Fortune Reit

[stilicon]

From the Strait Talk Singapore equity research report issued by Macquarie yesterday, I see a TP of HK$3,50. In december 2009, DBS put a similar TP of HK$3,61.

Assuming a yearly div of about 22,5c net, a return on capital of 8%, a potential further dilution of 10% within the next 3 years (sort of "margin of security" assumption) and no growth of the DPU whatsoever, you could get a DDM target of about HK$3,40. In november 2009, you could already make this rough calculation and buy it at HK$2,50 - 2,75. Why ?

Anyway, the TP of DBS and Macquarie reassure me.
I did not understood this low price in november (that I took as a mispricing).

Furthermore, with a P/B below at least 0,75, (depending on possible 31/12 revaluations) I find this Reit has still some value, contrary to most Sing REITs.

Fortune REIT is bizarrely undercovered by the analysts. But never mind.
Are there some potential severe problems that I miss ?

[stilicon]

Results are in and not bad.
NAV comes at HK$5,32 per share. Dividend for 2H09 is a bit disappointing to me, at HK$0,106, payable on 26/02/2010.
As I put a TP of HK$3,40, Fortune REIT is the last REIT I would sell presently.

Meanwhile, JPM issued yesterday a report setting a TP of HK$3,60.

Curious to see in the coming days the reaction of all the analysts following this REIT.

[ichew]

Meanwhile, I saw today, on the DMG_Morning_Insight, that a certain Lim Hwee Chiang, noted as an "insider", took the occasion to increase his stake from 2,0% to about 2,32%. I say, probably well done.

hi stilicon,
i think u may know this but tot i drop a comment here
i have to admit i didnt really check but i know tat this Mr Lim Hwee Chiang is the CEO of ARA.
ARA is the mgr of FortuneREIT.
So it is normal to see his stake "increase" becos FortuneREIT will be paying mgt fees to his coy ARA
a quick scan in AR08 (as at 21jan09) showed he held 0% direct interest
i didnt check if he bgt any in 2009 ...

[stilicon]

Hi, ichew.
I discovered also that Mr Lim Hwee Chiang is the CEO of ARA. He just signed the last Fortune Reit report today !
But in case of mgt fees in shares, would he, personally, appear, with his own name, on this DMG insider list, or would the name of ARA appear ?
I would say the second solution, but I don't know for sure.
Also, if I remember well, a month after, he reduced his stake, after a decent increase, following the same kind of DMG report.
As for now, I would like indeed to know whether this gentleman still owns or not any Fortune Reit share. For, if one person knows something about this Reit, it must be him.

[ichew]

becos he owns ARA shares in his own name, he is said to have deemed interest in Fortune
u can check Fortune's latest AR
last yr's AR (pg 93) showed tat he did not own them directly in his own name

but i like it tat other ARA funds r in it
i assume tat this means Lim Hwee Chiang must have felt Fortune is good enuff for investment

other shdrs listed r Cheung Kong, Temasek, ... but we do know how "good" Temasek is in investment

[stilicon]

You are certainly right, ichew.
The same thing happens today with SUNTEC REIT.

[stilicon]

DBS increases its TP to HK$3,71. Set a div for FY10 at 22,7c (HKD).
They also noted that :
- Gearing remains low at 23.7%,
- Fortune REIT has room to make yield-accretive acquisitions worth up to HK$2.1bn without tapping the equity market, before its gearing hits the 35% ceiling limit.
- still offers distribution yield of 7.4% for FY10 and 7.7% for FY11
and conclude that :
- "Fortune REIT would be a safe play in a volatile market."

- I would add that with a NAV of HK$5,32, it is still trading at a P/B ratio of about 0,6.

[stilicon]

The manager informs today that "Fortune REIT seeks dual-primary listing in Hong Kong by way of introduction"

I wonder if that will have an impact on its valuation. I guess it is the obvious purpose of the move.

I do not follow many HK reits, but for instance THE LINK is much more richly valued than is presently Fortune REIT. Albeit the assets of The Link are supposedly of better standing (right ?).
In the office/industrial space (so arguably not easy to make a comparaison) another Ara-managed Reit, Prosperity Reit has an almost insanely rich valuation, with a very low ROA and a very high leverage (a dangerous combination).
So maybe, this will ultimately increase the Fortune Reit valuation and bring it in line with that of some of the HK-traded reits.

It is also a kind of notice of failure for the SGX.

[Blackjack]

I thought I read somewhere sometime ago that HKE is seeking to reduce dual listings by "way of introduction". Cant quite remember though.

[ichew]

I thought I read somewhere sometime ago that HKE is seeking to reduce dual listings by "way of introduction". Cant quite remember though.

i feel this may not be much of an issue becos this coy is linked to superman Li
anyway anyone attending the coming AGM / EGM on 26-mar?