Thursday, April 25, 2019

Starhill Global Reit - Q3FY19 Results and Thoughts

Starhill Global Reit posted their Q3FY19 results yesterday evening which saw their revenue and NPI dropped slightly by 0.9% and 1.8% YoY.

As a result, this brings a lower income available for distributional from the previous year quarter of $25.4m to $25m, a marginal drop. What is interesting is they decide to retain less for this quarter, citing lesser tax expense for this quarter and as such decided to distribute more payout to shareholders. As such, DPU has marginally increased from 1.09 cents the previous year to 1.10 cents this quarter.

Based on the current share price of 75 cents, this brings about an annualized yield of about 6%.

If we look at the details, the occupancy for the Adelaide Myer Center actually went higher this quarter, up from 84.4% to 89.9% while contributions from the rest of the office sectors are up year on year.


Still, the retail component takes up the majority of the revenue stream so it still very much depends on them.

While Ngee Ann retail continues to be fully occupied, Wisma retail continues to see changes in tenants as management continues to reshuffle the portfolio of the tenants coming in and out. Commenced leases as of 31 Mar 2019 stands at 91.7%, which most likely explains the drop in revenue and NPI this quarter, but they have committed leases up to 99% occupancy which is slated to commence in next quarter, so technically we should see better NPI in the upcoming quarters to come once they operate optimally.

There's also the Toshin review coming up in Jun 2019 later this year for the Ngee Ann retail side, so there's a prospect the agreement might come up to be better.




The Reit has also convened for a special agm on the new master lease agreement on their Malaysian properties, Starhill Gallery and Lot 10 Property which I previously blogged here.

There will be rent rebates during the AEI so there will be minimal impact during the interim.

The WALE will improve from 5.7 years and 4.2 years respectively to 9.8 years and 6.4 years.

Overall, I think performance is still soft while the Reit is in the midst of transition into many things.

Still a hold for me at current valuation while waiting for a better tomorrow to come.

Thanks for reading.


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Manulife Reit - Decent Q1FY19 Result Start To The Year

Manulife Reit announced their Q1 FY19 results this morning which saw a 27.7% increase in Net Property Income (NPI) year on year due to the 2018 acquisitions of two buildings – Penn in Washington DC and Phipps in Atlanta. 

This trickles down to bottomline DPU performance which grows slightly by 0.7% year on year to 1.51 cents (up 0.01 cent from last year same quarter).



If we compare this across quarter on quarter (Q4FY18 vs Q1FY19), NPI has actually slightly declined from US$25,491k in previous quarter to US$25,084k this quarter. There is a slight dip in the Gross Revenue by roughly the same amount, so there must be some small movement in the occupancy during the period. 

The net income is also not comparable quarter on quarter because there’s a fair value adjustment in Q4FY2019 (end year) which results in a higher fair value gain. But this does not affect the cashflow so you can see distributional income remains comparatively possible to compare. 

DPU is also lower this quarter at 1.51 cents as compared to last quarter at 1.54 cents.


If we have it annualized based on current DPU quarter, we’ll get a conservative 6.06 cents full year, which translates to about 6.9% yield at the share price of 87 cents. 

I say this conservatively because there’s a few passing rents that are below the market rate that are up for lease renewal soon. 

Apart from Michelson in Irvine, which I highlighted in my previous Manulife Management meeting (Link here) they are above the market rent, and Hyundai leases renewed back in Jan is one of them, the rest seems to be under-rented, in particular Buckhead and Midtown Peach Atlanta which has potential for positive rental reversion in the next coming lease renewal. 

This is the organic boost the management is looking to bring value to their trophy class properties.


In terms of balance sheet gearing and growth strategy, they remain in line to purchase another acquisitions which is yield accretive that can boost their overall AUM. These are likely in Dallas, Houston or Pittsburgh area where the cap rates are slightly higher, making it easier for yield accretive target. 

Management has also reiterated that interests cost will drop in the following quarter upon the refinancing of the Figueroa’s loan due to the delay in interest rate hike in the US, so the Reits should also benefit from the lower cost of borrowing. 

The management has also put up an interesting slide on the tax structure in the presentation that highlighted the tax benefit structure they have on the Barbados partnership which tax interest income on intercompany loans in Barbados and principal repayment not subjected to tax. The Reits structure is also such that they are not subjected to 30% withholding tax on the interest and principal on shareholder’s loan.




Overall, I think a decent quarter. 

I like the fact that management has also been transparent and provided a lot of operational updates information such as the upcoming AEI taken to upgrade Figuera's lobby and also their coming growth plans.

Thanks for reading.


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Monday, April 22, 2019

REITs Symposium 2019 - Your Information Guide To Most Reits You Need To Know (Updated)

This is a quick update on my previous post on the upcoming Reits Symposium which will take place on the 18th May 2019 at the Marina Bay Sands Convention Center.



Shareinvestor has updated me on the agenda details which includes the interesting panel discussion which includes several veterans from the Reits industry which I think is the more interesting part of the event as you get to hear views right from the horse's mouth themselves. 

There will be 2 panel discussions during the event itself strategically conducted in the afternoon:

Panel Discussion 1: Is Reits Still A Viable Investment In Today’s Climate? (2.10 - 2.40pm)

Cham Kum Kong (SGX) 
Kenny Loh (Trainer with Adam Khoo Learning Technologies) 
Chia Nam Toon, ARA 
Analyst 
Moderator: Nupur (REITAS) 

Panel Discussion 2: Insights to Best Performing Singapore Reits (5.00 - 5.30pm)

Anthony Ang (Sasseur Reit) 
Paul Chew (Phillip Capital) 
David Kuo (The Motley Fool) 
Calvin Neo (Nikko AM) 
Moderator: Dinesh (Dollar & Sense) 

Apart from the panel discussions, there will be other interesting sharing from Kenny Loh who will share his insight of some of the basic fundamentals of what to look out for when you are selecting Reits. 

Kenny is someone I’ve shared a stage with together before during the InvestFair back in 2017 so he’s someone who knows stuff on what he's doing.


If you have not signed up but would like to attend, the sign up link is here if you are interested.

If you use my referral link (3fs), you are able to get an additional gift with the same cost if you purchased it online directly.

Thanks for reading.

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Thursday, April 18, 2019

Apr 19 - Portfolio & Networth Update

No.
 Counters
No. of Shares
Market Price (SGD)
Total Value (SGD) based on market price
Allocation %
1.
Starhill Reit
377,000
0.755
284,635.00
30.0%
2.
Vicom
  31,300
6.79
212,527.00
23.0%
3.
Netlink Trust
236,000
0.835
197,060.00
21.0%
4.
First Reit
152,000
0.98
148,994.00
17.0%
5.
The Hour Glass
106,900
0.80
  85,520.00
  9.0%
6.
Far East Hospitality Trust
    3,000
0.67
    2,010.00
  1.0%
7.
Ho Bee Land
       300
2.53
       759.00
  1.0%
8.
Warchest
    1,000
    1,000.00
  1.0%
Total



932,505.00
100%

Greetings from JB!!

We are on a long weekend for the Easter week so I decide to bring my family to a nearby getaway to our neighbouring countries for some quick hit shopping, eating and playing time.

I was just catching up with fellow bloggers Thomas from 15 Hour Work Week and Chris from Tree of Prosperity two days ago over lunch and we talked about M Bison from the Street Fighter series and look what I've got in our Airbnb apartment! A Game Console!

Muahaha, I am surprised I still remember the special moves by all the character, including the famous M Bison
Back to the portfolio updates now.

April has been a very good month for investors because the stock market continues to go up and most if not all my portfolio has benefited from the upward trend moves.

Two of my biggest holdings, Starhill and Vicom, have been doing superbly well this year so they are the main contributor to the increase again this month.

I have divested Manulife Reit at USD 86.5 cents because I think the general valuation overall is rather fair and I wanted to reduce my over-dependence on Reits which is taking the majority of the portfolio before the divestment. Looking at how Kep KBS reported good Q1 results and outlook recently, it seems like there are still room for the US commercials to go up.

With the proceeds, I took an interesting position at The Hour Glass, which I averaged a couple of times from 70 cents all the way to 74 cents, accumulating a total of 106,900 shares in the process. This is after the big move which seen big institutional play coming in on this stock a few weeks ago.

This is a relatively short term play because YTD results have been doing really well with margins marginally up to 25% from 24% last year but revenue line also increases. My estimation for FY earnings is THG will end the year with EPS around 9.3 cents which if we give a valuation of 10x PER, the target price will be around 90+ cents. 

The share price has been up a few good times this week so my position is already up around 9% as it closes at 80 cents today, but between now and FY results I suspect there is another 10% upside.

On a smaller update, I took the DRIP for my Far East Hospitality Trust last quarter dividend which is priced decently att 63 cents. This is the reason why you see I have 3,000 shares in my portfolio. Since the amount is too small to make any action, I'll just leave it there for now.

Networth Update

The portfolio continued to do well this year, which is up again from the previous month of $900,096 to $932,505 this month (+3.4% month on month; 29.8% year on year).

This is the 16th consecutive record month that the portfolio has broken a new record high.

I am coming due soon for my sabbatical D-day in May so I've got to make every returns count now while the bull lasts.


The hardest part being involved in the bull market is the expectation as investors we are giving ourselves to be performing better than the index.

To date, the return has been satisfactory as it is performing better than the index so I can't ask for much more (i.e, if the stockscafe statistic is correct. I've had friends in my chatgroup who disputed the ES3 returns to date to be incorrect).


Next month will be interesting because we are in for a "Sell in May and Go Away" period so we don't know if the market will fall for that legendary trap but we'll have to cope and see.

Meanwhile, have a great long weekend and enjoy and celebrate the Easter this weekend.

Thanks for reading.

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Tuesday, April 16, 2019

How Do You React When Your Companies' Share Price Goes Up or Down?

I received an email from a reader (whose name I’ve concealed) who asked for my opinion on his recent purchase of stock which leads me to write this article. 

In the email, he mentioned that he initially bought OCBC at a share price of $11 with the intention of holding it long term. However, as the stock market continues to go up in the past recent weeks, he is now sitting on a decent capital gain over a short period of time, which I assume he did not initially expect, and now faced with a situation if he should sell his stock to lock in the capital gain. 

Now, for the purpose of this article, I will be focusing more on the logic behind his action rather than the company itself so I won’t be discussion any of the company’s fundamentals. 

In today’s bull market where share price continues to go up despite some scare news in the market, it is common to see people getting uneasy over their decision especially if they are holding on to winner stocks. 

This is a first world problem that many investors face in the market this year but one that can still make people go uneasy over their decision, especially after seeing some of their investment sitting on double digit gains over a short period of time. There is always a tendency to lock in the gains and make an attempt to get back in when the market prices them lower eventually. 

In case you are wondering, this happens to me (and most likely everyone too) from time to time too, so I am openly sharing how I face these psychological barriers myself and hope it will help others who are facing a similar problem. 



Timing The Market vs Time In The Market

The debate over timing the market versus time in the market has been rehearsed through countless times so I won’t bore readers too much with this one. 

The main essence of this concept is that timing the market requires you to be right two times, one with the buying and one with the selling, and it is incredibly difficult to be spot on all the time. 

Still, I am not here to tell or judge that you should not do that. 

If you have good enough justification why you wanted to time the market and believe in your ability to do that, then by all means go ahead. 

For instance, if you think the valuation of the companies you owned are stretched and that you are better off waiting for a more comfortable valuation then by all means do what you think is necessary. Over time, you will have a track record to justify if what you are doing is worth exploring. 

I’ve seen some friends in my circle group who are extremely good in timing the market so I will not write off folks who can do that. 

Profiting/Losing By Luck Or Design 

I think this is something worth exploring and expanding a bit more. 

In the email, the reader asks for advice on his next course of action that looks like this: 

1.) Sell it now or before the dividend date, which he can lock in for capital gains but forgoing the upcoming dividends 

2.) Sell it after dividends, which means the dividends will be in the pocket but not sure how much is the share price going to drop 

3.) Hold it for long term, receive and take dividends for this round first 

You can see where I have issues with his listing of the actions he wanted to take. 

If I read him correctly, he seems to struggle to come against his own conviction because he initially wanted to keep this for a long term yet he is being tempted and swayed by profits he could gain over a short period of time. 

I think the more important discovery that we can ask ourselves as investors of our own game is if we are able to deduce whether we are profiting/losing our investment by design or luck. 

By design, it means spending a worthwhile effort to understand the fundamentals of the company or designing a strategy through technical analysis of the company you are prospecting. 

Profiting By Design 

This is the best outcome of the lots. 

If you are an investor who consistently make profits because of design, then you are in a good stead because you have established a good foundation of fundamental research and temperamental adjustment that suit the needs of your investment style. 

Perhaps, the only problem that needs to try to be avoided is an issue with over-confidence, simply because winning can inflate a person’s ego over time. It is important that we keep our feet on the grounds and be humble about the prospect of making the next decision because it can impact the outcome that you choose. 

Profiting By Luck 

If you found out that you have profited on your investment but it is because of luck, then perhaps it is a good time to sit down and review the overall strategy you have on your hands. 

Like the reader who wrote to me, the important question that he should be addressing is not if he should sell now or sell later to wait for the next dividend payout. The important issues on hand is how he can turn that luck into design so he can continue profiting over the long term. 

Blessed this round, he might not be so lucky the next time round. 

It is a matter of time for a person who profited by luck to face a scenario where he will be losing at some point. 

Losing By Design 

If you buy a company with a strong conviction after doing tons of research but are still losing money at the end of the day, then the key is to be patient. 

Mr. Market can be irrational on many occasions that we don’t know why certain companies may be mispriced in a way you think it shouldn’t. If you continue to hold that belief, then it is also a good time to be adding on to your existing position to build up a larger position over time. 

Having said that, there are some companies that are value trap by design which track record will usually show some tales so it is important not to be overly biased in one aspect. 

Losing By Luck 

This is the worst of the lots. 

Losing both money and luck on all fronts should tell a conclusive story that something needs to be changed immediately. 

Take the right action now! 

Overall Thoughts 

I can understand that sometimes it is not that easy to deduce if we are profiting or losing by luck or design. 

It is usually only an aftermath on hindsight that we get to review if the previous position we took is the correct choice. 

Investing is a game of marathon and there will be plenty of chances that you get to review all the 4 scenarios I’ve pointed above. 

If we show any complacent or behavioral contempt, it’ll be a matter of time before the results will show and it’s a wasted chance to have lost some or all your money. 

I think the key message I wanted to drive here is that we should always be reviewing our strategies and temperamental regularly regardless of any of the outcomes because it is the attempt of hard work that will make the difference at the end of the day. 

This is the main reason why I like the investing game. It is a game of self-reflection and one that you can win the game if the process is right.

Thanks for reading.

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Friday, April 12, 2019

What Recently Reminded You of How Fast Time Flies?

Our elder son is turning 5 years old next week which means for both my wife and I we had him by our side for nearly 5 years of our lives now. 

For a 5 year old, that is his whole 100% of his life together with us but for my wife and I it is a relatively small portion (5/33) of our life experience which is the reason why time seems to fly past so quickly. 

It feels like it was only a while back that he’s still learning how to crawl and walk but in a blink of an eye he is able to run at full speed now. One of his favourite pastime is to watch the National Geographic and Animal Channel where he would silently sit in one corner and watch how animals run and hunt for their preys. His favourite animal creature is Cheetah, which explains why he likes to dash around the house in speed that we had to remind him to slow down. Give a few more years, he probably has his own ideas and would ignore our advice. 

To commemorate the time we spent together, we choose to keep the traditional way of album photos of each passing occasion we spent together. For instance, instead of glamorously inviting tons of visitors to our house to celebrate his birthday, we would instead bring him to Legoland and buy him a customize birthday cake. We try to keep such celebration short and simple but memorable and joyous.  
Being the writer inside me, I also love to write and document our experiences in a family and lifestyle blog which I kept separately from this finance blog I am writing. 

It has our fond memories of attending many different events that we attended such as the Children Dinosaurs Festival @ Gardens by the Bay in 2017, Toybox @ Sentosa in 2018 and all our travels moment in the past 5 years. 

Till now, we continue to believe in working hard to pursue and create more memories together. 




Days Are Long But Years Are Short

If you have read a book called “The Happiness Project” written by Gretchen Rubin, you would realize that she has a quote in her book that says like this: 

“The Days We Spent Are Long But The Years We Live Are Short” 

Many of us choose to lavishly spend our days but forget to live our years. 

I used to think that days like this flew by because we’re such a busy society in motion. We live a life where busy is king and productivity is lucrative. Our schedules are filled with work life imbalance that we often are not able to differentiate between dawn and night because the sky is always dark when we step out of the office. 

Most of us who are employees of a corporation in this capitalist society are more likely to relate to this. 

We wake up early in the morning getting ready for work only to find the outgoing crowd rushing to the same direction we are going. After enduring most of our time during the day in our prison cubicle attending to our outlook email, we still have to occasionally deal with rude client who demands for unrealistic expectations, who then call for an unproductive meeting only to realize there isn’t always a solution provided to the problem. 

Everyday is a battle struggling to get this happiness project right in our lives. 

As the years flew by, I remember what Charles Swindoll once said: “Each day of our lives we make deposits in the memory banks of our children” 

I am full of flaws and I am still working hard in refining them to get better, but I know my heart is in the right place. 

It’s the only bank that really matters in the end.

Thanks for reading.

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Tuesday, April 9, 2019

First Reit FY2018 - My Thoughts On The AGM

I had the opportunity to attend the AGM which was held this evening at the Mandarin Orchard Grand Ballroom at 2.30pm.

I arrived sometime around 15 minutes and there were already long queues forming for the registration. The AGM was packed and there were a few folks who had to stand when they arrived a bit later.

The door gift was a nice running tracker watch, courtesy of the printed First Real Estate Investment Trust. I think this is a similar model when the government distributed it out last year to the citizens during the health board promotion.




There were new faces across the Board, and one of the prominent ones was Mr. Christopher James Williams, who became the new appointed Chairman and Non-Executive Director in late 2018. This was his first First Reit AGM.

Ok, let's see what I can gather from my notes.

FY2018 Performance and Performance Since IPO

Mr. Victor Tan (CEO) started off by giving us an overview presentation of their full year 2018 performance.

Both operational performance metrics and distributions increased year on year in 2018 as compared to 2017, which capped off another good year for First Reit.

However, share price didn't fare so well.

It tumbled from the high of $1.42 in 2018 to the closing low of $0.92 at one point, which translates to about 40% drop in the share price.

Knowing the share price didn't fare well in 2018, the CEO diverted their attention away from a single year share price and reminded investors that had they held on from IPO in 2006 until end of 2018, they would have earned an annualized return of 15.9%, which is still one of the highest in the S-Reit universe. That alone is one remarkable achievement feat investors should not forget about.

During the period from 2006 to 2018, total AUM has also increased by a remarkable 13.8% CAGR to $1.35b, while Net Property income has risen by 13.7%.

In the last 8 years, they had made yield accretive acquisitions one after another, which includes 10 hospitals, 2 integrated hospitals + malls and 1 integrated hospital + hotel (more updates on these below).

Since IPO, they had also only did one rights issue in 2010 and a small placement in 2012. Both are for yield accretive acquisitions properties they bought.

I'll break into each segment separately to make it neater to organize.

Extraordinary Resolution 4

There was an extraordinary resolution that needs to be passed on the alignment of the admin and logistical operations with OUE after OUE and OUELH become a major stakeholder.

One of the example given was the the current distribution practice which First Reit typically distributes within 60 days after the distribution payment period. To align this with the rest, they will change it to within 90 days after the distribution payment period.

This will be one-off so the next quarter distributions will be slower than normal then the frequencies follow back the quarterly norm payment.

Surabaya Hospital Development

There was a shareholder who asked on the updates on the Surabaya hospital development.

Not many people knows about this but LK is actually building a new hospital, sort of an extension beside the current Surabaya Hospital which is owned by First Reit.

The intended target is to have this built ready by 2019 then have it injected into First Reit portfolio.

There was an incident last year regarding sinkhole which prevents it to be completed by this year and instead this project has been postponed for completion to 2021.

The existing Surabaya hospital will still follow the current lease with LK which expires in 2021, so once the new hospital is injected it will follow a separate lease agreement than the current.

Growth Strategy


The management and Board gave a subtle strong hint of an acquisition target they are working at and it is most likely coming from Japan.

One reason for this is they highlighted Itochu as a strategic partner with OUELH which has pipelines in the Japanese market.

For Japan, we can take reference from Plife Reit when they made acquisitions for Japan nursing homes, which has a net property yield of 6.7%.

They also mentioned the possibility of Malaysia, China and Myanmar in a bid to diversify their portfolio away from the Indonesian geographical so we should see upcoming acquisitions targeted in these areas.

Divesting of Non-Core Assets

The CEO also gave a strong hint on a few potential divesting of non-core assets.

He specifically picked out the Imperial Aryaduta Country Club, one of the 5 properties which have their current lease expiring in 2021. He mentioned that while the hotels are doing well, the Country Club is not doing well as he often see unutilized tennis courts being used.

In addition, this property is currently sitting on a large parcel of land as much as 54,410 square meters, so they are looking into divesting this. The current valuation of this property can fetch them approximately $40.6m.


Another property they are working to divest is also Sarang Hospital in Korea, which is a very small part of their portfolio.

The management also gave hints that they are working on separating the strata title for the 2 integrated hospital + malls and hospital + hotels, so they can divest the malls and hotels portion, but that is still work in progress.





Gearing & Funding Options

They have a total debt borrowings of $503m, which translates into a current gearing of 35%, which is well below the statutory requirement of 45% threshold.

They are currently paying around $17m a year on interest costs at a weighted average cost of debt at 3.84%.

$110m of the $503m debt profile will be due in 2019 while the rest will be due in 2021 and beyond.

The CEO gave an update that they have paid off $10m via internal cash funding while the $100m has been approved by the bank for further extension.

One of the shareholders asked if the management will be reducing or increasing the gearing and Victor said while the long term optimal allocation is to remain the gearing at 35%, in the short term the gearing may rise to 40%. This gives a strong hint of an acquisition coming that would be funded via debt or debt + equity.

LK's Rental Leases and The Lease Expiry in 2021

I'm leaving this for the last because I think this is what everyone goes to AGM to find out more.

There are 5 properties that will have their leases expiring in 2021:

- Siloam Lippo Village
- Siloam Kebon Jeruk
- Siloam Surabaya
- Sarang Hospital
- Imperial Aryaduta Country Club

I've detailed the last 2 properties in my above "divesting" section that they are looking to potentially divest so I think we won't be overly concerned with that.

The other 3 is their most matured and biggest portfolio, and has their leases contract with LK.

Currently 82.2% of their rental income comes from LK, while the rest comes from Metropolis (12.4%) and a few smaller ones.

Obviously, the biggest concern is surrounding the ability of LK to i.) pay their rental and ii.) re-negotiation of the lease expiry coming 2021.

LK's Timeliness Payment of Rental

If you look under the Notes 16 of the Trade Receivables portion in page 118 of the Annual report, you will see that the related parties receivables have increased in 2018 from $14m to $23m.

The CEO mentioned that LK used to pay 3 months in advance of deposit for the rental but last year they decided to do away with it. While they still pay their due rental payment, they have never defaulted and Victor believes that 2018 was a year they had problems with their cashflow, which is also all over the news by the way, and that given their recent fund raising activities, that is no longer a going concern (also confirmed by the auditor).

One of the Director also pointed out that the capital market appreciates the fund raising and restructuring of the LK which shows their bonds recovering from a 17% yield to the current par yield at 7%.

The credit rating was also upgraded by Moody in the most recent exercise.

Re-negotiation of Lease Expiry in 2021

This is perhaps the bigger concerns for investors.

There are 5 properties that will have their leases up in 2021, and 3 of them are matured properties lease with LK.

LK provides 80% of income support that they will receive from Siloam to operate the hospitals and pay to First Reit and the concern is if LK can provide similar income support once the current leases expiry.

One of the shareholders highlighted an important point when he mentioned given LK's lower shareholding interest than the now OUE and OUELH whether it gives bargaining power more to LK than to First Reit.

The CEO and Chairman gave a confident answer that First Reit is in no inferior position to negotiate with LK because first the current lease agreement they have in below the market rate and second it is in LK and Siloam's interest to continue operating the hospitals because First Reit only owned the land and building while LK and Siloam have vested interests in the equipment, doctors, nurses that they have invested over the years. Third, the hospitals are also doing very well with operational metrics and occupancies up year on year so LK will want to keep that momentum going.

My Thoughts

First, I will share my thoughts on the LK's concerns.

I don't think LK will go into default simply because while they have $1b liabilities on their books , they also have $5b on their assets. In other words, they can divest their properties like they did in the recent exercise to raise funds should it comes to that stage.

On the renegotiation of the leases with LK, I think it'll come to a stage where it becomes too important to neglect for both parties because LK still ultimately has 10% vested interest in First Reit so as a related party and vested interest in the operations, they would want to make sure they have cakes on the share too. The most likelihood scenario is that they would follow the current lease agreement structure which would continue for the next few years.

Based on the subtle hint they gave during the agm on the gearing, growth and divestment plan, it seems that we are going to see some corporate action soonest.

There are 2 likely scenarios.

Option 1: Divest the non-core assets first at a profit, share price recovers, then do a debt + equity placement (I think debt + rights would be overkilling) to purchase a yield accretive acquisitions.

Option 2: Straight away do a debt + equity placement (since CEO gave hints of a 40% gearing in short term) for a yield accretive acquisition, then subsequently divest the non-core assets to reduce gearing.

The two key words here which I noticed throughout the agm is yield accretive acquisitions and whether the divestment or acquisitions will come first, albeit both will come at one stage after another.

It is Not easy to do a yield accretive deals when your mother shares are trading at 8.7% yield. Chances are you find a 6.7% npi Japanese nursing home then fund it as much as possible with debt. Either that or go with some income support from sponsor to boost the deal. 

First Reit will be announcing their Q1FY19 results tomorrow morning, so maybe there's a good surprise soon now that the resolution on the agm has been passed.

Thanks for reading.

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