Sunday, November 19, 2017

My thoughts on Mapletree Industrial Trust and Dividend Discount Model Valuation

Few weeks back, Mapletree Industrial Trust released their quarterly earnings and at the same time, announced a joint venture with Mapletree Investments to acquire 14 data centres. This shouldn’t come as a surprise, as they have made known their investment strategy on 26th Sept 2016 to explore established data centre markets. 

It was funded via bank borrowing and private placement of 68million shares to institutions and other investors at the issue price range of $1.83 to $1.90. It was 3.3x oversubscribed and price at the top range at $1.90, suggesting strong institutional demand.

MIT was the first share I have ever own and bought it during it’s IPO. Back then I was in my final months of NS and I went to subscribe 3,000 shares at the ATM machine using all my savings. I was lucky that to be alloted 1,000 shares because I was told that a good IPO with Temasek backing is hard to get. It opened at $1.00 and I thought I was even luckier by selling it at $1.20 months later after collecting more than 2 rounds of dividends. I thought of buying back when it dips below it but it had gone upwards since then. However, I added 2000 shares at $1.84 in August after having some spare cash for that month and they announced the acquisiton after. Here are some of the reasons why I find the acquisition makes sense.


One of the concerns I had all the while was its short leasehold. As of March 2017, the weighed average unexpired lease term is about 39.3  (38.8 as of Oct 17) years. It's calculated based on land area. However, that's also the reason that it's able to obtain a higher yield compared to other Reits as leasehold properties require lesser capital to purchase, and tenants are not affected by the leasehold years. The downside is having to constantly acquire properties to improve the average lease term. 

If we were to calculate based on Gross Revenue, for FY16/17, total revenue collected for leasehold properties less than 21 years would be $41,699,000 of total revenue of 161mil, which is about 25%. 

After the data centre acquisition, it would strengthen it's porfolio by lengthening the land lease as it now forms 24.4% of its total portfolio by land area.

Accretive Acquistion

The joint venture is also said to be yield accretive, as the acquistion of the data centres increases the distribution per unit (DPU) despite the dilution effect.

This means more distributable income to shareholders without the need to fork out additional cash. Although the loans would increase net debt to 34.7%, it is still averagely lower compared to other industrial reits. 

MIT's net debt to asset is below the average after the acquisiton

Rental Escalation
If you have been monitoring First Reit and Parkway Reit in Singapore, you will realize that their DPU increases every quarter (when compared Year on Year).

Here's how the rent review mechanism is calculated, which explains why PLife Reit managed to grow their DPU every year, consistently.

The reason is because of the build in mechanism for rental escalations. In the case of the data centre, it's an annual rental escalation of at least 2%.

Recently I read a Business Times article about the way Reits compute rental reversions. There is no uniform way of calculating rental reversions and it's not mandatory to disclose it.

For instance, Keppel Reit's rent reversion only applies to new, renewal and foward renewal leases. Review leases, which refers to long leases, are not included. This was mentioned in the regulatory filing earlier this year. However in Q3 reporting, it was mentioned that rent reversion were positive at 3% for the first nine months.

As for Mapletree Industrial Trust, they didnt specifiy any rental reversion policy. Basically they just disclose the gross revenue and net property income in every financial period. As to whether they have any reversion for review lease or just renewal lease, your guess is as good as mine. I will write to Investor Relations team (suggested by Kyith from Investment Moats) and update you if they reply. 

Other positive points: 
-reduced maximum risk exposure to a single tenant
-increased WALE

Growing Dividends

In the past few years, it had dividend reinvestment plan (discontinued) which allows shareholder to automatically reinvest dividends and capital gains distributions. Investors who chose to take cash instead would see their shareholdings diluted by the new issued shares. Some reits reported higher distributable income after rights or drip, but dpu drops because of the dilutive effect. As for MIT, despite share dilution, its dpu has been always higher than the previous year's quarter since it's listing. The industrial REIT that sees dividend growing every quarter when compared year on year is Ascendast REIT. (with an exception in Yr 2013). Thats also the reason that it's trading at a premium to NAV of 1.4X

MIT's quarterly DPU (in cents)

In my opinion, it all boils down to the management, who has been very prudent in their investments to enhancing shareholder's value.

Being in the sales line, I do know that tomorrow's success is determined by our efforts today. Like what Warren Buffett had said, someone is sitting in the shade today because someone planted a tree a long time ago.

In the case of MIT, it is able to grow it's dividend partly due to AEI through funds from Dividend Reinvestment Plan (DRIP) and alwyas having visible pipeline of projects coming up. The coming ones will be 30A Kallang Place and Kallang Basin 4 Cluster (AEI) and a new data centre for HP. The management are able to ensure that new projects are able to contribute to the distributable income to offset any loss of dividends from lower occupancy or drop in rental yield. 

There is a saying that you can't have your cake and eat it. If Mapletree Industrial Trust has good management, growing dpu, low gearing, what's the catch?

1.4x book value
In my opinion, the downside is that it's trading quite above book value, 1.4X, and since it's listing it has never traded at a discount to book value. I guess that's the premium for good management and a reputable sponsor. You got to give it to them for growing the dpu in challenging times and enhancing shareholder value. I am often more inclined to buy Reits managed by a reputable Reit Manager. My favourites are: Parkway, Capitaland, Fraser and Mapletree. 

Lower dividend yield compared to peers
Secondly, it's dividend yield is lower than it's peers. At $1.97, MIT is trading at a premium to book value, hence it's yield is lower.

However, the dividend growth is equally important too as MIT managed to grow it's dividend at a rate of 6.87%


For a company with reputable sponsor, I thought the valuation is likely to be the Archilles' heel analyzing it's value. Though great companies are likely to be cheap especially in the bull market, we have to calculate and ensure we aren't overpaying or else we are unlikely to receive a decent return on investment.

As the purpose of buying Reits is for stable dividends, we would use dividend discount model.

Share price = Dividends one year from now / (Discount rate- Dividend Growth Rate)

For individual investors, we can use Capital Asset Pricing Model (CAPM) to determine the discount rate.

Discount Rate= Risk Free Rate - Beta (Market Return - Risk Free Rate)

E(R)= Rf + β (Rm - Rf )

For this exercise, I'll use Risk Free rate, Rf to be 10 Year Singapore Government Securities (SGS), which is 2.13%

Beta, β to be 0.43

As for markets return, R, I will be using STI ETF's return since inception till 30th Oct, which is 7.52% (with dividends reinvested).

10 year STI returns is about 1.83%. To be on the conservative side, lets use the higher return, 7.52% 

This gives us a discount rate of 4.4477%.

Since inception till end 2016, the dividend growth rate of MIT is about 6.87%.  If applied to dividend discount model, the value price per share becomes negative.( Dividend Growth Rate > Discount Rate) However, this is the assumption that it will keep growing it's dividend forever at this rate which may not be sustainable. Even as the growth rate approaches cost of equity i.e. 4.4477%, the value approaches infinity.

To find growth rate which market is current valuing, we can do up a value per share as a function of expected growth rate graph. In this case, the implied growth rate would be about -1.32% to justify the share price of $1.980. So market is pricing MIT at -1.32% drop in yearly dividends if all my assumptions hold.

Two stage dividend discount model
Perhaps I am being too optimistic by assuming dividends are going grow at 6.87% forever. In most cases, companies go through two or more stages of growth, where it begins with an extraordinary growth stage and gradually to a stable growth phase which lasts forever.

MIT was listed in late 2010, so lets assume 10 years of growth stage (since listing in 2010) at rate of 6.87% and subsequent perpetual growth rate of 3%. In this calculation, we will ignore any capital gains.

Discounted Dividends (Year 1 to Year 3) = $0.1190 + $0.1217 + $0.1246 =$0.3653

Total Equity value= Discounted Dividends (Year 1 to Year 3) + Discounted Perpetuity Value= $8.85

$8.85 is extremely high and it's definitely overvalued. The yield will become 1.3% and paying 12X book value.

I relooked at my calculations and the variables used yet I find the assumptions used are quite reasonable. I searched online on CAPM model and found an article about it's limitations. As the CAPM calculates the required return for risky assets, it measures risk based on the beta. Beta is actually the relative volatility of the investment compared to the market and a more volatile stock gives a higher beta value. 

However, value investors like Warren Buffett, do not associate risk based on its volatility. Rather they assess its fundamentals to determine it's risk. Hence, investors who uses CAPM model are not getting the required return based on true measure of risk..

To test it out the extent which beta affects the valuation, we can try out some sort of sensitivity analysis and we can also find out the implied beta at current market valuation.
Using a two stage dividend discount model and same assumptions,

Present value of dividends for the first 3 years:

Discount factor= 1 +Rf + β (Rm - Rf )
=1+ 2.13% + β (7.52%-2.13%)
=1+ 0.0213 +0.0539β  (above)

Present value of terminal price= $(0.1420* 1.03)/(0.0539β-0.0087)/(1+0.0213+0.0539β)⁴

(discount rate- growth rate)
=2.13% + β (7.52%-2.13%)- 3%
=-0.0087+0.0539β (above)

=1+ 0.0213 +0.0539β → discount to present value (above)

Hence adding all up: 

Price= Discounted dividends for 3 years+ Present value for stable growth

Price= 0.1243/(1+0.0213+0.0539β)¹ + 0.1328/(1+0.0213+0.0539β)² + 0.1420/(1+0.0213+0.0539β)³+0.146212/(0.0539β-0.0087)/(1+0.0213+0.0539β)⁴

Implied beta at $1.98 is about 1.32

The analysis suggest that the dividend discount model gives a very high valuation for low beta stocks, and the valuation derived is very sensitive to small increments in beta. This is why sometimes I avoid using valuation fomulas in calculating intrinsic values as some fomulas gives the theoretically right answer, but doesn't work well practically.

A better way is to determine the discount rate based on our perceived risk on the industry or the stock, rather than measure of volatility. For instance, I would use a higher discount rate for cyclical industries i.e. Oil&gas, whereas for more defensive sectors such as healthcare or companies that consistently generate free cashflows, I would apply a lower discount rate. Another suggestion for discount rate in valuing reits is to use the rate that I should be minimally compensated for. I would compare the returns to SGX-S-REIT 20 Index. You can check it out here. → Indices → Search for SGX S-REIT 20 Index and download it's fund factsheet. The 5 year asnnualized returns are about 11.9% as of June 2017. 

Thanks for reading my posts. I have been adding more shares during these past few months as the market is trending up.I hadn't got time to update my Facebook on my stock transactions because of work commitment and I was overseas last month too. Will be travelling again next month and the month after.. 
Will do an update and list out all my buy/sell shares hopefully by this month.

If you would like to follow my blogpost, you can do it by liking my Facebook page here

In these few months of bull market, how has your portfolio been performing?

Wednesday, June 21, 2017

Portfolio Update- June 2017

It's been 4 months since I update my portfolio. As mentioned in previous portfolio update, I liquidated most of my shares for some property investments which in the end I changed my mind. Hence I have been buying back some of the shares I sold.

Here are my 2 CDP portfolios and another one with StanChart. There's residual amount of US shares left which I didn't manage to sell it on time when the bank implemented the min transaction fee. On top of these, I have a POEMS Share Builder and POSB Invest Saver account to do dollar costs averaging which I have been putting in $1,000 and $200 respectively. Moving forward, I am planning to do more passive investing rather than actively managing my portfolio actively because I would like to devote more time at work when I am still in my 20s. (ok, late 20s) Because being young is really an advantage and a resource- in workforce or even in investing and I would like to utilize my strengths to succeed before I turn old. In investing, younger people tend to be able to take on more risks and even compound interest takes time. Whereas the advantage of being young at work is having more energy, more efficient and flexibility.

I must admit that age is catching up. Gone are the university days being able to survive with those 5 hours of sleep for 7 days in a row and mugging for exams and blog in the middle of the night.Today, I need at least 6.5 hours to feel refreshed. 

p/s I took a day off from work after my dental appt to rest and update my blog.

My Favourite quote: Feel the fear and do it anyway

Below are my my investment portfolio.




POEMS ShareBuilder

POSB InvestSaver

Cash available for investment

Total portfolio value ( $322k.

Shown below are the shares transacted since last year Sept. I have subscribed to all the scripts dividends including the recent DBS priced at $20.39. The script is not attractive at all but I decide to hold for the long term so I think it will do just fine.

Fraser Logistics & Industrial Trust
I liked the fact that the majority of its properties are (1) freehold, compared to most industrial Reits having short leasehold of below 40 years. Also it has a yearly rental escalation and long weighted average lease to expiry. My preferred choice is still Mapletree Industrial Trust, due to its low gearing and reputable sponsor - Mapletree Investments Pte Ltd but it ran up quite a bit already. It was listed few months before I ORDed and since then it has good track record of growing it's dividends even during challenging times.

First REIT
I bought back 5000 shares and will add the rest if it falls below $1.30. Recently the stock price experienced a minor dip after the news about the resignation of the CEO and director Dr. Ronnie Tan. Currently, I am waiting to see next quarter's performance before deciding on adding more. With current CEO Victor's Tan,who is previous CFO and 9 years of experience at Bowsprit, I am confident that many things are set in place to prepare for this succession plan. Dr. Ronnie also announced his resignation in Auric Pacific Group as a Non-independant non-Executive Director and a member of Audit and Risk Committee in 2016. It seems he is set for retirement unlike Singpost where you see a sudden resignation of CEO, COO and CFO.

Dr Ronnie Tan retires in Auric Pacific:

After selling the shares last year, it went up to a high of $5.30 before it retraced to a range of $4.70 to $5. I took the opportunity to buy during the correction at $4.76 and $4.92. I decided to hold Sats shares for the long term as I liked their management. In the annual report, the Chairman mentioned that they will keep costs low through investing in technology and automation, and he actually kept his words. In the following earnings report, the result speaks for itself. They managed to grow their profit and their FCF through enhancing productivity and costs cutting despite the challenging economic environment.

Here is just one of the examples where Sats invested in automated production line to enhance it's productivity. Click here for the link

Furthermore, I believe that SATS will benefit from the future construction of Terminal 5, which is 10 times bigger than Singapore's largest shopping mall or Terminal One, Terminal Two and Terminal 3 combined.

I have actually blogged on SATS 2 years ago. You can read it here.

I added Starhub at $2.98 for its yearly dividends of 20 cents/share yielding 6.7% .I bought it few days before the quarterly report hoping for a better set of results to drive up the share prices. Yet, the result wasn't a good one and unexpectedly announced of dividend cut to $0.16/year, i.e 5.7% yield. I decided to cut loss and move on.

After many IPO failed attempts, I was lucky this time and was allotted 6000 shares of Sanli. There are many reasons that I liked this company and I am intending to add more if it drops further. Firstly, it derives 99% of it's revenue from PUB which is a reputable and credible client. While it may face some 'concentration risk' by being over reliant on PUB, the plans to expand their business into southeast Asia region would help to diversify the revenue streams. It also has strong financials:  growing profits, increasing FCF and minimal debt. When it comes to management, the founder and executive directors are engineers with experience in this industry ranging from 15 to 20 years. During placement exercise, Heliconia Capital Management Pte Ltd, wholly owned by Temasek, increased it's shareholding from 6.65% to 7.97% which shows strong institutional support.

Next up, is the share under my watchlist and literally just got filled.(an hour ago)


 Today, taxis in Singapore are facing much competition from Uber and Grab. Moreover, these startup companies are giving out with many weekly promo codes that one can end up getting free rides to get from one place to another. Some taxi drivers even made a switch to become grab/uber drivers.

Attractive Grab Promotion

I always thought that ComfortDelgro derives its revenue from taxi business alone, hence I never took a glance at it when it drop to it's low earlier this year. Until I read the blog from SG Young Investment. You can read it here. In actual fact, Comfortdelgro has taxi business in 6 different countries also owns 74% of SBS. As of 2016, public transport division accounts for 56.8% of ComfortDelgro's total revenue.  The bus contracting model (BCM) implemented last year has benefited the public transport segment, and it will be paid a service fee and leasing fee in exchange for a fare revenue. As the service revenue is pegged to wage levels, inflation and fuel costs, it's will bring about stable earnings and won't get much impacted by external factors such as oil prices or passengers transport demand.

I am also looking forward to the opening of the Downtown Line 3, which will also contribute to its revenue once LTA hands over to SBS.

At 16x pe ratio, I believe it is attractively priced relative to it's peers such as MTR of HK with 25.1x earnings, and  BTS Group Holdings of Thailand at 50.2x. Closer to home, SMRT traded at  23.5x before it got delisted by Temasek Holdings. Hence it's probably the fact that much pessimism has been factored into the stock price.

Interestingly, my buy order for this stock just got filled as I was writing this blog. Counterparty: MACQUARIE

So how did your stocks and investments perform in June and any thoughts on Comfortdelgro?

Thanks for reading. If you are keen to follow my share transactions, kindly checkout my Facebook page here. I will update my Facebook once my buy/sell order is filled or whenever I wrote a blog post. Selamat Hari Raya Puasa to all my Muslim friends and readers and happy long weekends to all!

Saturday, June 10, 2017

Accordia Golf Trust

As we all know, STI has been moving up steadily this year, driven by bank and property counters. Year to date, it’s one of the best performing index in the world. Hence to search for good yield, I have expanded my radar to look beyond just blue chips and the common REITs. Recently, Accordia Golf Trust's attractive yield caught my attention when it reported its earnings. It is operated in Japan and I don't have much knowledge on golf business and it's future prospect. So I did some read up and in this article, I will be focusing more on the outlook on the golf sector in Japan rather than the numbers.

Brief History – Asset Spinoff

Ok, it’s just 3 years ago, but basically this is how it all started. In August 2014, Accordia Golf, which owns 133 golf courses, decides to be asset light and focus more on golf course management. Accordia Golf Asset LLC was then set up and Accordia Golf transferred 89 golf courses to Accordia Golf Asset LLC (fully owned by Accordia Golf then). Next, it transferred this silent partnership stake in Accordia Golf Asset LLC to Accordia Golf Trust for approx 113bn Yen. This purchase was financed through IPO by listing in SGX, JPY 25.4bn from Accordia Golf (28.85% stake in AGT), and JPY 45.0bn loans.

Accordia Golf Trust Management Pte Ltd then acts as the Trustee- Manager of AGT, which manages the business trusts and safeguard interests of investors, jointly owned by Daiwa Real Estate Asset Management Co. Ltd and Accordia Golf Co Ltd. Currently AGT is granted the first right of refusal over the sponsor’s golf courses and driving ranges and Daiwa Real Estate Asset Management Co Ltd provides asset management advice to AGT i.e. acquisition/disposal of golf course.

The below image, extracted from the annual report basically summarize the whole picture.

In simple words, Accordia Golf spinned off 89 of its golf course asset by listing AGT to focus on providing golf management services . With Accordia Golf Trust having call options over Accordia's Golf course and first right of refusal over the courses that Accordia buys or sells, it will be able to acquire golf courses to grow its revenue.

Next up, would be some of the trends I see in the golf sector in Japan and what it means for Accordia Golf Trust

Aging Population

The chart above shows the rise in population aging with a steady increase in population aged 60s and projected to rise till 2040. On the inverse, there is a fall in population below age 20-59 due to falling birth rates.

Not a good news for Japan but that would potentially mean more golfers in the future, as the chart below shows a rising trend of percentage of golfers above 50 & 60, which occupies about more than 50% in 2011. A possible reason may be that golfers at those age group are retired and have more free time to play. With medical advancement moving forward, life expectancy in Japan is also set to increase albeit a gradual one.

High Barriers of Entry/ Competitive Advantage

According to Accordia Golf Trust IPO prospectus, land price remains high and a typical golf course requires 50-80 hectars, costing about JPY5 billion to JPY6 billion in construction costs (excluding acquisition price). According to IPO prospectus, there has been no development of new golf courses partially due to lack of develop-able land, which shows that competition is limited and is likely that Accordia is able to maintain its market share in Japan.

To understand why the economies of scale and market competition makes it harder for new entrants, you have to look back into the development of the golf industry since the 1900s.

The 100 years timeline can be concisely broken down into 4 phases.

Phase 1
It started in 1956 when golf as a sport gains it’s popularity.The number of players has grown steadily with the number of golf courses, hitting a million golfers and about 500 golf courses in the country. Back then membership are obtained via shareholder memberships.

Phase 2
Few years later, golf courses doubled to 1,000 in 1975 and golf became a very popular sport to entertain clients by mixing business and pleasure. This was when a deposit system was introduced which was to be paid by a new member and could be fully refunded with no interest should one terminates the membership.

Phase 3
The deposit system became very well established with membership were easily sold with an increased demand. Golf companies then used the cash for golf development purposes as well as investment products. With the surge in players, they had never expected that one would consider to terminate their membership.

Here’s one article which depicts situation then in 1987, where a membership costs up to a few millions

Phase 4
Japan’s economic bubble unexpectedly burst in 1999, and many golf course then were still under construction, causing an oversupply when golfers shrank. That was when many golf companies faced pressures from members to request for refund. Many finally troubled firms couldn’t pay off went into bankruptcy and some were bought over by Accordia Golf and Pacific Golf Management (PGM).

Today, it becomes the situation where large size golf companies like Accordia are expanding their market share through acquisitions which smaller companies finds it hard to compete as they are lacking in economies of scale. The smaller golf courses located in more outskirts of city are poorly managed and had to resort into alternative ways to dispose/convert their assets As reported in the IPO prospectus, 37 golf courses have plans to turn their land into solar power plants and the chart below shows the reduction in golf courses after peaking in 2002.

Market Leader

Today, Accordia Golf is the largest corporate operator of golf courses in Japan, followed by PGM group. As mentioned, both have acquired much golf courses since 2000, and specialize in golf courses and driving range management compared to other companies, who are conglomerates and dealing with financials, real estate, etc. For instance, OrixGroup, third in line is a financial services group which owns baseball teams.

Olympic 2020

A possible catalyst to reignite the popularity of golf would be it's inclusion in 2020 Olympics in Toyko, starting from Rio in 2016. However to stimulate interest in golf  and tourism much also depends on the government continuing initiatives and it's abit hard to forecast the numbers at this point. A question to ask is that would one start playing golf after realizing that his country is hosting Olympics in 2020 with golf being introduced as an Olympic sport? It may create some awareness but I doubt that it would arouse much interest among the younger generation.

I used to think that Olympic Games will boost the the host country's economy via tourism growth, and was quite bullish on emerging markets like Brazil, as they hosted the World Cup and then Olympic Games 2 years later. However, the analysis report suggest otherwise.
Based on the analysis conducted by McKinsey, host countries for Olympic games sees mixed momentum in tourism growth. Hence, I wouldn't be too optimistic that Tokyo 2020 would bring much golf tourism to Japan.

There are three strategies that Accordia Golf Trust could grow it’s profit and distribution:

(1)    Internal Growth - growing number of visitors

(2)  External Growth - Acquisition from Sponsor through first right of refusal

(3)  Cost Cutting  

Internal Growth (Attracting more visitors)

As utilization rate is low on weekdays, they introduced a rewards programme (Jan to Jun 2015) to encourage more players during weekdays.  They also implemented the loyalty card programme and as of March 2016, there are 4.14mil loyalty card holders, which represents 57.5% golf holders in Japan. Since its launch, there is a steady increase in the membership. So today, one can imagine that more than half of the golf players in Japan actually owns a Accordia Golf loyalty card. Having a loyalty card helps to retain and capture new market share.

As golf course fees has been on a downtrend since the economic bubble due to decline in golf visitors, internal expansion will be limited in the short to medium term.  The below article shows that Japan’s golf courses are closing at a rate of one a week, due to declining interest among the young and the older generations.

A better strategy to capture market share would be via external growth.

External Growth (acquiring more assets)

This means to acquire more golf courses. One of the advantage of having sponsor is having first right to refusal in purchase of assets. Currently Accordia Golf has 25 golf courses, and Accordia Golf Trust has call option over 17 of them. As the LTV stands at a conservative 28.8%, there is ample room to fund acquisition via debt. 

Cost Cutting

Management has also been pursuing cost cutting measures such as promoting services without caddies, centralized administrative work to a main administration centre, promoting self-service or installation of automated payment machines. This means cutting down expenses to improve profit margin and cashflow for distributions. However, it's hard to read from the report if this actually pays off or whether it's effective.

Next, I will be discussing about the potential risks:

Seasonality/ Natural Disaster Risk

Unfavorable weather conditions or natural disasters could affect operating income (golf course revenue and restaurant revenue). Depending on the severity, it might cause structural damage/infrastructure damage which resulting in expenses being incurred. Unlike Singapore which only has 2 seasons- hot, and hotter, Japan experiences heavy snowfall and rain which could affect the business operations with closure of golf courses for days.

Currency Risk

As earnings are in JPY but distributions are paid out in SGD, a weakening of JPY or strengthening of SGD would affect it's payout. However, it's partially mitigated with foreign exchange forward contract. On the flipside, it's fortunate that there's also strengthening of Yen against SGD since early 2017, and this gave a slight boost in the distribution.

Interest Rate Risk

Accordia currently obtained three different term loans from 9 banks and divided into three tranches of 15b JPY each. I think interest rate is the least of worries, as it's LTV ratio is only about 29% (relatively low compared to Reits and other business Trust) and they uses interest rate swap contracts to convert the floating interest rates to fixed interest rates. Moreover, interest rate in Japan has been maintained at a low level due to loose monetary policy so it's unlikely they will face much issues in refinancing their loans in future.

Will I buy?

I have given some thought and won't be purchasing this counter because the earnings are very unpredictable especially with seasonality risks and complicated operating structure. Moreover Japan's golf population has been declining which seems like a sunset industry. This stock indeed has competitive advantage compared to other golf courses and it has high yield among Reits in Singapore but in this case I am willing to forgo the high yield for something safer. What are your thoughts and would you invest in Accordia?