It is one of the major advantage compared owning properties directly.

Beh syiok, then tomorrow can sell, and out and cash will be received after 3 days.

Locally, reit liquidity is low, once there are some fund managers wish/need to dispose, it will cause the price to stagnant or depress considerably of time. Whether the disposal is related to the reit fundamental is another story.

Fund managers has 2 type of decision to make in selling order :
1. Want - See poor outlook of the reit/company fundamental, dispose
2. Need - Asset re-allocation due to fund objective, strategy, redeemption, etc, dispose. which nothing to do with the fundamental side.

Eg. Reit distriubtion can come from not solely come from profit.
A shipping trust

The shipping company is earning 5 cents, while there is 3 cents depreciation incurred. The company basically has 8 cents of cashflow eventually it can declared 8 cents of distribution resulting yield become much higher.

Long term sustainable distribution is 5 cents which one should be looking at, not 8 cents as the ship eventually will be getting old and unusable (which is the purpose of depreciation).

So whenever we look at reit, we should look at the real profit or EPS they are generating. Any extra is a bonus and could mean (not a must) unsustainable over the long term.

NAV value stated is the net asset value. Borrowing has been deducted out in the calculation. It is the net worth of it based audited properties price.

(Current Asset + Fixed asset) - (current liabilities + long term liabilities) = NAV

To be exact, private placement will dilute the EPS and potential DPU.

Share price won't be adjusted due to private placement just like what on right issue.

But whether the private placement will make the share price goes down in the market due to demand and supply issue, different story.

But one thing from private placement compared to right issue, existing shareholders don't need to fork out extra money and generally those receiving end or subscribe the private placement one is not intend to trade in market one.

Yes, number of share is increased, but KLSE won't be adjusting the share price or closing/opening price accordingly just like what right issue or ex-div does.

There is no price "diluted', but it will dilute the EPS as well as potential seller in the market (which private placement generally doesn't as explained earlier).

This post has been edited by cherroy: Aug 6 2009, 03:47 PM

The issue has been partly known, after Ceva departed the warehouse previously, which the manager has no rental income for few months period while need to spend for maintenance cost.
That's the main reason why this reit has plunged from 0.9x to 0.6x. Only recent after news of Ceva moves back, Atrium share price rose from 0.6x to 0.7x.

But should see some improvement over the next Q. But still it is a dissapointing figure with 0.8cents.

If not mistaken, another warehouse is going on reach its lease expiration period next year, whether the existing tenant will renew the lease or not, or the manager can get a replacement stil isl a risk. So it will be trading at discount for sometimes (compared to its NAV).

The lack of diversification hurt a lot, that's why Axreit is preferred due to diversification of its property portfolio as well as having more properties instead a few only. At least one has problem doesn't hurt too much.

This is a reminder of risk of reit sector. Getting in tenants is the most important factor for reit.

Yup, may see some selling pressure probably tomorrow.

If all 4 its warehouse can be rent out, its yield is in double digit (be it 0.7x or 0.6x) which is an attractive yield.

The attractive yield is to compensate potential risk involved just like what happened.

Reit still got risk, it is not something like surely got good dividend one.

It is always tenants, rental, rental and rental.

0.8 cents translate into 3.2 cents pa. So if coming Q result is staying on this level, yes, the yield is not attractive and recommended sell at 0.7x.

But I do think coming Q EPS/DPU will improve as maintenance cost is one off, and Ceva has moved back and rent again, which Atrium should get the rental income back.

No, the above calculation is way off and totally wrong, no offence.

If the share is issued at 1.70, that's mean company is getting 1.70 hard cash, the above calculation or dilution effect is only right if the company issued the 20% share at RM0.00 or for free to someone.

Company is getting Rm1.70 x 120,000 shares means 204 million hard cash, which either they can reduce borrowing or have ability to do more acquisition to be more diversify and improve company earning.

The dilution effect is on EPS eventually DPU.

But if those private placement money reduce the company borrowing, it means saving on interest on borrowing which reduce the cost of company doing business which you able to see more net profit figure being made (not EPS, but total amount of profit figure), or if use the money to acquire some properties which can generate more income, it is good for long term prospect.

As far as I know, only Axreit is syariah compliance until now.

Whether syariah compliance or not make little difference on company fundamental.

But we can't deny that it is a selling point especially from islamic finance market even foreign investors from middle east, eventually there are more fund managers interest on it which potential make a share trade at a little bit higher premium (but it doesn't mean it is a must or necessary).

There is no harm done to be syariah compliance, as it is still will be after by both set non-islamic or islamic fund managers.

But if fundamental is poor, syariah compliance made little difference.

But if intend to be syariah compliance then ditch out existing lucrative business or properties, then it is a bit different story already.

Yes, it just means more tradeable share in the market and profit/EPS is shared among 306 million shares as compared to 255 million previously, but company has extra 200+ million cash being injected in the process.

Placement share is as same as the ordinary shares.

It depended on the issued price of the private placement, if the private placement price is higher than NAV, then NAV goes up, if lower then diluted. If the price is around 1.70, it has little effect.

Yes, it is as identical as right issue, just it is issued to third party instead to shareholders.

It doesn't mean must be losing end. It all depended on the issuing price.

I would say if it is issued at low price and significant to its NAV, yes, existing shareholders could be in the losing end. That's why company suspend the private placement last year end (which origin scheduled one).
If private placement price is at higher range, it strengthen the company cash position.

If it is right issue, then existing sharholders need to fork out extra cash to subscribe, while for private placement, you don't need to. For dilution part, if don't want to be diluted, can buy few more from the market to get back the origin stake (by then it is as same as right issue but in this situation, you have option/choice).

I don't like company seek more money from shareholders one, which contradict to the origin purpose of investing, especially for dividend stocks. We invested money to seek the for return, not the other way round company seek money from us.

I don't see Axreit has more upside room already in near term as its price is now trading exactly what it is worth of its NAV.

It is the yield supporting its price currently. So DPU will dictate its price currently.

I am not entering twice only. I entered more than 6 times already, (selling once at around 1.6x then bought back at around 1.50) range from 1.60 to 1.00.

Yup, you read my mind, I am thinking for selling 50-100 lots at 1.75 as well, as there is little room left for the upside, the max it can go I can see is around 1.8x only for near term, unless its DPU can surge more than 17-18 cents pa.

The harder part of the decision is it still giving good yield around 8% (net) which make me think twice of selling.

I would say, if don't want to hold long term one, at current price, can sell a bit.

This post has been edited by cherroy: Aug 21 2009, 02:18 PM

Just come across the news said that Axreit will use the money raised (lower borrowing) to acquire more properties in the near future, so dilution effect from the private placement might be cancelled out due to more income potential generated from the new properties acquisition.

If private placement being done at good price (which generally track the average market price then discount a bit), then it is positive for the company as well as the share price, as long as the eocnomy is the recovery track.

Axreit made a surprise DPU even though 3Q has not ended, wonder what's the reason for it? To pay ahead of the private placement? so that it is fair to existing shareholders? <-- which I think could be the reason.

Anyway, welcome another pay cheque.

Arreit so soon goes to Rm0.80 liao.

All reit are recovering back to its pre-crisis level, may be except Atrium only.

Amfirst near Rm1.00 already due to 4.xx cents DPU is expected after Sept.

In public listed company, if company management doesn't rip off and treat minority shareholders as fair as possible, it is considered good and sincere.

Again as I mentioned many many time already, minority shareholders have little protection in a sdn bhd, or bhd (public listed).

That's why I always like company distribute its certain high % of profit as dividend, because as minority shareholders, one of the way for actual return is through profit ->dividend and it is one of indicator that company treat shareholders fairly (got some exceptional case like if dividend given not from profit made but borrowing).

You can search through the company announcement, which generally available in most online trading portal or KLSE, or its quarterly annual report or the company website in general (if there is).

edited
or this forum, got lot of forumers are updating or contributing the available information whcih very helpful as well.

This post has been edited by cherroy: Aug 28 2009, 02:19 PM

There is no standard or rule of thumb. It all depend on individual company situation.

But if the company is not using the cash generated (through profit) or reinvestment etc purposes, I don't see why company needs to keep the cash forever if the company financial is healthy and cashflow is ok and strong especially those without debt company.

In generally for those kind of company, around 50% or more based on profit made (with positive cashflow), is seems rewarding to the shareholders especially minority shareholders, just my personal view.