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

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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9 likes
44 comments
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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$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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