Wednesday 12 August 2015

Initiated a long position in IREIT Global

I have been watching IREIT for quite a while now after it hogged the headlines of having a massive rights issue which would allow for the properties it owned to increase by 100%, basically twice the initial size when it IPO-ed in late 2014. Gearing has increased to an uncomfortable 43.7%, and total number of units have increased, thereby increasing the liquidity of the units traded in the market.

As a new investor, we should not be so worried about the dilutive effects of the rights issue, nor how much units would be added to the market. Instead, what we need to check is the theoretical ex-rights price (TERP) after the rights issue to have a rough gauge of what the price should correct to after the capital action, and from there work out a safer point of entry. Gearing and the new book value stays relevant, and of course the dividend yield after the rights issue. As I mentioned earlier, gearing has increased to 43.7%, and the current book value has reduced to $0.633, as taken from the company website. Dividend yield should be about 8% when one enters at a TERP price of $0.66, so anything below that price should provide a safe point of entry.

However, today I bought some units of IREIT at a price of $0.675, a good 1.5 cents from the safe point of entry of $0.66. First of all, IREIT Global is set to announce its results on 13 August 2015 after markets close, and I believe that the anticipation of the results and the accompanying dividend declaration to be supportive of any weaknesses in IREIT's share price. Since IREIT shares have been rather weak lately with its shares hitting the recent low of $0.675 for the third time, I took the opportunity to load up on some shares. Do note that I am fairly confident to nibble but not confident enough to engage in a large scale gobbling like I did with Cache Logistics Trust earlier. In fact, it was a lesson learnt from the previous trade with Cache which taught me not to be overly confident when sentiments have turned broadly sour across the interest-rate sensitive stocks like REITs. The situation now has not changed from several weeks ago, fears of interest rate hikes continued to plague yield stocks, including telco stocks and even other stocks which dragged down the index today. It would be brave but foolish to fight against the tide so a small position should suffice for now. 

I had attempted to use the standard chartered platform to execute my trade a notch higher at $0.68 today, but prices started to correct so I decided to leave my order for $0.675 at Lim and Tan to be executed instead. The sell down was stronger than anticipated, with the entire buy volume booked at some point of the day.

Now lets wait for another 2 more days of uncertainty before the results release. If all goes well, I may be able to exit with a profit with no money put down using the contra function unique to the Singapore market.

Good luck to me then!

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