Thursday, March 18, 2010

Reasons for AIMSAMPIREIT Purchase

This AIMSAMPIREIT is the former MI-REIT which almost went bankrupt and had to do placements and issue rights to finally stay above water.

So on the initial look, it might look like a shady investment in a company whose management might be extremely bad because of the saga. However, on deeper exploration, this REIT appears to be offering itself at an extremely reasonable price.

A very brief history:
MI-REIT, short form for McArthurCook Industrial REIT, IPOed in 2007 at a price of $1.20. (Btw, my mum bought 2 lots at IPO). Something went wrong with their financing, and they had to give placement shares, as well as issue 2 for 1 rights at 0.159, to ensure the REIT stays solvent. Since then, the original manager of MI-REIT has moved on to Cambridge Industrial Trust (CIT), and the REIT is renamed as AIMSAMPIREIT to reflect the white knights.

For a start, AIMSAMPIREIT is at 28.7% gearing, among the lowest in the industrial REIT sector. The calculation of the yield is at a conservative minimum of 8.8% at the moment assuming an annual yield of 1.9cts per share although I'm expecting at least 2cts. Only First REIT, LippoMapleTree and CIT offers higher yield, with First REIT and Lippo having lower gearing, but most of their assets in Indonesia, and CIT offering higher gearing and a management I don't really trust.

AIMSAMPIREIT's white knights are from AIMS Investments and AMP Capital, two rather big investment companies originating from Australia. To me, the fact that they are willing to take the plunge and stepped in to save the REIT shows that they are not a simple lot. And in fact, AMP Capital manages a lot of pension funds for Australians, giving credibility to their financial muscle. This fits one of my criteria for a REIT that it must have a strong sponsor. This is it.

Also, almost all of AIMSAMPIREIT's properties (with the exception of 1 Japanese building) are in Singapore. The tenants have moderately long leases, and this ensures constant rental income for the next few years, and likely too, a constant DPU, even if it's not increasing.

Finally, looking at the chart, AIMSAMPIREIT is one of the few REITs left that are not very far from its lowest point in March 2009.

The normal Technical Analysis that we commonly learned might not appear as well on this chart as the volume is extremely low. However, the lowest post-rights was about 0.175, which isn't too far from my purchase price of 0.215. More upside could likely be seen. Even if market were to crash now, I believe that the 20c mark would be a stronghold against the bears.

These.... are some of the simple reasons which I considered before putting my money into AIMSAMPIREIT at 0.215...


  1. Hi JW,

    Bulk of MI-REIT's problem was because Chris Calvert (the ex-CEO who is now CEO for CIT), did not put the necessary financing in place when he made the commitment on a property purchase due last year.

    The fact that the property in question was purchased at a higher price and was valued lower by end of last year made it almost impossible for the new manager to get any financing at all. Which bank would give a $1m loan for a property valued at $900k, for example?

    Thank goodness for AIMS and AMP Capital. Otherwise, MI-REIT would be history.

    I am more interested in AIMS and their plans for the renamed REIT. They have ambition to use the REIT to hold projects they are planning for in China. :)

  2. Hi AK71,

    I'm also interested about what they are going to do with the reduced gearing.

    There's definitely potential for this REIT.

    My only wonder is how CIT is going to be in a few years time.....

  3. Hi JW,

    CIT's loan will be due in 2012, I believe. In a more benign credit environment, they probably could get the loan renewed or re-financed. However, if the credit situation worsens, CIT might find itself in hot soup.

    Of course, with gearing level at 42% and a yield of 12%, it is hard for CIT to grow. I has hit a ceiling, for sure, and the ceiling could come down in 2012.

    I am going to put a link to this post of yours in the comments section of my latest post. I hope you don't mind. :)

  4. Hi AK71,

    thanks for your comment. I doubt CIT can grow much, given the way the rights money was used.

    Of course I don't mind the link. Thanks!

  5. Today i bot some lots of aimsareit at 0.22. Hope its another masterstroke from momoeagle:)

  6. Hi Hyruga,

    wow! But disclaimer still applies hor..., although I really believe in this stock :X

  7. I also believe in this stock as it has previously breached 0.23 on an intraday trading. Anyway, I am in for long term and dividend. Yes and i know disclaimer still applies.

  8. You make me feel tempted to top up at 0.22 as well... But I think the market is starting to overheat a little bit...


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