Cass Ng asked 7 months ago
Hi
I’ve been looking at 0823. While its DPU has remained fairly consistent, I noticed that the NAV has dropped significantly since 2020 and has yet to recover. Is there a risk that the NAV will continue declining, and what are the main reasons behind this trend?
I can only find the EBITDA interest coverage ratio for this REIT, not the EBIT version. When comparing the two, how much of a discount should I apply to the EBITDA ICR to approximate the EBIT ICR?
Thank you!
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Rusmin Ang Staff answered 7 months ago
Hi Cass
Property valuation in HK were very high in the last decade and when the country suffered property crisis, it is quite normal to see revaluation losses which will lead to expansion of cap rate, fair value losses and lower NAV. Also not to forget that Link REIT issued Rights a couple of years ago which leads to further dilution. I always focus more on the DPU. On DPU adjusted basis, Link REIT is quite stable.
I think EBITDA interest coverage is fine. If you want EBIT, you may have to manually adjust yourself. I really don't see the need there because depreciation/amortisation is usually a small figure. Even if we exclude them out, it isn't going to make a big difference in interest coverage but certainly a more conservative figure since the final result will still be lower.
Cass Ng
replied 7 months ago Thanks Rusmin, this clears everything up.
By the way, I have another question about a different stock.
For 3988 (Bank of China), although the P/B ratio looks reasonable, based on the price-yield chart it appears to be overpriced at the moment.
Does this mean I should wait until the price drops back to the average level before entering the market?
Thanks again!
Rusmin AngWe have not look at Chinese bank yet. Every country bank regime is different from one to another. It is always good to understand first before we invest in them.
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