Saturday, October 31, 2015

Saizen REIT $1.17 Purchase Offer - Vindication At Last

Straight out from Saizen's website is their most recent announcement - a purchase offer of $1.17 per share.

The offer of $1.17 is:
3.4% above the NAV of $1.14
26.5% above the last closing price of $0.925
31.8% above my average price of $0.88767

Since my initial purchase of Saizen REIT as the very 2nd security I bought in my investing career back in March 2014, I have collected a total of $118.35 in dividends from them.

Since I have 1500 shares, this is a capital gain of $423.50. Adding my dividend yield so far and my capital gains, I've a total gross profit of $541.85. Against my purchase value of $1331.50, this is a pretty cool gross profit of 40.7%. Since I use SCB as my broker, transaction costs were only a mere $3.39, which knocks down my net profit to 40.4%.

While the absolute figure is small now and might be scoffed by many, I believe in managing my $20,000 portfolio as if it was a $20 million portfolio. If I can't handle $20k now, I sure as hell can't manage $20mil, which by the way, would probably be how much my portfolio will be in the future ;) *wink wink* Just dreaming, just kidding, haha!

I have been a very strong believer of Saizen REIT ever since I identified that it is very likely grossly undervalued, especially when compared to actual J-REITs on the Japanese exchanges. After my first comparison in Oct 2014 last year, I revisited my analysis again and updated it at the end of May 2015 and found out that the difference in valuation became even more extended!

Recently, just 2 weeks ago, BFGF had asked me to share my favourite stock, explained in one sentence. I picked Saizen REIT, which was trading below $0.84 at that time. Although I wish I could have expanded on my choice a lot more, my one sentence was "I think Saizen REIT is a well-managed REIT that is undervalued by pretty much any metric you throw at it." I would have loved to highlighted my study findings comparing it to J-REITs, as well as how residential REITs are pretty stable, along with the recent successes of Saizen's managers, but alas, that all doesn't fit into one sentence.

After reading THE REIT BIBLE, the most important takeaway that I got which was also built upon by Green Street is that, all things equal (which they never are), unless you can justify strongly why a certain REIT deserves to command a premium over it's NAV, it is probably a safer bet to buy REITs below their NAV.

I still believe that when it comes to analyzing REITs, price relative to NAV (or P/NAV) is one of the more important metrics to look at. Definitely, it should not be the only metric used since there are plenty of other metrics around, but I think it's importance to REIT investors is once again highlighted here.

A lot of doubt has been thrown at Saizen REIT, especially regarding it's early years of performance leading up the GFC. I must admit, looking back historically, it is quite scary going into this counter knowing that P/NAV at one one plunged to 0.33 (Q2 2009) and lingered around the 0.4 to 0.5 for a very very long period (2H 2009 - Q2 2012). Since then it has slowly been creeping up in P/NAV. While looking at it now, it might seem like a no-brainer investment to onlookers, it takes some balls to buy into a foreign REIT that has been consistently trading 50% below it's NAV.

I did my homework, I took the leap of faith and I have been rewarded with an annualized return on this investment at around 25%. I am sad to lose this stable dividend payer, but I am rather glad that I am finally being vindicated about sticking with Saizen REIT.

My only regret is that I did not buy more of it!

Congrats to other Saizen shareholders! (especially Argyle who have been clinging on for the longest time, haha)


  1. I tell myself its plain luck. Even though them selling off a few properties above NAV and their discount compared to their Japanese listed counterparts were a 2 good signs of such a bid going through, they could've easily traded sideways for the next few years.

    but who cares...Huat ah!

    1. Hi Joel,

      Actually I always thought they would be trading sideways and I'd just be happy collecting decent dividends until it's value gets unlocked. I guess that happened a lot earlier than I expected!

      Huat ah!


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