Sabana Shari'ah REIT

[corydorus]

With higher interest rate, it will be hard to find less risk returns that can gives 8.5%.
Business cost will be higher.

My assumption Mr Market will be willing to pay for lower yield.

[felixleong]

I think some playing around with numbers.

I assume come:
2014, when the first trance of loan will be refinanced at 1% interest rate higher
2015, the second loan will be refinance at 2.5% interest rate higher.

I also account for dilution of units due to management fees.

I come to the following conclusion:
2014 yield will be 8.1%, dividend =9.2 cents
2015 and 2016 (No refinancing in 2016), yield will be 7.1%, dividend 8.1 cents per year

Assume I do not want to wait for the refinancing that will happen in 2017.

I will get 25.3 cents in dividends.

Assume Mr market still demand 8.5 % in 2016, price will be 95.2 cents.

Net gain is still 25.3 cents - 18.3 cents = 7 cents

Well, 7 cents return for 3 years is ridiculous. But at least there is not capital loss.

I have not take into account the Chai Seng acquisition, so my projection is highly conservative, to guage if there is any MOS for interest rate hike.

I think for SOR to hit 2.5% in 2015 is highly agressive too.

So there is some Margin of safety for capital loss.

Yeah i do agree, sabana also has a weak sponsor which leads to them having the highest cost of debt. Their renewals of master leases is still a worry and if terms end up unfavourable then yields might even fall further

[Greenrookie]

Lippo has higher cost of debt, so sabana is not the highest.

[Temperament]

I think some playing around with numbers.

I assume come:
2014, when the first trance of loan will be refinanced at 1% interest rate higher
2015, the second loan will be refinance at 2.5% interest rate higher.

I also account for dilution of units due to management fees.

I come to the following conclusion:
2014 yield will be 8.1%, dividend =9.2 cents
2015 and 2016 (No refinancing in 2016), yield will be 7.1%, dividend 8.1 cents per year

Assume I do not want to wait for the refinancing that will happen in 2017.

I will get 25.3 cents in dividends.

Assume Mr market still demand 8.5 % in 2016, price will be 95.2 cents.

Net gain is still 25.3 cents - 18.3 cents = 7 cents

Well, 7 cents return for 3 years is ridiculous. But at least there is not capital loss.

I have not take into account the Chai Seng acquisition, so my projection is highly conservative, to guage if there is any MOS for interest rate hike.

I think for SOR to hit 2.5% in 2015 is highly agressive too.

So there is some Margin of safety for capital loss.

Yeah i do agree, sabana also has a weak sponsor which leads to them having the highest cost of debt. Their renewals of master leases is still a worry and if terms end up unfavourable then yields might even fall further

Yes! That's why Market gives a higher DPU. i think at one time it was the highest yield REIT - > 10%. i was tempted. i think it is still the highest yield among the Reits. i think the Market will make Sabana to give > 10 % yield again. Then again i will be tempted.
GUTS!

[felixleong]

Sorry i meant for industrial reits in sg

[Temperament]

Sorry i meant for industrial reits in sg

Actually you are right in your logic.

But for Sabana (Muslim principle's REITs) it has many "supporters" i think, since day one. (How nice if only i am sure). So yield must be higher to highest in order to maintain a reasonable market price. That's why i always think logic doesn't apply in the Market.
In fact if i always base on logic, i will go MAD!
Alas, still dare not to test my observation.

[felixleong]

sometimes I also dun understand mr market

if we put sabana reit beside soilbuild reit
soildbuild reit is so much better

both has over 8% yield, but soilbuild has a lower gearing at 30% and a longer average weighted landlease at 50 years
I also think their lease terms are more well managed

[KopiKat]

sometimes I also dun understand mr market

if we put sabana reit beside soilbuild reit
soildbuild reit is so much better

both has over 8% yield, but soilbuild has a lower gearing at 30% and a longer average weighted landlease at 50 years
I also think their lease terms are more well managed

For now, the immediate negatives for SB REIT as compared to Sabana,

1. Newly listed, no listing track record. Even sponsor, same thing, just got listed recently. Previous track record (of Sponsor) of listing don't give a lot of confidence to market as it was subsequently delisted. IMO, Mr Market usually gives discount to uncertainty, especially more so during uncertain times.

2. Related to (1), it's still within the 30-days stabilising period. Since it's below IPO price, will it drop further after stabilising period? (Listed on 16-Aug, est. cease in 10-days).

Having said the above, I still went ahead to vest as I'm and had always been a sucker for Yield.... In fact I have both and may be switching some over from Sabana, depending on the outcome of their lease renewals.

Some tiny positives are Mr Lim buying 20Mil @ $0.73 on 19-Aug (I won't be surprised if he'd requested Stabilising Mgr not to be too active so that he can buy it cheaper from open market, rather than being 'returned' the ones he'd 'loaned' out for over-allotment). Also, Schroder had added 3.52Mil @ $0.7149 Avg Unit Price on 23-Aug to add to the IPO ones.

Still, quite a huge free float that can add to the price volatility once stabilising period is over...

[felixleong]

Thanks for your info, I think that it seems the current price of 71 cents is a very strong price support level given the signal sent by Mr Lim and Schroder.

However Sabana and SB does share some similiarities. I remember that when Sabana first IPO, it was underwater too as it was not very well received. Yields were as high as 10% and investors that when against the herd got rewarded well by picking Sabana up when it was below $1.00 ^^

[Greenrookie]

sometimes I also dun understand mr market

if we put sabana reit beside soilbuild reit
soildbuild reit is so much better

both has over 8% yield, but soilbuild has a lower gearing at 30% and a longer average weighted landlease at 50 years
I also think their lease terms are more well managed

Soilbuild managent fees, performance fees and aquisition fees are all higher than sabana.

Soilbuild management get performance fees as long as DPu is higher than preceding year, sabana get performance fees when DPU is 10% is higher than preceding year. Not sure why mr market discount it, but that why I prefer sabana