With the issuance of rights, DPS will fall from 6.55 cents to 5.38 cents. The DPS Yield will fall from 8.6% to 7.6%.
I asked myself the following 3 questions below previously in my post here (OUE Hospitality Trust Issues Rights to Fund Acquisition of Crowne Plaza Changi Airport Extension).
- As issuance of rights usually dilute the share price, what will be the fair price after rights issue? This is similar to the recent ARA rights issue whereby the share price fell from estimate $1.17 to $1.05 after rights issue.
- How do I subscribe for the rights?
- How do I or should I subscribe for excess rights?
As issuance of rights usually dilute the share price, what will be the fair price after rights issue?
I found out what I am asking is actually known as TERP (Theoretical ex-rights price). TERP is the calculated price for a company’s stock shares after issuing new rights-shares with the assumption that all the newly issued shares are taken up by the existing shareholders. The TERP price is S$0.7092.
How do I subscribe for the rights?
The easiest way is to apply via ATM (Automated Teller Machine).
- Click on More Services.
- Look for the menu item whereby it says something about “Rights application”.
- Select OUE HTrust Rights.
- Enter the maximum number of rights you wish to receive. Click Enter.
- Enter the excess rights you wish to receive.
- That is it!
The fifth person has an excellent step by step guide here. (A Step-By-Step Guide How to Apply for Rights Shares by ATM).
How do I or should I subscribe for excess rights?
I have shown you above how to apply for excess rights. I have applied for OUE HTrust excess rights as well. At an issue price of S$0.54, it is selling at 23.9% discount as compared to TERP and 29.4% discount if you compare to closing price of S$0.765 as per 7th March 2016.
Nice. The share price keeps plunging even after the rights. Im keeping an eye to see if i can get it at 60 cents hee 🙂
Yes B. Price has been plunging after news of rights issue. May even drop below S$0.54.
Chance upon your blog. Was reading and saw that your portfolio has many similar holdings as mine!!! Will visit your blog more often. Wish you the best…..
Thanks David. I visited your blog as well. Glad to know another dividend investor.
Hi Sweet Retirement,
I was reading a book and it said share price normally plunged after rights issue during a bear period n vice versa during bull.
But of u believe the company has the right fundamentsls and will get thru the current downturn and that the cash it collects will give more currency to pick up good assets down the road, then it makes sense to subscribe the rights!
But pardon me for being truthful, I think hospitality reit now among all other reits is seeing more negatives!
I have not analyse OUE but I believe u already did ur due diligence n the business is sound. 🙂
Yes, usually the issuance of rights will dilute the earnings per share and thus the plunge in share price. There are various reasons for a company to issue rights. It can be for repayment of debt, funding for new acquisition etc. In OUE HTrust case, it is raising funds for new acquisition of the extension for Crowne Plaza Changi Airport.
Hospitality REITS are mostly on the downtrend and OUE HTrust is of no exception. I own this REIT during IPO and still staying vested because I like the assets (Mandarin Orchard Singapore, Mandarin Gallery, Crowne Plaza Changi Airport) under OUE HTrust.
My Sweet Retirement