Friday, November 11, 2016

Ascendas Reit: A weird share price pattern?

I am writing here because I felt there might be some "pattern" in Ascendas Price movement.

Granted, all industrial reits are facing some weakness with fear of interest rate hike and spike in industrial vacancy.

But lets start with this picture.


If only this is the chart for its share price. You can see from here, with the exception of GFC, A-reit has an unblemished track records for raising DPU. Of course amount available for distribution grow much faster than increase in DPU, due to dilution of shares. And we are going to have the ECS issue overhang now, beyond the macro issues of Interest rate hike and vacancy.

But what I want to point out is there is always a fall in price following an announcement of placement and then followed by an recovery in price. 

I would like to give credit to A-reit Website, it made tracking of its performances a breeze.

http://ir.ascendas-reit.com/news_search.html?search=placement 

Here are the placement dates:

11August 2016
18 Dec 2015
9 December 2015
19 March 2013
14 March 2012
11 April 2011
31 March 2011
11 August 2009
15 Jan 2009






2011 is the furthest I can go with Ascendas Website, I can go further with Yahoo chart but I decided to stop.

Ascendas is a active manager who acquire and divests properties. Given that the DPU is generally raising lets say they pass the acquisition test, so have they divests at a loss?

Using the same method, 
http://ir.ascendas-reit.com/news_search.html?search=divestment


With the exception of  Block 5006 Techplace II, where there is no mentioned of premium or discount of sale price (lets assume it is a discount) the rest of divestment is from the lowest of 5% to double of it purchase cost.

Risks

I would think the manager pass its test in execution. 

But there are still 2 risks, in buying this business/ manager. 

1) Overvaluation, 2009 onwards is a bull-run for the stock market. 

2) Track records start from 2009, it stumbles in 2009 although it did recover

3) Track records especially that of manager's performance has more correlation to future performance than otherwise, however, that is assuming Singapore's economy is not going to the dogs. Also, there is no "track records" in Australia.

4) Given its sheer size of managing industrial properties. It is impossible for it to grow by just buying 1-2 properties. It need to either do an "Australia Stunt" or for the general industrial rents and occupancy to improve. 

Conclusion

Well, A- Reit has a prudent capital management system, one can wait for the price to fall further to reduce overvaluation risk. Assume A-reit can at least maintain the DPU for the next 2 years, it is yield of 6.6% at current price, definitely not Crisis level valuation but I would think it is good enough. (Annualize 1 H would have beat this DPU of 15 cents)

As for risk 2 and 3, I think thy are valid. I am not implying that it will go up soon post ECS, just that I thought the placement issue seem so recurring and predictable that I share this weird pattern. Is the "rights/placemnet is bad" for Reit Myth so entrenched, that whenever it happens, it is going to fall, regardless of what is happening in its business foundations. Granted, placement is usually done with a discount, but it should happen at announcement not completion.

I did a tracking of placement's discount some year back, with the exception of 2009, it is usually in the range of 5-9%

9 comments:

  1. i would have thought its dividend yield is higher than that. i tot the dpu closer to 15.5.

    ReplyDelete
  2. Kyith,

    I rounded down for simplistic and conservative calculations

    ReplyDelete
  3. This counter is shorted very heavily of late.
    Why?

    ReplyDelete
    Replies
    1. Uncle Temperament,

      I have no idea! Thanks for flagging it. Perhaps the pattern is self fulfilling ??

      So shortlisted jumped on announcement of ECS dilution ??

      Delete
    2. In fact almost all Reit counters are shorted.
      Even the favorable ones.
      Something is brewing?
      Dec rate increase by the FED or what?

      Delete
    3. Uncle temp,

      I do think if FED increase rate dec, it will again be a lot of opportunities for people to speculate and short reits for the traders. Possible headlines:

      Simple:
      Rate hike increase borrowing costs when operations facing headwinds

      Sophisticated:
      Bank rate increase reducing the spread of govt. bonds and reit, making the later less attractive

      indees plenty of chances for shortists,

      But discerning investors will also make use of price weaknesses. If one is neither, or not sure of craft of either, , can still grab popcorns and watch on sidelines LOL

      Delete
  4. Hi SI,

    I noticed the same price movement too, though I did it for rights and not placement. Similar but different. Here's my blog post on it here. I also mentioned that the best time to buy a reit is when their issued rights.

    And I also noticed that all the reits are dropping like flies, likely the rate hike fears are back again.

    ReplyDelete
    Replies
    1. Hi LP,

      I read that article when it is first published(I am a supporter, LOL)

      I agree that your observation is correct, A-reit don'6 do rights but placements

      Trying to get out for some which run up but too late, the decent earnings did not help shares price :(

      Delete
  5. Rate hike Probablity as tracked by CME
    http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html

    ReplyDelete