Saizen REIT is probably the worst-hit REIT in SGX with about 15% of their portfolio being damaged. For the purpose of this analysis, there will be a few assumptions.
- Assuming that the properties are wiped out and will not contribute to the REIT anymore.
- There is a 10% decrease in valuation due to increased risks.
Here are the statistics on Saizen REIT ($0.14)
- Yield = 6.31%
- Price to Book ratio = 0.817 (NAV at $0.171)
- Asset per unit = $0.369
- Debt per unit = $0.198
- Gearing = 53.6%
From the data, we can see that the NAV is still at $0.171 (from $0.271) even when the affected properties are abandoned. Moreover, the unaffected properties are still giving a modest yield of 6.31% (drop from 7.43%), which does not fit my criteria but nevertheless still respectable. The current panic selling, in my opinion, is just an over-reaction and will provide opportunities for buy-in.
One thing which I worry about is the debt. Debt is assumed to remain the same (repayments are still expected) which pushes the gearing up near 60% limit. Moreover, the higher the debt, the weaker it is. I expect rights issue to come to 'normalize' the REIT and bring it down to a respectable level. This will be a critical factor.
I am currently out of cash to invest (my family needs them more) so I will wait and see first. In any case, I am holding on to my current investments with Saizen REIT