Discount rate of 8.4% vs a lower dilution of 4.8% (for 40 mio raised instead of the initial planned 110 mio), seem excessive to me. Apparently, Mr market agreed in the morning.
While I appreciate the lower dilution and the utilisation of cash from the 2013 placement, there are also more questions that need to be answered.
About 100 mio is raised in the last placement, more than enough to cover the 70 mio difference the initial placement exercise want to raise.
So altogether, 170 mio of cash(excluding the 40 mio and consideration units to be issued) need to be set aside for this acquisition. Looking the Q3 cash level of 223 mio. it seems that the lower dilution is a pleasant surprise.
However, the pleasant surprise is offset by a nasty surprise of only 0.55 cents of advance payment. while it is not confirmed, lets assume the full quarter of distribution is 14% higher (13 days more out of 90), which is 0.62 cents. It is still an almost 10% fall in DPU QoQ from 0.69 cents.
The Pluit Village effect coming into play?
Looking at the currency exchange for the past 6 months, hardly any big swing to answer for that lower distribution
I almost wanted to accumulate at the lower price, until the lower distribution caught my eye.
A quick calculation:
Total dilution from equity raising and consideration shares will be about 10%.
So, 0.55 cents could be a conservative new normal QoQ DPU going forward for the next 1-2 quarters with all the one-off costs causing more downward pressure.
Assume 15 mio increase in NPI for distribution, yearly DPU should 2.75 cents, which translate into a yield of 7.9 % annually.
Seem not too bad a deal if you ask me.
Hi Sillyinvestor
ReplyDeleteI blogged about this too coincidentally, but am looking from another angle.
Glad to see you blogging about this too from an investor point of view.
Kemang acquisition is a good one on paper but you can see how the other malls are poorly lacking behind these days (think Pluit Village, Binjai Mall, etc). It appears that DPU yield are still well but poor performance over time will cause the distribution to fall. Operational performance is still key and they badly need to maintain that, if not improve.
Pluit village is a mistake a not is too early to tell, although it is definitely one of the weakest malls in the portfolio.
DeleteFrom the low DPU, it would seem they have not found anyone to take up the space.
Pluit is 75% occupied when acquired with income guaranteed. Kemang is already 92% occupied and is part of a bigger Eco-system, and is the first acquisition with Alvin on the helm.
The previous management is doing dump and recycle too obviously.
I say the five most dangerous words.
It's different this time
lOL
I'm keeping my fingers crossed they do better this time round....
ReplyDeleteHi David,
DeleteThere might be some overhang in the short term in the near term.
But there is distinctly difference.
The min price for consideration shares is 38 cents. 5 cents higher than current price. And bridge water agree to the deal
Bridgewater is a subsidiary of Lippo, so the 38 cents deal will hold.
DeleteBut then the downside is down not give much confidence as compared to Tong Jiguang buying.
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