Portfolio 2019

I find that writing a year end result isn't so important, should take the time to research or rest instead, let the result show in 5 to 10 years.  It has been 4+ years since I started the investing journey. So let's do a quick one.


Value/Growth/Income Portfolio (SG/HK/US)

2015 - Started investing after my first book, first stock is keppel so yeah GG
2016 - Read more books. End of SCB no minimum fee. Started invest on REITs as well as in 17/18
2019 - Venture outside SGX and non Reits counters. Suffered 3 major losses but is worth the school fees to Mr Market. I am still at least on par with STI after these losses. Still a Noob being slapped by the wave in the open sea.


Income Portfolio (SG/HK)

2018 - Bad call on Duty Free International.
2019 - Bought at market bottom in DEC 2018. The buy out of Ascendas Hospitality Trust and Accordia Golf Trust now in pending. Luck for the bottom picking and the 2 buyout which are both heavy in the portfolio

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Accordia Golf Trust Got An Offer Price

Accordia Golf(AG) offered Accordia Golf Trust (AGT) JPY$63,167 Million (S$780 Million) for all interest of its golf courses, including debts.  This amount to 71 cents per share. Initially, myself and the online committees were expecting a delist of 80 cents to a high to 120 cents or more and this feel like a low ball offer. However, the offer is regard to the golf courses and not an offer to buyout the whole trust. We got our hands in a situation of Saizen Reit. I need to reevaluate.

How much is the valuation of the golf course? 

The golf courses is valued at JPY$141 Billion in the latest quarter statement. Some have pointed out the JPY$63,167 Million offer is not enough. But the actual value is after deducting debt. The liabilities consist of borrowings, leases, membership deposits and differed taxes. These items are operational incurred debt, which I believe will be buy out together with the golf courses. 

Total liabilities are worth JPY$92 Billions*, which make the golf courses worth JPY$49 Billion. So Accordia Golf is paying JPY$14 Billion above valuation for these golf courses. 

*I make some adjustment due to the change in accounting

What is left?

The other assets (cash, receivables, other assets) total JPY$7.8 Billion after deducting intangible assets. This is worth 8.7 Singapore cents per share. 


Am I right?

I am no accountant. I do not know if the 'debt' includes all liabilities for this case. Such is the difficulty of a retail investor.  According to above assumptions.

Actual value = Golf Course + other left over assets
                     = JPY$49 Billion + JPY$7.8 Billion
                    =  70 Singapore Cents

Offer Value  = Offer price for Golf Course + other left over assets
                    = JPY$63.167 Billion + JPY$7.8 Billion
                    =  80 Signgapore Cents

NAV base on latest Quarter = Equity - Intangible/ total shares
                                             = (JPY$66 Billion - JPY$4 Billion) / 1.1 Billion
                                             = 70 Singapore Cents

Hence my assumption of actual value and actual NAV is correct. And the so call low ball offer below NAV is due to the deduction of intangible. 

Conclusion

After sounding my displease, thanks to user @dennischins in Investingnote pointing out offer is only for the golf course. The clarification of AGT released today wasn't clear and has cause much confusion. Or rather we retail investor are not familiar to the terms.

Hence, AG actually paid 25.6% above value for the golf courses or a 14.3% premium above fair value in terms of unit price.  At 80 Singapore cents valuation, I guess I can't complain as it matches my previous expectations.

However do note in the case of Saizen Reit, they distribute the proceeds soon after divestment but delisted 2 years later. Impatient investor will sold after the distribution. 


I may have may a mistake somewhere. Please point out if there is any. 

EGM for Saizen Reit and distribution of proceed

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Revisiting First Reit: There Is Still Fear

PT Lippo Karawaci Tbk has 5.2 Trillion Rupiah or $500 million SGD in cash left after their issued rights, last reported 9 month to 2019. 

How about Siloam Hospital? Net profit has jumped back up with 50% increase in operating cash flow (OCF) to $357 Billion Rupiah. Capex is at 4 year low with low debt. Things is looking good. However cash flow use for investing is more than OCF.

First Reit revenue from Siloam Hospital is 82.2% which is $95.5 million SGD or $985 billion rupiah. It was said that Karawaci is paying for Siloam's rental, total $698 billion rupiah. Karawaci can easily paid up. That mean Silaom have to cough out $287 billion rupiah.

Siloam operating expenses jumped from $1354 billion to $1630 billion rupiah in FY 2018, probably due to rupiah depreciation effect as well. For 9 month 2019, the expense increase more than 15%. No rental info can be found. $287 billion rupiah is less than 20% of the expenses.

Kawawaci paid $510+32 (One property added in FY2019) billion rupiah for 9 month 2019 for Siloam's rental. There was 1 more property added. Signs that the sponsor won't throw the rental to Siloam, they have the cash anyway.

In my opinion, I think the lease renewal will remain status quo.
1. It is disadvantage to cause another up roar by drastically reduce the rental.
2. If I want to make a drastic change, I would opt to do in 5 years later for 44% of the portfolio rather than now for 22%.
3. The affected properties rental stands for $170 billion rupiah or $16.5 million SGD. lets half this rental revenue and that is a lost of $8.25 million SGD. That is 1 cents drop in DPU in terms of SGD.
4. Let's say they throw it to Siloam to pay up, $170 billion Rupiah won't be a big impact on Siloam.

Conclusion

Market is in fear for small impact. At least for the next 5 years.Of course there is also the concern of asset injection via rights.

Reference:
Karawaci
https://www.lippokarawaci.co.id/investor-center/financial-statements
Siloam
https://www.siloamhospitals.com/Contents/Investor-Relations/Publication/Annual-Reports

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Accordia Golf Trust Buyout: Various Signs And Estimates

Some of things I found digging around show most likely the buyer is the parent company of Accordia Golf Trust (AGT).

Impairment of Good will

The Buyout came after 2 Quarters since the impairment of goodwill. The reason to impair othe goodwill is weird. I have no idea why they would do it after IPO for so long, reducing NAV, dustruption is common for their asset (reason can be read here) . Although it would no affect cash flow in any way.

Someone coming in to buy all your asset shortly after the NAV is lower? sound fishy and planned. NAV has reduced from 90 cents to 71 cents and now reevaluated at 76 cents probably due to the strong YEN.

Restructuring of Parent Company 

 Accordia Golf Co. Ltd (AGCL). It was announced on Nov 19 2019  that all shares of AGT is transferred from AGCL to a new entity call Accordia Next Co. Ltd. Then Nov 28 2019, came the announcement of the non-bidding buyout.

AGCL was bought by K.K. MBKP Resort back in 2017.

High Buyout price of Parent

According to AK of ASSI,  AGT Parent, AGCL was bought by K.K. MBKP Resort at 1.6x NAV. Why such a price? Looks high, wow 1.6x NAV. If you look at the chart of AGCL. It was offered close to market price, the share price did not move much after the offer was make. News of the offer was reported on Nov 30 2016.

1.6x NAV as offer price for AGT? need to be realistic here.

Offer Price

We can speculate that the buyer do not want to pay at 90 cents a share resulting in the impairment. If we give a conservative small premium over NAV of 5%, the offer price will be 80 cents. If they decided to throw in the 3rd quarter dividend then a offer price of 82 cents is possible.

The highest yield in Japan REIT is 5.5%, a hotel REIT and as low as 2.7%, a office REIT. The TTM DPU for AGT is of 4.7 cents. At 82 cents the yield will be 5.7%.  A good enough deal for the parent.

Once the deposit of membership is fully paid out in 8 - 9 years. There will be a boost in DPU. A future catalyst of AGT.

AK post about aprice offer of $1.20. We can dream but that will give a yield of only 3.9%. Will they pay for such a yield? 

Croesus Retail Trust

Croesus Retial Trust was bought out and delisted in 2017 with a 1.1x  NAV and a yield of 6.7%. Japan Reit highest yield was 5.5%, retail REIT are even lower. Aeon REIT is currently at 4% yield. Great deal for the buyer, not so great for the shareholder. losing out a great REIT and a great yield, I had a yield on cost of more than 8%

Remeber, Shareholder is always at the losing end. Think Challenger.

Other interesting finds

AGCL has been sitting on its butt doing nothing since 2011 and IPO AGT in 2014.
Source: http://www.accordiagolf.co.jp/english/company_info/history.php

Analyst of AGT is hard to find. You may be interest to read.
https://www.smartkarma.com/home/daily-briefs/brief-singapore-accordia-golf-trust-agt-sp-privatization-likely-at-min-0-76-sgd-unit-leaves-another-13-upside-and-more/

Conclusion

High chance of a deal. 80- 82 cents is conservative and reasonable. Of course, a 1.1x NAV offer price would be even better. 

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Income Portfolio boost by Merger & Buyout

My Income Portfolio has grown really well this year, noticeable is VICOM, Perfect Shape, Valuetronics. The biggest contributor is however Ascendas Hospitality Trust which was 25% of the portfolio which I divested in august. Hence taken its place is Accordia Golf Trust (AGT) at 27% of current portfolio. It was recently announced to have a buyer of all its golf courses. Although it is a good news, if AGT was to delist, I would have to look for new counter to buy with higher risk as well. I hope the deal offer at a great price or failed to be sold isn't that bad too.

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