(11-03-2013, 12:56 PM)Greenrookie Wrote: [ -> ]I dun quite understand why the market is giving this deal such a thumb up.
1. Increased valuation for the properties.
Prior to the annc, SPH was trading at 17x P/E, with 22% of pre-tax earnings from the malls. On the other hand, CapitaMalls is trading at 22x DPU. Assuming the spin-off REIT is valued similarly to CapitaMalls, the multiple for the malls' earnings should increase.
2. Tax savings.
REIT structure is more tax-effective. I believe some of the previous malls' earnings will be tax-exempt under this new setup.
3. Possibility of a special dividend.
In short, it is called "Asset Recycling".
Yes we are about to be completely swamped by REITs, and it doesn't look like it's going to stop anytime soon!
Maybe SGX market's euphoria is really going to start now. Beginning with REITS of course.
(11-03-2013, 07:09 PM)Musicwhiz Wrote: [ -> ]In short, it is called "Asset Recycling".
Yes we are about to be completely swamped by REITs, and it doesn't look like it's going to stop anytime soon!
Is it me or does anyone else noticed in recent years, the larger IPOs in local market are either REITs or Biz Trusts?
Eg. MCT, Hutchison Port Holdings Trust, couple more I cant recall.
I don't believe in the notion that companies form REITs because they want to benefit potential investors. If the companies are really cash-rolling, why not remain status quo or even privatise it?
I mean I can understand the idea of "giving what clients wänt" but ultimately, how good is this scenario going to benefit our local investment community?
Higher yield? Shiok. But nobody thinking of getting caught out by higher i/r, Iguess.
Never mind.
(11-03-2013, 06:47 PM)lanoitar Wrote: [ -> ] (11-03-2013, 12:56 PM)Greenrookie Wrote: [ -> ]I dun quite understand why the market is giving this deal such a thumb up.
1. Increased valuation for the properties.
Prior to the annc, SPH was trading at 17x P/E, with 22% of pre-tax earnings from the malls. On the other hand, CapitaMalls is trading at 22x DPU. Assuming the spin-off REIT is valued similarly to CapitaMalls, the multiple for the malls' earnings should increase.
2. Tax savings.
REIT structure is more tax-effective. I believe some of the previous malls' earnings will be tax-exempt under this new setup.
3. Possibility of a special dividend.
I was looking for a special dividend or dividend in specie for this SPH REIT to exisiting shareholders.
Never thought of these, thank you for sharing. An immediate capital gain for SPH by spinning this into a REIT. Better recurring income by paying less tax.
(Vested)
(11-03-2013, 07:33 PM)arthur Wrote: [ -> ] (11-03-2013, 07:09 PM)Musicwhiz Wrote: [ -> ]In short, it is called "Asset Recycling".
Yes we are about to be completely swamped by REITs, and it doesn't look like it's going to stop anytime soon!
Is it me or does anyone else noticed in recent years, the larger IPOs in local market are either REITs or Biz Trusts?
Eg. MCT, Hutchison Port Holdings Trust, couple more I cant recall.
I don't believe in the notion that companies form REITs because they want to benefit potential investors. If the companies are really cash-rolling, why not remain status quo or even privatise it?
I mean I can understand the idea of "giving what clients wänt" but ultimately, how good is this scenario going to benefit our local investment community?
Higher yield? Shiok. But nobody thinking of getting caught out by higher i/r, Iguess.
Never mind.
Admittedly, wealth creation in Singapore in recent years is largely due to asset inflation.
In economic terms, appreciation in value of the same asset does not add to GDP/GNP. In these sense, relentless increase in value of land assuming ceterius paribus will lead to crowding out of other precious resources - labour, capital and entrepreneurship.
Hence, policy makers is busy correcting the path they have charted in yesteryears.
The mega listings of REITs simply point to a simple fact - there is a dearth of listing apart from the same old usual stuff that we are seeing - all surrounding hard assets.
Honestly, this recycling adds to shareholders' wealth. However, should there be correction in asset values that we have long forgotten, then everyone will have it. It is unimaginable but certainly possible.
Can it be more like assets multiplying mainly using the retail/institution investors money? Like Capital Land all over China and Singapore &......? The main ? is under what circumstances or market conditions will cause these REITS become bubbles?
Or is it really a safer investment sector than others, that has recovery ability after a Bear market?
Anyone can remember what happened to REITS during the 2008/2009 fiasco? I do.
Only vested in LippoMall now. Purchased with "taking a chance" by buying the last NIL Paid Rights and then subscribed. Sold some and trying to sell the rest. It's OK if i can't sell at the price i want, i keep lol. Or i may just sell , regardless.
(11-03-2013, 07:50 PM)Temperament Wrote: [ -> ]Can it be more like assets multiplying mainly using the retail/institution investors money? Like Capital Land all over China and Singapore &......? The main ? is under what circumstances or market conditions will cause these REITS become bubbles?
Or is it really a safer investment sector than others, that has recovery ability after a Bear market?
Anyone can remember what happened to REITS during the 2008/2009 fiasco? I do.
Only vested in LippoMall now. Purchased with "taking a chance" by buying the last NIL Paid Rights and then subscribed. Sold some and trying to sell the rest. It's OK if i can't sell at the price i want, i keep lol. Or i may just sell , regardless.
Prices can fluctuate erratically, and become impossible to predict from supply and demand alone. Bubbles can form from greed and excessive speculation. This is why all S-REITS has a gearing limit placed on them.
Of course, the best time to pick up fundamentally sound counters are during an economic crisis.
(11-03-2013, 06:47 PM)lanoitar Wrote: [ -> ] (11-03-2013, 12:56 PM)Greenrookie Wrote: [ -> ]I dun quite understand why the market is giving this deal such a thumb up.
...
2. Tax savings.
REIT structure is more tax-effective. I believe some of the previous malls' earnings will be tax-exempt under this new setup.
...
I recalled i asked the tax saving question, but the answer was in REIT level, it is tax free, but in group level, it is still tax-able.
(11-03-2013, 07:50 PM)Temperament Wrote: [ -> ]Can it be more like assets multiplying mainly using the retail/institution investors money? Like Capital Land all over China and Singapore &......? The main ? is under what circumstances or market conditions will cause these REITS become bubbles?
Or is it really a safer investment sector than others, that has recovery ability after a Bear market?
Anyone can remember what happened to REITS during the 2008/2009 fiasco? I do.
Only vested in LippoMall now. Purchased with "taking a chance" by buying the last NIL Paid Rights and then subscribed. Sold some and trying to sell the rest. It's OK if i can't sell at the price i want, i keep lol. Or i may just sell , regardless.
Not sure how bubbles will form, but trouble will come when valuation of properties is adjust significantly downwards when interešt rate is raising rapidly or above 4%. When it happens at a time when a highly geared REIT near its lending cap, they will be forced to do fund raising to pare down, leading to dilution of yield even if u subscript to its rights.
But since the Gfc, reits has generally keep a buffer from the lending cap and space out their debts servicing. So that risk is reduced.
Another problem is when the parent sponsor also get into trouble.
Oh ya, in the unlikely situation when banks get screw, REITs will be jalat jalat