Sabana Shari'ah REIT

[KopiKat]

Do you know why the Malaysian IPO's are doing very well? Do you know why Sabana will do well? There's a lot of money coming in from the oil-rich Middle-Eastern countries and their investment funds! And they are obliged to invest in Shariah compliant companies. There are some more big IPO's in the pipeline for Malaysia. Malaysia is appearing to become the Islamic financial centre of Southeast Asia, which has the largest Muslim population of the world.

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2nd Chance could benefit from this too if it positions itself well.

I remembered that was the hype / selling point they were trying to create ~2yrs back... But, I don't really buy that cos' I was wondering why some of the biggest SWFs in the world from Mid-East like Abu Dhabi (ADIA) and Kuwait (KIA) had been already investing for ages in listed companies like CitiGroup, Daimler,..etc who apparently are unlikely to be Shariah compliant...

IMO, very likely, only those Muslim religious organisations eg. Mosque Funds are obliged to invest in Shariah compliant companies..

As for the success of Malaysia IPOs, there're some who says it's cos' of Election year, esp. the mega (No.2 and 3 IPO in world this year?), state-linked ones like IHH and Felda...

[Stocker]

Obvious persistent accumulations .

[cfa]

Will this dilution impact on DPU ?

http://info.sgx.com/webcoranncatth.nsf/V...F003287F3/$file/20120920_Announcement_CS_AIP.pdf?openelement

[KopiKat]

Will this dilution impact on DPU ?

http://info.sgx.com/webcoranncatth.nsf/V...F003287F3/$file/20120920_Announcement_CS_AIP.pdf?openelement

It's like a Bond (Shariah compliant ones) that can be converted to Shares.
See SGX Annc dated 6-Sep-12 on the purpose,

• approximately S$61.0 million (which is equivalent to 76.2% of the gross proceeds of the Issue) will be used towards the acquisition of the property 23 Serangoon North Avenue 5, Singapore 554530 (the “Property”) (details of the acquisition is set out in the announcement dated 8 August 2012); and

• approximately S$19.0 million (which is equivalent to 23.8% of the gross proceeds of the Issue) will be used for other general corporate purposes and to pay the estimated fees and expenses, including professional fees and expenses, incurred or to be incurred in connection with the Issue and the acquisition of the Property.


Another SGX Annc dated 6-Sep-12 on the Conversion Price & 'Coupon',

Profit Rate / Periodic Distribution Dates : 4.50% per annum, payable semi-annually in arrear on or about 24 March and 24 September, beginning on or about 24 March 2013
Initial Conversion Price : S$1.1933 for each new Unit

So, for now, with Sabana @ $1.11 close, (lower than conversion price), it's unlikely there'll be any conversion / dilution (Conversion can start only from 9-Nov-12). The proceeds raised are used to acquire another asset, which ought to generate enough income to pay for the interest + some leftover for extra DPU.

But, yes, there'll be dilution of DPU once it gets converted. Total max. is 10.5% of existing shares,

3. Conversion Units
The number of new Conversion Units to be allotted and issued, pursuant to the full conversion of the Convertible Sukuk is 67,040,979 (based on the Initial conversion price of S$1.1933 and assuming no adjustments to the Initial Conversion Price). The 67,040,979 new Conversion Units represent approximately 10.5 per cent. of the existing Units in issue as at the date of this announcement.

[tanjm]

The conversion price of 1.1933 seems a bit too low given that the interest rate is 4.5%. Normally a convertible should have a lower interest rate in return for potential equity upside. In this case the interest rate seems a bit high for a fairly acheivable conversion price of 1.19.

[cfa]

Base on present yield of 8.035% (2.27x4=9.08 cents vs 1.13 ).
If S$100,000 /1.1933 =83,801.22.
83801.22 x 8.035% =6.73 cents per share ( DPU )
So isn't it better to buy the share directly ?
Why there are investors still want to subcribe the convertible bond ?

[Nick]

I am guessing that since the bondholders have the right of redemption of Sept 2015 - if Sabana share price languish, they can easily get their principal back. There is no such option for equity holders.

[tanjm]

I am guessing that since the bondholders have the right of redemption of Sept 2015 - if Sabana share price languish, they can easily get their principal back. There is no such option for equity holders.

Exactly right. In fact a convertible loan is equivalent to a standard loan plus a share warrant. There is supposed to be a reduction in yield to compensate the company for issuing said warrant. The warrant gives them the right to buy shares at a fixed price (which in this case they'd pay with the loan redemption).

Which is why I said the terms of the deal don't look too good (interest rate too high, strike price too low).

[valueinvestor]

I am guessing that since the bondholders have the right of redemption of Sept 2015 - if Sabana share price languish, they can easily get their principal back. There is no such option for equity holders.

Exactly right. In fact a convertible loan is equivalent to a standard loan plus a share warrant. There is supposed to be a reduction in yield to compensate the company for issuing said warrant. The warrant gives them the right to buy shares at a fixed price (which in this case they'd pay with the loan redemption).

Which is why I said the terms of the deal don't look too good (interest rate too high, strike price too low).

The terms of the deal don't look too good to existing Sabana reit unitholders or bond/warrant holders ?

[KopiKat]

The pricing for the Sukuk was fixed on 6-Sep-12. Some market closing data for the prior days from Yahoo,

6 Sep 12 : $1.075
5 Sep 12 : $1.075
3 Sep 12 : $1.05

A bit lower compared to latest close of $1.13 (21-Sep) and conversion price of $1.1933 is >10% premium. Not sure if it's too low tho'...