Elite Commercial Reit – IPO

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The first REITS to be listed in SGX for 2020. Will it be a good REITS?


Elite Commercial Reit is offering 114,686,200 units for It’s IPO at £0.68 per unit (payable in Singapore dollars at S$1.21 per Unit). There will be placement tranche and public offer as below.

  • Placement Tranche: 108,951,900 Units
  • Singapore Public Offer: 5,734,300 Units

Gearing will be 33.7% and indicative yield is 7.1%.

Price to book is about 1.03x.

Indicative Timetable

The offer is available to subscribe on 28th January 2020, 9.00pm and close on 4th February 2020, 12.00pm. Trading will start on 6th Febuary 2020, 2.00pm.

Business Overview

Elite Commercial Reit will be the first UK focused REITS listed in SGX and it is 99% leased to UK Government. The portfolio comprises 97 commercial buildings located across the UK. 

What’s Good?

New lease

A new 10 years leases in 2018 which means you dont have to worry about empty occupancy rates at least till 2028. The aging population is also a great factor on the leases as 82.5% is leased to Department for Work and Pensions (DWP). 

Recession-proof Distribution Yields

Projected yield at 7.1% for FY2020, and 7.2% for FY2021.

What’s Not So Good?

Forex

GBP/SGD is currently trading at S$1.78 to 1 GBP and IPO offering prevailing exchange rate of S$1.77 to 1 GBP which is very close but if you look at past 5 years  chart, It doesn’t seems like It’s going up anytime soon.

Brexit events also causes uncertainty to the currency.

Conclusion

7.1% yield and tenant aggrement lasting till 2028 at least with PB 1.03x, I will subscribe to this IPO at ATM. As the public float is 5 mils, there is really no need to subscrible for more. It’s likely to be allocated a small amount or donation of $2.

Keep the warchest for more offers that is coming up.

Author: The Financial Guy

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