I made a full divestment of Ireit Global today at a share price of 75.5 cents, which yields me a profits of over 21% over a period of about 1.5 years.
I talked about how I wanted to do a strict review on my post yesterday in a bid to increase my cash position so I have to pick what I think has the least reward with the most risk one way or another. It wasn’t an easy decision but it has to be done.
I’ll just quickly list down what was going through my mind when I picked Ireit Global as one of the companies to divest:
1.) I wanted to raise the percentage of my cash holdings after having only less than 8% in the portfolio.
2.) The recent decision to go 90% payout means the dividend yield would probably drop to less than 7.5% based on current share price. I’d have preferred if the company do a 100% payout then raise funds via equities as and when they are ready to do so. My guess is the upcoming acquisitions will not be accretive and they had to retain as much cash as possible to lessen the dilution.
3.) Germany DAX market is one of the top performing market in the global for this year. With economy recovering and inflation rising, it is likely that the tapering of the interest rates in the Europe will start to play out late this year and early next year. By then, it is now a question of whether the company is able to grow faster than the increase in interest costs eventually.
4.) Tikehau management strategy is to grow inorganically by injecting assets in industrial, commercial, or retail across Europe. I have to say this is the biggest question mark to date because as investors we have no sort of data available that would suggest the acquisitions are going to be align and accretive. The last Berlin acquisition was at 7.1% NPI yield and I thought it was an excellent buy for the asset. It remains to be seen if they can get similar nature of transactions injected into their portfolio.
5.) Market depth showing 76 cents to be a very strong resistance with heavy volume that I feel is unlikely to break any time, hence upside in terms of capital gain is capped.
My goal by having this cash now is to find an opportunity that could yield me higher than 7.5% per annum while assuming the share price doesn’t move up or down. I feel like there might be some good opportunities that I can take advantage of hence the decision.
If you are a long term holder of Ireit, I think the fact that the assets are all freehold in nature seems to suggest that if you can hold long enough, you’d eventually recover your breakeven price for as long as the management does not screw investors by doing suicide move.