The recent Sunday Times investment section list down K Green as a dividend stock producing yield of over 9% which is extremely impressive. However, the journalist failed to point out that there is a big difference between a trust and a REIT. Under the Singapore Companies Act, all companies can only pay out dividends from earnings (accounting profits). This is not true for business registered as a Trust. For such business, they are able to pay out dividends based on free cashflow. The fair value of K Green will thus decline overtime based on it's current business model.
Many investors seems confused by the accounting for concessionary service agreements and how to compute a fair value to K Green. Will try to analyse how we should work out the fair value in future posts.
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