IREIT Global registers prospectus for IPO on SGX

Source:  http://www.channelnewsasia.com/news/singapore/ireit-global-registers/1296576.html

SINGAPORE: Investors in Singapore WILL soon have access to the European real estate market. IREIT Global has registered its prospectus for an initial public offering (IPO) on the SGX mainboard.

Under the IPO, IREIT Global is offering almost 168 million units at 88 cents each. It will be Singapore's first REIT with a portfolio based in Europe. The IPO will comprise an international placement of about 156 million units to investors outside of the United States, and an offering of 11.36 million units for the PUBLIC in Singapore.

Mr Lim Chap Huat, the owner of Soilbuild Group Holdings, has agreed to subscribe for about 80 million units under the international placement. IREIT has also entered into an AGREEMENT with Wealthy Fountain Holdings and Mr Tong Jinquan, chairman of Shanghai-based Summit Property Development - under which they would subscribe to a combined 251.603 million units.

It hopes to raise a total of about S$369 MILLION in gross proceeds, the bulk of it to help pay for the properties that will be injected into the trust.

IREIT has an initial portfolio of four freehold office properties in Germany valued at approximately S$478 million dollars. The IPO closes on Aug 11 2014, and the TRADING is expected to commence two days after that.

"I believe this is one of the (most) SUCCESSFUL REIT markets in the world. It's one of the largest capital markets in the world today and there are investors who understand this vehicle and are willing to invest. We are aiming to distribute 7.6 per cent for the year 2014 and 8 per cent in 2015 to 2016," said CEO and Founder of IREIT Global, Itzhak Sella. 

- CNA/by

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Why Genting SP should not pin too much hope on Japan?

Why Genting SP should not pin too much hope on Japan?

Background

Japan economy has remained stagnant for 30 years. To revive its economy, there has been a suggestion for the government allow casinos being built in the country for the past 10 years. Despite the tempting and obvious economic benefits from building casinos, Japan parliament was reluctant to accept the industry for the fear of social and cultures problems that come with it. It was clear that Japan is not going to have any gambling dens until PM Abe swore to bring the nation back to its glorious past. Abe presented his vision of having 4 dens in the country and that is when the market starts speculating on potential business opportunity for Genting Singapore.

While there are some analysts like Motely Fools which tells you how competitors from nearby Macau will limit profitability of potential casinos in Japan, this write up of mine tells you why Genting Japan is just another dream of the dreamers.

Reasons:

1. 1.       This Sept is the last chance for Abe to push for legalisation of casino. If it fails, Pro Casinos groups have to wait for next year to bring up the bill again. Given that the parliament has rejected the bill in all previous sessions held this year, it is hard to see why the parliament would change its stance this Sept. Thus at least there is a low chance to see any casino bill being passed in 2014.
2. 2.       Japanese are people with strong cultures and value. Japan once adopted closed door policy to all foreigners until the west threaten to pull down their doors with cannons. Japanese culture of determination (some described it as stubbornness) is still evident when we look at their mind blogging farming industry which produces the similar agriculture products with the world most expensive farmers and lands. Going by the same logic, we can deduce that the Japanese won’t easily succumb to economic pressures.
3. 3.       As mentioned, the topic of casino is reopened for discussion only as a last resort to end Japan’s 30 years of economic woes. However the new economic policy, or what they called Abenomic, is starting to show some result in lifting the economy with a growth of 1.6% last quarter. This would satisfy the opponents that no casino is actually needed to lift the economy.

·         http://www.tradingeconomics.com/japan/gdp-growth

·         http://www.reuters.com/article/2014/08/02/us-brazil-japan-idUSKBN0G200O20140802

1. 4.       Poll shown that PM Abe, the main proponent of Casino bill, is losing his charm.

·         http://www.ecns.cn/voices/2014/07-17/124580.shtml

• 5.       By looking at the chart, we can also see that the market as a whole is of the opinion that casino opportunity in Japan is unlikely to materialize. Discounting away the excitement when the plan was first announced, we see that Genting SP price remained rather stable throughout 2014 and near 2013 price level when Genting had yet to express it’s interest

The above 5 reasons should at least mean casino in Japan is highly unlikely for the next 3-5 years or at least until Japanese politicians are at their wits end again.

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First Sponsor (Initial Assessment)

Rosesyrup Research

First Sponsor (Initial Assessment)

Call: Short

Target Price:$0.947

Introduction

• Sinked immediately after IPO and close at $1.44. 
• Below IPO price of $1.50

1. Property bubble

• First Sponsor is a Chinese developer.
• Valuation is affected by fear for china housing bubble and fall in property prices
• Business situated in Chengdu and Dongguan, a 2nd tier city, where housing is more likely to exist.

1. High Debt

• Leverage make up nearly 60% of total asset. Very highly leverage as compared to most peers like 
• In China, funds and banks have refrained from lending to highly leveraged property developers. 
• Possible cashflow problem in near future
• High interest cost due to China shadow banking problem

Valuation

• Method: P/E Ratio
• Rationale=> It reflects investors' confident in a company bottom line. This is better than a DCF model since current property price (which make up large amount of the company's asset) is highly volatile and therefore less meaningful.
• Current P/E = 8.706X
• Comparable Companies
• Xiamen ITG has P/E of 6.49X and leverage of 39.68% only
• Poly Real Estate has P/E of  5.73X and leverage of 31.56% only
• Optimistic Target Price: $0.947
• Pessimistic Target Price: $0.827

Conclusion

• Downside: 51.9%
• Call=> Short
• Relatively low volume on its first day of trading. Only $1.6M of shares traded.
• Thus I believe the initial shareholders and private placement holders have yet to dump their shares in the market.
• However, as it become clear that First Sponsor won't be able to hold above $1 mark, these shareholders will start to massively cash out as they trample for exit. 
• There is a possibility for price to sink below the pessimistic target due to bad sentiment.
• Time frame: Within 2 weeks from this post. 

My Portfolio as at 22/7/2014

Blumont

Average price: $0.11

Target: $2

IPCO

Average Price: $0.033

Target: $0.096

Innopac

Average Price: $0.033

Target: $0.096

YingLi

Average Price: $0.285

Target: $0.845