Friday, June 02, 2023

My Plan for Aims Apac Reit Preferential Offering


Optus Centre, Australia owned by Aims Apac Reit

Happy Vesak Day!

I spent this holiday morning strategizing my June 2023 cashflow and thinking about how to deal with the Aims Apac Reit's preferential offering.

On 31 May 2023, Aims Apac Reit (O5RU.SI) announced an equity fund raising of about S$100m, consisting of S$70m in private placements to institutional investors and a non-renounceable preferential offering to existing shareholders for S$30m, at a ratio of 35 units for every 1,000 units owned at $1.189 per unit.

Following the news, the share price of AA Reit tumbled from $1.31 to $1.22 after halt of trading was lifted. This is unthinkable as its share price recently hit $1.43 in May after announcing a strong set of quarterly results and a near-term record quarterly dividend of more than $0.026.

As of 1 June 2023, the private placement has closed at S$1.214 per unit, which is a 6.7% discount to the adjusted volume-weighted average price at $1.30 per unit, after subtracting an advanced distribution of around $0.018 per unit.

The purpose of this fund raising exercise serves to partially or wholly fund asset enhancement initiatives of 2 existing properties in Singapore, redevelopments of properties, potential future acquisitions of properties and to pare down debt to keep its aggregate leverage within the desired range. 

I believe the management has considered alternatives such as taking on additional bank loans or issuing bonds in current high interest rate environments and that having an equity fund raising is the most optimal solution in the present landscape. This equity fund raising allows AA Reit to grow its portfolio organically, enhance financial flexibility and strengths, and most importantly, it is an yield accretive action to benefit shareholders.

The sponsor of AA Reit, Aims Apac Capital holdings limited has provided an irrovacable undertaking to the Manager, joint Bookrunners and the Underwriters to showcase their strong support and conviction in AA Reit for the long-term. Excess units not subscribed by existing shareholders will be absorbed by them.

I fully support this equity fund raising even though I am disappointed to see its share price tumble so much in such a short span of time. Amidst fear and uncertainty, I sensed opportunity.

I currently own 32,000 units of AA Reit at a net cost of $0.80 after factoring in all the cumulative dividends collected. I have been waiting for a good opportunity to add on investment in this Reit since my last addition at $1.18 in Sep 2020 and the time could not be any better than now. 

In fact since 2016, this Reit has already paid me more than S$13k of dividends!!! This is a greatly managed small industrial Reit which provides consistent and steady passive income to reward loyal shareholders.

Let me briefly share my action plans in the upcoming weeks.

1. Increase investment amidst fear and uncertainty

I will place order queues to buy more than 10,000 shares of AA Reit at below $1.23 next week. At a yield of more than 7% and more than 10% discount off its book value of around $1.35, I believe that this is a great opportunity to increase holdings in AA Reit.

2. Subscribe entitled and excess PO shares

With more holdings, I should be entitled to more Preferential Offering shares. Say if I own 43,000 shares of AA Reit before its ex-Rights date of 8 June 2023, Thurs, I should be entitled to 1,505 shares. Hopefully, with priority given for rounding of odd units, I should be able to get at least 2,000 shares at PO price of $1.189.

3. Sit back, relax, collect the advanced distributions and future dividends

Whether I am successful in increasing my investment in AA Reit or not, I will still be entitled to advanced distributions of between $0.017 and $0.019 per unit after its ex-Dividend date on 8 June 2023 based on my current holdings. These dividends are payable on 20 July 2023. In the coming months, years and decade to come, I hope to enjoy more dividends from AA Reit perpetually effortlessly.

Thank you all for reading. Stay focused and remain steadfast as always!

With love and peace, 

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