Sunday, August 19, 2012

Far East H trust IPO

The final prospectus has been logged.

The indicative timetable is as follows:

My thoughts on the IPO:

Far east H trust gives 6%.
Comparing to other hospitality trusts, CDL H trust gives 5.938% and Ascendas H trust gives 7.786%
I feel that the yield is a little low.

Far east H trust has a P/B of 1.
CDL H trust has a P/B of 1.21 and Ascendas H trust has a PB of 1.07
P/B looks good but P/B it is not a very important factor when investors looks at REITs or business trusts.

Far East H trust has a gearing of 30.2%
CDL H trust has a gearing of 25.2% and Ascendas H trust has a gearing of 34.3%
Gearing is on the average as compared to other hospitality trusts.

Other advantages:
  • strong potential pipeline for future acquistion
  •  This is a stapled security, not a 100% reit. This means that the business trust component do not need to give out at least 90% of its earnings as distributions. Any major reduction of the distribution will impact its yield and market value
  • Limited short term upside. The 0.93 IPO price is placed at the highest of its indicative price. Any upside in prices is limited by its yield.
Other notes:
In the investment tranche, the stapled security is 30 times over subscribed.

I will be applying for this. This will be for the long term as there shouldn't be much short term upside.
Good luck to those who are applying for this as well.

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