Thursday, January 23, 2014

Sabana REIT- misjudgment of management, what to do next

In my earlier posts, I overestimated the management of sabana.

They had make acquisitions that are yield accretive with decent yield of 6-7%.

They have a performance fees structure that will only payout performance when DPU increase by 10%. If DPU increase 10%, I seriously do not have problem with them claiming their due rewards.

But alas, it's quite obvious the management interest are not aligned with the minority shareholders and the capability is questionable too.

First, a placement that dilute existing shareholders holding, to buy a half vacant AMD building.

The results:

Pathetic increase of about 3 million gross revenue income that is matched by 3 million increase in property expenses, due mainly to the fact that Chai Chee property is a multi-tenant lease and 5 other become multi-tenant when the master lease didn't renew master lease.

So it is very obvious that sabana is not able to exact good rental revisions even when it now operate a multi-tenant lease.

Also base management fees an trust fees will increase, due to the increase of asset valuation under management.

"Good job", doing nothing would be far better than doing a expensive placement to buy an half vacant AMD when the industry space will see more supply over the next few years. Again it is quite clear that management would muddle along to squeeze more fees out of these value destroying exercise. They also also immediately cash out on their units in lieu of payment. Not interested in holding longer term.

So, what should I do?

It is definitely not a buy. It is a sell? Well, if u bought at 80 cents and is sitting on nice profits, it might be good to lock in profits and search for better options too.

It is sell even if its at a loss? Can they further destroy within the next year?

Well, I just need to collect this dividend and the next to break even if the price can be kept at 1.065.

Logically, I should hold. But the price might tumble even more. They have refinancing this year, and over the next 3 years. Would they do something stupid again?

To be fair, they did managed to increase the sub tenants by 5 over the last 3 months.

I think barring a increase in vacancy rate, the current yield of 8% is safe for the year.

I will hold for the time being. There is no attractive alternative that I can buy anyway either for yield or capital gains, at least not now.

9 comments:

  1. you are the smart one you should know what to do.

    ReplyDelete
  2. I will ride out the storm, without adding anything. But seriously, the management is testing my patience.

    Me smart?? Ya, maybe with the ""

    But I am ok with it. Made a mistake, look forward, decide and move on

    ReplyDelete
  3. Dear Silly invester.

    Remember the last time, I have bring to your attention that the coming crash in end Q1. But it surprise me that this come earlier than expected.

    I am not here to hurt ppl, nor show off that I am right. I am here to suggest that you sell to strength because mkt got more to come down.Mark my word, U are going to see a 1000 over pts drop in a SINGLE DAY, if my analysis is right, so far 70% hit rate.

    As of last wk, we shorted dow, S&P and SIMSCI heavily on china data. We are in nice profit. We are going to short on every recovery till the trend end.

    It is not wise to go down with the counter and up and make little. Sell now is still not late. When time to buy, I will be back here just to share with you again. Or u may mail me if u wish to, I always humble to share.

    May u be well.

    cw

    ReplyDelete
  4. Hi CW,

    Thanks for looking out for me. I sure hope u are wrong for many people out there.

    But I will be ready for that day. In fact, people can rich by riding through a bear and bull. I am a salaried worker, will keep accumulating when the time is right. My portfolio is not big compared to my annual income. It will just mean I have to tighten my belt a bit more., and spend my ammo on blue-chips which I have been tracking for some time.

    But if u are wrong and I liquid everything or most, there is no participation anymore.

    Thanks again. New year is coming. May u huat.

    ReplyDelete
  5. Dear invester. ( i feel odd calling u silly, nobody is, )

    This one is just to share with u. No ill intention. Just have a stop loss. If a stock can go down 15% to 20% , then it got lot more to down.

    This wood horse, is nothing short of the Trojan Horse. It is a dangerous horse.( inside are soldier hiding there).

    Thanks for your kindness.

    Happy New Yr. May u and kyith be happy n well. Good luck.

    ReplyDelete
  6. Thank you for your new year wishes. I will tried to be nimble in my sales when profits is big enough and keep a close watch of the poor performing ones too, although I have a job and can't monitor them hourly

    ReplyDelete
  7. Hi Invester

    Yes, trading is full time, if got a day job, it is good to value vest then, don't trade.. Go for solid blues, like SGX n SIA eng.

    Trading is not for part time. Cut your loser fast.

    It is very high risk. Can gap down fast, with in minute. Like KLW.
    Wish u good luck. I believe u have a lot of opportunity to value vest this yr.

    I hope u do not find me bothering n cumbersome.

    cw

    ReplyDelete
  8. CW,

    U are too polite.

    The more diverse the views, the wider the bandwidth for reflection and thoughts, which also mean many possible choices and consequences.

    It is a good thing.

    ReplyDelete
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