Thursday, August 10, 2023

"Subscribed" to Capitaland Ascott Trust Preferential Offer from the market


Capitaland Ascott Trust has recently announced an equity fund raising of approximately S$300 million. This includes a private placement at $1.043 for 191.8 million shares and a preferential offering at $1.025 for 100.5 million shares.

This corporate action is deemed unpopular by shareholders as seen by the issue prices for private placement and preferential offering at the lower tier of range and tanking of its share price by around 10% to lower than $1.02 as of time of writing.

This equity fund raising comes a year after its previous private placement held in Aug 2022 which caused a dilution of shareholdings. 

About $170.2 million, or 56.1 per cent, of proceeds from the overall fund-raising exercise will go into funding the stapled group’s proposed $530.8 million acquisition of assets from its sponsor, which includes The Cavendish London in Britain.

Another $82.8 million, or 27.3 per cent, will be used to finance aplanned extension and renovation of Novotel Sydney Central, its hotel asset in Australia.

Some $19.9 million, or 6.6 per cent, will go into financing the renovation of Citadines Holborn-Covent Garden London, the stapled group’s serviced residence in Britain.

The preferential offering will be on the basis of 29 shares for every 1,000 shares owned.

As I currently hold 8,000 shares of Capitaland Ascott Trust which were converted from previous Ascendas Hospitality Trust, I am entitled to 208 preferential offer shares. 

I hope to get 2,000 shares including excess but not guaranteed in preferential offering.

Now that the share price of Capitaland Ascott Trust is below the preferential offer price of $1.025, I have nibbled 2,000 shares at $1.01 off the market which costs $2,048 instead of $2,052 from if I were to subscribe to preferential offer. Hence I will skip the preferential offer exercise.

There it goes. 

Capitaland Ascott Trust constitutes less than 5% of my SGX income portfolio and is not my most favourite REIT. Though I believe it is the best hospitality REIT for investors to ride on the tourism recovery wave, it is not the most attractive REIT to hold for the long-term considering that there are many better quality REITs offering more attractive yields at lower risks.

Nonetheless, I am happy to round up my investment in Capitaland Ascott Trust at below book value of $1.15 and continue "owning" hotels and serviced residential properties around the globe, while collecting rental for the long-term at a yield of more than 5%.

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

With love & peace,


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