Mapletree Industrial Trust Converting Into a Data Centre Focused REIT- Don't Miss The Preferential Offerings @S$2.64 Per Unit.

Mapletree Industrial Trust ("MIT") wastes no time in the the execution of its strategic vision of having two-third of its property portfolio in data centres. Coming off the heel of the last US data centers acquisition exercise in 2020, MIT recently announces another US$1.32 billion acquisition of 29 data centres from Florida based Sila Realty Trust. 

New engine of growth

Data centres remain resilient with attractive growth opportunities, which are underpinned by the acceleration of digitalisation, cloud adoption and e-commerce during the pandemic. The completion of the significant acquisition of the 29 data centres will mean that MIT now has 53.6% of the REIT's entire portfolio vested in this key property segment relative to 41.2% pre-acquisition. MIT total assets under management thus will increase from $$6.8 billion to S$8.6 billion.  

MIT expects the proposed acquisition to be distribution per unit (DPU) and net asset value per unit (NAV) accretive to unitholders. Based on pro forma estimates, assuming the proposed acquisition was completed on 31 March 2021, it would boost DPU by 3.3 per cent to 12.97 Singapore cents. NAV would rise to S$1.76 per unit from S$1.66 per unit.

Key dates and points to note for the preferential equity raising exercise for retail investors

MIT will be issuing 5 new units for every 100 units which retail investors currently hold at S$2.64 per unit. Based on the market closing price of S$2.75 per unit as at 28 May 2021, this represented a discount of 4% off the latest market price. Existing investors will also receive a quarterly dividends of S$0.021 per unit cut off as at 28 May 2021. 

The rights issue will commence from 3 June 2021 to 11 June 2021 so be sure to subscribe for it.

If you are holding under your own CDP account, go to the local ATM for subscription. If the units you held are under other brokerage nominee accounts such as Maybank Kim Eng or Tiger Brokers etc, then use their designated inhouse system for giving your instruction. 

Parting thoughts

The frustrating aspect of owning a Mapletree REIT is that it tends to be overvalued with market pricing trading way above its NAV per unit and hence resulting in a lowly distribution yield of around 4%. 

During the past week, I actually sold off part of my MIT holdings at S$2.83 per unit and use the proceeds to purchase another industrial REIT, Ascendas, which has dropped below S2.94 per unit. In a strange twist of fate, Ascendas REIT pricing declines when it announced the acquisition of the remaining 75% stake in Glaxis business park in Fusionpolis (via private placement at S$2.94 per unit) whereas, MIT unit price shot up when they announced the US$1.32 billion acquisition of data centres. 

For long term investors who do not mind waiting patiently, MIT is the typical "slow and steady" REIT which grows its distribution yield and net asset value gradually overtime backed by a solid Singapore government affiliated Temasek Holdings. 

Singtel Reported Impairment of S$1.2 Billion- Horrible Results Expected for Full Year of FY2021 and "Strategic Review"

On 14th May 2021, Singtel announced a shocking S$1.2 billion in impairment charges for its investments in digital marketing firm Amobee (-S$589Mil), cybersecurity business Trustwave (-S$336Mil) and also Optus (-S$204Mil). Singtel used to be extremely defensive about its Amobee and Trustwave businesses and argued that the thrust towards digital investments in new business and North America market is good for Singtel in the long term. However, Singtel appears to be singing a different tune this time round with a power-point deck on "lessons learnt" from these digital investments that are now being partially written off. It should have focused on digital opportunities in Asia to leverage on its current customer base instead of focusing too much on the North American markets for its Trustwave and work with strategic partners by taking up minority stakes instead of a majority. 

S$1.2 Billion Impairment Charges

Strategic Review Commencement

Group Digital Life still facing huge losses during past 9mths till Q3 FY2021

It is quite disappointing that S$1.2 billion is wasted and thrown into the drain just like that. Apparently, Singtel had taken a bite more than it could chew. It does not have enough internal talents to pull off its digital businesses by itself.  On top of the impairment, Singtel has been throwing more good money after the bad in terms of running the business as it has always been in the red. But at least the new CEO of Singtel seems to be making a right decision to embark on a course of corrective action to try to stem the losses at the underperforming business segment. 

Any bright spots?

I think it would be hard to market an IPO off the loss making digital business in the near term. Singtel is more likely to be looking for a strategic partner to sell off a majority stake in them. 

The bright spark may lies in Singtel’s information and communications technology (ICT) arm NCS which, since 1st January 2021, operates as an autonomous business unit, reporting directly to the Group CEO to accelerate its expansion into Asia Pacific, with special focus on Australia and China. It is highly likely that Singtel will decide to spin off its former Enterprise Group NCS through an IPO to unlock intrinsic value in Singtel Group. The good thing about NCS is that it has many Singapore government IT contracts as its operations executives have good networking and understanding of the local requirements of government agencies.  

Parting thoughts

I think that the upcoming full year results for year ending 31 March 2021 is going to be super ugly for Singtel. With the departure of the former CEO and a new CEO on board, this is now a good time to clean off legacy issues and move towards "supercharging the future". 

Enhanced COVID measures as good as Circuit Breaker 2.0- Retail Mall REITs on firesales again?

This is shocking news-so many new measures within a day to restrict movement with effect from 16th May 2021 onwards- which is as good as a mini Circuit Breaker 2.0. All retail REITs, Frasers Centrepoint Trust, Lendlease, SPH REIT and Starhill Global began their sharp diving after lunch. Firesales 2.0 came again. Probably good time to start accumulating from today some of the retail mall REITs. Lendlease with 33% holdings in offices in Sky Italia Milan and JEM office tower will probably weather this 1 month storm better. Mapletree Commercial Trust price drop but still looks expensive with a yield that is barely 4%.

This mini CB 2.0 is going to kill retail shops again. Singapore government needs to get more vaccine supplies and increase the vaccination rates like USA and Israel. Else we will be stuck in this never ending circuit breaker.

Singapore Press Holdings Finally Got Blessing From Government To Get Rid Of Its Loss Making Media Segment

What a wonderful development! Singapore Press Holdings ("SPH") finally got the green light from the government to get rid of its loss making media segment. In my last post on the potential restructuring scenarios, I have been hoping for the disposal of its loss making media segment for the longest of time and it finally materialised. But still, I was quite disappointed that SPH need to waste money to appoint Credit Suisse as their "financial advisor" for the restructuring exercise. Is it not obvious that in a commercial business, loss making segment needs to be closed down or sold off instead of allowing it to fester for so many years? The essence of such a corporate restructuring actually lies in going after the various government agency/Ministry to lobby for such a move. The green light for such a daring manoeuvre can only come from the blessing of the Singapore government- you do not need an external financial advisor for this. 

The free S$80Mil cash injection and donation of SPH and SPH REIT units worth S$30Mil to the new entity as SPH's divorce settlement deal with the loss making media segment is actually a very small price to pay. SPH profitability of 1 year from its pre-COVID property business should be more than adequate to cover this hence inflicting only a tiny dent in its overall long term financials.

The only key question now is the branding of SPH going forward. With no media segment at all, does it still make sense for it to call itself "Singapore Press Holdings" when it is in fact a real-estate Group? Also, I am extremely disappointed that with the appointment of a financial advisor looking at this for 1 month on available options, they could have also added in the deal to divest Seletar Mall to SPH REIT to unlock further value. 

Equity Portfolios Updates (30 Apr'21)- The Return of Increasing New COVID Clusters And Will It Lead To Another Singapore Lockdown?

 

It is worrying when the Singapore government starts to talk about a second circuit breaker is on the table if current measures to tighten the surge in local COVID does not curb it successfully.  Based on current cases, it may get worse over the next few weeks. I am awaiting the release of more findings by the Ministry of Health with regard to how effective is our COVID vaccines and how the virus managed to "break through" doctor and nurses who already got 2 full shots of the vaccines. Is it due to mutant strains whereby current vaccines are no longer effective? There is a high chance that upon the first trading day in May'21, the SGX might see a huge drop in prices due to concerns over a 2nd lockdown. I also think that various government agencies are tightening anti-COVID control measures and there will be more government announcements next week. It maybe a good idea to take some profits or do some switching into safer class of assets.

1. Portfolio 1- CDP held stocks

For my cash portfolio, not made much changes since last update. 

2. Portfolio 2- Margin purchased securities

With the announcement by DBS of a record breaking S$2 billion dollars profit, all bank counters benefitted and increase last week. I have taken advantage of this surge to sell off more of my DBS and UOB holdings to take profit and also switched into Mapletree Industrial Trust ("MIT") which is suffering from a momentary price weakness. 

MIT is targeting to grow its data centres high tech portfolio. Hence there will be more acquisition coming up. Also the Singapore government is backing MIT. I foresee further capital growth and potential of MIT to appreciate beyond S$3.30 per unit.

As for our local banks, I think OCBC is still undervalued hence I am still holding on to them. If the next week results from OCBC quarterly report is just as good as DBS and price shoot up further, I will be paring OCBC down and re-invest the proceeds into other stocks.

I have also paid down some margin to reduce the use of leverage here in view of the increasing COVID cases which have increased the macro-economic risk of our local scene.

3. Portfolio 3 (with Tiger Brokers)- Venture into high risk stocks here

The damn low commission fees of 0.08% allows investor to take up tiny bite size high risk counters at a fraction of the normal brokerage commission. This allows better risk management in the event of bankruptcy or huge capital losses of the investments. I have thus made additional investments into FSL Trust, Sabana REIT and Oceanus Group but only taking up tiny portion and diversifying them.  

The best performing counter in this portfolio is FSL Trust which has returned over 20% profits (including upcoming hefty dividend payout) in just 2 months.

For Sabana REIT, the key risk here is that the much anticipated acquisition by ESR never materialize. 

For Oceanus, the pricing of S$0.039 per share is overvalued if we looked at the historical results. However, if you believe in the 4 pillars strategy marketed by their CEO (which seems to be turning around the business with new growth segments), then there is actually tremendous growth potential here. Again, too many variables here hence I only intend to take a bite size stake in this counter. I will do a further post on Oceanus group in the future. It has a very intriguing and colorful history including possible internal sabotage which had led to the death of many of its farmed abalones and financial crisis previously.

Parting thoughts

I am looking forward to the upcoming dividends from Global Investment, FSL Trust as well as the 3 local banks in May'21 and June'21 for re-deployment.  Let's keep our fingers crossed that the COVID-19 situation can be well contained over the next few weeks to avoid another economic lockdown which will derail our recovery.