Eu Yan Sang: Weight management package.

Ads on slimming pills and courses are plenty. I am always sceptical about them especially when they are not cheap to begin with. However, if they are offered to me free of charge, I wouldn't mind trying. Free. Why not?

Now, Eu Yan Sang is also into the business of slimming! Yes, I didn't believe it myself but it is apparently true.

A Nuffnanger lost some 5.2kg and 10cm around the waist with the help of a physician from Eu Yan Sang!

Anyway, Eu Yan Sang is giving away 2 weight management packages worth more than $2,000 each. So, if you are interested, enter the contest and you might just be a winner:
http://sg.sharings.cc/AK71SG/share/1EYS2013

Saizen REIT: Refinancing expenses reduced net income.

Saizen REIT reported a 70.5% decline in quarterly net income from operations. What investors in Saizen REIT should be concerned with is the permanence of the decline.

Saizen REIT saw a 2% increase in gross revenue, quarter on quarter, but a 15% increase in operating expenses and this led to NPI reducing 3.3%. If the higher operating expenses are the new norm, then, expecting a marginal decline in future DPU makes sense.

The biggest blow comes from "other operating expenses". This saw a 7.5x increase. This was what led to such a big decline in quarterly income from operations. However, remember that this is a one off event.

Basically, Saizen REIT terminated certain loans to refinance under better terms and to extend maturities. Although with the early terminations came hefty costs, bearing in mind that these are one time costs, the REIT has emerged stronger from the refinancing efforts. Why?

1. The cost of refinancing will be recovered in less than two years from interest savings achieved from new lower interest bearing loans.

2. The higher loan to value ratios of the new loans lead to more possibilities in debt funded acquisitions which will up income and, most probably, DPU too.

3. The earliest maturity date of Saizen REIT's loans is now in February 2018.

The pain that comes from such a large decline in quarterly net income from operations will pass because the costs that come from refinancing are a one off event. However, the benefits of the mentioned refinancing are longer lasting and will benefit anyone investing in Saizen REIT for income, all else remaining equal.

A pertinent question would be how the weaker Japanese Yen is going to impact valuation in S$ terms. NAV/unit of JPY18.69 means 22.86c in S$ terms today. So, the REIT is still undervalued, trading at under 20c per unit. However, this is less so than a year ago.

In the absence of yield accretive acquisitions and further improvement in occupancy which has improved to 92.2% on average, it is reasonable to expect DPU to be affected negatively. However, I sense more acquisitions in future and with higher average occupancy too.

Investing in Saizen REIT is buying into a conservatively leveraged play on Japanese residential real estate and a conviction that the Japanese economy will see better days ahead. With the JPY much weaker than the S$ these days, anyone investing for income should temper their expectations in terms of DPU in S$ terms.

See Saizen REIT's 3Q 2013 results: here.

Related post:
Saizen REIT: DPU 0.66c.