Expiry:
Target Price
$0.5
(-12.28%)
NOW:

Update:
The 2nd Quarter results are bad as expected due to the abnormal weather. The good news is that repayment of membership deposits for the quarter is only 258 million yen versus 1.1 billion yen last year. The Q1 deposit refund was even lower at 88 million yen. So maybe last year was really abnormal and we can expect the average deposit refunds to maintain around 250 million yen per quarter as per previous years.
The demand for golfing when the weather is good is still there as shown by the number of players in Oct 2018 which is up 15.7% yoy. I do not think such bad weather like last quarter's would reoccur anytime in the near future. I estimate the dividend payout to be between 5 to 6 cents per year from now. This would give a yield between 10 to 12% which gives me a lot of safety margin.
The bonus would be if the management finally start the acquisitions of more golf courses now that the loan renewal has been completed. Any acquisitions can be fully funded by debt as the Loan to Valuation is only about 30% currently.

I first invested in $Accordia Golf Tr(ADQU.SI) about 3 years ago when the price dropped a lot due to the fall in the Yen exchange rate. The price dropped further due to poor results from bad weather but then recovered when the performance stabilized. However I was very disappointed with the management as they have not done anything to improve the distribution since IPO in 2014. Each AGM they promised that they are looking into acquisitions of additional Golf courses from the sponsor but nothing has materialized. At the 2016 AGM, I requested the management to hedge the Yen/SGD exchange rate as the the Yen was strong then but they decided not to. This was in sharp contrast with the other Japanese REIT, Croesus which locked in good rates for up to 2 years. Till now, they do not do currency hedging, they have failed to understand the importance of a stable exchange rate. In Nov last year distributions were badly affected by a big increase in membership deposits refund. This was the straw that broke the camels back and I sold all my 80,000 shares at a small profit.
Since then the share price have dropped around 20%, I decided to look at AGT again to see if it's worth buying. The latest quarter ending Jun 2018 results are not bad with total distributable income down 7.2% YoY despite the heavy rains and flooding in Western Japan. I think that things will get much worse before getting better for the following reasons:
1. Abnormally hot weather with temperatures reaching 40 deg C. The July report is out with the number of players down 14.1% YoY. August continued to be hot with temperatures similar to Singapore.
2. The most powerful Typhoon in 25 years, Typhoon Jebi just hit the Osaka area today.
3. The 2% upfront refinancing fee: 1% was paid last quarter and another 1% which is equivalent to 452 million Yen to be paid in the next quarter.
4. The last and most serious: 10 billion Yen in refundable membership deposits which the lock up period is over. The deposits are refundable when the membership is terminated and normally they refund 200 to 300 million Yen each quarter. However for the quarter ending Sep 2017, they refunded more than 1 billion Yen in membership deposits which reduced the half year DPU by 33%. I think that they are expecting another big increase in membership deposits refund this quarter as they did not declare a DPU for the last quarter's results. Normally they would declare a DPU for the quarter which would only be paid out half yearly.
So AGT shareholders should be prepared for a possible big impact in the DPU for this quarter. This is just my opinion and it may not happen. Good luck if you are invested.

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49 comments
Pizzaprata

Reply to @layers : Will watch the monthly reports closely as I accumulate. I used to own 80k shares.

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layers

http://layersinvesting.blogspot.com/2018/0...

i think the weather will b a long term issue

Pizzaprata

Reply to @layers : Yup, in early 2016 it dropped to 48 cents. Unfortunately I was still unfamiliar with the counter so did not load up.

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Smallcapasia

Hi @Pizzaprata , i think this is a very good post, highlighted many of my concerns too. Can i share this post with my readers?

Pizzaprata

Reply to @layers : The Japanese community is smaller nowadays but are more concentrated in the West as all 3 Japanese schools are there.

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miketak

wow 57cts now... I got out 2 years ago when I observed that their results kept getting worse... stay away from this biz trust until their membership start to recover. Increase in golfers from aging population is a reason that has been proven wrong.

layers

Reply to @miketak : it's not a reit

MaxLim

This one is like the golf ball.. Will end up into the hole

Gracian

Usually, i play golf, i think of clinching contracts of $$$ with my businesses' counterparts, not $$$ from this SG counter. Lolllll

lynlynnakamori

we have very nice Golf course at Hakone

KitWhye

Ask any golfer. I am one of them. Golf courses will never make money. High maintenance costs eat into the profits, if any. This trust is not for long term investment. Why AGT want to list in Singapore and not in Japan? The only positive is whether the golf course could be redevelop into something more appealing. If not, cash flow will be depleted over time. Distribution will never improve. Minority shareholders need to ask hard questions and challenge the future survival of golf courses.

lynlynnakamori

Olympic 2020....what you think?

Pizzaprata

Reply to @lynlynnakamori : I believe the 2020 Olympics will generate interest in Golf as it will be part of the games for the first time. That's why I am this keeping AGT in my watchlist. However due to the membership deposits issue, I would need a bigger safety margin and would only enter if it's cheap.


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Managed to get 30k shares of $Accordia Golf Tr(ADQU.SI) today at 0.53. The share price have been dropping since the disappointing 4Q Mar'19 results, please read my previous post. Was queuing @0.50 for a long time but decided to increase my buy price to 0.53 this week as I am expecting good results in their next earnings release. If you see the latest monthly report (attached), there is an increase of 3% in the number of players for April to June Quarter. If you have been monitoring the financial results of AGT, you will know that their expenses are fairly constant at 11 billion Yen each quarter irrespective of the number of players. That's one reason why the performance of AGT fluctuates greatly. Therefore I expect the Income available for Distribution to be better than the 1.66 billion Yen for the same quarter last year. A distribution of 1.66 billion Yen should give a DPU of 1.85 cents. The Yen/SGD exchange rate is also more favourable currently. Furthermore there is no refinancing fee cost this year unlike last year.
Please take note that AGT has been known for throwing up surprises like the huge repayment of membership deposits in 1H2017 so my estimates may be way out but so far the deposit refunds have been pretty stable. Please DYODD.

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Attachment(s):

Disappointing 4Q results from $Accordia Golf Tr(ADQU.SI) and I am not talking about the impairments. The impairments are non cash items so I am not bothered about them. But it does raises ones eyebrows that the sponsors dumped the Golf courses to the Trust at a whopping 29% above the market valuation during the IPO. Another reason not to participate in IPOs.
I am more concerned about the low Distributable Income Available for Shareholders of 194m yen as compared with 493m yen for the same period last year. The thing is this year the weather was much better than last year which had an abnormally cold winter. There were 12.7% more golf players this year than last so what happened to the cash flow?
First the top line, the revenue for the quarter was just 7.5% more than last year which means that the revenue per golf player is dropping which is the first concern. The revenue was also affected by lower membership fees which was 178m yen lower than last year. This is the second concern as although there are more players, they are not committed enough to join as members.
The revenue is still higher than last year and after all the expenses and adjustments, the net increase in cash this year is 1,429m yen which is much higher than last year's 776m yen. The reason for the low distribution for this quarter is due to the high Reserves (see attached) 1,235m this year as compared to 283m last year. If you look at the breakdown of the Reserves: 559m withholding tax, 244m property tax, 278m trust operations and unwinding of 255m upfront fee previously reserved. There is no explanation why these reserves are so high this quarter. I know the last item is the one-off refinancing upfront fee which was deferred from the 2Q. If you take a look at past quarterly results, it looks like the management use the Reserves to adjust the distribution amount to their liking. Anyway if the Reserves are negative this year, it may be positive next year as after all these are reserves of cash which belongs to the shareholders. So the actions of a shitty management have once again provided us an opportunity to accumulate shares. I will wait until after XD as the share price almost always will fall by more than the dividend amount although this time it will probably not hit my previous entry price of 49 cents.

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Attachment(s):


Although the STI did no go up much (<2%) for the month of February, my portfolio performed much better (+11%) this month thanks to the following counters:
$AEM(AWX.SI)
$Sunpower(5GD.SI)
$Accordia Golf Tr(ADQU.SI)
$Silverlake Axis(5CP.SI)
$Sasseur Reit(CRPU.SI)
$Oxley(5UX.SI)

My conviction and patience have paid off. Even Oxley which have been on the downtrend for so long has finally started to move up, however it’s still underwater for me. Last week I took 23% profit for AGT. Today, I sold all my Silverlake shares at 31% profit. I also sold 20% of my AEM share at 33% profit. And for Sunpower, my average price is 0.44 and I will sell my 2nd batch after the results release tomorrow.
As for Sasseur Reit, I will be keeping them for now. It is still CD with a 3.541c dividend coming up. I believe their outlet sales can continue to grow and it should be able to payout a dividend yield of at least 8.5% after XD.
I first bought Sasseur reit 5 months ago. I did not buy much as there is no track record and the malls are in China, it will be difficult to monitor how there are doing. However I believe in their business model and even added more during the recent price drop before the results release. The results were better than expected and it proves that the Outlets model is resilient to online shopping and even the trade war! The 4Q DPU is 28% above forecast. This is despite the fall in the RMB/SGD exchange rate. The reason for the good performance is that the 4Q is historically the period with the highest sales and also that they no longer have to keep reserves in case of poor performance. This REIT is difficult to understand and is not for everyone, please see my previous post if you want to know more: https://www.investingnote.com/posts/1019661

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Sold 20k shares $Accordia Golf Tr(ADQU.SI) @0.605 which I bought @0.49. I think it is still possible to go up further but my rule is that I will take profit if it hits 2 years worth of dividends. The logic is that I will be able to buy it at a better price in the next two years. This is especially true for this stock which performance depends literally on the weather. The reason why the stock price has been climbing is that Japan has been having good weather since October and the number of players have been increased which is why the 3rd Quarter (Oct-Dec2018) results were very good The advantage of investing in Accordia is that they issue monthly reports on the number of players on their golf courses. As their expenses are fairly constant at about 11 billion Yen per quarter, the number of players have significant impact on the performance which you should monitor closely if you are invested.
However there is one item which we cannot predict which is the repayment of members deposit. This item can affect cash flows greatly as the total deposits is around 10 billion Yen. Fortunately the 1.1 billion Yen repayment in the 2nd Quarter last FY seems to be an anomaly and the refunds have been 250 million Yen or less per quarter for the past one year.
Another reason I sold is the poor management which I have talked about before, see my previous post: https://www.investingnote.com/posts/1000750
This time they did not even hedge last quarter's distribution, they reported the amount available for distribution which is 1.72 billion yen without mentioning the DPU. Previously they do not hedge long term but they hedge for the quarter that would be paid in the later half of the FY. Yen has been dropping the past month and the DPU could be impacted. Of course the Yen could appreciate but the management does not understand that shareholders prefer a stable DPU.

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$Accordia Golf Tr(ADQU.SI) share price has hit below my target of 50 cents, see my previous post: https://www.investingnote.com/posts/1000750
However I would not enter even at this low price due to two reasons:
1. Due to abnormally bad weather, the number of players for the quarter has dropped to 1.41 million which is 9.5% lower year on year. This should reduce income available for distribution by about 1.1 billion yen. Together with the upfront refinancing fee of 450 million yen, there will be no distribution income left for the 2nd Quarter.
2. Possibility of another large refund of membership deposits which I mentioned in my previous post. Any deposits refund more than the usual 200+ million yen would have to be deducted from the 1st Quarter's distribution which is to be paid out together with the 2nd Quarter.
It would be better to enter after the Q2 results are out on 13 Nov. Please DYODD.

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