Hui Xian Reit (HXR) 30% owned by ARA Asset Management, is make up of malls, offices, service apartments and hotels. The segments' profits are shown on the pie chart below.
Note:There is an estimate adjustment to mall and office in 2015 & 2016 from Chongqing Metropolitan Oriental Plaza
Office faces headwind from new office supplies and slow down in china's growth.Office segment is still growing but Chongqing Metropolitan Plaza's office NPI drops.
Service apartments has been stagnant, recent growth is due to converting 107 hotels rooms at Grand Hyatt Beijing to service apartments.
Hotel properties have the worst performance for HXR. Occupancy has not grew above 70% since IPO and was below 40% in 2014. Recently acquired two more hotels (Harbour Plaza Chongqing 66%, Sheraton Chengdu Lido Hotel 73.6%). Not sure what the management is thinking, however hotels only contribute 7% of profits.
The implementation of Value Added Tax in May 2016 greatly affected HXR's growth. NPI remain stagnant for the past 3 years.With the recent devaluation of RMB, base on last year's DPU of RMB0.268, which equals to 8.1% yield base of a price of RMB$3.31.
NAV is dropping, probably due to the increasing gearing affecting the total assets. Gearing at 23%, interest coverage 8.4x, NAV of RMB4.795. At a price of RMB$3.31, PB ratio is at 0.69 with a yield of 8.1%. With low PB and high yield, anyone wants a piece of this Reit?
The gearing is still low for a REIT. The discount to PB is probably due to the REIT being in China hence currency risk and political risk is a factor
ReplyDeleteinterest cover dipped to 3ish for 2015 and 2016. not sure why. yea dividend in RMB probably 1 of the risk too
DeleteDPU looks to be dropping for 2018 as well
DeleteThe REIT acquired Sofitel
ReplyDeleteShenyang Lido Hotel in 2011, whose profitability has subsequently
deteriorated. It acquired Chongqing Metropolitan Oriental Plaza in
2014. Again, profitability of this retail/office complex had trended
down in FY16 and 1H17. In 1Q17, it further acquired Metropolitan
Oriental Plaza (office) in Chongqing and Sheraton Chengdu Lido
Hotel.Their not so positive acquisition may be the reason for the unimpressive low price
yep the hotels obviously not doing well, Chongqing Metropolitan Oriental Plaza office not doing well. Malls occupancy rate drops due to AEI. time will tell, they did well for a long time except for the hotels.
DeleteIt also seems like the worse is over for them. ARA has done a pretty good job in SG hope they can replicate the same for China property
ReplyDeleteBut ARA only hold 30%, how much can they Influence? IIRC The latest result show a drop in DPU.
DeleteBTW are you vested?
DeleteYep invested the yield is worth the risk
DeleteWow, RMB depreciated doh. 8% yield with bad performance so will go lower.
Delete1 main reason I not getting this cos it is traded in RMB. scb dont have RMB acc
How long have you been holding it?