deadpoet wrote:VituVingiSana wrote:deadpoet wrote:I see fahari is somehow still being traded. Here's a question - should one buy at current prices, until they are bought off at 11 two or three years down the line? I remember reading that investors who opted not to sell would still be bought off down the road. Guaranteed gain if you are willing to wait.
There are no guarantees!
Given the rapid rise in the interest rates then the loans that FAHR has or will take will eat into the EBIT.
A lower PAT = lower valuation of the properties.
It may pay off IF the promoter pays 11 or more but at 18% tax-free the IFB seems less risky for the promoter i.e. ILAM chooses not to buy out other unitholders given it can get 18% from bonds.
Fahari has no loans, as far as I'm aware. And we would be talking about a potential gain larger than 18%. Though I acknowledge the risk. There's also the potential income from the planned sale of properties.
Edit: there would be little risk for the promoter since 11 bob is still way below NAV.
there would be little risk for the promoter since 11 bob is still way below NAV.
I am leery of the "valuations" of properties.
Look at Old Mutual, Centum, Britam, etc. Over the past 5 years they have been writing down the value of their properties. For those that have not done so the reality will hit them soon enough.
When T-Bonds were paying 12%, the Rental Yields of 8% were considered acceptable. The 4% differential could have been covered by capital appreciation and increases in rent over time.
When the IFB is paying 18%, some firms are sticking with 8% Rental Yields thus over-valuing their properties.
Investor has 1bn
2019: Buys a property for 1bn that gives him 80mn/year (8%) instead of a T-Bond yielding 12% (120mn). He hopes that rent increases + capital appreciation will give him at least 12% pa
2023: IFB pays 18% (180mn) but the building still yields 80mn - economy is tough and raising rents is hard - so the shortfall is 100mn.
Will someone pay 1bn for the building to get just 80mn?
Or pay 575mn to get 80/600 = 14%? [I am keeping the 4% spread from IFB yields]
Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett