Tuesday, December 6, 2016

Accordia Golf Trust

I didn't see much views about the potential privatization of sponsor by MBK.

Reading about the tender offer, offer a few insights that I think are important but not reported by the various news agency.

1) “Year 2020 problem”
It means a problem that may cause a reduction in golf demand in circumstances where a majority of postwar baby-boomers who lead the current golf demand will be over 70 years old.

My thoughts: It is a direct conflict with AGT's management claims that the seniors have more time to play golf and it is a opportunity. Also, 70 years old is arbitrary figure isn't it? 2017 could well be the problem if 67s are not healthy enough to play golf.

2) It is stated that "MBK Partners Group was interested in investing in the Company, had agreed to the Company’s management model including the Circulating Business Model".

The Circulating Business Model consist of the asset light strategy, but the focus is on the upstream expansion of golf courses and upgrade of existing courses, and also with a look to overseas expansion for strategic alliances.

So, if the sponsor-to-be if going to buy assets at a quickened pace, the greater the probability of asset injection, isn't it? That is when the puzzling statement came in:

"However, after the implementation of the asset-light strategy using the business trust, although the Company prepared for selling to AG Asset the golf courses owned by the Company, because the unit price of the business unit of AG Asset remained low, and it took time to discuss and coordinate with related parties, AG Asset is unable to raise funds for acquiring the golf courses owned by the Company"

Stripped off the corporate structure, AG asset basically refer to the Accordia Golf trust. It is very obvious management 's intent is to raise funds through placements or rights, instead of debts. Otherwise, why does the low unit price matters?

My final thoughts:

Will MBK be able to find partners? Will AGT become a dumping ground? A strong sponsor is good only as far as it willing to be fair to shareholders. Case in point is the difference the past LMIR and Ascendas Reit. Both have strong parents. Look at Ascendas's recent acquisitions, while the purchase price might appear pricey, there are reasons to explain it. Lipuit Village, anyone? 4-5 years after it is acquired, it occupancy still did not cross the nation average of 85%. But Kemang Village is finally yield accrretive.

AGT's price has been retreating abeit very slowly while STI is going strongly.

I thought such pessimism is rather uncalled for. First, the privatization might not go through, the major shareholders just owned less than 30% of Accordia Golf Japan.

Assume the deal goes through, it will again take a while before the "upstream" actions flow "downstream".

  

7 comments:

  1. Hi SI,

    You're vested in this? I got in and got out quite some time ago.

    ReplyDelete
  2. Hi SI

    I got a feeling AGT seems to be more of a dumping ground than adding value type of reits. Nevertheless, even as a dumping ground, it might also pays off in the long run. I still think given current situation they'd probably waiting for a buyer to sweep their assets off at once.

    ReplyDelete
    Replies
    1. Hi B,

      Thought that u would leave a comment and I am right.

      U can well be right. Just that I am wondering why is it so difficult to "dump", I mean Japan has negative interest rate. Let's say Japan lenders are unwilling to lend, how about Singapore? That is the whole idea of listing in Singapore isn't it ?

      Also, equity issue, the crux is the price and discount, Goldman Sa and its founding shareholders of Coporate raiders know this best la, how are they holding back.

      Definitely not for altruistic reasons of creating value, but perhaps fighting for a good deal, which is not a bad thing

      The funny thing is 133 golf courses, out of which 90 is already owned by AGT, if they want to expand, "dumping" or "recycling" is defintely in the mind. They only own about 30% of the trust, recycling is less likely ...

      Hope the parent do get stronger and do have better alignment ...

      Delete
    2. 1. Asset light strategy means AG has already treated AGT as their dumping ground. Earlier suitor may still liking their wound now, they either have to cut lost or locked up their fund in this counter forever, at around 6% return, there are better option out there, moreover the lost opportunity of capital appreciation of the bull run in the last few quarters. People whom got in late may still treat this as fix income machine if it survives the next few years with constant dividend payout

      2. However with MBK in the picture now, our fate may have changed. I don't see them merely interested in AG which is already asset light, don't forget MBK is an investment company, running golf course is never their expertise, I highly suspect they will take back AGT and repackage it somewhere else which could unlock even more profit. The current price pressure seems like behind a hidden hand, somebody doesn't want it to goes up, the 2 big boys kept buying and selling, for what? If they are genuine share owner, they should be more than happy to see it goes up like we do but this is not happening, tell me why?

      Delete
  3. Hi Desmond,

    I didn't speculate why they buy and sell. I though just like ventures, the fund managers follow clients instructions to enter and exit.

    Hey, if there is buying out to repackage, we should be happy isn't it?

    Anyway I will also more than willing to offload at the right price, but at current price, if Status quo with no new updates. I will just do nothing

    ReplyDelete
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