First REIT

[shanrui_91]

I do not follow both REITs, but i do think it make sense. With REITs outperforming the STI index this year thanks to a run-up in prices, i reckon it might be wiser to issue a share placement at elevated prices (abeit at a discount), compared to gearing up (even though interest rates are still low).

After this placement, gearing ratio reduces with an expanded equity base. The end result is First Reit having even greater gearing power for future opportunities or weathering a crisis. This is what a profit-oriented Manager will do to maximise their own returns.

Maybe the question should be - why aren't they having a rights issue (where all shareholders can 'benefit') instead?

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on another note, a rights issue doesn't sound too optimized to raise 29mil sgd.
So a private placement does make sense here if one feels the price paid is NOT undervaluing First Reit.

You are right that it does make sense to issue rights given that they are trading at premium over NAV which will lead to increase in NAV for current shareholder.

However, I am still wondering why they (the 2 Indonesian Reits) are lowly geared as compared with other REIT? Not that it is a bad thing but just wondering if there could be other reasons why they are the lowest geared among all the REITs

[Stocker]

The debt headrooms could be reserved for future lippo's assets.

[Drizzt]

or could it be usually indonesia based investment has a high inflation risks thus the aversion to high debts

[changwk]

hi,

back in late 2010, FReit has done 1 round of rights issue at $0.5. it was 5 rights for every 4 units held. Approx 346mil rights were issued valued at $172mil. All rights were fully subscribed.

Rights began trading on 31 Dec 2010 and the share price close at $0.7.
those who converted their rights to shares had an instant capital gain of 40%. it was quite incredible.

[jovialger]

hi,

back in late 2010, FReit has done 1 round of rights issue at $0.5. it was 5 rights for every 4 units held. Approx 346mil rights were issued valued at $172mil. All rights were fully subscribed.

Rights began trading on 31 Dec 2010 and the share price close at $0.7.
those who converted their rights to shares had an instant capital gain of 40%. it was quite incredible.

So now with placement instead of rights, seems to be benefiting 3rd parties with the discounted shares ?

[cfa]

and the 3rd parties are their own friendly parties.

[Nick]

hi,

back in late 2010, FReit has done 1 round of rights issue at $0.5. it was 5 rights for every 4 units held. Approx 346mil rights were issued valued at $172mil. All rights were fully subscribed.

Rights began trading on 31 Dec 2010 and the share price close at $0.7.
those who converted their rights to shares had an instant capital gain of 40%. it was quite incredible.

It doesn't work that way. Before the rights was issued, FR was trading at 95 cents. The theoretical XR price was 70 cents if the rights was fully subscribed. So there was no instant capital gain at all initially since capital gains from the rights share was offsetting the capital loss from the pre-rights shares. It took a year later before the market recognized its value and its share price rocket upwards to over $1.00 today.

[changwk]

Hi nick,
You are right. Thanks for the feedback.

Does anyone know who is took up the recent placement?

[Nick]

First REIT continues acquisition trail with two new strategic hospitals in Indonesia

• To acquire Siloam Hospitals in Bali and South Jakarta at an attractive purchase consideration of S$190.4 million
• Acquisition will expand First REIT’s portfolio to 14 properties and achieve a target asset base of over S$1.0 billion
• Attractive initial net property yield in excess of 9%

http://info.sgx.com/webcoranncatth.nsf/V...A00377E79/$file/First_REIT_Press_Release_27_March_2013_Final.pdf?openelement [Press Release]

Share price currently trading at $1.22. I do certainly regret selling too early.

(Not Vested)

[HitandRun]

I've been selling since it was 85-90 cts. Looks like I'm kind of early too. Incidentally, the timing of the CEO's purchases is REALLY impeccable.