Global Investments

[Nick]

GIL RELEASES DIVIDEND GUIDANCE OF 0.75 CENTS PER SHARE

http://info.sgx.com/webcoranncatth.nsf/V...B0041941E/$file/11_20120409_1H2012DividendGuidance.pdf?openelement [SGX Announcement]

This is certainly a good piece of news and would translate to double digit yields.

As earlier mentioned:

To maintain its 1.50 cents distribution, GIL needs to generate free cash-flow of $12.4 million. In FY 2011, it generated FCF of $9.4 million but with the redemption of Pepper Notes 6 and possible suspension of coupons from its European Notes, its FCF may drop this year (but partially mitigated by contribution from the newly purchased CLO coupons). In other words, the quanta of the DPU will depend solely on STAM ability to utilize the rights proceed (of $35 million) and $42 million cash to purchase assets with decent yield and potential for capital appreciation.

It is likely that some of the current cash hoard will be used to fund the interim dividend but hopefully with some astute transactions, GIL would be able to make up the short-fall in their distributions in 2H 2012.

[Boon]

GIL RELEASES DIVIDEND GUIDANCE OF 0.75 CENTS PER SHARE

http://info.sgx.com/webcoranncatth.nsf/V...B0041941E/$file/11_20120409_1H2012DividendGuidance.pdf?openelement [SGX Announcement]

This is certainly a good piece of news and would translate to double digit yields.

As earlier mentioned:

To maintain its 1.50 cents distribution, GIL needs to generate free cash-flow of $12.4 million. In FY 2011, it generated FCF of $9.4 million but with the redemption of Pepper Notes 6 and possible suspension of coupons from its European Notes, its FCF may drop this year (but partially mitigated by contribution from the newly purchased CLO coupons). In other words, the quanta of the DPU will depend solely on STAM ability to utilize the rights proceed (of $35 million) and $42 million cash to purchase assets with decent yield and potential for capital appreciation.

It is likely that some of the current cash hoard will be used to fund the interim dividend but hopefully with some astute transactions, GIL would be able to make up the short-fall in their distributions in 2H 2012.

Please refer to the AGM presentation dated 21 April 2011:

http://www.globalinvestmentslimited.com/...tation.pdf

On page 13, it is stated that GIL will "continue to maintain the dividend policy of distributing majority of the cash economic income as semi-annual dividends."

On page 8 of this presentation,it is shown that the cash economic income (CEI) for FY2010 was S$0.022 per share but the dividend payout for FY2010 was only S$0.01 per share. This means CEI per share carried forward to 2011 was S$0.012, amounting to S$4.7 million (number of shares then was 393 millions)

From page 16 to page 25 of the current Annual Report FY2011, one can work out the total CEI for FY2011 to be about S$12.7 millions. however, the total dividend payout for FY2011 was only S$8.25 million, again CEI of S$4.4 million is available to be carried forward to 2012.

Therefore, CEI of S$4.7 million and S$4.4 million combined carried forward is more than enough to cover dividend payout for HY2012 totaling S$6.2 million. CEI derived from Year 2012 should be enough to cover dividend payout for the second half of 2012.

(Vested)

[weijian]

The brief results of the rights issue are out with 129.8% subscription compromising of 77.0% valid acceptance and 52.8% excess application.

I have been in a (lucky?) situation where i did not have to entertain any 'rights offering' from the companies that i am vested in. Just wondering how do i interprete "valid acceptance" and "excess" percentages respectively.

My guess below:
(1) 77% of valid acceptance - Only 77% of rights were exercised at close. This includes those who bought more rights on the open market.
(2) 52.8% excess application - investors apply for excess rights that were not taken up.

Appreciate if someone could correct me if i am wrong.

[Nick]

The brief results of the rights issue are out with 129.8% subscription compromising of 77.0% valid acceptance and 52.8% excess application.

I have been in a (lucky?) situation where i did not have to entertain any 'rights offering' from the companies that i am vested in. Just wondering how do i interprete "valid acceptance" and "excess" percentages respectively.

My guess below:
(1) 77% of valid acceptance - Only 77% of rights were exercised at close. This includes those who bought more rights on the open market.
(2) 52.8% excess application - investors apply for excess rights that were not taken up.

Appreciate if someone could correct me if i am wrong.

You are right. I guess slightly less than half of the excess applications will be successful.

GIL closed at 13.3 cents today which translates to a dividend yield of 11.3% (based on annualized guided 1H 12 dividend).

[Boon]

GIL RELEASES DIVIDEND GUIDANCE OF 0.75 CENTS PER SHARE

http://info.sgx.com/webcoranncatth.nsf/V...B0041941E/$file/11_20120409_1H2012DividendGuidance.pdf?openelement [SGX Announcement]

This is certainly a good piece of news and would translate to double digit yields.

As earlier mentioned:

To maintain its 1.50 cents distribution, GIL needs to generate free cash-flow of $12.4 million. In FY 2011, it generated FCF of $9.4 million but with the redemption of Pepper Notes 6 and possible suspension of coupons from its European Notes, its FCF may drop this year (but partially mitigated by contribution from the newly purchased CLO coupons). In other words, the quanta of the DPU will depend solely on STAM ability to utilize the rights proceed (of $35 million) and $42 million cash to purchase assets with decent yield and potential for capital appreciation.

It is likely that some of the current cash hoard will be used to fund the interim dividend but hopefully with some astute transactions, GIL would be able to make up the short-fall in their distributions in 2H 2012.

Please refer to the AGM presentation dated 21 April 2011:

http://www.globalinvestmentslimited.com/...tation.pdf

On page 13, it is stated that GIL will "continue to maintain the dividend policy of distributing majority of the cash economic income as semi-annual dividends."

On page 8 of this presentation,it is shown that the cash economic income (CEI) for FY2010 was S$0.022 per share but the dividend payout for FY2010 was only S$0.01 per share. This means CEI per share carried forward to 2011 was S$0.012, amounting to S$4.7 million (number of shares then was 393 millions)

From page 16 to page 25 of the current Annual Report FY2011, one can work out the total CEI for FY2011 to be about S$12.7 millions. however, the total dividend payout for FY2011 was only S$8.25 million, again CEI of S$4.4 million is available to be carried forward to 2012.

Therefore, CEI of S$4.7 million and S$4.4 million combined carried forward is more than enough to cover dividend payout for HY2012 totaling S$6.2 million. CEI derived from Year 2012 should be enough to cover dividend payout for the second half of 2012.

(Vested)

Is anyone going to the AGM scheduled to be held on 19th April 2012? I would if I am based in Singapore but I am not. If you do, please tell the Manager that its dividend policy statement (statement A) :" continue to maintain the dividend policy of distributing majority of the cash economic income as semi-annual dividends." doesn't make sense.

It would make more sense if it is (statement B) " cintinue to maintain the dividend policy of distributing majority of the Free Cash Flow generated as semi-annual dividends" OR (statement C) "continue to maintain the dividend policy of distributing majority of the cash economic income received from our investments, after payment or provision for operating and financing expenses, as semi-annual dividends"

Statement A and the cash economic income figures provided for FY 2010 and 2011 somehow seems incompatible or inconisitent. Therefore, the arguments I put up in my previous post could be considered invalid. With the way the dividend policy statement and the cash economic income figures had been presented, one could easily be "misled" into believing that the arguments could hold.

If statement A doesn't make sense, which statement, B or C, is a better fit ? May be this should be included as another agenda to be sorted out in the upcoming AGM.

(Vested)

[Contrarian]

You can email to the IR manager or the company email. They are quite responsive... suggest u have a chat with them on the merits of your points...

The one thing I can never know, is no visibility on their asset performances and their targetted investment return threshold and risk management capabilities.

[Nick]

Hi Boon,

I believe CEI takes into account interest and operational expense which explains why the Boeing Aircraft only yielded CEI of US$1.32 million.

GIL Aircraft Lessor No 2

Revenue: S$4.765 mil
Depreciation: $1.297 mil
Interest Expense: $1.325 mil
PBT: $2.143 mil (or US$1.7 mil)

I believe after netting off tax and management fees expense, the CEI and FCF would be approximately US$1.3 mil as stated in the AR 2011.

Let's take a look at the FY 2010 and FY 2011 figures as this is when STAM was fully in charge -

FY 2010

CEI: $8.65 mil
FCF: $4.78 mil
Dividends: $3.93 mil

FY 2011

CEI: $12.7 mil (estimated by you)
FCF: $9.43 mil
Dividends: $8.25 mil

(FCF = Ops cash-flow - Interest Expense - Debt Repayment)

So there seems to be a pretty big discrepancy between the CEI and FCF. On closer inspection, I realized that we have not been factoring in realized gains of disposal. I noticed that the RMBS notes generated $0.99 million CEI in FY 2011 of which $0.89 million was profits from the sale of AHM Notes. In the cash-flow statements, the return of capital (and the profits) would be lumped together in the investing cash-flow statement and hence not included in the FCF computation. But even then - I am not sure whether it can explain the gap. Perhaps, there are other Fund-level expenses that isn't included ? Personally, I will continue to measure the Fund distribution capability by using its FCF generating ability since it takes into account all of the recurring factors. The distributions are pretty close to the FCF figure so I think it is fairly useful. However it is limited by potential capital appreciation and divestments but I would expect the Management to retain such gains to grow the NAV over time. In the medium term, GIL has to grow its recurring FCF to over $12.4 million to maintain its 1.5 cents dividends. In the long run, GIL should focus on assets with cash-flow visibility like Senior Notes or operating lease assets with fixed charter agreements. At the moment, besides the aircrafts, its really difficult to make any forecast going forward since most of the legacy assets are high risk and illiquid assets.

Ultimately, this are my own fallible thoughts/interpretations. I could certainly be grossly mistaken about my facts etc so it will be best to clarify with their IR department.

Would value your inputs !

(Vested)

[Boon]

On page 95 of AR 2011, Cash Economic Income means : Income received in cash on investments which is referable to the period, and received prior to dividend payment date, after capital amortisation.

On page 59, it stated that: "Cash Economic Income is determined by the Company on the advice of the Manager. This determination involves an assessment as to whether distributions received on the investments constitute capital or income. This determination involves an element of judgement by the Manager. In this regard, the Company relies upon the experience of the Manager and its knowledge of the Group’s target asset classes to make the determination at the relevant time. In determining the Company’s Cash Economic Income, the Manager takes into account any changes to the expected returns on the investments over the time that the Group holds the investment. The expected returns on the investments are calculated based on a financial model specific to the investment and are determined on an asset by asset basis. This can result in an adjustment to the apportionment of distributions received between capital and economic income at various stages over the lifetime of an investment."

I am trying to make some sense out of this. Will be back!

(Vested)

[Boon]

Fly Leasing Limited
No: of shares own = 1,051,010
Dividend received = US$0.80 per share
Revenue = Dividend Income = US$ 0.84 mil (or S$1.054 mil)
CEI = US$0.84 mil as per AR 2011

GIL Aircraft Lessor No:2
Monthly Rental = US$ 160,000.00 per month per aircraft
Revenue = Rental Income = US$ 3.840 mil ( or S$4.765 mil )
Debt Repayment (Principal) = S$ 1.826 mil
Interest payment = S$ 1.325 mil
CEI = S$1.614 mil (or US$ 1.30 mil )
CEI = US$ 1.32 mil as per AR 2011

ASCENDOS

Revenue = S$1.162 mil = E$ 0.69 mil = CEI as per AR 2011


It seems clear to me that CEI as defined by the Management has taken into account of capital amortization ( principal repayment and interest expenses ) but NOT the operational expenses.

(Vested)

[propertyinvestor]

WOOTS! Allotted Excess rights 50lots!