Dear readers, there is one thing which I have been noticing about Singapore Reits and Trusts that I would like to share with you readers here. Actually, this thing which I notice is nothing new but I would just like to discuss more the context of this thing that I notice here.
Over the trading week to-date, we read that:
SPH has launched a private placement to raise monies to partially fund an acquisition of a stake in a South Australian shopping centre
Ascendas India Trust is launching a private placement to fund its potential investment in a Bangalore business park.
As I have mentioned several times before in Sg Stocks Investing, a common way for Reits and Trusts to grow is to increase their Assets Under Management (“AUM”) via acquisition of other business interests. And to increase their AUM, Reits and Trusts would have to raise funding and this is commonly done through placement of shares, often at a discount of the trading price of the equity. But this would dilute the equity ownership of existing shareholders.
Often the concept of dilution of equity ownership of existing shareholders is not easily understood by investors until the equity price turn south in more of the cases.
Then the question is whether it is worth holding the Reit or Trust with the capital gain going south as versus to holding the equity for dividend income yields.