Over the weekend, a friend asked me if I would be interested in Ascendas Hospitality Trust although he knew that I am generally not interested in IPOs. He was just asking for my thoughts on the Trust.
Ariake Sunroute Hotel, Japan. |
Ascendas Hospitality Trust (A-HTrust) will be offering 437.33 million stapled securities at 88 cents each for mainboard listing in its initial public offer (IPO) in Singapore.
(Source: The Business Times, 18 July 2012)
What are stapled securities?
Stapling simply means that two different securities are "stapled" together for the purposes of trading or transfers. Stapled security could comprise two or more of the same or legally different instruments, for example, a share in a company and a unit in a trust.
The trust(s) and the company(ies) can hold assets and operate businesses, but active business, such as asset management and development are typically conducted by the company while passive investments in property or funds are undertaken by the trust. In practice, the trust and the company effectively operate as one entity although the company continues to be a separate legal entity from the trust.
Source: http://www.invested.hk/invested/en/html/section/index.html
For example:
CDL Hospitality Trusts is a stapled group comprising CDL Hospitality Real Estate Investment Trust ("H-REIT"), a real estate investment trust, and CDL Hospitality Business Trust ("HBT"), a business trust.
Well, what do I think of Ascendas Hospitality Trust? I won't do a thorough analysis of the Trust because I don't really have the inclination although I will share why I am not interested in it (now).
ibis Beijing Sanyuan Hotel. |
Initially, the Trust will hold 10 hotels in its portfolio. These hotels are in the countries of China, Australia and Japan with Australia contributing to some three quarters of its income. The Trust also projects an 8% distribution yield in the year 2014.
I feel that I need to be conversant in the economies of three countries and the health of their respective tourism sectors to analyse how well they could continue doing. I would also need to take into consideration that income would be collected in three foreign currencies and converted to S$ for distribution to unitholders. Foreign exchange rates would affect income in S$ terms.
So, analysing this Trust and forecasting its future income is somewhat more challenging. It is less straightforward.
Then, what about my investment in Saizen REIT? Isn't that Japanese?
I won't say that I am conversant with the Japanese economy or its housing sector but I am a bit better informed in the area. Also, it is one country, not three and I only have to look at a pair of currencies, not three.
Saizen REIT is also holding residential properties, not hotels. Demand for housing is more inelastic compared to demand for hotels and with the type of properties Saizen REIT owns, there is lesser correlation with the ups and downs of the economy. Demand for hotels, however, is very different.
Ascendas Hospitality Trust is going to demand a lot of time and effort from me if I were to be become a unitholder. An eventual 8% distribution yield? I will need a higher distribution yield to entice me into this one in view of the work I have to do.