Saturday, 9 April 2016

Ascendas Htrust is no Saizen Reit 2.0

After the small bet and profit on Saizen Reit, I was very tempted to have another go for Ascendas Htrust, even utilising portion of the warchest.

As there were rumours of four to five potential buyers, it did look high chance that the acquisition deal would be successful.

However, after some consideration, I decided it is no-go for Ascendas Htrust.

1. There was absolutely no margin of safety on the price for Ascendas Htrust.  When I bought Saizen Reit, it was more than 20 cents away from its NAV and gave approximately 20% margin of safetyBut Ascendas Htrust was already trading above its NAV of 70 cents (more on its NAV later) and hence no margin of safety for me.

2. I am also skeptical of the sudden re-valuation of Ascendas Htrust's NAV to 84 cents after news of the possible sales.  There is no addition to Ascendas Htrust's portfolio and the market conditions also deteriorated rather than improved for the past year.  To me, this is like when I pay for an item at a store, but the store owner tells me that I have to pay more that what is displayed on the price tag, without giving me valid reason.  I think potential buyers would also be evaluating their purchase based on 70 cents, rather than 84 cents.

3. Saizen Reit is unique and one-of-a-kind Reit, but there are other hospitality reits around.  Moreover, apart from Ascendas Htrust, all other hospitality reits are trading below their NAVs.

As such, I think there is no upside but plenty of downside if buying into Ascendas Htrust for the acquisition bet.

The takeaway from this is that one success does not lead to another success, even in more or less similar circumstances.

Really need DYODD. 

1 comment:

  1. Thanks for sharing. I understand your point of views of not buying this stock. Your post is easier to read than other financial bloggers.