Sabana REIT: Internalization pains.

When Sabana REIT's unit holders voted for the internalization of the REIT's manager, some readers asked me what I thought of it.

For the record, I didn't vote for the internalization.

I sat on the fence.

From past experience with Croesus Retail Trust, I guessed that internalizing the manager would be a costly exercise.

I said as much here in reply to readers' comments.

However, if successfully executed, it would result in significant cost savings and greater alignment of interests.

The exercise was smooth sailing in the case of Croesus Retail Trust although it was pretty costly.

That was partially because the REIT's sponsor suggested the internalization themselves.

It was not a demand made by activist investors.

It was suggested partly to unlock value and to address the persistent underperformance of the Trust's unit price.

Later on, Croesus Retail Trust was sold to an institutional investor at a premium to valuation.

I had mixed feelings about the sale.

I lost a reliable passive income generator but I did enjoy an attractive return.

Whether the internalization of the manager played a part or not in the sale of Croesus Retail Trust to the institutional investor is anyone's guess.

Anyway, looking at Sabana REIT, from what has transpired so far and at the recent EGM, it is obvious to me that we are not seeing another Croesus Retail Trust here.

To me, the entire process in Sabana REIT's instance seems to be far more challenging.

It is going to take way longer and cost way more than expected.

Regular readers know that I increased my investment in Sabana REIT significantly in late 2020 and early 2021 after the lowball offer to buy the REIT was rejected.

Sabana REIT was and still is pretty undervalued.

However, I don't like investing in businesses which keep me guessing.

Peace of mind is priceless.

My investment in Sabana REIT has paid me attractive dividends in the last few years.

However, with so much uncertainty now, I have decided to reduce my investment in the REIT significantly while I am still in the money.

Taking back my capital, I will have a stronger war chest to take advantage of other investment opportunities.

So, with this decision, Sabana REIT is no longer one of my largest investments.

I still retain a legacy position from donkey years ago which is free of cost.

OCBC ups dividend by 5%! $7 billion net profit!

OCBC has declared a dividend of 42 cents per share, up from 40c a year ago.

This represents a 5% increase which makes me happy.

Full year dividend per share is, therefore, 84c.

This is an increase of some 21% from a year ago.

Payout ratio is about 53% of net profit.

The stellar results of 2023 was driven mainly by higher net interest margins across all its markets.

Net profit was in excess of $7 billion, up 27% from a year ago.

I like that OCBC has continued to drive costs lower with a lower cost to income ratio of 38.7%.

For people who are worried about OCBC's exposure to China, I have said before that they anticipated the problems early on like DBS and limited their exposure to the troubled property sector.

Their NPL ratio is at a very manageable 1.0%.

OCBC, like DBS and UOB, is well capitalized and well managed.

Even as net interest margins come under pressure, OCBC is expected to perform relatively well and should continue to pay attractive dividends.

This is especially when the current 53% payout is pretty undemanding.

In terms of valuation, OCBC is similar to UOB in that it trades at 1.1x book value, has a PE ratio of around 8x but it has a more attractive dividend yield of some 6.2%.

The last time I bought more of OCBC's common stock was in the middle of last year at between $12 to $12.30 a share.

In a recent YouTube video I produced, I said that immediate support has moved higher to $12.60 a share.

This has likely moved higher again to $12.90 a share which is where we find the rising 50 days moving average.

As OCBC is already my largest investment, I am in no hurry to add to my position.

If I have yet to initiate a position, I would buy some on a possible pullback in stock price to under $13 a share.

Just to get a foot in the door and not throwing in everything including the kitchen sink.

If AK can do it, so can you!