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!

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Toy Story Land

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Good deal:
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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?