Saizen REIT

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#51
I think good for saizen unit holders or stocks with earnings in japanese yen after currency translation Yen --> SGD Tongue

Japan Gyohten: long-term yen decline unlikely

notes:
* Dollar's dominance cause of instability-Gyohten
* 10-15 years before yuan can be added to SDR basket

source: http://www.guardian.co.uk/business/feedarticle/9493706
source: reuters

TOKYO, Feb 10 (Reuters) - The yen is unlikely to weaken in the long term due to Japan's persistent deflation, which translates into stronger purchasing power for its currency, a former top Japanese currency official said on Thursday.

"The yen is unlikely to weaken medium- to long-term as long as deflation persists, because currency moves tend to be driven by purchasing power and deflation means that the yen's purchasing power will become stronger and stronger," Toyoo Gyohten told Reuters in an interview. He added that the dollar's dominance was already diminishing as the euro increases its share in global trade, but Europe's credit problems have prevented the single currency from being considered a strong alternative to the dollar.

"The dollar's unipolar dominance certainly has been a cause of instability (in global financial markets) ... The fact that France and China are discussing the dollar's role reflects declining trust in the dollar," Gyohten said. Reform of the global monetary system and changes to the greenback's role as a reserve currency are expected to be high on the agenda at the Group of 20 finance chiefs' meeting next week in Paris.

Gyohten also said it will likely take 10 to 15 years for the yuan to be added to the basket of currencies which backs the IMF's Special Drawing Rights system. This allows members to draw funds to supplement their reserves and currently comprises dollars, euros, yen and sterling.
French officials have suggested setting a timetable for the yuan's entry into the SDR's basket of currencies could be one achievement of their presidency of the G20, but Washington is reluctant to concede this without more yuan exchange rate flexibility. Gyohten was director general of the Ministry of Finance's international bureau at the time of the Plaza Accord in 1985, when rich countries agreed to let the dollar depreciate to reduce the United States' trade deficit.

He then served as Japan's top currency official until he retired from the finance ministry in 1989. He now heads Institute for International Monetary Affairs, a think tank. On Japan's tattered public finance, the government's social security and tax reform package due in June will be the key to gaining market trust, Gyohten said.

"Japan's circumstances are different from other countries as most of its debts are held by Japanese people and there is room for tax hikes ... But that will not act as panacea for markets forever."
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#52
Announced semi-annual dividends of 0.52 cts today...

Distributable payout could be higher (i.e. additional 0.26 cts) if not for loan principal repayment..

Extracted from the results..
The amount deployed for loan principal repayment comprised mainly amortisation payments on the loan
principals of YK Shinzan, YK JOF, GK Choan, GK Chosei and GK Chogen. While loan amortisation reduces
cash available for distribution, it results in savings on interest expenses going forward. Solely for illustration
purposes only, had the aforesaid amount been distributable, it would have amounted to an additional distribution
of approximately 0.26 cents per Unit (based on 1,122,925,619 Units in issue as at 31 December 2010).

Outstanding warrants = 323431798

Semi-annual distribution amt = (0.0052 + 0.0026) x 1122925619 = $8,758,820

Assuming all warrants exercised, (i.e. total shares = 1446357417), potential distributable amt remains the same for 1 yr (i.e.8,758,820 x 2 = $17,517,640), annual distribution amt = $17,517,640 / 1446357417 = $0.0121

Annualized yield (based on share price of 0.165) = 0.0121 / 0.165 x 100% = 7.33%

I guess Saizen is pretty fair valued at 0.165..

What do you guys think?



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#53
It continues to make losses.

A 7% yielding REIT with rapidly depreciating assets ?

Should it should trade at a higher yield to offset the negative returns ?

(Not vested)
Disclaimer: Please feel free to correct any error in my post. I am not liable for anything. Do your own research and analysis. I do NOT give buy or sell calls and stock tips. Buy and sell at your risk. I am not a qualified financial adviser so I do not give any advice. The postings reflects my own personal thoughts which may or may not be accurate.
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#54
Based on the Annual Valuation, the aggregate value of Saizen REIT’s properties amounted to JPY 40,381.7 million (S$636.9 million). This represents a decrease of 4.0% to the aggregate value of JPY 42,051.1 million (S$663.3 million) of these 161 properties based on the valuation performed as at 30 June 2009.

The fair value of Saizen REIT’s properties decreased because the independent valuers had adopted slightly higher capitalisation rates, in view that while the property and credit markets have stabilised, property buyers and lenders still tend to adopt a cautious approach. The slight decrease in rental rates of new contracts entered into in FY2010 for Saizen REIT’s properties also contributed to the decrease in valuations.


http://info.sgx.com/webcoranncatth.nsf/V...200313F05/$file/20110124_Valuation_of_Property.pdf?openelement
http://info.sgx.com/webcoranncatth.nsf/V...A0032624F/$file/20100826_Annual_Valuation_of_Properties.pdf?openelement

1. Real estate prices are always fluctuating. This shouldn't be a source of concern if the primary interest is income stream. Their properties are valued at below replacement cost. Certain groups are bullish on Japanese properties.

2. The properties are freehold so the only major costs are maintenance & upgrading.

3. Rental income has been dropping slightly in the new renewal contracts.

4. The recent divestments have also been executed at an increasing discount vis-a-vis valuation, albeit slight.

5. Nett Property Income / Income Expense Ratio is around 2.68. This might improve after the loan payment announced today.

6. After adjusting for dilution and factoring the resolving of the YK Shintoku Issue, I estimated the yield to be around 6+% based on $0.16.

7. The fair value loss of JPY 195.4 million is simply due to the increase in the market traded price of the warrants. Purely accounting and negligible since most have factored in the dilution into their calculations as the warrant holders are in the money.

8. Key personnels within the company are vested in the REIT.

9. There is also JPY/SGD forex to contend with.

10. It does not provide much upside nor present much risk at current levels.

YMMV.
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#55
Beyond what everyone's put here: some pluses & minuses

Pluses:
Obviously discounted P/B. If they can sell off their assets at about 4% discount to book, the book values are pretty decent.
Vested management

Minuses: The macro-economy.
Japan's debt-to-GDP exceeds 200%, which for now hasn't tipped over.
About 90% of it has been held by locals, which have been keeping it there at 2% rates as they don't have many other places to put their money.
We have a situation where if the interest is 4% of GDP, but GDP is growing at less than 4%, so if the debt isn't retired soon via some extraordinary measure (combination of asset sales, tax raises, spending cuts etc), the debt itself will mathematically balloon Japan into bankruptcy. This can't be good for either property prices or JPY.

But at the current price to NAV it's now priced for a greater than 50% probability that either the REIT or Japan will go bankrupt. Even with the ratings downgrade, Japan is still investment grade, so it's not about to default so soon.

Then the traded warrant dominates the stock itself as long as the REIT itself doesn't drop below $0.09. If the discount to NAV closes before it expires, then the warrant will appreciate a whole lot more than the REIT. If the discount to NAV hasn't closed by then, and if the JPY isn't in trouble, then this would continue to be attractive and you can pay the extra $0.09 to buy the REIT.

In other words, if the REIT is a good idea (and the management seems to think so), the Warrant is even better.
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#56
>In other words, if the REIT is a good idea (and the management seems to think so), the Warrant is even better.

Warrants not entitled to dividends.
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#57
That is true.
Except that I'd just quote Buffett's latest letter: We agree with investment writer Ray DeVoe’s observation, “More money has been lost reaching for yield than at the point of a gun.”
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#58
To add on to Buffett, personally I think high yield is over-hyped. What's more important (to me at least) is the sustainability of that yield. Hence, I go for "lower" yield assets which promise to be able to at least deliver that yield consistently.

To each his own, of course. Smile
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
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#59
Here's a picture showing Saizen's Portfolio location.

[Image: portfolio_map.gif]

Today's earthquake took a huge hit on the listed counter.
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#60
Updates from Saizen about their portfolio exposure to the affected regions.

http://info.sgx.com/webcoranncatth.nsf/V...000476EC6/$file/20110311_Earthquake_in_Northeastern_Japan.pdf?openelement
Disclaimer: Please feel free to correct any error in my post. I am not liable for anything. Do your own research and analysis. I do NOT give buy or sell calls and stock tips. Buy and sell at your risk. I am not a qualified financial adviser so I do not give any advice. The postings reflects my own personal thoughts which may or may not be accurate.
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