Stock Analysis 10: Accordia Golf Trust

This is a unique business trust which manages golf courses in Japan. It just IPO-ed last year, and is looking to give out it first distribution in end of June 2015. Stock price has since taken a huge beating due to the weakening of yen.

Market Price (2015-4-10) = $0.77

*Based on Aug to Dec results

Earnings
Approx. EPS: $0.0376 (Different Exchange Rate)
Approx. DPS (First Year): $0.0391 (For first distribution, 5 months operation) / 5 * 12 = 0.0938

This is in the best case scenario at this moment. I shall be ultra-conservative, taking into account the foreign exchange risks, taking a DPU of 0.0391 * 2 = 0.0782

In the 2nd year onwards, DPU = 0.9 * 0.0782 = 0.07

Payout Ratio: 100% first year, at least 90% thereafter.

Ratios

Yield: 9.1% for 2nd year onwards

Profitability

ROE: 3188/84274 = 3.7% (For 5 months period) [Avg for SG blue chips is 11.8%]
Asset Turnover: 23509/183104 = 0.12
Gross Margin: 5194/23509 = 22% (>15% is good)
Net Income Margin: 3188/23509 = 13.6% (>7% is good)

Balance Sheet

Current Ratio: 14503/17208 = 0.84
Debt To Equity: 0.51
Gearing Ratio: Total Liabilities/Total Assets = 98818/183104 = 53.9%*
NAV: $0.8

*It is said that the gearing ratio will come closer to 36.1% after adjusting deferred tax liabilities and member deposit 

Additional Info

Biannual distributions based on 31st Mar and 31st Sep. To distribute 100% of income for first year (~$0.0391), and at least 90% from 2nd year onwards.

Personal Opinion:

+ High dividend yield!
+ Leading provider in Japan with a high barrier of entry.
+ Growth Factors: Aging population, return of golf to Olympics 2016, Government boosting tourism.
+ Number of institutions started buying it for the past 2 months (Goldman Sachs, Morgan Stanley, at ~0.76 average price)

- Extremely high leverage of 53.9%.
- High unpredictable weather/natural disaster, and forex risks.
- Concentrated assets (all in Japan), stagnating revenue (lesser young people taking up the Sports)

This is probably the 'riskiest' stock I am aiming, as it's really a more 'recreational' than 'essential' service. The revenue are collected in Yen which we all know has plummet massively (and no one knows whether it'll continue sliding down).

On the positive side, I think the risks have already been priced it (stock has gone drop 30% from its IPO price of $0.97, and opening price of $0.85). At this level, I think the high dividend yield can justify the risks. It has also find a good support - believe the downside should be limited.


Reference:
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