First REIT- Important Upcoming Events And Accumulation of Units (Will First REIT Soar Or Crash Further?)

3 key upcoming events to watch out for First REIT for this quarter. (1) The AGM for FY2018 will be held at Mandarin Orchard Hotel on 9th April 2019. There is a resolution tabled on top of other routine resolutions such as re-appointment of auditors. The additional resolution sought to change the Trust deed and proposed that the distribution payment period of First REIT be amended from 60 days to 90 days. (2) The other major event is the announcement of 1st quarter results on 10th April 2019. (3) The third event would be the AGM of Lippo Karawaci on 18th April 2019 to approve the US$730 million dollars worth of rights issue to resolve the liquidity crisis. 

1. Additional resolution to change the distribution payment period of First REIT from 60 days to 90 days during AGM on 9th April 2019.

The rationale for the proposed amendment was due to the change in ownership of the REIT manager which have been effectively bought over by OUE Lippo Group. Based on the Manager's post-completion review to synergise operations with other OUE Lippo entities, if the distribution period of First REIT were to remain at 60 days, First REIT would have to operate on a different payment cycle and operating cycle from OUE H-Trust and OUE C-REIT. The change in the distribution payment date will thus streamline the operations of the REIT manager and generate savings in time and resources.

It was further made known that unitholders are not materially prejudiced by the change in timing of First REIT's distribution payment by this extra 30 days as First REIT can earn interest on the distribution amount during this period.

I think that great emphasis was placed on the elaboration that this is purely operations planning due to the takeover so that investors do not make wild guesses that this is due to cash flow difficulties. 

2. The announcement of Q1 FY2019 financial results and amount for distribution on 10th April 2019.

Looking forward to the release of the results on 10 April 2019 (Wednesday) after the end of its closing and the upcoming dividends payment distribution. 

3. AGM of Lippo Karawaci on 18th April 2019 to approve the US$730 million dollars worth of rights issue to resolve the liquidity crisis

This is a closely watched event by the entire market that will determine the fate of the entire fortune of Lippo Karawaci as well as First REIT. Once the shareholders approve the rights issue, it will guarantee rental payment for FIRST REIT for the next 2 years from funds being set aside for this purpose. 

Final Thoughts:

I think that to me, point 2 and point 3 as alluded to the above mentioned are very important and I will be monitoring them closely. I have sold off 20,000 units previously in Feb'19 at an average price of S$1.10 to reduce my concentration risk. With the announcement of the rights issue at Lippo Karawaci, I think that the holding risk has become more palatable and have begun accumulating 45,000 extra units of First REIT at around S$0.990 to S$1.00 per unit.

As at 5 April 2019, I am holding on to 71,000 units of First REIT which is around S$70K. I rationalized that with the completion of the rights issue and appointment of 3rd generation leader John Riady as new Lippo CEO to improve the tarnished image, the risk premium required by the market will go down and there will be at least a 10% capital appreciation over the next year. In the meantime, the 8.5% dividend yield should compensate for holding on to First REIT and hopefully, cover for the plunge in price (during the lead time from bad news announced and selling off of units) should things go awry.