The suspense is finally out. First Reit is acquiring two additional properties in Jakarta (MRCCC and SHLC) via a 5:4 rights issue at 50 cents per share. On top of that, it will raise a $50million debt from OCBC. Implied TERP is $0.70.
First Reit sponsor, PT Lippo Karawaci Tbk will be the master tenant for both properties.
I view this deal positively as the funds raised are used to acquire additional yield-accretive assets and not to par down existing debt. In fact, First Reit gearing, after this acquisition is still low relative to peers.
The main thing is do you trust the business environment in Indonesia? Will it degenerate to the days in 1998? After watching it for more than a decade, I think it would be worthwhile to make some small bets in the country especially in business that support domestic consumption. About 70% of the economy is domestic and it was hardly scathed by the financial crisis in 2008/2009.
I will be going for the rights.
Meanwhile , I have divested Cosco and vested some additional lots in SMRT.