KINV

Buy @ $0.55, $0.545

Q1 results were out last night and I was impressed by the big jump in DPU,

• Q1 (Mar13) = 0.89ct
• Q4 (Dec12) = 0.74ct
• Q3 (Sep12) = 0.73ct
• Q2 (Jun12) = 0.79ct
• Q1 (Mar12) = 0.69ct

They had previously announced the acquisitions of 6 malls in Oct-12 using debts but that results in lower DPU on a Proforma basis. This appeared evident from the subsequent Q4 DPU. However, this time round, it’d appear that there’d been a positive accretion to DPU for Q1.

• Yield = 6.473% @ $0.55 (5th Highest)
• NAV = $0.5654 (now at slight discount ; only 4 REITs at discount)
• Gearing = 24.3% (2nd lowest REIT but was 9.3% before acquisitions)

All indicators look good. Main risk is FOREX & Political as assets are all in Indonesia.

So, with the above positive analysis, I was waiting early in the morning to Jump-Q with friends and family members. Unfortunately, matching was done at 8:58am and I ended up in the Buy Queue for $0.545. When the prices seems to be heading higher, I quickly grabbed some at $0.55. Subsequently, someone dumped in large Qty and my $0.545 ones also got done!

• Vol = 14,549,000
• Range = $0.545 to $0.555
• Open = $0.545 ; Close = $0.55

It looks like someone sure has a lot to sell!

Current intention is to hold for longer term unless I get spooked by new developments. 😀

 

12 May 13

Finally found the time to compile some data,

	Q113	Q412	Q312	Q212	Q112	Q411	Q311	Q211
Gross Rental Income	39,371	32,959	30,553	30,519	30,441	24,347	22,023	21,917
Net Property Income	37,260	30,798	29,521	30,737	30,857	24,612	22,476	22,570
Distributable Amount	19,619	16,159	15,848	17,121	15,008	11,421	11,494	11,864
Available Distribution per Unit (cents)	0.89	0.74	0.73	0.79	0.69	0.53	1.06	1.09
Total Return For The Period Before Tax	25,929	23,939	26,541	27,124	24,818	14,991	20,868	17,582
Other gains/ (losses)	-1,382	1,896	5,208	1,252	459	-4,585	2,161	-1,173
Add back losses / Remove Gains	27,311	22,043	21,333	25,872	24,359	19,576	18,707	18,755
Financial expenses	-7,023	-6,518	-5,886	-2,503	-4,091	-3,160	-2,061	-2,252
Total Administrative Expenses	-3,053	-2,602	-2,512	-2,533	-2,583	-2,201	-1,979	-1,906

 

What I’m looking at,

• Gross Rental Income : See the changes due to rental renewals / new acquisitions

• Net Property Income (NPI) : From Q312, they outsourced the property management (includes collecting fees – reflected in Gross Revenue in prior quarters). Net result is Net Property Income < Gross Rental Income
• Other gains / losses : The non-cash items, mainly due to their currency forward contracts which are added / deducted. Can be quite substantial from -$4.5M to +$5.2M. Can see the impact on DPU.
• Financial Expenses : Related to borrowings. Mainly Interest but can also include arrangement / commitment fees eg. Q112
• Total Admin Expenses : Related to AUM. See the rising trend as they acquire more assets

Have to look at above in the context of the Total Units Issued, Total Assets or Total Debts, depending on the row of interest

 

Comments

• The DPU = 0.89ct (Q113), which is a good +20% from the previous quarter of 0.74ct (Q412) looks sustainable going forward. Here, I looked at “Total Return For The Period Before Tax” and add back “Other gains / losses” as that ought to give a good picture of the recurring income ie. $27.3M (Q113) vs $22M (Q412).
• The “Other gains/ losses” figures can result in +/- 10% volatility to DPU in the worst case. Related to FOREX and includes Forward Contracts & Swaps
• The outsourcing of Property Management to a third party looks suspiciously to me like another source of income for their related parties as the net result is a swing from a previous ~$300k additional income to an additional expense of ~$2.1M. A total impact of ~$2.4M lower in income!
• Under Financial expenses, the extra couple of $M for arrangement / commitment fees is not small and is likely to happen every time they refinance their borrowings or take on new debts for acquisition