Thursday, 9 November 2017

Keppel KBS US REIT - Balloting Results

Keppel KBS US REIT announced that its IPO received strong response and the public tranche was 6.7x subscribed. 

The public balloting table is presented below:


Investors who applied for 50,000 shares will have a 46% chance of being allotted 15,000 shares. 

I did not apply for the public tranche as I was allotted 50,000 units from the placement tranche. 

"The positive demand from both institutional and retail investors is a reflection of their confidence in Keppel-KBS US REIT's high quality portfolio and unique investment proposition that is backed by strong visible growth opportunities, both organically and through future acquisitions." - Manager

My personal view is that the relatively small issuance size and 6.7x subscription rate will imply a decent debut for the IPO. It will start trading at 2pm on 9 Nov. 

Good luck to those who applied and managed to get some shares! ๐Ÿ˜Š

Sunday, 29 October 2017

Keppel KBS US REIT



Keppel-KBS US REIT ("Keppel US REIT") is offering 262,773,400 units at US$0.88 per unit (with over-allotment option). The REIT is established to invest in a diversified portfolio of income-producing commercial and real estate related assets in United States. While the IPO is not registered yet (should be in the coming days), the public offer will close on Nov 7 at 12pm.

(Side comments: It is quite difficult to locate the lodged prospectus on MAS website and I can never understand why SGX don't have it in the Catalogue either... you can find the link here. Having said that, i have to commend that this is a relatively easy to read prospectus with detailed information ๐Ÿ‘)

Key Objectives

The key objectives are to provide unit holders with regular and stable distributions while maintaining appropriate capital structure and sustainable growth in DPU and NAV.

IPO Portfolio

The initial portfolio comprises 11 office properties in the United States as follows:


West Coast (3) - The Plaza Buildings in CBD of Seattle, Bellevue Technology Center close to Microsoft Global HQ in Seattle and Iron Point located in Folsom Sacremento.

Central Region (5) - Westmoor Center in Northwest Denver, Great Hills Plaza in Northwest Austin in Texas, Westech 360 in Northwest Austin Texas, 1800 West Loop South, West Loop I & II  in Houston.

East Coast (3) - Powers Ferry Landing East and Northridge Center I & II  in Atlanta and Maitland Promenade II  in Orlando, Florida. 

Distribution policy

The first distribution will be from Listing Date to 30 June 2018 and be paid to unitholders on or before 30 Sep 2018 (quite a long wait). The distributions will be declared in USD and can be paid in either USD or SGD, depending on the arrangement with the custodians. Subsequent distributions will be semi-annually thereafter.

What I like about the REIT
  • Direct play on the United States - similar to Manulife US REIT, this offers the "second" pure play access to the US Real Estate market. If you are bullish about the US economy growth trajectory and the office real estate outlook, then this is a REIT which will provide that exposure. According to Cushman, the projected GDP growth will continue to be stable at around 2% but those in the IPO portfolio are above the national average (see chart below)
  • Quality portfolio in key growth markets - Frankly i am not an expert in the US real estate market but based on the description, it seemed like the properties are well located and diversified in the cities of Seattle, Austin Texas and Atlanta. According to the prospectus, major US markets in which the IPO portfolio is located have experienced higher job growth in 2016 than previously estimated and these bode well for the US office real estate market and those properties in the IPO portfolio have growth rates that are above the national average (see chart below). Many of the cities serve as national or regional headquarters of Fortune 500 companies
  • Attractive distributions with visible organic growth  - The yields look decently attractive to me with built in rental revisions that will help ensure improvement in DPU. In addition to the built in escalations, the prospectus provided a nice "uptrending asking rental chart" based on national average. 

Keppel US REIT is projecting the yield to increase from 6.8% in FY2018 to 7.2% in FY2019 as shown below.

This is underpinned by the below average lease rental which will be up for "renewal" in 2018 and 2019. Investors who want the projections can refer to page 64 of the prospectus.  

  • Well diversified portfolio by asset and tenants mix and geographically. It also has a stable lease expiry profile - The income is highly diversified as demonstrated by the charts below with a stable lease expiry profile. No more than 20% of lease expire in a single year
  • Freehold properties with decent leverage - All the properties in the IPO portfolio are freehold (same as Croesus Retail Trust) and at 36%, there is still much headroom to take on debt and the debt is not up for refinancing until 2021 and 2022. I like freehold properties ๐Ÿ˜€
  • Strong institutional support


The issuance is well supported by cornerstone investors such as Affin Hwang, Credit Suisse, DBS and Hillsboro Capital. 
  • Reputable sponsors and experienced team - I like the Keppel branding behind the combined Keppel-KBS name. It is a name which local investors can identify with and you know they are here for the longer term. While Keppel Capital is based here, KBS is headquartered in California with more than 180 specialists (See geographical footprint of KBS below)

Some of my concerns

  • How long will the partnership last? The Manager is jointly owned by Keppel Capital ("KC") and KBS Pacific Advisors Pte. Ltd ("KPA"). The shareholders in KPA are 4 individuals from KBS Capital Advisors ("KBS"). KC is the asset management arm of Keppel Corporation. As in all corporate partnerships, they will not last forever and eventually they will split. 
  • Rights issues is unavoidable, investors have to be prepared for rights issue in future - As you can see from the article in Manulife US REIT, rights issues is unavoidable as the REIT starts to grow and acquire new properties. According to the prospectus, there is a strong pipeline of potential acquisition properties. As REIT has to distribute at least 90% of its income, investors in this REIT must be prepared to fork out cash when acquisition kicks in. 
  • Forex exposure - For investors in Singapore, you will be exposed to USD at both the asset level as well as the distributions. Personally, i don't mind but for some investors, you may lose out on forex based on the share price movement and whenever the distributions are converted into SGD
  • IPO at premium to NAV - The current NAV is US$0.84 (page 60 of the prospectus). Investors who subscribed at US$0.88 will be paying a slight premium to book of 1.047x. 
  • Long waiting period till next distribution  - Investors who buy into existing REITs will get their distributions in the next 6-9 months, whereas IPO subscribers in this REIT will only receive their first distribution in Q3 2018. This makes it less attractive for investors who finance their acquisition with debt.   
Fair Value

The closest listed peers is actually Manulife USD REIT where my original write up is here. According to REITDATA and Shareinvestor, it is currently trading at a yield of 7.06% and a price to book of 1.09x.

Let's see how was its performance since launch. The IPO price was $0.83 and it languished for an extended period of time before investors appreciate it better and the price finally moved above its IPO price about 9 months later.


Keppel KBS US REIT is fairly priced at its IPO price of US$0.88 which represents around 6.8%-7.2% yield and price to book of 1.04x. 

Based on the valuation metrics of Manulife USD REIT, it should trade at a fair value trading range of between 85 cents (assuming investors require a minimum yield of 7% yield) and 92 cents (assuming Keppel USD REIT trades up to 1.09x book value).

My Ratings

As I have mentioned a few times, REITs are not meant for flipping. You invest only if you like the yield. As such, i will give it a one chilli rating for the IPO.

Having said that, i actually prefers this IPO to the Manulife USD REIT. I felt that investors are able to appreciate the Keppel branding and the well-diversified nature of the US IPO portfolio. If investors want to consider diversifying their REIT exposure beyond Singapore to the United States, this should be a name that can be considered. I will subscribe some shares for my longer term hold.

Polling time


Saturday, 14 October 2017

Lion-Phillip S-REIT ETF

I received at least 10 private messages asking if i will be covering the ETF. Even though i don't really consider this an IPO, i will share my thoughts with you.

What is an Exchange Traded Fund ("ETF")?

A short while ago, ETF was not accessible to retail investors until MAS relaxes that in April 2015! If you ask me what an ETF is, it is basically a fund tracking a particular index which it is set up for. In this particular case, this ETF is set up to track the Morningstar Singapore REIT Yield Focus Index.

Key information

The minimum application amount is 50,000 units (or $50,000) and it will be listed on 30 October 2017. The Managers are Lion Global Investors Limited and Phillip Capital Management. The Manager intends to pay out dividends semi-annually and you can find more information about the ETF here. You can find the FAQs here.

Who is ETF suitable for?

Investors who want regular distribution and seeking an "index-based" approach towards investing in a diversified basket of Singapore REITs listed on SGX. According to the prospectus, the ETF will not be actively managed as the Manager do not intend to actively select the REITs to outperform the market or take defensive positions in declining markets.

What i like about the ETF
  • Low cost way for investors to start planning for their retirement. While the initial minimum subscription is $50,000, investors with less capital can subsequently buy and sell in smaller units once the ETF is listed
  • Diversification. Investors are able to gain exposure to a diversified basket of REITs despite the small outlay 
Index REITs


The ETF is supposedly going to track the above REITs based on the weightings. While there could be some tracking error as the Manager tries to replicate the index but investors can expect that their money to be invested in the above basket of stocks

Some of my concerns
  • Low liquidity - Looking at the current trading volume of ETFs on SGX, trading liquidity is likely to be limited. However, investors could ask participating dealer to create or redeem the units
  • Inefficient tax structure - It seems like there is a tax leakage as retail investors who invest in the REITs directly will be "better off" than investing through the ETF even though they will probably not "feel" it as it will not be so evident. See tax treatment for individuals by IRAS versus tax treatment for the ETF below.
Page 66 of the prospectus: "Taxable income distribution from Real Estate Investment Trusts ("REITs") listed in Singapore derived by the Fund will generally be subject to tax withheld at source at the prevailing income tax rate, currently 17%. Such taxable income distribution derived by the Fund is a non-Designated Income and will be subject to tax at the prevailing income tax rate, currently 17%, which could be offset by the tax withheld at source. The gains or profits derived by the Fund from the disposal of units in REITs listed in Singapore are Designated Income."
  • Lower returns. The targeted yield of 4 to 5% after tax is not high enough for me for this asset class
Fees involved
  • Transaction fee and Duties of $500 per $50,000 means investors who subscribe to the ETF incur a 1% creation charge. The rate is similar to placement fees in an IPO, except that this is not an IPO. Investors who didn't sell through the exchange but via redemption subsequently will incur a 1% redemption fee as well
  • Manager's Fee  of 0.5% per annum
I didn't comment on the fee levels as you don't expect this to be created for free isn't it? So you have to access for yourselves whether you are comfortable with the fees you are paying

Mr IPO's views

The ETF is great for retail investors who wants to start their retirement plans and wants to build up their portfolio in a disciplined way but do not know how to choose the REITs. It is a safe way to build up a diversified portfolio from day one. To me, the best way to invest in this ETF is to set aside a small amount of cash regularly and nibble at the ETF through SGX. 

For investors who are more savy and have more capital, my view is that you are better off creating their own "index" of REITs. There is no point paying for low liquidity and low returns and incurring the transaction and manager's fees. I will give it a miss personally. If you have $50,000 to invest, you can start creating your own portfolio and enjoy a better after tax returns. ๐Ÿ˜Ž  Maybe i can charge 0.5% as advisory fees next time? ๐Ÿ˜‹

Saturday, 7 October 2017

IPOing 101 - Share Application Rules

For the IPO newbies, i have previously written a few articles that may still be relevant and for your benefit, i am posting the links here.

  1. IPOing 101 - How to apply for IPO shares
  2. How to increasing probability of getting IPO shares from the public tranche
  3. How to lay your hands on placement shares
Even though these articles were written in 2007 (wow more than 10 years ago ๐Ÿ™‚), I took a quick glance and think that they are still applicable. Please let me know if you spot any mistakes. ๐Ÿ˜‚

Having said that, I am still learning new things everyday! Here are some questions for today and see if you have the answers. For the purpose of this article, i will not be using the printed forms anymore. At this time and age, i think they should eliminate the printed forms to save the ๐ŸŒฒ...

Let's take a look at Appendix F using the most recent APAC Realty IPO as an example and see if we can learn something new.

Question 1: Must you physically be in Singapore when you apply for the IPO shares?

Answer: UNLESS PERMISSIBLE IN SUCH OTHER JURISDICTION, YOU MUST BE IN SINGAPORE AT THE TIME OF THE MAKING OF THE APPLICATION FOR THE OFFERING SHARES.

The answer is yes, you have to be in Singapore! It was printed in BOLD and Capital Letters, indicating that this is an important point! In other words, it is illegal to apply for the shares through the internet banking if you are physically in United States at the point of application... feeling guilty now? ๐Ÿˆฒ

Question 2: What is the minimum number of shares you can subscribe for and in what multiples? Example, can you apply for 2,000 shares, or 2400 shares or 2,688 shares?

Answer: The minimum initial subscription is for 1,000 Offering Shares. You may subscribe for or
purchase a larger number of Offering Shares in integral multiples of 100. Your application for
any other number of Offering Shares will be rejected. 

In other words, the rules are: (1) you must first apply at least 1,000 shares and (2) it must be in multiple of 100. Based on the question above, if you apply for 2,688 shares, it will be rejected but if you apply for 2,000 or 2,400 shares, it will be accepted.

Question 3: Can you apply for the same IPO placement shares with different banks or brokers? Example - Applying for Netlink Trust placement tranche through DBS, Credit Suisse and UOB?

Answer: Multiple applications may be made in the case of applications by any person for the
Placement Shares only (by way of Application Forms for Placement Shares or such other form of application as the Sole Issue Manager, Bookrunner and Underwriter may in its absolute discretion deem appropriate)

In other words, you can apply for Netlink placement shares through different banks or brokers

Question 4: Can you apply for the same IPO under both placement and public tranche?

Answer: Multiple applications may be made in the case of applications by any person for the Placement Shares together with a single application for the Public Offer Shares whether by way of an Application Form for Public Offer Shares or an Electronic Application.

In other words, you can apply for the placement tranche multiple times but you can only the public tranche once

Question 5: Can you apply for the same IPO public tranche using ATMs from different banks? 

Answer:  Only one application (be it using physical form or electronically) may be made for the benefit of one person for the Public Offer Shares in his own name. Multiple applications for the Public Offer Shares will be rejected. Persons submitting multiple applications for the Public Offer Shares may be deemed to have committed an offence under the Penal Code, Chapter 224 of Singapore, and the SFA, and such applications may be referred to the relevant authorities for investigation. 

In other words, you can only make ONE application for the public tranche ๐Ÿง and it is a serious offence and you can be charged in court for this. ๐Ÿ‘ฎ


Question 6: Why can't i use the ATM network or Internet Banking platform of certain banks for some IPOs (the answer is not found in the Appendix F) ๐Ÿ˜‹

This is an additional question which i have added which i think some people may not know. 

ATMs

Usually the issuer will have to decide which banking network they would want to use to distribute the shares during the IPO application. The de facto bank will be DBS bank. DBS has the widest ATM network compared to the other 2 local banks. If the issuer decides that DBS is adequate, it may not extend the ATMs to UOB or OCBC, especially for smaller issuance.

in addition, some banks has internal restrictions. I understand UOB has certain restrictions internally on distributing perpetuals through its ATM network.

Internet Banking

DBS has the most advanced Internet banking and mobile app platform among the three banks. As such, DBS users can apply for IPO using both internet banking or mobile app platform. I have been using the DBS internet banking to apply for shares for the longest time. At the time of writing, the UOB and OCBC internet platform is still not ready for IPO applications. Do let me know if my understanding is wrong. 

Polling time: Link is here



Wednesday, 27 September 2017

APAC Realty Limited - Balloting Results



I rarely see such balloting announcement results where there was no accompanying ๐Ÿ“ขpress release and APAC Realty Limited announced its placement and public tranche subscription rates separately๐Ÿค”:
  • Placement tranche of 44,503,200 shares was 13.4x subscribed
  • Public Offering of 4,411,000 shares was 29x subscribed
In connection with the offering, DBS, the stabilization manager was also over-alloted 9.75m shares and will step in to stabilize the market if necessary

The placement tranche was placed out in the following manner:

and the public tranche balloting results is below. 

It is also interesting to note that investors who applied for any number of shares has an equal 42% chance of getting the shares! ๐Ÿ˜Ž The Issuer didn't favor the big applicants or the small ones. 


Strong group of Institutional Investors

I am actually surprised that the issuance received quite a bit of interest from both hedge fund managers and traditional fund managers. The list is of managers awarded the shares are below and it doesn't include the cornerstone investors:


How did Mr. IPO fare in the balloting?

It is also quite rare whereby my broker said that i can still apply at the ATM even though i was given 2,000 placement shares. 

Here is my application results - 

Overall, i think APAC managed to attract strong interest in its placement tranche where it eventually priced at the high end of the 60-66 cents range. Good luck to those who managed to get some shares!

Happy APACing

Saturday, 23 September 2017

APAC Realty Limited



APAC Realty Limited ("APAC" or the "Company") is offering 48,914,200 shares at $0.66 each, of which 44,503,200 shares is distributed via placement and 4,411,00 shares via Public Offering. The offer will be subject to over-allotment option where up to 9.75m shares (or 19.9% of the offering shares) can be sold. The IPO will close on 26 Sep 2017 at 12pm and starts trading on 28 Sep 2017. The prospectus is here. The market cap based on the enlarged shares is around $205.3m

History

For investors who don't know the Company, this was previously known as Hersing Corporation and Northstar led the management buyout from the previous owner Harry Chua (who owns the Tim Ho Wan franchise in Singapore) around Aug 2013. Jack Chua, unrelated to Harry Chua, became the CEO after helping to grow ERA Singapore into the largest real estate agency in Singapore. The news article is here. The Company is now being re-listed as APAC Realty Limited.

Business Model

The Company has an easy to understand model and the prospectus made it even easier with a succinct graphical view on its business model. Basically the revenue is the commission that is generated from the property transactions


Financial Performance


The Company ended FY 2016 with a revenue of $284m and a net profit of $15.9m. Q1 2017 continues to see improved revenue and profitability where net profit increased by 109% from $1.926m to $4.031m. Based on the adjusted EPS of 4.47 for FY2016, the Company is listing at the historical PER of 14.7x. Q1 is usually a slower period but the Company seemed to have pulled off one of the highest growth quarter on quarter of 109%. 


Assuming i am less aggressive in my projection of using 35% growth for FY2017 and a further 20% growth for FY2018, the EPS will grow to 5.58 Singapore cents in FY2017 and 6.7 Singapore cents in FY2018. This translate into a PER of 11.8x and 9.8x for FY 2017 and FY 2018 respectively.  

The Company is listing at the right time where its revenue and net profit is seeing an uptick due to the turnaround in the Singapore market. See article here.

Use of Proceeds

The Company intends to use the proceeds to strengthen and expand its presence in Singapore, expand its range of services and geographical presence in the Asia Pacific and enhance its technological capabilities


What I like about the Company
  • One of the largest agent networks in Singapore. In this business, you will need scale and we have seen several consolidation in the market place in the last 12 months where Propnex acquire Dennis Wee and Orange Tee merged with Edmund Tie & Company. APAC commands about 21% of the agency share in Singapore in 2016. Its market share in 2012 was 15.1%.
  • The Company has been resilient and profitable for the last 10 years - The Company was profitable even during the global financial crisis and for the last 3-4 years where the Singapore property market is languishing. This bodes well with the perceived upturn in the Singapore property cycle in the coming years

  • The Company intends to distribute 50% of its net profit after tax from the Listing Date to 31 Dec 2017 and for FY 2018 as dividends. Assuming an EPS of 6.7 Singapore Cents, the DPS will be around 3.35 Singapore cents for FY2018. This translates into a yield of 5.08%, which is decent since i have been conservative (i hope) in estimating the EPS growth. My gut feel is that the dividend policy will continue given that its major owner is a PE fund and they will want regular distributions back to their investors as well.
  • Stable and highly cash generative business - The real estate business is highly cashflow generative and generated $22.6m in FY2016. By deducting commissions from sale proceeds at the close of transaction probably mean that bad debts are pretty low. Other than the intangible assets of $101m, the Company doesn't have a lot of leverage on its books remaining. In addition, buying and selling properties seemed to be Singaporean's favorite past time and this is unlikely to change
  • The Singapore Residential Market seemed to be turning around - While the cooling measures are still in place, the market seemed to have turned around. If the Company is able to maintain its market share of the transaction value, the profitability of the Company will be maintained as well
  • Presence of cornerstone investors  - The presence of FIL Investment Management (Fidelity) 15.2m shares, Qilin Asset Management (Family Office of Soilbuild Group) 12.12m shares, Asdew Acquisitions (Alan Wang) 6m shares and Azure Capital 6m (Fund managed by Terence Wong) bodes well for the issuance. While they collectively owns 11.1% of the float, they individually own less than 5% of the issuance, meaning they are not subject to any reporting should they sell the shares. My personal view is that they are likely to be longer term investors (i.e. hold for at least 6 to 12 months). The low free float of 16.5% means that the shares will be tightly controlled, which may be good for the issuance.

Some of my concerns
  • Heavily dependent and limited size of Singapore market  - while Singapore has been the crown jewel of ERA, the market size is limited unless it can continue to gain market share from its rivals. The consolidation in the market place is good for APAC as it will help make the market more professional and stabilise the commission by weeding out fly by night agents
  • Disruption by fintech companies - There are many fintech companies sitting at the sidelines waiting to disrupt the marketplace by providing better services,leveraging on technology, and lowering commissions. However, in my view, property business is at the end of the day, still a "people business". You will still need agents to facilitate the closing of a property transaction and companies such as propertyguru is probably one of the tools which agents leveraged on. 
  •  Government intervention - This is one area which is subject to heavy regulations by the government. Any new property measures to curb speculation will hurt the local market. The reverse is true though, whereby if the Government relaxes or removes any existing property measures, it will be a huge a boost to the Company
  • Future selling by Northstar - Northstar is a private equity firm with Indonesian roots that has since expanded to Singapore. It's recent activities included the de-listing of Innovalues from SGX. APAC is held by one of the Northstar Funds and the aim of PE fund is to eventually sell the Company for a profit. Northstar Fund will own 72% of the Company (assuming over-allotment is exercised) post IPO. They will continue to sell down the shares once the moratorium is over but I trust that they will continue to divest in a responsible manner. My own estimate is that based on current share price, they will be sitting at >1.6x money multiple on their original investment
  • Ease of competition - While the industry has undergone some consolidation, you can be assured that competitors will re-emerge when the market is hot again due to the ease of entry into the industry. My gut feel though is that the market will continue to be dominated by a few key players
  • High Per Share Issuance Price - The issuance price of 66 cents sometimes mean that retail participation may not be as vibrant. I would have preferred to see it priced at below 30c for the launch as you need some massive retail participation to see good price movements
My Fair Value

There are no listed peers on SGX, hence it is difficult to put a valuation benchmark. If the Company wants to maintain good market cap, they should lean towards being a dividend play and investors will learn to appreciate the Company better. A 50% payout ratio seemed reasonable and i wished they would keep it permanent. Investors will love this stock when that happens.

Assuming a valuation benchmark of 11-13x for FY2018 and based on my EPS of 6.7 Singapore cents, the fair value range will be from 74 cents to 87 cents.

My Chilli Ratings

I like the fact that the Company has a public tranche for retail investors, is paying out 50% of its net profit as dividend and that the property cycle seemed to be turning better in the next 1-2 years.The presence of cornerstone investors also bode well for the Company. I will give it a 2 chilli ratings for this IPO.

Happy IPOing

Please note that Mr. IPO is vested through the placement tranche.

Strawpoll - Vote now!


Saturday, 16 September 2017

Cromwell Europe REIT



Cromwell European Real Estate Investment Trust ("Cromwell" or CEREIT") is offering up to 1,583,955,000 Units at €0.55 to €0.57 per Unit. 79.198m Units will be available for public offering in Singapore, 267.857m for a public offering in Japan (without being listed there) and the balance units will be via the Placement Tranche. The REIT is currently in book-building phase with the pricing to be determined around 21 Sep 2017. The market cap will be €1,814.8 million based on the maximum IPO price. The IPO is expected to close on 26 Sep and be listed on 28 Sep 2017. The draft prospectus is here.

CEREIT is the first Singapore REIT with Pan-European portfolio as show in the diagram below. 


The portfolio is being acquired at 1.7% discount to the Appraised Value. The Portfolio is spread across office, light industrial or logistics and retail. The summary of the IPO portfolio by asset class and geographies are set out below.


What I like about Cromwell Europe REIT
  • Decent yield - The yield of 7.5% to 7.7% is decent
  • Well diversified portfolio across asset classes and geography - The 81 properties are diversified across asset classes in 6 countries, Denmark, France, Germany, Poland and the Netherlands. The offices are located in major cities in Netherlands and Italy, the light industrial and logistics are spread across the 4 countries while the retail assets are mainly in Poland.
  • Freehold assets - The assets are predominantly freehold 
  • Long portfolio lease with Weighted Average Lease Expiry ("WALE") of 5.1 years - implying stability in predicting income

  • Potential upside if the Manager is able to execute as occupancy is currently at 89.3%
  • Experienced sponsor and manager - The Sponsor is listed on ASX since 2006 and has global of A$10.1b, meaning it is not a "fly-by-night" manager
  • Presence of cornerstone investors - The presence of Cerberus Singapore and Hillsboro Capital helped provide some institutional pricing to the issuance. The track record of the two cornerstone investors are not available
  • Decent board composition and management  - The board comprise of independent directors who are experienced
  • Exposure to Eurozone - This again depends on your view whether Europe has turned the corner. If your view is yes, then this is a positive factor, otherwise, you can move this to the "concerns" column ๐Ÿ˜‹
  • Not overly levered  - The leveraged ratio ranged from 34.3% to 36.6% and this provides some headroom to levered up to 40%

Some of my concerns
  • Low alignment of interest - the Sponsor will hold only 12.7% as at listing date (and even lower at 8.7% if the over-allotment option is exercised). There is no alignment of interest. The Sponsor is cashing out on its portfolio and their timing is good with Euros at a high. In addition, they will have one of the lowest Sponsor's stake for REITs listed on SGX ๐Ÿ™„
  • High fees - Seems like the Sponsor is not well-liked as it charges above market fees. There is an article that warns that CEREIT's overall management fees are on the high side and more than double the peer average ๐Ÿค”
  • Performance fee - I don't like the performance fee of 25% of the difference in DPU. This sound a tad too high and not in line with market. No reasons why i should pay performance fee if Manager managed to increase the occupancy from 89.3% to 100% right or use financial engineering to boost DPU? Plus the rental demand and rates is frankly market driven, why should the manager be rewarded for this? ๐Ÿค•
  • No economies of scale - The portfolio seemed to be so well-diversified that while it doesn't depend on any single property, the well spread out locations also mean that there is less opportunities for reaping scale in its operations. I have to caveat that i am not familiar with the properties and its location
  • Sponsor cashing out at close to book value - The issue is priced to the max at around its book value of €0.54 per unit. There is no "upside" from this valuation and the Sponsor is cashing out cleanly
  • Large free float - The huge free float of at least 87% probably mean that all the demand should be satisfied
  • Euro Exposure - It depends on your views of Euro against SGD (see 5 year chart below). The distributions will be made in EUR and converted to SGD at each distribution date. Investors who don't mind Euro exposure would welcome the issuance but for the majority of retail investors here, be prepared for a "wild" ride as the exposure cuts both ways. The good thing is you can actually receive the distributions in Euro if you opt for it. Perhaps can buy some Units so that you can go Europe to spend it for holidays every year (natural hedge)? ๐Ÿ˜‚

Listed Comparison IREIT (sourced from Shareinvestor.com unless otherwise stated)

The only listed peer is probably IREIT even though it owns only office buildings in Germany. My previous write up on IREIT was here


IREIT didn't really debut well and the share price dropped post listing. The current yield seemed to be around 5.78 cents (annualised DPS) / 76 cents (last traded) = 7.6%. It is currently trading at a price to book of around 1.12x but the gearing is at 41.3%) Source: here.


My Chilli Ratings

This is a one-chilli rating for me. Buy if you are bullish on Eurozone or goes to Europe for holidays๐Ÿ– as it offers pure exposure to that region. The yield of 7.5-7.7% is respectable and is 'better valued' when compared to IREIT as it has a lower leverage and not trading at a premium to its book value. My key concerns are the manager's fees and the perceived lack of aligned interest given the low sponsor's stake.

Given the huge float, this is not a "hit and run" or "stag" game. Buy it only if it is part of your retirement plan for passive income. You can probably get it from the ATM or from the open-market post listing.

Voting time

Will you be subscribing to the IPO? Cast your vote here or click on the picture below!

 Click to vote

Subsequently, the Sponsor cancelled its IPO plans on 22 Sep 2017. The news is here.




Wednesday, 9 August 2017

SGX Bull Charge Giveaway Results

I refer to my earlier post on the SGX Bull Charge Giveaway Contest that was conducted over my Facebook Page which ended 8 August 2017.

Interested participants must click "Like" on the post below to participate in the draw. 

I had wanted to give a higher weightage to "fans who shared" the post and there was 27 of you but unfortunately Facebook doesn't show me all the names, as such, i wasn't able to do that fairly. As a result, all participants stood an equal chance of being allotted.

71 of you managed to do that by the deadline but one of you only clicked "like" on 9 Aug and thus was not entered into the contest. sorry! ๐Ÿ˜‚

I then keyed in all the 71 names into my project set up in Random Picker as follows:

and the 12 winners of SGX Bull Charge are ....๐ŸŽถ๐ŸŽถ๐ŸŽถ๐ŸŽผ (drum-roll)....


The above draw was conducted publicly. Hence, if you are one of the 71 participants, you can easily key in your name here to verify that you have been included in the draw. 

Thank you for your participation! I hoped you have enjoyed the contest ๐Ÿ˜€

Can the above 12 winners please "private message" or email your full name and email  to me by end of this week... I will then compile and send them to SGX who will then email you the registration link directly as they will need to collect other information such as your date of birth, contact numbers etc.

Last but not least... Happy Birthday Singapore!!! 

Sunday, 30 July 2017

SGX Bull Charge Giveaway Contest

This is a follow up post to "An Evening with Mr. IPO" with the contest details and how to get a running slot beside Mr. IPO.

Date and Time

Date:   17 Nov 2017
Time:     4pm till late

Prizes to Giveaway

12 complimentary tickets to SGX Bull Charge 2017. To ensure a wider and fairer distribution, I have decided to give out the complimentary tickets individually

Two Simple Steps To Participate

Step 1:  Visit the Facebook Page of Mr. IPO here and search for the post "SGX Bull Charge Giveaway Contest"

Step 2:  Just click "Like" or "Love" or any of the circled emoticons on that particular post. (Fans who share the post with their friends get extra brownie points ๐Ÿ˜€ )

 

When will the contest end?

The contest will run from now till 8 August 2017 and the winners will be announced on 9 August 2017 in conjunction with our National Day! (You always know i am patriotic right?)

How will winners be picked?

When the contest ends, I will use this  Random Picker (or other similar website) to pick 12 random numbers and matched the number to the participants according to the sequence of those who have "liked" the post. For example if you are the first one to "like" the post, you will be allotted "number 1" and if 1 is picked by the random picker, you would have won one of the complimentary SGX Bull Charge slot!  In this way, all data are kept confidential! 

The winners will just need to message me their emails so that i can pass them on to SGX for processing.

How can Mr. IPO fans dress up for the event?

While there are many fans, there is an equal number of "enemies" who can't wait to "chop" Mr. IPO to pieces. What can you do to save Mr. IPO if you are attending the event? 

I looked at similar events in the past to get some ideas...

Option 1: Dress like the Bull Mascot to help create "double" and "divert" the attention...


Option 2: Dress up as friendly neighbours from across the causeway


Option 3: Dressed as real fans of Mr. IPO (this will really help confuse the chilli choppers)


But please don't dress up like this or you will be slaughtered for sure... lol


Happy participating and good luck! 

While I can't guarantee the chance of you winning will be easier than applying for "3 chillis" IPOs but i can assure you that it won't cost you a cent to apply for this... better than the $2 wasted at the ATM ! 

Thursday, 27 July 2017

Aspen Group Holdings - Balloting Results

Aspen announced that its PUBLIC tranche was 7.8x subscribed. Super misleading considering that the public tranche is small. I think most IPOs try to use the entire subscription rather than the public tranche only. 

I didn't compute but if combined with the placement tranche, it's probably about "1x subscribed" 

Commenting on the subscription results, Dato' Murly, Executive Director, President and Group CEO of Aspen, said, "We are greatly encouraged by the strong investor demand for our IPO, which we believe reflects the confidence in the potential of our properties, prospects and future plans. We would like to thank them for their strong support and welcome them as our new shareholders. We will strive to grow our business further, riding on the bright prospects for the property development sector in Penang. With this listing, we believe Aspen is positioned for the next phase of growth regionally.
The balloting and placement table below. 

Interesting to see institutional support from Setia, Affin and Daiwa. They probably see "value" and know the company better than what my untrained eyes can't see. 

Good luck to those investors who went for the ATM. You will be 100% Bao Tio as indicated by the table above. Hope it's durian Bao Jiak tomorrow. 

Happy Aspening
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