RnR Weekly is a recurring series where I cover the past week’s major news stories and earnings results in the markets from a Singaporean perspective.
In this week’s edition, I discuss some life updates, KORE’s recent earnings, AA REIT’s secondary placement and more.
Some of you may be wondering where I’ve been over the past 2 months as I’ve been rather irregular with my blog updates. In fact, I wonder if this post should still be named a “weekly” post 🤣
Anyway, long story short, working and studying is tough man. Taking 3 modules in 1 semester while working is kinda crazy. I find myself living week by week, completing work deadlines while being mindful of upcoming assignment and test dates.
In fact, I just completed all my midterms over the past 2 weeks. No rest for the weary though, as I now find myself staring at project proposal deadlines.
That said, I find the knowledge I’ve gained over the past months have been fascinating, even for those “boring” accounting modules.
I’m glad I took this course and look forward to applying the learning to my job as I go along. In the meantime, hope you guys will bear with the content drought. I’ll reassess my content schedule when I complete my first semester.
Earnings season is back upon us, so I finally have some results (and dividends) to dive into.
Keppel Pacific Oak US REIT Q3 2019
From an overall perspective, the quarter was fine with flat quarter on quarter DPUs. Using these figures, KORE’s valuation seems close to fair value.
Some potential flies in the ointment include gearing close to 40% and some market statistics noted in the announcement:
The first slide shows a projected increase in vacancies, decline in absorption and increase in office building deliveries in the coming years. This indicates an overall increase in supply and potential fall in rental rates.
The second slide shows negative absorption in most submarkets KORE is in. Also an indicator of oversupply.
Will see if this is corroborated on Manulife US REIT’s results next month.
For more KORE related articles, check them out here.
AIMS APAC REIT Secondary Placement
The other piece of news I would like to discuss is the AIMS APAC REIT Secondary Placement. This exercise sparked a >8% sell off in the REIT in the past week.
I think there was some confusion by retail investors as to the implications of this placement exercise, thinking that the REIT was raising funds without acquiring a building.
To clarify this, let’s take a look at the facts based on regulatory filings:
- As part of the exit early this year of AMP Capital from the REIT, AIMS acquired AMP’s stake in the REIT manager and renamed the REIT from AIMSAMP Capital Industrial REIT to AIMS APAC REIT.
- With regards to AMP’s units in the REIT, a call option was issued to AIMS, giving AIMS the right to acquire AMP’s units in the future.
- This option was exercised this week. Based on SGX filings, AIMS seems to have acquired the units at $1.40.
- AIMS simultaneously placed these newly acquired units to new institutional / accredited investors. The placement initially had a indicative price range of $1.35 – $1.41. The placement exercise price was eventually set at $1.35, which implies an immediate loss of 5 cents and set at the low end of the range.
- A substantial shareholder, APG Asset Management NV, seems to have subsequently sold over 4% of their position via married deal and market transactions at a blended price of about $1.35. This caused them to cease to be a substantial unitholder.
- AIMS did not hold on to the units it bought from AMP, indicating a potential lack of confidence in the REIT. This has also led to the Sponsor’s ownership of the REIT declining to just under 8% of outstanding units.
- The way the placement was conducted also indicated a fire sale or lack of interest in the REIT, due to the low placement price and willingness to accept an immediate 5 cent loss.
How should investors' react?
I was initially indifferent to the secondary placement. However, after reading through the subsequent SGX filings, the Sponsor did not give me the comfort that they have the confidence or the intention to support the REIT going forward.
I am a little conflicted over whether I should sell as current management seems to have done an ok job at managing the REIT. However, given this action and the not so rosy outlook for the Singapore manufacturing sector, I’m tempted to let go of this REIT 🤔
I think I’ll reassess my position after the upcoming earnings results. Do let me know your thoughts on this as well.
For more AIMS APAC REIT coverage, do check out my REIT dashboard.
Reads / Videos of the Week
Inside Bill's Brain: Decoding Bill Gates on Netflix
Bill Gates is somebody I’ve watched from afar and been fascinated with. So when Netflix released a 3 part documentary on him, I could not resist.
Follow his life and marriage through the years and learn about 3 key initiatives his foundation has been pursuing: Re-imagining sanitation, eradicating polio and revamping nuclear energy.