KIPREIT planned to acquire AEON MALL KINTA Shopping Mall for 280 milllion Ringgit Malaysia. Previous owner had performed AEI (Asset Enhanced Initiative) for 32 million Ringgit Malaysia.
(Valuation CH Williams Talhar & Wong Sdn Bhd valued the 21-year old structure at a price of 220 million Ringgit Malaysia)
The rental agreement last for 10 years which start from 2015 to 2025, with the yearly rental rate of 16.31 million Ringgit Malaysia.
anybody looked at note 10 of their 2018 audited accounts? They have RM87mil in borrowings which will be repaid in 1 bullet payment 5 years from date of 1st drawdown. I cant find any disclosure on when it was drawndown. It is sitting there in their books for 2017 and 2018. So I can only assumethat they would need to pay it back between now and 2021. They have ~20mil in cash, makes about 40m FCF every year and i do not see any disclosure of how much cash is cordon of to pay for the RM87m. Anybody has any information on how they plan to pay back this RM87mil? Thanks.
simply put sometime between now and 2021... they will have to: 1. do an equity fund raising 2. refinance 3. reduce distributions option 1: dilution means reducing the yields assuming all else equals option 2: refinancing to defer the bullet payment is probably their best choice.... if via a normal term loan... it means yields goes down. if via the same terms then it would probably be the same yield as now. option 3: Right now there is about 3 years left to pay the 87m bullet payment, roughly about 29m a year. Their distribution in 2018 ~37m... so they will have to cut distributions per year to about 8m.
That means the 8%+ yield that we are seeing is not sustainable.... my 2 cents. Feel free to comment.... i am here to learn.
BoD is trying their very best to generate increasing profit. Any deal that cannot give a recent yield will not be purchased. The existing business they have been improving and increasing its profit while reducing cost be installing solar panels onto the assets. Reits always carry suitable debts with a max gearing ratio of 0.5.
@kinuxian The news even stating after the cash call existing 300m cash will be increased to 400m. May be who attended their AGM can enlighten us further ?
their cash call is only ~100m shares... assuming they can place out at 0.80... only get 80m cash. Their Aeon purchase... from circular looks to be 100% funded by debt... but assuming 80% financing at 5% interest rate for 20 years..maybe NPI additional RM4m a year. if they manage to place out the 100m shares (which they will have to) their yield will no longer be 8%... proforma ~5% only. If only going to get 5% yield IGB or PAV reit safer
(1) According to what i had read in the AR2018 , they DO NOT have 300m cash .
Cash and Bank Balance = 8.9M Deposit with License Bank = 10.9M
Generally speaking it's 20M for cash, and 28M for short term asset.
(2) REITS usually will refinance their debt with the asset as backing. As long REITS can generate income more than (i) the existing rate - eg. if average rate is 7.0% , and the latest acquisition give 7.5%, that is addictive effect AND (ii) higher rate compared to the cost of fund - which is the loan.
They will be off good with the dividend declaration.
(3) They cannot simply cut the dividend yield, it is MANDATORY for REITS to declare a minimum of 90% NPI to enjoy the taxation benefit. REITS are differerent compared to normal share.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
malinfan
698 posts
Posted by malinfan > 2018-07-10 14:59 | Report Abuse
Under value? .... can buy more. LoL'...