02-01-2011, 07:29 PM
> I still like Suntec because yield is ok at 6% and P/B is still
> below 1 in terms of valuation. Actually, I thought MBFC is a
> good deal in the long run as office rents has bottomed and
> likely to increase in the future, perhaps sooner than later.
> If you compare to CapitaComm, it has the money to invest,
> but currently can not find anything suitable unlike Suntec & K-
> Reit because sponser CapitaLand does not have such attractive
> CBD office pipeline. If you compare the performance over the
> recent downturn, CapitaComm double shareholding with rights
> issue to raise cash when it's price is still low. Suntec, in
> comparison, held off any dilutive fund raising until the market
> recovered. I sold off CapitaCom and added Suntec instead. Now
> Suntec is one of my larger Reit counter.
[/quote]
> I still like Suntec because yield is ok at 6% and P/B is still
> below 1 in terms of valuation
The MBFC bought is at yield of 4% (if u calculate the purchase price, not against stock price). The valuation of MBFC are very aggressive by my standard.
So the Asset Value is how the mgt tends to mark it up.
> I thought MBFC is a good deal in the long run as office rents
> has bottomed and likely to increase in the future.
I believe MBFC structures many of their leases in 5+5 terms. There is an agreed increase in rental X% every year. Most likely3-5%
If you get a steep increase in interest rates beyond 2011, this will most certainly eat into the yield.
> If you compare to CapitaComm, it has the money to invest,
> but currently can not find anything suitable unlike Suntec & K
> -REIT
K REIT holders did not get a good deales at all. They gave up Keppel Towers and GE towers, both Freehold CBD assets to K Land, in exchange for MBFC at such high valuations.
I think Suntec is unlikely to swallow more assets in next 1-2 years. Their debt profile is increased significantly, hitting gearing of 40%. It gives little room for downside in valuation markdown.
Yes CCT has used up all the Capitaland pipeline. So it has to find new office buildings.
> CapitaComm double shareholding with rights
> issue to raise cash when it's price is still low. Suntec, in
> comparison, held off any dilutive fund raising until the market
> recovered. I sold off CapitaCom and added Suntec instead. Now
> Suntec is one of my larger Reit counter.
There is no right or wrong here. At the point of downturn, CCT probably think the crisis will drag 3 - 5 yrs and bet on a worst case scenario. On hindsight, nobody knew the recession rebounded so fast and strongly. If I had known this, I will triple my bet on ARA and Suntec REIT.
I believe CCT's leases are structured on a shorter term. So it is likely the releases and rentals will rise much faster.
Whatever it is, the sponsor and the REIT mgr of any REIT is the sure winner.
> below 1 in terms of valuation. Actually, I thought MBFC is a
> good deal in the long run as office rents has bottomed and
> likely to increase in the future, perhaps sooner than later.
> If you compare to CapitaComm, it has the money to invest,
> but currently can not find anything suitable unlike Suntec & K-
> Reit because sponser CapitaLand does not have such attractive
> CBD office pipeline. If you compare the performance over the
> recent downturn, CapitaComm double shareholding with rights
> issue to raise cash when it's price is still low. Suntec, in
> comparison, held off any dilutive fund raising until the market
> recovered. I sold off CapitaCom and added Suntec instead. Now
> Suntec is one of my larger Reit counter.
[/quote]
> I still like Suntec because yield is ok at 6% and P/B is still
> below 1 in terms of valuation
The MBFC bought is at yield of 4% (if u calculate the purchase price, not against stock price). The valuation of MBFC are very aggressive by my standard.
So the Asset Value is how the mgt tends to mark it up.
> I thought MBFC is a good deal in the long run as office rents
> has bottomed and likely to increase in the future.
I believe MBFC structures many of their leases in 5+5 terms. There is an agreed increase in rental X% every year. Most likely3-5%
If you get a steep increase in interest rates beyond 2011, this will most certainly eat into the yield.
> If you compare to CapitaComm, it has the money to invest,
> but currently can not find anything suitable unlike Suntec & K
> -REIT
K REIT holders did not get a good deales at all. They gave up Keppel Towers and GE towers, both Freehold CBD assets to K Land, in exchange for MBFC at such high valuations.
I think Suntec is unlikely to swallow more assets in next 1-2 years. Their debt profile is increased significantly, hitting gearing of 40%. It gives little room for downside in valuation markdown.
Yes CCT has used up all the Capitaland pipeline. So it has to find new office buildings.
> CapitaComm double shareholding with rights
> issue to raise cash when it's price is still low. Suntec, in
> comparison, held off any dilutive fund raising until the market
> recovered. I sold off CapitaCom and added Suntec instead. Now
> Suntec is one of my larger Reit counter.
There is no right or wrong here. At the point of downturn, CCT probably think the crisis will drag 3 - 5 yrs and bet on a worst case scenario. On hindsight, nobody knew the recession rebounded so fast and strongly. If I had known this, I will triple my bet on ARA and Suntec REIT.
I believe CCT's leases are structured on a shorter term. So it is likely the releases and rentals will rise much faster.
Whatever it is, the sponsor and the REIT mgr of any REIT is the sure winner.