AIMS APAC REIT to buy Woolworths' HQ.

It is confirmed. 

AIMS APAC REIT is going to buy Woolworths' HQ in Sydney. 

The price tag? 

Around S$454 million. 

This is going to increase the REIT's portfolio value by more than 26%.


As a long time investor of AIMS APAC REIT, I like the purchase for the following reasons: 

1. The asset will increase the number of freehold assets held by the REIT. 

2. The purchase will increase income visibility as there is a 10 years lease to Woolworths with annual rental escalation of 2.75%. 

3. There is room to build more rentable space as the asset's plot ratio has yet to be maxed out which will allow for more organic growth in the future (and this is probably a big push for the REIT to make the purchase if we look at their commendable record in maxing out plot ratios of some of their assets in Singapore.) 

4. The purchase is likely to be DPU accretive because it is going to be 60% financed by debt (which is likely to be competitively priced given the current low interest rate environment) and net proceeds raised from the recent S$250 million in perpetual bond issue will also be utilized.


A question on many unit holders' minds is probably will there be a rights issue? 

The REIT manager has said that they could issue new equity. 

Personally, I think that it is a forgone conclusion because when we compare the price tag of S$454 million and what we know in point number 4 above, there is a shortfall of some tens of millions of dollars. 

Equity issuance could take the form of private share placements or a rights issue, of course.


As a long time unit holder, I hope that any equity fund raising is going to be a rights issue. 

This is so that I can increase my investment in the REIT probably at a discounted price. 

After all, I never get invited to take part in private placements. 

I suppose I will just have to wait and see. 

Woolworths’ Full Year Result 26 Aug 21: Woolworths’ earnings led higher by Australian Food business.


References: 

1. AIMS APAC REIT and perpetuals. 

2. AA REIT: A private tour.

REITs and rights issues: Good at the right price.

Reader:
Can I ask u a question regarding to recently cache log have issue a right maybe know is it this right can be convert able into share when expired?

AK:
Once they have expired, rights are worthless.





Reader:
Alamak
Did u know when is expired date? Pls
And How do I sell off

AK:
It has already expired.

Reader:
Alamak like that mean nothing can I do with it?

AK:
I blogged about this. I even posted a reminder on my FB wall. 😉
All instructions and closing date in the package sent out by the CDP too.




Please be very careful and take note of all the dates when there are rights issues.

Exercise your rights to avoid dilution and, possibly, a big decline in distribution yield before the closing date.

How did Cache Logistics Trust's rights issue turn out for me?

I took up my entitlement and also subscribed for excess rights, receiving 40% more rights units than my entitlement as a result.




All investments are good at the right price and because heavily discounted rights units give the highest yields, unless it is a basket case, applying for as many excess rights as I can afford to makes sense to me.

Read this blog from earlier today?
Is AK the investor right 6x out of 10x?

Related posts:
1. Nil-paid rights and excess rights. 
2. Cache Logistics Trust 18 for 100 rights issue.

Frasers Hospitality Trust (FHT).

Reader:
Frasers Hospitality Trust. I like this and invested in it last year and applied for excess rights.

I find FHT attractive because mostly freehold and spread across many countries. Yield is 7%+. Plus strong sponsor and brand name.

I am not good in analysing. Hope you will talk to yourself. :)


AK:
I don't like it when a REIT purchases properties and DPU goes down.

And the rights issue was in part to strengthen balance sheet which did nothing to improve DPU.

"The issue would also reduce FHT's debt levels and strengthen its balance sheet."
http://www.straitstimes.com/business/companies-markets/frasers-hospitality-trust-to-raise-266m-in-rights-issue

I don't like it when total distributable income goes up but DPU goes down.

"Distribution income for the quarter was up 3.1 per cent year-on-year... DPS in the three months as at end December 2016 was down 18.9 per cent year-on-year..."
http://www.businesstimes.com.sg/companies-markets/frasers-hospitality-trusts-dps-down-on-enlarged-stapled-security-base

As a shareholder, I should be very interested in what happens to the DPU. I feel that the shareholders could have been better off without the rights issue.

There are probably things to consider beyond that but my plate is full. ;)

Related post:
REITs and rights issue. 

Sino Grandness and rights issue.

Reader:
Just checking can you comment on SINO GRANDNESS rights issue?
Is it worth subscribing to the rights?
Thanks

AK:
Always ask what is the reason for issuing rights. It seems like they have trouble repaying debt and, hence, the rights issue. If so, the rights issue does not add value for investors.
Subscribe if you believe that the company is able to do much better in future.

Reader:
ok thanks for the advise.

AK:
If you are putting in more money but the performance declines, it is a bad deal.

Reader:
yeah



Remember, not all rights issues are created equal. Some will enrich investors and some will impoverish them. 

In general, I do not like rights issues which happen because the balance sheet needs strengthening. They weaken our own balance sheet and do nothing to improve our cash flow.

Related post:
A lesson on rights issue from 2011.

Ascott REIT's mega discounted rights issue.

Hi AK

With the recent rights issue of Ascott reit, i read that the DPU and NAV per unit will most likely drop after this event.

Can you share your thoughts about this(the reason for this rights issue)?

Declining DPU. Source: HERE.

Hi AY,
I don't like Ascott Residence Trust. I don't have this.
They are always raising funds but I don't see performance improving.
If you want to read more about rights issue, here are some of my blogs you might be interested in:
1. http://singaporeanstocksinvestor.blogspot.sg/2011/10/reits-and-rights-issues-dilutive-or-not.html
2. http://singaporeanstocksinvestor.blogspot.sg/2010/09/reits-simply-explained.html
3. http://singaporeanstocksinvestor.blogspot.sg/2011/11/reits-and-rights-issues-singaporean.html

I feel that unit holders would have been better off without the acquisitions and the mega rights issue.

Reference:
"Ascott Reit unit holders will have the option of purchasing up to 481.7 million rights units at a ratio of 29 rights units for every 100 units they own. The rights units will be issued at 91.9 cents - a 21.5 per cent discount to the closing price of $1.17 per unit on Monday. Ascott Reit expects yields of up to 4.5 per cent for the acquisition of AOS and 5.4 per cent for the German properties." Source: The Straits Times, 8 March 2017.

AIMS AMP Capital Industrial REIT: Making money.

The issue of how REITs must constantly raise funds in order to expand has been beaten to death and I have also blogged about it more than once. The debate can and probably will go on forever but, as far as I am concerned, it has little value and serves to distract us from what really matters.

If REITs are raising funds for activities that are yield accretive, I would readily support the exercise and would, in fact, try to subscribe for more than my entitlement of rights if the offer is very attractive. Bearing this in mind, I have been able to profit from rights issues. To me, as an investor, I want to make money and if I could profit from rights issues, I would.

To this end, one of the rights issues which I have made the most money out of was AIMS AMP Capital Industrial REIT's. The rights were priced at 15.5c per unit. I applied for many excess rights and received quite a large number of rights units in that exercise. Post consolidation, these rights units cost 77.5c per unit. At today's price of, say, $1.22 per unit, there is a capital gain of about 57.5%. From then till now, I have also enjoyed an annual distribution yield (on cost) of some 13% on these units.

Of course, there are some who would point out that the units I was holding on to, pre-rights issue, suffered some dilution and loss in value. The suggestion is that Mr. Market would recognise this and that it could be reflected in the unit price. Well, at today's price of $1.22 a unit, it would translate into a pre-consolidation price of 24.4c per unit. I don't remember ever paying as much as 24c a unit, pre-consolidation, for AIMS AMP Capital Industrial REIT. There is something to be said about a penchance for buying into REITs which are trading at a (large) discount to their NAVs, perhaps.

Why am I quite suddenly talking about AIMS AMP Capital Industrial REIT and rights issues?

OK, before you go clicking on SGX looking for announcements, no, they are not having a rights issue. Then why?

Well, some people say that I am always using First REIT as an example of how investing in REITs can be very rewarding. So, this is another example to the same effect, isn't it?

It is also a more powerful example since there were many who cursed George Wang et al. from the days when it was known as MI-REIT and in need of recapitalisation, declaring that the REIT would never amount to much after the rescue.

(Pause...)

29 Woodlands Industrial Park E1.

OK, if you have guessed that this is not the real reason behind this blog post, hurrah! You guessed correctly.

I try to be forward looking and care more about the future than I do about the past. Caring more about the past could become an obsession as I grow older though. I hope it would not happen although I am sure it is only a matter of time. I see enough examples of how it is happening to older people all the time.

The catalyst for this blog post is the annual report from AIMS AMP Capital Industrial REIT which I was flipping through over the weekend. Specifically, it has to do with the fact that quite a number of properties in the REIT's portfolio have re-development potential.

As we have seen in the current redevelopment of 20 Gul Way which is to be completed in two phases (phase 1 by November 2012 and phase 2 by December 2013), redevelopment is a very good way of delivering more value to unitholders.

The redevelopment of 20 Gul Way did not require any rights issue although there was a private placement to CWT Limited (and regular readers know that I would very much prefer rights issue but the private placement was rather small and a rights issue would have been rather costly.)

10 Soon Lee Road

Well, there are a few more properties in the REIT's portfolio which could be considered for re-development to take advantage of the maximum plot ratios allowed. Examples are:

10 Changi South Lane (Lease expiry: June 2056)
Current plot ratio: 1.60
Maximum plot ratio: 2.50

541 Yishun Industrial Park A (Lease expiry: June 2054)
Current plot ratio: 1.28
Maximum plot ratio: 2.50

2 Ang Mo Kio Street 65 (Lease expiry: March 2047)
Current plot ratio: 1.31
Maximum plot ratio: 2.50

103 Defu Lane 10 (Lease expiry: June 2043)
Current plot ratio: 1.20
Maximum plot ratio: 2.50

8 Senoko South Road (Lease expiry: October 2054)
Current plot ratio: 1.30
Maximum plot ratio: 2.50

10 Soon Lee Road (Lease expiry: March 2041)
Current plot ratio: 0.88
Maximum plot ratio: 2.50

With gearing level at 30% or so, I would not be surprised if a major rights issue is required if there should be plans to redevelop these sites. In fact, I expect it to take place. When will it take place? Ah, that one, I don't know.

If you think that I am quite excited with the prospect of another rights issue, you are right (pun unintended). I am pretty sure I am not the only one too.

Related posts:
1. REITs and rights issues: Dilutive or not?
2. REITs and rights issues: A Singaporean tale.
3. AIMS AMP Capital Industrial REIT: Accumulate on weakness.

My very first blog post on AIMS AMP Capital Industrial REIT in December 2009:
AIMS AMP Capital Industrial REIT (MI-REIT).

First REIT: Excess rights allotment.

On 29 Dec, I blogged about how First REIT's rights issue was a resounding success.  From the comments and emails so far, it seems that First REIT favours smaller investors for this rights issue.

See comments in the blog post here.

I have arrived at the following hypothesis based on the data collected so far:

1.  Entitled rights: 5,000 to 8,750,
excess rights allotted: 1,000.

2.  Entitled rights: 10,000 to 38,750,
excess rights allotted: 2,000.

3.  Entitled rights: 40,000 to 98,750,
excess rights allotted: 3,000.

4.  Entitled rights: 100,000 to ???,???,
excess rights allotted: 4,000.

I don't have data for entitled rights below 5,000 and beyond 100,000.

Of course, holders of odd lots would have the advantage of rounding up odd lots, be it 250, 500 or 750 units. These would add to the excess rights allotted.

I welcome more comments and feedback on whether my hypothesis is correct. Congratulations to fellow First REIT unitholders successful in getting excess rights.

SINGAPORE : Singapore's healthcare real estate investment trust First REIT on Friday said it has completed the acquisition of two Jakarta hospitals.

The two new Indonesian healthcare properties include the Mochtar Riady Comprehensive Cancer Centre as well as Siloam Hospitals Lippo Cikarang, a six-storey hospital that began operations in 2002.

With these acquisitions, First REIT said it has crossed a significant milestone as its assets under management have almost doubled to S$612.8 million as at December 31.

The trust's manager revealed that it aims to achieve a portfolio size of S$1 billion in two to three years...

...Meanwhile, the manager of First REIT revealed that based on projection year 2011, the trust's gearing level will stand at about 17 per cent, which is significantly lower than the regulatory limit of 35 per cent.

The manager of the trust added that this will provide it with sufficient headroom for future accretive acquisitions, and it will continue to look out for other healthcare-related assets in Asia to further raise its asset base. 

Complete article here.

First REIT: Excess rights not enough.

First REIT's rights issue is a resounding success. Valid acceptances at 97.7% which means there are not many excess rights to go around. Of the 7,790,838 rights which were not validly accepted, rounding up of odd lots would have priority. Seeing how there are 88,002,026 excess rights applied for, chances are most of the funds would be refunded to those who applied for excess rights. This includes me.

Rights units would be issued on 30 Dec and will start trading on SGX Main Board on 31 Dec.

Read announcement here.

I believe that there is some fear that First REIT could see a fall in price when the rights units start trading as people cash in their excess rights for a 40% capital gain. Personally, I do not think that very probable. If priority is given to people who need to round up odd lots, how much excess rights would they be able to sell to realise this gain? With such an overwhelming number of excess rights applied for, each unit holder who did apply for excess rights could end up with one or just a few lots of excess rights.

Personally, if I were successful in getting any excess rights at all, I would hold on to them for an estimated yield of 12.8% (6.4c/50c). I would also hold on because I believe the fair value to be closer to 80c (for an 8% yield). I won't be in a hurry to sell.

Having said this, Mr. Market is unpredictable mostly. Price is currently at support provided by the 20d and 50d MAs at 70.5c. In case of a pull back, expect support at 69c, as provided by the rising 100dMA.

First REIT's management also announced that its existing portfolio has been revalued at $355.5 million, an increase of $14.6 million from the end of 2009. This means that NAV for the REIT is now higher by some 4.3% and this would also lower its gearing level a bit. Good news.

Related post:
First REIT: XR and fair value.

First REIT: Rights issue.

For a while now, there has been expectation of First REIT doing some acquisitions and in the process would have the need to raise funds. First REIT's management announced on 9 Nov 10 a 5 for 4 rights issue at 50c per unit.

The Mochtar Riady Comprehensive Cancer Centre (“MRCCC”) is being acquired from Wincatch Limited, an unrelated third party, for S$170.5 million, and Siloam Hospitals Lippo Cikarang (“SHLC”) is being acquired from the sponsor of First REIT, PT Lippo Karawaci Tbk, for S$35.0 million.Read announcement here.

Including fees and expenses, MRCCC would cost S$174.6m while SHLC would cost S$35.9m.  Total acquisition cost: S$210.5m. The rights issue would raise gross proceeds of $178.2m. First REIT would take a 4 year term loan facility of S$50m from OCBC to make up the balance.

The rights issue would more than double the number of units in issue to 624,104,000 units. So, although the NAV increases to S$474,200,000, post rights, NAV per unit would decline from 98c to 76c. Gearing level is largely unchanged and remains low as much of the funds required for the acquisitions is obtained through equity and not debt.

Of greater interest to unitholders is the distributable income which would increase 84% post acquisitions from S$20,964,000 to S$38,542,000. The annualised DPU would, however, reduce from 7.62c to 6.18c due to the larger number of units in issue. So, is this rights issue a good deal for existing unitholders? To answer this question, look to distribution yield.

The theoretical ex-rights price (TERP) is calculated to be 70c based on a CR price of 95c.  At 95c, the yield, with an annualised DPU of 7.62c is 8.02%.  At the TERP of 70c and an expected annualised DPU of 6.18c, XR, the yield is 8.83%. So, this acquisition is distribution yield accretive and is good for current unitholders.

Unitholders have the option to sell their nil-paid rights when trading starts if they do not wish to pay for them. Based on the exercise price of 50c and the TERP of 70c, we could see the selling of the nil-paid rights at 20c or so. This could be viewed as a return of capital.

Assuming that a unitholder has 4 lots in First REIT and is entitled 5 lots of rights. By selling the nil-paid rights at 20c per unit, he would get $1,000. This is the difference between the CR price of 95c and the TERP of 70c (i.e. 25c x 4,000). There is no capital gain per se. However, the distribution yield on his existing investment will actually improve from 8.02% to 8.83% without him having to cough up more funds. So, am I saying that we should sell the rights? Well, if we do not have enough funds to pay for the rights, this is not a bad idea.

Personally, I would pay for the rights. This is because the distribution yield would improve 10% from 8.02% to 8.83% with the acquisitions and rights issue. So, the additional funds I am putting in would enjoy a most attractive yield.

Furthermore, from the recent experience with the rights issue of AIMS AMP Capital Industrial REIT in which the TERP was 21c, the XR unit price ended higher and it is currently trading at 22.5c. So, with First REIT, we could see the XR price higher than the TERP of 70c. How much higher? Based on the assumption that units should trade closer to 8.02% yield, the CR yield at 95c, we could see First REIT's unit price going 10% higher to 77c, XR. Accepting and paying for the rights could, therefore, lead to capital gains.

Good luck to fellow unitholders.

See slides here.

Related post:
First REIT: This one is for keeps.

AIMS AMP Capital Industrial REIT: Excess rights.

A friend who applied for 2,500 excess rights was given 100% of his application.

Another friend who applied for 365,000 excess rights was given 39,000 rights or 10.7% of his application.

A reader, SnOOpy88, commented this morning:
"Results are out in CDP A/C.
I got only 17% of excess over my rights. Good start for me.
Wonder what will be the pricing direction now, given that some of us had got shares at $0.155 ?
Huat ah..."

SnOOpy88 did not mention how many excess rights did he apply for.

From my friends' experience, it seems that the less excess rights we applied for, the larger the percentage of our application would be successful. I wonder how many excess rights I would be alloted.  I would know this evening when I open the mailbox, I guess. ;)

Congratulations to fellow unitholders who are successful in getting some excess rights.  Each lot of excess rights secured is equivalent to an immediate gain of S$65.00 based on the current market price of 22c per unit. That's a 42% gain! In the money! :-)

Related post:
AIMS AMP Capital Industrial REIT: Results of rights issue.

AIMS AMP Capital Industrial REIT: Results of rights issue.

Valid acceptances:
506,083,252 units (98.6 % of Rights Issue).

Excess applications:
163,926,201 units (31.9 % of Rights Issue).

"The balance of 7,226,529 Rights Units which were not validly accepted, will be allotted to satisfy excess applications. In such allotment, preference will be given to the rounding of odd lots (if any) while directors of the Manager (the “Directors”) and Substantial Unitholders1 will rank last in priority.

"Successful subscribers with The Central Depository (Pte) Limited (“CDP”, and the securities accounts with the CDP, the “Securities Accounts”), will be sent, on or about 15 October 2010, a notification letter from CDP stating the number of Rights Units that have been credited to their respective Securities Accounts."  

Read announcement here.

It seems that people who applied for massive numbers of excess rights would be disappointed, myself included.

Related post:
AIMS AMP Capital Industrial REIT: Rights issue.

Jade Technologies: Rights issue.

A friend asked me what do I think of Jade Technologies Holdings Ltd.  Apparently, it is issuing rights and my friend would like to have my take on this.  Frankly, apart from a faint impression that this company was involved in some scandal in the past, I do not know what it does.  So, I dug around for details.

It seems that the company is now investing in the production of titanium dioxide in China.  It has a substantial stake in Daqing XinLong Chemical Company Ltd, a titanium dioxide producer in China. The decision to move in this new direction has transformed Jade from a loss making company to a profitable one as it reported a profit of S$1.6m in its 3QFY2010 (ending June 2010) after experiencing losses in the first two quarters (and indeed for the last 9 years).  It would be interesting to see if it continues to be profitable by end of FY2010 (September 2010).  By all indications, it seems that it would be so.  See slides here.


As a result of its return to profitability, Jade’s Earnings Per Share (EPS) is now 0.02 cents for 3QFY2010, reversing from a loss of 0.10 cents in 3QFY2009. The Group’s Net Asset Value (NAV) per share also improved from 0.31 cents to 0.67 cents over the same corresponding period. Read announcement here.

Jade is currently trading at 1.5c. With a NAV of 0.67c, it is trading at more than twice its NAV. Assuming that its 4Q could turn in similar results as its 3Q (i.e. a net profit of S$1.6 million), it would mean a full year profit of >$2m.  Assuming that in FY2011, the company is able to replicate $1.6 million in profit every quarter, it would have a full year net profit of S$6.4m.  Based on approximately 2.461 billion shares in issue, it has a market capitalisation of S$36.9 million (at a share price of 1.5c) and we would have a forecast PE ratio of 5.77x.

What about the rights issue? The company is proposing 3 rights for every 4 shares owned.  For every 3 rights accepted and paid for, 1 warrant would be given free.  Price of rights at 1c each.  Warrants must be exercised within 2 years at a price of 0.3c each.  This effectively means that the number of shares in issue will double in the near future.  This means a halving of EPS and a doubling of the PE ratio, ceteris paribus.

Rationale of this exercise: The Company is currently exploring certain business expansion opportunities but none of these plans has progressed to a stage where they may be announced. The Company proposes to undertake the Rights Shares and Warrants Issue to raise funds and to strengthen the capital base of the Company for its expansion aspirations.  Read announcement here.

Anyone who is investing in this company and subscribing to the rights must be a firm believer that it could double (in order to keep its PE at the forecast FY2011 level), triple or quadruple its earnings (post rights and warrants) in the near future.

Nil-paid rights and excess rights: Some numbers by LP.

LP, blog master of Bully the Bear, and owner of the infamous cbox therein, has this to share:

I think that people don't understand that the price of the nil-paid rights (right shares that are entitled to you based on your holdings upon XR of the mother share) is priced as this:

Price of mother share - 0.155

If it's lower than the above formula, it opens a chance to arbitrage the difference by buying the nil paid rights or shorting the mother share. Either way, equilibrium will be achieved to bring the price of the nil-paid rights back to the stated formula.

So, if the mother share is trading at 0.225, the nil-paid rights will be priced at 0.07. You pay 0.07 PLUS brokerage to get the nil-paid rights, then you pay at the atm 0.155, so the price will be 0.225 excluding brokerage.

Or on the other hand, if you can buy the nil-paid rights at 5 to 6 cts, you are buying the mother share at 0.205 to 0.215. Good deal to me even if you have to pay brokerage!

If you don't want to do this during the nil paid rights trading period, you can always opt NOT to pay any brokerage and paying 0.155 to apply for excess rights. But you might not get it.