Saturday, February 4, 2017

Sabana Reit Is My Top Performing Investment In 2017

Sabana Reit is probably one of the most deafening and worst performing Reits we have listed in the SGX market. There has been so much recent news surrounding the company that it appears there are many uncertainties on its future.

I made my initiation purchase on Sabana (Link Here) just last month and to date it has been my top performing counter ahead of any other companies with current unrealized gain sitting at around 28%. The company has also recently went ex-dividend for a 0.88 cents so I will also be entitled to the dividend.




There are some of my friends who received their entitlement of the rights + excess so their average price could be a lot lower than mine and hence sitting on higher gains at this point. Kudos to these folks.

While the gains in terms of percentage are rather decent, it is not a big position (2% of portfolio) so the gains are not material to the overall portfolio.

Rather, there are two important lessons which was my personal key takeaway that I received from this.

The first takeaway I get was that there are opportunities investing in a not so good company, as long as it is not a total crap company. Companies like Sabana, which are backed by hard assets (net of assets less liabilities) are almost impossible to get to 0 valuation for as long as the assets are real. In this case, the share price and valuation has been battered so bad and shunned by so many people that it becomes an attractive investment at some point. I think I came to that conclusion when I decide to enter them at 34 cents.

At some point, I think there is a need to do a risk reward ratio and while we can never say never to a company that might go bust, the potential for the reward need to be there. On the other hand, it is pointless to average down on a company that has no chance for a turnaround or risk reward ratio that is lower than your expectation.

The second takeaway I get from this was that as minority shareholders (I mean what can I do with only 30,000 shares), it is almost impossible to influence the strategic business decision as a business owner position. 

Sure, the recent activist decision to remove the manager of the Reit is welcomed by many of us, including myself, but surely if you are just one of the pawn soldier in the big organization, it is easier to get out early and divest the stock and move on when things get patchy instead of waiting for so many years before making "noises" hoping things go in your favor. Don't get me wrong as I think the recent activist noises are helping minority shareholders to improve their values but the time could be better spent on others instead of harping on one bad investment idea.

For now, I'd be a happy quiet shareholder waiting to watch the show hoping to see some sparks coming out but if not, I'd be an equally happy shareholder moving on with my other investment.



10 comments:

  1. Replies
    1. Thank you Blanc Fable.

      I really do think the recent run up is due more to luck. Wasnt expecting to run up so fast.

      Delete
  2. Hi B,
    Yah ! Reit are backed by hard assets..NAV will not go down to zero .. some might think this as hindsight statement,,, but in any investment,," price is what you pay ,Value is what you get" as Warren Buffett said ,,, at certain "price level " ,, margin of safety or value may appear,,,
    Hope we are right at the end of the day.,,
    Cheers! 😀😀

    ReplyDelete
    Replies
    1. Hi STE

      Yes i have the same thought as yourself. On hindsight it appears like a good investment after all but I do really like to see the managers get ousted out because of their poor performances over the years operationally.

      Delete
  3. Hi B,

    Yes. A good price paid for a bad Reit. I wanted to enter too but price already went up.

    Cheers.

    ReplyDelete
    Replies
    1. Hi PIF

      Yea there are so many other reits with the recent run up too though. Think you benefited a lot from it as well.

      Delete
  4. Hi, this is jerry low. I just saw someone posted this link onto our new facebook. I like how frank you write, regardless whether it is politically correct or not. There are many sad stories in this Shari'ah Compliant Sabana case, bearing in mind the profile of a REIT investor. I urge you to join us in FB. Please consider using your knowledge and writing skill to post/link your articles and also to answer questions we expect retail unitholders to have. There are 12,636 direct CDP unitholders and probably another 15,000 unitholders using CPF, SRS, nominess.

    https://www.facebook.com/groups/1586399528054150/?qsefr=1

    ReplyDelete
    Replies
    1. Hi Jerry

      Thanks for the link. I just joined the group.

      Realistically, I do vote in favor of replacing the managers because all these years their performances count for nothing other than increasing performance fees.

      From a shareholder view, I wouldnt want to enter the reits if not for its low valuations but operationally we cannot argue that it has been a poor performing reits.

      I do hope for the best in the egm.

      Delete
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