First REIT: 1Q FY2011, Prospects Looking Up!

First REIT announced 1Q FY2011 results earlier today after markets closed. Our hopes for a special bumper distribution were like what Singaporeans like to say, "crushed like a cockroach." Distribution per unit (“DPU”)  was also lower y-o-y on a quarterly basis due mainly to the dilutive 5-for-4 rights issue in Dec 2010. This was because the increase in distribution due to the maiden contributions from the newly acquired Mochtar Riady Comprehensive Cancer Centre and Siloam Hospitals Lippo Cikarang were not sufficient to offset the dilutive effects of the rights issue.

Now that the bad news are out of the way, let us try to look for some positives in the results announcement. Firstly, management reiterated their aim to raise its asset base from the current S$584.6 million to S$1 billion in the next two to three years. This implies that we can anticipate more upcoming acquisitions to be made shortly (likely in Indonesia) and correspondingly, significant increases to subsequent distributions.

Secondly, management commented that divestment of the proposed Pacific Cancer Centre @ Adam Road (“PPCC”) has lowered First REIT‟s gearing to a low 13.8%! Meaning that the company can afford to go on the above mentioned acquisition spree without the need for more dilutive rights issues.

Thirdly, the announced DPU for quarter came in at a decent 1.58 cents, which still translate to an attractive annualized yield of about 8.66% (certainly beats the "red-hot" Hyflux Preference Shares hands down!)

Going forward, the prospects of First REIT certainly does look bright for the Kiasu Investor!

Link to presentation slides.

Kiasu Investing Rule #2: Manage your REITs as if you were managing your Fantasy Premier League goalkeepers

Before one can fully comprehend the above rule and put it to good use, the Kiasu Investor (KI) would first need to have an appreciation of what Fantasy Premier League (FPL) is all about.

Not exactly our idea of

"Fantasy Premier League"

For the uninitiated, Fantasy Premier League (FPL) can best be described as an online competition-cum-strategy game that involves millions of players from around the world (and yes, there is real and decent prize money for the ultimate winners). The game is based on the weekly performance of football teams from the English Premier League.

To put it briefly, the underlying premise (objective) of this game is to:

- assemble the best football players that you can from a limited budget (to form your team).
- each week, your team will get an overall score based on how well the footballers you have selected perform in the real-life Premiership matches.
- each footballer have a "price tag" that may fluctuate daily depending on how well he is performing in his matches.

- tinker with your team by transferring footballers in and out in an attempt to maximize your game score. (again restricted by your budget)

All this may sound very well, but one may start to wonder, "What the hell has the above mentioned got to do with my investment strategy??"

Allow us to explain: In FPL, one of the most basic but extremely effective strategy when selecting your goalkeepers is to "pair" two cheap keepers rather than go for a reputable goalkeeper that would cost dearly. This is because matches are typically played in "home" and "away" fashion, with the teams playing at home typically out-performing (due to home ground advantage). Hence by choosing two average goalkeepers and alternating them every week (always playing the goalkeeper at home), there is a good chance to earn excellent "returns" every gameweek and hence outperforming the score you would have gotten by playing the more "reputable" keeper week-in, week-out.
Coming back to our investments, by applying Kiasu Analysis (KA), we can also divide the stock counters that we favor into alternate groupings based on their distribution / dividends dates.

 As an example, first, we can apply KA to come up with a list of trusts / REITs that gives out half-yearly distributions (i.e Feb & Sep). Next we come up with a list that gives out half-yearly distribution in alternate quarters (i.e May & Nov).

In the 1st Group (distribution in May & Nov)

Ascendas India Trust  - 7.16% annualized yield

In the 2nd Group (distribution in Feb & Sep)

Saizen REIT - 6.933% annualized yield
K-Green Trust - 8.21% annualized yield


By adopting a "pairing" of perhaps Ascendas India Trust (AIT) with K-Green Trust (KGT), I can potentially extract annualized yield of up to 15.37%** by switching in-and-out between the two after receiving each distribution.


For Illustration:
Mar-May'11     - Buy into AIT
May'11            -  receive AIT distribution (approx. 3.5%)
Jun-Sep'11      - Sell AIT, buy into KGT
Sep'11             - receive KGT distribution (approx. 4.1%)
Sep-Nov'11     - Sell KGT, buy into AIT
Nov'11             - receive AIT distribution (approx. 3.5%)

**assuming nett zero gains (or losses) from switching between the counters

In this way, you get to receive distributions from both counters within the "pairing" but only need to stay invested in only one counter at any point in time.

The best part is, you can apply this principle to form any "pairings" of your personal preference (need not necessarily be REITs or trust, though the former typically provide more certainty in terms of distribution). In fact, for Grandmaster KIs, you can even do pairings of three or more counters.

More examples of counters that gives half-yearly distribution: 
CapitaComm, CapitaRChina (i.e Jan & Jul)
SPH (May & Dec)

Perhaps you can discover and share with us your personal favorite pairings or combos?

Potential Bumper Distribution from First REIT from Sale of Adam Road Hospital?

First REIT ($0.735) will be announcing first quarter 2011 results tomorrow (Wed, 20 April). The sale of Adam Road hospital was completed on 25 Mar 2011 with a net cash gain of approximately S$8.3 million. In the announcement dated 23 Feb 2011, it was stated that if the full estimated gain from the sale had been distributed for the financial period 1 January 2010 to 31 December 2010, the DPU would have worked out to be 9.06 cts. This translates to a full-year distribution yield of approximately 12.3% on last traded price. Of course, it is entirely up to the REIT manager's discretion on how much of the gain (if any at all) to distribute. However, being the ever optimists that we are, KI is "secretly" hoping for a bumper distribution this time round.

How to benefit from US stocks plunge after credit rating outlook downgrade by S&P?

Kiasu Investing Rule #3: Always try to pick-up "Cum-Dividend" stocks as close to Ex-Dividend date as possible and at as low an entry price as possible (the ideal is to time entry at the lowest price point between CD and XD dates).
Given the slew of Ex-Div dates that are rapidly approaching, and the timely plunge in US stocks caused by the credit rating outlook downgrade, the coming sessions may present us with a golden opportunity to not only put into practice Kiasu Investing rule #3, but also possibly at an ideal entry point as mentioned in the rule above.
For the benefit of fellow KIs, I have attached two separately compiled list of upcoming dividends for your easy reference.
The first one is from UOB Kayhian shows the list of SGX stocks with significant payouts with Ex-dates in April 2011

The second list was kindly compiled by my broker from CIMB.

Good luck and have fun!

Sabana REIT yield potentially the highest among all S-REITs?

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.

Is Hyflux 6% Preference Shares the new Gold?

Came across a candid commentary in Business Times which pointed out that even during morning walks at Botanic Gardens, one could not escape overhearing retirees chattering and getting all excited over the new preference shares issue announced by water treatment firm, Hyflux.

Getting All Excited over New Gold?

On a more sombre note, the article did mentioned that DBS, the issuer's sole manager for this exercise, had closed the book early after receiving orders close to $1.4 billion or 7 times from both onshore and offshore institutional clients. The article went on to highlight some of the risks investors should be aware of before blindly jumping on the Hyflux bandwagon along with their fellow Kiasu Investors (KIs)...

The article went on to quote the issuer's manager's comment that based on the extremely positive response this time round, investors can look forward to seeing more corporate issues in the pipeline.

Hyflux 6% Class A preference shares worth a punt?

Singapore water treatment firm Hyflux announced its preference shares offering of up to S$200 million.


At first glance, I thought this didn't look too fantastic a deal...given that there are a number of S-REITs out there that are offering higher or comparable yields.


However, news from the placement tranche seems to indicate that demand for this is very "hot" (reminiscent of the earlier DBS 4.7% Preference Shares offering)


Should this be worth a "Stag" then? Probably so, but don't expect too much in terms of percentage gain... unless of course, our hordes of fellow Kiasu Investors (KIs) cannot resist chasing the price up...