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.

Hong Kong Disneyland - Grizzly Gulch!

Where to go during the upcoming school holidays?

Disneyland, where magical moments happen every day!

Hong Kong Disneyland is bringing in new exclusive theme lands to add to all the fun!

Grizzly Gulch - Wild wild west!

Grizzly Gulch is an upcoming theme land set to open at Hong Kong Disneyland, this will be a World Exclusive only for Hong Kong, so you won’t be able to find this in any other Disneyland around the world!

Toy Story Land

Remember the familiar phrase “To infinity & Beyond!” from Buzz Lightyear? Now you can experience the magic at The Asia Exclusive Toy Story Land which opened last November!

Bring out the child at heart and set sail to enjoy the new theme rides and just bask in Disneyland’s magic: Hong Kong Disneyland! 

Good deal:
4 Days 3 Nights Hong Kong at less than $400 per person. Find your Hong Kong Long Weekend Getaway at the best price with ZUJI.

Have conviction and make money?

It is impossible to see into the future. People who say that they can are like fortune tellers.

How much are their advice worth? How much would we pay fortune tellers to read our palms?

Whatever decisions we make are based on a whole gamut of factors. Then, we have certain expectations of how things would turn out after making such decisions.

The more thoroughly we could reason our feelings of conviction, the higher our chances of staying the course and, dare I say, that our decisions could deliver on our expectations.

Regular readers would probably get the feeling that for whatever has done well for me, I have been reasonably rigorous in my reasoning for those decisions (e.g. to be invested in industrial S-REITs in the last 3 years).

Every person, I believe, has flaws. I have a whole bagful of flaws. One flaw I have when it comes to investment is that I tend to be more careless when I do not have a feeling of crisis.

To have conviction is good but it has to be well reasoned. If I am unable to reason well my conviction, there shouldn't be any conviction.

Remember, however, that conviction is only part of the equation. Luck plays a big part in whether things turn out the way we expect them to.

I was reading The Business Times (weekend edition) and came across an interview with Isaac Souede, the chairman and CEO of Permal, one of the world's largest hedge funds groups.

He is reasonably bullish on China and is exposed to Asian equity through China, "which is seen as pivotal to Asia's fortune."

"If I'm wrong and China has a hard landing, all of Asia won't grow... Most countries in Asia (except India) are in the glide path of a pro-growth policy... which is very positive for equities. But the harbinger of all that is China...

"If Europe stays on a glide path of zero growth for the next five years, US and China will be fine... As long as Europe doesn't become cataclysmic and create a financial issue, then it can be at least cauterised. Europe is a very long term, trial and error solution. The key is for the US and China not to implode."

His conviction is strong and he has his reasons. However, so many things are not within his control. So, a good dose of luck is needed to deliver on his expectations.

Making money needs more than well reasoned convictions but well reasoned convictions should be part of the money making process.

Related posts:
1. Excuse me, are you an investor?
2. How did AK71 overcome his losses?

Millionaires usually emerge from bear markets richer.

On 9 July, I wrote a piece on how fear of a collapse of the eurozone must be so strong that investors are paying Germany to borrow money from them.

Today, I read in The Business Times that "Millionaires added US stocks more than any other asset in the latest year as average investors fled to bonds, according to a survey by Fidelity Investments."

The survey involved 1,020 households with at least US$1 million in investable assets, excluding retirement savings and property, for the 12 months ended March 2012:

20% bought individual domestic equities.
13% added to the cash positions.
11% bought into ETFs.
10% added to bonds or stock funds.

Average age of respondents: 61 years old.
Average investable assets: US$ 3.05 million per respondent.

"They're probably ahead of the average investor in how they view opportunities," Bob Oros, EVP in Fidelity's wealth services group, said of millionaires. "They're becoming less and less risk averse."

Millionaires' outlook for the future of the economy was the most positive it has been since the annual study started in 2006.

We know that millionaires usually emerge from a bear market even richer than before. Now, do we know why?

Related posts:
1. Borrow money and be paid to do so.
2. Perpetual bonds: Good or bad?
3. Should we be staying invested or in cash?

Sabana REIT: 2Q 2012 DPU 2.27c.

When people asked me whether they should invest in AIMS AMP Capital Industrial REIT or Sabana REIT recently, I asked them what are they after? If they are after a higher yield in the immediate future, Sabana REIT is the obvious choice.

Sabana REIT has declared a DPU of 2.27c, just 0.01c higher than in the last quarter. Annualised, this gives us 9.08c. Buying units of the REIT at $1.00 a piece would give us a distribution yield of 9.08%. Sabana REIT is probably the only one in the S-REIT universe now that is offering a distribution yield in excess of 9%.

Gearing: 34.1%

NAV/unit: $1.04

Interest cover ratio: 5.6x

Occupancy: 98.4% to 100%.
(Total occupancy rate: 99.9%)

Remaining land leases (average): 39.7 years.

The REIT's management should be working on leases expiring in 2013 soon, if they have not started already. Given that 47.4% (down from 49.4% in January 2012) of leases expire in 2013, this is a top priority, in my opinion. Hopefully, we would then see positive rental reversions which would, in turn, improve DPUs.

They have signed a new 10+5 year master lease for 1 Tuas Avenue 4 which would now expire on 31 March 2022. I would like to see more of such effort to reduce lease expiry concentration in 2013 and, to a certain extent, 2015.

In the meantime, the REIT could probably make another two or three acquisitions if it gears up to 40%. This would be the fastest way to improve DPU.

The REIT will go XD on 25 July and its income distribution is payable on 29 August.

See presentation slides: here.

Related post:
Sabana REIT: 1Q 2012 DPU 2.26c.

AIMS AMP Capital Industrial REIT: 1Q FY2013.

DPU is 2.5c, 0.2c lower than in the last quarter. This is within expectation. Some might remember when a reader was elated that the REIT was paying 0.1c more in DPU per quarter culminating in 2.7c in the last quarter, I mentioned that it would probably not be repeated in this quarter.

The REIT will go XD on 31 July and income distribution is payable on 18 September.  With unit price at $1.30 or so, we are looking at a distribution yield of 7.69%, annualising the 2.5c DPU for the quarter (representing 97.7% of its income available for distribution). However, we are likely to see income improving towards year end and the REIT is likely to pay out all of its income available for distribution in Q4. So, the distribution yield for the whole year could be a bit higher, everything else remaining constant.

NAV/unit: S$1.40

Gearing: 29.7%

Interest coverage ratio: 6.0x

Occupancy: 99.1%

Weighted land lease expiry: 41.8 years

Average security deposit: 7.2 months

The management is actively managing the REIT's lease expiry risk and has made good progress since the last quarterly report. If it continues with the positive momentum, we could see more positive rental reversions and this could be DPU accretive.

Of the REIT's total debt of $279.4m, $113.6m is maturing in October 2013. I would like to see the REIT's manager getting this out of the way with a longer 5 years term loan instead of the usual 3 years. Of course, it makes sense to do so as it locks in a lower cost of capital in the current low interest rate environment. It will bolster investor confidence in the REIT.

For anyone investing for income and thinking to continue doing so for another few years at least, the REIT's DPU is likely to increase some 15% by end of 2013. This is very attractive and probably explains why the REIT's unit price has been on a steady climb upwards in recent weeks.

People ask if they should sell now and buy lower at a later date. People also ask me if they should buy now anyway as price could continue to go higher with expectations of a higher DPU in the coming quarters.

Answer:
I would not tell you what to do (surprise, surprise). I would share with you what I am doing: nothing. What investment I have in the REIT now is part of a core portfolio for income. Whatever I bought to trade for capital gains, I have already sold. If the REIT's unit price should weaken significantly, I would buy again. If its unit price should strengthen more significantly as to compress distribution yield by much more, then, I would consider further divestment. Now, I am keeping the status quo.

See presentation slides: here.

Related posts:
1. AIMS AMP Capital Industrial REIT: 4Q FY2012.
2. AIMS AMP Capital Industrial REIT: Making money.

Tea with AK71: Soup Restaurant's S-Card.

Yeah! After weeks of waiting, I have received my S-Card from Soup Restaurant.

Some might remember that before I was a shareholder of Soup Restaurant, I blogged about how I chose to invest in Old Chang Kee instead of Soup Restaurant. That decision has turned out quite well.

Not too long ago, I explained my more recent decision to invest in Soup Restaurant. Well, it remains to be seen if my decision would bear fruit.

In the meantime, I will enjoy a discount off my bills on my periodic visits to Soup Restaurant's outlets. Yummy!

Related posts:
1. Old Chang Kee: Initiated a long position at 26c.
2. Soup Restaurant: Gain of $7.7m.

Win $50 watching TV!

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K-Green Trust: DPU of 3.13c.

I am still holding on to a small investment in K-Green Trust. I will be getting some money for the 5th time in the form of income distribution soon.

The Trust distributes income half yearly and a payout of 3.13c has been declared. Date payable: 16 August 2012.

Mr Thomas Pang, CEO of Keppel Infrastructure Fund Management Pte Ltd, the Trustee-Manager of K-Green Trust, said, "K-Green Trust continues to perform well in this period and remains committed to deliver stable, predictable and reliable distributions to the Unitholders."

Well, stable distributions are nice but what I am more interested is in seeing the Trust gear up to deliver growing distributions to Unitholders.

See announcement: here.

Related post:
1. K-Green Trust: Results for year ended Dec 2010.

Win a new iPad, iPod and $100 Dining Vouchers!

XinWang Hong Kong Café is launching their very own game to thank fans for their love and support over the years.

The puzzle game introduces 10 Signature Dishes to be completed within a certain time limit.

Play the game and you could be a winner!

Play now: XinWang Game.

Help raise funds for the Singapore Eczema Fund.

Do you know of anyone suffering from skin conditions (i.e eczema, psoriasis…) and constantly have to bear with the irritating itch? Or do you know of anyone suffering from joint conditions (i.e. osteo-arthritis, rheumatoid arthritis…), where they constantly feel the pain as they move around?

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Taking OLIVA forte™ promotes cardiovascular wellness and skin health, maintains healthy joint functions and strengthens the immune system.

OLIVA forte™ is raising funds for Singapore Eczema Fund which helps the low income with their eczema treatment. 20% of total sales proceeds from the sale of OLIVA forte™ essence trial pack (30 capsules@ S$25 (40% discount)) will be donated to the eczema fund.

Find out more at: OLIVA forte™.

Fraud: Advice from a fraudster (Updated).

UPDATE:
Two videos on common types of scams and how to avoid being the next victim.


--------------------------------------
Often, we hear the saying that if it sounds too good to be true, it probably is. However, could we be missing out on something good if we simply tell ourselves this each time there is a deal which looks too good to be true?

So, how do we tell if something is a genuinely good deal or if it is a well disguised pit. For sure, it is not easy. Even very savvy people have been victims of con jobs because if a con artist is a professional, he could have almost all the grounds covered. I say "almost" because the most elaborate of con jobs would still have loopholes.

How do we discover loopholes, if any? Who better to learn from than a professional con artist?

I read this in the weekend edition of The Business Times, 30 June - 1 July 2012:

"I am a proven liar. Don't believe anything I say," said Samuel Israel. He is the hedge fund manager convicted of running a US$450million Ponzi scheme who faked his own suicide in 2008 to avoid his prison sentence before turning himself in after a worldwide manhunt.

When asked what can an investor do to avoid being conned, he said, "Seek as much transparency as possible. If they do not understand exactly how a manager is making money, do not invest. If there is a secret process that cannot be explained, run."

Investors are sometimes too busy looking for profits to notice where the truth ends and the deception begins.

Related post:
Fraud: Like taking candy from a baby.

Yongnam: Worried about warrants?

Yongnam has been doing very well in recent years. Its management also shows a commitment in sharing the fruits of its achievements with shareholders as it paid steadily higher dividends in the last four years.

Yongnam's order book remains robust although its Q1 revenue and profit declined due to delays in starting up of a couple of projects. Is this why its share price has been languishing? Does Mr. Market expect Yongnam to underperform from this year on?

Well, to be fair, the broader market has been languishing too. It remains to be seen whether the 3,000 points pyschological resistance on the STI could be overcome.

With Yongnam, I am not so worried about its fundamentals. In fact, I expect the company to win more contracts as regional governments spend more on infrastructure projects. This will generate steady revenue for the company. With increasing contribution from its specialised civil engineering arm, profits are likely to improve at a steady clip.

What could be holding back its share price is its outstanding warrants. Warrants? Yes, the company had a 3 for 10 warrants issue in 2007. 3 for 10 is quite a big proportion. If all the warrants were exercised, we could see a 23% dilution in EPS. Then, its shares would look more expensive.

So, the question is whether Yongnam is able to make use of the funds productively to improve its EPS proportionally or more to negate any dilution concerns. This is something that no amount of foresight would be able to throw light on. So, a cautious Mr. Market is understandable.

Now, I would like to suggest that it is possible that holders of the warrants might not exercise the warrants. Reason? The exercise price is 25c a piece. With Yongnam's share price at 23.5c at the last closing, these holders could be better off allowing the warrants to expire and buying more shares of the company in the open market if they wanted to add to their long positions.

Also, if I remember correctly, the warrants were not free. They were sold at 3c a piece. So, the full price of a warrant turned share is actually 28c for the original warrant holders.

There are rather bullish 12 months target prices for Yongnam's shares by various research houses from 30c or so upwards. Unless Yongnam's share price is able go past 25c a piece, the exercise price of its warrants, I doubt holders would exercise their warrants and worries of dilution would evaporate, therefore.

The warrants expire 14 Dec 2012. That is only five months away. I guess I can only wait and see.

Related posts:
1. Yongnam: 3 new contracts worth $63.8m
2. Yongnam: FY2011 results.

Yongnam: 3 new contracts worth $63.8m.

Yongnam announced that it won 3 new contracts worth $63.8m. This will add to the company's current order book of $469m, making it $532.8m. These new wins are expected to have a positive effect on the company's numbers for 2012. Yongnam is a leader in its field and expectations are for more contract wins in the coming months.

Yongnam's net profit for 1Q 2012 came in lower compared to 1Q 2011 because of delays in projects starting up in 1Q 2012. 2011 was also a very strong year due to completion of higher margin projects. An improvement in 2H 2012 is expected, however. 

"Nonetheless, we continue to win notable projects both in Singapore and overseas. As at March 31, 2012, our order books stood at a healthy S$469 million. We remain cautiously optimistic that the Group will perform reasonably well in FY2012 in view of a strong pipeline of projects that we are bidding for and the two delayed projects ramping up in the second half of the year." Seow Soon Yong, CEO

Gross profit margin: 29.3%
Net gearing: Lower at 0.28x
NAV/share: 24.13c
EPS: 0.91c

If we were to annualise the weaker quarterly EPS of 0.91c, we will get 3.64c. This would give us a PER of 6.45x with a share price of 23.5c.

Read announcement: here.
See 1Q 2012 results: here.

Tea with AK71: Lipton, Twinings, TWG et al.

I think we would not have missed much if we stayed away from the stock market the last few days. So, we might as well take it easy and have a cup of tea once in a while. My usual is a cup of Lipton tea which is inexpensive and quite good, I feel.

I had Twinings before which is supposedly more atas. Is it really?

Then, when a friend from Hong Kong came to visit, he went into this very atas looking tea drinking place, TWG, in ION Orchard. He was looking to buy some TWG tea because they were not available in Hong Kong. He and his wife bought some in Canada and enjoyed it. I looked at the prices and anyone looking at me then might have wondered whether to call an ambulance. Super expensive!

What inspired this blog post? I recently ordered some supplements and was given a packet of very atas looking tea. It is St. Dalfour Classic Breakfast Tea. It is organic tea from Ceylon and blended in St. Dalfour, France. Wah! If it doesn't sound atas to you, you must be drinking more atas tea than this. Please help to educate me.

Note for non-Singlish speakers: The word "atas" in Singlish means "high class".

Borrow money and be paid to do so!

No, there is no typo in the title of this blog post. Yes, you read it correctly!

So, where can we go to borrow some money and be paid to do so? Who are the people lending us money and paying us for it? Maxi-Cash?

Nope, not Maxi-Cash. What I am describing is happening in Germany and, unfortunately, the option is not open to us. So, it would remain a dream.

Hey, day dreaming is actually good for health, you know?

BERLIN: Investors paid to lend Germany money for six months at an auction on Monday, the country's central bank said, as they flocked to the safe haven of Europe's top economy.

The yield or rate on the auction of six-month debt was a record low -0.03 percent, the Bundesbank, which organised the auction, said in a statement.

Source: CNA, 9 July 2012.
Read the full story: here.

In ASSI, we talk of growing our wealth and beating inflation. We also say that if we want to protect our wealth, we have to take risk. So, to find investors parking billions of Euros in bonds with a negative yield is simply mind boggling! For these investors, they cannot even talk about how the interest they receive is not keeping up with inflation. Upon maturity, they would get back a smaller amount! (Keeping my money at home would at least ensure that the nominal value stays the same, wouldn't it? I think I am missing something here.)

Some would argue that these investors are paying the borrower to keep their money safe. Now, I am going to say something which you might find enlightening (or not): Keeping our money safe is not the same as keeping our wealth safe.

Related posts:
1. Grow your wealth and beat inflation.
2. To protect our wealth, we have to take risk.

China Minzhong: Crossroads.

China Minzhong's share price has been forming a base. It is clear that immediate support is now provided by the 20dMA which has stopped declining and is, in fact, gently rising. A rising MFI suggests that there is an underlying and growing demand while the sharply rising OBV suggests that smart money is moving back into the counter as its share price moves sideways with an upward bias.

The MACD, although rising, is still in negative territory. However, this could change soon as it could cross into positive territory next week, everything remaining constant. Could a change in trend take place soon? It looks possible.

The 50dMA is still declining sharply and we should see it crossing the 20dMA in the next week or so. If the share price is able to stay above the 50dMA then, we could see much more room for moving upwards.

A major resistance would be a gap fill at 82c which, incidentally is where the 100dMA and the 261.8% Fibo line are approximating. Before that, however, I expect resistance to manifest at 71c which is where the 161.8% Fibo line approximates.

Immediate support is at 59c thereabouts.

Sound Global: Would I buy now?

Fundamentally, a top down approach suggests that the industry Sound Global is in will continue to do well as governments invest in solutions to water related problems. My past research and experience with the company when it was known as E-pure also gave me the confidence required to invest in the company again although my initial re-entry price of 59c was less than ideal.

In the subsequent market sell down, I bought more shares at 46.5c on 31 May 2012 which means that my long position is now in the black. I am looking to possibly locking in some gain as the charts seem to suggest that this could be a good idea.

In the last session, a black candle was formed on the back of higher volume, suggesting that the bulls had a hard time pushing the share price higher. Do I see signs of distribution? Well, the OBV is still rising which does not suggest that smart money is leaving as price moves higher. Accumulation is still going on.

However, the lower high on the MFI which measures demand suggests to me that buying momentum is slowing down. Then, looking at the MACD histogram (MACD-H) which is a measurement of the distance between the MACD and the signal line, we see lower highs too. The MACD-H usually precedes the MACD itself. So, a change in trend could be on the horizon.

Could Sound Global's share price move higher from here? It could but the technicals suggest that it could be a slow grind upwards if it should happen. Would I buy more then? Probably not as I feel that, technically, selling could be a more palatable proposition.

Capitaland: Leveling up.

"People’s Bank of China slashed its one-year deposit and lending rates by 25bps and 31bps respectively just a month after it cut interest rates by 25bps. Beijing also announced further easing of interest rates, with banks expected to lower lending rates by as much as 70% against benchmark rates." Further expectations are for the bank RRR (required reserve ratio) to be cut by another 50bps in 3Q 2012.  (Source: The EDGE)

All these measures would serve to improve liquidity, helping businesses and consumers gain easier access to cheaper loans. As Capitaland has a significant presence in China, improving liquidity in the country will only benefit its projects over there.

Capitaland's share price has been climbing steadily higher on the back of higher volumes. This has attracted the attention of bulls and bears alike. Yes, undoubtedly. Although bulls are enjoying the ride, at the first sign of weakness, bears would rush back in.

Volume is the fuel that drives rallies. With the high volume seen, we won't be wrong to expect price to possibly go higher. Now, how high can the share price go? No one can say for sure. Bummer!

However, what I can say is that price has touched a major resistance, a many times tested resistance. People who bought at this level during the period of 11 April 2012 to the first few days of May 2012 could be looking to break even. The desire to break even is why this resistance is likely to be a tougher one.

The bullish momentum has to be strong enough to break through the barrier decisively. Any hesitation by the bulls will bring back the bears. Even as the OBV suggests that accumulation is powering on, there is no sign that the counter is overbought on the MFI.

Managing to break the immediate resistance could possibly see the double top formed in February and March 2012 tested. This is at $3.15. Incidentally, the 150% Fibo line approximates this price level as well which adds to the expectation that this resistance could be a stronger one.

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Cambridge Industrial Trust: 30 Teban Gardens.

Cambridge Industrial Trust is looking at buying 30 Teban Gardens for S$41m.

"Cambridge Industrial said 30 Teban Gardens Crescent is a high quality asset, with prominent exposure to the Ayer Rajah Expressway. The acquisition will further reduce the reliance of the trust’s income stream on any single asset or tenant."

Eurosports Auto at 30 Teban Gardens distributes Lamborghinis.

What I am immediately interested in is how are they going to fund the purchase and how will it impact my income received from the REIT.

The REIT has a gearing level of some 35.9% as of March 2012. Not excessive but it is not low either.

The manager has said that the acquisition will be funded through a mixture of equity fund raising and debt. In what proportion and in what form is the equity fund raising going to take? I guess we will have to wait for more details.

If the acquisition goes through, the manager expects the net property income (NPI) of the trust to improve some 4.6%. If the acquisition is fully funded by debt, DPU could be impacted similarly but with equity fund raising involved, depending on how many new units are issued, DPU would probably not increase by as big a percentage. If a rights issue is involved, we would also have to see the asking price before we can calculate the distribution yield.

Cambridge Industrial Trust has improved on its DPU for four consecutive quarters and it seems like a relatively good investment for income. However, I am unable to forget Chris Calvert's spotted track record before this. So, this remains a smallish investment in my portfolio.

I have a nagging feeling that this acquisition is not a good idea. Although the acquisition would only go through on a condition that the vendor (seller) obtains a further 22 years lease from JTC, the initial lease term was for 10 years only (from 1 July 2007). This means that 5 years have lapsed. Even with a further 22 years of lease, it would mean a total of only 27 years is left to the lease and would expire in 2039.

Is the valuation overly optimistic and is the REIT overpaying?

Slides presentation 26 - 28 June 2012: Here.

See announcement on acquisition: Here.

Croesus Retail Trust.

"Croesus Retail Trust is planning a Singapore initial public offering of about $800 million (US$634.22 million), backed by mainly Japanese assets, IFR reported on Wednesday."

It is an interesting choice of name. Croesus was the wealthy King of Lydia (part of modern day Turkey) and in Greek culture, the name is synonymous with a wealthy man. Would the REIT live up to its name?

Although I find this REIT interesting, I am not too excited about it at least for now because I remember Starhill Gobal REIT's Japanese retail properties to be a drag on its performance. The lacklustre Japanese economy has caused its retail sector to decline year after year.

Unlike demand for housing which is rather inelastic (which is a reason for liking Saizen REIT), demand for retail spaces is very sensitive to a country's economic performance.

This was what Starhill Global REIT's management said in its 2011 Annual Report:

The Japanese retail environment remains challenging. The Manager is continuously optimising asset performance through active management of the leases.

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Let us wait for more details.

Croesus Retail Trust plans $800m Singapore IPO: IFR
Wednesday, 04 July 2012

© 2012 - The Edge Singapore

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).

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Voices, noises and choices.

The amount of information out there is enough to make one feel somewhat overwhelmed or even faint. I have not been reading blogs as much in the last one week and kept my reading primarily to Channel NewsAsia, The Business Times and Yahoo!Finance. Even so, it probably is enough to make heads spin.

Some proclaimed that the U.S. housing market has bottomed and is picking up! Conventional wisdom says that the U.S. housing market must pick up before we see a return to sustainable economic growth. On the same day, another article claimed that the U.S. economy is sliding back into recession!

Then, the stock markets around the world rallied because European banks can now be recapitalised directly from bailout funds. There are those who then said this is only a relief rally and it won't last. Their advice? Don't believe the rally! Sell the rally!

S&P500                       +2.49%

DAX                              +4.33%

What about the Singapore stock market? Some say that it is being re-rated upwards because stocks here are up 9.8% in H1. Some say that it is because of window dressing in the first half that has pushed the STI upwards. Huh? Which came first? The chicken or the egg?

Hey, don't believe me, go get a copy of the weekend edition of The Business Times today. (Er, in case some are wondering, no, this is not a paid advertorial by The Business Times although you could be helping me a tiny bit as I am a shareholder of SPH.)

OK, if you have not fallen off your chair or reached for a bottle of medicated oil by now, good.

So, what are we to do? Do we join the bullish camp or the bearish camp? Regular readers would have guessed my answer. I would say neither. Stay practical. Stay invested but have a war chest ready.

Staying 100% or mostly in cash is not a good idea. It is unproductive as higher than average inflation chips away the value of our cash on hand. In fact, The Business Times has an article today which says that although the Singapore labour market is tight and although people might receive increments to their salaries, they are seeing little gain due to high inflation. Like what we learned in economics, there is nominal wage increase but not much real wage increase.

Actually, businesses are finding rising costs a struggle to deal with. Restaurants have reduced the size of portions being served and have, in some cases, increased prices.

At Ichiban Boshi, my family like to order soft shell crabs because we find that $5.50 for 2 soft shell crabs (cut into halfs) is not too bad. However, when we ordered it again a month or so ago, we only found 3 halfs on the plate. We thought perhaps 1 half fell on the kitchen floor or something. Anyway, when we ordered it again on a more recent visit, there were still 3 halfs only.  Inflation had spirited away half a soft shell crab although price stayed at $5.50 a portion. Sheesh!

There are many costs of doing business and rent is a big one here. Rental rates in Singapore have been going up and up. Thus far, the only sector that has seen a decline in rent is in prime office space due to more than ample supply. There were signs very early on which is why I have been underweighting this sector in my porfolio of S-REITs. However, we can expect this sector to recover rapidly if the global economy picks up again. Just bear in mind that office tenants are a rather footloose bunch.

SPH's Clementi Mall.

Generally, however, it is a very good time to be landlords. For the vast majority of us who are not financially able to participate by owning shops and buildings directly, investing in selected S-REITs and SPH is the next best thing. In fact, some might say it is even better as we do not have to worry about the day to day operations of the properties. Well, there are pros and cons, to be sure.

There are many voices out there and we have many choices. However, we have to always remember not to be intimidated by all the information being stuffed in our faces. What is worse than having no information? It is to be drowning in too much information.

Know what matters. Everything else is just noise, is it not?

Related posts:
1. Office S-REITs VS Industrial S-REITs (4)
2. Staying postive on S-REITs.
3. Bearish or Bullish?
4. SPH: Better investment than retail S-REITs?