Sabana REIT: Fundamental analysis.

Sabana REIT closed at $1.02 and touched a low of 97c at one point today. After the rather strong performance by MIT and GLP on debut not so long ago, the unenthusiastic response to Sabana REIT on its first day of trading by market participants was somewhat surprising. Let us do an analysis of the REIT and whether it is a good investment at the current price.

Sabana REIT has an aggregate leverage of 26.5% which is comfortable but bear in mind that a Shariah compliant REIT cannot lever beyond 35% while other REITs are quite comfortable levering to 45%. Its NAV per unit is 99c. So, it is trading at a slight premium to NAV and at 97c, the low of the day, it was only at a slight discount to NAV.

The total GFA of all its properties is 3,286,220 sq ft.  Its largest property which has a GFA of 810,710 sq ft has a remaining lease of 45 years. The rest of its properties have remaining leases of between 22 and 72 years. Three properties have remaining leases of 31 years or less and their combined GFA is 706,055 sq ft. Nothing irregular here. Although close to a quarter of its GFA would come to an end in 31 years or less, it does not seem worrisome at this point in time.

The REIT has an occupancy rate of near 100%. This is a good thing but it also means that there is little room to increase occupancy and revenue through renting out more space. 59.5% of its leases (by revenue) will expire in 2013 while the rest would expire in 2015. So, income should remain predictably stable till 2013.

The REIT will distribute 100% of its taxable income till 31 Dec 2012. Thereafter, at least 90% of taxable income will be distributed. Income distributions will be made quarterly to unitholders.

The estimated annualised DPU for 2011 is 8.63c and for 2012 is 8.67c. These represent yields of 8.22% and 8.25% respectively based on the IPO price of $1.05 per unit.

I believe that we have a fair offer here in Sabana REIT. Although I would rather invest in AIMS AMP Capital Industrial REIT which offers an annualised DPU of 2.08c for 2011 which would translate to a yield of 9.24% at a unit price of 22.5c, investing in Sabana REIT could provide some safety through diversification.

One thing that worries me is the lack of a track record of Sabana REIT's manager whereas AIMS is an old hand at managing REITs and Mr. George Wang's achievements are impressive. So, would I invest in Sabana REIT? If price weakens further, I might just buy some.

View prospectus here.

Related post:
Sabana REIT: IPO at $1.05/share.

Recent purchases: First REIT, AIMS AMP Capital Industrial REIT and Healthway Medical.

It is a wet evening and the stock market wasn't all that inspiring either. So, I decided to look at what I have bought recently and how they are doing.

First REIT
I bought some at 95c and again at 96.5c. Volume expanded today as price closed at 97c. It looks as if the rising 20dMA is pushing the price higher. Of course, FA proponents would say that the CR status is causing its unit price to stay bouyant which I believe too.

At the purchase price of 95c, my average price would be 95c x 4 + 50c x 5 /9 = 70c.  DPU of 6.4c in 2011 means a distribution yield of 9.14%.  At the purchase price of 96.5c, my average price would be 96.5 x 4 + 50c x 5 /9 =70.67c. Distribution yield would be 9.06%. Pretty attractive.

If I were to be successful in my excess rights application, the distribution yield would improve, of course. I am actually somewhat tempted to buy more. I might put myself in the buy queue at 96c which is where we find the rising 20dMA now.

 

However, a word of caution from the TA side: the MACD has formed a lower high while price formed a higher high on 9 Nov. This is a negative divergence and price could come down in time. Of course, we know that date is probably 1 Dec when the counter goes XR. Although I do not see any reason why it would trade below the TERP of 70c, it could.  If it does, I would buy more. Simple.

AIMS AMP Capital Industrial REIT
I bought more of this REIT and I blogged about it recently on 23 Nov. At 21.5c and an annualised DPU of 2.08c in 2011, the distribution yield of my latest purchase is 9.67%. This is very attractive to me. I am in the buy queue at 21c as well but with the rising 100dMA providing support at 21.5c, the chances of price going down to 21c aren't all that high.

Of course, with the MACD dipping into negative territory, we could see momentum remaining weak. Stochastics has similarly dipped into negative territory. Overall, the suggestion is that although we might not see much upside in the near future, the downside is similarly limited.  This is a great investment for anyone who is investing for income.

Healthway Medical
Although I have told myself before that I do not have to trade the market anymore and I could just sit back while waiting for dividends to come in from my investments, I just could not resist buying some Healthway Medical shares when I saw the positive divergence between price and MACD. I blogged about it on 22 Nov.

Well, it still looks rather promising. Volume is drying up as price consolidates at 15c. Immediate resistance is at 15.5c as provided by the 20dMA. Breaking this would give us an immediate target of 16.5c.  17c is where we find the downtrend resistance while 18.5c is the eventual target if the potential double bottom is a valid pattern. Now, if the downtrend resistance remains unbroken, there could be more downside to come. So, my strategy is to divest at resistance. This is purely a trade.

Related post:
Healthway Medical: Prime for a rebound?