Centurion Corporation: A smaller investment.

Not too long ago, I said I trimmed my position in Centurion Corp.

If you don't remember or if you missed it, see:

Reallocate as interest rate rises.

Centurion Corp. is now one of my smaller investments because I went on to trim my position further as its share price rose in recent days.

My investment in Centurion Corp. was no longer one that gave me peace of mind and, hence, the decision.

I am just being consistent as I said before that if I keep thinking about an investment and not in a good way which means I am worried, then, I am probably over invested.

I am feeling pretty good now with a smaller investment in Centurion Corp.

Source: AK asks 2 questions.

My investment thesis of so many years ago is now being brutally challenged.

In a rising interest rate environment, it makes sense to me that highly leveraged entities will find it more challenging to bring home the bacon but if they could increase their income while controlling other costs, it is not too bad.

However, if they have regulatory issues which could impact their income negatively to deal with, then, the picture becomes hazy and I feel that this might be the case with Centurion Corp.

I invested in Centurion Corp. primarily for income but with interest rate going higher and, more importantly, regulatory issues regarding PBWA capacity, it is less certain that the dividends which I expect from the investment are going to be sustainable or even forthcoming.

Already, the number of beds are reduced in certain assets and we could see the same thing happening in other assets in the not too distant future which would also require additional CAPEX when Centurion Corp. is already lacking a strong balance sheet. 

As an investor for income, if I could get a dividend yield of 4.5% or so by investing in the local banks which should also enjoy a strong tailwind from rising interest rate, the case for investing in Centurion Corp. for income weakens considerably.

Investing in Centurion Corp. for income now only becomes a superior strategy if it can pull off a Saizen REIT and long time readers of my blog would know what I am talking about.

Saizen REIT was trading at a big discount to NAV too but the REIT was also consistent in distributing meaningful income while Centurion suspended dividends for two years and could do so again.

Saizen REIT was also selling their buildings at a considerable premium to their valuations which confirmed that the REIT was truly undervalued.

Centurion Corp. could unlock value by selling some of their assets just at valuation and that would unlock lots of value since its common stock is trading at such a huge discount to its NAV per share.

As interest rate rises, cap rates should expand and that is when we could see asset valuations declining.

Still, with such a big discount to NAV and if the valuations are credible, value could be unlocked for shareholders through a partial sale of assets even at a slight discount to valuations.

If this were to happen, then, I would have made a mistake by significantly reducing my exposure to Centurion Corp. 

This is why I retain a smaller investment in Centurion Corp. so that I would suffer a weaker form of seller's remorse in such an instance.

Well, I am only human and can only do what I feel is right for me.

Don't play play and anyhow follow.

Recently published:
Trading Chinese tech stocks for pocket money.

Related post:
Saizen REIT: Deeply undervalued.

How to invest in REITs?

This is a reply to a reader's comment on REITs and how I process them in my mind. 

If you are interested, see reader's comment: HERE. 

My reply: 

What we look out for will depend on our motivation. 

As an investor for income, I am more interested in whether my investments are able to pay me a meaningful and sustainable dividend.

This is especially important for a retiree like me with no earned income.

When it comes to REITs, I pay attention to whether money is being put in my pocket.

I would ask if what the management is doing would be beneficial or detrimental over time?

If beneficial, we want to make sure the benefits are bona fide for the longer term.

We want to make sure that the benefits are not illusionary or temporary.

Of course, there are other things to consider because we don't want to put money in an Eagle Hospitality Trust, for example.


It is hard to put everything down on paper because it could also just be personal experience at times. 

I could get bad vibes and just decide to stay away for peace of mind, for example.

So, for a start, understand what you want and you will know what to look out for.  

"I can never make it easy by saying ‘Here are three things’. You have to derive it yourself to ingrain it in your head for the rest of your life." 

- Charlie Munger 

Having said this, there was something I gave out during my talks (i.e. Evening with AK and friends) in the past and it might or might not be useful to you:

I also pulled some older blogs which I think might make for interesting reading: 

1. Ascendas Hospitality Trust: A nibble. 

2. Eagle Hospitality Trust: My philosophy. 

3. Saizen REIT is undervalued. 

4. Croesus Retail Trust and current thoughts. 

5. Sabana REIT and current thoughts. 

6. REITs and rights issue.

After more than 12 years of blogging, you could probably find more related posts in ASSI if you do a search.

You could also go to the web version of my blog and read the blogs linked in the right sidebar.

Unfortunately, the mobile version of my blog does not display the sidebars (and many other things.)

Gambatte! 

Recently published: 

Why AK invests in REITs?

Why AK invests in REITs?

Quite a few recent comments were about REITs.

So, a blog on why I invest in REITs is probably a good idea.

Some people are worried that impending rising interest rates will mean REITs doing poorly.

After all, REITs are all leveraged to some degree and higher interest rates will surely burden REITs.

However, compared to us directly investing in a property, REITs are probably more conservative when it comes to borrowing money with allowed gearing capped at 50%.

We are allowed a higher gearing level in the purchase of a property, in comparison, with 70% or 80% LTV being the norm.

Of course, property valuation has to be trustworthy but that is another topic.

If you are interested, maybe, read this blog:

Eagle Hospitality Trust: Financial engineering NAV.

So, if we are worried about rising interest rates and REITs doing poorly, we should also be worried about investing in real estate in general.

I very much prefer investing in REITs because:

1. I do not want to take on more debt.

2. I do not want concentration risk.

3. I do not want to deal with tenants.

Regular readers know I do not borrow money to invest in stocks.

I know some will argue that some debt is not a bad thing and I agree because a judicious amount of debt can make good decisions deliver better results.

Of course, the opposite is also true as debt will magnify the damage resulting from bad decisions.

There is no telling when a seemingly good decision could turn bad and I do not want to take the chance especially in retirement.

In fact, investing in REITs already exposes us to debt since REITs are leveraged.

I just don't want to take on more debt on a personal level and like I said, REITs are relatively conservative when it comes to leverage which helps to give me peace of mind.

See:

Gear up to get more passive income?

Unless we are very rich, it is unlikely that we can buy more than one or, maybe, two properties on our own steam.

This creates concentration risk and if we should end up buying a property which is hard to rent out or resell, we could be in trouble.

The truth is that most of us are not experts when it comes to real estate investment and we usually rely on "experts."

Concentration risk also includes counter party risk.

So, even if we should rent out our property, if the tenant stops paying rent for some reason, rental income goes to zero.

When we invest in REITs, we invest in a bigger number of buildings and we are collecting rent from a larger number of tenants.

See:
$500K stuck in bad property investment!

and

Condo investment has been a drag!

REITs are professionally managed.

I don't have to look for tenants.

I don't have to deal with their demands or complaints.

I don't have to deal with the upkeep of the properties.

The only thing I have to do is to check my bank account once every quarter to make sure these REITs pay me a share of the rental income.

I should also mention that it is rarely possible to buy properties at a discount to their valuation.

Properties are rarely mispriced like some were in the USA  during the early days of the Global Financial Crisis.

However, it is often possible to buy REITs at a discount to their NAV and a relatively big discount at times.

If we look at my largest investments in REITs today, most of my investment in AIMS APAC REIT was made when it was trading at a discount to NAV more than 10 years ago.

My investment in AIMS APAC REIT has been free of cost for some time and it is still generating income for me.

IREIT Global is a more recent investment in comparison and I increased my investment in the REIT substantially at a discount to its NAV and it is still trading at a discount to NAV today.

Sabana REIT grew from a small legacy position to a more substantial position after the low ball offer by ESR REIT was rejected and the purchases which resulted in the relatively substantial position I have now were made at a big discount to NAV.

I could go back a few years and it was the same with Saizen REIT, for example.

See my response to Felix Leong who said I was plainly lucky:
Saizen REIT: Right prices and luck.

Investing in bona fide income generating assets can hardly go wrong.

When there is mispricing, we could possibly make more money.

When compared to real estate, mispricing is not as rare when it comes to REITs.

In recent years, I increased my investments in non-REITs but it wasn't because I felt that REITs were no longer relevant to income investors.

Investing in income generating non-REITs is just a way to avoid concentration risk.

Yes, REITs reduce concentration risk but having 100% of our portfolio in REITs also creates concentration risk.

OK, before I confuse myself further, I better stop.

Remember, this is just AK talking to himself, as usual.

It is never my way or the highway.

References:

1. Dumping all my REITs.
2. Largest REIT investments.

3. 4Q 2021 passive income.

Recently published:
Lost on Alibaba and $200K left...

Daiwa House Logistics Trust: Good or not?

I woke up to not one, not two, not three but four comments from readers regarding Daiwa House Logistics Trust and I took that as a sign that I would have to take some time off from gaming to blog.

Daiwa House Logistics Trust's IPO ends this Wednesday (24th Nov.)

IPO? I usually avoid IPOs because they are usually priced well for the seller and not for the buyer.

IPO stands for "it's probably overpriced?"

Is it more of the same in this case?

Looking at the information available, as an investment for income, Daiwa House Logistics Trust is not overly attractive to me.

For someone who is new to investing for income and who is just starting to build a portfolio, this could have a place.

However, with a distribution yield of 6.3% to 6.5% which is similar to what my two largest investments in REITs, AIMS APAC REIT and IREIT Global, are offering, Daiwa House Logistics Trust just isn't that attractive to me.

If I do invest in Daiwa House Logistics Trust, it would probably be because I would like more diversification.

However, it would be just geographical diversification which is less meaningful than diversifying into non-REITs.

This is especially so since my wish is to build a more resilient income generating investment portfolio.

Increasing the size of my investments in the local banks, DBS, OCBC and UOB, I believe would be more meaningful and Singapore banks make decent investments for income too.

Bear in mind that the banks pay only a fraction of their earnings as dividends while REITs distribute 90% to 100% of their income to their investors.

In this light, we could even say that the banks are more attractive than Daiwa House Logistics Trust as investments for income as what would be their dividend yields if the banks were to pay 90% of their earnings as dividends? 

Banks also benefit from rising interest rates and while REITs can still perform well with higher interest rates when compared to bonds, they might experience some downward pressure.

Having said this, if Daiwa House Logistics Trust should see a significant decline in unit price, I might buy some.

The better investments I have made in REITs have almost always been post IPOs and that is saying something.

If I am wrong, it wouldn't be a tragedy as not making money is not the same as losing money.

Anyway, why am I not excited about this IPO other than the fact that I usually avoid IPOs?

After all, Daiwa House Logistics Trust is Japanese and some of my better investments were Saizen REIT, Croesus Retail Trust and Accordia Golf Trust.

The trio were all Japanese too and delisted subsequently, netting me some very nice gains.

I will continue to talk to myself.

1. Land lease.

Saizen REIT had only freehold Japanese residential buildings.

Croesus Retail Trust and Accordia Golf Trust had mostly freehold Japanese assets.

Daiwa House Logistics Trust will start with mostly leasehold Japanese assets.

Having more leasehold Japanese assets for their IPO helps to bump up their distribution yield as leasehold assets are usually cheaper while still commanding prevailing market rents.

This is especially the case for assets with much shorter remaining land leases.

VIVA Industrial Trust, anyone?

It helps to make the IPO look more attractive to investors.

Having mostly leasehold assets, the distribution yield really should be higher than the 6.3% at IPO.

The impression I get is that the IPO is probably priced more dearly.

If we look at past IPOs of S-REITs with mostly leasehold assets, most of their distribution yields were higher, if I remember correctly.

2. Japanese focus.

The Japanese focus of Daiwa House Logistics Trust might not last long since they have right of first refusal (ROFR) over 11 assets in Vietnam, Malaysia and Indonesia.

They market this as a good thing but one reason why I liked Saizen REIT, Croesus Retail Trust and Accordia Golf Trust was their focus on underappreciated and undervalued Japanese assets.

The Japanese market is probably more stable and less risky when compared to Vietnam, Malaysia and Indonesia.

3. Fund raising.

There are two things here.

We have been seeing some issuance of perpetual bonds by REITs to raise funds and the most notable is probably Lippo Mall Trust.

While perpetual bonds do not increase the gearing level of REITs, all else remaining equal, since they are treated as equity instead of debt, it is a form of financial engineering to make numbers look better.

Still, as long as the funds raised will help to improve performance and generate more income in a sustainable fashion for shareholders, it is a good thing.

I could be wrong but it is the first time I see a REIT having perpetual bonds issued at IPO and that makes me somewhat curious.

The second thing is that with the REIT being relatively small and with a relatively long list of ROFR assets, there could be more fund raising before long especially when the manager says they want to keep gearing below 40%.

Why start with only 14 Japanese assets and mostly leasehold ones with average remaining land lease of about 38 years?

Why not start with a larger portfolio and include most of these ROFR assets of which 17 are mostly Japanese freehold assets instead?

I have a couple of guesses but they are just guesses.

So, Daiwa House Logistics Trust, good or not?

As it is, Daiwa House Logistics Trust might seem decent enough for some as an investment for income but it isn't something I feel I must have in my portfolio.

It isn't screaming "BUY."

References:
1. VIVA Industrial Trust: 9% yield.

2. Saizen REIT.

3. Croesus Retail Trust.

4. Accordia Golf Trust.

5. Cutting losses in S-REITs.

6. Dividends from DBS, OCBC and UOB.

Accordia Golf Trust: $0.732 offer.

Finally, we have news.

"... sponsor of Accordia Golf Trust (AGT) has proposed to acquire the trust's 88 golf courses in Japan for S$804.1 million, or an implied purchase consideration of S$0.732 per unit, it said on Monday."

What do I think?

Too low!

Why do I say so?

If you are new to my blog or if you cannot remember, read the following blogs:

1. Offer must be way above valuation.

2. Accordia Golf Trust: Reasonable or realistic price?





Basically, I think that an offer price of $0.732 a unit undervalues Accordia Golf Trust by a lot.

Long time readers know that I invest in Accordia Golf Trust mainly for income.

Having said this, my belief that Mr. Market does not fully appreciate Accordia Golf Trust's value only became stronger in the last couple of years.

There is definitely evidence of undervaluation. 

I have shared some thoughts towards this in some of my past blogs.

It isn't a secret that I have a soft spot for what I believe to be undervalued investments which pay dividends while I wait for their value to be possibly unlocked.

That was the case with Saizen REIT.

It was also the case with Croesus Retail Trust.

What about Accordia Golf Trust?

Accordia Golf Trust is a good fit too.





I increased my investment in Accordia Golf Trust significantly in 2018 and 2019 so that my position crossed the $200,000 mark in market value.

See:
3Q 2018 passive income: AGT.

and

Largest investments updated (4Q 2019).

That was after substantially reducing my investment in 2017 at $0.70 a unit.

To understand why I did that, see:
Reducing investment in Accordia Golf Trust.







Looking at my records, I see purchase prices of 49c to 54c in 2018 and purchase prices of 51c to 53c in 2019 as I substantially increased my stake.

The records are all hand written, of course.

Feeling a bit sentimental.

At $0.73 a unit, the market value of my investment in Accordia Golf Trust would cross the $300,000 mark easily.

Been receiving nice passive income from Accordia Golf Trust.

This might end soon, it now seems.

Even though some of that $0.732 a unit would likely go towards costs and some of it might be retained at the Trust level as Accordia Golf Trust is not being delisted, receiving approximately $0.70 a unit would still give me a pretty nice capital gain.

When I take into consideration the dividends received in the past, my investment in Accordia Golf Trust has turned out pretty well.





Having said this, honestly, I am perfectly OK with holding on to my investment and to continue receiving passive income especially because I think an offer of $0.732 a unit is really too low.

I am pretty disappointed and even disgusted.

Well, I guess there is really no point in being upset about this.

Could have been worse, I suppose.

It is what it is.

For what it is worth, having a lot more cash in my bank account is a rather comforting thought.

Well, for a while anyway.

Have to try to look at the bright side of things a bit more, especially during these trying times.






Reference:
The Business Times

Accordia Golf Trust: Reasonable or realistic price?

This is in response to a reader's question.

As it is going to be about managing expectations, I think it is important enough to be a blog.

In a recent blog on Accordia Golf Trust in response to a friend's question as to whether it was realistic to expect an offer price for Accordia Golf Trust's golf courses which would translate to $1.20 a unit at the Trust level, I explained that although I didn't know if it would happen, it certainly wasn't an unreasonable expectation.

If you are a new reader or cannot remember why I said that, I have provided the link to that blog at the end of this one.






Now, being reasonable and being realistic are quite different.

I said in the same blog,

"... to be realistic, when selling an entire portfolio, it is usually more difficult to command a big premium compared to selling the properties individually."

and I also said,

"Nonetheless, a compelling offer has to be one that is substantially above the NAV."

What is considered "substantially above the NAV"?

Well, there isn't a right or wrong answer and it is going to be really a matter of opinion.






For me, I feel that a 10% to 20% premium to NAV would be considered substantial enough to be pretty attractive if we were to use our past experience with Croesus Retail Trust and Saizen REIT as yardsticks.

In an earlier blog on Accordia Golf Trust, I daydreamed about the possibility of selling the golf courses at a 60% premium to their valuations.

Remember, I said I was merely speculating and that it was a daydream.

It might have been a reasonable expectation but it might not have been a realistic one.

Even as we manage our expectations, we can only hope that what Accordia Golf Trust received was not a lowball offer.






The next thing I am going to talk to myself about can be related or unrelated to the blog topic at hand, depending on our perspective.

You might or might not know about the "Reasonable Person Test".

I learned about the "Reasonable Person Test" when I did Business Law as a module donkey years ago.

If this is something new to you, it is probably good to learn about it.

The question to ask is, realistic or not,

"Would a potential jury agree that $1.20 a unit is a reasonable asking price?"

Here is a video on the "Reasonable Person Test":







Related post:
Accordia Golf Trust: Offer must be way above valuation.

Accordia Golf Trust: Offer must be way above valuation.

Accordia Golf Trust rose 10 cents or 16.7% to close at 70 cents a unit in the last trading session.

A friend who read my last blog on Accordia Golf Trust called me to ask if $1.20 a unit is realistic?

What did I say in reply?

Well, I do not know if it would happen but I think it is not an unreasonable price.

I told him the best test is to try and sell the golf courses in the open market and see how much potential buyers are willing to pay.

This was one of the ways I used to determine that Saizen REIT was undervalued so many years ago.






For example, in a blog on Saizen REIT 5 years ago in 2014, I said:

"I am inclined to believe that Saizen REIT's properties are worth much more since they managed to sell a property in May at 19% above book value and another one in August at 12.8% above book value. 

"This suggests that the book values of the REIT's properties are rather conservative."

Mr. Market will always pay what he feels is the right price for an asset at any particular point in time.

Not sure if valuations can be trusted? 

Mr. Market has the answer. 

This could very well be the same for Accordia Golf Trust.






If we recall, earlier this year in April, the Trust sold one of their golf courses at above valuation too.

"The consideration of the Divestment is JPY 200,000,000 (approximately S$2,415,751).

"The valuation of the Golf Course as at 31 December 2018 conducted by CBRE, the independent valuer commissioned by the Trustee-Manager as part of its annual valuation of its golf courses... is JPY 27,500,000 (approximately S$332,166)."

Full announcement on Accordia Golf Trust's website:
Divestment Of Village Higashi Karuizawa Golf Club.


You might want to read that again.

The consideration was jaw droppingly above valuation.

It could be the case that the book values of other golf courses in the Trust's portfolio are rather conservative as well.








However, to be realistic, when selling an entire portfolio, it is usually more difficult to command a big premium compared to selling the properties individually.

This was certainly the case with Saizen REIT.

Nonetheless, a compelling offer has to be one that is substantially above the NAV.

Otherwise, there is no reason to accept the offer.

Related post:
Accordia Golf Trust: 60% premium or $1.21 per unit?

You might want to read this:
My investment portfolio or investment philosophy?

Accordia Golf Trust: 60% premium or an offer of $1.21 a unit?

Some readers might remember Saizen REIT and Croesus Retail Trust.

They were two of my largest investments in the past.

If you are new to my blog and are interested in finding out more,

See:
History with Croesus Retail Trust.

Also see:
How much did I make from Saizen REIT? Offer by Lone Star.

Although I made good money in both cases, it was a challenge trying to find new investments for income that could even come close to what Saizen REIT and Croesus Retail Trust were doing for me.

To make it worse, they were relatively large investments for me and, therefore, harder to replace totally.






Why the sudden nostalgia?

Well, it seems that Accordia Golf Trust could go the same way Saizen REIT and Croesus Retail Trust went.

Accordia Golf Trust requested for a trading halt and issued a statement.

Part of the statement:

"... it has received a non-binding proposal in connection with a potential transaction which may or may not lead to a divestment of AGT's interests in all of its golf courses..."

I have mixed feelings about this.







I have been increasing my investment in Accordia Golf Trust as I believe it is undervalued.

I believe that it can be a more rewarding investment for income, given time.

See:
Why invest in Accordia Golf Trust?

I kept increasing my investment and, recently, it rose into the next bracket in my list of largest investments.

See:
Largest investments (4Q 2019).

My investment in Accordia Golf Trust is now basically similar in size to my past investment in Croesus Retail Trust.

A video clip by Accordia Golf Trust:







I hope the offer is going to be similarly compelling or more compelling if it should happen.

If we recall, Accordia Golf Trust's parent was sold to MBK at a 60% premium to NAV.

Could we see a similar premium for Accordia Golf Trust?

With a NAV per unit of 76 cents, that would mean an offer price of $1.21 or so.

Round it down to $1.20 a unit?

Sure, it is OK.

I am not greedy.

Well, I am just speculating.

It is healthy to daydream, I was told.






Accordia Golf Trust last traded at 60 cents a unit.

Still undervalued, I believe that Accordia Golf Trust still offers good value for investors.

However, the news of a non-binding proposal could attract speculators and I would avoid chasing rising prices.

I will just wait and see what happens next.

Recently published:
Are stock prices coming down?

Eagle Hospitality Trust: Financial engineering and selling at 44.5 cents a unit.

When I analyse stocks, I am aware that I do not have the resources to do complete analyses.

Most if not all of my analyses are incomplete and I make decisions based on such incomplete analyses.

What?

Really?

Yes, really.

An example:
ComfortDelgro: An incomplete analysis.

I just have to decide on which bits of information are more crucial to my decision making process.

If I have access to those bits of more crucial information, I will be able to make a decision.

If I don't have access to what I think are more crucial, I should stay away until a time when things have changed.

Those few times that I ignored this advice to myself, I mostly regretted my decisions.






It is almost like a jigsaw puzzle.

We don't usually need to put every piece of the puzzle in its place to see the picture.

As retail investors, if we can be approximately right most of the time, we will probably do well enough in the long run.

When I blogged about Eagle Hospitality Trust recently, it was the same.

In the blog, I said "it is enough to stop me from investing in Eagle Hospitality Trust even now."

Of course, if you have read my last blog on Eagle Hospitality Trust, you know what I am talking about.






Yes, in the case of Eagle Hospitality Trust, what really struck me hard was the substantial shareholders selling at what seemed like ridiculously low prices.

Not just selling their investments at ridiculously low prices but also selling them in large chunks.

Guess what?

It has happened again.

Today, it was announced by Eagle Hospitality Trust that Compass Cove Assets Limited which is wholly-owned by Mr. Norbert Shih Hau Yuan sold 5 million units at 44.5 cents per unit on 7 November 2019.

See:
SGX: Eagle Hospitality Trust corporate announcement.






So, we see that even a selling price as low as 44.5 cents a unit is acceptable to this substantial shareholder.

I believe they are the people who sold 6 hotels to Eagle Hospitality Trust's sponsor who in turn injected the hotels into the Trust.

See: 
"Asset management firm ASAP sold six hotels to EHT's sponsor..."


We should ask how realistic are the valuations of these hotels?

Making an investment decision based on published NAV could be a bad idea as the valuation could be inflated.

Older readers of my blog would remember that I said the NAV of Saizen REIT was too low because they were able to sell their properties at a premium to valuation in the open market.

Newer readers might want to read this blog in which I talked to myself about Saizen REIT and Sabana REIT.

See:
Saizen REIT: Right price and luck.

If you would like to read more about Sabana REIT,

See:
Sabana REIT: History and current thoughts.





Anyway, we should ask if Eagle Hospitality Trust tried to sell these six hotels in the USA, could they get buyers to pay prices equal to the valuations by the "two reputable independent valuers" the manager of the Trust keeps referring to?

Good question, don't you think?

See:
Closer look at EHT's portfolio. 
(You can also go to the comments section at the end of this blog for a brief account.)

So, looking at the cash flow is probably a better way.

Really?

As more than 60% of EHT's cash flow is secured with master leases, there is some comfort there for investors.

However, as seasoned REIT investors know, master leases usually hide the real (usually lower) cash flow generated by the properties.

It was also probably the master leases that led to higher valuations for the properties.

Financial engineering.

Always amazing.





When Ascendas Hospitality Trust had its IPO so many years ago, I wasn't interested in it partly because of some financial engineering involved to make it more attractive.

Of course, older readers of my blog know that I usually avoid IPOs anyway.

So, how did Ascendas Hospitality Trust become one of my largest investments?

It was only after some time when the effects of financial engineering lapsed and when the unit price declined to a level that became more compelling that I nibbled.

When unit price plunged even lower, I gobbled as I had clarity.

As an investor, I need clarity.

Without clarity, I cannot be sure if something is clearly undervalued or not.

Of course, if we cannot trust, we cannot invest.

See:
Ascendas Hospitality Trust: More income.

Of course, Ascendas Hospitality Trust will have a new name soon.

See:
Ascendas Hospitality Trust: Bad deal?





Anyway, back to Eagle Hospitality Trust.

At this point, it is almost impossible to believe that everything is fine and nothing is wrong.

Of course, it is only my belief since it could also very much be that I am growing old and cynical.

We should ask why are substantial shareholders selling at such low prices?

Unless they issue a statement on why they are doing this, we can only guess.

Will they do this?

EHT is due to announce results two days from now on 13 November 2019 but it should not distract investors from important questions that need answering.







Related post:
Is Eagle Hospitality Trust worth it?

3Q 2018 passive income (non-REITs): AGT.

Some might remember that I reduced my investment in Accordia Golf Trust many moons ago at slightly more than 70c a share.

Since then, Accordia Golf Trust has seen its unit price gone down a slippery slope.

It finally got to a point where I just had to hit the "accumulate" button.

I remember sharing before but I just cannot remember was it here in my blog or during an "Evening with AK and friends" that my own research (with the help of Google Translate) found that PGM, Japan's second largest golf course operator at that time, made an offer to buy Accordia Golf's assets a couple of years or so before Accordia Golf Trust was listed in Singapore.





PGM's offer back then, roughly, translated to a present day unit price of 56c a share.

The offer was rejected by Accordia as being too low then.

Of course, we know that Accordia Golf Trust listed in Singapore later at a much higher price of 97c a unit.

With this in mind, I simply could not resist buying at a price that Accordia Golf's shareholders rejected as being too low or at more than 30% discount to its NAV.





Putting this figure in perspective, a more recent development was the sale of Accordia Golf Trust's parent to MBK, a Korean private equity firm, in a deal that valued the parent at a whopping 60% premium to NAV!

If we give this a moment to sink in, it would seem that Accordia Golf Trust has been hugely undervalued by Mr. Market.

It reminds me of the time when Saizen REIT was able to sell its assets at a premium to valuation.

It reminds me of the time Croesus Retail Trust was sold at a premium to valuation.

To be sure, income investors should be concerned with the stability of Accordia Golf Trust's income distribution as it still has quite a bit of membership deposits which have yet to be claimed.





By my estimate, if redemption remains elevated as seen in the last financial year, DPU could stay at about 3.8c to 4.0c a year and it could take about 5 years for this to be fully purged from AGT's books, all else being equal.

Of course, if redemption should be even higher in some years, DPU could be even lower and if redemption is lower, DPU could be higher but, eventually, membership deposits should be fully redeemed.

This matter of membership deposits is a legacy issue and once they have been fully redeemed, it will no longer be a drag on AGT's DPU but, realistically, it would take some time before this issue is all in the past.






Some might remember that I put forth one reason for reducing my investment in Accordia Golf Trust late last year as the worrisome uncertainty surrounding its loans.

However, they have since managed to refinance their debt with a new 5 year loan and with a lower interest rate to boot.

This is very good news, of course, and has provided me with the confidence to accumulate as Mr. Market remains pessimistic about AGT.





There is intrinsic value in Accordia Golf Trust and once all the membership deposits have been redeemed, all else remaining equal, we could see DPU at around 6c or higher again.

I think a prospective distribution yield in excess of 10% is pretty attractive, especially when we remember that AGT's gearing is relatively low.

We just have to make sure we pay a low enough unit price for AGT.

Sometimes, I forget but I try to remember what Buffett said before:

"Have the purchase price be so attractive that even a mediocre sale gives good results."





The advantage of being a retail investor and not a fund manager is that we only have to account to ourselves.

Unlike fund managers, we don't have to worry about dealing with investors who might only be interested in seeing their investment increasing in unit price, quarter to quarter.

Our actions are not motivated by a need to appease other investors.

In this respect, retail investors are a fortunate bunch and we should not forget this.

However, remember not to ask barbers if we need a haircut and, of course, nobody cares more about our money than we do.





I remind myself from time to time that all investments are good at the right price.

Once I have identified an undervalued investment, and it should preferably pay a meaningful dividend, I buy some.

So, what did I do?

I bought more Accordia Golf Trust at between 52 to 54 cents a piece recently.

Now, all I have to do is sit back, relax and get paid while I wait.

Well, if Mr. Market makes me even better offers, I would probably be buying more.