I Sold All Of My LINK REIT Shares....

The prices rise of 30% over the issue price for the recently listed LINK REIT, is just too much too fast, in my opinion. So I am taking my profits and waiting for a better opportunity to reenter if it presents itself. The closing price represents a yield of 5.1% according to a Standard article today.

Also, another investment note: taking advantage in the frenzy surrounding the LINK REIT, Cheung Kong will list their own Prosperity REIT with an indicated yield of 5.3% to 5.7%. REITs have to pay out at least 90% of their profits and Prosperity will pay out 100% to start in order to attract buyers.

However, according to the Standard story, the REIT properties are only expected to earn $29.8 million in 2006.

Prosperity REIT will pay Cheung Kong HK$4 billion for the properties, an 11.9 percent discount to their valuations. The new trust has also secured a total of HK$1.9 billion in bank loans to help fund the purchase.

Prosperity REIT expects its 2006 net profit will reach HK$29.8 million, a far cry from the HK$711.9 million net profit it reported for the first half of this year, though almost 86 percent of the gain was attributable to a revaluation of the investment properties.

The 29.8 million in profit gives a real yield of only 29.8*0.9/4,500= 0.67% a far cry from the 5%+ payout offered this year. It may be that since the Chinese language makes it difficult to translate numbers in excess of 10,000 into English, that the actual earnings expected in 2006 are 298 million leading to an indicated yield then of 298*0.9/4,500= 5.9%. But this seems too high relative to the payout expected of 5.3-5.7%.

Maybe the Standard writers should check some of these numbers before they publish so that they make sense. Its not that hard to do then they can call Cheung Kong to elaborate on the differences. This is what journalists are supposed to do, right?