With Lendlease REIT shareholder unfriendly action to dilute existing unitholders at approx. 13.5% discount to finance a purchase, I have pared down my stake
Thought of Lendlease REIT
While Lendlease REIT is pivoting to be a full Singapore REIT, the way it has resolved to do it is to purchase more shopping malls from the parent. Looking back Fraser Centrepoint Trust has done the same thing, but its share placements have always been only done at 1 times book value; and unitholders were given the opportunity to partake in it.
Lendlease REIT in its anxious state to grow big has severely diluted existing unitholders and not offer a chance to existing unitholders to join the discount. Further, its purchase was fully financed by share placement. What this means is leverage will lower; but existing unitholders are diluted. The placement price was not good too and the banks supporting it wanted to earn the easy money out by not placing it at $0.62（ex dividend); this could have been done, and it is likely Lendlease REIT would have achieved its fund-raising objective. Both the REIT manager and Singapore banks were doing a great disservice to Lendlease Minority Unitholders which shows how terrible Singapore stock market is and something "MAS" current poster boy Chee Hong Tat should aim for- which is to stop retail investors from being easily diluted with legislative measures put in place to punish controlling shareholders.
As of now, Lendlease REIT only owns 70% of PLQ with a definite future that 30% more will be purchased. I do not know if it will be another share placement or leverage up to 42%; but as unitholders, it seems the REIT manager does not care about the minority at all. As a result, despite 90% of its portfolio now in Singapore shopping mall, there is a discount ascribed to the company where it now trades at 0.9 times book value. There is about 5-6% discount due to potential shareholder unfriendly action.
With 0.9 times book value and 5.7% dividend yield, Lendlease REIT is ALMOST FULLY VALUED. Unless the REIT manager changes its action and state it in words via SGX announcement documents or AGM minutes, it is unlikely it will go to 0.96 book value (which is the true fair value like Fraser Centrepoint Trust, office properties are now valued at 0.6 times book value); hence I have decided to pare down my stake to buy other shares with higher upside. They are:
- Asian Pay TV Trust-10% Dividend Yielder who should be chugging along at this rate nicely for 5 years to come
- NTT DC REIT- a 7% dividend yielder
- Nanofilm- A component precision manufacturing company with exposure to China and;
- United Hampshire US REIT- Sustainable 8% Dividend Yielder.
Dividend, Dividend, Dividend
The reshuffling of fund, moving from fair value to undervalued dividend gems, will enhance my dividend inflow.
My US REITs are a great value bargain starting to prove their worth with improvement in cash flow.
