Tuesday, August 11, 2015

Capita Comm, Why You So Loser?

Why is Capita Commercial Trust (CCT) being such a little bitch these days?


On Jan 23rd 2015, it closed at a high of $1.925.

Today it is at $1.38. This is a huge decline of 28% in a mere span of just 7 months.

NAV is at $1.72, which means that CCT is selling at a 20% discount to it's NAV. I strongly dislike buying REITs at a premium over NAV and this is honestly one of the more important factors that I look at.

Based on 1H 2015 DPU of 4.31 cents, the yield at current price is a decent 6.2%.

CCT has a credit rating of A3 by Moody's and A- by S&P, making it one of the highest rated REITs. CCT has a very low gearing of only 29.5%, making it one of only 4 REITs to have a gearing lower than 30%.

It seems that the market is thinking that CapitaGreen is going to be shit because it only has a current occupancy of 80.4%. The leases on CapitaGreen are long, expiring only after 2018, so I don't know why this seems to be an issue.

CCT has a portfolio occupancy rate of 98% and if they exclude CapitaGreen that has just started, it would be an impressive 99.7%.

CCT is a branded REIT and has well-known properties in central locations. It has a good credit rating and low gearing. Valuations seem attractive to me.

Revenue up, NPI up, DPU up, NAV up.
But, stock price down. What gives?

Is this scare because of the alleged "rate hike"? Many people have come out and talked about how "rising interest rates are bad for REITs". It's obvious that at ZIRP, interest rates can only go up. However, I strongly strongly strongly doubt that we are going to see sustained higher rates in the near future. The Fed may really raise rates, or maybe they won't. However, I've done my homework and I know that interest rates has nothing to do with long-term REIT returns. The correlation is 0. If rising rates are making REITs sell off, then by golly, I'm going to be buying all this shit up with both hands. If bonds, then of course! I know a lot of people don't agree with me on the interest rates / REITs relationship, but hey whatever, that's what makes a market right? You don't want to hold it anymore? I'll take that shit off your hands for you, you're most welcome.

There is absolutely no need to rush into the markets now and use up all your dry powder. The fireworks show hasn't even started yet! The STI is only 10% down.

But at a price like this, I wouldn't mind to nibble into CCT, even if it is on it's way down into the abyss. This is a good price to me already. Can it get cheaper? Why not? What will I do? Probably buy even more.

It's madness, buying stocks when they get cheaper right? Or is it?

2 comments:

  1. is that because market doubts its dividend unsustainable?

    ReplyDelete
  2. I noticed that the slide started when news of RBS vacating 2 stories at One George Street. That plus the economy's slowdown + news of rate hike + oversupply of office space + outflow of funds back to US could be a cause... but I'm buying in too. Love it when it's getting cheaper as I'm a lazy investor. Have been collecting dividends and will do so for the next 10, 20, 30 years. (vested)

    ReplyDelete

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