Thursday, November 11, 2010

Sabana Shari'ah Compliant REIT

There's more IPO coming up and more REIT type of IPO, right after the launch of the mega one by MIT. Unfortunately, though I bidded for that in the offer period, I didn't get a single lot at all. Let's hope this one - Sabana Shari'ah Compliant REIT works out well for me.

This is actually an industrial reit managed in a manner compliant with Shari'ah investment principles and they can only invest in Shari'ah compliant real estate and real estate related assets. It holds 15 industrial properties across Singapore and is the only Shari'ah compliant reit listed in Singapore - possibly the largest in the world by total assets. What's interesting about Shari'ah compliant reit is that muslims can apply into this. Strictly according to their religion, there are certain investments (even insurance) that does not sit too well with their religious teachings and principles, hence they are not allowed to invest in them. By setting up this reit, it opens up a new instrument for them to put their money in. Sort of to tap the Middle eastern market, so to speak.

Shari'ah guidelines state that non-permissible activities cannot exceed 5% pa of the gross revenue of the reit. Non-permissible activities include activities like conventional financial and insurances services, gaming, non halal production, tobacco related products, non-permitted entertainment activities and stock broking in non-complaint securities. Takaful insurance coverage have to be sought where available and financing, investment and deposit facilities have to be shari'ah compliant, if not, after seeking approval, the conventional kinds will do. Go on and google about Takaful and Shari'ah. It's a very elegant way to do ethical investing.

They should be doing road shows to entice institutional investors to get into their placement tranche before deciding on the IPO price. The minimum and maximum offer price is $1.00 and $1.10 respectively. Based on the minimum offer price, the forecasted yield for the reit in 2011 and 2012 is 8.45% and 8.48% respectively. NAV value is 0.94, so obviously the IPO price is above the NAV by around 6.4% to 17%, depending on the offer price. Gearing, defined as total liabilities to total assets stands at 33%, which is pretty okay. AIMS and CIT, both industrial reits, have gearing at 34% and 39% respectively, so this sabana one is quite normal I suppose.

Sabana reit have quarterly payouts, on the last day of March, June, Sept and Dec. However, the first distribution after listing will be on March 2011, payout latest by end of June, so says the prospectus. 503,994,445 units will be offered in total, of which 428,494,445 (85%) will be for placements to institutions. Another 44,500,000 (8.8%) will be for managers and employees and the rest 31,000,000 (6.2%) will be for the retail investors like you and me.

In comparison, GLP offered 1,173,244,000 shares, with 102,375,000 (8.7%, but could be less, I didn't subtract those given to employees/managers) offered to the public. MIT offered 594,913,000 with 80,445,000 (13.5%) offered to the public. I didn't get any shares from MIT and got 1 miserable lot for GLP. I think it's going to be tough getting something for Sabana because the amount allocated for retail investors are even less than half that given by MIT for retailers. That's my honest opinion.


My rule - don't hold IPO for more than 1 day. If I've less than 5 lots I'll just sell on the debut day of trading and be done with it. Since the price range is more like MIT than like those penny 20 cts IPO, the first day gains should be like 20% rather than 40%. Say it's 1.10 offer price, 15% will be 1.27. I'm happy to run at that price and any more is a bonus. I'm not greedy at all.

If however, I'm given more than 5 lots, I'll sell half on first day, and hold on the rest for a while. At 8+% it'll be quite good holding it, so I'm not scared of it falling further. The price is supported by the yield so it shouldn't fall too much, if at all. There are indexes which are Shari'ah compliant, so since Sabana reit is a biggie in term of total assets, I'm sure the indexes will get their hands into it. I'm of course assuming that the placement is not enough for the big boys, so they will try to get their hands in open market, much like GLP upon listing. That might be catalyst for it to go up further. Could be time to dispose of the remaining lots by then.

Talk so much, get it first then talk more.