Accordia Golf Trusts

[Greenrookie]

UHAccordia is worth a look in my humble opinion.

It's yield is more than 10% if we annualized it.

It's FCF is higher than payout.

It's operating numbers is resilent due to managemeny ability to manage cost. It's has space for inorganic growth too with parents' "dumping" sooner or later.

Currency risk is migated with recent JPY strength ...


I picked this up when market went tipsy ... 

In my opinin, if APTT deserve a second chance, accordia deserve better...

The bugbears are:

Dependable on weather, bad weather bad operating environ
 Currency weakness
No Injection of driving ranges by parents 

But valuation more than offset this... 

http://sillyinvestor.blogspot.sg/2015/07...t.html?m=1

Greenrookie,
Great analysis of AGT on your blog.  A very nice blog too.  I have read your blog article on AGT before but when I tried to consolidate all the articles on AGT, I could not find yours.  I remember it very well because you were the only writer who gave AGT a miss at the time of writing.  I did not realize at that time that you have bought it during the recent market turmoil. I also nibbled some last week.

BTW, AGT's 2H operating profit is expected to be lowered than 1H.  What is your estimation of its 2H operating profit and operating cash flow?

Krowten,

You are too kind. You got me. Where did you read or figure that 2H will be lower? I am not exactly expecting a significantly lower 2H.
Seasonality factor, it should be worst during winter, dec to feb...

So... Really hope you would enlighten me.

[krowten]

Dear Greenrookie,
Please take a look at slide 15 of AGT's 1Q15 presentation file on Seasonality, and the profit for 4Q14 (1 Jan to 31 March 15) in the 1 Aug 14 to 31 March 15 results and compared it with the profit for 1Q15 (1 April to 30 June 15). Though it is said in slide 15 that the bar charts are for illustrative purpose, I believe the trends are correct.

It is logical to expect business to be poorer in Winter months. Based on slide 15, Japan's winter is from January to March; hence, 4Q profit (but not necessary cash flow) should be the worse.

[mulyc]

IMHO it's biggest drivers currently are its potential acquisition pipeline, strengthening of JPY and the Olympics. All of which have been moving forward positively so far.

[Gaudente]

half year distribution down to 2.32 cents from previous 5.71 . Quote plunges to 59 cents 38% down from IPO.

I'm starting to think these guys are dicks and conned me (as well as a lot of other people) big time 

[tanjm]

half year distribution down to 2.32 cents from previous 5.71 . Quote plunges to 59 cents 38% down from IPO.

I'm starting to think these guys are dicks and conned me (as well as a lot of other people) big time 

Not quite. The forecast was stated up front in the prospectus. The normalised DPU (after the initial big fat one) at a exchange rate of 81.16 was supposed to be 6.79 cents per annum or ~ 3.4 cents per half year (seasonality unadjusted).

Here's what happened. First the exchange rate is now more like 86.2 - a 6% depreciation. This, by itself isn't so bad - everyone's aware of the FX risk after all. This brings it down to about circa 6.3 cents (3.15 cents per half year).

The second point is more important. The operating income for the half was 27,739 million yen and the expenses 22,525 million. This means the operating margin is actually quite thin, with a fairly sticky expense cost base. The revenue only went down by 2.5% against forecast (due to bad weather apparently), but that's like a 700 million yen hit or about 0.74 cents per share (actually a bit less because income tax was less).

Bottom line : excluding exchange rate risk, the distributable amount to shareholders is very sensitive to revenue. More so on the downside (because operating expense is sticky) than on the upside very likely.

Doesn't mean that this is a bad investment. Just means that its income is more volatile than you might expect. THIS IS NOT A REIT-LIKE investment, despite the high yield.

[touzi]

A non reit-like reit ?  What do you mean? Like all other reits, it distributes at least 90% of income doesn't it?

[pattanispirit]

Paying 90% is for tax incentives for local properties REIT. For overseas, no tax rebate, so they can pay anything they want or even skip div payment like saizen used to do.

[Nick]

A non reit-like reit ?  What do you mean? Like all other reits, it distributes at least 90% of income doesn't it?

Because unlike a typical REIT, there is no income stability. No leases, no fixed contracts etc.

Investors need to ask themselves whether they can secure 9% yielding investments with safer revenue profile. If not, then AGT is attractive. If yes, then it won't make sense to purchase AGT unless you believe in the organic growth potential.

[touzi]

A non reit-like reit ?  What do you mean? Like all other reits, it distributes at least 90% of income doesn't it?

Because unlike a typical REIT, there is no income stability. No leases, no fixed contracts etc.

Investors need to ask themselves whether they can secure 9% yielding investments with safer revenue profile. If not, then AGT is attractive. If yes, then it won't make sense to purchase AGT unless you believe in the organic growth potential.

I was looking at CMPacific, and your explanation came to mind. Though officially not a Reit, CMPac do have some of the Accordia characteristics mentioned. With last week's drop, yield is also comparable.

[Nick]

A non reit-like reit ?  What do you mean? Like all other reits, it distributes at least 90% of income doesn't it?

Because unlike a typical REIT, there is no income stability. No leases, no fixed contracts etc.

Investors need to ask themselves whether they can secure 9% yielding investments with safer revenue profile. If not, then AGT is attractive. If yes, then it won't make sense to purchase AGT unless you believe in the organic growth potential.

I was looking at CMPacific, and your explanation came to mind. Though officially not a Reit, CMPac do have some of the Accordia characteristics mentioned. With last week's drop, yield is also comparable.

My comparable was Croesus Trust since it is also a Japanese business trust trading at a similar yield of over 9% yield. Yet, it has a fixed income profile backed by multi-year master leases.

(Vested in Croesus)