Friday 6 January 2017

BHG Retail REIT Q3FY16 Review

My thought on BHG Retail REIT for my future reference.

Based on the current dividend and price, the dividend yield would be dropping due to the special arrangement where the strategic shareholder agreement if assuming no changes
1. FY17, the DPU will be around 5 cents with yield 8.3%
2. FY18, the DPU will be around 4.8 cents with yield 8%
3. FY19, the DPU will be around 4.2 cents with yield 7%
4. FY20, the DPU will be around 3.8 cents with yield 6.4%
5. FY21, the DPU will be around 3.6 cents with yield 6%


If BHG Retail REIT would have to sustain 8.5% yield, it would required annual dividend payout of $25M to support the yield once the arrangement end. Annalise dividend payout based on Q3 2016 it would translate to $18m and this mean in order to maintain the current dividend yield, BHG would need to growth additional $7m dividend payout in the next 4 years which mean about 8.7% growth annually. This has not factor in the current payout is 100%, the new units issued over the next 4 years for management and any positive or negative performance impact.

BHG currently gearing ratio is around 30% which mean BHG can take another debt around 100m, will BHG be able to maintain the current yield?, seem the reasonable will be around 7% provided there will be more acquisition in the future and rental growth rate of 2-6% based on IPO forecast. To achieve 7% it will require growth of 3-4% in dividend payout annually.

With BGH REIT Manager performance fee is tie to the growth of the DPU, this likely have positive impact to the unitholder as Manager will (hopefully) work toward to increase the DPU (even thought they will still earn the performance fee is up down up down)

With BHG yield around 7%, This will be around the same as CapitaLand Retail China Trust (currently too concentrated in Beijing) and with the current PB of 0.75 vs 0.9. So it seems like the market has factor in the growth??? but who know what is CapitaLand Retail China Trust DPU in 4 years time?

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