thanks for all the info, very detailed
I also strongly agree that maintaining 1.5 cents distribution may be difficult
(11-07-2013, 09:50 PM)felixleong Wrote: [ -> ]I think global investment looks very attractive base on the numbers alone
30% discount to nav seems like good margin of safety and the 10% yield is pretty juicy
however the yearly rights issue is really a pain in the ass for shareholders
I do feel that their AUM is still not big enough at 250 mil, their target might be half bil or 1 bil as such there is really a very high probability of rights issue to come.
I also think that they will not need to set aside as much cash as they have the scrip dividend plan in place, I think the majority shareholders will feel more worth it to take the discounted scrip(shares) instead of cash
Firstly, great analysis by Boon
Secondly if major shareholder takes script, then cashflow is less stretched for the dividend payment. (Boon nonetheless showed that the recurring CF is unable to sustain the dividend payout). But isn't the argument that minorities are being diluted?
REITS are yield products for Outside Passive Minority Investors (OPMI). What that means is they are concerned more on yields or EPS rather than dilution of interest or NAV.
In this case if the company keeps doing rights issue and paying dividends, the way to look at it is by additional capital cash flow basis. Simplistically, the yield would be dividend divided by the rights issue. That would be your reinvestment yield:
0.015/0.138= 10.87%
0.015/0.128= 11.72%
0.015/0.152= 9.87%
0.015/0.143= 10.49%
If you don't subscribe to rights, you basically just get your 1.5cts cashflow (plus the cash u get from selling the rights perhaps).
From the cashflow basis,
IF the 1.5cts dividend sustains, the returns should have been great for OPMI but I'm making no representation of their future prospects as I have not done as detailed analysis as Boon
And certainly of course it can evolve into a ponzi where capital raising are for the payment of 10% yield
Boon Wrote:With the enlarged share capital base after the completion of the recent Rights Issue, GIL would need SGD 17.88 million to support DPU of SGD 1.5 cents annually, would it be sustainable?
The writing is on the wall if u read GIL's dividend guidance carefully. It's explicitly suggested that 1.5c div is conditional upon the gain from the aircraft sale:
GIL Wrote:In light of the net accounting gain arising from the (Aircraft Sale) Transaction, the Company is pleased to provide dividend guidance of 1.5 Singapore cents per share in respect of the financial year ending 31 December 2013.
Given the low yield environment, it's diff for GIL to generate high recurring cash flow from the newly raised funds. Thus, capital gains will likely feature more in future dividend payment, if high yield were to be maintained. As Boon mentioned, this is less sustainable.
IMHO, GIL's high dividend is an illusion, at least in its current growth phase. If u have taken up all rights, u would have pumped in more money than the dividend received. If u have not, a significant portion of the dividend payout is actually a return of capital, considering the dilution.
well, GIL will stop doing rights when boon swan foo cant pay for it anymore !
Last i checked, he still the single largest shareholder there and all the funding that you guys are talking about , he is also feeling it man !
With the sale of the two Boeing 757 cargo aircrafts completed, presumably, GIL is debt free now - with total asset estimated at about SGD 248 million
My earlier analysis shows that recurring cash flow is unlikely to sustain DPU of 1.5 cents………………
Nonetheless, looking from a different perspective, DPU of 1.5 cents equates to total dividend payout of SGD 17.88 million, which is equivalent to a net ROA of 7.2% (= 17.88 / 248). In theory, this shouldn’t be too difficult to achieve for a capable fund manager, considering that:
a) some existing assets (CLOs) are yielding returns as high as 13% to 14%
b) a cash hoard of about SGD 100 million has yet to be deployed
May be it is difficult under the current low yield environment - ???????????.
(Vested)
(29-07-2013, 09:38 PM)Boon Wrote: [ -> ]GIL announced that approximately S$6.42 million of the net proceeds of S$48.50 million raised from its Rights Issue have been used for investment in listed equities.
http://infopub.sgx.com/FileOpen/35_20130...eID=249678
(vested)
Well, i dont know. i think equities are risky now and how much higher can they go ?
Of course GIL need to invest after this right issue, but really, i am not sure it was wise as shareholders to be funding such investments when upside is really limited.
What perplexes me here is the annual rights issues. As far as I can see, the only entity that benefits from this is the manager (more fees) and yet, as far as I can see, the manager owns no shares and the largest shareholder only owns around 8%. So why does the Board keep agreeing to rights issues and why on earth do shareholders vote in favour of resolutions to allow the company to issue more shares without some strong conditions tied to eliminating / reducing the discount to NAV ? Am I missing something ?
(29-07-2013, 09:38 PM)Boon Wrote: [ -> ]GIL announced that approximately S$6.42 million of the net proceeds of S$48.50 million raised from its Rights Issue have been used for investment in listed equities.
http://infopub.sgx.com/FileOpen/35_20130...eID=249678
(vested)
Unless the managers have Warren Buffett caliber in stock picking, I really think they should refrain doing that. Which is why I decided against buying it a few months ago despite their high yield and huge discount to NAV.
A much better way to spend that money is either to buy back their shares which are trading below NAV, reinvest their cash to produce a recurring income, or distribute access cash as dividends to shareholders.
Or like Warren Buffett, disclose their holdings in these public equities, and explain clearly their rationale in investing in them.
I am not vested and have not done any in-depth study on this counter. Please correct me if I made any wrong assumption.
A couple of things:
(1) Reading this announcement left a bad taste in my mouth.
http://infopub.sgx.com/FileOpen/38_20130...eID=251487
(2) Many sub-par listed closed-end funds historically trade at a discount to their NAV, and such discounts can range from 5% to 15%. Let's assume that GIL will trade at 15% discount as fair value, then the current ~0.7 P/NAV doesn't look as much of a steal.