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The result is expected as there is no major development in Q219 and dividend is supported by $4.9m gain from the Gain on disposal of hotel development right. With this total of $27.2m out of $44m has been used.

Another bad news is Microsoft Operations Pte Ltd which contribute around 3% FCOT gross rental income has exercise option to per-terminate its lease in Alexandra Technopark and it will end by Jan 2020.

There are 2 AEI in progress
  1. China Square Central that cost $38m
  2. Central Park that cost $11.5m
Those AEI need $$$ which might explain the debt has gone up from previous  610m to 627m.

From the portfolio, filling 40% vacancy space in Alexandra Technopark will not totally help the gap, Total NLA is around 1m sq ft so 40% will be around 400k sq ft and multiply by rent based on slide 35 will just net around $1.5m gross rental.

I am really guessing they will do some acquisition as I don't think the current dividend is sustainable as the management fees already paid 100% in unit and the gain of disposal left around $17m which might only last 3-5 quarters.

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Recently there is some news around Google in talk for 400k sq ft in Alexandra Technopark, As I currently I own some share of FCOT, this is a good news for me.

Now, lets look into Q1FY19 result

The overall gross revenue has been on the down trend quarter by quarter from $35m to $31m and the dividend still being supported by
  1. Gain on disposal of hotel development right by $3.7m (Q1FY18 was supported with $1.9m)
  • Total use from this gain to date is around $22.3m out of $44m
  • 100% Management Fees paid in unit (FY17 and before, portion of the management fees was paid in cash)
  • HP also did not renew 93k sqft space that expire by 31 Dec 2018 so Q2FY19 will be impacted by this event as well.

    Based on the slides on the business park rent for city fringe is around $5.8sq ft so if the deal with Google does happen, then it will be revenue around $2m based on $5.8 calculation.

    It will help to reduce the dependency for the dividend to be supported by gain on disposal of hotel development right.

    Seem I will need to expect management might plan some acquisition to be able to maintain dpu payout and back to the day where management fee paid in cash instead of unit

    The Gearing has went down from 34.7% in previous year to 28.4% this year as a result of the divestment of 55 market street. No major refinancing till FY20 and the current average interest rate is 2.97% and 90% borrowing fixed rate

    For the occupancy, it increase from 83.4% to 83.8% compare to the previous quarter. I am expecting positive rental reversion for Singapore properties and negative rental reversion for Australia property plus the weakness in current AUD.

    In summary,
    1. DPU will remain flat in the next coming quarter supported by the gain on hotel development
    2.  93k sqft space not renew will drag down the gross revenue in Q2 if item 3 below does not materialised
    3. Deal with Google will off set some dependency on DPU to be supported by the gain on hotel development
    4. Potential growth for DPU will come from China Square central retail podium which will increase from 64k sqft to 78sqft which is currently already 40% pre committed.
    5. Potential acquisition in 2019

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    Year 2018 Review,
    Year 2018 is really not a good year for my portfolio which drag by First Reit which drop almost 30% from the high $1.4 in early Jan 18 to the current price less than $1. This was has been my worry but I react too late to reduce my holding, I manage to reduce 47,200 shares before it was start to drop where I was intending to reduce further 50,000.

    I have also divested RHT which was my 3rd biggest holding in early 2018 which I glad I did as from the announcement that made so far, it does not seem the manager see the shareholder interest and keep delaying the deal without being able to do anything.

    I have added additional $15,000 into my current portfolio which mainly come from the realized gain

    My portfolio in term of market value drop about 10%  despite i added $15,000, excluding the injection my portfolio drop about 14%.

    I manage to reach realized gain of $32,000 exceeded the target I set last year ($28,000)

    Below are my current portfolio

    Frasers logistics and Industrial29%
    First REIT27%
    CapitaLand Retail China Trust13%
    Mapletree North Asia Commercial Trust9%
    IReit Global8%
    EC World4%
    Frasers Commercial Trust4%
    Apac Reality2%
    Fortune REIT2%

    I added 2 Non REIT for trying the new approach where while I waiting for capital gain, I will collect the dividend.

    For my brick and mortar investment, I am left with around $25,000 to pay the loan which I will complete it by year 2019

    There is a new venture for me in 2018 which one of the reason why i only manage to inject $15,000 into stock, This new venture will need few hundred thousand funding and hopefully it will start running latest before Q2 2019.

    For Year 2019 Goal,Based on my long term goal for my stock investment, I am targeting to achieve $31,000 realized gain in 2019 which I think I will achieve if my current holding is performing.

    I am monitoring the below REITs to be added into my holding when opportunity arise
    1. Mapletree Logistic
    2. Frasers Commercial Trust
    3. Mapletree North Asia Commercial Trust
    4. CapitaRetail China Trust

    I will try to add some stock which I think undervalue and paying dividend as well.

    Happy New Year 2019 for everyone and hope moving ahead will be smooth sailing for everyone ^_^.
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    Dividend PayoutQ4 FY18 DPU of 1.78 cent is lower than Q3 FY18 of 1.8 cent in term of Singapore dollar however in term of Australian dollar is is higher from 1.76 to 1.78 cent of Australian dollar.

    Exchange rate hedge at A$1:S$1.0011 and current exchange rate is A$0.99:S$1.00

    The management has provide guidance on the exchange rate impact to the DPU
    A 100 bps points increase in the AUD:SGD and EUR:SGD exchange rates will result in an increase of 0.02 Singapore cents in DPU

    A$2 million distribution from divestment gain is include in Q4 FY18.

    RevenueThere is additional A$1.9 million relates to the early surrender fee received for Lot 105 Springhill Road, Port Kembla, New South Wales. This property is up for renewal in 20 Aug 2019 and the space have been taken up by another tenant with 3 year lease from Aug 18.

    Few item there will impact the revenue
    Acquisition of the 21 properties in German and Netherland is only from 25 May to 30 Sep.
    Acquisition of one Australia property is only contribute from 5 Sep to 30 Sep
    Divestment of 2 Australia is in 17 and 20 Aug so there is no income from 20 Aug to 30 Sep

    DebtNothing much change from the previous quarter
    1. Healthy Interest coverage ratio at 7 times
    2. Interest Rate 82% fixed
    3. Average cost borrowing 2.5%
    4. Gearing at 34.6%

    Lease ExpiryWell spread lease expiry with average around 10% except for 2022 and 2026

    Management FeesFor Q4 FY18, The management fees paid 100% in unit as for FY18 is 88.2% in unit. I will wish more management fees paid in cash while maintaining the DPU.

    Rental ReversionAverage rental reversion is negative at -3.2%

    There is one -19.8% rental reversion however this property only contribute A$ 1.2 million to gross revenue in FY17 where by for 55-59 Boundary Road, Carole Park, the rental reversion at 3.9% and the gross revenue in FY17 is A$1.7 million

    Divestment and Acquisitions In summary, the divestment will cause lost of around A$ 9 million whereby the Acquisition will add additional around A$ 6 million. Note one in gross revenue term and one in NPI term.

    Divestment of A$ 98 million also net A$ 23 million gain, A$ 2 million distributed in Q4 FY18 and A$ 62.6 million used to fund the acquisition

    31 Oct 18, Mandeveld 12 in Mepple, The Netherlands which will bring  in additional A$ 2 million and it fully funded by debt. The purchase price is approximately S$ 39.88 million

    5 Sep 18, Properties lease hold and free hold in Australia which will bring in additional NPI of AUD 4 million. The acquisition is fully funded by divestment of 2 Australia property. The purchase price is A$ 62.6 million

    20 Aug 18, 80 Hartley Street in Australia for around S$ 90 million which net S$ 17 million gain. The property contribute around A$ 7.9 million to gross revenue in FY 2017

    17 Aug 18, Lot 102 Coghlan Road in Australia for around A$ 8.75 million which net almost A$ 2 million gain. The Property contribute around A$ 1 million gross revenue in FY2017
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    Total Market Value as of 1st Nov stood around $400,000 and it yield about $28,000 dividend.

    My portfolio market value has drop from $420,000 end of last year to $400,000, the biggest drag come from First Reit due to the issue that the Sponsor currently has that I blogged here.

    I have achieved my target I set for this year to earn $28,000 this year as at 1st Nov 18 currently my realized capital gain and dividend reach $28,780.

    With FLT yet to announce their dividend, Likely I will hit $30,000.

    Below are my current holding from the largest to the smallest.

    First REIT
    Frasers logistics and Industrial
    CapitaLand Retail China Trust
    Mapletree Greater China Trust
    IReit Global
    EC World
    Frasers Commercial Trust
    Fortune REIT
    Fraser Property
    Apac Reality
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    MNACT Q2 FY18/19 Result Review
    The result is pretty good in my opinion due to
    1. Historical positive rental reversion
    2. Only 7% of debt will be maturing in Mar 2020
    3. New source of income diversification from Japan Properties 
    4. Percentage of management fees paid in cash has increase to 12.9%, in the past it has been paid in units of MNACT
    * MNACT paid dividend quarterly now!

    DebtThe average interest rate has inch up from 2.44% in previous quarter to 2.48% which is likely due to the refinancing for the loan due in Mar 19 and partial amount due in Mar 21.

    With the refinancing, there will be no debt need to be refinance in Year 2019 and the next refinancing will be $206m in Mar 2020.

    The management has provide guidance an increase of 50bps will reduce the dpu payout by 0.072 cent. If we assume the annual DPU will be 7.7 cent based on 1.926 quarter DPU, the impact of interest rate will be minimal

    Proportion of fixed interest rate remain at 78%

    Rental ReversionIt has a good up rental reversion and historically it has positive rental reversion (see the 40% positive reversion and it is anchor tenant!)

    Lease Expiry
    Potential organic revenue growth if management can keep the rental reversion for upcoming lease that expired. On another flip coin, I worry how long the manager can keep this good track record

    ReceivableIt has recognized the refundable consumption tax of S$25.2 million by the tax authorities arising from the acquisition of the Japan Properties resulted to boost MNACT cash to $184m

    Financial Ratio
    1. Gearing 39%, increase from 36.2%
    2. Average effective Interest Rate 2.48%, increase from 2.44%
    3. Interest Coverage Ratio 4.1 remain same as previous quarter
    4. Next debt refinancing 7% of total debt in Mar 2020
    5. Occupancy rate 99.6%

    Management Performance Fees structure (align with Shareholder)REIT Manager performance fees is based on a performance fee of 25.0% of the difference in DPU of financial year with the DPU in the preceding financial year multiplied by the weighted average number of Units in issue for such financial year
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    There has been few negative news revolving Lippo Karawaci(LPKR) which is the largest Master Payee for First Reit, some of the link below to the news
    1. Downgrade by Moody
    2. Corruption by some of LPKR Senior Employee

    First REIT Financial,Nothing much has change a few some of the key item I would like to keep in mind

    ReceivableThis has been concern for many First Reit shareholder and it is one of the highlight in analyst report.
    Receivable has increase from 29m in Q2 to 49M in Q3, an increase of 20M. The Manager shared it has received 17.5m in 15 Oct and the quarterly report is ended on 30 Sep, hence it is a late but it is late on advance rental payment (Oct to Dec).

    This is basically related to LPKR cash flow issue highlighted in the news above.

    DebtFirst REIT has a debt of 100m that will need to be refinanced by Nov 18 and 10m to be refinance in Mar 19. It is currently in negotiation with the bank to extend. The next debt need to be refinance is $182.1m in FY2021 which 2-3 years from now.

    Current Average Effective Interest Rate is around 4% and for the fixed interest rate it is hedge for 2 years (No clarity on when the hedge will end) and the debt on fixed rate proportion 59%.

    As we are in the raising interest rate environment, we could expect it might be refinanced with higher interest rate.

    Now, PT Lippo karawaci (LPKR) - Account for 82.4% of First REIT Income

    I took a quick glance on Siloam Hospital Financial report and does not seem Siloam Hospital having issue on their cash flow. SILO current asset is higher than their total debt.

    Next, I took a look at Lippo Karawaci Financial report ended Mar 18 which has 51.05% interest in SILO. Their current ratio which is the current asset/current liabilities actually quite high at 5.

    Looking into one level down in LPKR financial report,

    Current Asset (in the report 45,022,456)Below I only take those that i think is liquid
    1. Cash and equivalent : 1,873,233
    2. Available for Sale Financial Asset : 6,799,644
    • This is include their holding in LMIR and First REIT (which they have disposed half of their holding and now the holding at 10.63% of the total First Reit issued unit)
  • Other Current Financial Assets : 2,250,580
  • Inventories :29,835,373

  • Current Liabilities (in the report 8,887,980),Some of the interesting Item out of those figure
    1. Advances from Customers: 2,428,184
    2. Sale and Leaseback Transactions : 263,712
      1. This is interesting as I guess it is related to FIRST REIT as we can find the detail in their foot note 45.b

    Now, looking at their long term debtBelow are their financial ratio

    Below are their debt maturity

    For the cash flow, It is currently generating negative cash flow

    ConclusionAs per report in many website, if LPKR has cash flow problem they might want to sell some of their asset to fund their cash flow which they did with their disposal 100% disposal on Bowsprit and 10.63% in First Reit.

    With the recent corruption charges, their sales on Meikarta project might be impacted as Me as an investor, I will avoid the project that has dispute.

    Looking at LPKR financial report, I will hold my First Reit for now while monitoring their financial and on the corruption charges. However DPU might be impacted by the raising interest rate.

    While looking at those company, I found Mr Ketut Budi Wijaya has position on those company, interesting.
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    It seem now I start to feel the impact from US Interest rate hike start, my home loan that is tie to the Fix deposit rate has been increasing few times this year every time US raise their interest rate.

    With this, I assume it will be the same for loan to the business and it will start to impact the REIT especially those correlate to USD interest rate hence its trigger me to review the loan of my few largest REIT holding

    First REIT
    1. Proportion of debt based on fix rate has been reducing from 92.3% to 60.7%
    2. 100M is due to be refinanced by 2018
    3. No information on the average interest rate in their financial report.

    First REIT has been having a few negatives news that make me worry as well
    1. The Sponsor financial instabilities and with Rupiah depreciating against USD, it might add more issue to the sponsor. 
    2. OUE has taken over the REIT Manager which I don't really like as based on the other 2 REIT under OUE, it has not been performing well and more like dumping ground.

    With the above,
    Interest Rate hike might hurt First REIT distribution as only 60% with fixed interest rate.

    If REIT manager under OUE make the 1st non-dpu friendly acquisition from OUE, I guess it is the time to say bye to First REIT before it destroyed further.

    Now i am pondering if I should reduce further my holding in First Reit as it is currently my largest holding.

    Frasers Logistics & Industrial Trust
    1. Debt mainly in AUD and Euro, natural hedge.
    2. Proportion of debt based on fix rate has increase in Q318 to 81% from 79% in Q217
    3. Average cost of borrowing at 2.5%

    With the debt mainly in AUD and EURO which yet to start their rate hike even with US raising the interest rate, I guess it should be safe for now

    CapitaLand Retail China Trust
    1. 80% of the debt is currently hedge into fixed rates hence 20% in variables
    2. Average cost has been inching up from 2.51% in 1Q18 in March to 2.6%  2Q18 in Jun
    3. Debt is in SGD

    With the debt in SGD, the interest rate hike will definitely impact CRCT once the hedge expired and need to re-hedge

    Maple Greater China Trust
    1. 90% of debt is hedge into fixed rate increase from 78% in March 18.
    2. Natural debt in HKD, RMB and Yen
    3. Average interest rate 2.44%

    Hong Kong has been following US on the interest rate hike to 2.5%
    Japan yet to start to raise their interest rate.

    I guess, the average might be going up due to interest rate hike in Hong Kong as it is still the majority of loan proportion.

    SummarySeem most of my main holding in REIT will be impacted except FLT for now.
    Turbulence coming?
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    Transaction for the month of Aug
    1. Sold 8000 shares of AAReit @1.41, was bought @1.37
    2. Bought back 10000 shares of First Reit @1.3
    3. Bought additional 7000 shares of CapitaRetail China Trust @1.44
    4. Bought additional 10000 shares of EC World Reit @0.695

    Total Profit to date is $24,751 which is $3,300 away from my this year target.

    My current stock allocation

    First REIT50.44%
    Frasers logistics and Industrial23.49%
    CapitaLand Retail China Trust9.50%
    EC World4.55%
    IReit Global4.09%
    Frasers Commercial Trust2.95%
    Mapletree Greater China Trust2.79%
    Fortune REIT2.20%
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