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| Potential for higher distribution this coming month? |
One characteristic of a true-blue Kiasu Investor (KI) is to always target the highest-yielding investment among those of a similar risk profile. In Singapore, there are plenty of choices for high-yielding investments. Most of the REIT counters are trading at relatively large yield-gap when compared to Singapore Government Securities and bank deposits. The commonly cited counters with the highest yields are namely AIMS AMP REIT ($0.21), Cambridge Industrial Trust ($0.505), Sabana REIT ($0.935) and Cache Logistic Trust ($0.935). All four counters are focused on the industrial and logistics sector, with the first three expected to provide yields of > 9% based on last traded prices.
At a quick glance, there doesn't seem to be too much differentiating the four. Delving in deeper, an investor may consider other factors such as gearing level, discount to NAV, the strength of sponsor (or rather the lack of one), the past performance of management etc. Applying the above analysis, one would observe that Cache Logistic Trust has a lower gearing level and a relatively stronger sponsor and hence is compensated by a lower yield and trades at a slight premium to NAV.
However, being a die-hard KI, I applied Kiasu Investing Rule #2 (more on this rule later), which is when I came across a line in Sabana's IPO prospectus stating that "Sabana Shari’ah Compliant REIT will make distributions to Unitholders on a quarterly basis, with the amount calculated as at 31 March, 30 June, 30 September and 31 December in each year for the three-month period ending on each of those dates. However, Sabana Shari’ah Compliant REIT’s first distribution after the Listing Date will be for the period from the Listing Date to 31 March 2011 and will be paid by the Manager on or before 29 June 2011." This effectively means that the upcoming distribution, being the first for Sabana since it's listing on 26 Nov 2010, could potentially include distributions for a period of slightly over four months (i.e. from 26 Nov 2010 till 31 Mar 2011) compared to the typical three months.
Putting on our Kiasu Analysis (KA) hat, it is worthwhile to note that Sabana REIT's manager had forecasted DPU of 8.63 cts for the period from 1 Jan 2011 to 31 Dec 2011 (twelve months). Assuming a similar distribution rate for the period from 26 Nov 2010 to 31 Dec 2010 (four months), we are potentially looking at a potential distribution of 2.876 cts for this quarter (8.63/12 times 4), or approximately 3.076% based on last traded price of $0.935 (potentially making it the highest distribution in percentage terms among all the S-REIT counters for this quarter!)
P.S: Please note though, there is the risk that the forecasted distribution for the year may not be evenly spread out over the four quarters like we have assumed in our calculations.
