Sold 48,000 shares of FIRST REIT on 28 Dec at $0.36
Bought back 75,300 shares of FIRST REIT on 31 Dec at $0.23
Given the capital remain the same at $48,000 (Bought 24,000 shares @ $1 on 23 Jan & another 24,000 shares @ $1 on 29 Jan) with the above transaction, my FIRST REIT share average price is now $0.64 instead of $1.
If I did not buy back 75,300 shares today, my real loss will be $30,720 (Excluding $2,620.80 of dividend collected and broker + SGX fees).
What is the worst case scenario IF my this buy back stunt goes wrong?
Real loss will be $48,000
Thus, my risk amount here is $17,280
I know many of you cant wait to run as far as you could from FIRST REIT, this CRAZY Mr CDxD still went in to buy.
Reason for buying:
1) OUE Limited committed to be the biggest buyer (winner) for this rights issues
OUE Limited (19.72%) + OUE Lippo Healthcare Limited (10.36%) + First REIT Management Limited (9.36%) = 39.44% of FIRST REIT as at 24 Dec
If OUE Limited have such a high % stake in FIRST REIT and committed to subscribe to all the rights, from we, who is having ikan bilis stake in FIRST REIT, is trying to sell all our shares cheaply away, it doesn't seem OUE Limited would agree to take up such a bad deal if it doesn't benefit them.
DO they know something we doesn't know?
DO they purposely issue the rights at such an undervalue price which they know it will benefit them in the long term?
DO business owners usually think 7 steps ahead or small shareholders is the one that will think 7 steps ahead??
2) Average share price reduce from $1 to $0.64
Rights issues at 20cents & 98 rights units for every 100 existing units
When the announcement came out, people emotion will break lose and gone crazy.
When that happened, SELL button is the most favourite button.
Having rights issues to pay off debt is a big dangerous warning sign.
Having rights issues to buy new asset is the one we should be happy and support it.
Unfortunately, this rights issues is for the former.
Shareholders should already have prepared themselves mentally for possible rights issue (which I did blog about the possibility in Dec 2018, Jan 2019 and Jan 2020).
Similar to the recent Mar 2020 fastest bear market, many investors have been waiting for the bear to come for years.
I wont deny from the facts that remaining in FIRST REIT will cause my shares worth to devalue.
Since I am able to reduce my average cost per share by 36% from $1 to $0.64, why not?
3) No insider selling
OUE Limited have been buying back their shares almost every alternate day since Oct 2020
The situation above is very different from EHT (Eagle Hospitality Trust) where their substantial shareholders keep selling their shares.
4) Restructuring plan is out
Although this is not the best restructuring plan to shareholder, but at least there is a direction ahead.
I like to pen this. Every time you buy shares the justification has to be on it owns merit. Using average out price hoping to recover your loss is risky imo. Hope you know what you are doing. Happy New Year.
ReplyDeleteHi Cory
DeleteYes, I fully agreed with you.
The #1 push factor here of me buying is not about average down price. That is actually the bonus.
I am putting my bet on OUE Limited to know what they are doing. If today it is Lippo who is doing the commitment, then I wont be buying back in. Yes, I am aware OUE & Lippo belong to same Riady family.
Happy 2021!!!!
I cannot decide if buying more First REIT is brave or crazy, but to me it seems that everything is bad news about this REIT. There might be lawsuits or other issues coming up, my guess is they default. I am still holding, but wish I had sold :)
ReplyDeleteHi Maru
DeleteYes, there will be more issues coming up, but I dont think will default.
FIRST REIT is the property owner and have $1,338.7m worth as asset (Based on 1H 2020 appraised value).
At most banks will take over some of these properties, similar to when you over leverage to buy properties and cant make payment.
The tricky part here is their properties is hospital. Even if banks want to take over these properties, will Indonesia government allow that to happen since it will disrupt the healthcare ecosystem.
Stephen Riady (OUE Chairman) acquires S$95m Good Class Bungalow in Aug 2019 (https://sg.asiatatler.com/society/stephen-riady-acquires-95million-nassim-hill-good-class-bungalow-all-you-need-to-know) & OUE Limited is doing share buyback since Oct 2020.
What is S$158.2m that FIRST REIT is trying to raise?
Nevertheless, DYODD and believe in that :)
Happy New Year!!
Why don't you buy OUE then?
DeleteWah, your this question is similar to when I am dating the son/daughter, someone come over and ask "Why dont you choose to date the father/mother?" LOL
DeleteMy 2 cents is OUE is a diff gameplay since it have many other children aside from First Reit which you need to take into consideration.
I cut loss on my small position the day Lippo announced they are unilaterally reviewing the lease with FR. Obviously FR was not aware and had to scramble for a response later. Imagine your tenant announce to the whole world the rent u charge is too high and want out. It only goes to show one thing - the lack of bargaining power of the landlord. Conventional investment wisdom will tell u to avoid companies with only few major customers or worse a single dominant customer. I calculated the intrinsic value post rights and restructure to be around 20 cents. so this baby is not flying anywhere anytime soon. so no hurry to buy. U can imagine the shock I had when i see queues to buy at 0.405 the day of the announcement. either these people dont know how to calculate or never read news.
ReplyDeleteYes, having anchor tenant is a double edged sword.
DeleteWhen they are doing well, you will be happy.
When they are doing not so well, you will feel the stress too.
Hi,
ReplyDeleteHappy New Year to you!
Thanks for sharing but just a suggestion: if you truly believe it's undervalued, after you sold why not considering buying back a smaller position and massively subscribe to excess rights?
I agree with learnbondpropequity's views and I think management is the key. Once the news on Lippo comes in, I exited a few days later. They are at the mercy of their tenant and faced concentration risks as well as currency risks.
Also, when it comes to investment, there's opportunity costs as well. Have you consider other SG reits which you can ride on the recovery play rather than First Reit?
Just my two cents, but I hope your overall investment will turn out well! 😉
Hello
DeleteHappy 2021!!
Subscribing to excess rights is another part of my plan too (Keeping to same $48,000 as cost).
So dont be surprise if you see me post more on buy&sell transaction.
(If everything goes accordingly to my plan. Sometime in life, “Ji hua gan bu shan bian hua” aka “Plans Can't Keep Up with Changes.”)
I do keep a lookout on other SG stocks too but so far, did not manage to find one (With 50% loss, need 100% return to breakeven).
The Riady has a reputation of not treating minority shareholders well when the crunch came. Considered what happened to OUE commercial, Lippo reit and now First reit. Sold my First holding at a loss last year when the first sign of trouble on Lippo Karawaci surfaced. For retail investors like us, there are under-currents we are not aware of. Better err on the side of caution. My 2 cents.
ReplyDeleteAgreed on that.
DeleteEverything have a price tag on it.
Just like employee, if you are happy with the salary offered, you accept it. Else, continue looking.
Thus, as long as the buy price is right, it will/should be a good investment after you have DYODD.
Are you subscribing to the rights?
ReplyDeleteThere seems to be 2 events now
- EGM to vote for the resolutions of which failing may lead to liquidation of the company.
- Capital raise via equity which require existing investors to raise capital which is actually used to support Lippo.
- Officially, it seems Lippo parent is just using all the reits to keep themselves afloat and this could be quite dangerous given the interconectedness.
Good luck.
Depending on the share price.
DeleteIf it move upwards, I will sell some and subscribe to rights (including excess).
But I wont channel more fresh money in on top of my sunk cost $48,000