Friday, May 19, 2017

[SGX Portfolio] Bye bye LMIRT

I bought Lippo Malls as one of my very first investments back in June of 2014. Wowza... that's almost 3 years! My thesis wasn't very complicated. Retail REITs are a nice class of REITs, Indonesia has the demographics to give a nice "growth" story, gearing was really low (just 26%) and most of all, because it was an overseas Asian REIT, it was just shunned by most investors, giving it a nice P/NAV discount of 10%.

Just a few months later in Dec 2014, price dropped a whopping 25%, from $0.405 when I bought it, to $0.305 when I was talking about it. If I had sold, I could have booked in a beautiful annualized loss of 50%, hahaha. Instead, I rolled up my sleeves and plunged myself arms deep into the anus of this beast (very graphic imagery, I know).

Fast forward to where we are today, the past month has seen LMIRT poking above $0.40. With prices slapping at my anchored entry price, it piqued my interest and got me looking at my LMIRT investments which have been a steady, steady dividend payer all this while.

Looking at the financial statements, LMIRT has a NAV of $0.3735 (1Q17 statement). I decided to sell all of my shares of LMIRT at $0.42, which represents a premium over NAV of 12.5%.

Does LMIRT really deserve a premium of 12.5%? Sure, Indonesia does have higher property yields compared to many countries, so a high premium does not necessarily mean a low distribution. However, one of my biggest guiding principles when it comes to REITs is the P/NAV premium and discount.

The "natural" premium of malls / strip properties is probably about 4% (just guesstimating from Green Street's data and approximating to the mall conditions of Indo). Throw in the default 5% deviation and BAM, you see that we're on the upper ends of what is plausible. Of course, this sort of thinking isn't that good since who knows what is an appropriate premium for Indonesia retail REITs and what its actual SD is.

Of course if you use dividend yields as your main metric, you'd likely get a different answer and that LMIRT is just fine for giving out about 8.5% dividends. To each their own I suppose.

My average price of my shares were $0.353 and I sold at $0.42, giving me capital gains of 19%.
I've collected quite a bit of dividends here and there, but since I've owned different amount of shares at different times, the dividends work out to be about 21%.

19% capital gains with 21% returns from dividends is a nice 40% gains. Over the past 3 years, that works out to be about 12% annualized returns, not too bad I guess.

Honestly, I like LMIRT. If the premium comes back to something more realistic or attractive, you can be sure that I'd be willing to go back in.

Buy low, sell high. That's the name of the game, ladies and gents

1 comment:

  1. Using just a metric to analyse is too simplistic. Revaluation will bring the PB to 1 or below. Indonesia also just got upgraded to Investment grade country. I regret not buying when i see something boiling underneath.

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