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Showing posts with label GLP. Show all posts
Showing posts with label GLP. Show all posts

GLP versus ProLogis.

Saturday, June 4, 2011

I was just reading an article in The EDGE and wonder what this would mean for GLP and its shareholders:

"GLP was listed on the SGX last year after it acquired the Japanese and Chinese portfolio of Prologis with the Singapore Government Investment Corp. (GIC) in 2008.

 
"Last December, GLP had to clarify that it did not disclose during IPO that a non-compete agreement with ProLogis was due to expire this February as the deal requires GLP not compete with ProLogis in Japan while ProLogis reciprocally does not compete in GLP’s core market of China.

 
"The clarification was made in response to a report in The Business Times that the prospectus for GLP’s initial public offer last October did not specifically disclose that the non-compete agreement was expiring in a couple of months."

Question. Was the non-disclosure misrepresentation on the part of GLP during its IPO? This is especially grave if the information omitted could have serious consequences for GLP's shareholders. I learned in business law many years ago that misrepresentation by omission is just as grave as misrepresentation through the giving of false information.

From a purely business perspective, I wonder how things would pan out in the next few years as ProLogis becomes more aggressive in its pursuit of growth in Asia. Is GLP up to the challenge? It did buy ProLogis' assets. I liken this to Akira asking an OEM to produce its products. Obviously, the OEM is the party with the knowledge and the production capabilities. If the OEM were to offer its products directly to the market, it could do so with an in-house brand and at a more competitive price. Consolation? Akira has a more established brand name but see what good it did for Akira? Did GLP have enough time to establish a strong brand name?

Of course, I am just thinking aloud here and playing the Devil's advocate. I am throwing the floor open to anyone, vested or not vested in GLP, to share any pertinent thoughts on the matter.




Related post:
GLP: A falling dagger?

GLP: A falling dagger?

Sunday, February 13, 2011

As the Post Chinese New Year Sale continued in the stock markets, some stocks I have never been interested popped up on my radar screen. Capitaland is one such stock. Another one is GLP as some I know dipped into their funds and bought as its price plunged in the last session.

A friend sent me a SMS to say he bought some at $1.96 (the IPO price) in the morning and it closed at $1.93 for lunch. Then, it went on to touch $1.88 when another friend who was in the queue got his buy order filled. GLP closed at $1.93 in the end.

Is this stock going to rebound or would it decline further? After a huge sell-off, it is reasonable to expect a rebound. Short sellers would want to cover their short positions if the bulls are emboldened to push the price higher for some reason. However, the truth is no one knows what would happen next week.

TA is useful in that it lets us know where are the supports and resistance and we have to plan accordingly. TA simply gives us a glimpse into what could be and there are always two sides to a coin. Of course, sometimes, it is nifty enough to give us probabilities as well but they remain probabilities and never certainties.

What is the chart for GLP saying?


What is obvious is that GLP has been in a worsening downtrend since 1 Nov 2010.  Look at the three orange lines I have drawn and you would realise this. The latest trendline resistance is rather steep and approximates the declining 20dMA. $2.06 thereabouts. Selling at resistance in a downtrend is a sound strategy.

The immediate support is at $1.88. If this were to break in the next session, we won't know where is the next floor although employing Fibo lines could give us a clue. $1.82, anyone? The technicals are weak and so is my heart. I shall abstain.





Related post:
What's my take on MIT and GLP?

Sabana REIT: Fundamental analysis.

Friday, November 26, 2010

Sabana REIT closed at $1.02 and touched a low of 97c at one point today. After the rather strong performance by MIT and GLP on debut not so long ago, the unenthusiastic response to Sabana REIT on its first day of trading by market participants was somewhat surprising. Let us do an analysis of the REIT and whether it is a good investment at the current price.

Sabana REIT has an aggregate leverage of 26.5% which is comfortable but bear in mind that a Shariah compliant REIT cannot lever beyond 35% while other REITs are quite comfortable levering to 45%. Its NAV per unit is 99c. So, it is trading at a slight premium to NAV and at 97c, the low of the day, it was only at a slight discount to NAV.

The total GFA of all its properties is 3,286,220 sq ft.  Its largest property which has a GFA of 810,710 sq ft has a remaining lease of 45 years. The rest of its properties have remaining leases of between 22 and 72 years. Three properties have remaining leases of 31 years or less and their combined GFA is 706,055 sq ft. Nothing irregular here. Although close to a quarter of its GFA would come to an end in 31 years or less, it does not seem worrisome at this point in time.

The REIT has an occupancy rate of near 100%. This is a good thing but it also means that there is little room to increase occupancy and revenue through renting out more space. 59.5% of its leases (by revenue) will expire in 2013 while the rest would expire in 2015. So, income should remain predictably stable till 2013.

The REIT will distribute 100% of its taxable income till 31 Dec 2012. Thereafter, at least 90% of taxable income will be distributed. Income distributions will be made quarterly to unitholders.

The estimated annualised DPU for 2011 is 8.63c and for 2012 is 8.67c. These represent yields of 8.22% and 8.25% respectively based on the IPO price of $1.05 per unit.

I believe that we have a fair offer here in Sabana REIT. Although I would rather invest in AIMS AMP Capital Industrial REIT which offers an annualised DPU of 2.08c for 2011 which would translate to a yield of 9.24% at a unit price of 22.5c, investing in Sabana REIT could provide some safety through diversification.

One thing that worries me is the lack of a track record of Sabana REIT's manager whereas AIMS is an old hand at managing REITs and Mr. George Wang's achievements are impressive. So, would I invest in Sabana REIT? If price weakens further, I might just buy some.

View prospectus here.

Related post:
Sabana REIT: IPO at $1.05/share.

Saizen REIT, First REIT, Golden Agriculture and Genting SP.

Friday, November 12, 2010

Markets in Asia seemed to have taken the lead from the dismal performance of Wall Street and the STI was no exception as it retreated 1.3%.


STI drops 1.3% to 3,252 at closing
Friday, 12 November 2010

So, is this the beginning of the end? I actually find it re-assuring that such a question was making its rounds amongst local investors. It shows that the memory of the last crash is still fresh in the minds of many. Many are actually holding cash and waiting for the next big crash before moving in to cherry pick beaten down stocks.

The market could be perverse and the more we expect something to happen, the more unlikely it becomes. So, people waiting by the sides with chestfuls of cash could be disappointed.

Indeed, there is massive amount of liquidity in the market if the amazing over-subscriptions of GLP and MIT were anything to go by. Money is going where it is treated best. It is not going to be treated best in US Treasuries, for sure. The investments to be in are Asian assets. Asian countries with strong economies and currencies are the ideal investment destinations.

So, unless we have evidence to the contrary, I would say: Do not fear the selldown!  What are we to do then?  Invest in Asian equities (and inflation is here to stay)!

Personally, my portfolio which is primarily investing for income hardly budged in today's selldown. No roller coaster ride for my weak heart. Just dividend collection on a regular basis for me.

With regards to Saizen REIT, a reader sent me an email asking: "Was it your article in your blog that attracts sudden interest in this stock?  The volume is more than ordinary. I wonder." I doubt that my blog has such influence.  Anyway, there were some sessions in the past in which volume was much higher but the interesting thing about today was the number of trades with large buy ups at 16c. There was a total of 14 transactions with a total of 5,419 lots changing hands, of which 12 transactions were at 16c and 5,204 lots were bought up at 16c. 2 transactions were for 1,000 lots each and 1 transaction was for 2,000 lots. Has Saizen REIT caught the attention of some heavy weight investors? Your guess is as good as mine.
See my last blog post on Saizen REIT here.

I have been waiting the whole day for someone to sell me some First REIT units at 95c but to no avail. Some people are puzzled why am I so interested in getting some at 95c when I am already vested at 40+c and 70+c. Well, with the proposed acquisitions and rights issue, buying more even at 96c could be quite rewarding. With an average price of 70c, post rights, if we were able to buy at 95c now, a yield of 9.1% is not impossible with an estimated full year DPU of 6.4c in 2011. As the XR date is 1 Dec which is almost 3 weeks away, I will continue to wait patiently at 95c. Wish me luck.
Read announcement from First REIT here.
Read my last blog post on First REIT here.

Golden Agriculture suffered a downgrade by OCBC and broke its immediate support at 75c, closing at 73c. Just yesterday, I mentioned that "Although Golden Agriculture reported commendable results today with a 41% year on year increase in net profit to US$99 million (S$127 million) for the third quarter ending 30 Sep (3Q2010), the attempt by price to go higher was half hearted as it touched a high of 78.5c before closing at 76c. The very long upper wick on this short bodied white candle hints of strong selling pressure. Volume is relatively low and the negative divergence between price and volume is still all too visible." We could see 70c support tested sooner than later.
Read my last blog post on Golden Agriculture here.



The counter on my watchlist that suffered the greatest decline in percentage terms is Genting SP, declining 15c or 6.6% to close at $2.13 after touching a low of $2.07. The question on the minds of anxious investors is whether it would go lower?


The price gapped down to start the day at $2.10 but formed a white spinning top after testing the 50dMA at $2.07 which was the low of the day. A spinning top suggests indecision which is a good thing for bulls on a day with massive selling pressure. If the price starts at $2.18 or higher in the next session and manages to break resistance at $2.21 which is the 50% Fibo line as well as the 20dMA, we could have a recovery. Having said this, the MACD has been moving lower as price moved higher, presenting an obvious picture of negative divergence. I would treat any rebound as a chance to reduce exposure.

Saizen REIT: AGM on 19 Oct 10.

Tuesday, October 19, 2010

I managed to take leave from work to attend Saizen REIT's AGM with a friend today. The AGM started on time and there were few surprises for me as I have been tracking this REIT for about a year now. Nonetheless, I picked up some interesting points which might not be apparent from the presentation slides.

The management took pains to impress upon unitholders that even if YK Shintoku were to suffer a foreclosure, the rest of Saizen REIT would not be affected. The DPU of 0.26c for the months of May and June 2010 did not have any contribution from YK Shintoku. We could expect this DPU to be sustainable. So, even if YK Shintoku's loan remains unresolved, we could expect a DPU of 0.26c x 6 = 1.56c per annum, ceteris paribus.  This is a yield of almost 10% based on a unit price of 16c.  However, I would expect this to be diluted somewhat if all the warrants are exercised. A 7% yield could be more realistic then.  When we take into consideration that Saizen REIT owns freehold properties, this becomes quite attractive.

Depending on whether YK Shintoku's CMBS is refinanced and the size of its portfolio at the point in time if refinancing happens, yield would be adjusted upwards but the magnitude of such an adjustment would remain guesswork for now, at best.

The management's energy is now focused on the re-financing of YK Shintoku's CMBS. The main difficulty in getting the loan re-financed is the cautious stance of lenders. This explains why they are gradually divesting properties in YK Shintoku to lower the absolute quantum of the loan. This is a preferred alternative to having the portfolio foreclosed by the CMBS holders.

A smaller loan quantum would also make it more palatable to potential lenders, of course. In fact, Mr. Raymond Wong mentioned that a bank in Tokyo is willing to lend them more money provided that they resolve the YK Shintoku CMBS first. A chicken and egg problem, it seems.

Mr. Wong further revealed that in the last two years or so, they met up with about 60 different banks and managed to refinance all but YK Shintoku 's CMBS. The absolute size of this CMBS remains a challenge although it has been reduced through divestment of properties over time from the original JPY 7.953 billion to the current JPY 5.9 billion. It was also said that YK Shintoku has a cash reserve of JPY 0.6 billion which would reduce the outstanding loan balance to JPY 5.3 billion.

The problem with CMBS is that it has to be fully repaid and there is no amortising feature. So, the challenge is now to find a lender willing to lend JPY 5.3 billion to refinance YK Shintoku's CMBS.

The management revealed that it collected $14.56 m from warrant proceeds as of 18 Oct. Potentially, it could receive another $30.18m if the rest of the warrants are exercised. If enough properties from YK Shintoku were divested to make the outstanding loan balance payable using warrant proceeds, we might not even need to refinance the loan. JPY 5.3 billion is (at today's rate of 1 JPY = 0.01575 SGD) equivalent to S$83.475m.  For such an option to work, it seems that Saizen REIT would have to divest another $40m worth of properties from YK Shintoku's portfolio.

Both Mr. Raymond Wong and Mr. Chang Sean Pey agreed that it is not the best time to sell properties in Japan. In fact, it is a time to buy properties in Japan (which could explain partially why GLP and MLT bought so many properties this year in the country). Unfortunately, the lack of willing lenders for YK Shintoku's refinancing bid leaves them little choice but to continue divesting properties until a time when it is no longer necessary. Like Mr. Wong said, it beats having the portfolio foreclosed.

The successful refinancing or discharging of YK Shintoku's CMBS would represent a bonus for unit holders since it would resume contribution to the REIT's distributable income. This is not, by any means, certain. Therefore, I would not buy Saizen REIT with this as the primary motivation. It is just a bonus that could very well materialise.


The management's tact to present the REIT as a safe income generating instrument was not lost on me. However, some unitholders were clearly not impressed and asked if there were plans to have greater coverage of Saizen REIT by brokerages and whether there would be further re-rating upwards by Moody's. It is a fact that Saizen REIT's units are trading at a huge discount to NAV and the yield is very high.  This was explained by Mr. Raymond Wong, quite candidly, because of the market's perception of the REIT which has remained unfavourable as well as the negative perception of the Japanese economy as a whole.

Having said this, understanding the need to have increased coverage for Saizen REIT, the management has met up with the largest retail brokerage in Singapore yesterday and will conduct a briefing for analysts today. Of course, positive coverage could give Saizen REIT's unit price a shot in the arm.  After all, it remains a strong value proposition.

Mr. Chang made a very good point that the depressed value of Japanese residential real estate is not because rental rates have plunged. Rental rates have remained relatively stable. It is because liquidity has dried up but this is slowly changing. The recent successful divestment of various properties in YK Shintoku shows that buyers are back and liquidity is returning. Things could only get better from here, in my opinion.

So, was there anything I did not like about the AGM? Resolutions 3 and 4: Allowing the manager to make or grant convertible instruments and to issue by way of placement at a discount of 10 to 20% of the unit price at the point in time. Although Mr. Raymond Wong assured unitholders that it is a formality and that they would not do any placements at such a steep discount to the current very depressed unit price, I voted against these resolutions.  I do not like share placements as they exclude small investors like me from taking part in the enlarged capital base.  I much prefer a rights issue.

In general, I enjoyed the AGM. Both Mr. Raymond Wong and Mr. Chang Sean Pey were polite and shared information freely. They answered questions candidly, acknowledging the difficult circumstances surrounding their efforts to refinance YK Shintoku's CMBS. Mr Arnold Ip, the Chairman, whom I have always imagined to be a Chinese gentleman but turned out to be Eurasian, said that they are now a lot more optimistic about the REIT and its future when, only a year ago, they were thinking of the worst case scenario.

After attending the AGM, I am more convinced than ever that Saizen REIT is a value proposition that is hard to ignore.  It is an income instrument that would continue to deliver a relatively high yield at the current price and the potential upside is more than any potential downside. I would continue to accumulate on weakness, if the opportunity presents itself.

AGM presentation slides here.

Related post:
Saizen REIT: Divestment of 3 properties.
Saizen REIT's properties: Would I buy?
Saizen REIT: Better than expected DPU.

What's my take on MIT and GLP?

Monday, October 11, 2010

A reader sent an email asking me what is my take on the IPOs of Mapletree Industrial Trust (MIT) and Global Logistic Properties (GLP).  My reply was:

"I don't have enough data on hand to make an informed commentary on these.  That's why I have kept quiet about these although I have friends who would like me to blog about them.

"However, IPOs are not usually available at a bargain, especially in these bullish times. So, generally, I would avoid IPOs.

"With MIT, the expected yield of 7.6% seems ok. I do not know what is the NAV per share. I know it is using some of the proceeds to pay down debts to bring its gearing level to 30% to 35%.  Exact figures, I do not have.

"With GLP, it is being offered at a 10% premium to NAV. It does not even have any income distribution guidance. So, we don't know what is the yield.  What would be its proforma gearing level?  Too many unknowns. I would avoid."





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