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Cache Logistics Trust: 2Q 2012's DPU down 5%.

Thursday, July 26, 2012

A drop in DPU? Yes, that is right. From 2.086c in the last distribution to 1.981c this time round.


This is due mainly to a private placement of 60 million units in March this year. This is an important reason why I prefer a rights issue to a private placement.

With a rights issue, all unitholders are given a chance to participate in the enlarged capital base of the REIT. With a private placement, retail investors are usually disadvantaged.

Although the DPU might still fall 5% if the REIT had a rights issue instead of a private placement, at least all unitholders would have had a chance to buy new units at a discount which would mean the distribution yields on their investments would be less affected negatively, if at all. Unitholders would also be able to benefit from the price appreciation of the rights units.

Well, it remains to be seen if the management is able to improve DPU in the coming quarters, raising it to the level before the private placement in March.

NAV/unit: 90c.
Gearing: 27.5%.
Interest cover ratio: 7.5x.

With gearing lower at 27.5%, new acquisitions could be in the pipeline.

See presentation slides: here.

Related post:
Cache Logistics Trust: 1Q 2012.

4 comments:

Drizzt said...

The issue is the quality of deployment rather than rights issues or placement.

In this article it shows many scenario and how placement can be really good for shareholders even if its private placements.

http://www.investmentmoats.com/stock-market-commentary/value-investing/share-placements/

AK71 said...

Hi Drizzt,

Thanks for sharing the link.

Granted that private placements could benefit unit holders who are not party to them. However, I would still prefer to be part of any fund raising exercise required for yield accretive initiatives, given a choice. My investment would be better safeguarded that way.

SnOOpy168 said...

I agree with AK. Had a fun time with FR's rights issue. The loooong wait to pay and get the results are a but annoying.

But from the POV of the REIT's, a private placement may be faster to close and (perhaps) cost less in terms of fees & publicity / publications.

AK71 said...

Hi SnOOpy168,

Yes, rights issues make sense if the funds to be raised is more substantial. For small amounts, a private placement would be more economical. :)

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