Wednesday, March 15, 2017

Ascott Reit(A68U): Rights Issue, Part 2

Drafted: 3/15/2017

Data source: my own blog, ASSI's blog, Ascott's presentation.

It is a tough day, rather difficult to concentrate and spend the extra energy after a long day's work. So this is a self reflection piece to correct my own wrong perception.

I post  an blog on Ascott Reit's rights issue some days ago. Thru my research over the net, I realize that ASSI has previously penned down his thoughts on similar cases. His mind is much sharper.

He determines if a rights is dilutive on: one has to judge based on if the injected assets keeps the same(even better, a higher) level of yield. An example he quoted is: blending of two glasses of fruit juice, the first one's sweetness will not be diluted if the 2nd glass has a higher content concentration.

Ascott's 2016 yield is ~8.x%(from SGX info). New one (based on its presentation) is:

I re-read Ascott Mar 7th' announcement, and it is called "renounceable rights"(可放弃供股), meaning it can be sold(renounced) by existing unit holder, not so bad a proposal from Ascott team. So I guess, a passive-income-collection-type of  investor(for instance, a retiree) could sell one's rights (and may lower one's unit cost some more) to avoid the pseudo scenario I mentioned in my last post: the collection 3-year of dividends at 800+/p.a. is spent in one shot to subscribe rights entitlement.

But won't a passive investor, in this case, feel a little being left out when the REIT mgr keeps getting a bigger (mgmt fee) pie due to enlarged asset portfolio, while one unit holder's % in that pie gets relatively smaller?

Seems a better plan for an exiting passive holder is to sell rights to lower the existing unit cost(improve yield in a self-made way), and use collected cash to buy Ascott on weakness, if still keen in the counter.

Such rights instrument arrangement is uncommon in Shanghai market which I'm used to, indeed I have a lot more to learn.

1 comment:

  1. Still many retails don't understand dilution at personal investment level