First REIT: Bumper distribution 3Q 2011.

Ex-rights, with a pro forma DPU of 6.4c for 2011, I estimated First REIT's fair value to be at 80c per unit many moons ago. This was based on an expectation that 8% distribution yield was fair for the REIT. With the latest announcement of a DPU of 1.92c for 3Q 2011, is the estimated fair value of 80c outdated and probably too low?

I still hold the units I bought during the last bear market at 42c per unit as well as the rights units at 50c per unit. I also bought quite a number of nil-paid rights at 16c per unit and the final cost on those units is 66c per unit. In the recent market weakness, I bought more units at 73c, 74.5c and 76c. These, I partially divested as price tested resistance. On cost, the distribution yields on my current positions in the REIT are between 8.8% to 16%.

First REIT's unit price ended the last session at 79.5c. NAV/unit stands at 77.88c. So, the REIT is trading above NAV now. This could change in future even if the REIT's unit price stays at the current level as the management is in the early stages of talks with its sponsor for more acquisitions. With gearing level at 16.4%, the REIT has a very comfortable debt headroom. Another round of equity fund raising is, of course, possible but there is less necessity for one in the near future.

With news of higher DPU for 3Q 2011, could we see unit price testing and probably even breaking the psychological resistance at 80c in the new trading week? We could, of course.

Am I going to increase my investment in the REIT at current prices? I won't. Why?

The DPU of 1.92c for 3Q2011 includes 0.34c which is a special non-recurring distribution. This is from divestment gains of the REIT's Adam Road property. If we remove 0.34c, the DPU is 1.58c which is more in line with expectations. 0.34c is just a bonus.

So, although some want to increase their investment in the REIT tomorrow, I won't.

XD: 28 October.
Payable on 29 Nov.

Maintaining my current investment in the REIT, I am very pleased with the bumper distribution and look forward to its payment on 29 Nov.

Read announcement here.

Related post:
First REIT: XR and fair value.

Tea with AK71: Breakfast at Long John Silver's.

I think breakfast at Long John Silver's compared to McDonald's offers better value for money.

Thick slices of toast with turkey bacon, eggs and cheese. Yummy! I am not crazy about the hash brown though.

Iced Milo! Slurp!

Price: $5.10 with tea or coffee. Add 50c to upgrade to an iced Milo. :)

From their website:

Caution: Waiting time can be quite long if they are busy. I would usually avoid if I see long queues or many tables with a number standee which means diners are waiting for their meals to be sent to them. In terms of efficiency, McDonald's still takes the top spot.