Saturday, January 17, 2009

Ascendas REIT: raising capital

AREIT's announced a capital raising exercise announced on 15th Jan with their 3Q results. If their rental revenue remains constant, this will reduce DPU from 16c to 13.5c.

Calculations are below.

Capital Raising Details:
  • Total of 354m new shares. 292m being sold by private placement (to institutions), 108m by a rights issue to existing shareholders (1 for 15).
  • With 1325M units currently issued (from Annual Repport), that is a dilution of 26%. Fuck!
  • They are raising approximately $400M.
  • New number of shares is 1679M
  • The new capital only covers the additional debt raised since March 08. Debt increased from 1.5B then to 1.9B now. It does not cover the short term debt issues under review by Moodys.
How does the recapitalisation affect their projected DPU?

Look at the benefits to their finance costs, as well as model some defaulting tennants. To do this, I need to know their revenues, interest costs and non-interest costs:
  • 3Q08 revenue was 102M (from the press release). Annualize to 408M.
  • Interest costs for the 3Q YTD are 43M (from 3Q results). Don't know the costs for 3Q alone. As an estimate, annualise the 43M (times 4/3) to 57M. May understate it a bit.
  • 54M is availiable for distribution in 3Q (press release). Annualize to 216M.
  • Therefore, non-interest costs were 408 minus 216 minus 57 gives 135M.
Therefore, before the capitalisation, we get an income statement of (in millions):

Revenue: 408
Interest costs: 57
Non-Interest costs: 135
Profit for distribution: 216

What effect does the 400M cash injection have on their interest payments?
  • Borrowings will decrease from 1.9B to 1.5B (from the 3Q results balance sheet), or 21%. We could estimate that interest payments drop in proportion from 57M to 45M.
  • Another way to estimate: In the March 08 (Annual Rpt), interest payments were 42M for a debt of 1.5B. This is the same 1.5B that Ascendas will have after the capital raising - in other words - no change the time in Mar 08 the time after the capital is raised. 72% of that debt was fixed, 28% was variable (or abt 11M of the interest payments). Depending on what variable rates thay are paying now, their interest could range from 42M to 53M. I'll ignore this for now....
Going back to the income statement, after the capitalisation:

Revenue: 408
Interest costs: 45 (down because 400M debt paid off)
Non-Interest costs: 135
Profit for distribution: 228 (increase of 12M or 5.5%).

Their profit is up 5.5%. But per unit, we must reduce by 26% for the new shares issued. Hence ~20% reduction in DPU (to 13.5c).

Later on I'll see how their revenue could be affected by a recession.

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