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QuestionsCategory: Portfolio ManagementRights Issue – CRCT
Cheng asked 2 years ago

Hi The Fifth Person,
I am invited to subscribe to the rights issue for CRCT. Rights Ratio : 56 : 1000
Would like to ask for your opinion on the rights issue and your view on CRCT. Will decide from there. I am fully aware that if I will to subscribe to it, it  will end up landing with odd lots and dilution to occur. CRCT announced a change in their investment mandate to include also industrial & commercial properties. They announced a 1 billion acquisition of 5 biz parks properties in Suzhou , Xi’an and Hangzhou and remaining 49% stake in Rock Square retail mall in Guangzhou. In short, transform from pure retail into an integrated properties holder. Do expect to see future growth for CRCT .
Have been holding on to this REIT for more than 10 years . Dividend Yields is above 6%. In year 2017 & 2019, dividend yields are relatively high, 11.2% and 14% respectively which are very attractive to investors. Am waiting for opportunity to sell and for the stock price to appreciate + dividends received so far …to breakeven or made a profit. Current price now is  $1.24 whereas I paid $2.90 back then. Did a calculation on my own need to sell above $1.60 before I can made a profit out of it. Do advise whether my understanding is correct. Kindly also advise whether for odd lots do you forsee any issues in selling open market.
Hope to hear from you soon !

4 Answers
Victor Chng answered 2 years ago

Hi Cheng,
Regarding CRCT, I will get Rusmin to reply this question. 

Cheng answered 2 years ago

Hi Victor, 
Sure, thanks !

Rusmin Ang answered 2 years ago

Hi CW,

CRCT’s portfolio is mainly retail in China which is currently facing a lot of competition from e-commerce. E commerce as a % of retail is very high in China at 30%. As a comparison, singapore is in the teens level. In any case, you need to be very sure that the retail will stay relevant in China and one best way to check is to regularly visit the malls owned by CRCT, or at least have someone there looking out for you. I do not have answer to that as I seldom visit China, so I’m more comfortable investing in Retail reits in singapore. Malls in Singapore should stay relevant even after the pandemic. You can watch our full discussion on YouTube.

Their venture into logistics and commercial is probably a good strategy to derisk the overall portfolio concentration. Cut the long story short, are you happy with the performance of CRCT, in term of DPU, over the last few years. If not, I don’t think it’s worth considering the Rights. You may want to make decision from the prospect of the REIT, instead of calculating how much you need to get back before selling. 

Odd shares shouldn’t be significant, so it shouldn’t be the main decision maker in my opinion even if you ended up with one. Having said that, we usually prefer to take cash when it comes to dividend reinvestment plan because we will end up with odd shares. 

Cheng answered 2 years ago

Hi Rusmin,
Well noted on your comments above. Thanks !