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Sunday, December 19, 2021

This is a short blog in reply to a reader's comment in my last blog which was about my largest REIT investments. 

Read the reader's comment: HERE

My reply: 

When it comes to AA REIT's unit price, I can only say that Mr. Market will do what it wants to do. 

I do not know why the unit price is where it is but I do know that AA REIT should continue to generate stable income for me. 

If there is a dip in DPU, it is probably going to be temporary, everything else being equal. 

In the grand scheme of things, over a longer period of time, inflation should see prices including asking rent going up. 

As an investor for income, I do not usually invest in REITs for a few months only or even for just a couple of years unless I find out it was a mistake which has not been the case for AA REIT. 

Why did I add to my investment in IREIT Global and not AA REIT? 

You are right in your suggestion that it was due to IREIT Global's rights issues and the fact that my resources are limited. 

Also, I want to add that price is not the same as value. 

At $1.60 a unit, AA REIT was trading at a big premium to NAV but its unit price has retraced to a level that is closer to its NAV which means it is a better time to buy now than it was before. 

However, IREIT Global is still trading at a pretty big discount to its NAV which helps to make it a more compelling buy.

Warren Buffett famously said that whether socks or stocks, he likes buying quality merchandise when it is marked down.

Could be the case here.

When we take into consideration that IREIT Global holds freehold assets while many of AA REIT's assets are in Singapore with relatively short land leases, the value that IREIT Global brings to the table now shines brighter. 

Having said this, it is important to bear in mind that AA REIT and IREIT Global might both own buildings but they are in different sectors. 

They are also in different parts of the world. 

Not putting all our eggs in one basket is probably a good idea.

Of course, AK is just talking to himself here and, depending on our motivations, it might or might not be relevant to us. 

Related post: 


Blur Sotong said...

Thanks AK. Tbh, despite increasing cases happening over in Europe over the recent few months, IREIT continues to hold the price (so far).

AK71 said...

Hi Blur Sotong,

I feel that it is because of the situation in Europe that IREIT's unit price is depressed right now.

IREIT could trade closer to its NAV when countries in Europe have a better handle on the pandemic.

Fingers crossed. :)

laurence said...

AK our Oracle and Enlightener as always !! 0;)

AK71 said...

Hi Laurence,

Thanks for the vote of confidence but I could be wrong, of course. :)

David said...

Hi AK,
Wishing you & family a Merry Christmas + a Health7 & Happy 2022.

Best Wishes.

AK71 said...

Hi David,

Thank you.

Wish you and loved ones a very good 2022 in every possible way. :)

john said...

Am, Wish you a fruitful 2022. I had attended your last two meet the friends session and find it very insightful. Will u be doing one over the internet in the future ever again?

AK71 said...

Hi John,

I am glad you enjoyed the last two "Evening with AK and friends." :)

I thought of taking a 2 or 3 years break after the last one but because of the pandemic, it has become a much longer break.

Being the lazy person that I am, I am not complaining. ;p

Don't know if there will be another "Evening with AK and friends" in the next two years.

Will just have to wait and see. ;)

I also wish you a fruitful 2022. :D

Evening with AK and a long break.

Sennett said...

There's a reason why ireit trades at such a depressed valuation, they have time and time again shown that they are not interested in value creation for shareholders and have been doing dpu and nav dilutive acquisitions.

AK71 said...

Hi Sennett,

Thanks for sharing your view.

As for me, I cannot explain Mr. Market's behavior.

I just do what I feel is right for me. ;p

C said...

Dear AK Shifu, currently Wilmar 200 dma is around $4.52, based on 1y chart this stock is on downtrend. It has broken 20 dma of $4.13, could you please talk to yourself how to determine if one should take some money off the table (maybe sell some) if Wilmar does hit $4.52 ? Then can buy back again if it does fall back to around $4.00 again since the 200 dma is on downtrend for time being.

AK71 said...

Hi C,

If you are trading Wilmar's stock, your strategy is sound.

Just remember that moving averages show where resistance and supports are but they don't tell us if these will hold.

Conventional trading wisdom says that there is nothing wrong with taking profit, of course.

yh said...

Dear AK,

We see Euro weakening with continuing downward pressure. Can you please talk to yourself if and how the weakening Euro would affect IREIT performance ?


AK71 said...

Hi yh,

Oh, that is an easy one to answer.

If the Euro weakens against the S$, DPU will reduce, all else being equal. ;)

CupcakedCrusader said...

Hi Ak, no one knows whether the weakening of the Euro will be temporal or permanent. In that case, how does one value IREIT and the suitable window to enter.

Based on the numbers, IREIT still has a strong balance sheet and ability to fill up occupancies relatively quickly.

AK71 said...

Hi CupcakedCrusader,

Unfortunately, perfect knowledge only exists in Economic textbooks. ;p

We would have to make assumptions based on our beliefs and experience in many instances and this is one such instance.

My belief is that the Euro would not weaken drastically because the ECB would have to increase interest rate which would strengthen the Euro to combat inflation and they have already started the process.

We can also take reference from what IREIT's insiders did in the past and I remember insiders buying at 60c a unit not too long ago.

At the moment, I still like IREIT as an investment for income.

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