AIMS AMP Capital Industrial REIT: Acquisition of Northtech.

I received many SMS and emails regarding this REIT's trading halt today. When it became known that the REIT is to make an acquisition and this time using mostly money from a private placement, there was much concern in the air with some asking if they should sell their investment in the REIT. Let us ask the question, "Is this acquisition sensible?"

Acquisition of Northtech building is NPI (nett property income) yield accretive. The building's NPI yield is 7.6% while the REIT's current NPI yield is 7.2%. This building has another 44 years left in its land lease from URA which is pretty good. Gearing level would be at 33.6% upon completion of the acquisition and placement exercise. Quite comfortable. See presentation slides here.

However, what is immediately important when we are investing for income is, of course, the income distribution per unit (DPU). How would the DPU be affected? Let us look at some numbers.

Acquisition price of Northtech building is S$72m. Private placement will fund approximately S$42m of the acquisition and debt would fund the rest. The REIT has an existing loan facility and also an acquisition loan facility which is a three year term loan facility and a revolving credit facility totalling $45m. What is not immediately known is the interest rate for the new acquisition loan facility. However, judging by how the manager was able to refinance previously to reduce interest margin from 3.5% to 2.16%, I am hazarding a guess that the interest rate for this new loan facility would be similarly attractive.

The share placement would bump up units in issue by about 11%. Currently, total units in issue is approximately 1,979,909,000. After placement, total units in issue would be approximately 2,199,898,000.

I estimate the NPI of Northtech building to be S$5.5m per year and the REIT's NPI prior to this acquisition (excluding 23 Changi South Ave 2 and including 27 Penjuru Lane) to be S$59m per year. NPI bumps up 9% but the number of units in issue goes up by 11%. Expecting the distributable income to be similarly affected, DPU would be diluted by 2% or so. Negligible but not nice, nonetheless.

It is also apparent that the REIT would have quite a bit of undrawn debt facility after this acquisition is over. They could possibly use this for asset enhancement purposes or for further acquisitions.

Existing unit holders can look forward to an advance distribution that would pay out the distributable income of the REIT for the period from 1 January 2011 to the day immediately before the date on which new units are issued. The DPU is estimated at 0.285c and would be paid on or around 28 March 2011. See announcement here.

Of course, the share placement does not allow all unitholders to participate in the enlarged capital base of the REIT and benefits a smaller pool of institutional investors as they buy at a 7 to 10% discount from the current market price. A rights issue would have been more equitable, for sure.

What would I do? Would I sell my stake? No, a DPU of 2c per year as per my estimate means a distribution yield of 9.3% based on the current unit price of 21.5c. In fact, if there should be some irrational selling when the trading halt is lifted, I would increase my long position in the REIT if its unit price should test 21c, which technically, is a strong support.

Please remember that although I have spent quite a lot of time (almost 2 hours) crunching numbers and styling this blog post, going through past reports and announcements as well as the ones published today, my estimates remain just that, estimates. They are good enough for me but you have to decide if they are good enough for you. Please read the disclaimer at the end of the page. ;)

See announcement on acquisition and private placement here.

Read article on AIMS AMP Capital Industrial REIT in The Edge dated 14 Feb 2011 here.

Related posts:
AIMS AMP Capital Industrial REIT: Revised DPU and fair value.
AIMS AMP Capital Industrial REIT: 3Q FY2011.

CapitaMalls Asia: Bouncing off $1.88 support.

In my last blog post on this counter, I said "Next support? $1.88. This is quite obvious from the candlesticks and also a gentler trendline support using the lows of 20 Dec 2010 and 1 Feb 2011."

Today, my overnight buy queue was filled as price touched a low of $1.88 before closing unchanged at $1.91. A doji was formed and it is a possible reversal signal. If the signal is valid, we should have confirmation tomorrow and price should move higher.

Immediate support at $1.88 while immediate upside target is $2.00. Could be a good trade.

Related post:
CapitaMalls Asia: Reloaded at $1.92.

Tea with AK71: Mini facelift of ASSI and return of AdSense.

I have finally gotten around to tidying up my blog which some readers think is a bit busy looking (which is a nice way of saying it is messy, I guess). I really didn't find my blog messy. It is just like I don't find my bedroom or my study messy. I can find my things, right? Hahaha... Yes, I have been like this forever. I would claim that there is system in my mess.

Well, I have to admit that a blog is different. It is not just a private diary for me and me only. I am sharing ideas with people on a public platform and it is only plain courtesy to make it friendlier to navigate and to find things. Oh my, I have been lacking in plain courtesy before. My apologies.

I did the mini facelift last night, rather late last night. Yawn. The major changes happened on the right sidebars. I have taken away most of the slimmer right sidebar boxes and moved them up to become wider and, I guess, easier to read boxes. I have also further broken down the blog posts under the old "Recommended" and "My strategies" headings which were boxes I threw quite a few blog posts under and didn't give them much thought. I know, yah, "Recommended" and "My Strategies" sound so helpful, right? Nah.

I have kept some old headings and together with the new headings, the blog posts are now under the headings of "Passive Income Journey", "Wealth Creation", "Stock Market Strategies", "Fundamental Analysis", "Investing in REITs and Business Trusts", "Healthway Medical" and "Precious Metals". I did actually remove some blog posts and boxes which I thought are no longer helpful as well. I showed no mercy!

The left sidebar has the same components as before except that I shifted their positions. I shifted the box which encourages readers to share ASSI right to the top while aggregating all the ways in which readers could stay in touch with ASSI under a single heading. The two headings are "Sharing my blog" and "Staying in touch". I know, pretty original, isn't it? Haha.. I also included a nifty widget from Twitter. This is just another way in which readers could stay in touch with ASSI.

Also, after 24 hours of removing all the ad spaces for AdSense or Ads by Google in ASSI, I am hazarding a guess that all readers would have read my blog post from yesterday on how I was removing the ad spaces temporarily. It was a self imposed ban, so to speak. Now, I am serving Ads by Google again.

If you have any comments at all regarding what I have done with my blog, please feel free to let me know. Have a great week ahead. :)

Related post:
Removing AdSense from ASSI for now.

GLP: A falling dagger?

As the Post Chinese New Year Sale continued in the stock markets, some stocks I have never been interested popped up on my radar screen. Capitaland is one such stock. Another one is GLP as some I know dipped into their funds and bought as its price plunged in the last session.

A friend sent me a SMS to say he bought some at $1.96 (the IPO price) in the morning and it closed at $1.93 for lunch. Then, it went on to touch $1.88 when another friend who was in the queue got his buy order filled. GLP closed at $1.93 in the end.

Is this stock going to rebound or would it decline further? After a huge sell-off, it is reasonable to expect a rebound. Short sellers would want to cover their short positions if the bulls are emboldened to push the price higher for some reason. However, the truth is no one knows what would happen next week.

TA is useful in that it lets us know where are the supports and resistance and we have to plan accordingly. TA simply gives us a glimpse into what could be and there are always two sides to a coin. Of course, sometimes, it is nifty enough to give us probabilities as well but they remain probabilities and never certainties.

What is the chart for GLP saying?

What is obvious is that GLP has been in a worsening downtrend since 1 Nov 2010.  Look at the three orange lines I have drawn and you would realise this. The latest trendline resistance is rather steep and approximates the declining 20dMA. $2.06 thereabouts. Selling at resistance in a downtrend is a sound strategy.

The immediate support is at $1.88. If this were to break in the next session, we won't know where is the next floor although employing Fibo lines could give us a clue. $1.82, anyone? The technicals are weak and so is my heart. I shall abstain.

GLP 3Q net profit likely at US$80m - JPMorgan
Friday, 11 February 2011

© 2011 - The Edge Singapore

STI down 1.2%; Kim Eng Securities suggests switching to yield plays. “We are stringent in our selection, picking only stocks with stable businesses and the ability to sustain a good dividend payout,” the house says.  
Friday, 11 February 2011

© 2011 - The Edge Singapore

Related post:
What's my take on MIT and GLP?