Welcome

Welcome to my investment blog where I share with you my analysis of REITs in Singapore.

I hope that my investment philosophy will bring me a steady stream of income apart from my job. I am aiming for at least $3,000 per month which can sustain the current expenses of myself and my family.

Do enjoy reading my blog and post any comments that you have. I welcome them because it is a time to learn from each other.

When I am looking at investing in REIT, here are some of the guidelines that I am looking at. Feel free to comment on it. I am willing to listen to ideas.

-> at least 8% yield.
-> Price that is lower than its NAV.
-> Low gearing (if possible)
-> High secured NAV.

Current Dividend income is $4,200/month.

Monday, December 1, 2014

Analysis of OUE Hospitality Trust - Acquisition of Crown Plaza Hotel

Current Price on 28th Nov 2014 = $0.90
  • Current Yield = 7.29%  
  • Price-to-book Ratio = 0.903
  • Asset Per Unit = $1.357
  • Liabilities per unit = $0.456
  • Gearing = 33.5%
OUE Hospitality Trust has just announced that they are buying Crown Plaza Hotel and its extension for half a billion dollars. The above statistics are the ones before the acquisition.

In my view, this acquisition is beneficial for OUE shareholders and not OUE Hospitality Trust holders. To OUE Hospitality Trust, it may be just what I would say "Net Equal" situation, meaning with the same yield, and same NAV. The increase in yield is from 7.29% to 7.56% if it is funded entirely by debt. However with that, their gearing will be 47.9% which increases its risk.

Therefore, they are likely to finance it partly with equity which will lower the yield to 7.34%. To me, the increase is too little. No doubt they are diversifying their asset base but they need to purchase it with increase in yield at least.

They have not announced whether they are going for 100% debt or partly financed by equity. But in my opinion, when it opens on 1st Dec, I am predicting that their share price will drop due to its increased risk.

2 comments:

  1. Hi,

    I find your blog very interesting and I want to learn more about REITs in my investing journey. As I am new and still learning how to evaluate REITs, I would like to ask why Far East Hospitality Trust has dropped some much since IPO. This is so I can avoid it next time. Appreciate your views. Thanks.

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    Replies
    1. Hi K,

      Many thanks for your encouragement. We journey it together.

      As for Far East Hospitality Trust, I am in the process of analysing it and will put it in the upcoming posts.

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