KEPPEL KBS US REIT...... Take the JUMP!

One of the popular investment class in SGX is REIT, Real Estate Investment Trust. It's typically provides stable and low beta stock price swing, sugar coated with consistent dividend payout. I probably should have invested more in SG REIT than speculating in stock market. However, those "Branded" REITs (Prada!!) which backed by heavyweight cornerstone sponsors are mostly trade at full book value >0.9 P/B and low dividend yield <6%.

This week, I would like to write about Keppel KBS REIT which recently changed name to Keppel Pacific Oak US REIT. This REIT was issued for USD0.88 at IPO. Traded around this price for sometimes until the share price start to tanked in late 2018.

2 key reasons for the fierce selling:

1. Fear of possible US tax withholding Law changed could impose 30% tax on its profits.
2. Greatly discounted Rights issue at USD0.50 to purchase new office building in US.

This REIT's price dropped from USD0.85 to USD0.54 lowest point in very short period of time. At this price, the dividend yield will exceed 12% return. Very attractive investments return especially the Right issue which allowed you to acquire more share at discounted price to book value. With Keppel as the cornerstone sponsor, I'm confidents that it's a very safe investment and the opportunity won't come twice in your lifetime.

What I like about Keppel KBS REIT:

1. High dividends yield >12%
2. Good sponsors > Keppel & KBS
3. Right market and strategic locations - US companies are growing a fastest pace support the demands for office space.
4. Super cheap rights issue - Like buying TESLA model X at Cherry QQ pricing.

I started buying between 58 cents and 64 cents. I had fully subscribed to the Right share and applied for Rights excess at USD 0.50. I got the full allocations plus excess share due to many not willing take the risk to invest. Including the Rights share and dividends received, my average price come down to USD0.53.

Fast forward to 2019, Keppel KBS US REIT issued a statement and clarify that they expected no tax impact as a result of the new US tax regulations. This immediately cleared up the risks hanging, the share price immediately recovered from 0.54 to 0.64. I sold it later in March 2019 at USD 0.68 with 23% gains in profit for 5 months holding period.

I admit that I make a big mistake as later it hit 80cents highest few months after I sold. Currently the stock trading at 74cents. But I'm glad I took the courage to "JUMP"  when others rush for the exit.

     "Taking a calculated investment risk is like taking a bungee jump with safety harness"-WC

I end this blog with my favorite song by G.E.M. "LIGHT YEARS AWAY". Enjoy.

- WILLIAM CHENG

Stock name: KEPPEL KBS US REIT
Country listing: Singapore
Research periods: 2 weeks
Stock accumulation/holding periods : 5 months
Return on investment (ROI) : 23% in 5 months 
2019 Stock ROI ranking: 5th (biggest gains)