Dasin Retail Trust ("DRT") just released a shocking set of 1H 2022 results whereby its investment properties valuation went down another <S$64Mil> for the 6mths period ending 30 June 2022. This is not including the <S$62.8Mil> written down taken for the previous financial year ending 31 Dec 2021. The total of <S$126.8Mil> of fair valuation being written down within a year makes one wonder about the real valuation of their balance sheet items. DRT also took a <S$11.4Mil> allowance hit for the 1H 2022 due to impairment of trade receivables from tenants. Notwithstanding the aforesaid mentioned, the worst news was that the management of DRT decided not to pay out a single cent of earnings in distribution for its 1st half using the pretext of prudent working capital management in the face of potential worsening of COVID outbreak in China.
Worsening financial health and unable to get back long outstanding debts owed by tenants.
For me, the danger signs of DRT in either bankruptcy or forced liquidation has been increasing and the last straw is the lack of a single cent of distribution for 1H 2022. I will be bailing out of DRT and withdrawing the bulk of my funds-leaving only S$500 to S$600 in capital (in the event that DRT survived the imminent business crisis). S$751Mil of loans remain due by 31 December 2022 even after so many rounds of loan extension by the bankers. Outstanding debts allowances has also ballooned to <S$11.4Mil>.
Sales of investment properties to raise cash to partially repay bank loan demanded by bankers
The management of DRT has been unable to conclude the sales of some of their shopping malls to raise cash despite only about 3 more months left in the loan extension. Extremely slow execution means that the potential buyer is also having doubts with regard to the quality of the assets being put up for sales. DRT could be on its way to a rights issue or forced liquidation of assets at firesales price if the bankers decided to take action to mitigate their risk exposure.
Parting thoughts
From the perspective of minimizing risk of total losses of capital, I have drastically reduced my stake in DRT by selling off 21,000 units immediately. Personally, I think that DRT management has neither been very transparent in the handling of its syndicated loan re-financing exercise nor timely in its routine operational updates. I also have serious reservation on the declared Net Asset Value of S$1.25 per unit asserted by the management. S$1.25 per unit may seemed like a lot of buffer and room for any black swan event or financial fraud. However, from the collapse of Eagle Hospitality Trust we can draw some parallel of what else may happen. The subsequent long drawn restructuring process ended up in the Trust becoming beyond saving. DRT may well be worthless if either the restructuring process drags on or the realised valuation of the investment properties is only at 50% of its current value posted on its statement of financial position- there is now a distinct high probability based on the recent turn of event. All the very best to other contrarian retail investors still holding on to DRT.
The only way to salvage is if China suddenly reverse its covid zero policy. That has the same probability as Xi having a massive stroke or heart attack.
ReplyDeleteYes indeed....not sure when China going to reverse the zero covid stance which is like a Whack a Mole" game. Maybe after its own local mRNA vaccine becomes available as a booster for its population.
DeleteI also have a bad feel that the management trying to sell the assets at a huge discount to the related party to get much needed cash to repay part of the bank loans. Existing Singapore unit-holders probably going to be milked dry again. Right now, Dasin Mgt releasing the bad news piece by piece to ensure that the Trust does not collapse overnight.