4X your money with MUST! Curious AK takes another look.

For readers who prefer reading to watching videos, this is the transcript of a video I produced recently.

From time to time, I come across videos which claims to 10x your money.

Usually, they are pretty speculative at best, and in most cases, they are simply scams.

However, sometimes, we could get a gem or two.

Although keeping an open mind is a good idea generally, but it is only a good idea if we do not give up our own thinking process at the same time.

We want to stay critical and not outsource the thinking process.

Bloggers, Youtubers and even experts at research houses are as human as you and me.

Anyway, you did not come here to get lectured by AK.

You want to know what is this four-bagger investment?

Don't need to skip to the end of the video because you will know in a few seconds.

I have produced several videos and published a number of blogs on US commercial properties real estate investment trusts.

My view has been to avoid the entire sector as there is too much going on which could sink the ship.

Some might wonder if we could find a gem or two with blood in the streets.

This is all good and well in less treacherous circumstances.

However, what the sector is facing could be a tsunami of blood, and this could turn deadly even for those who are in the streets looking for gems.

In a report from CIMB research house, they said that they have a target price of 55 cents a unit for Manulife US REIT.

That was an eye-popping target price as Manulife US REIT trades at 14 cents a unit now.

If CIMB is right in their projection, then, Manulife US REIT is a four-bagger stock in the making.

Anyone wants to take a chance?

In their latest results, the real estate investment trust reported a lower occupancy of 86%. Businesses which are renewing their leases are downsizing or right-sizing.

Physical occupancy which is a more important measure and a forward indicator of things to come is only at a bit more than 30%.

This means that almost 70% of their buildings are not occupied although they are leased out at the moment.

To me, what is the biggest issue with Manulife US REIT is the gearing ratio of 49.5%.

The manager was growing the real estate investment trust in what I would say was an irresponsibly aggressive way.

Of course, they still got paid their fees.

Now, without borrowing another single dime, that gearing ratio could breach 50% as their assets could see valuations decline.

This is why I keep emphasizing that we want to invest in entities with strong balance sheets. 

This is especially when we have a treacherous mix of weaker economic outlook and much higher interest rates.

Manulife US REIT still has almost 20% of leases expiring by end of next year, with about half of the expiries happening for the rest of this year.

I don't know how CIMB researchers came up with a target price of 55 cents a unit for the real estate investment trust.

I say this because it is most likely that Manulife US REIT would have to do fundraising and with gearing nearly at 50%, the only option is an equity fund raising exercise.

With their current depressed unit price, it would probably have to be a very dilutive private placement plus preferential offer.

So, investors have to be prepared to cough up more money.

This makes a target price of 55 cents simply untenable.

I get the feeling that the manager of the real estate investment trust is looking a Mirae as a lifeboat now. 

And other investors might want to do the same and look for their own lifeboats.

Like I said in my blogs and videos on Eagle Hospitality Trust, insiders can sell for many reasons. 

However, when insiders decide to bail out when things are looking bad, it is probably because things are really in a bad shape.

Of course, we can choose to take a bet that things could turn out well but with so many pieces of the jigsaw puzzle in place, we can tell that the odds are not very good.

Fortune favors the brave as Matt Damon said in his ad.

What about AK?

AK is not brave and has no fortune.

AK talks to himself.

No one cares more about our money than we do.

Don't ask barbers if we need a haircut.

We don't have to make back our money the same way we lost it.

Don't throw good money after the bad.

If AK can talk to himself, so can you!

虎口拔牙.

That one, AK dare not do. 

You dare to do?

Reference:
1. Buying US office REITs in 2023.
2. Fortnight of banking crisis. Lessons.

$1.60 target price for AA REIT. Really? Why so good?

I make investment decisions based on my own analyses.

However, as a retail investor, I am cognizant of the fact that my analyses are usually incomplete.

I have compared the exercise to a game of jigsaw puzzle.

As long as I have the crucial pieces of the jigsaw puzzle in place, I should be able to make a decision.

I have been blogging and making videos about AIMS APAC real estate investment trust.

It has been one of my better investments for income which has also appreciated in value over the years.

Unlike some other investments which gave me worries from time to time, and a few investments even gave me near heart attacks, AIMS APAC REIT has given me peace of mind.

(Before I go on, if your eyes are feeling tired and you would rather listen to AK talking to himself, you can listen to the video which I have embedded below instead.)

When I remember that I have been invested in the real estate investment trust since the Global Financial Crisis, that is a very long track record.

AIMS APAC REIT has paid me consistently, through good times and bad times.

Still, there could be things I don't know about the real estate investment trust.

So, when I chance upon analyses done by experts, I would read them to see if I might find some missing pieces of the jigsaw puzzle.

Even opinion pieces can be interesting.

In a report dated 8 May, DBS research published a higher target price of $1.60 per unit for AIMS APAC REIT.

The target price is quite a bit higher than what AIMS APAC REIT is trading at.

Apparently, the researcher at DBS was surprised that the real estate investment trust delivered a better performance than what they were forecasting.

The very strong positive rental reversions of 18.5% and record high portfolio occupancy of 98% were the reasons given for why the real estate investment trust outperformed the researcher's expectations by as much as 15%.

It doesn't stop there.

DBS research house thinks there could be more upside because of two reasons.

1. Weighted average lease expiry or WALE of 1.4 years for the logistics and warehouse segment is the shortest in AIMS APAC REIT's portfolio.

Usually, we want a longer WALE for stability.

However, as the passing rent of $1.22 per square foot for this segment is below the current market rate of $1.40 to $1.80 per square foot, the shorter WALE is a positive for AIMS APAC REIT.

We can expect the strong rental reversions for logistics facilities to continue.

2. AIMS APAC REIT plans on growing organically through more Asset Enhancement Initiatives and redevelopment opportunities.

I have been blogging about the potential for AIMS APAC REIT to maximize land use of many assets in their portfolio which have underutilized plot ratios.

So, this is not something I didn't already know.

Anyway, the higher target price by DBS took into account not only past performance but also expected future performance.

As for the possible downside, AIMS APAC REIT has a high proportion of loans or around 88% hedged to fixed rate.

They also do not have any refinancing requirement until November 2024 when a $100 million MTN will be due.

Will AIMS APAC REIT trade at $1.60 a unit in the future?

It is definitely possible as it has done so in the past and it could do so again.

However, that's not how I would approach the real estate investment trust as a possible investment.

Why not?

I am mostly an investor for income and I care more about whether I will be receiving regular meaningful income from an investment.

If the market price of that investment should go up, it is a bonus.

If it doesn't go up, as long as it keeps generating income from me and doesn't make me worry, I am happy enough to stay invested.

If AK can do it, so can you!

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Reference:
Why AA REIT?