Tuesday, January 29, 2013

Ascott: Raises S$150m Private Placement

For Ascott investors who have not heard the news, Ascott has raised a private placement of ~115m new units at an issue price of S$1.305 per new unit raising proceeds of up to S$150m. This may come as a surprise to some as the management has stated in the recent briefing that they will be comfortable with 40% to 45% gearing. But as with Reits, I would have expected it to raise some kind of rights issue or private placement once gearing goes above 40%.
Following the private placement, Ascott gearing will be reduced to about 35% assuming the proceeds is used to repay the debts, which is at a comfortable level should they need to leverage to purchase yield accretive opportunities or taking some AEI projects on their portfolios sometime in the near future.
Because of this move, there will be an advance distribution income to exisiting holders from 1 Jan 2013 to 5 Feb 2013 before the new units are issued. There will be a heavy dilution effect of about 10% as a result of this placement, which is a rather disappointing issue as an Ascott investor. For the short term, I will expect to see price go nearer to S$1.30, especially after the X-date on the 1st Feb 2013. Will I add to the counters? I doubt so for now due to its heavily dilution effect of the placement.

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