CapitaLand 3.0 – Asia Largest ( Rights or No Rights ?)

image credit to edgeprop.sg


Guess this is the hottest business news headlines since the announcement made last week :

While everyone seems excited about how it will transform CapitaLand -> CapitaLand 3.0 to be one of the Asia largest real estate group and world No.9 in term of AUM, with 8 listed REITs entity on SGX.






I am more interested in below slide which shows the “deleverage plan” of how they are going to reduce the net debt/ equity ratio from 0.72x (post-transaction) to 0.64x by Dec 2020.



Well, it means that the chances of divesting (some said “dumping”) part of these 3 Bil assets to those listed REITs entity has increased, and guess what, investors should expect more “rights issue” for those REITs which have higher “gearing” in case they are going to “ Hop –in Hokkien” or receive part of these “divesting assets “.

We all knew that investors really “hate” rights issue in whatever form or discounted price, from recent OUE-Com REIT, Kep-KBS REIT to Cromwell REIT, stocks price tumbled after the announcement of rights and all of them dropped below TERP before stabilizing. Also, recent price drops from FIRST REIT due to rumour of possible rights issue after changing of the Reit Manager is a nightmare and scary episode for some of the investors.


What is TERP ( Theoretical Ex-Right Price) ( from Investopedia.com)

It is highly debatable whether “rights issues “ from REITs are good or not, but one thing for sure is the share price will be beaten down “irrationally “ unexpectedly low in some cases.

For retirees who are purely depending on dividend as sole income source, it might not be good as he/she need to fork out more cash to buy the right ( alternatively, may sell his rights after ex if it’s “renounceable “) , but as investors who have a more diversified source of income and war-chest ready, it might be a good opportunity to accumulate at a certain stage after the rights announcement.








Is the REIT Myth Busted? ( from www.propwise.sg)



Above article will give you a more balanced and holistic view about rights issue from REITs and since REITs ( which inherit some form of growth factor ) is not like Bonds, one will need to expect rights call from time to time. Since my portfolio still having 45% in REITs, guess no other options that  I would have to get ready with my war-chest to play with this game of “rights “ right, treating “Rights issue” as part and parcel of investing in REITs.

If you are not ready for any rights issues for REITs, guess you still have the option of going for REIT ETF which will still give you a decent return (yield) after fees.


Cheers!



Further reading REIT ETF:


Singapore Budget 2018: Reit ETFs to enjoy tax transparency





Quote Of The Day:




“Games are won by players who focus on the playing field –- not by those whose eyes are glued to the scoreboard.” 
 
Warren Buffett

Comments

  1. Rights are normal business model for REITs so not wrong! :-)

    ReplyDelete
    Replies
    1. Yah, is part and parcel of REIT's business model..
      Cheers !! :D

      Delete
  2. Yes I think Rights issue coming for CapLand Reits. Prices move up is also telling. Get ready your cash and "hop". :)

    ReplyDelete
    Replies
    1. Hi Henry,
      Yes, indeed , some speculation on Lippo Mall Reit as well as price been pushed up quite substantially and same as First REIT , is matter of when not why the right will happen eventually.
      Cheers !! :D

      Delete
  3. For those heavy in REITs, will definitely need to be prepared for rights. After I subscribed excess for KepKBS and Cromwell , i braced myself for the roller coaster ride. Fortunately im out of the woods for both now, if only i get more of the excess!

    ReplyDelete
    Replies
    1. Hi Lazy Investor,
      Wow , glad to know that you are out of woods for both !
      I took advantage on the price dropped and now sitting on 9-11% profit for both accounts , counting on their incoming dividend to be declared in coming month.
      Cheers !! :D

      Delete
    2. Guess we bought into KKBS at similar price then. Yeah, but ive taken the opportunity to reduce my holdings for Cromwell. Abit worried with regards to whats going on in Europe.

      Delete
    3. Yes , Europe is a bit chaotic now especially with pending "Brexit " issue..
      Cheers !!

      Delete

Post a Comment

Related Posts Plugin for WordPress, Blogger...

Labels

Show more

This Month's Top Blog Posts

2nd Qtr 2021 : Portfolio & Dividend Update

Bitcoin ( Crypto) Is Not Tulip

Dow Jones 125 Years : Investing For The Long Term

Investment Clock : What Time Is It ?

Renounceable vs Non-renounceable Rights Issue ( Edited )