(18-08-2012, 02:32 PM)Nick Wrote: [ -> ]The Management will probably reveal the listed equities they invested in recently during their 3Q results. Based on the current share float of 825.3 million shares, a distribution of 1.5 cents / share will require cash out-flow of $12.4 million. GIL only generated $3.59 million net distributable cash (after deducting loan amortization and interest expense) in 1H 2012. This works out to 0.435 cents per share semi-annually or an annualized yield of 6.2%. They have to utilize their substantial $60 million cash hoard to invest in appropriate yielding instruments to boost distributable cash-flow substantially. Most of the cash expenses are already fixed ie management fees as a function of market cap (not AUM or net of cash) and operating expenses should be stagnant so new investments might boost operating margins over time. The key lies in what STAM will do with the cash hoard and whether can it make decent investments to generate sustainable cash-flow over the next few years to maintain (and grow) the DPU. My personal estimate is that 7% return from $70 mil new investment is the minimum hurdle to attain the 1.5 cents dividend.
Hi hi. Thanks a lot for the insightful analysis.
Just curious how did you arrive at the 3.59m net distributable cash? Please correct my accounting knowledge, coz im still very new at reading the statements for investment analysis.
From the P&L, if i take total revenue - total expense + depreciation, i get 4.5m.
From the cashflow statement, i get about 5.2m by taking Operating CF + loan repayment received - borrowing cost - cost of rights issue - proceeds from sale of assets.
I prefer the operating cash flow as a gauge for cash flow due to the direct method of accounting. On that note, the fund did achieve 12.56m of OCF in FY2011, while receiving 14.8m of Loan repayments (about 2m excluding the AUD8.1 repayment). That covers the 12.4m required to maintain the 1.5cents dividends.
Loan repayments --> not too sure where the repayment comes from other than early prepayment of MBS principal.
H1 2012: 1,808,000
H2 2011: 14,847,000 - 2,163,000 = 12,684,000 <--- high due to the AUD8.1m redemption of Pepper Trust No. 6
H1 2011: 2,163,000
H2 2010: 10,694,000 - 1,469,000 = 9,225,000 <--- high due to the AUD5m redemption of Pepper Trust No. 5
H1 2011: 1,469,000
Too bad all the other existing notes mature only in 2023+.
Operating cashflow has been falling though...after the divestments, though default has fallen.
H1 2012: 5,169,000
H2 2011: 5,770,000
H1 2011: 6,790,000
If they only need to generate 2m returns from the 78m cash, they would need an annualized yield of about 5%. Some Asian high yield credits or listed shares (as Nick mentioned) can more than easily fit the criteria. Perhaps buying back the own fund's shares can fit the returns requirement too.
I dont think a closed-end fund would attract a substantial shareholder. But if it does, ill be more worried that the shareholder become and activist to close down the fund and return all the cash. Coz it seems to me that the fund is significantly undervalued, and that it could potentially be worth more by liquidation.
As of June 2012:
Cash: SGD78,674,000
Aircraft: Sold forward at USD25,890,000
Fly leasing: 1,051,010 shares x USD13.04 stock price as of 17 Aug = USD13,705,170
Debt: SGD15,614,000
Other liabilities: SGD739,000
Using just purely the above liquid assets at USD1=SGD1.25, NAV is already 0.135per share.
On a side note, a USD1 movement in Fly lease, is worth about SGD0.0016 to GIL per share. Interesting. The stock has rallied USD1 since end-June.