SGX Business Trust Discussions

[kichialo]

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[Nick]

The Business Trust asset class has been hugely unpopular among local investors due to its poor operating record during the credit crunch in 2009. I have compiled a list of business trust and how their share prices have performed since IPO. Let’s see whether anything surprising pops up !

I have made the following assumptions –
1) Unit-holders participated in all rights and public equity fund raising exercises.
2) FSLT and RMT IPO prices are quoted in US$ since their DPU is declared in US$.

Ascendas India Trust

IPO Price: $1.18 (IPO’ed in 2H 07)
Current Price: $0.925
Dividends Declared: $0.2454
Net Loss: $0.0096
Net Loss Percentage: 0.81%

CitySpring

IPO Price: $0.89 (IPO’ed in early 2007)
IPO Price after adjusting for 1 for 1 rights @ $0.48: $0.685
Dividends Declared: $0.1583 (pre rights) & $0.0525 (post rights)
Dividends Declared adjusting for rights: $0.13165
Current Price: $0.575
Net Gain: $0.02165
Net Gain Percentage: 3.16%

First Ship Lease Trust

IPO Price: US$0.98
Dividends Declared: US$0.2977
Current Price: US$0.3682 (using current exchange rate)
Net Loss: US$0.314
Net Loss Percentage: 32.0%

India Bulls Properties Investment Trust

IPO Price: $1.00 (June 2008)
IPO Price after adjusting for 53 for 100 rights @ $0.16: $0.709
Dividends Declared: 0
Current Price: $0.27
Net Loss: $0.439
Net Loss Percentage: 61.9%

K-Green Trust

IPO Price: $1.11 (based on 1st day closing price in June 2010)
Dividends Declared: 0
Current Price: $1.08
Net Loss: $0.03
Net Loss Percentage: 2.7%

Pacific Shipping Trust

IPO Price: US$0.45 (IPO’ed in 2H 2006)
IPO Price Adjusting for offer of 3 for 4 @ USD 0.365: US$0.414
Dividends Declared: US$0.099253 (pre rights) & US$0.07533 (post rights)
Dividends Declared (adjusting for rights): US$0.132046
Current Price: US$0.38
Net Gain: US$0.098046
Net Gain Percentage: 23.7%

Rickmers Maritime Trust

IPO Price: US$1.00
Current Price: US$0.318 (current exchange rate)
Dividends Declared: US$0.20154
Net Loss: US$0.48046
Net Loss Percentage: 48.0%

Treasury China Trust

IPO Price: $1.76 (based on 1st day closing price)
Dividends Declared: $0.025
Current Price: $1.87
Net Gain: $0.135
Net Gain Percentage: 7.7%

MIIF

IPO Price: $1.00 (2005)
Current Price: $0.595
Dividends Declared: $0.334
Net Loss: $0.071
Net Loss Percentage: 7.1%

Global Investment Limited

IPO Price: $1.06
Dividends Declared: $0.252
Current Price: $0.215
Net Loss: $0.593
Net Loss Percentage: 55.9%

Top 3 Gainers

1) Pacific Shipping Trust with 23.7% gain over the past 4.5 years
2) Treasury China Trust with 7.7% gain over the past 0.5 years
3) Cityspring with 3.2% gain over the past 4 years.

Top 3 Losers

1) Indiabulls Properties Trust with 61.9% loss over the past 2.5 years
2) Global Investment Limited with 55.9% loss over the past 3.5 years
3) Rickmers Maritime Trust with 48% loss over the past 3.5 years


I was quite surprised with the data collected. I had expected the Ai-Trust to out-perform its peers since its assets are freehold property land and its gearing remains low. I did not expect PST to out-perform its fellow peers by such a large margin since it was the smallest business trust there. But even then a 23% gain over 4.5 years, isn't very impressive either ! TCT gains has been impressive over the past few months as more and more market players began to noticed it and the quality of its assets. It spiked after making the 2 recent acquisitions in December.

The data clearly showed one thing – with the exception of PST, the gainers made single digit gain over a few years which is pretty poor. Singapore Government bonds held over the same duration would have made better gains with lesser risk. Moreover, the Top 3 Losers started out brightly – Indiabulls had given distribution forecast yield while RMT and GIL paid handsome dividends until the credit crunch derailed them. In other words, prospective shareholders cannot afford to use past performance to determine whether a Trust measures up. Instead, he has to examine whether can the Trust continue to operate as a going concern with stable distributions even if a recession were to occur. Unfortunately, this is easier said than done.

Quite a number of biz trust were listed in 2007 and 2008 period which co-incidentally (maybe not) was the period of extreme bullishness. Don’t fall for the projected yield in the IPO Prospectus, be wary of the future and keep an eye on the capital structure ! Its quite ironic that a 1.5% Fixed Deposit out-performed all but 2 business trust ! That's over 80% of them !!! It is also very important to understand the businesses which your biz trust is under-taking. A leasing business is generally easy to grasp but many failed to question why did some of these trust had a 100% cash payout policy. Development business and investments in exotic assets (like private infrastructure or loans) requires some innate understanding of how these assets functions. It is best to avoid investing in anything which you may not fully grasp. Personally, even till today, I still don't quite grasp the majority of GIL's assets since I lack the knowledge.

I do expect more business trust to be listed if the market conditions continue to be good. So let's be vigilant and share about any potential disasters which may occur for any newly listed business trust.

(Vested in PST)
PS: Please voice out any mistakes in the figures. Thanks

[newborn1000]

Good information by Nick........

Quick common for businesses to under perform fixed interest account........(especially when it fails....)

[cif5000]

The Business Trust asset class has been hugely unpopular among local investors due to its poor operating record during the credit crunch in 2009. I have compiled a list of business trust and how their share prices have performed since IPO...

Its quite ironic that a 1.5% Fixed Deposit out-performed all but 2 business trust ! That's over 80% of them !!!

Nice compilation. I see something else from these data but I guess it's nothing novel. IPOs are priced high. I am also guessing from my stomach that if we did similar compilation on stocks (i.e. using IPO prices as the starting point), the result will not be too far off.

[Nick]

The Business Trust asset class has been hugely unpopular among local investors due to its poor operating record during the credit crunch in 2009. I have compiled a list of business trust and how their share prices have performed since IPO...

Its quite ironic that a 1.5% Fixed Deposit out-performed all but 2 business trust ! That's over 80% of them !!!

Nice compilation. I see something else from these data but I guess it's nothing novel. IPOs are priced high. I am also guessing from my stomach that if we did similar compilation on stocks (i.e. using IPO prices as the starting point), the result will not be too far off.

Yes very true. Most of these trusts would have been decent investments if purchased in 1H 2009. If I have time, I will attempt to compile a list of data for REITs.

What else did you see from these data ? Please share hehe




Thanks Newborn1000 for the compliment

[Jacmar]

The Business Trust asset class has been hugely unpopular among local investors due to its poor operating record during the credit crunch in 2009

I do expect more business trust to be listed if the market conditions continue to be good. So let's be vigilant and share about any potential disasters which may occur for any newly listed business trust.

(Vested in PST)
PS: Please voice out any mistakes in the figures. Thanks

Nice compilation. Thanks. I am not a favorite of business trust as I have this nagging question as to why the owners want to put their business as a business trust if the business is so good and not run it like a business going concern. Business trust adds another layer of management cost to a stand alone business. Your data goes to show that it is overvalued and the owners wants to bail out.

[Blackjack]

That's hard work Nick. Looking forward to see the list for Reits too.

Thanks for your effort btw.

For TCT and KGT, I have a feeling we haven't seen long enough of a listing history yet for the percentage to be representative. Probably need to wait another year or two.

[Nick]

Hi Blackjack,

Thanks for commenting on the data compiled. I hope I got my figures right !

KGT has been trading at very narrow range. Personally, I am not impressed with its 100% cash payout policy which leaves it with no room to replenish its assets with the BOT lease expires.

TCT is an interesting stock considering its sharp discount to its book value despite holding on to prime assets in Beijing and Shanghai. It has been trading at sharp discount from its 'IPO' price for a long time till the recent acquisitions were made which caused the price to sky-rocket from 1.50ish to over 1.80 within days ! So you are right that it isn't representative yet due to its short listing history. I am quite mixed on TCT prospect - part of me is quite certain that the discount to its NAV will decline with time while another part of me screams out IndiaBulls Indiabulls !!! The Management is quite focused on trimming down this gap in unit price judging by its recent comments. Makes sense...you can't raise much equity if unit price is trading at such levels !

[Jon-san]

One thing i noticed though, is that KGT has a net loss, but it's highlighted in green. Just a bit misleading, is all.

[Nick]

One thing i noticed though, is that KGT has a net loss, but it's highlighted in green. Just a bit misleading, is all.

Ok corrected. Careless mistake from me hehe