Singpost - Don't count on it for dividends

Singpost is not longer the high dividend paying stock it used to be with the change in dividend policy. With the increased shares due to placement, their latest half year earnings per share is illustrated to be 2.63 cents.

 Extrapolating this to a full year earnings per share = 5.26 cents.

With a 60% payout ratio = 3.156 cents
Dividend yield (last done price $1.495) = 2.11%
With a 80% payout ratio ( last done price $1.495) = 4.208 cents
Dividend yield = 2.81%

The range of 3.156 - 4.208 cents is a fall from the usual and consistent 6.25 cents.

To be fair to Singpost, the earnings per share does not take into account the following:
1) peak shopping season in the second half of the year
2) cost savings due to their Regional eCommerce Logistic Hub which opened only in Nov 2016.
3) Reopening of SPC retail mall in mid 2017
4) Completion of synergies between their acquisitions such as Jagged Peak and Trade Global

4th November 2016 Presentation

5th January 2017 Presentation

Interest rate sensitivity of Sabana

Like a moth to a flame 

Burned by the fire 

My love is blind 

Can't you see my desire?

 - Janet Jackson

So if you have read my previous post about this particular "Hot sweet young thing " friend who recommended me to buy Sabana, she is back to recommend me! After Sabana's price having dropped further to $0.38 from the price of $0.51 when she recommended me. (Due to rights).

Hot Sweet Young Thing ( onwards called HSYT) said:" COme oN, a lousy business is a good investment at the right price. Can you calculate how Sabana will be affected by the rise in interest rate instead of just amplifying what is thrown around about a rise in interest rate and REITS are going to die...PleAse!"

Being a HSYT does have her privileges....so....

To calculate the debt of Sabana post rights

Using the above to calculate Debt

To calculate the distribution of Sabana post rights

With the 3 new purchases, the increment in distribution is assumed to be $6.15 million per year. This figure is attained from investmentmoats.  I agree with his way of calculating this figure. I emailed Sabana investor relations for a post -rights forecasted distribution but they replied that they were unable to provide and told me to wait for the Offer Information Statement ( together with the application forms) which will include more information.

Pre-rights latest distribution annualised based on the table below = 4.77cents per unit.
Pre-rights total number of shares  = 778 million.
Pre -rights total distribution annualised per year = $37.1 million ( $0.0477 times 778 million shares)

Lastest distribution pre-rights for annualised DPU

Interest rate sensitivity of Sabana post rights

Interest rate sensitivity

By the way, it is quite irritating that Sabana isn't able to give a forecasted DPU while other Reits do give. This makes it troublesome to do the above. Arrgh the privileges of a HSYT....

Interest rate rise and interest coverage

Since Sabana Reit has already fallen so hard, why not buy it as there should be enough of a margin of safety ( P/B 0.66) and all bad news have already been priced in. Yeah why not, good idea!

Except that the Federal Reserve has indicated a few rate rises next year and here is the picture.

By compiling the interest coverage ratios of the REITs, it can be seen that Sabana Reit has the lowest interest coverage ratio of 2.63 and any increase in finance cost would hit it hardest.

Anyway,  I do think that concerns about gearing is over-rated  as looking at Ireit, it has a whopping high gearing of 42.5%, one of the highest among the REITs, and yet its interest coverage is also one of its highest and its dividend yield too. Besides, some REITs engage in issuing perpertual bonds which are not reflected in their debt.

Nothing interesting to buy so far!

Should i buy Sabana Reit at a Price to Book of 0.66 and dividend yield of about 10%?

My friend recommended me Sabana Reit as it was trading at a dividend yield of about 10% and  at a P/B of 0.66. Sounds good right!

I made a 'big picture' comparison with its peers and it loses in many metrics. I think i will give it a miss.

What will i be doing since the STI has surged

As of writing, the STI has hit a high of 2960.67. Don't know whether to be happy or sad. I'm happy because my concentration of purchases in banks since September 2015 and throughout 2016 paid off. I am quite happy because my Super Group shares are very highly likely to be privatized. I made a loss as i went in at the wrong entry price and its a lesson RE-learnt to not fall in love with a stock. I'm happy because ARA which i acquired this year got privatized and this is a gain in profits. I am sad as with this surge in the market, i haven't the opportunity anymore to increase my income from buying high dividend paying cheap stocks. There were considerations on whether i should take some profits on my banks since the RSI ( relative strength index) has hit a very extreme overbought level but i think i won't as i do not know where to put the cash and i am not a trader by nature ( i realised again!).

There has been many wrong forecast in the media about where the market will go, like people thought the Brexit or Trump event will cause some upheaval in the market but look at where we are now. I have re-learnt that there is no point in forecasting, just look at the current situation and see whats best( with some gunpowder of course).So, as i really don't know what to do, i have finally surrendered to investing in the NIKKO STI ETF. This is because other than the benefits of diversification to reduce risk( yawnzz) i get 2% commission to purchase the ETF. Yes, i get 2% commission not pay 2% commission which means i make an immediate guaranteed 2% gain everytime i buy. Without being paid 2% commission, i would not be buying an ETF as it's only giving me between 2-3% yield pa which doesn't fit into my style of investing. Furthermore, I do not think the STI is in overvalued territory ( or bargain price) and so will just continue with this until it hits 3100 then i will stop.

Been reading a book by Bobby Jeyaratnam and reading up on the financial presentations by the different REITS in Singapore and I am beginning to change my opinion on them after many years of observing and reflecting. I will be looking into finding any good opportunities to load them.