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 $3,300/month.

Thursday, September 17, 2015

Analysis of Viva Industrial Trust - Considering Private Placement which is bad for investors.

Current Price on 9th Sept 2015 = $0.725
  • Yield = 10.20%  
  • Price-to-book Ratio = 0.872
  • Assets per unit = $1.403
  • Debt per unit = $0.572 (including current liabilities)
  • Gearing = 40.7%
  • Credit Rating = BB
Viva Industrial Trust has just announced that they are buying another property called Pioneer Property for $53.1 million. They claim that it is yield-accretive if it is 50% funded by debt and 50% funded by equity. Combining with the earlier announcement on acquisition of another 2 properties, yield is going to increase to 10.56%. However, there is a problem and it is increasingly becoming a big one for investors. Private Placement!

Private placement is good if you need to raise cash and you only needed a small enough amount. However to investors, it is never a good thing. In general, it is usually dilutive to NAV and yield. To their credit, they have tried to show in their documents that it is going to be better on the assumption that new units are priced at $0.74 but now trading price is already lower. So any private placement is going to be even worse, benefiting only certain investors (For the record, I manage to participate in one before just because I saw it in time and my OCBC broker happens to be able to do it for me. I don't know whether I will have a chance to participate in the next round)

To me, the best option is still rights issue simply because every investor gets a chance to participate which in my opinion is fair. Yes it is draggy because the whole process takes about at least a month but they are suppose to create investment value for us as managers right? Moreover, rights don't really create investment value. It is just an invitation for us to buy more shares and get more dividend. After that, the value drops and everything is likely to be in square one again.

I am vested with 79,100 shares worth now $57,000 (Sitting on a $6,000 paper loss). Even if they go for rights issue, I doubt I will be able to benefit a lot on it. Just hoping that there is no value destruction exercise coming along. 

1 comment:




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