I used that earlier this year to do voluntary contribution to my CPF savings. I will make a note of this. PayNow. Thank you for sharing. :)

AK71 said...

Hi Garudadri,

I wouldn't apply for more rights than I intend to hold but with the excess rights usually heavily oversubscribed, we probably won't get many excess rights handed to us too.

As for the future unit price, it is anyone's guess but if the COVID-19 situation improves which I guess it one day will, there is a good chance of yield compressing and unit price increasing.

AK71 said...

Hi Qiongster,

The SMM and Keppel O&M business merger is a good thing and should happen sooner than later in the current environment.

As for SMM's impending rights issue, it is more than 50% the market value of the company and should give it sufficient resources while it pivots towards renewable energy infrastructure.

If we believe in SMM's strategy, then, we should put some money into this rights issue with the believe that the investment should reward us in future.

However, if we are investing for income, SMM is currently lost making and does not pay a dividend.

So, depending on what we are after, we will have to act differently.

AK71 said...

Hi KJ,

XR (ex rights date) means that units sold from that date will not be entitled to rights units.

If anyone is interested in being given rights units, they must be unitholders when the counter is still trading CR (cum rights.)

Unitholders should be receiving a package from the CDP in due course with details on how and when to pay for the rights.

foolish chameleon said...

Uncle AK. Any idea how to calculate the TERP for this?

Betta man said...

Hi AK,

price of Wilmar plummeted to $4.51 at point of writing due to fall in crude palm oil price. Is it a good time to accumulate ? Appreciate if you could talk to yourself.

AK71 said...

Hi FC,

It would depend on what is the pre rights price that we are using.

If we use 66 cents per unit, then, 1000 units = $660.

Add 214 units at 59.5 cents per unit = $127.33 + $660 = $787.33.

TERP = $787.33/1214 = 64.85 cents per unit approximately.

I am a bit rusty and poor at mathematics but I think it should be about right. ;p

AK71 said...

Hi Betta man,

Wilmar is undervalued.

However, technically, it has broken its long term support at about $4.80 a share.

We could see the share price drifting lower and if it breaks $4.50, we could see $4.40.

Having said this, I see positive divergence as the MACD formed a higher low even as the share price declined which suggests to me that smart money is accumulating Wilmar on weakness.

K said...

Hi AK,

Good day to you, would like to ask your opinion on the impact of rising interest rates on REITS since you have most of your portfolio in REITS. As I understand a rising interest rates will push REITs returns lower - are you doing any repositioning on your portfolio?

Thanks
KW

ok said...

Hi AK, worthwhile to acquire it when the stock has ex-rights, if one doesn't already own the stock, instead of buying the stock now to get access to the rights, thank you?

"If we use 66 cents per unit, then, 1000 units = $660.

Add 214 units at 59.5 cents per unit = $127.33 + $660 = $787.33.

TERP = $787.33/1214 = 64.85 cents per unit approximately."

Rookie said...

Hi AK,
With the current price of Singtel, will you be considering to add some?
Seems like $2.30 is a strong support.
What do you think.
Thanks.

AK71 said...

Hi KW,

You will know how I feel when you read this blog:
Dumping all my investments in REITs.

AK is lazy. I know. ;)

AK71 said...

Hi ok,

If we believe in the fundamentals and if we feel that we are being compensated well, why not?

In fact, in the last round of rights issue, not only did I take up my entitlement and apply for excess rights, I bought more units in the open market post rights issue.

Having said this, we have to do what we believe is right for us. :)

References:
1. IREIT's rights issue: Why subscribe?
2. 4Q 2020 passive income.

AK71 said...

Hi Rookie,

The last time I increased exposure to SingTel was in 4Q 2020 at about $2.00 a share as it looked terribly oversold to me.

SingTel is still in the process of transforming its business to become more relevant and robust in the face of ongoing challenges.

It will take some time and it is probably prudent to keep my investment smallish even as I am paid while I wait.

I have IREIT Global's rights issue coming up and that will drain my war chest which has barely begun to recover.

So many things to buy but so little money. ;p

Rae said...

Hi AK,

What do you think of keppel corp after it cut away it's offshore marine?

Thank u

AK71 said...

Hi Rae,

Keppel Corp would be better off without its loss making O&M arm, for sure. :)

laurence said...

Every counter that AK selects to invest turns out to be always spot-on and always hugely rewarded ........... multiple times each, I must add.
AK is truly our peerless Oracle of Reits, Trusts and Dividend Stocks. ;)

AK71 said...

Hi Laurence,

Thanks for the encouraging words.

I have been wrong before too. :)

Reference:
Is AK the investor right 6 times out of 10?

garyp said...

Hi AK, i also have some positions in IREIT, would I be informed about the rights issue in writing? Haha I don't really monitor the movement of my portfolio much and unless they send me letter i won't be updated.

SnOOpy168 said...

Hi AK.

I just saw the rights issue and immediately remembered to head to ASSI.
Thought i was reading an older article or email notice as I recalled they did a rights recently (thats 2020). Seems to be a better deal here than FR's rights and will be joining this fun. :-)

Good that you're still talking to yourself as usual.

AK71 said...

Hi garyp,

We will receive a package in the mail from CDP whenever our investments have a rights issue.

However, please check with your broker if you are using a margin or nominee account as in such cases, the units or shares are held through the brokerage.

AK71 said...

Hi SnOOpy168,

IREIT Global is definitely cleaner than First REIT when it comes to financial engineering or the lack of it.

No mouse trap here from what I can see. :)

garyp said...

The last package fr IREIT was some months back and I opted to sell my share haha... oh sp ur referring to that one? ok thanks :)

AK71 said...

Hi garyp,

I don't know what you received from IREIT.

It should be a package from CDP. ;)

Kenny How said...

Hi AK,
I noticed I am given some irritating global nro units in my CDP. can tell what that is. Many thanks

ok said...

Hi AK,

I'm not lawyer. But suggest you could be neutral in the choice of words in comparing with first reit in case they sue you for defamation, or simply leave out other reits.

We hope u dun get into legal troubles, as you have been unstinting in giving your financial analyses.

AK71 said...

Hi Kenny How,

I am not sure what you are referring to.

Best to give CDP or your stock broker a call. ;)

AK71 said...

Hi ok,

Eh, I don't think I said anything defamatory about First REIT and they aren't the only REIT which did some financial engineering to make their numbers more attractive.

I have blogged about so many REITs and their financial engineering tactics before.

How liddat? Cham lah. ;p

SnOOpy168 said...

Had a quick glance this morning about my results for the rights & excess. It seems that I had been fully allocated my rights + rounding up excess + 80% of other excesses applied.

Rarely I got this good luck, or there is something Mr. Market or fellow shareholders are not telling me. Must buy a round Toto & Big Sweep as well.

Market now doing 0.64-0.645 :-)

Now, I hoped hard that it will deliver the performance & ever growing dividends.

AK71 said...

Hi SnOOpy168,

Thanks for sharing and grats for getting the results you desired. :)

I am too lazy to check online and will wait for the mail from CDP. ;p

user0910293 said...

Hi AK,

I just stumbled upon REITs and see the potential in IREIT. May I know if it's a good time to buy in now? Given that rights have just been distributed? Or should I wait? What are some of the key factors I should consider to buy before/after rights distribution?

Thank you!

AK71 said...

Hi user0910293,

I have blogged a reply to your comment:
Good time to buy now or should I wait?

Good luck to all of us. :)

Sandra said...

Hi AK, regarding today's Sunday Times Invest section on CPF may not allow shielding of CPF balances soon, can you share your thoughts and advice? What can common folks who are not investment savy do to have some extra stable passive income from the higher interests earned from CPF if shielding is not allowed? Thanks in advance.

AK71 said...

Hi Sandra,

I just blogged about this today:
No more 'shielding' of CPF soon.

I also think that we should all have a SRS account:
Options with CPF LIFE and SRS in retirement.

References:
1. SRS: A brief analysis.
2. How to have a comfortable retirement.
3. Don't do silly things and we can retire smart too.

Sandra said...

Thanks, AK. Will read and study the details regarding the benefits having the SRS account. Gam Sia :)

Sandra said...

Thanks AK. I will read your blog on the benefits of having a SRS account in retirement. Gam Sia :)

AK71 said...

Hi Sandra,

Yes, if we have earned income and pay income tax, contributing to our SRS account yearly makes good sense for the tax relief.

If we are risk averse or not investment savvy, we can use the money in our SRS account to buy insurance policies with a huge savings component and eventually also buy annuities which will help to fund our retirement.

Sandra said...

Thanks Ak. Will read the articles u referenced. Gam sia :)

AK71 said...

Hi Sandra,

Hope you find the blogs helpful but please remember that AK is just talking to himself as usual. ;)

Sandra said...

O yeah, of course ;)

David said...

HI AK,
Good Day.
I have applied excess on iReit Rights & got a bit.
Thank you
David

AK71 said...

Hi David,

Me too. Huat ah! :D


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