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Accordia Golf Trust

I guess this is probably why investing can be so dangerous and index investing may really be the best way to go.

If you refer to my prior analysis on AGT, my worst case estimation was a 20% drop in distributable income for 2H FY17/18. While DPU for 3QFY17/18 at 1.43 cents was less than a 20% decline, the DPU for 4QFY17/18 has declined by more than 60% to 0.45 cents. In case, of my estimated DPU of 4.85cents SGD cents, DPU for AGT has fallen to 3.85 SGD cents.

The decline was on the back of lower EBITDA, -322 JPY million (Q4FY17/18) compared to 12 JPY million (Q4FY16/17). There was also another $500 JPY million for capital investment, bringing distributable income from 1297 JPY million to 493 JPY million.



It really is a year of double whammy for AGT. In Q2FY17/18, they were hit with a 300% surge in membership redemption. That drove Q2FY17/18 distributable income from 497 JPY million to -323 JYP million.



Consequently, the dividend per unit for AGT has fallen to 3.85cents for FY17/18. The price for an 8% yield would be $48.13. The question is if this is the worst case scenario for AGT. Can things get better from here or will the headwinds persist?


First, there is uncertainty in membership redemption. There is still approximately 10,000 JPY million of membership to be redeemed. AGT has explained that the large redemption in 1HFY17/18 was due to the expiry of the lock-up period for one of the more expensive golf course. Assuming those that had wanted to redeem probably would have done so by 1HFY17/18. 

So it is probably safe to assume that the remaining $10,000 JPY million of membership is likely to follow the average redemption of approximately 500 JPY million to 600 JPY million per year. So we should expect Q2FY18/19 DPU to revert back to the level of approximately 0.4cents. 

The business of AGT is seasonally dependent. Business is better in Spring and Fall where the weather is more conducive for a nice round of golf. So far,  DPU for Q1 and Q3 is relatively stable (+/- 20%) at around 1.5cents. 

Supposedly last winter (FY16/17) was bad, but it got worse this year (FY 17/18). The worst thing is... nobody can control the weather. So maybe it's prudent to assume a similar DPU for next winter. 

This brings us to estimated DPU for FY18/19 to 1.5+1.5+0.4+0.4 = 3.8 JPY, which translate to approximately 4.85 SGD cents. At this level, for 8% dividends, the share price will be about 60cents. 

Except that anything could happen, we could still see a similar spike in membership redemption, or them incurring additional costs for renewing their debts (definitely higher interest rates) that are due in August 2018, or weather could be worse than this year. 

Maybe, that is why there is a need for the so called "margin of safety". If one were to require a 20% MOS, a share price of 48cents will probably make more sense.







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