Merger of ESR-REIT and VIVA Industrial Trust.

I have more than a handful of relatively small investments (i.e. anything smaller than $100,000 and usually smaller than $50,000 in size).

Some of them are legacy investments (i.e. leftovers from many years ago after selling off most of the investments) and ESR-REIT (formerly Cambridge Industrial Trust) was one of them.








The last time I blogged about this REIT was in June 2016.

Back then, I added to my investment in the REIT at 52.5 cents a piece.

After adding to my investment, still, it remained a smallish investment and I explained why in related post #1 at the end of this blog.








Well, I have decided to let go of my investment in the REIT.

Why?

Regular readers know that I have concerns about VIVA Industrial REIT. See related post #2 at the end of this blog.

I am uncomfortable that ESR-REIT and VIVA Industrial REIT are talking about merging.

I have enjoyed many years of income distributions and I will also enjoy a capital gain from the divestment.

So, everything taken into consideration, it is not a bad outcome.








This reminds me of the time when I let go of K-Green Trust (KGT) in 2014 when it was decided that they would merge with CitySpring Infrastructure Trust.

I didn't like CitySpring. 

What to do?

I cut KGT loose. See related post #3 at the end of this blog.






With this move, my total investment in REITs shrinks again and, everything else being equal, so will the income distributions I will be receiving from REITs this year.

Read:
ESR-REIT and VIVA in merger talks.

Related posts:
1. Cambridge Industrial Trust (June 2016).
2. VIVA Industrial REIT's short land leases.
3. KGT and CitySprings' unequal marriage.

2014 full year income from non-REITs.

This is the first time I am blogging about my full year income from investments in non-REITs. As my passive income generated from investments in S-REITs has for many years overshadowed income received from non-REITs, it wasn't very meaningful to blog about the latter.



Now that passive income received from S-REITs took a plunge, it has become more essential to talk to myself about what I have done in the non-REIT space which has shored up dividends received this year, making income contributions by non-REITs a more significant part of my total annual income from the stock market.


Before I continue, readers might want to bear in mind that a few of my investments in the non-REIT space have been with me for many years. They are not all new investments, therefore.

Anyway, non-REITs which have contributed to my passive income in 2014 are:

1. Croesus Retail Trust
2. Hock Lian Seng
3. Perennial China Retail Trust *
4. CapitaMalls Asia *
5. NeraTel
6. Wilmar
7. Yongnam
8. APTT
9. ST Engineering
10. SPH
11. QAF
12. Old Chang Kee
13. K-Green Trust *
14. SATS
15. Ascendas Hospitality Trust
16. Singapura Finance

* Sold and will not contribute any income in 2015.

New or old, I have blogged about all the above stocks before. So, if you should be interested in understanding why and when I invested in these stocks, just do a search for them in my blog and you will find the relevant blog posts.

Of these 16 stocks, I increased my long positions or initiated long positions in the last 12 to 15 months in Croesus Retail Trust, Hock Lian Seng, NeraTel, ST Engineering, SPH, SATS, Ascendas Hospitality Trust and Singapura Finance. 

Apart from Singapura Finance, it is quite obvious that I increased or initiated exposure to these stocks because of their relatively attractive dividend yields. I am still an income investor at heart.

I wouldn't say that all the stocks are of the "good to hold forever" variety but it should be obvious to regular readers that I am not averse to selling a stock if I am no longer impressed by its prospects. 

There are many examples which I have blogged about in the past and examples from this year are Perennial China Retail Trust and K-Green Trust in the list shared earlier.

Anyway, the total amount of dividends from non-REITs in 2014 is beefed up mostly by my rather big investment in Croesus Retail Trust which happened when its unit price took a severe beating shortly after its IPO. 

The relatively large increases to my investments in SPH and NeraTel also helped.

Income from non-REITs in 2014:
S$ 61,752.66

This figure could increase in 2015 despite losing the contributions from Perennial China Retail Trust, CapitaMalls Asia and K-Green Trust. This is because Ascendas Hospitality Trust will make a full year income contribution in 2015.

Of course, it is hard to say at this point in time if I could divest partially or fully some of the investments mentioned here in 2015. 

Indeed, I could also put more money to work in the stock market. So, nothing is set in stone. However, I do know that if valuations should go closer to crisis levels, I will be buying more.

I understand that the stock market could get a bit bumpy but my investments for income should provide me with much comfort and also help to fill my war chest in the meantime.

Related posts:
1. 2014 full year income from S-REITs.
2. AK went shopping in the (stock) market.
3. Be comfortable with being invested.
4. Mystical art of wealth accumulation.
5. Portfolio review: Unexpectedly eventful.
"... my decision to increase my level of investment in SPH and NeraTel last year so that my overall portfolio is less reliant on S-REITs for passive income was pre-emptive. Enlarging investments in Hock Lian Seng and Croesus Retail Trust earlier this year has also helped to reduce reliance on S-REITs for passive income."

Keppel and CitySpring Trusts: An unequal marriage?

I got into K-Green Trust (now renamed Keppel Infrastructure Trust) a few years ago at $1.11 per unit. I was attracted by its zero gearing and relatively decent distribution yield.

Over time, I received a DPU of almost 8c a year from K-Green Trust. So, with a closing price of $1.09 per unit in the last trading session, I have achieved a return of about 7% per annum which is not too bad for an income investment.

With zero gearing, together with other unit holders, I was waiting for K-Green Trust to gear up and acquire some DPU accretive investments but after waiting for 4 years, nothing really happened. Well, that is not until now.

Honestly, I don't have good feelings towards the merger of K-Green Trust and CitySpring Infrastructure Trust. To be honest, again, this probably has to do with the experience I had with CitySpring and I shared my thoughts here in my blog many years ago.

It would have been much cleaner for K-Green Trust, which I believe to be stronger financially than CitySpring, to acquire assets on its own and grow its DPU. The merger complicates things. Well, at least, it does for me. The first thought that came to my mind is that CitySpring's weaker balance sheet will strengthen with the merger.

Granted that K-Green Trust's assets have limited lifespans but it is like a good cup of coffee that is slowly being finished. We just have to top it up with more good coffee. CitySpring, to me, is coffee that is not so good. Now, these two cups of coffee are being mixed up.

It is easy to see that K-Green Trust has had a better track record compared to CitySpring's in the last few years. CitySpring has had two rights issues and seen its DPU reduced by more than 50% in the process over the years. What? They took more money from unit holders and it resulted in less income distribution per unit? Pui!

Now, with the proposed merger, existing unit holders of K-Green Trust will receive 2.106 new CitySpring units for every K-Green Trust unit owned. Oh, my. I am going to be a unit holder of CitySpring's again after so many years?

I lack the inclination to dig into the numbers as I am disappointed and flabbergasted by K-Green Trust's decision to give up its strong balance sheet by merging with CitySpring. There is no need to, in my opinion.

So, although it could be a mistake because I might not be able to see the big picture that more savvy investors are able to see, I will probably be saying good-bye to my investment in K-Green Trust, taking advantage of its higher unit price as a result of somewhat positive sentiments.

Out of sight and out of mind. Zen.

Related posts:
1. CitySpring Infrastructure Trust: Divestment.
2. K-Green Trust: Zzzzzzzzzz.

K-Green Trust: Zzzzzzzzzzzzzzzzzz.

This blog post is in response to a comment from a reader.

When was the last time I blogged about K-Green Trust? One year ago!

See:
K-Green Trust: DPU 4.69c.

K-Green Trust seems to me to be quite lazy.

I have been waiting for them to gear up and make DPU accretive acquisitions forever! The management did not take advantage of the ultra low interest rates in the last 3 years at all to acquire assets. It is baffling.

Their portfolio of assets will run out of time gradually and some alarmists wave around banners saying "No more assets in 11 years!"

Well, not exactly. I looked at this in detail before.

See:
K-Green Trust: A bad investment?

I remember the Trust listed 4 assets to which it has ROFR. I will wait and see how things pan out but I could fall asleep while waiting.

Please wake me up if they buy something. Thank you.

K-Green Trust: DPU of 4.69c.

K-Green Trust announced a DPU of 4.69c for 2H 2012.

For a long time now, I have been waiting for K-Green Trust to gear up, acquire assets and increase DPU. Well, it seems that my wish is going to come true.

"In 2013, we will focus on acquisitions in areas of waste management, water treatment, renewable energy and energy efficiency, including assets that were identified under the Rights of First Refusal," Thomas Pang, CEO of the manager of the trust.

Perhaps, it is time to look into buying in the next bout of selling by Mr. Market.

Related post:
K-Green Trust: DPU of 3.13c.

K-Green Trust: DPU of 3.13c.

I am still holding on to a small investment in K-Green Trust. I will be getting some money for the 5th time in the form of income distribution soon.

The Trust distributes income half yearly and a payout of 3.13c has been declared. Date payable: 16 August 2012.

Mr Thomas Pang, CEO of Keppel Infrastructure Fund Management Pte Ltd, the Trustee-Manager of K-Green Trust, said, "K-Green Trust continues to perform well in this period and remains committed to deliver stable, predictable and reliable distributions to the Unitholders."

Well, stable distributions are nice but what I am more interested is in seeing the Trust gear up to deliver growing distributions to Unitholders.

See announcement: here.

Related post:
1. K-Green Trust: Results for year ended Dec 2010.

K-Green Trust: Results for year ended Dec 2010.

Here are the highlights:

1. Profit after tax for the period from date of listing on 29 June to 31 December 2010 was $8.7 million, 22.1% higher than forecast.

2. Earnings per unit (EPU) for the period from date of listing to 31 December 2010 were 1.39 cents.

3. Net asset value per unit as at 31 December 2010 was $1.16.
 

4. Distribution per unit (DPU) of 4.31 cents was higher than forecast by 10.2%.
 

5. Annualised distribution yield was 7.9% based on unit closing price of $1.07 on 31 December 2010.

Full report here.

Some readers might remember an earlier blog post in which I questioned if K-Green Trust was a bad investment. In that post, I said "If it could land lucrative acquisitions with cheap debt, we could also see it reducing its payout ratio and keeping cash for asset renewal purposes. To think of KGT as a static business trust with no growth opportunities could be rather short sighted.  Why? Because it has zero gearing unlike CitySpring Infrastructure Trust." This is still a valid assumption but the Trust has yet to announce any such plans.

DPU of 4.31c will be paid out on 10 March 2011. This probably explains the bump up in the Trust's unit price to $1.10 today, forming a wickless white candle in the process. The buy signal on the MACD histogram yesterday has been confirmed. Drawing some Fibo lines suggests that further upside could meet with stronger resistance at $1.13. Is this attainable? The MFI has formed a higher low and further upside from $1.10 is probable.

Related post:
K-Green Trust: A bad investment?

Sabana REIT, Golden Agriculture, First REIT and K-Green Trust.

Sabana REIT retested its low of 96c today. To top it off, it closed at 96c. Distribution activity continues for the seventh straight session. This is quite obvious when we look at the OBV. I said before that I could consider getting some if the yield is greater than 9%. Technically, if 96c gives way, the 123.6% Fibo line is at 94.5c and the 138.2% is at 93.5c. I might buy some at those levels.

Golden Agriculture formed an inverted black hammer today, closing at 74c after moving higher in the day. This is a bearish development. I remain wary of the negative divergence between price and volume. I would like to see the uptrend support retested and that is when I might add to my position.  This is currently at 70c.

Increase exposure to upstream planters: DBS Vickers
Monday, 06 December 2010

© 2010 - The Edge Singapore

First REIT's trading volume has been declining as price stayed at and above the immediate support at 73.5c. The momentum oscillators are positive and the MACD is rising above the signal line in positive territory. All very nice but as volume dwindles, we have to be wary. If we had missed loading up earlier, loading up now at 73.5c carries a higher risk, technically speaking, even though the uptrend is intact.

Immediate support at 73.5c with the next support at 71.5c and this is also where we find the rising 20dMA. Looking back, this counter has a history of relying on the 20dMA for support as it moved higher. So, buying at the 20dMA is safer.

First REIT +0.7%; Ignores rights issue lodgement
Monday, 06 December 2010

© 2010 - The Edge Singapore

K-Green Trust broke its immediate support at $1.04 and touched a low of $1.03. Immediate resistance is now at $1.06 while we could see the low of $1 achieved on 1 July retested. All the momentum oscillators are downtrending. The declining OBV suggests continual distribution taking place. I had originally thought of buying more at $1 but I might want to wait for clearer signs of a reversal before taking action now.

Related posts:
Sabana REIT: Fundamental analysis.
Golden Agriculture: Levitation act.
First REIT: XR and fair value.
K-Green Trust: A bad investment?

K-Green Trust: A bad investment?

There has been much discussion regarding K-Green Trust (KGT) and its yield. I agree that KGT's estimated DPU of 7.82c represents a partial return of capital.

Unlike Saizen REIT which owns freehold properties, for example, KGT's assets have limited lifespans. At the end of their lifespans, they would be returned to the Singapore government and there is no guarantee that their concessions would be renewed and if they were renewed, at what price?

KGT has a total of 3 assets:

1. Senoko Waste-to-Energy Plant

(Concession: 15 yrs fr 1 Sep 09: 14 yrs left)

2. Keppel Seghers Tuas Waste-to-Energy Plant

(Concession: 25 yrs fr 30 Oct 09: 24 yrs left)

3. Keppel Seghers Ulu Pandan NEWater Plant

(Concession: 20 yrs fr 28 Mar 07: 16.5 yrs left)

The Senoko Waste-to-Energy Plant is estimated to contribute to 50% of the Trust's income.  The Tuas Plant is estimated to contribute to 35% while the NEWater Plant is estimated to contribute to 15% of income.

Assuming that KGT pays out 100% of its free cash flow (and this makes it a self liquidating trust), does not engage in any acquisitions over the lifespans of its three existing assets and continues to have a DPU of 7.82c (representing 100% of its free cash flow) while it still has ownership of the said assets, buying KGT at $1.11 would take 14 years to get back my investment.  By then, KGT would be left with its Tuas Plant and NEWater Plant, the Senoko Plant's concession having ended.

Assuming that its DPU is halved after taking away the Senoko Plant, DPU would become 3.9c. This would continue for 2.5 years before the NEWater Plant's concession terminates and we would get a total DPU of 3.9 x 2.5 = 9.75c. Then, we would be left with 7.5 years of concession for the Tuas Plant and assuming the DPU is then reduced by 30% to 2.7c, we would get a total DPU of 2.7c x 7.5 = 20.25c.  In total, I would gain 30c for the $1.11 I invested earlier in August over a 24 years period or a total of 27% return which means a simple return of 1.13% per annum.  This rather simplistic estimation, however, assumes that KGT maintains the status quo which I think is highly unlikely.

KGT is a business trust and it does not have a gearing cap. It could have a gearing level of more than 45% and as long as it is able to generate income in excess of its interest payments and any regular debt repayment, we could see DPU increasing.

If it could land lucrative acquisitions with cheap debt, we could also see it reducing its payout ratio and keeping cash for asset renewal purposes. To think of KGT as a static business trust with no growth opportunities could be rather short sighted.  Why? Because it has zero gearing unlike CitySpring Infrastructure Trust.

Remember that KGT has Right of First Refusal (ROFR) granted by Keppel Corp on four projects which, more likely than not, would be DPU accretive acquisitions as KGT would most probably fund these with debt to begin with since its gearing level is zero:

1. Biopolis DCS Plant Biopolis@one-north, Singapore
2. Changi DCS Plant Changi Business Park, Singapore
3. Woodlands DCS Plant Woodlands Wafer Fab Park, Singapore
4. Amotfors Energi WTE Plant Sweden

Of course, this assumption has its premise on KGT having a competent management team that would take care of unitholders' interests. This remains to be seen.

Would I buy more of KGT? At $1.00, the price I originally thought of on 3 July, I would.

Related post:
K-Green Trust: Weak technicals.

K-Green Trust: Weak technicals.

In my first blog post on K-Green Trust on 3 July, I mentioned that "I would be quite happy to collect some units at $1.00 which would give a yield of 7.82% to begin with." With its price in decline lately, could I get my wish?

On 22 August, I said that "a near term support seems to have formed at $1.10" and "I would buy some at the current price of $1.11 instead of waiting as per my original plan". I also said "With an estimated yearly DPU of 7.82c, buying at $1.11 would give a yield of 7.05%."

Well, as things turned out, K-Green Trust's support was at $1.09 and this broke on 21 Oct. Today, price closed at $1.06, a natural candlestick support level. This could break and a stronger support would be at $1.04. Could we see $1.00 eventually, the buy price I thought of in my maiden post on the trust?

With the lower highs on the MFI and RSI plus the MACD plunging in negative territory, we could see price going lower in the near future. Look at the OBV and we see ongoing distribution. All technicals point to a higher probability of price going lower.

Related posts:
K-Green Trust: A stable source of passive income.
K-Green Trust: Possibly stabilised.

K-Green Trust: 3Q 2010 results.

K-Green Trust announced the following today:

1. The profit after tax achieved for the period from date of listing on 29 June to 30 September 2010 was $4.6 million, 26.5% higher than forecast.

2. Profit after tax for the third quarter was $4.4 million.

3. EPS for the period from date of listing to 30 September 2010 was 0.73 cents.

4. Free cash flow for the third quarter was $19.2 million.

5. Net asset value per unit as at 30 September 2010 was $1.15.

The strong set of numbers is encouraging. Read announcement here.


Related post:
K-Green Trust: Possibly stabilised.
K-Green Trust: A stable source of passive income.

CitySpring Infrastructure Trust: Thoughts on divestment.

On 5 Oct, OCBC reported that they were suspending coverage on CitySpring Infrastructure Trust as they see limited positive price catalysts in the near term. Furthermore, Hydro Tasmania which is owned by the Australian government is proceeding with dispute resolution and is demanding for A$6.9m in commercial risk sharing mechanism (CRSM).

For a long time now, I have regarded my investment in CitySpring Infrastructure Trust as a mistake. I blogged about it in "High Yields: Successes, failures and the in betweens."

With a quarterly DPU of 1.05c, the yield is 6.94% at the current unit price of 60.5c.  As of 30 June 2010, it had S$1,450,941,000 in borrowings against S$2,014,838,000 of total assets. This gives a gearing level of 72%. This is being optimistic as intangibles account for S$432,026,000 of total assets. Yield is not fantastic and gearing level is extremely high.

Comparing CitySpring Infrastructure Trust with K-Green Trust, we see that the latter has a similar yield but with zero gearing, it is almost immediately apparent that K-Green Trust presents a more compelling proposition.

At CitySpring Infrastructure Trust's current unit price, removing it from my frozen portfolio would result in a small loss but with the many quarters of income distribution collected, I would probably end up with a small gain.  Time to close a chapter, I think.

View slides here.

Related post:
K-Green Trust: Possibly stabilised.

K-Green Trust: Possibly stabilised.

On 15 Aug, I did a TA for KGT and suggested that its chart showed some weakness. At that time, it hit a low of $1.11.  In the next two sessions, it went to a low of $1.10 as its price hugged the lower Bollinger. It has since shown a detachment from the lower Bollinger as price moved sideways. Volume has been declining in recent sessions with this sideway movement in price. This suggests that much of the selling is done. This is possibly confirmed by the OBV which has gone flat which suggests a stalemate between accumulation and distribution.

 

The RSI's lower highs indicate recent selling pressure and the index is now in oversold territory.  The MFI has similarly entered the oversold territory with falling demand. However, both indices are turning up slightly. Is a reversal on hand? It is too early to tell. However, there is a picture of growing stability as price has moved sideways for more than a week.

I decided to look at the Stochastics since it is most useful in a rangebound situation.  It has been trending up in the oversold region since 5 Aug. This looks promising. It means that the daily closing price has been relatively stronger in recent sessions compared to its price range.

On 3 July, I blogged that KGT has "Stable cash flow, low risk and room to grow.  This sounds like a good addition to my passive income portfolio. It diversifies my income stream and injects a higher level of stability at the same time. The lower yield is acceptable because of its debt free balance sheet.  When a balance sheet is heavy in debt, the risk is higher and, consequently, I would demand a higher yield."

I have been waiting for a possibly better entry price but it was impossible to use TA at that time as KGT was newly listed then. This situation is being corrected.

I believe the catalyst for an upward movement in price for KGT would be the announcement of a cash distribution and a near term support seems to have formed at $1.10 in anticipation of this. Therefore, I would buy some at the current price of $1.11 instead of waiting as per my original plan.

With an estimated yearly DPU of 7.82c, buying at $1.11 would give a yield of 7.05%.  It would also be buying at almost the NAV of $1.12. I believe that KGT would be a valuable part of my passive income portfolio.

Related post:
Charts in brief: 13 Aug 10 (Part 3).

Charts in brief: 13 Aug 10 (Part 3).

Noble: Looking at Noble's chart, the double top formation is quite obvious. If this is a valid formation, we could possibly see price declining to hit $1.20.  Top at $2.20, neckline at $1.70, target at $1.20.  A scary possibility? Price closed at $1.54, the low formed on 20 May.  Could this hold?  Well, the MFI just dipped into oversold territory.  RSI continues to sink in oversold territory.  OBV shows continuing distribution.  Price could enjoy a brief rebound and should meet with resistance at $1.64 in such an instance.

Noble cut to Hold by DBS Vickers with $1.62 target. DBS Vickers says 2Q10 results dismal, with earnings down 65% on year at US$86.6 million ($118 million).
Friday, 13 August 2010

© 2010 - The Edge Singapore

KGT: I am still interested in collecting some units of KGT.  However, the price refuses to fall below $1.10.  When I first blogged about KGT, it was at $1.06 and I said I would wait for $1.00.  Doesn't seem very probable now. However, I decided to sneak a peek at the charts. 

Well, not much to work on but notice that price has been trading below the 20dMA in recent sessions with a falling MACD. MFI has formed lower highs which suggests a falling demand. The RSI has likewise been falling suggesting increasing selling pressure over time. We could see KGT at under $1.10 again if this keeps up.  Good things come to those who wait?  Of course, if the counter goes CD soon, it could change everything.

Related post:
K-Green Trust: A stable source of passive income.

K-Green Trust: A stable source of passive income.

I spent some time recently looking into the latest trust to list in the stock market here: K-Green Trust (KGT). This is an infrastructure business trust listed by Keppel Corporation recently. Initially, it only has three assets:

1. Senoko Waste-to-Energy Plant

(Concession period: 15 years from 1 Sep 09)

2. Keppel Seghers Tuas Waste-to-Energy Plant

(Concession period: 25 years from 30 Oct 09)

3. Keppel Seghers Ulu Pandan NEWater Plant

(Concession period: 20 years from 28 March 07)

The Waste-to-Energy plants treat close to half of Singapore's incinerable waste while the NEWater plant is one of Singapore's largest.

The main attraction of this trust is the stability of its non-cyclical cash flows and a lack of counter-party risks as its customers are NEA and PUB.

Using the usual metrics for analysing trusts, we find that KGT has zero gearing, has an estimated dpu of 7.82c (which translates into a yield of 7.38% based on the last traded price of $1.06) and is currently trading at a 5.5% discount to its NAV of $1.12. Although the small discount to NAV is unattractive, the zero gearing is.  There is room for KGT to gear up to, say, 40% and improve its dpu in time.

Stable cash flow, low risk and room to grow.  This sounds like a good addition to my passive income portfolio. It diversifies my income stream and injects a higher level of stability at the same time. The lower yield is acceptable because of its debt free balance sheet.  When a balance sheet is heavy in debt, the risk is higher and, consequently, I would demand a higher yield.

I would like to buy some units of KGT but how much would I pay? On its first day of trading, KGT started off at $1.17 and hit a high of $1.33 and closed at $1.11. Usually, I would depend on TA here but being so new in its listing, four days old, to be exact, TA is impossible. However, we can see that it reached a low of $1.00 on 1 Jul and formed a white candle with a long upper wick on 2 Jul as it closed at $1.06.  This suggests some selling pressure.

Why the selling pressure? If we remember that KGT units were actually given to existing shareholders of Keppel Corporation as a special dividend, the reason becomes apparent. Some shareholders are monetising their "dividends".  If this continues to play out and if the buying interest does not strengthen to counter balance the selling pressure, KGT unit price could go lower.

I would be quite happy to collect some units at $1.00 which would give a yield of 7.82% to begin with.

K-Green Trust rated hold
Monday, 28 June 2010

© 2010 - The Edge Singapore