An Analysis on Sabana REIT

Sabana REIT is listed on 26 Nov 2010

Financial Data

Yr                Rev              Net Income              DPU
2013           86 mil (est)      80 mil (est)            9.70c (est)
2012           81.768 mil      76.937 mil             9.28c

2011           76.945 mil      73.074 mil             9.53c

Other Data (as at 30 June 2013)

Debt:

• Current:  Nil
• L.Term : 417.291 mil
• Total    : 417.291 mil

Borrowing breakdown

• 100.2 mil 3-yr term CMF (Commodity Murabaha Facilities) due in Nov 2004
• 177.6 mil 3-yr term CMF due in Aug 2015
• 75 mil 5-yr term CMF due in 2017
• 72.5 mil @ 4.5% Convertible Sukuk due 2017. Where the convertible sukuk can be converted to shares @ $1.1933

Cash Bal: 13.442 mil

Shares Issued: 649, 704,185

As of 24 Sep 2013, a private placement of 40,000,000 units @ $1 has been carried out. This will rank pari pasu with the normal shares. Thus total share has been enlarged to 689, 704, 185. This constitutes to about 6% dilution in the ordinary shareholding.

NAV: $1.09

Business Model

http://www.sabana-reit.com/about.html

Opinion

With an estmated 8% div yield Sabana REIT looks good to any investor who is looking for long term gains. However upon researching this REIT, we may need to take note of a few issues:

• The REIT does 100% payout every qtr, they do not have any capital reservation for expansion
• In order to increase their revenue, their only way is by borrowing from the market to fund any acquisition. Thus, their borrowings will be subjected to market prevalent rates.
• Any increase in the 10-yr treasury rates of Singapore Bond, the market will force this REIT to lower their mkt price in order to maintain the yields abv 7%.

Conclusion

As this REIT is fully funded by debt, we may need a large margin of safety in order to keep this REIT for long term. If we're to assume that the 10-yr treasury yield is going to increase by 1% to 3.5%,  we may need to have at least a minimum of 10% buffer to its book value for us as an investor to enter to this stock.


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