Missed selling APTT at higher price.

Hi Mr. AK,

I like when you say all investments are good at the right price.

I also follow you to buy APTT when it was 38c. Thank you.






I just found out you sold end of last month. The price now 43c.

I missed the chance to sell at 49.5c. Do you think I should sell at 43c?






I am not blaming you but I only read your blogs on stocks.

I missed the sell on APTT at high price because it was not not in the blog title.








Hi LK,

Welcome to my blog.

If you like Peter Lynch's famous saying, you should first learn to tell the difference between price and value. 

You could start by reading some books: HERE.





Read that blog post of mine again to learn why did I choose to sell and not hold on to APTT for dividends. 

Note that although the investment gave me a very nice 32% capital gain, that was not the main reason for selling.






As for being less than organised in my blog, I am a mental blogger. Sometimes, I confuse even myself. 

A thousand apologies.

Best wishes,
AK

Related post:
The reader was referring to this blog:
My savings accounts, recent money flow and investments.

My savings accounts, recent money flow and investments.

I have a few savings accounts but my most used accounts are the following three:

1. POSB
Despite the low interest rate for my savings, I am holding on to my POSB account mainly because I have had it since I was a boy and I feel comfortable with it. I have many arrangements tied to this account and it would be a bother to terminate it. The most important function of this account for some time now is to make and receive payments for my stock market transactions.





2. UOB
The UOB ONE account provides me with higher interest income. Since I am unemployed, I don't have any salary to credit. So, the higher interest rate offered by OCBC360 and BOC to do this doesn't apply to me. With UOB ONE account, the most important criterion is spending on the UOB ONE card. I just have to charge $500 a month to the UOB ONE Card. I do spend money despite what some might think. I keep slightly more than $50,000 in this account.





3. CIMB
I know many are worried about Malaysian banks. I was worried too but I did some research into CIMB and decided that it is well run enough although it still pales in comparison to Singaporean banks. I like how it offers a flat 0.8% interest on savings per annum (on the first $750,000) and I like the free cheque book. Yes, I am an IT dinosaur and still write cheques. I keep the bulk of my savings in this account.





I know some are worried about how having more money in the bank means money is rotting away to the extent that they do not keep an emergency fund but I think the majority of us would probably be quite happy to see more money in our savings accounts.

When I shared my investment results for FY 2016, I said I added to a few positions (See related post at the end of this blog.)







In recent weeks, I reduced my investments in SPH and Hock Lian Seng.

Although I did start a few new investments this year, namely,

1. Frasers Logistics & Ind. Trust
2. CapitaLand Retail China Trust
3. Kingsmen Creatives
4. Centurion Corporation Ltd.

And added to my investments in

5. APTT*
6. IREIT Global
7. Sabana REIT (Rights Issue)
8. Religare Health Trust






When I logged into my POSB account just now, I saw a balance which is a little bit more than what I would maintain usually. 

The total value of the stocks that I sold must be higher than the total value of the stocks I bought in recent times. 

Related to this, I decided to see exactly how much money came in and how much went out for the whole of 4Q 2016 and the current year to date:

Outflow:
$284,370

Inflow:
$320,090

Net inflow:
$35,714

Why am I sharing this? I just feel like it, I guess. Nothing profound.

If you manage to get something useful from this blog, I am glad.





However, we should not read too much into the musings of a mental investor who blogs as a past time.

Related post:
Full year passive income from non-REITs.

* With the rather substantial run up in APTT's unit price since December last year, I decided to reduce my investment in APTT today, retaining only the legacy position from its MIIF days. 

Some might remember that I added to my investment in APTT on the assumption that a DPU of 4c is more sustainable than 6.5c and at 37.5c a unit, I was looking at a 10.66% distribution yield from a heavily leveraged entity. Now, it has come down to 8%. 





As a more sustainable 8% distribution yield could be found in some less heavily leveraged entities, I am selling APTT at a price I would not buy at.

Hence, the net inflow of funds revealed earlier will see an increase in the next two days, everything else remaining equal.

2016 full year passive income from non-REITs (Part 2).

UPDATE (20 Jan 17):
When I shared my full year results for non-REITs last year, I wondered if Religare Health Trust (RHT) might be privatised. Then, with Accordia Golf Trust's (AGT) sponsor being bought over by Korean investors, MBK, many asked what is going to happen to AGT? A reader, betta man, shared this with me:

https://www.smartkarma.com/insights/accordia-golf-agt-sp-high-conviction-family-office-favourite

There is nothing wrong with speculation as long as we know we are speculating. Me? I am quite happy to hold on to my investment.
-----------------------------------------------------------------------------

As promised, this is Part 2 of a very long blog post. If you have not done so, read Part 1: HERE.
Let us start this blog post with some gossip. Wah! Is Religare Health Trust going to be delisted?

You say, I say, they say. Hmm. ;p

Anyway, three big things happened in the non-REIT space for me.

1. A big thing was receiving a much larger than usual distribution from Religare Health Trust (RHT) which I initiated a long position in sometime last year at 88c a unit. The special dividend (which gave me a yield of almost 30% based on cost) came from them disposing a share of an income generating asset due to regulatory requirement. Including regular distributions this year, RHT has been a very rewarding investment for me. I am quite happy to continue holding on to my investment in the Trust as it continues to generate income. 
See this chat with a reader:

2. Another big thing that took place in the non-REIT space was the internalisation of Croesus Retail Trust's management. There was a rights issue because of this. I took up my entitlement and also applied for excess rights. The rights units were priced at slightly under 80c a unit (and will enjoy a distribution yield of almost 9%). The size of my investment in the Trust increased by almost 6% as I took advantage of the exercise.

3. The third big thing is the offer to privatise ARA Asset Management at $1.78 a share. This is likely to be concluded by the middle of next year and based on my entry prices, I would get to enjoy reasonably attractive capital gains of 35% to 78% although I would miss the regular dividends.

As I had a fixed deposit maturing and with the much lower interest rates offered by the banks this year for fixed deposits compared to last year (1.1% per annum at UOB for 13 months, for example), I decided to buy more ARA shares at $1.71 a share in late November.

I believe that this is possibly an arbitrage opportunity which could give me an "interest rate" of about 4% over a period of, maybe, half a year. 

It could be higher because ARA pays dividends twice a year and another payout could happen in April or May. If it should happen, I could see a DPS of 2c to 3c if the privatisation process is not completed by then.

Of course, to be realistic, there is a chance that the offer might not be accepted as I know some shareholders feel that the offer of $1.78 a share still undervalues ARA. 

In such an instance, I would be quite contented to hold on to my latest purchase to receive regular dividends (for a 3% dividend yield based on a DPS of 5c or about 50% of EPS) as I also believe ARA is worth more and that its shares should trade at a higher price. 

Delist or stay listed, I am happy with ARA either way.

Total dividend income from non-REITs in 2016: 


S$ 105,641.29


This translates to S$ 8,803.44 per month.

Apart from dividend income, regular readers know that I used to trade stocks more actively. Earlier this month, I revealed on my Facebook wall as well as the comments section here in ASSI:

Source: A wealth building strategy that has worked for AK.

Although I enjoyed some capital gains from a few trades this year (and the most recent trades being in DBS as its share price rose significantly for a few weeks), it is due to an emphasis on investing for income that has ensured further improvement in my financial health.

On this note, I will now say something about APTT because it seems that many readers were attracted to APTT by the relatively high distribution yield of 10% and bought into it. Now, many of them are worried because the unit price plunged.

If we know the value of a stock, we would know if the price makes sense. If we didn't know the value of the stock, we would never know if the price makes sense. If we don't know this, price movements would make us emotional.

I said before that APTT's past DPU of 8c was unsustainable. Although the management reduced DPU to 6.5c, I said that it might be more prudent to have a DPU of 4c which, I felt, was more sustainable. That was because 4c would be closer to APTT's EPS. 

At 37.5c a unit, I decided to add to my investment in APTT recently. I know what some people might ask and here is my answer: 

I don't know if the unit price will decline further but if it should, knowing what I know and all else being equal, I would probably be buying more.

Investing in APTT, we are not investing for growth. We want its income generation ability. If you thought you were investing for growth when you got into APTT, you might have the wrong tool. 

Know what we want to do and use the right tools.

For those of us who invested in APTT for income, ask if anything has happened which has damaged its ability to generate income significantly and, if something has happened, is the damage long lasting? Then, do what you have to do.

Know what am I going to say? 

Yes, if AK can do it, so can you!

HAPPY NEW YEAR!

And I hope you have found my blogs this year to be inspiring and helpful on your own journey towards financial freedom.

Let me know if I should continue talking to myself next year. ;)

LOL. From my FB wall (1 Jan 17).

Related posts:

1. 1H 2016 income from non-REITs.

2. Breadtalk, OCK and QAF.

3. Made $1m investing for income.
4. 2016 FY income from S-REITs.

Outlook for 2017 

(by OCBC Investment Research):

While the overhang from Brexit and the US presidential election is over for now, heading into 2017, we expect continued weakness in oil-related stocks, softness in the property sector and higher impairment charges for banks to be some of the factors that will dent investor confidence in the Singapore market. While interest rates are likely to head higher, we believe the hunt for yield is not completely over and investors are still likely to accumulate quality high-dividend stocks. We expect banks to report low- to mid-single-digit earnings growth, and the outlook for the residential property sector is still soft after numerous quarters of decline and with no clear pickup in demand or selling prices. The oil and gas sector is still saddled with refinancing issues as well as a lack of orders and earnings. The telecommunications sector is also facing the threat of a new player.

-----------------------------------------
Watch from the 22nd minute for the discussion on Singapore banks:

2016 full year passive income from non-REITs (Part 1).

During an "Evening with AK and friends", someone asked if I was going to sell my stocks as market guru Hu Li Yang was expecting a stock market crash. I said we should stay invested as the market was still awashed in liquidity and money will go to where it is treated best. See: Evening with AK and friends.



So, what did I do in 2H 2016 in the non-REITs space? I made various purchases but, mostly, I was buying DBS shares. Besides DBS, I also bought some shares of OUE Limited, PREH, Wilmar, OCBC, Breadtalk and Starhub.

(I am impressed by DBS' cost management. Their cost to income ratio keeps declining.)

The narrative for investing in OCBC was similar to the one for DBS. Although all three local banks' stocks looked cheap to me, my preference was for DBS because of the perceived cheaper valuation.


The reason for me putting some money in OCBC's stock was mostly because my long position in DBS grew so big (and I do mean BIG) that it was prudent for me to step on the brakes. 




Using a strategy I employ frequently for stocks which I am highly confident in, my relatively large position in DBS included both a core position for income as well as a trading position.

Why not UOB? 


Well, I think UOB has been a bit laid back. I am not saying that it is a bad thing, mind you, but its growth story seems less exciting.

Of course, some might say that DBS and OCBC have been more "adventurous" but I like to think that they are more enterprising.

I feel that growing their wealth management business more aggressively will continue to set them apart from UOB as that business contributes more and more to their earnings.

Next, Wilmar. I continue to like Wilmar's business strategy and their very impressive scale of operations. It is an amazingly complex business and, to be quite honest, I have no way to analyse most of its operations.

However, when Mr. Kuok thinks their shares are cheap and bought more at $3.00 a share, that was a pretty clear signal to me. At that price, we would also be buying at around its NAV which seems conservative.

Source: RHB.

Having accumulated a rather significant long position in Wilmar in recent years, I am quite happy to wait while being paid to do so.

Now, for OUE Limited. I blogged about my rationale for increasing exposure to OUE Limited when I shared my numbers for 1H 2016 (see related post #1). Back then, I added at $1.51 a share. In 2H 2016, I added more at $1.53 a share.

Twin Peaks.

My decision to increase exposure was mostly driven by the even larger discount to NAV from the time I initiated a long position. 

There is much value in OUE Limited but waiting for value to be unlocked requires a lot of patience. Well, remember, a wise man did say before that the big money is in the waiting.

Along similar line of reasoning, I also added to my investment in PREH at 80c a share a few days ago. This is the lowest price I have ever paid for PREH. The last time I bought any PREH shares was more than a year ago. 

It is interesting to me that Mr. Ron Sim, Mr. Pua S.G. and Mr. Kuok K.H. have been increasing their stakes in PREH on price weakness. 

PREH is an asset play but it is also a growth story. It is not for the faint hearted.

PREH

As for Breadtalk, I have a more recent blog post on my decision to initiate a position. I compared it to Old Chang Kee and QAF Limited, both of which I have been a shareholder of for many years. 

If you are interested to know why I had a change of heart and decided to initiate a smallish long position in Breadtalk, go to the related posts at the end of this blog post (see related post #2).

Starhub. In June last year, when I did a technical analysis for Starhub, I said:

"The widening of the Bollinger Bands indicates increased volatility. The OBV shows selling pressure. The MACD is declining and shows no sign of a positive divergence. These are all on the weekly chart which suggests that continuing weakness in the longer term should not surprise us." Read blog post: here.


We saw Starhub's stock price sinking and I nibbled  again in late November. I feel that Mr. Market is right to be concerned but might be overly pessimistic about Starhub's prospects with the introduction of a 4th telco.

There is plenty of speculation now but, to be realistic, it will take time for the new entrant (which is expected to enter the market in 2018) to gain traction and it remains to be seen how successful it will be.




Back in June 2015, I also said that SPH and Starhub were similar:

"They could see earnings come under pressure for different reasons but that makes them similar too as the challenges are very real.... I would like to have some buffer in terms of dividend yield buying into SPH and Starhub because I am investing in them primarily for income and not growth." Read blog post: here.

I believe I am getting a much thicker cushion buying Starhub at under $2.80 a share and that was what I did.

As for SPH, let me share here a recent conversation with a reader:

I have been a SPH shareholder for many years and I am happy enough to be paid while I wait.
---------------------
As this turned out to be a very long blog post, I chopped it up into two parts. Read Part 2: HERE.
Related posts:

1. 1H 2016 income from non-REITs.

2. Breadtalk, OCK and QAF.

3. Made $1m investing for income.
4. 2016 FY income from S-REITs.

1Q 2016 income from non-REITs.

This blog post almost did not get written. Thanks to this reader, it did:

"Hi AK,

"I read your blog on you first quarter income this year from reits. I am very inspired. I have been waiting for your blog on your first quarter income from non-reits. Please inspire me again. Many thanks!!"

Well, actually, I did receive a couple of emails before this asking me about what I did in the non-REITs space in 1Q 2016 but I really didn't do much. So, no blog post.

However, inspiring? Hmmm...

If blogging about my 1Q 2016 income from non-REITs will inspire more to think about investing for income to become more secure financially, OK.

Like I said, I didn't do much in 1Q 2016 in the non-REITs space.

Looking at my records, I bought DBS shares, DBS shares and more DBS shares as its share price plunged. The last time I bought any was at $13.45 a share in late February 2016.

In 1Q 2016, I received income from:

1. APTT
2. Tai Sin
3. Croesus Retail Trust

Fuji Grand Natalie inHatsukaichi City, Hiroshima Prefecture, Japan.

Total income received from non-REITs in 1Q: 

S$ 12,181.34

That works out to be about S$ 4,060.45 a month.

Of the 3 stocks, Croesus Retail Trust is my largest investment. It has also been rather busy 

See: 
Private Placement of 70,000,000 new units at 75c a unit. (March 2016)

See: 
Issuance of $60,000,000 5% fixed rate notes due 2020. (April 2016)

See: 
Completion of Acquisition of Fuji Grand Natalie. (April 2016)

As long as the management is able to make good use of the funds raised to improve DPU, I am happy. 

Most of the money raised in the private placement has gone to the acquisition of Fuji Grand Natalie (a freehold property that enjoys 100% occupancy) which was purchased at a 6% discount to valuation.

7 reasons to acquire Fuji Grand Natalie:

See: Presentation slides.

Seems to me that all is well, for now.

Investing for income is about investing in undervalued or fairly valued assets which are able to provide visible and meaningful income generation which should ideally be sustainable.

If AK can do it, so can you!

Related posts:
1. 2015 full year income from non-REITs.
2. 1Q 2016 income from S-REITs.

2015 full year income from non-REITs.

Before I reveal the numbers, let me talk to myself about what I did in 4Q 2015, investments wise.

I re-initiated a long position in ARA as I felt that its stock price declined to a reasonably attractive level. 

ARA's rights issue which followed not long after was unexpected but I took up my entitlement and applied for excess rights as I looked at it as an opportunity to buy more on the cheap. I will probably buy more if the stock declines further in price.

Of course, those who follow my blog will also remember another rights issue and that was by Croesus Retail Trust. I too participated fully in that rights issue.

A back of the envelope calculation shows that Croesus Retail Trust is now trading at a 10% distribution yield. 

Croesus Retail Trust has rather high gearing level but if we were to take that away, Croesus Retail Trust is actually still generating more than a 5% distribution yield (i.e. non-leveraged yield) which I think is very attractive for a portfolio of mostly freehold retail properties in Japan. 

As the Trust's unit price declined, I added to my position again in the middle of December at 78c a unit.

I also increased my investment in Accordia Golf Trust as its stock price declined. The last time I did this was in mid-December at 51c a unit.

Investing in Accordia Golf Trust, we must realise that weather plays an important part in its performance. So, we have to expect its revenue to fluctuate quite a bit seasonally, much like investing in hospitality REITs.

With sentiments pretty negative, if Mr. Market were to offer me meaningfully lower prices, I would probably be buying more.

I also did a bit of trading in 4Q 2015. I reduced my long positions in Wilmar and ST Engineering as their stock prices recovered. That gave me some trading gains for the quarter.

I don't trade very much anymore as it requires a bit more work. Now, I might not even look at the stock market for several days in a row.

I added to my long position again in ST Engineering as its stock price declined by more than 10% from my recent selling price. 


ST Engineering is still one investment for income and growth. I definitely want to buy more if Mr. Market goes into a depression.

For those who do not follow my comments section, I initiated a smallish long position in DBS. Some know that I have been thinking of buying into the three local banks for a while and have been waiting for their stock prices to become cheaper.

I chose DBS first because it was trading at the smallest premium to NAV compared to OCBC and UOB. There is also consensus that DBS would be the biggest beneficiary of rising interest rates.

I also added to my investment in SingTel as its stock price declined. We invest in SingTel, Starhub and M1 because they are defensive income generators but with SingTel, there is also a nice element of growth.

Finally, I added to my long position in APTT this month after having left it alone since its inception. The rapid plunge in APTT's unit price up till middle of December seemed excessive to me even though I have mentioned before that a DPU of 8c a year is unsustainable in the longer run.


A much lower DPU of between 4c to 5c would probably be more sustainable for APTT. So, adding to my long position at 63c a unit, I am expecting a more realistic distribution yield of 6.3% to 7.9%.


A more recent development was an expression of interest by a party to acquire Ascendas Hospitality Trust which I included in my income portfolio in 3Q 2014. I have added to my investment on a few occasions since then, as and when its unit price declined.

The last time I increased exposure to Ascendas Hospitality Trust was on 24 August 2015 at 58.5c a unit. With an estimated annual DPU of 5.5c, I was looking at a distribution yield of almost 10%.

Although I hope that the offer is going to be at a fairly attractive premium to valuation, I am aware that if the Trust should be taken private, my income from non-REITs next year would take a hit.

Very safe to show hand like this.

Including my first income distribution from Religare Health Trust (RHT), dividends from my investments in non-REITs in Q4 brings my income in 2015 from them to a grand total of S$76,804.69.

This works out to be about S$6,400.00 a month.

Including the distributions from S-REITs this year, I am pretty satisfied with the total income generated by my investment portfolio.


Related post:
1. ARA: Re-initiating long position.
2. Croesus Retail Trust: Rights.
3. Trading ST Engineering.
4. Religare Health Trust: Entered at 88c.
5. 9M 2015 income from non-REITs.

What do these stocks have in common?

Which stocks am I referring to?

1. Marco Polo Marine
2. Yongnam Holdings Limited
3. AIMS AMP Cap Industrial REIT
4. Asian Pay Television Trust
5. Saizen Real Estate Inv Trust

They have all been upgraded by Maybank Kim Eng to 100% valuation in their list of marginable stocks.

Own any other stocks shown in the photo?

Asian Pay Television Trust (APTT): 201 lots.

Asian Pay Television Trust (APTT) was my first IPO application in donkey years. So, you can imagine I was somewhat excited.

When I heard that people who applied for 100 to 499 lots would get 80 lots if successful, I was even more excited! I applied for 201 lots!

Apparently, only 7 out of every 50 applicants were successful for the range of 100 to 499 lots. Chances were slim and chances were even slimmer for people who applied for 99 lots or less.

Chances improved markedly for those who applied for 500 to 999 lots. 33 out of every 50 applicants were successful and they would get 374 lots each! Wow!

This was an IPO that favoured the bigger players, it would seem. Be ready to either make a big killing tomorrow or be killed big time. I think the former is more likely.

Congratulations to all successful applicants!

Related post:
Asian Pay Television Trust: IPO

Asian Pay Television Trust (APTT): IPO.

Usually, when people ask me about IPOs and if I would take part, I would answer in the negative.

Subscribing to what Warren Buffett thinks about IPOs and that is IPOs of stocks are almost always bad investments, I have not taken part in IPOs in many years. Warren Buffett is of the opinion that IPOs are rarely undervalued offers.

What about the IPO of APTT? Is this an exception?

Well, APTT will be holding TBC which was a business in MIIF's portfolio and we know that TBC was the crown jewel of MIIF's portfolio of businesses. With TBC removed from its portfolio, MIIF saw its unit price tumbled almost 70% yesterday.

At a unit price of 97c, APTT's distribution yield is estimated to be 7.5% in the first year and this is estimated to increase to 8.5% in the second year. With relatively high yields like these waved around, the IPO has attracted a high level of interest from institutional investors.

Indeed, Dow Jones Newswires reported in an article dated 2 May 2013 that 8 cornerstone investors were secured. These are investors who are willing to commit to holding significant stakes which shows their confidence in the Trust.

In a yield hungry world, investors fed up with a low interest rate environment could push up the unit price of APTT when it starts trading on 29 May 2013. Of course, there is no way of telling if this would happen but look at how Croesus Retail Trust saw its unit price rose 23% on its first day of trading recently and we get an idea of just how things could turn out for APTT. Although not really comparable, it suggests that Mr. Market could be quite happy with distribution yield compressing to just 6.5%.

In case you are wondering about gearing (and you should), APTT's gearing is about 40%, while Croesus Retail Trust's gearing is at 47%.

If a distribution yield of 6.5% is what Mr. Market is willing to accept, APTT could trade at $1.12 per unit. If Mr. Market demands a minimum of 7% yield in the first year, we could see APTT trading at $1.03 to $1.04 per unit. If news that the placement tranche was 3 times oversubscribed by institutional investors is reliable, chances are we will see APTT trading higher.

If you are interested in participating in the IPO, take note to do so by 12 noon, 27 May 2013.

Related posts:
1. MIIF: Asian Pay Television Trust (APTT).
2. MIIF: Lower fair value.

MIIF: Lower fair value with lower income distributions.

With MIIF divesting TBC, unit holders will no longer be getting income distributions twice a year from the Fund in future.

This is because MIIF receives income from TBC in March and September while it receives income from HNE and CXP in September only.

MIIF will have a DPU of about 0.7c in August 2013 which is from the final income received from TBC. A DPU of about 1.2c will be paid out in March 2014 which will be for income received from HNE and CXP.

In future, we should expect only once a year distribution from MIIF for income received from HNE and CXP. Also, do not expect 1.2c to be the norm either as it is expected that the tolling revisions for HNE will adversely affect DPU for the full year starting in 2014.

What would be a fair value per unit for MIIF when it resumes trading?

In recent past, MIIF was trading at about 63c a unit and with an annual DPU of 5.5c, unit holders were enjoying a distribution yield of some 8.73%. For ease of calculation, let us be generous and assume that an annual DPU of 1.2c will be the norm. This would give us a fair value of 14c per unit, thereabouts, in order to have a similar yield. This would mean a decline in price of some 49c per unit!

If this estimate should gel with Mr. Market, unit holders would have been better off selling at 63c a unit prior to the voluntary trading suspension since unit holders are only getting 44.329c per unit from the divestment of TBC either in cash or in APPT units (priced at 97c per unit).

It would also mean that anyone with a purchase price of 58c or lower per unit, prior to the trading suspension, is quite "safe" while anyone with a higher purchase price could lose money.

Of course, there is a chance that APPT could see higher unit price when trading starts and there is also a chance that MIIF might not see its own unit price plunging to 14c per unit. If this should be the case, then, this effort by the management to unlock value for unit holders could be declared a success.

Anyway, now that we have some ballpark figures, we will be able to make some snap decisions tomorrow, if required, keeping in mind that any investment at the right price is a good investment.

See: MIIF dividend guidance.
See: APPT offer price and MIIF APPT units.

Related post:
MIIF: Asian Pay Television Trust (APTT).

MIIF: Asian Pay Television Trust (APTT).

MIIF is calling for a special general meeting on its plan to spin off its stake in Taiwan Broadband Communications (TBC) through the setting up of a new business trust, Asian Pay Television Trust (APTT).

The idea is that this will further unlock value for unit holders who could either accept new units in APTT or cash in payment. Overseas unit holders can only accept cash in payment. The minimum valuation of MIIF's stake in TBC puts it at S$469.5 million or S$0.408 per unit, net of costs.

This is probably the fund's most valuable asset. In terms of proportion to the fund's NAV, it is approximately 60%. In terms of earnings contribution, it accounts for about 76% of the fund's earnings. So, it is obvious that TBC is the star performer in the fund's portfolio.

Could unit holders profit from this spin off?

1. For a business that is worth at least S$469.5 million, it generates an income of about S$44 million. That gives us a raw yield of 9.37%. What would the final distribution yield be like, after costs? 8%? In a yield hungry world, we could possibly see distribution yield compressing to under 7% which means the market value of unit holders' investment in APTT could then see a gain of approximately 15%.

2. A sell off of MIIF units by Mr. Market could happen, post spin off. Since TBC accounts for some 76% of the fund's earnings, MIIF's unit price could decline proportionally. However, Mr. Market doesn't behave rationally all the time. We could take advantage of drastic mispricing to sell or buy units in MIIF then as there could be some confusion as to the valuation of MIIF, post spin off.

For now, we can only wait to see how things will turn out.

See MIIF's full 2012 results: here.

Related post:
MIIF: Realising value.