First REIT: 2Q 2012 DPU unchanged.

First REIT has delivered another quarterly DPU of 1.93c, unchanged from the last quarter. However, the quarterly DPU of 1.93c would not be repeated as it includes the final payment from the gain from selling of its Adam Road property. This is why I have cautioned more than once that we should use a more conservative quarterly DPU estimate of 1.6c when valuing the REIT.

The REIT goes XD on 30 July 2012 and income distribution is payable to unitholders on 29 August 2012.

NAV/unit: 79.5c
Gearing: 15.9%
Interest cover ratio: 11.8x
Occupancy: 100%

In 2H 2012, the REIT could see marginally higher income once a 5 storey annex is completed in its Lentor Residence later this year. It is also expected to take advantage of its low gearing and acquire more properties from its sponsor, Lippo Karawaci. The REIT has ROFR to several properties in Indonesia in various stages of completion.

Lentor Residence

First REIT's current unit price is definitely on the high side. Mr. Market is not known for patience. So, if the REIT should be tardy in its efforts to improve DPU, we could see its unit price declining over time now that the contribution from the sale of its Adam Road property will cease.

See slides presentation: here.

Related post:
First REIT: 1Q 2012 DPU of 1.93c and a higher fair value?

Ascendas Hospitality Trust: Am I interested?

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.