Friday, February 7, 2014

Second Chance Properties-Less

Seems that the current "in" thing to do for Singapore listed companies with investment properties is to either package them into REITs or cash out on their property holdings, to reduce their real estate exposure in view of potential headwind for rental rates and property values with the government's intention to cool the property market.

It started with the SPH REIT spin-off from SPH, followed by OUE's Hospitality and Commercial Trusts, and latest plan by F&N to inject some of the Thai owner's properties into yet another REIT. Now even Second Chance Properties is joining the party, as it announced yesterday that it is disposing all 45 properties in its portfolio to a REIT company (Celestine Management) for $175m to be listed as a REIT (See announcement).

I'm actually neutral with the company's move, which could possibly be a good one as long as it's able to get good valuation for the properties. The short term impact should be beneficial to shareholders. With cash on hand, and its consistent dividend track record, the dividend payout could be easily maintained for quite a while. In its latest 2013 annual report, under the CEO statement, it has mentioned its intention to distribute dividends of no less than $0.035/share for year 2014. Based on the post-announcement stock performance, the market does not seem to have any negative jerk-knee reaction to its move.

For long term, I will be looking forward to see its plan on how to utilise the proceeds from the disposal to increase the shareholders' value.


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