OUE Hospitality Trust Rights Issue – Opportunity, or Fallacy?
I really wanted to write an article on this over the Labour Day weekend at the start of May, but somehow procrastination set in, and with my busy schedule, somehow I forgotten to comment on this rights issue. My humble apologies to my readers, and I promise that the next article would be of more interest.
Well, basically, it’s another classic case of being unable to “digest” the acquisitions, as per OUE C-REIT last year – therefore, a rights issue was required. I was able to capitalize on this by buying a small stake on OUE Hospitality Trust before ex-rights, and oversubscribed by 4 times to the rights. I was expecting to get the same amount of shares that I got, but to my surprise, i was allocated twice the amount that I originally got. In short, I basically tripled my shareholdings through the rights issue. This is relatively “expensive” since I had to pay money for the rights (and shares), as shareholders who held OUE shares when they gave out the units in OUE H-Trust stood to gain more, if they didn’t buy any more units after their distribution in specie.
So all in all, this seemed like a risky bet on a risky asset, as the trust manager seems to be quite aggressive on the M&A front, and given that OUE H-Trust’s assets are all located in Singapore, it’s very exposed to interest rate hikes – which was staved off for a while until recently – and tourism, which Singapore hasn’t been doing too good as well. However, in the long run, as long as the mangement for both OUE C-REIT and H-Trust does not embark on such dilutive corporate actions or mismanage the business, in my opinion, things should look up.