I have a Cap. I have a Com. Ahh! Cap Com.
Cap Mall Cap Com. Cap Com Cap Mall.
Ahhhhh! Capitaland Integrated Commercial Trust!
On 22 Jan 2020 morning, the proposed marriage between Capitaland Mall Trust (SGX:C38U) and Capitaland Commercial Trust (SGX:C61U) was announced. The combined entity, Capitaland Integrated Commercial Trust will become the 3rd largest Reit in APAC and the biggest Reit in Singapore with 25 properties having a value of S$23 billion. Each Capitaland Commercial Trust unit will be compensated with 0.72 unit of Capitaland Mall Trust and 25.9 cents in cash.
I was rather surprised and shocked not because both reits are in my portfolio but because this is the third time within 6 months that my portfolio is affected by such Reits merger. The first marriage was Ascendas Hospitality (Now delisted) and Ascott Trust (SGX:HMN). That was not much of a surprise to me as both are same breed hospitality trusts under Capitaland after they acquire Ascendas Singbridge.
Then comes Frasers Commercial Trust (FCOT) (SGX: ND8U) and Frasers Logistics & Industrial Trust (FLT) (SGX: BUOU). I own FCOT in my SRS account and FLT in CDP. This seems like a copycat of the merger between OUE Hospitality and OUE Commercial Reit which pioneered the fusion of Reits with different property class
And now the marriage of the God of Retail Reit and Goddess of Commercial Reit to form the Largest and Best Reit in Singapore.
a) to future proof for large acquisitions and grow beyond Singapore
b) to improve credit rating and boost financing power
c) DPU accretive to unitholders of both Reits
d) reduce single asset class risk through diversification
My positions in Cap Mall and Cap Com are poised for the long term with 5 to 10 year time frame horizon. I have no plans to time the market to lock in profits because I have traded them many times in the past for kopi monies. They are now the fundamental blocks of my income portfolio. I am slightly disapppointed with this merger despite the benefits as I will have one less top grade Reit in my portfolio and I will end up with unusual quantity of the new Capitaland Integrated Commercial Trust entity. My 5,000 Cap Mall and 10,000 Cap Com will become an awkward 12,200 CICT. Cap Mall is a name that we are so used to for the past 18 years and we need to orientate ourselves to this new CICT legend in this new decade. I believe CICT is a must have in any income portfolio not just for retail investors but also for fund managers and corporate coffers.
My action plan is to sit back, relax and collect all the dividends till the merger take place in Jun 2020, collect the capital returns of 25.9 cents per share from Cap Com to boost my war chest. After CICT is listed after the merger, I intend to purchase 2,800 or 7,800 CICT to top up my resulting quantity of CICT to 15,000 or 20,000. Hence, I will be happy if the price of CICT do not run up too high so that I do not need to average up my cost too much. In the short term, I think both the prices of Cap Mall and Cap Com should experience volatility. Coupled with the worsening situation of the Wuhan virus that may affect retail industry, there is a decent chance of stocks experiencing pullbacks to justify the risks of staying onboard the ship.
Thanks for reading! I wish everyone a Ratty Happy Chinese New Year!
With Love & Peace,
Qiongster
2 comments:
Hi Qiongster,
Thank you for all the posts. I enjoyed them all and learnt lot!
I am totally newbie in this investment thing and want to learn how to invest in Reits.
I like to just buy them and keep it and just collect dividends as I am not active.
What do you recommend I buy and do?
Much appreciated
First of all, always be prepared to lose when you start to invest. You need to have a brave heart and calm mind to weather storms and fluctuations of the share prices.
Second, have an own plan of how much to allocate based on your risk appetite. If you are conservative, you can invest 20 to 30% of your cash. If you are slightly adventurous, 40 to 60%.if you have young with high income and can afford to lose with time on your side, invest 80%.
Third, as you like to keep Reits long term, you are suitable to be a long term investor. You can try to collect the best Reits in Sg whenever their prices dip or crash, namely the Mapletree, Capitaland, Frasers, Keppel family of Reits. They are also called Ah Gong Reits owned by the gov through Temasek.
Next, think of what kind of Reits you prefer. There are industrial, retail, commercial, hospitality and health care. The lower the risk, the lower the yield. And most good Reits have ballooned to a high price that compress their yield to less than 5%. It is obvious the safest Reit is Parkway Reit that has less than 4% yield.
Besides reits, you can add in growth or income stocks into the portfolio. Growth stocks pay lesser dividends than income stocks and reits. An eg of growth stock is Thai Bev, property developers like Capitaland, Frasers Limited etc. Eg of income stocks are telcos, banks and reits.
Most people will advise new investors to go for Index Exchange traded funds like but I would encourage new investors to ownself think of the type of businesses you would like to own. Those who favour food and staples go for dairy farm, sheng siong, koufu, old chang kee. Those who like travel and hospitality can own a piece of travel industry through hospitality reits, SATS, Sia Engineering etc. If you like money, no harm owning the banks that own everyone's monies and mortgages. If property oriented, Reits are the best heavens to own a small slice of property without going through the hassle of collecting rental.
Lastly, I have to reiterate that all the above investments come with risks of varying degree. I will not tell anyone what to buy. One has to decide for oneself how much risk to take and how much yield you like to earn from your money. You can learn from reading books, reading people blogs, news to have an idea which stock or counter to buy.
I wish you all the best in your investment journey! Welcome onboard.
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