Thursday, February 9, 2017

Its not me - part 2 - Fraser Hospitality Trust

It's human instinct to want fairness and i am all for fairness. 
In one of the facebook group " Remove Sabana Reit" ,a member by the name of Mr Goh  mentioned that Sabana's rights are renounceable while Soilbuild rights are non-renounceable. This may explain why Sabana's rights expense was 12 times more expensive than Soilbuild.

Renounceable rights can be traded through SGX while non-renounceable rights cannot be traded on SGX. Naturally, since one has to engage investment bankers to list these tradable rights on SGX , it will cost more.

Fair enough. 

However, it doesn't explain why the expenses were 4.2% when the fees paid to the Investment bankers were only 3.6%. 

Where did the 0.6% ( remaining of the expense) of the $80.2 million ( $481,200) go to?
Take note that 0.6% is still higher than the 0.34% total rights expenses of Soilbuild.

Actually to be frank, a rose is still a rose, no matter what name you give it. 
Rights issuance is to raise money and whatever way you want to do it, the outcome is the same. 
And you Sabana, chose to use a more expensive route to raise the money you want.

So do not attribute an oversubsciption of 209.1% as strong support from unitholders when you spend so much money. Soilbuild was oversubscribed by 174.4%.

For some perspective
How about we forget about the above

Frasers Hospitality Trust(FHT) issued renounceable rights on September 2016. 
FHT holds a portfolio of hotels and service residences, and not industrial buildings like Sabana. 
The difference ends here.
Both issued renounceable right, both are effectively REITS and both are pretty close in dates in their issuance of rights.
On a percentage-wise, Sabana really overpayed.

To be fair, a small percentage of a large sum is different from a big percentage of a small sum. But this begs the following questions:

1) Was the issuance of a renounceable rights the most optimal way to raise such a small amount of funds?

2)Was a renounceable rights issuance ( presumably resulting in a higher cost) done because the managers were afraid that their rights will be undersubscribed if done under a non-renounceable rights issuance?  Gimmick to look good?(Yet still want to rebut to say that they are doing well with the 209.1% oversubscription.........)

3) Where did the $481,200 go to? It being higher than the total cost of the non-renounceable rights issuance of Soilbuild?

A lesson can be learnt here. In general, ceteris paribus, a renounceable rights will enjoy a higher subscription rate than a non-renounceable rights. And its pretty common sense. If i hate the company or if i do not have the cashflow to invest anymore, i will sell the renounceable rights to a willing buyer who will subscribe for it. 

Wednesday, February 8, 2017

It's not me - Soilbuild Reit

Having followed the 2 facebook groups to remove manager of Sabana, one member mentioned that the cost paid to raise the proceeds through their rights was quite huge. Let's compare with industry practice again. This skill honed from years of working under a boss who keeps asking me why i want a raise every year and the need to compare with industry practice.

So the closest one to compare with Sabana would be Soilbuild, both being industrial reits, closest in market capitalization size and closest in rights issuance dates.

Soilbuild Reit's market cap = $662 million
Sabana Reit's market cap = $459 million
(Yahoo finance)

Soilbuild Reit's rights : September 2016
Sabana Reit's rights : December 2016

Rights-related cost , millions= $0.395
As a percentage of proceeds raised = 0.2/ 59.4 = 0.34%

As a percentage of proceeds raised = 4.2% 

4.2% vs 0.34%..... more than 12 times more i missing something here? I am unable to find the breakdown of the rights-related cost.

Soilbuild Rights
Sabana Rights

Monday, January 30, 2017

A fortunate series of events - AIMS, Mapletree, Soilbuild, Cambridge, Ascendas and Sabana Reits

I am "Old Cow Eat Tender Grass" a.k.a SGDividends
HYST called me and shouted:" May the year of the Rooster see you lose lots and lots of money and after losing all your money, lose your hair too! Just because you gave me $2 and a bunch of expired discount vouchers with minimum spend of $88.... You suck!"

She slammed the phone, before i could retort and say :" It was just a joke, look at your DBS paylah, i put $88 in it......."

A bad joke, which reminded me of the Bee Gees song.

"I started a joke which started the whole world crying. 
But I didn't see that the joke was on me oh no 
 I started to cry which started the whole world laughing 
 Oh If I'd only seen that the joke was on me......."

OK, on a serious note. Are the gripes of the shareholders against Sabana unjustified? Are they a bunch of people who lose money then kao peh kao bu? Is this just an "old cow who eats tender grass" just a blind following the blind? To answer the above questions, I compiled the following tables just so one can see clearly the alignment between a REIT and its shareholders.


While the DPU and distributable income decreases over the years from 2013 onwards to 2015, their management fees increases over the years. Does this show alignment with unitholders?

Other industrial REITS

Since people always like to say industry practice, so lets industry practice it. Let's compare with the other industrial REITS.

Ascendas is really solid. While DPU increases, the management fees decreases. Good job!

Aim's fees track their DPU. As DPU rises, fee rises. While DPU drops, fee drops. OK, you win.

Cambridge is an oddball, in that 2013 was an especially 'HUAT' year for the managers but thats because they had an extremely large performance fee due to beating a certain index. But in general, as their DPU decreases, their fees decrease too.

Mapletree is pretty good. While they increase their fees, they increased their DPU. Fair enough.

Soildbuid is doing ok. Similar to Aims, as fees increases, DPU increases. As fees decreases, DPU decreases. Justified.

Yes i am watching.
Exercise your rights and join forces.


Saturday, January 28, 2017

Sabana Reit - At the cusp of an epoch

HSYT keeps saying my english sucks and i am unintelligible. Hence, the need of a nice cheem title to show that i have some class in my english. Anyway, HSYT came to collect angbao from me today and before she left, she muttered the following under her fragrant breath, just to rankle and jiggle this old brain of mine.( got class?)
Aha! Old Uncle who likes to eat soft grass immediately linked up what she was trying to say!That little limkumput of a HSYT!Luckily only gave you $2 for your angbao ,padded with massage and skincare vouchers with minimum spend of $88 bucks.. TAKE THAT!

So back to the Sabana story which i just recently bought just to support the movement. Unlike others who have lost money, i did not.


I own many other counters, including a splattering ( got class?) of REITs. I thought that if we could make this a precedent (got class?) , it will bode well for minority shareholders in that we would not be taken advantage of for all other REITS or companies. It doesn't cost much to have a voice. It cost only $37 ( 100 shares ) to make your voice heard and start making all REIT managers or companies more accountable.

Fees, Fees,Fees, Heads i win, Tails i still win

Let's look how misaligned a REIT is to the unitholders. 
(below is summarised from Sabana IPO prospectus. Nearly all REITS have a similar structure if not identical)

Base Fee  
Up to 0.5% per annum of the value of the Deposited Property.
Performance Fee 
0.5% per annum of net property income if it achieves at least 10.0% in annual growth in DPU over the previous financial year
Acquisition Fee 
1% of acquisition price
Divestment Fee 
0.5% of sale price

**Any acquisition or divestment of properties do not need unitholders to vote

Now, how could a REIT manager game the system to earn more money?  

If the REIT gearing is low, i could borrow more money to acquire a lot of properties and increase  the DPU at the same time, increasing my base fee, netting performance fee and earning acquisition fee.

If the REIT gearing is nearing the regulatory limit of 45%,  I can issue rights or issue perpetual bonds to purchase new properties to increase my value of deposited properties to increase my base fee, and earn acquisition fee.I could also divest properties, netting some divestment fee in the process.

Will it be to my benefit to work hard to negotiate a lower price for the new property purchases?NO. Since the higher the acquisition fee, the more i earn as i earn 1% on the price, but better to play safe by buying at market value based on independent consultant's assessment so that i have evidence to back me.

Do i care if the purchased property i buy is lousy? Not really, since i can always dispose of it and earn the divestment fee.

Would it benefit me to spend money to do Asset Enhancement ( AEIs) so as to retain or attract new tenants? Not really, if it's unoccupied, maybe it's better and i can now justify its disposal and earn the divestment fee.

What happens if the DPU or share price goes down eventually? I am still earning the base fee, acquisition fee and divestment fee. I can't be fired. Heck the performance fee, it's too much work to find tenants, market the properties and retain tenants just to earn the miserly 10% of net property income.


In case you are unaware, Sabana is in the process of  buying three properties and disposing 1 property. 

On a side note, please do not depend on the Monetary Authority of Singapore( MAS) to help us. They have many stakeholders whose interests MAS needs to balance while looking at the big picture. I think they are doing a good job already, having come up with a consultation paper on REITS and the issue of accountability and alignment was brought up. 

It is we, the unitholders, who must ACT as no one care more about our money than ourselves. 


Thursday, January 26, 2017

Sabana Reit - An opportunity to unlock value

On 25 January, Sabana released their latest results presentation. I had a very troublesome time trying to calculate their price-to-book value post-rights.  The adjusted NAV per unit shown refers to pre-rights but naturally, everyone would be interested in knowing the post-rights one as the rights shares has already been issued.

I can't find any information on the new right units in their latest presentation. I had to dig up previous documents in order to find out the number of new rights units... so troublesome.

New rights units = 310,712,244
Units in issue as at 31 Dec 2016 = 742,371,286
Total units in issue = 1,053,083,530
New proceeds = $80,000,000
NAV as at 31 Dec 2016 = $556,795,000 
Total NAV post rights = $556,795,000 + $80,000,000
Nav per unit =  $0.605
Price to book = 0.60

25 January Results Presentation
Lately, there has been this group of investors who are trying to remove the Sabana manager OR to dissolve the trust and sell the assets. It seems to be going well. Therefore, i bought a little bit of Sabana to participate in it. 

The worst case that can happen is that these group of investors fail and i just get an about 7-9% dividend yield . I would much prefer them to dissolve the trust and sell the reit and i get 30-40% return ( assuming it can sell near it's NAV value and after factoring cost of selling). 

Even without these considerations, i think it would be good for me to support the rise in minority shareholder activism as this would sent a message to other companies that they need to buck up and not take us for granted.


Saturday, January 14, 2017

Singpost - Don't count on it for dividends

Singpost is not longer the high dividend paying stock it used to be with the change in dividend policy. With the increased shares due to placement, their latest half year earnings per share is illustrated to be 2.63 cents.

 Extrapolating this to a full year earnings per share = 5.26 cents.

With a 60% payout ratio = 3.156 cents
Dividend yield (last done price $1.495) = 2.11%
With a 80% payout ratio ( last done price $1.495) = 4.208 cents
Dividend yield = 2.81%

The range of 3.156 - 4.208 cents is a fall from the usual and consistent 6.25 cents.

To be fair to Singpost, the earnings per share does not take into account the following:
1) peak shopping season in the second half of the year
2) cost savings due to their Regional eCommerce Logistic Hub which opened only in Nov 2016.
3) Reopening of SPC retail mall in mid 2017
4) Completion of synergies between their acquisitions such as Jagged Peak and Trade Global

4th November 2016 Presentation
5th January 2017 Presentation

Friday, December 30, 2016

Asian Pay Television Trust - from IPO price of $0.97 to $0.38. Dividend yield of 18.4%!

HSYT came to me again to say this motherhood statement: :"The time to buy is when there's blood in the streets.Go buy APTT. Drop a lot! Dividend yield 18.4%,  P/B 0.45!"

Nice, worth a look! Except that this phrase sounds vaguely familiar...Rothschild or something. Anyway, a drop of $0.97 to $0.38 in 3 years is darn huge and it would be very interesting to point the blame at something, interest rate rise, China factor, franchise rights not being able to renew, e,t.c and seriously, this pointing finger is pointless and it is after the FACT that it has dropped. not before the FACT where one can profit immensely with usual all talking heads. Still, its good to know what the risk are, if one were to decide to enter this Asian Pay Television Trust ( a spin off of  the now delisted Macquarie Infrastructure International Trust in 2013). Their only asset is the Taiwan Broadcasting Communications ( TBC)

Is there any catalyst for this drop in share price?

Proposal to Replace National Cable TV Rate Caps due to digitisation
From 2013 IPO Prospectus
Has this proposal been set in stone by the National Communication Commission? If yes, what is the digitization proportion of TBC in 2016?

If TBC fails to meet the timeline, it has a cap in the amount it can charge which could reduce its earnings going forward.

Splitting of 100 channels to four packages A,B,C and D in 2017
From 2013 IPO Prospectus
The proposal is that from 2017, TBC has to split its 100 channels into four packages. Customers can then choose to buy what they need instead of paying for some channels which they don't watch. Will this cause a reduction in their earnings?

Material licenses held by TBC due for renewal in 2017 and 2018

2 out of 5 of their cable licenses are due for renewal in 2017. The other 3 are due for renewal in 2018.
Now the questions is will they be renewed ? If yes, is it expensive to renew or else more debt or rights needs to be undertaken to fund this renewal?
Anyway, it has an existing debt of SGD$1.2 billion dollars currently ( gearing of 47.2%).

I have emailed the investor relations for the above and hope they answer.

Tuesday, December 27, 2016

Interest rate sensitivity of Sabana

Like a moth to a flame 
Burned by the fire 
My love is blind 
Can't you see my desire?
 - Janet Jackson

So if you have read my previous post about this particular "Hot sweet young thing " friend who recommended me to buy Sabana, she is back to recommend me! After Sabana's price having dropped further to $0.38 from the price of $0.51 when she recommended me. (Due to rights).

Hot Sweet Young Thing ( onwards called HSYT) said:" COme oN, a lousy business is a good investment at the right price. Can you calculate how Sabana will be affected by the rise in interest rate instead of just amplifying what is thrown around about a rise in interest rate and REITS are going to die...PleAse!"

Being a HSYT does have her

To calculate the debt of Sabana post rights

Using the above to calculate Debt

To calculate the distribution of Sabana post rights

With the 3 new purchases, the increment in distribution is assumed to be $6.15 million per year. This figure is attained from investmentmoats.  I agree with his way of calculating this figure. I emailed Sabana investor relations for a post -rights forecasted distribution but they replied that they were unable to provide and told me to wait for the Offer Information Statement ( together with the application forms) which will include more information.

Pre-rights latest distribution annualised based on the table below = 4.77cents per unit.
Pre-rights total number of shares  = 778 million.
Pre -rights total distribution annualised per year = $37.1 million ( $0.0477 times 778 million shares)

Lastest distribution pre-rights for annualised DPU

Interest rate sensitivity of Sabana post rights
Interest rate sensitivity

By the way, it is quite irritating that Sabana isn't able to give a forecasted DPU while other Reits do give. This makes it troublesome to do the above. Arrgh the privileges of a HSYT....