Elite Commercial REIT a value buy or value trap?
Is it really the right place and right time for Elite Commercial REIT? At a time when the whole world is firmly gripped by fear because of the Wuhan coronavirus, Elite Commercial REIT braved the storm to seek a listing on SGX mainboard. Notably, this IPO came after a slew of S-REIT listings in 2019, which included ARA US Hospitality, Eagle Hospitality Trust and Prime US REIT. Those were primarily US assets but Elite Commercial REIT differentiates itself as the first UK-focused S-REIT.
It seems that the management is determined to make the IPO a success. The public offering constitutes only 5,734,300 units while there is international placement of 108,981,000 units. In addition, 77,827,900 units are allocated to cornerstone investors. Understandably, given the current climate, such tactical allotment is needed to ensure that a successful IPO subscription.
The distribution yield is a mouth-watering 7.1% but whether this sort of distribution yield is sustainable is one big question mark given that the forecast is based on merely 15 months of financial results. The private trust investors were “unwilling to provide representations and warranties” for the latest three financial years of Elite Commercial Trust and had sought exemption from SGX.
Will Elite …