Recent IPOs

Hyflux preferential shares

Today is the first day of listing of Hyflux preferential shares. It open at 102.000 with an intra day high of 103.100 and intra day low of 102.000. It closes at 103.020 at the end of the day.

In my previous post, I guessed that it will open at about 103. Even though it open slightly lower than my guess, it managed to close at 103.02. The first day's results wasn't too surprising for a "preferential shares" stock.

Given that the dividend payout will occur on every 25th Apr and 25th Oct, the first dividend payout will be coming in Oct. I was allocated 5k worthed of the Hyflux preferential shares. This will increase dividend per year by $300. =)

Maple Commercial Trust

The maple commercial trust (MCT) has just completed its IPO and will be listed tomorrow. Before the IPO started, I was quite interested in this REIT. One of the properties under this REIT is VIVO city, one of the biggest malls in Singapore. The bulk of my portfolio already consists of a handful of different REITs.

The yield that this new REIT is offering was somewhat disappointing. Based onthe IPO price of 88c, it is providing a yield of around 5.66% (Dividend is about 4.98c per year). On the first look, the yield may seem decent enough. But let us compare it with other similar REITs. The MCT's property portfolio consists of both retail and commercial. So, we should be comparing it to other REITS that have properties of a similar nature. Starhill global reit and Suntec reit are 2 such examples.

Extracted from reitdata.com

REIT

Period

DPU cts

Mkt

Yield

NAV

Gearing

Assets Type

Starhill Gbl

Q1 – Mar11

1.07

$0.630

6.889%

$0.93

30.20%

Malls + Office

SuntecReit

Q1 – Mar11

2.388

$1.520

6.372%

$1.77

38.40%

Malls + Office

Yield

The 5.66% yield is low compared to its peers. Given a low yield, there isn't much room for upside for the share price itself. Say the share price increases from $0.88 to $1, it will mean that the dividend of 4.98c is now only a 4.98% yield. Will you buy such a REIT when other REITs are giving more than 6% yield? The yield will be limiting the upside of the REIT's price.

Gearing

Gearing in the most simple terms refers to the amount of money the REIT owes. Typically, reits have about a gearing of 30-40%. MCT is about 39% based on the values I calculated in the prospectus. This is higher than its peers. A high gearing will make it hard for the reit to acquire more properties in the future. A private placement will leave investors diluted. A rights issue will mean that the investors have to fork out more money, though they can choose to sell their rights.

Market sentiment

Despite the 2 points I listed out above, the IPO is quite well oversubscribed. The public placement is 5.45 times over subscribed. On the whole, it is 8.38 times oversubscribed (excluding reserved units). Seems that many people want to own a part of VIVO city.

My Guess for MCT's trading trend tomorrow:

It should open in the slight green given its strong response for the IPO. But the upside is limited by the yield as pointed out above. For the next 6 months, unless there are major changes to the property portfolio of MCT or there are major changes to the REIT market in general, the price should drop so that the yield is normalized to be inline with other REITs.

Personally, I did not apply for this IPO. But I am interested to see how MCT fares tomorrow. In the unlikely event that it opens below $0.88, I may even consider buying.

Good luck to all who are now proud owners of the REIT!

Hyflux Preference Shares

The Hyflux preference shares IPO has just ended and the balloting ratios are out. These preference shares give out a 6% dividend per year (payable semi-annually on 25th April and 25th October every year). The dividend is also cumulative. That means that if Hyflux is unable to give out the full 6% dividend in the year, the dividend will accumulate and get paid out on the next payout date. This makes the preference shares quite attractive.

Back to the balloting results.

Thoughts from this IPO:
1) When applying the IPO with both cash and cpf, the total shares applied are taken into account as a whole. I applied for 100 shares using cash and another 100 shares using CPF. But I ended up getting 50 shares under cash, instead of 30 shares for cash and CPF each.

2) Even though the IPO is about 5 times over-subscribed, everyone got at least 30 shares (paid 3k SGD). The private placement was 7 times over-subscribed. Based on such a good response, I would think that the preference shares will open with at least $103.

3) The highest band of the IPO balloting ratio always attracts my attention. The highest band investors applied for at least 20,000 shares each. Each share cost $100. That means that 5 applicants have a whooping 2M SGD cash + cpf on hand to apply in this IPO. The huge gap between the rich and poor is much bigger than you think

The Hyflux preferential shares will commence trading on the 26th Apr 2011. We shall see how it turns out then. =)