Global Investments

[lazyplane]

Looks like the share price dropped to 0.143.

Which is the rights exercise option.Pity, I wanted to exercise the rights. Looks like I won't bother now.

What would happen if the rights issue fails?

Dude, ex right already lah.

[Nick]

The valid acceptances and excess applications represent approximately 100.2% of the total number of Rights Shares available under the Rights Issue. The proceeds raised from the Rights Issue after deducting estimated expenses is approximately S$48.5 million.

http://www.globalinvestmentslimited.com/...cement.pdf [Results of Rights Issue]

GIL closed at 14.5 cents. It has guided FY 13 distribution of 1.5 cents which translates to a dividend yield of 10.3%. Let's see how they deploy the substantial cash hoard in the coming quarters.

(Not Vested)

[felixleong]

thanks for the info

sorry to ask, anyone knows whats the current NAV of global inv post rights issue

thanks

[Nick]

thanks for the info

sorry to ask, anyone knows whats the current NAV of global inv post rights issue

thanks

1Q 2013

Equity: $195 million
Shares: 851 mil shares (includes DRIP issued units)

The rights issue raised $48 million proceeds.

Pro Forma Equity: 195 + 48 = 243 mil
Shares: 851 + 340 = 1191 mil
NAV: 20.4 cents

This is just an estimated figure. If the Management had provided a pro forma NAV, please refer to it.

(Not Vested)

[felixleong]

thank you so much for the info~

[Boon]

GIL had issued dividend guidance for FY2013 of SGD 1.5 cents per share. The dividend of 1.5 Singapore cents per share is expected to be declared in February 2014 and will apply to the enlarged share capital of the Company.

Since taking over the management in 2009, STAM had made Rights Issue every year for the last 3 years (2011, 2012, and 2013).

New Shares Issued
2010 = Nil
2011 = 157,202,434 (Rights Issue; Issue Price = SGD 0.138 per share) - completed
2012 = 275,104,260 (Rights Issue; Issue Price = SGD 0.128 per share) - completed
2013 = 26,103,375 (Dividend Scrip; Issue Price = SGD 0.1522) - completed
2013 = 340,542,666 (Rights Issue; Issue Price = SGD 0.143 per share) – completed.

Number of Outstanding Shares
FY2010 = 393,006,086
FY2011 = 550,208,520
FY2012 = 825,312,780
3Q2013 =1,191,958,821

1) The number of new shares had been increased by 798,952,735 from 393,006,086 (2010) to 1,191,958,821 (2013) – roughly an increase of 200% over a period of 3 years
2) AUM has grown to roughly SGD 250 million. What is the target size of STAM?
3) STAM certainly looks ambitious in growing the AUM – I would not be surprised at all if there is a fourth round of capital raising in the future – be it another rights issue or issuance of Preference Shares, which STAM has the mandate to do so.

NAV per share (SGD)
FY2010 = 0.310
FY2011 = 0.272
FY2012 = 0.230
2Q2013 = 0.208 (Projected: after completion of current Rights Issue)

4) NAV per share has decreased with more new shares being issued each year. This trend would continue if more shares were to be issued in the future.
5) Decreasing NAV would put downward pressure on share price IF investors demand the same margin of safety (MOS) as measured by discount of share price to NAV.

Dividend Per Share (SGD)
FY2010 = 1.0 cent for 393 million units (= SGD 3.930 million) = paid
FY2011 = 1.5 cents for 550 million units (=SGD 8.253 million) = paid
FY2012 = 1.5 cents for 825 million units (=SGD 12.380 million) = paid
FY2013 = 1.5 cents for 1,192 million units (=SGD 17.88 million) – Guidance

6) DPS has been maintained at 1.5 cents since 2011.

Estimated Cash Available (SGD) After Rights Issue
Cash balance as at 1Q2013 = 16.7 million
Proceeds from sale of two-aircrafts (Aircraft Lessor No:2) = 35.5 million
Proceeds from Rights Issue = 48 million
>> Total = 100 million

7) With the enlarged number of shares issued after the completion of the Rights Issue, GIL would need SGD 17.88 million per year to support DPU of SGD 1.5 cents. Going forward, the BIG question is – is the DPS of 1.5 cents sustainable? IMO, it would be difficult but ultimately it all depends on what kind of return STAM could generate from the SGD 100 million cash hoard available – and by taking on how much risks..

Current share price = 0.145
Share price/NAV = 0.145/0.208 = 70%
Dividend Yield = 0.015/0.145 = 10.3%

Does it look attractive? What do buddies think?

(Vested – small stake)

[felixleong]

I think global investment looks very attractive base on the numbers alone
30% discount to nav seems like good margin of safety and the 10% yield is pretty juicy

however the yearly rights issue is really a pain in the ass for shareholders

I do feel that their AUM is still not big enough at 250 mil, their target might be half bil or 1 bil as such there is really a very high probability of rights issue to come.

I also think that they will not need to set aside as much cash as they have the scrip dividend plan in place, I think the majority shareholders will feel more worth it to take the discounted scrip(shares) instead of cash

[a74henry]

Rights issue being fully subscribed shows the confidence that shareholders have in the management to deliver.

I agree that Global Investments look attractive on the dividend yield and the fact that it is below BV.

The management needs to consider bringing the MV higher instead of issuing rights at a significant discount to its MV and a substantial discount to its BV.

[Boon]

The yield and the discount to NAV certainly look attractive at current share price - but sometimes it could be deceiving if it is not sustainable.

NAV per share will drop further due to dilution - if more shares were to be issued in the future.

No doubt, with dividend scrip, GIL would not have to set aside so much cash for future dividend payments, but ultimately it must be able to generate enough FCF (from recurring operating cash flow + gain on sales of investments) to sustain the DPU.

Somehow, I feel that it is increasingly difficult for GIL to generate FCF of SGD 1.5 cents per share with the enlarged capital base – will substantiate with more arguments and calculations later.

(Vested)

[Boon]

With the enlarged share capital base after the completion of the recent Rights Issue, GIL would need SGD 17.88 million to support DPU of SGD 1.5 cents annually, would it be sustainable?

Let’s review STAM’s performance over the past few years during which it has been fully in charge of managing the business of GIL – after taking over from the previous management team Babcock & Brown in 2009

New Shares Issued
2011 = 157,202,434 (Rights Issue; Issue Price = SGD 0.138 per share)
2012 = 275,104,260 (Rights Issue; Issue Price = SGD 0.128 per share)
2013 = 26,103,375 (Dividend Scrip; Issue Price = SGD 0.152 per share)
2013 = 340,542,666 (Proposed Rights Issue; Issue Price = SGD 0.143 per share)

Number of Outstanding Shares
FY2010 = 393,006,086
FY2011 = 550,208,520
FY2012 = 825,312,780
3Q2013 =1,191,958,821

NAV per share (SGD)
FY2010 = 0.310
FY2011 = 0.272
FY2012 = 0.230
2Q2013 = 0.208 (Projected: after completion of Rights Issue)

AUM (SGD)
FY2010 = 122 million
FY2011 = 150 million
FY2012 = 190 million
Current = 248 million (Projected: after completion of Rights Issue)

Dividend Per Share (SGD)
FY2010 = 1.0 cent for 393 million units (= SGD 3.930 million) = paid
FY2011 = 1.5 cents for 550 million units (=SGD 8.253 million) = paid
FY2012 = 1.5 cents for 825 million units (=SGD 12.380 million) = paid
Cumulative dividend payout (FY2010, FY2011, FY2012,) = SGD 24.563 million
FY2013 = 1.5 cents for 1,192 million units (=SGD 17.880 million) – Guidance
Cumulative dividend payout (FY2010, FY2011, FY2012, FY2013) = SGD 42.443 million

Recurring Cash-Flow (SGD)
FY2010 = 4.782 million
FY2011 = 9.432 million
FY2012 = 9.374 million,
Cumulative (FY2010, FY2011, FY2012) = 23.588 million
1Q2013 = 2.069 million
FY2013 = ????????????

Ratio of Recurring Cash Flow to Dividend Payout :
FY2010 = 4.782 / 3.930 = 1.22
FY2011 = 9.432 / 8.253 = 1.14
FY2012 = 9.374 / 12.380 = 0.76
FY2013 = ????? / 17.880 = ????

Gain on sale of investments (SGD)
FY2010 = Nil
FY2011 : Total = 3.608 million
1. Gain on divestment of New Gate Funding 2006-3 PLC = 2.503 million = ( “inherited assets” – fully impaired to zero value)
2. Gain on divestment of AHM-RMBS = 1.105 million = ( “inherited assets” – fully impaired to zero)
FY2012 : Total = 1.202 million = (3.307 – 2.105) million
3. Gain on divestment of US RMBS = 0.866 million (“Newly acquired” asset)
4. Gain on divestment of 174,749 Fly Leasing shares = 2.03 million (“inherited assets” – partially impaired – BV = USD 4.28 per share)
5. Gain on divestment of Asia Listed Equities = 0.411 million. = (“Newly acquired” asset)
6. Available-for-sale financial assets – reclassifications to profit or loss on disposal (net of income tax) = - 2.105 million
1Q2013 : Total = 0.321 million = (5.694 – 5.373) million
7. Gain on partial divestment of Asia Listed Equities = 1.43 million = (“Newly acquired” asset)
8. Gain on partial divestment of 318,781 Fly Leasing shares = 4.264 million. =(“inherited assets” – partially impaired – BV = USD 4.28 per share)
9. Available-for-sale financial assets – reclassifications to profit or loss on disposal (net of income tax) = - 5.373 million
2Q2013 : Total = ?
10. Gain on divestment of two aircrafts = 6.758 million.
2Q, 3Q, and 4Q2013: Gain on divestment of other asset = ?????

Cumulative gain on sale of investments over 3 years (FY2010, FY2011, FY2012) = 4.810 million

Cumulative gain on sale of investments realized in 2013 to date = 7.079 million

Cumulative gain on sale of investments over 3 years + 2013 to date = (FY2010, FY2011, FY2012, and 2013 to date ) = 11.889 million (of which 9.182 million was attributable to gain on sale of “inherited” assets – assets bought by previous management, and 2.707 million was attributable to gain on sale of “newly acquired” assets – assets bought by STAM)

Comments:
a. FY2010: ratio of recurring cash flow to dividend payout = 1.22 (recurring cash-flow was enough to cover dividend payout)
b. FY2011: ratio of recurring cash flow to dividend payout = 1.14 (recurring cash-flow was enough to cover dividend payout)
c. FY2012: ratio of recurring cash flow to dividend payout = 0.76 (recurring cash-flow was NOT enough to cover dividend payout). Cumulative recurring cash flow (FY2010, FY2011, FY2012) of 23.588 million was not quite enough (but close) to cover the cumulative dividend payout (FY2010, FY2011, FY2012,) of SGD 24.563 million. However, if gain on sale of investments over the corresponding 3 years (of 4.81 million) were to be taken into account, it would be enough - with a surplus of 3.835 million.
d. FY2013: projected ratio of recurring cash flow to dividend payout < 0.76 (recurring cash-flow would NOT be enough to cover dividend payout). Gain on sale of investments realized in 2013 so far amounts to 7.079 million. If recurring cash flow for FY2013 could reach 10.801 million, then it would be fine. If not, surplus from previous 3 years (2010, 2011, and 2012) of 3.835 million could be utilized to make it up. Therefore, it looks like dividend payout of 17.88 million in 2013 would be sufficiently funded from recurring cash flow in 2013 + gain on sale of investment 2013 + surplus of 3.835 million from previous 3 years, if needed.
e. Over the years, AUM and total dividend payout have been growing - but proportion of recurring cash-flow to total dividend payout has fallen behind. The ratio has been dropping from 1.22 (2010) to 1.14 (2011), to 0.76 (2012) and my prediction is it would be lower than 0.76 for 2013. Recurring cash flow had not been growing in FY2012, and it did not appear to be growing in 1Q 2013 either. With the sale of the two aircrafts now completed, there would be no more recurring cash-flow from aircrafts rental from 3Q onwards – therefore, the situation could get worse before it gets better. This is a worrying trend – STAM has been slow in growing recurring cash-flow to support dividend payment – instead it has been increasingly relying on gain on sales of investments to fund dividend payout – which IMO is not sustainable in the long run – as 9.182 million out of total gain on sale of investment realized to date of 11.889 million were gains on disposal of assets inherited by STAM from the previous management (Babcock & Brown) – many of these gains were one offs - of fully impaired/partially impaired assets. STAM only managed to make a realized capital gain of 2.707 million – on disposal of assets bought by STAM itself.
f. Of the inherited assets, most of what could be sold for gains had been sold - not many of the following remaining unsold items could be sold for substantial real gain”, IMO
- Fly Leasing shares (557,480 shares as at 20130331)
- Ascendos
- SEIZA SERIES 2006-1 TRUST
- Avoca CLO

For 2013, DPU of 1.5 cents seems justifiable. Moving forward, if this trend continues, it would mean troubles

(vested)