Saizen REIT

Check out SAIZEN REITS..

I am vested and will continue to hold...
I am definitely convinced that this is a hidden gem..

What say u?

(21-10-2010, 10:48 AM)Zelphon Wrote: Check out SAIZEN REITS..

I am vested and will continue to hold...
I am definitely convinced that this is a hidden gem..

What say u?

have they resumed paying dividends yet?

They have resumed paying dividend, XD 8 Sep 2010, SGD 0.0026.

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Key financial information :

Number of Units in Issue as at 18 October 2010 -> 1,111,004,712

Outstanding Warrants as at 18 October 2010 -> 335,352,705

Warrant proceeds received as at 18 October 2010 -> S$14.56 million

Potential warrant proceeds (assuming exercise of all outstanding warrants as at 18 October 2010) -> S$30.18 million

NAV as at 30 June 2010 -> S$376.83 million

NAV per Unit as at 30 June 2010 -> S$0.40
- Adjusted for warrants -> S$0.32

Net Gearing as at 30 June 2010 -> 34.7%
- Adjusted for warrants -> 27.7%

Computed based on an exchange rate of JPY 63.4 : S$1.00 as at 30 June 2010

For more detail, you can download this

Notwithstanding their resumption in dividend payment and having refinanced other debts - with 1 major debt issue still in default - I think it is naive to believe that this Japanese residential Reit managed by a Singaporean team will eventually succeed. I am not at all encouraged by the following -

1. The underlying residential properties are small and not worth much individually. The fact that the properties are spread quite widely acoss Japan makes housekeeping/maintenance/servicing work and monitoring difficult for the management and costly.

2. It is naturally more difficult for the Singaporean management team to maximize the earning potential and sale value of the underlying residential properties, as well as to minimize the maintenance and other expenses. This is the same in the area of seeking refinancing of the debts. There are amble evidences on this aspect from the recent sales of properties - most of them were below valuation - and the prolonged refinancing exercises todate.

Bearing in mind many people had bought into this Reit during its IPO at $1.00 apiece in 2007, I just can't help but feel quite sad for them. This Reit shouldn't have gotten approval to list on SGX in the first place!

this reit in sg should serve as a nice wake up call that property price isnt always going north as evident in japan..

I'm vested because I feel amongst the reits listed in SGX, this one has the best chance for capital growth with reasonable (average) dividend yield.

The recent property sales (at an average discount of 4% of valuation) were "forced" by the CMBS loansharks. They had to sell the properties to avoid foreclosure which would be more undesirable. To me, a 4% discount at the current economic climate in Japan is quite reasonable, besides even if you discount all their properties at 10%, the current unit price is still at a steep discount to their NAV. It's also a sign that the properties they are holding are not illiquid.

Anyway to summarise, the worse case scenario (short of acts of god) at the current unit price if 15.5c would be relatively stable dividend yield of 6-7%. Anything positive like better credit rating, increase in rental or Japan finally making a recovery would be a bonus.

Let's wait for the next dividend announcement..

A simple calculation from the latest dividend payout...
It amounts to 9.75% annual yield as the payout was from 2 months of accumulation.

One important point to note is that ALL SAIZEN REITS properties are FREEHOLD..

Even Mapletree Logistic Trust is embarking on Industrial Properties acquisition in Japan now..

9.75% is optimistic... there are a bunch of outstanding warrants that will dilute future distributions, also one cannot be assured that the rental rates will not continue falling without any expense in renovating the buildings. Then again, you are right... it's freehold!

Saizen's area of speciality is residential; not logistics.

EDIT: Thought it'd be good to share that during their recent AGM, the management was trying hard to push a few points
#1 even at the worse case scenario of losing YK Shintoku, their NAV is more than x2 of current market price.
#2 other than Shintoku, all income from their other portfolio will be distributed. The income generating part of the reit will continue to generate income regardless of the outcome of YK Shintoku.
#3 they are very unwilling to sell properties as the current prices have pretty much bottomed out (quoting from memory "it's a good time to buy"), but they're forced to unload some properties with time to avoid foreclosure.
#4 they have 15m cash hoard, and are unable to use it to pay part of their Shintoku CMBS loan as there is no such option in the CMBS loan structure (i.e they have to pay the full amount or continue with the 7% interest)
#5 currently most of the income from Shintoku goes into paying the interests with a small amount (estimated 200m? Need to check their financials) to repay the principal.

That's about all that I can remember =P

looking at the last balance sheet: NAV is 26.16 yen - 31 mar 2010, 26.05 yen - 30 jun 2009

using an exchange rate of 68 yen - 1 sgd
that gives about: sgd 38 cents
and it is trading at 16 cents today, price to book ratio: 42%
did i calculate correctly?

if true i've bot a gem lol

i'm learning reits & i'm thinking that NAV (price to book) and amount of debts on balance sheet is probably a most important thing to valuate reits following my punt on Mapletree Industrial Trust

note that my punts on reits so far are very speculative even though i use value investing techniques to value them lol
for properties, my personal thinking is that distributions or dividends are less important than its balance sheet, amount of debts and p/b ratio when 1 is investing.
(balance sheet with a lot of debts are weak balance sheets and would have a significant negative impact on the NAV during a recession)

me playing/punting/speculating saizen reit is on a basis that i think japan economy would do fairly well given their savings + japan govt stimulus measures
NIKKEI has been observed to do pretty well lately, often green when regional indexes (e.g. STI, HSI, SSEC) are red
if this is true (japan economy improves + govt stimulus), properties prices would rise when demand go up and when revalued asset prices go up price to book would look even more attractive, not to mention rising rents and perhaps cash distribution

(21-10-2010, 11:50 PM)piggo Wrote: I'm vested because I feel amongst the reits listed in SGX, this one has the best chance for capital growth with reasonable (average) dividend yield.

The recent property sales (at an average discount of 4% of valuation) were "forced" by the CMBS loansharks. They had to sell the properties to avoid foreclosure which would be more undesirable. To me, a 4% discount at the current economic climate in Japan is quite reasonable, besides even if you discount all their properties at 10%, the current unit price is still at a steep discount to their NAV. It's also a sign that the properties they are holding are not illiquid.

Anyway to summarise, the worse case scenario (short of acts of god) at the current unit price if 15.5c would be relatively stable dividend yield of 6-7%. Anything positive like better credit rating, increase in rental or Japan finally making a recovery would be a bonus.

(23-10-2010, 01:17 AM)ag88 Wrote: looking at the last balance sheet: NAV is 26.16 yen - 31 mar 2010, 26.05 yen - 30 jun 2009

using an exchange rate of 68 yen - 1 sgd
that gives about: sgd 38 cents
and it is trading at 16 cents today, price to book ratio: 42%
did i calculate correctly?

if true i've bot a gem

IT IS TRUE..

IT IS THE MOST UNDERVALUED UNNOTICED GEM IN SGX...