MM2 Asia: Not Worth At Current Share Price

By now, most in the local news would have read of the liqudation of Cathay Cinemas in Singapore. MM2 Asia is the parent company of Cathay via MMconnect. Share prices are lower post announcement of this news.

The current question begets is the company worth as an investment at 0.3 cents, having fallen 99%. 

My view is not yet and further fall in share prices may continue.

What Businesses Does MM2 Has?

Post liqudation of its Singapore Cinema business, the company has 03 unprofitable business and 01 profitable business:

(i) 39.2% stake in Unusual (market cap: $71.5 million, unprofitable)

(ii) 29.9% stake in Vividthree (market cap: $7.9 million, unprofitable)

(iii) Cathay Malaysia (also unprofitable)

(iv) Movie production/content (earns about $5 million excluding impairment losses)

Overall, MM2 has many segments that are loss making and not paying dividend. My view is that MM2 Asia should focus on selling off the unprofitable segments and focus on its roots and what it does best- making movies. The sale of its stakes will raise cash proceeds of $31 million and this amount will help a lot in its debt heavy balance sheet.

MM2 Asia Balance Sheet- Heavy in Debts

Latest balance sheet shows $217 million in debt and $9 million cash/$151 million in other current assets which are mainly movie project costs that MM2 accountants believe can be recovered at full cost. I highly doubt it will happen and likely a a 70% recovery rate is only achievable.

Hence net debt should be about $102 million. 

The weighted cost of debt is 7% interest and a large portion is a 6% bond given by Tan Boon Seng. 

Operating cashflow wise, MM2's is rather lumpy and it is quite hard to estimate the cashflow. However, given the profitability of the its movie production unit, I believe MM2 Asia can use the profits to repay its debt (likely a 20 years track to slowly repay debts until a manageable level) 

An intersting aspect of the $54 million bond structued with Tan Boon Seng is that MM2 Asia will start to repay him $10 million at the end of each year from 2027 to 2031. Given the operating status of MM2 Asia, all their cashflow will be focused on repaying Mr Tan until 2031. Current shareholders should not expect any dividend owning this stock until at least 2032.

What is in it for Shareholders

To be honest, nothing is left for shareholders in its current shape. All its cashflow and disposal will be used to repay its debts maturing each year. If the stakes of Vividthree and Unusual are not encashed, it is either the company will go bankrupt or more share placment/rights which will further dilute shareholders.

Where there is "claimed" equity of SGD$5.9 million (0.1 cents book value per share), I doubt the value of its assets in the balance sheet can be fully recovered because many are due to movie production costs and intangibles which MM2 accountants have overstated to an extent. The company is likely in net negative equity which means negative book value per share. Other current assets are likely only recoverable at 70% of $150 million, which to me suggests impairment of $45 million, putting MM2 Asia at negative equity of $40 million.

Don't have too much hope. 

It is likely existing shareholders will be diluted further because MM2 Asia needs cash placement/equity injection. My view is that $30 million in cash is needed for the company to survive in the next 2 years. The best solution is to sell its stake in 02 other listed companies, however given the stubborness of management to not hurt their sister companies and the slowness in restrucuturing, the sale won't happen in time and existing shareholders will be diluted further.

For existing shareholders, a 0.3 cents is a good opportunity to sell. 0.1 cents is where we will see the company being traded at. If the company does not sell its stake in other listed companies, things may get worse from now.

3 Singapore REITs with Overseas Properties that Give 8% Dividend or Higher

REITs offer investors a regular income stream and is a mainstay in income investors' portfolio.

Singapore is home to one of the largest cluster of REITs worldwide and hence it is no surprise among them, there are Singapore REITs with overseas properties. Surprisingly, due to tighter regulations in valuation approaches at overseas countries, the result is these Singapore REITs with overseas properties generate sustainable dividend in excess of 8%.

Here are a few Singapore REITs which gives 8% dividend or more for Singapore income investors:

Elite UK REIT

Elite UK is in the office space of the United Kingdom (UK). Most of its properties is leased to the UK government for office use, majority in the welfare segment. Its leverage ratio is at 40.7%, lower than the average S Office REITs which are at 41% and has above average occupancy rate of 97%.

Due to cap rates and valuation, it is paying 100% payout ratio and pays 2.8 pence per cents. At 34.5 UK cents, it is paying out 8.1% yield for investors who purchase it now. In recent times, its cost of debt has dropped from 4.9% to 4.8% now. DPU is expected to grow from 2.8 pence per share as cost of debt falls. Its dividend and leverage ratio are better than any Singapore office REITs including that of Keppel REIT

United Hampshire US REIT

Run by UOB, the REIT is in the strip mall segment of USA, catering to supermarkets and tenants in the essential services. Its leverage ratio is at 40.0%, lower than the average leverage ratio of Singapore REITs. Occupancy rate of the REIT is above 95%

Despite the sale of a few malls, these were positive sales because it improved the distributable income available to investors. Full year DPU is 4.06 US cents, an increase of 2%. Its payout ratio is less than 100%, as the REIT keeps a portion of its distributable income (5%) for CAPEX and payment of debt.

At 49.5 cents share price, it gives an 8.2% dividend yield. Its leases are on long term basis with annual in-built rental increases. Coupled with the lower interest (SOFR) environment in USA, the REIT is expected to increase its DPU above its 4.06 US cents. The REIT manager is currently taking fees in cash and if it elects to take units instead, DPU is set to rise further at an annual increase of 2% and investors will get yields of above 8.2%

Sasseur China REIT

It has 4 outlet malls in three Tier 2 China cities. The REIT is the lowest leveraged among Singapore REITs at 25.8% and yet it has one of the highest yields in Singapore. Full year annualized dividend is 6.1 Singapore cents at 70.5 cents which enables it give investors 8.5% dividend yield.

Surprisingly it is not paying out 100% of its distributable income and is keeping 9% for CAPEX and payment of debt. It is quite normal for China REITs to be so prudent compared to Singapore Asset managers. This results in China/HK REITs having a low leverage and payout ratio. Indeed, surprising to learn that Singapore companies have a higher risk appetite than China's. 

Year on year, Sasseur REIT's tenant has still seen increase in tenant sales which is good news and the REIT has occupancy rate at above 97%. The REIT too has recently refinanced its offshore debts to onshore China debts which are of lower interest rates (similar to what LINK REIT has done). This has reduced interest rates to 4.8% average.

Conclusion

The above 03 REITs are indeed unique. First, they give higher dividend than Singapore REITs with Singapore properties. Second, their leverage is lower than their Singapore peers and third, they are not paying in excess of their payout ratio like what Keppel Singapore does.

I will be keeping watch on these gems to see as and when there is opportunity to buy them.

<Author is vested in United Hampshire US REIT and keeping the other 2 in the watchlist due to their relatively low leverage ratio, sustainable payout and high dividend yield>

Portfolio Update: Buying A Dividend Stock I Once Knew, Creating a 6% Dividend Portfolio

This week saw further deployment of my capital earned from Yangzijiang Financial. I bought Keppel Pacific Oak REIT at 21 US cents. It was bought for its future dividend where from 2026, KORE will resume its distributions.

Portfolio Composition

40% of my portfolio are now in US REITs, listed in SGX. While they are not strong beneficary of the $5 billion MAS funds, my thoughts is investing in them for their potential high yield earned far exceeds the need. Owning this dividend stocks are much better than owning Singapore stocks or buying a property on leverage.

As a result for 2026, the inflow of dividend should be approximately $60,000, giving a 6% dividend. Current total Portfolio Value is close to a million sing dollar.

Returns wise, since my challenge to property agents, United Hampshire US REIT has provided 2.5 US cents capital gain + 4.1 US cents in dividend. That is a 14.5% returns in less than a year. It is likely the REIT will be giving 4.2 US cents in dividend in 2026, which makes it a 9% dividend yield on current price.

Dividend Received Year to Date

USD: $3,682

SGD: $13,414.50

HKD:$7,100

Effects of US Federal Reserve Starting To Lower Rates, Share Price Growth for SGX Listed US Based REITs

A few hours ago, Fed Chair Jerome Powell on Friday gave a tepid indication of possible interest rate cuts ahead. The US Fed interest rate cuts will lower the SOFR rate that US borrowers on.

In Singapore, it will not translate to interest savings for most SGX listed REITs. This is because most of the REITs are on debts tied to the SORA (Singapore) and Japan's. As a matter of fact, SORA (Singapore's rate) has fallen faster than USA's. While USA's SOFR has not decreased by a single decimal throughout the year, Singapore's SORA has fallen by 1.5%.

Only Beneficary

The main beneficary are the US listed REITs because almost all their loans are tied to US SOFR instead of SORA unlike the rest. In time to come, we can expect the decline in US Federal Reserve Rate to benefit them.

KORE is the most sensitive to movement of SOFR because it has 24% of loans pegged to SOFR and the tightest margin spread due to a perceived stronger property portfolio. The magnitude of the fall in SOFR will result in a good percentage in extra cashflow for unitholder. Next in line is PRIME where it has about 34% tied to SOFR floating rates.

Good Time to Own SGX Listed US Based REITs

Declining SOFR means lower interest expense and in turn higher distributable income for unitholders. These are facts and not analysis. So it is definite such unitholders are going to benefit to a greater magnitude than those owning Singapore SG REITs.

To add to that, the USD dollar is at its lowest against the Sing Dollar, it is a good time for Singapore investors to mass swap the Sing Dollar to buy these assets when we have a strong Sing Dollar before it starts to depreciate again.

Higher Dividends for US Office REITs (except Manulife US)

This post will cover KORE and PRIME REIT. In recent times, these 02 REITs have posted results which shows their property portfolio are turning around. KORE has shown a slight decline in occupancy from 90.0% to 88.2%. And PRIME has maintained its occupancy at 80%. 

With this, it will point to a stabilisation of their property valuation which means an unlikely scenario of breaching leverage ratio above 50%. So what remains is when will their distribution resume.

KORE Resumption will Start From FY2026 Result

As per the title; this has been confirmed by the REIT manager, what remains is the proportion of payout ratio. From the wordings, it will definitely not be 80%/90% of the distributable income because this is the end state where the REIT wants to be at.

For PRIME, while the manager has not indicated increasing its payout ratio; management call has alluded that PRIME too is looking to increase its payout ratio from its current 10%. So the question is what is the ratio.

The CAPEX Problem 

Unlike the Singapore market, in USA commercial most of the tenancy improvement's cost are borne by the landlord. Therefore for every new lease/renewal, there is quite a hefty cash outlay that has to be upfront borne by the landlord.

For last year and this year, both REITs are forecasting a high CAPEX requirement of 45-50million to secure tenants to long term contract.

Operating Cashflow from Rental Growing

And to add to that, most of the new leases comes with rent free period of 3-12 months. This is why at current moment, both KORE and PRIME have reported low operating cash inflows because they are only earning about 70% of rental cash inflow from their properties. 

For KORE, due to the execution of 24% of its leases in the past 18 months, it has about 11% more of its portfolio coming online for rental income, while PRIME based on presentation has 10.5% of its portfolio starting to bring rental cash in. These are important data points. For KORE, this means after most of its new leases start to bring in rent, it will have operating cash inflow of about $82 million, while PRIME is at $76 million.

Counting it Backwards (CAPEX will taper off from 2026)

Both REITs will be incurring upfront CAPEX during last year and this year due to the need to secure tenants and backfilling. However, from FY2026, the CAPEX needs should be lower. In my projection, KORE would incur about 20 million in maintenance CAPEX while PRIME should be about 15 million. This is due to the relative ages of their properties. 

Expansion CAPEX should be lower because both REITs have higher occupancy rates. However, due to PRIME needing to backfill a larger vacant space and in turn needing to pay tenancy improvement, it is likely PRIME will spend USD$5 million more than KORE.

Hence in total, I assume both REITs have CAPEX needs of US$35 million for FY26.

Interest Expense

In KORE's latest annual report, it was able to refinance its new loans at slightly better margin rates. However, this was a small loan refinanced of US$50 million. That said, an advantage of KORE is its ability to secure better loan rates than KORE. 

In its annual report, KORE has been paying at rates of SOFR + (1.43%-1.66%), while PRIME's is SOFR + above 2%. Both REITs have approximately the same amount of debt.

KORE has been able to Refinance Debt at Better Rates

As a result on a full year, KORE's interest expense is US$26 million, while PRIME's stands at US$36 million.

Dividend Resumption

Judging from the cashflow, KORE will have about US$20-30 million in free cashflow once most of its new leases come online + CAPEX tapers off. Hence I forecast investors can expect to see about 2 US cents (US$20 million) dividend from KORE.

For PRIME, free cashflow should remain zero or negative due to its continous higher interest expense and still high CAPEX cash outflow to backfill leases. 

KORE is in a stronger position. This is because it has secured a narrower interest margin + SOFR as compared to PRIME. And the other positive for KORE is that it is in stronger sub office markets as compared to PRIME. For investors of these 2 Office REITs, higher dividends can be seen soon. But the question is what % will each of these REITs give?

Mid August Portfolio Update: Complete Divestment of Yangzijiang Financial

I have compeleted divesting Yangzijiang Financial shares. With the realised gains and initial capital, I have bought other companies such as Starhub and further increase in my position of Lendlease REIT. 

Lendlease REIT Higher DPU for Next 3 Years

The sale of its JEM office is DPU accretive because the interest saved outweighs the office revenue the REIT would have earned even factoring the 13% rental escalation. Second, with a lower leverage ratio, the REIT can start to use its bank borrowings of 3% interest to redeem perpetuals as and when they reach maturity. I expect 4.0 cents total dividend for 2026 & 2027 and 4.3 SG cents in 2028. Debt ratio will be about 44% once all perpetuals are exchanged to bank borrowings. Buying Lendlease REIT at up to 60 SG cents is attractive given the future dividend of 4.3 cents (7% yield)

Another divestment is Yanlord, keeping only a small amount of shares and a Partial sale of Asian Pay TV .

Dividend Received

LINK REIT paid dividend. So Year to Date

USD: $3,682

SGD: $13,414.50

HKD:$7,100

Asian Pay TV, Olam, Nanofilm, Far East H trust and Lendlease will only pay its dividend in Sept, so there will be another round of dividend inflow. 

Portfolio Composition

Alibaba remains the largest component but has dwindled due to the purchase of other companies. As of now, United Hampshire US REIT is the second largest. However, the third and fourth largest are PRIME and Lendlease with expectation of increasing dividends in the next few years. 

Most of my holdings are in REITs due to the thoughts that interest rate/expenses are coming down. A lower interest expense means a higher net profit and in turn dividend. Dividend Yield compression may happen too which leads to higher share prices for REITs.

This will enable my porfolio to earn a larger amount of dividend over the next few years.

United Hampshire US REIT- Strong 1H Result, Higher Dividend and 8% Dividend Yielder

United Hampshire US REIT (UHREIT) has released its first half results. The top draw is the REIT has maintained dividend in the 8% yield range.

Here's a summary of the results:

(i) Revenue down due to divestments

(ii) Distributable income increased by 4% to 2.09 US cents for the last 6 months

(iii) DPU Yield of 8-9% at current share price

Business segments of Grocery and Self Storage

On virture it is a REIT focusing on tenants providing basic essential services, its revenue does not fluctuate much. Occupancy rate has been strong staying at above 95%. The REIT leases have in built annual escalation which allows an increase of NPI per property.

Interest Expense

This is the main item which will determine the directions of its dividend. As of 1H2025, debt weighted interest rate is 5.13%, a decrease from 6 months ago. UHREIT debt profile is all pegged to USA SOFR and its swaps expire in end 2026, I expect 4 rate cuts from now to then, which will put interest at 3%. Hence, I expect interest expense to start lowering from 2026. This leads to.......

DPU Growth

With annual rental escalations and forecasted lower interest expenses from 2026, UHREIT DPU should grow from its current annualised 4.1 cents. This puts it at a high 8 to 9% dividend yielder. The recent acquistion of Dover Marketplace should result in a higher DPU as well. 

At 47.5 US cents, this is a steal and a stock to include to boost your dividend returns. It is a definite buy and I have a target price of 70 US cents.