Analysis of Saizen REIT - Going to be taken over... Wow!

Current Price on 24th Oct 2015 = $0.925

• Yield = 6.34%  
• Price-to-book Ratio = 0.779
• Assets per unit = $2.028
• Debt per unit = $0.841 (including current liabilities)
• Gearing = 41.4%

Saizen REIT announced that they have an offer on their table to be taken over or buy over their assets which I thought is very rare and everyone should take notice of what is going on in this episode. They did not reveal a lot but looks from the sudden increase in price (close to 10cents recently already), there are people who is banking that it will materialize. Let's take a look at the statistics

Yield is now at a modest 6.34% after trading at 7+% for quite a while. It looks low, but if you are buying over everything, it look decent actually. NAV is currently at $1.188 which is about 22% more than the trading price. It means that there is a chance that the takeover price will be higher than the current trading price. In the best scenario, it will be 22% higher (Buying at NAV price)

If I were to look at this, the deal for us look like this. If it materialize, investors will earn between 10 - 22% over the next few months. If it does not materialize, price will fall by about 10% aka back to its original trading price. If you have bought it earlier (I did not), your margin of safety will be higher and returns will be higher as well. Sounds like taking a fifty-fifty risk. Looking at the way they wrote the announcement aka using the word "Firm Offer", they seem to be positive about the deal.

To me, this is a test on how accurate the annual valuation is as I have been using it to do my price-to-book ratio. If they sell it at a cheaper price than its NAV, it cast doubts on their valuation process and also affect other REITs as well. But if they manage to sell at NAV, it will give a big boost to all other REITs.

Now is what am I going to do? If I take the risk with $10,000, the range of my profit/losses will be between $1,000 loss and $2,200 gain. Am I going to risk more? Well, I would like to try and gain some experience from it. I need to get myself into the game also to feel the emotional aspects of it.