Sunday, February 16, 2014

AIMS REIT 7 for 40 Rights Issue

AIMS REIT announced a 7 for 40 rights issue. The rights is renounceable which means that there will be a window for investors to sell the rights if they do not wish to participate in the rights issue. The issue price is at $1.08 per unit

An approximate $100M will be raised fro this rights issue. Of which, about $80M will be used to fund asset enhancement initiatives (AEIs), development or acquisitions. $17.2M will be used to pay down outstanding borrowings and the remaining 2.8M will be used to perform this rights issue exercise.

As there is nothing concrete given on the asset enhancement, development or acquisitions, we cannot determine if this rights issue will turn out yield accretive.

Based on the last done price of $1.415 on Friday 14th Feb 2014, the theoretical ex-rights price (terp) is
(1.08 * 7 + 1.4415 * 40 ) / 47
= $1.365

The issue price is at a discount of 20.9% to the terp

The indicative time table for the rights issue is as follows:

Investors have a few options for the rights issue:
1) exercise their rights
2) exercise their rights and apply for excess
3) sell their rights shares
4) sell their aims units before XR


Anonymous said...

SO we have about 5 cents to play with(Current P. minus TERP). for NIL P Rights? But how the market going to response is interesting to me?

Mad Stranger said...

Rights unit price should be
TERP - rights exercise price

I am expecting the rights units to be
1.365 - 1.08 = 0.285

Imagine this:
An investor wants to buy some AIMS units during the rights trading period.
He can buy
a) the AIMS units directly OR
b) buy the rights units and exercise the rights by paying $1.08 per unit.

Theoretically, (a) and (b) should add up to be the same.