Tuesday 28 December 2021

Trading Halt For Both Mapletree Commercial Trust and Mapletree North Asia Commercial Trust

Trading halt was called since this morning for both Mapletree Commercial Trust ("MCT") and Mapletree North Asia Commercial Trust ("MNACT"). Looks like a possible merger and acquisition involving the two REITs to build up its size for greater synergy? Yesterday, I was trying to buy additional Mapletree North Asia Trust due to its high distribution yield of around 6.5% but was very surprised to see the price keep shooting upwards and have to give up. SGX  regulators ought to do better in preventing leakage of important information from leaking out before major announcements. In the end, I decided to invest the extra cash into Capitaland Integrated Commercial Trust (this is another story that I will share on another day). Let's keep our fingers crossed that Mapletree will come up with some value adding initiative in their upcoming announcement for all investors.

(Note: I am currently vested in both MCT and MNACT).

Tuesday 14 December 2021

Dasin Retail Trust On The Verge Of Bankruptcy Declaration? Will It Be Suspended From Trading on SGX?

This is a follow up on my previous post on Dasin Retail Trust ("Dasin") on 18th September 2021 with regard to its debt crisis of S$500Mil since the syndicated bankers were willing to only grant a short term extension of 5 months from July 2021. The day of reckoning for Dasin approaches this week with the bank loan officially being in default on 19th December 2021 if it is unable to secure support from the syndicated bankers. Up till today, there is still no news being released by Dasin's new Trust Manager, Sino Ocean on SGX. Dasin's senior management has been silent since the last announcement made to the public on 7th November 2021 on the change in new Trust Manager. Unit prices for Dasin also dropped sharply and is now near its all time low at S$0.375 per unit in stark contrast to S$0.785 per unit during its peak this year. The silence for so many weeks in the face of imminent loan default is deafening. Are we witnessing the calm before the storm?
1. Taking calculated risk
I am still holding on to my small stake in Dasin Retail Trust as my investment thesis is that since the new Trust Manager, Sino Ocean which took over is a listed company on the Hong Kong Stock Exchange and well-known, the bankers will be willing to grant a long term extension of the due bank loan instead of rolling into a default and proceeding with creditor winding up process. Forced sales of investment properties is not going to be good for all stakeholders. Its current dividend yield is close to +14.2% based on its last unit price of S$0.375 per unit as at 14 December 2021.
2. Liquidation stress testing of realisable assets to repay bank loans and Unitholders
I have written in to the Customer Relation Officer on their website but till now have not received any reply on the status of its bank loan negotiation. In the worst case scenario, we have to assume that the fair value of the investment properties in Dasin's books have been severely inflated. If distressed selling price is at a discount of <-47.3%> of its last disclosed numbers, then this will mean a total loss for current investors-pls see below screenshot for illustrative simulation model. Not impossible given the case of Eagle Hospitality Trust. Also, given that China property debt crisis from Evergrande- if not managed well- may lead to a case of economic meltdown in the entire China market across all sectors. However, I am keeping my fingers crossed that the discounted selling price is at most only 40% off the last valuation in order to recoup back some of the investment costs. 
Parting thoughts
I have no idea how my tiny foray into Dasin will turn out. My investment thesis may turn out to be totally wrong. If so, this will be the 2nd SGX listed Trust (within this 2 years) that collapsed with investors losing all of their investments. The only good thing about Dasin is that the results will be known quickly by next Monday (20th Dec 2021) latest. It will either increase by maybe 50% from good news on renewal of bank loan or be suspended indefinitely due to default of bank loan when the announcement is released.

Please also see my previous posts on Dasin:

Sunday 5 December 2021

Investment Portfolios Updates- S$619k (3 Dec'21)- Equity Portfolios Facing Challenge of Omicron COVID Variant

The stock markets tanked recently due to the Omicron variant. I have sold off 42,000 units of my SPH REITs under my Portfolios to raise cash level at the start of the week. Subsequently, prices of local bank stocks and REITs dropped further and I took the opportunity to buy into more OCBC and Mapletree Industrial Trust while retaining some cash. My investment approach is still primarily an income focused strategy using cash account (Portfolio 1) supplemented by my Portfolio 2 opened with Maybank Kim Eng and leveraging on their Margin facilities-current projected dividend income is +S$44.6K per annum. For me, no point in timing the market by selling a major part of the portfolio as it is better to stay invested in order to continue to receive dividends and not missed out on opportunities such as new M&A announcements.  

1. Portfolio 1- Stocks held in SGX Central Depository
Not much action here except for selling off of SPH REITs to buy into 1,000 OCBC shares while retaining cash of around S$10K here from the sales.

2. Portfolio 2- Margin purchased securities
(i) The past 2 months has been rather interesting. I took a calculated risk with my margin account by buying into SPH shares after the announcement of Keppel Corp proposed acquisition at S$2.01, figuring that the market pricing then at around S$1.90-S$1.93 range, offers the most probable upsides with S$2K in profits expected with the successful completion of the offer. Next, Cuscaden Peak came into the picture to start the bidding war and I closed off my margin position in SPH shares recently to walk away with +S$6K profits (S$2.34 per share exit) as I do not think there will be another 3rd party offer.

(ii) I have reduced my holdings in retails REITs such as Lendlease REIT and SPH REIT. Anti-COVID measures will hit retail badly if the Omicron strain spreads widely.  

(iii) I have also increased my holdings in Mapletree Industrial Trust. I figured that it is prudent risk management to have the backing of strong sponsor like Temasek in the event that the COVID crisis worsen and there is a need for sponsor's cash injection should the property value plummet like in 2008. 

3. Portfolio 3 (with Tiger Brokers)- Venture into higher risk as well as capital growth stocks here
However, my venture into China Alibaba continues spiraling downward non-stop with concern over forced delisting by China regulator from NYSE and I am taking a huge hit of unrealised loss of almost <S$9k> from it. I will probably do a short write-up on Alibaba in my next post. 

Basically, I think the fundamentals of Alibaba are still intact despite the crackdowns by China regulatory and the lower growth rate. Just this week, I have invested another 100 shares of Alibaba at a price of HKD121.6 per share. But I think this is the last batch of Alibaba shares that I am buying to mitigate the risk of holding excessive Alibaba stocks.

Parting thoughts
I am looking forward to receiving further dividends in December 2021 for further re-investments. Let's see how the market reacts next week and whether there is further blood-bath due to the Omicron variant. However, personally, I do not think Omicron will be a repeat of the 2020 March crash as current vaccine surely still must have some effects (despite reduced efficacy) on the new COVID strain and chances of world-wide lockdown again is slim. I will continue buying in piecemeal to exploit the current market decline.     

Tuesday 30 November 2021

Digital Core REIT IPO- Exercise Some Caution If One is Venturing into This New Data Centre REIT Crusade.

Coming off the heels of the first REIT IPO (Daiwa House Logistics Trust) on the Singapore Stock Exchange is Digital Core REIT. From the many glorious reviews by many bloggers and cornerstone shareholders such as DBS lining up, we can foretell that Digital Core REIT seems to be on its way to a very smooth and successful listing.  Nevertheless, I am not really excited by it and will not be taking part in its IPO- the reasons I will explain towards the end of this post. Let me start by putting a summary background about this second 100% pure Data Centre REIT that will soon be listed on the SGX followed by some quick highlights of its positive traits. Last but not least, prospective investors should take some caution for this data centre investments instead of thinking that US data centres are one of the safest investments out there- I will elaborate more on this point towards the end of this post.  

The initial public offering (IPO) portfolio will comprise 10 freehold data centres in the US and Canada with a total net lettable area (NLA) of 1.2 million square feet (sq ft).

Four of the data centres are located in the Silicon Valley, with another 3 in Northern Virginia, 2 in Los Angeles and 1 in Toronto.

Portfolio occupancy is at 100 per cent with a tenant base comprising blue-chip companies including global cloud providers, global colocation and interconnection providers, social media platforms and IT solutions providers.

Weighted average lease expiry of the portfolio stood at 6.2 years based on base rental income for the month of June or 7.7 years by NLA as at end-June. Its distribution yield is expected to be 4.75% for 1st year and increase to 5.26% by second year.
2. Positive traits for Digital Core REIT IPO
The following are the good points I like about Digital Core REIT IPO:

(i). Sponsor is listed on the New York Stock Exchange and well known.
The sponsor Digital Realty is listed on the NYSE and is well known for its development and operation of data centres. Digital Realty was even involved with the sales of its data centres to Mapletree Industrial Trust in early January 2020. So in a way, we can see the footprints of Digital Realty in Mapletree Industrial Trust.

(ii). Alignment of Sponsor's interest with Digital Core REIT
Post-IPO, Digital Core REIT will have right of first refusal (ROFR) to a potential pipeline of over US$15 billion of data centres - both existing and under construction. Similar to the initial portfolio, the sponsor intends to co-invest in 10 per cent of each of Digital Core Reit's future acquisitions.

(iii). Significant debt headroom of US$596Mil for future acquisition
Digital Core REIT is expected to have an aggregate leverage of 27 per cent as at the listing date -significantly lower than its peers - giving it a debt headroom of up to US$596 million. This means room for taking on cheaper financing from bank borrowings to get a higher return for unit-holders. 
3. Points to exercise caution before diving into this IPO
Despite the positive traits as aforementioned, I do have some serious reservation about jumping into this IPO:

(a) Withholding tax regulatory risk-30% downside risk to distribution yield
The problem with holding SGX listed REITs with US properties portfolio is the ever present significant risk that the US favorable tax rules for overseas REIT may be changed overnight and withholding tax may be applied which will reduce distribution by a hefty 30%. Many years ago in 2018 (if I recalled correctly), there was a big hoo-ha with Keppel-KBS US REIT as well as Manulife US REIT where their unit price crashed overnight due to uncertainties over the tax holding structure while pending clarifications from the US IRS. I reckon that the current high yield factors in the risk premium from changes in regulatory tax risk.

Anyway, the current approved tax planning always structure a shareholder loan extended to the US entity holding on to the properties and then charging an interest as a form of tax shield. The main way to repatriate profits will thus be via capital distribution via the return of the loan. 

For those interested to understand more about the current tax structure to mitigate US withholding tax for US properties, please refer to my previous post on "Are The Distributions From Manulife US REIT (MUST) Sustainable? Clarifications from MUST's Investor Relation Team".

So, imagine if Digital Core REIT is caught in any such changes to tax regulation, its already low distribution yield of 4.75% will plunge to a miserable 3.33%. The low yield does not seemed worthwhile to undertake the risk especially with such a significant concentration of properties in the USA only.

(b) Worst market timing to choose for IPO- Pure bad luck to be caught with COVID Omicron variant
With stock markets dropping for the past 2 days in particularly with Moderna CEO scaring everyone with his comments that current vaccines will most likely be much less effective against Omicron variant, this is one of the worst possible time for Digital Core REIT to IPO. There are a lot of other alternative investments out there to exploit the sharp drop in stock prices. You can buy into banks or if you are into data centres can snap up Keppel DC REIT or Mapletree Industrial Trust to diversify away the over concentration risk with excessive properties holdings in the USA. 

Parting thoughts:
I have decided to give the Digital Core REIT IPO a miss given that I am really not comfortable with the US regulatory tax risk vs the low distribution yield on offer of only 4.75%. My personal preference would be to take advantage of the numerous opportunities that arises during the current stock markets sell-off. For those subscribing for the IPO of Digital Core REIT, please note that the public offer will end at 12pm on 2nd December 2021 (Thursday) and publicly commence trading at 2pm on 6th December 2021 (Monday)

Wednesday 24 November 2021

Keppel Corp And Cuscaden Peak Got Whacked by SIAS Over SPH Offer.

The Securities Investor Association ("SIAS") has again stood up for retail investors by questioning the big boys Keppel Corp and Cuscaden Peak over their offer for Singapore Press Holdings ("SPH"). Talking about SIAS means also talking about Mr David Gerald, the original founder and president of SIAS. I recalled meeting the man himself over a decade ago while doing my Final Year University Project on Corporate Governance and interviewed him. He is a good man who is passionate in his drive to help retail investors. I recalled his request to my project team members then to join the SIAS as he needs "younger blood" as he is worried about the continuity of SIAS. I have utmost respect for this man. Back to the Singapore Press Holdings epic drama. SIAS has raised questions to both Keppel Corp and Cuscaden after feedbacks from retail investors:

1. Letter to Keppel Corp Senior Management
(i) Mr Gerald's letter to Keppel Corp questioned why Keppel is making it so urgent for SPH shareholders to cast their votes. Keppel had mentioned that the sooner the scheme is approved, the better it is for SPH so as to reduce any further uncertainty and instability for its various stakeholders and preserve value. 

SIAS shot back at Keppel by asking what does Keppel mean by "Uncertainty and instability" and raised the points by some retail investors that it would be fairer and easier for them to make a decision if both offers could be considered at the same time.

(ii) Keppel Corp also got shot a second time when SIAS raised another query on why is it beneficial for existing shareholders to receive Keppel units that trade at a discount to net asset value and why are SPH shareholders asked to trade their exposure to the current SPH assets for commercial properties owned by Keppel REIT. 

Personally, I think that Keppel Corp is only thinking for itself on how it can conserve cash else they would have given a cash option like what Cuscaden is offering right? But they are caught in a predicament as Keppel cannot openly admit this else it will be tantamount to saying "screw" the current SPH shareholders, we just want to minimize our cash outlay for this deal.

2. Letter to Cuscaden Peak
Cuscaden Peak (consortium made up of hotelier Ong Beng Seng, Capitaland and Mapletree) were not spared the hard questions. I think it is funny, as a matter of fact, the way SIAS did not mince their words.

(i) Firstly, SIAS raised a very good question on if Cuscaden's bid were to succeed, what is its long term plan for SPH REIT? Well, Cuscaden has been very quiet on this aspect.

(ii) Secondly, SIAS questioned the strange chain offer for SPH REIT made by Cuscaden of S$0.964 per unit given the last trading price of S$1.01 per unit as at 22 Nov 2021. The chain offer becomes lower than the recent market price? Does not make sense right? Do "surface job" must also do better right?

Parting thoughts
Market pricing hovers mostly at S$2.34 per share (after Ex-Dividend) despite the Cuscaden offer of S$2.36 in full hard cash. Probably market is pricing in uncertainties over whether all the regulatory approvals for the deal will go through. For myself, I have sold off part of my SPH holdings to take some profit while waiting for further drama to unravel and settle down. Looking forward to the replies by Keppel and Cuscaden to SIAS.

Tuesday 23 November 2021

Daiwa House Logistics Trust IPO- 3 Reasons Why I Am Staying Away From It.

The talk of the town recently is on the IPO of Daiwa House Logistics Trust ("DHLT"). Although I see a number of good reviews on it, personally, I will neither be taking part in its IPO nor buying any units post IPO (unless its price plummet to justify a higher distribution yield of at least 7.5%). I will do a quick background introduction of this new SGX REIT and then state the 3 reasons on why I am staying away from it.  

Some background on this new IPO on SGX this year
DHLT is a Singapore REIT established with the investment strategy of principally investing in a portfolio of income-producing logistics and industrial real estate assets located across Asia. The initial portfolio of DHLT (the “IPO Portfolio”) will comprise 14 high quality modern logistics properties in Japan with an appraised value of approximately JPY 80,570.0 million or S$952.9 million and an aggregate net lettable area (“NLA”) of approximately 423,920 square metres (“sq m”).

Three reasons why I am staying away from DHLT:
There are some points that I do not feel comfortable when it comes to DHLT. 

(1) DHLT is supposedly from a renowned sponsor Daiwa House Industry Co Ltd which is one of the largest construction and real estate development companies in Japan.
It is stated that the sponsor Daiwa House Industry Co Ltd is one of the largest real estate developer in Japan. In addition, it is also listed on the Tokyo Stock Exchange. Unfortunately, I am not familiar at all with Daiwa House. This is different from property groups like Lendlease listed on the Australian Stock Exchange. I will prefer to monitor its financial performance  for some time first before taking up a small stake in it for diversification. 

(2)  Some reviews reported that DHLT is a Japan-focused logistics REIT. This is not true.
DHLT is not a pure Japan-focused REIT. The sponsor intend to recycle its Indonesian, Malaysian and Vietnamese properties via DHLT in the near future. I do have personal doubts on the quality of such overseas assets. It gets very tricky when we deal with such overseas market properties. Not every REIT has the expertise of long standing groups like Mapletree. Will unit-holders end up with the shorter end of the stick?

(3) Will the REIT do well in rental collection in the face of deflation challenges in Japan's economy
The current property bubble and debt crisis in China reminds me of the same for Japan back in 1990s. Japan's "Lost Decade" was a period that lasted from about 1991 to 2001 that saw a significant slowdown in Japan's previously bustling economy. The Japanese's battle with deflation and the liquidity trap is a long drawn one that unfortunately still affects Japan even today. 

Parting thoughts on this IPO
For now, I think I will be staying away from DHLT as alluded to my discomfort over the 3 points listed above. Note that DHLT public tranche subscription will end by 24 November 2021 (Wed) 12pm. The REIT will commence trading on 26 November 2021 (Friday) 2am. Will this IPO flopped upon 1st day of trading or will it rise sharply? 

Monday 15 November 2021

Cuscaden Peak's Superior Counter Offer For Singapore Press Holdings at S$2.40 Per Share- Goodbye Keppel Corp!

Good riddance to Keppel Corp's previous offers. Cuscaden Peak (the consortium making up of Ong Beng Seng, Capitaland and Mapletree) made a superior counter offer for Singapore Press Holdings ("SPH") today. During my last post, I mentioned that Cuscaden Peak may just trump Keppel's offer of S$2.351 per share (mixture of cash and Keppel & SPH REITs in specie) by 0.1 cent only and shareholders should not be too surprised- well, it turned out to be  way above expectation afterall as the current counter offer price on the table is S$2.360 per share (all cash) which is almost +1 cent more. I had enough of Keppel Corp's offers which were always a "hybrid" consideration of cash and REITs units. The market price of SPH, after every one of Keppel's offer, fell way below the fair value consideration.  

Moreover, Cuscaden Peak is extremely generous and provides another option for shareholders who preferred some SPH REITs to be distributed as part of the offered consideration so that they can participate through SPH REIT units in recovery upside of the retail real estate sector while receiving a significantly higher cash component than has been offered in the Keppel Scheme. 
Cuscaden's offer of 2 options to SPH Shareholders are vastly superior to Keppel Scheme.
1. Strategic mistake by Keppel Corp in their bid for SPH.
First and foremost, I think that Keppel Corp management should not have made it clear upfront that their offer of S$2.351 per share is the last and final offer. Keppel Corp may have underestimated Cuscaden Peak's deep pockets. By making a statement that they have already made a final offer, it motivated Cuscaden to just tip the bar over a little to easily trump their bid. Anyway, this is water under the bridge. 

Ultimately, Keppel Corp will walk away with S$35Mil breaking fees from SPH. After paying off legal and financial advisory fees, I expect Keppel Corp to retain a substantial part of the fees for future working capital or for special distribution to shareholders. Keppel Corp share price should shoot up once the trading halt is removed. My sense is that most of Keppel Corp retail shareholders frown upon the SPH deal in the first place. 

2. What does SPH senior management have to say about the current 2 offers on the table?
Subject to the IFA opinion and in the absence of a superior competing offer, the preliminary recommendation by the SPH Independent Directors is that SPH shareholders should vote down the Keppel Scheme and vote in FAVOUR of the Cuscaden Scheme.
Vote down Keppel Scheme first and vote for Cuscaden Scheme later
Also, SPH shareholders should take note that unlike the Keppel Scheme which is still subject to its shareholders' approval, the Cuscaden Scheme does not require the approval of Cuscaden's shareholders. All regulatory applications have been made the deal is expected to be fully completed in February 2022.

3. Other points for SPH shareholders to take note 
Shareholders who need cash and want to cash out immediately should take note that the ex-dividend date for the SPH S$0.03 per share dividend is on 22 November 2021 (Monday). 

So, if trading halt is removed and the price of SPH hits at least S$2.39 (S$2.36 offer + S$0.03 dividend) per share, then SPH shareholders can consider selling off.

On 22 November 2021, if the price of SPH is at least S$2.36 per share, then SPH shareholders can consider selling them off.

From 16th November 2021 to 21st November 2021, I expect the trading price to range between S$2.39 per share to S$2.43 per share. The worst case scenario would be that the price per share lingers way below S$2.36 per share but shareholders just have to hang on and wait till February 2022 for the deal completion to realize the full S$2.36 per share.
SPH's investment property-Seletar Mall at Sengkang Fernvale
Parting thoughts
I do not think that there will be a 3rd competing bidder at this stage since the price per share of SPH has seen such a huge jump over the past few weeks. With the transfer out of its Media business, SPH remaining property business has also come to a quick end. I think that shareholders should take this opportunity to cash out of SPH and let professional property management veterans take over the business. Alternatively, the only other option left is to vote down everything and let SPH continue its business under its current CEO....not exactly an ideal or rational case are my personal thoughts.

P.S: Fellow SPH shareholders, please share your views and thoughts on the Cuscaden Peak's new offer. Will you sell off immediately after trading halt is lifted to reduce further market risk or wait it out for a "counter-counter" offer albeit low probability? 

Please also see my previous posts on this:

Wednesday 10 November 2021

Keppel Raises Counter-Offer Bid of SPH to S$2.351- Three Things Shareholders Need To Watch Out For And Not Drawn By Clever Marketing

Good news indeed! On  the early morning of 10th November 2021, Keppel Corp has finally announced its counter offer of S$2.351 per share to shareholders of Singapore Press Holdings ("SPH"). This represented an +11.95% improvement in its offer price relative to the offer of S$2.10 by the Cuscaden consortium. While I see many retail investors jumping with joy and popping the champagne happily proclaiming even more upsides from another potential counter-counter offer from Cuscaden, this S$2.351 per share deal is actually not that great an offer by Keppel Corp. The essence of the deal remains similar to the initial crafting, that is, SPH shareholders are still being paid with a combination hybrid of cash and stocks. 3 things which shareholders need to watch out for:

1. Disappointing that Keppel Corp did not offer an all-cash deal which means deal subject to market risk
The counter offer does seems great at first. However, I still can't help but feel disappointed that the deal still involves the distribution of units in Keppel REIT and SPH REIT. When the initial offer was announced, SPH REIT and Keppel REIT dropped in price but Keppel Corp did not make any comments about the decline. 

However, right now, the S$2.351 per share is worked out by Keppel Corp taking into account the latest trading price of SPH REIT of S$1.02 per unit on 9th November 2021 and they make a big hoo-ha out of it. Once market opens, the price of SPH REIT and Keppel REIT will fluctuate again and what is there to stop their prices from dropping?

Bear in mind that the consideration will only be given to shareholders of SPH only in mid-January 2022. Hence there is plenty of time for downside surprises.

2. Fallacy to think that the bidding war is still on- it has ended on the contrary
Keppel Corp has already declared that the revised offer is final and will not be further increased. Given that Keppel has show-hand and released all their buffer in the counter-offer, the counter-counter offered price (assuming there is even one) by Cuscaden consortium will only be slightly above Keppel Corp's of S$2.351-maybe even S$2.352 per share. So don't be too surprised to just a 0.1 more cent counter-counter offer from Cuscaden consortium even if they decided to make one. 

Basically, unless a 3rd bidder joins in, the so called bidding war has effectively ended already. 

Note that the worst scenario here is that Cuscaden gave up on making a revised offer and shareholders will be left with the current best offer from Keppel Corp. Share price of SPH on 16 November 2021 (the last allowed day by Keppel Corp legal team for SPH to enter into another competing offer) may drop in such instance.

3. The Keppel revised deal may not go through SPH EGM and Keppel's own EGM.
One will need >50% of headcount of SPH shareholders voting by proxy at the EGM and also >75% of the total number of votes cast by SPH Shareholders voting by proxy in order to go through. Same for Keppel Corp's side. So this is the uncertain portion. If any of these EGM failed, the current pricing of SPH might drop immediately back to below S$2 per share. Back to square one. 

Parting thoughts- What now for SPH shareholders?
I reckon that once the trading halt is lifted, the price of SPH will shoot up to S$2.381 (including 3 cents for the dividends that is not ex-dividend yet) per share or even more as many investors may speculate that Cuscaden will make an even better offer. 

However, share price most likely will drop after the last allowed date of 16th November 2021 if no competing counter offer from Cuscaden is received by SPH. Keppel Corp's offer is plagued by the distribution in specie of units in SPH REIT and Keppel Office REIT which are subject to potential market downside risk.

P.S: Fellow SPH shareholders, please share your views and thoughts on the new counter-offer. Will you sell off immediately after trading halt is lifted to reduce further market risk? Or will you wait for another potential counter-offer from Cuscaden on 16th November 2021?

Monday 8 November 2021

Strange Chain Offer for SPH REIT By Cuscaden For S$0.964 Per Unit And Possible Leakage of Keppel Corp Counter Offer?

The Cuscaden consortium making up of Capitaland, Mapletree and Ong Beng Seng made a potential chain offer for SPH REIT on top of Singapore Press Holdings ("SPH") for S$0.964 per unit. However, current market price has surged to S$1.02 per unit. Moreover, SPH REIT was at S$1.10 and S$1.20 at one period before the COVID-19 madness. The chain offer is obviously just for show to comply with the takeover code.  Anyway, I hope that Keppel Corp will make a good counter offer for SPH. Since the news was released on 29th October 2021, the 10 days consideration period (if we assume it refers to working days), will mean an announcement soon by or before 12th Nov 2021. 

From the market price of SPH at S$2.170 per share suddenly today (8th Nov 2021), there maybe market speculation of internal news that Keppel Corp most likely will make a counter offer. Keeping my fingers crossed that there is indeed a better offer from Keppel Corp.


Friday 29 October 2021

Another Competing Offer for Singapore Press Holdings- S$2.10 PAID FULLY In CASH And Points To Note By Shareholders

Wow, I was shocked by the sudden trading halt and new announcement made by Singapore Press Holdings ("SPH") today.  Cuscaden (Consortium made up of Capitaland, Mapletree and Ong Beng Seng) announced that it has on 28 October 2021 submitted to the board of directors of SPH (the "Board") a proposal to acquire (the "Proposed Acquisition") all the issued and paid-up ordinary shares in the capital of SPH! What is even better, Cuscaden further announced that its offer of S$2.10 per share, will be paid for all in hard cash. Breaking news indeed! With the new all-cash offer on hand, I expect the share price of SPH to shoot up immediately from S$1.99 per share to at least S$2.10 per share. 
Extract of proposed offer S$2.10 all in hard cash

1.Dream come true!
Back in my previous 8th August 2021 posting, I have mentioned that shareholders need to get rid of the loss making Media segments first which will open up doors to other competing offers. Happy that the new competing offer materialize. Guess shareholders like myself do not need to take up Keppel Corp's offer of part cash along with Keppel Office REIT and SPH REIT as consideration. Getting units in odd lot as well as Keppel Office REIT are actually something that I do not want. 
Extract of previous posting on 8th August 2021

2.Safer deal for SPH shareholders- superiority to Keppel Corp's offer
The good thing about the Cuscaden deal is not just the all cash offer. The other added advantage is that the new scheme of offer will not be subject to any further shareholders' approval on the part of Cuscaden and its consortium members unlike the one from Keppel Corp.

3. Will Keppel Corp revised its offer price?
With the competing offer, there is a chance that Keppel Corp might revise its offer. Even if it did not win the acquisition, Keppel Corp will walk away with a break fees of S$34Mil from SPH. So it is a win-win situation for Keppel Corp.

4. Parting thoughts and points to take note by existing shareholders
Well, I am extremely excited by the new offer. Let's see whether there will be a bidding war between Keppel Corp and Cuscaden. Existing shareholders should not just sell off their shares immediately upon lifting of the trading halt. Please wait for the dividend ex-date of 22 November 2021 to pocket the S$0.03 dividends per share also. The S$2.10 offer will still be waiting there for picking up by shareholders. Of course, if the market price reaches S$2.13 before ex-dividend date, shareholders can consider selling off immediately. However, it maybe wise to hold first to see whether there are better counter-offer from Keppel Corp. Even better, there maybe another consortium or equity fund coming in with a 3rd bid. 


Wednesday 27 October 2021

Mapletree Industrial Trust Distribution Yield Hits 5%- Excellent Q2 FY21/22 Results With Completion of US Data Centres Acquisition

Mapletree Industrial Trust ("MIT") announced another quarter of splendid results. Its Q2 Gross Revenue increased by a whopping +50.5% year-on-year with a +47.4% corresponding in net property income. Most importantly, its quarterly distribution increased by +11.99%. At the market price of S$2.75 per unit, its annualised forward distribution yield thus hits 5.05% per annum. 
Summary of Q2 and 1st Half FY2021/2022 results

Zoom in on Q2 Quarterly YoY results
The stellar performance of MIT is mainly driven by contributions from the completion of US$1.32 billion acquisition of 29 data centres in the United States of America on 22 July 2021. I am happy to see the gradual transformation of MIT into a more data centres centric REIT. Its overall WALE also increased from 3.7 to 4.3 years.  
MIT hits 5.05% distribution yield

MIT's market price over NAV per unit of 1.54 times-so much better than Keppel DC REIT's 2.0 times

Parting thoughts:
Well, the strong performance of MIT lead me to have a tiny tinge of regret over my recent investments into Keppel Data Centre REIT instead of putting in more into MIT. Saying that, I already have a significant concentration of my overall combined portfolio in MIT. Its NAV of S$1.78 per unit (relative to mkt price ratio with Keppel DC REIT) and attractive distribution yield of 5.05% is enticing indeed. Just hope that interest rate does not run up too quickly (given that the US has been busy printing loads of money into its economy) and policy makers stay cool on inflation.

Tuesday 19 October 2021

Raffles Education Corporation In Hell of A Mess- Oei Hong Leong Vs Chew Hua Seng

Since 29 July 2021, Raffles Education Corporation ("REC") has plunged by more than 62% from S$1.60 per share to S$0.061 per share as at 18th October 2021. For its financial statements ending 30 June 2021, its auditor BDO LLP has also recently expressed concern on whether Raffles Education can carry on its business as its current liabilities is now more than its current assets. Internally, Raffles Education also faced intense infighting between its 2 majors shareholders. In the latest fiasco, Mr Oei Hong Leong has raised a letter to the Board of Directors expressing his concern over a number of adult family members of Mr Chew Hua Seng working in REC and drawing high salaries. Share prices seems to have dropped further after the circularization of the letter in public.
1. Shocking super late disclosure of material news only months later on 29th July 2021
Mr Oei has also previously dropped a letter to ask Mr Chew on why material disclosure relating to a default of the Malaysian Affin bank loan of S$131Mil (RM$410Mil) was not made known to shareholders earlier.  

Apparently, writs and statements of claims has been filed in the High Court of Malaysia by Bank Affin on 27th May 2021 and this amount is more than half the market capitalisation of S$220Mil at that juncture but was never disclosed until 29th July 2021. 

2. This is not the first time Mr Oei Hong Leong went after Mr Chew Hua Seng
It was reported that Mr Oei and Mr Chew used to be good friends for about a decade, and went on holiday together with their wives on more than one occasion. However, their relationship soon soured and they became eternal rivals instead. 

The discord had already started in 2017 when Mr Oei claimed that Mr Chew had agreed to find a buyer to buy-out his stakes in REC. This led to a lawsuit by Mr Oei against Mr Chew. Mr Oei eventually lost the suit in Feb 2020. Subsequently, there were various attempts by Mr Oei to oust Mr Chew out of REC.

3. REC forced to sell off office and college campus at 51 Merchant Road to raise S$200Mil to boost current liquidity
In a bid to raise funds, REC has announced on 16th August 2021 that it intends to sell its current campus for S$200Mil and if possible arrange for a sales and leaseback. All potential buyers will be aware of the tight deadline that REC requires to raise cash to pay off short term debts which are due within a year. Not sure on whether it can get a good price considering the weak bargaining power REC has at this particular point in time. Well, I am not very optimistic on REC getting a good deal. 

Parting thoughts- "calculated risk" to buy into REC?
I have a friend who has decided to spend S$5K to buy into REC. He termed this as raiding the stocks for a speculative trade for quick profits and has invited me to join in additional purchases. For me, I will stay far far away from REC to wait for the dust to settle between the warring factions.

Updates as at 20 Oct 2021 3pm: 
On 19th Oct 2021 just after my posting, the CEO of REC requested for a trading halt pending release of an announcement. Currently, REC is still being suspended. It also turned out that Mr Oei had started selling off a significant chunk of his REC shares. Hopefully, trading suspension will be lifted soon else recent investors who invested have their funds stuck.

Wednesday 13 October 2021

Dasin Retail Trust Bounced Back To Life with 22% Valuation Improvement- Will It Survive the Debt Crisis With Sino-Ocean Capital Taking Over As New Trust Manager?

Dasin Retail Trust ("Dasin") has been on a roller coaster ride since my last posting on 18 September 2021. When Dasin made a shocking announcement on 28th September 2021 that its half year distribution payment has been postponed to 4th October 2021 instead of 28 September 2021 itself, this sparked off a fierce selling frenzy by many unit-holders to get rid of their units fearing the worst had happened. The SGX regulator  immediately raised a query to ask Dasin to give more detailed clarifications with regard  to the actual reason for the delay. Price at one point dropped to  S$0.380 per unit from S$0.415 per unit.  Dasin's NAV as at half year reporting was S$1.46 per unit. It was totally disastrous as Dasin entered into one of its darkest chapters since its listing on SGX.  

1. Dasin Management team should have planned better for the half yearly distribution and not caused market panic
The false alarm started with Dasin management team being extremely secretive on the reason for the delay other than it was due to "technical issues" delay on 28 September 2021. The mind blogging term "technical issues" thus lead to widespread panic as investors feared that either Dasin has run out of cash or some bank facilities covenants has been breached which led to immediate default with bankers closing in. 

It was only after SGX regulator started querying before Dasin management came out to explain (on 1st October 2021) that the delay was due to COVID-19 measures that slowed down the verification work from a bank in Macau that was transferring funds back to Singapore.

2. Dasin bounced back with Sino-Ocean Group (listed on HKE) taking over as the new Trust Manager
On 12th October 2021, Dasin announced the successful completion of sales of shares of the Trust's manager from the Founder, Mr Zhang Zhencheng to Sino-Ocean. Sino-Ocean. Capital’s businesses include real estate investment, private equity investment, structured investment, strategic and innovative investment. It has clinched numerous awards such as “Top 10 Best Investment Institute (Real Estate Industry)”, “Top 10 Real Estate Fund Management Institute”, “Best Real Estate Equity Investment Institute”. As at the end of 2020, its assets under management exceeds RMB 133.2 billion.

With the financial backing and reputation of Sino-Ocean Group, the risk of non-renewal of offshore bank loans by the syndicated banks to Dasin has been significantly (albeit probability of non-renewal is still existent) reduced. As a result, Dasin roared back to life on 13th October 2021 with prices hitting intra-day high of S$0.580 per unit at one time. Its price has since gone down to S$0.470 per unit. Nevertheless, this is still an impressive 22% surge in market valuation within 3 weeks.  

3. Parting thoughts
The next step for the new Trust Manager, Sino-Ocean, would be to engage the bankers with regard to the final negotiation for the S$500Mil bank loans that are due for repayment by 19th December 2021 which lead to a current ratio of less than 1 for Dasin. If the long term banking facilities renewal hurdle is cleared, I reckon that there is a potential upside of 40%-50% increase in unit price back to S$0.70 per unit, which was the price before the sudden collapse from 16th June 2021 onwards due to the impending repayment date of the offshore borrowings expiring on 18th July 2021 at that juncture (it was eventually extended but only till 19th December 2021). Saying that, many investors are still scarred by the bad track record of previous S-chips listed on SGX. 


Sunday 10 October 2021

How Much Is Singapore Press Holdings Worth Now? Disappointing Final Dividend Declaration.

Singapore Press Holdings ("SPH") final results was extremely good if we exclude the worsening performance of its media segment. Anyway, Media segment will be history to SPH soon, as shareholders has voted overwhelmingly in September 2021 to spin it off into the new proposed "company limited by guarantee" model. The final dividend declared of 3 cents per share is extremely stingy and disappointing. I have thought that they would have sweeten the Keppel Corp deal for shareholders by giving extra special dividends to keep retail shareholders happy so as to support the takeover. 

Updated Keppel Corp's Offered Consideration
Since the offer was announced on 2 August 2021, Keppel REIT's price has dropped a lot which does impact the deal being offered to SPH shareholders. Let us start to do a little bit mental acrobatics using the most recent market price of SPH, Keppel REIT and SPH REIT as at 8th October 2021 (Friday):
1. First point to note is that as the probability of the deal being crystalized (in particularly with SPH Media successfully voted to be transferred out thus meeting the first condition of the offer) has more visibility overtime, the premium based on current SPH market price has gone down significantly relative to 2 August 2021. Initially, there was a 11.65% premium which has declined to +4.26% based on current market valuation of SPH at S$1.980.

2. Nevertheless, we have to be mindful that due to upcoming dividends being declared in both SPH and SPH REIT, this will skew the valuation exercise since ex-dividend will mean a drop in equity value later on. Hence we need to normalize the numbers to account for the upcoming drop in business fair valuation due to payout of dividends. The premium if one were to buy today is still very much worth it as there is a potential +5.23% upside once the deal is being completed.

3. With the local and international COVID-19 situation improving day by day, Keppel REIT and SPH REIT market value may also go up even more. This will increase the premium of the Keppel offer to SPH shareholders.   

Parting Thoughts
Assuming that one is holding on to 10,000 shares and at an entry price of S$1.980, there will still be an upside of 5.23% (S$1K) once the deal is being approved by SPH and Keppel Corp shareholders despite the ex-dividend effect. This will mean an overall +S$1.3K upside including entitled dividends (of course, if the deal is indeed approved).

Monday 4 October 2021

Will SPH Release A Special Dividend To Reward Shareholders Before Voting On Keppel Corp's Acquisition Offer?

As per the SGX announcement by Singapore Press Holdings ("SPH"), it will release its year ending 31 August 2021 financial results on 5 October 2021 (Tuesday). Lusterless SPH share prices far from the offered price also suddenly went up a bit during the last 2 weeks. Maybe market in anticipation of a special and generous "dividend" before going into the AGM to vote for the Keppel Corp acquisition deal? Will SPH management give something extra to sweeten the upcoming deal?  

Sunday 3 October 2021

Investment Portfolios Updates- (1 Oct'21)- Added More Alibaba Group Holdings And Keppel DC REIT

1. Portfolio 1- CDP held stocks
I have sold off all my stocks in Global Investment Limited (except for the odd lot of 1 share) as it has gained over 30% in terms of capital return. While the share-buy back helps to increase its share price, I do not like it as its management seems to have run out of idea on what assets to invest in and the dividend yield has gone down drastically. I have used the proceeds to switch to Keppel DC REIT and also Mapletree North Asia Commercial Trust. 

2. Portfolio 2- Margin purchased securities
I have invested into Keppel Pacific Oak REIT in view of the better performance among US office REITs and future growth potential. Manulife US REIT was extremely disappointing in terms of its recent results as well as too highly leveraged.

In addition, I have also taken up positions in SPH in early August 2021 as there is visibility of increase in its price by 10% upon completion of the Keppel Corp's offer. Given that Keppel Corp and SPH are all owned by government linked companies, I figured that probability of the deal going through is rather high with less risk. Even if the deal does not go through, I can live with holding on to SPH as its student accommodation business can be further monetized via a REIT offer. Woodleigh shopping mall and Seletar Mall can also be sold into SPH REIT.

3. Portfolio 3 (with Tiger Brokers)- Venture into higher risk as well as capital growth stocks here
While my main approach in investment is towards an income generation strategy as evident from my portfolio 1 and portfolio 2 above, I have also set aside some funds for capital growth. Hopefully, the returns from 1 of these will be multiple fold as a booster to my overall portfolio. 

For Alibaba, I have been adding on to it over the past few months- please see: "The Alibaba Fiasco- Catching A Falling Knife?"

As for Dasin Retail Trust, this is a high risk high reward counter. Basically, its current liability exceeded current assets as the bankers are not willing to renew the Trust's bank borrowings but only extend it till 19 December 2021. Its market price thus has dropped significantly to only S$0.410 per unit at the time of my purchase. My initial investment in this was S$5K as I was optimistic that its new Trust Manager being appointed is a China state owned enterprise listed on HKE and there is a huge potential to see a 100% return in investments by end of the year- please see: "Will Dasin Retail Trust Go Bankrupt And Be Put On Fire Sales? Annualised Distribution Yield at 12.9%."

However, I was flabbergasted when the Managing Director of Dasin Retail announced last week that cash distribution for the half year ended 30 June 2021 has been delayed by a week due to "technical" issue. I am not sure what is "technical" issue. But it may mean that there is no cash available or there is breach of banking covenants which seems to be pointing to the fact that negotiation on renewal of the bank loans are not finalized yet. Hidden skeletons may also soon start surfacing. Hence I decided to just sell off most of it and only retain a S$1K position in Dasin Retail Trust.

Friday 1 October 2021

The Alibaba Fiasco- Catching A Falling Knife?

Wow, Alibaba (HKE 9988) plunge below HKD$150 per share in the region of HKD$140 per share recently. Is this an after effect of Evergrande?  This is a disaster indeed for my "growth stock" investing venture so far. I am still staring into the red despite joining the buying spree only lately but I still plan to continue buying little bit more. Is this catching a falling knife? I still think that the fundamentals of Baba is excellent based on its financial statements and annual growth rate demonstrated. Also, I think that the Communist party will neither be bent on destroying Baba nor nationalizing it out of a sudden. I reckon that the current pressure exerted on Baba has to do with infighting among 2 major factions in the Communist party (Alibaba seems to be linked closely to one of the faction). 

Alibaba has also invested in a number of technological businesses. The most recent one is the USD200Mil being invested in the Singapore Logistics firm, Ninja Van, which specializes in final mile delivery in South East Asia countries. Ninja van has already hit "unicorn" status with a valuation crossing US$1 billion and is expected to go for a listing in US within the next 1-2 years. Any further enhancement in valuation from the Ninja van IPO will reap a handsome return for Alibaba's stake also.   

Anyway, this whole of September 2021 is a bad month for stocks. It also offered a lot of good buying opportunities for income investing. I am happy to have received much of my yearly dividends in September 2021 and to recycle it back into income producing stocks/REITs for more dividends. 

(P.S: I have not updated my Investment Portfolio for sometime. Will probably do it in the next post but too busy recently with work and also catching the super exciting "Squid Game".)

Saturday 18 September 2021

Will Dasin Retail Trust Go Bankrupt And Be Put On Fire Sales? Annualised Distribution Yield at 12.9%.

Dasin Retail Trust (“Dasin”) is in financial crisis. SGX has raised queries regarding its weak balance sheet with cash on hand and other short term assets being unable to fulfill its current liabilities. Apparently, a huge sum of loan financed by local and offshore bankers had expired and granted only a temporary extension till 19 December 2021. The local China banker lender had withdrawn itself for new facilities and this left the offshore bankers shell-shocked and being placed on guard that there may be fundamental weaknesses or other “surprises” waiting to spring on them in Dasin. Not surprisingly, Dasin’s unit prices has thus plummeted from S$0.785 per unit as of beginning of the year to the current S$0.415 per unit (as at 17 September 2021) which is a whopping 47% plunge in valuation.
1.Quick financial recap for Dasin
As at 30 June 2021, Dasin’s net asset value is S$1.46 per unit. DPU for the 1st half of 2021 is 2.98 cents which gives an astounding annualized yield of +14.36% at the latest closing price of S$0.415 per unit as at 17 September 2021. Take note that there is also income support for Dasin which will no longer be available from FY2022. The normalized 1st half DPU (if we were to add back the distribution waiver to some units due to this) will be 2.67 cents which still gives a dazzling annualized yield of +12.9%. The higher distribution relative to FY2020 is mainly due to recovery from covid-19 impact as well as contribution from Shunde Metro Mall and Tanbei Metro mall which were acquired in July 2020.
Before one rejoice, we need to delve into deeper discussion on the key going concern risk from the impact of Dasin’s maturing huge debt of S$500Mil that may result in a forced liquidation.
Dasin has S$422.7Mil of offshore debts and S$79.2Mil of onshore local debt that matured in July 2021-approximately S$500Mil.The bankers have extended these to 19th December 2021. Classification of these are thus “short term” which resulted in a current ratio (current assets/current liabilities) of less than 1. Since Dasin clearly does not have enough funds to repay all the loans, this will mean a default of loans and an immediate lawsuits from the lawyers representing the bankers which can lead to a forced liquidation and an unfavorable fire-sales of all shopping malls at a very low price. Unit-holders will also face suspension of trading of their units and get their liquidity stuck for 1-3 years (at least 1 year) under such adverse turn of event.
2. Bankers spooked by Dasin. A repeat of the Eagle Hospitality Trust Saga?
Most of the investors of Dasin are extremely worried about the reason why the consortium of banks renewed the term loans for Dasin until only 19 December 2021 and did not extend them for 3 to 5 years as per the normal practices with other REITs. There were also market talks that a local China bank pull out of the syndicated loan earlier this year which spooked the hell out of the remaining bankers.
It was also reported that the bankers were so filled with anxiety that they resorted to sending out personnel and officials to visit Dasin’s malls. Good news here is that the shopping malls under its portfolio seems to be packed and doing extremely well.
Hence it does not seemed to be another case of Eagle Hospitality Trust saga where the sponsor did a lot of magic tricks to move the money around out of cleverly engineered financial valuation of assets which resulted in many current lawsuits being filed. Dasin has also been paying out distributions for the past few years unlike Eagle Hospitality Trust which failed to even deliver its first distribution.
3. Other points to note- Sponsor Mr Zhang Zhencheng seems to have financial difficulties.
One interesting point to note is that Mr Zhang Zhencheng and his investment vehicle Aqua Wealth have pledged 38 Mil Dasin’s units as collateral for margin facilities with CGS-CIMB for purpose of securities trading. He has been forced by the broker to liquidate some of his Dasin’s holdings due to margin call. The fact that Mr Zhang Zhencheng did not top up additional cash to his margin account suggests that he has encountered some financial distress personally.
While it is true that Dasin and Mr Zhang’s Aqua Wealth are different legal entities, the implication here, in terms of corporate control environment, is that it leads to higher risk or pressure of possible financial misstatement in order to ensure the financials of Dasin looks well. Investors have this lingering doubt that things are not as rosy as reported for the 1st half results and there are cans of worms that may surface soon. Many failed business such as Eagle Hospitality Trust reported unrecorded liabilities only when special accountants were appointed to scrub through their books.
In addition, once we add in exorbitant default interest rates on bank loans as well as professional service firms such as liquidator and lawyers, a huge chunk of the net assets will be burnt up quickly to feed these hungry sharks which may result in little or none being left for the unit-holders.
4. Light at the end of the tunnel?
The good news here is that Mr Zhang Zhencheng is a smart man. He has pulled in a HKE listed investment holding company Sino-Ocean Capital (specializes in property investment and development activities in China) to take up a 70% stake in Dasin’s Manager. It has also granted an option to Sino-Ocean Capital to buy up to 26% of the units owned by Aqua Wealth. Sino-Ocean already held on to 6.36% of Dasin which will make it one of the biggest holder of up to 32.36% if the option is exercised.
Sino-Ocean is a state owned enterprise in China which thus placed it in an entirely different league with other S-chips listed on SGX (which were beset by corporate governance and accounting problems).
It was reported that the entry of Sino-Ocean was instrumental in the bankers agreeing to extend the original loan facilities maturing 18 July 2021 to 19 December 2021. The new Trust Manager is working with the bankers to secure a longer term syndicated loan. Anyway, 3 months left for negotiation with bankers and we will know the fate of Dasin soon.
Parting Thoughts
So the key question at the end of the day is whether Dasin will survive this loan crisis. Phillip Securities, in July 2021, has issued a price target of S$0.780 per unit for Dasin which is an 88% potential upside. Personally, I think that this is a very risky time to enter into Dasin unless there are more information being released. Sino-Ocean Capital also has not exercised their option to acquire more units in Dasin hence they may still be doing their own due diligence and are uncertain. Henceforth, there may still be bigger surprises that are unrevealed yet.