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  1. #11
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    I am watching to see what happens to the price of bonds as rates rise, Might be the odd good price.

  2. #12
    ShareTrader Legend Beagle's Avatar
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    New issue was priced at 4.00% yesterday, senior ranking 5 years maturity. I like their very modest gearing and the fact that the vast majority of their properties are leased to big name retailers like Countdown and Bunnings that will be in business no matter what happens to the economy.

    I put my paw up for a few and got half what I asked for.

    I might get into more medium term high quality bonds as things unfold during the year using a dollar cost averaging approach. A hundred here, a hundred there a few months later and so on. That reduces the risk of being stuck with too many that were issued at too low a price. A lesson I am sure a few are lamenting who went into 7 year bonds in the low 2% range at the bottom of the interest rate cycle.

    Companies that issued long bonds at below 2.5% a while back, on a risk-reward basis really scalped bond investors in my opinion. Wouldn't mind betting there's a few people licking their wounds over what they choose to invest in 2020. (Famous last words, 4.00% might look pathetic in 18 months time and then I get egg on my face lol).

    One good thing, I only got half what I asked for so can only be half right or half wrong lol.
    Last edited by Beagle; 19-02-2022 at 01:26 PM.
    Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.
    Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine

  3. #13
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    Quote Originally Posted by Beagle View Post
    New issue was priced at 4.00% yesterday, senior ranking 5 years maturity. I like their very modest gearing and the fact that the vast majority of their properties are leased to big name retailers like Countdown and Bunnings that will be in business no matter what happens to the economy.
    I am not a fan of corporate bonds Beagle, because IME you get an equity type risk on the downside, while foregoing the equity risk on the upside. Having said that I have invested in bonds 'at the right price' (I held Turners bonds for a few years, some St Lukes bonds in ancient history before that) that reflected all of these risks, My 'rule of thumb' is to look at the underlying dividend yield of the listed entity issuing the bond and add on a couple of percentage points for risk.

    IPL closed at $1.80 on Friday, which equates to a 5.1% gross dividend yield. That means I would be interested in IPL bonds yielding 7.1%. I did a crash course in IPL by reading the appropriate sharetrader thread and checking out AR2021. IPL was floated out of Stride Properties which traces its history all the way back to being an amalgamation of property syndicates from the old Doug Somers-Edgar Money Managers days. Stride Properties went to great lengths (and cost!) to extract themselves from the external management contract set up by Somers-Edgar. But Stride have now seen fit to impose a similarly onerous management contract on their 'child', Investore (IPL).

    The Investore management contract is based on a percentage of the asset value of the properties under management, reducing to 'only' 0.45% of the incremental 'portfolio value', once the total portfolio value goes above $750m (it has). The $140m revaluation of Investore properties over FY2021 bodes 'well' for the future. Over FY2021 this management fee consisted of a $4.965m 'base fee' and a $2.076m 'performance fee' making a total of $7.041m (plus another bonus of $2m carried forward into future years). For reference underlying Investore profit after tax (removing property revaluations and cash flow hedge movement) was $22.2m (after a finance expense of $13m) on $64.5m of gross rental income.

    Stride still owns a cornerstone stake in Investore. The mode of operation seems to be to periodically feed property investments to Investore, thereby clipping the property management ticket for all Investore managed assets ad infinitum, and leveraging up the management fees owed to Stride as they go.

    It looks to me as though the winners in this money go around are Stride, who can continue to extract value out of the Investore property portfolio regardless of actual rental receipts received by Investore. With management fees to be paid guaranteed, but rental income not, it looks like the financial future of Investore is very tied to 'good retail times' continuing. Thoughts?

    SNOOPY
    Last edited by Snoopy; 21-02-2022 at 05:30 PM.
    Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7

  4. #14
    ShareTrader Legend Beagle's Avatar
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    I looked at buying the shares instead which were $1.73 at the time of my review compared to last stated NTA of $2.20. This initially got me excited but as I looked deeper into the issues you've outlined Snoopy my enthusiasm waned. I then considered that we are well past the low of the interest rate cycle so with higher cap rates going forward the NTA will decline and the share price is merely front running that a little bit, (market is a forward looking beast).

    At the end of the day, the gearing is very modest, (in the mid - late 20% range) and the leases are being paid by Countdown in the majority, (more than 60% of leases) and other big box retailers like Bunnings who are never going to go broke so I will get my 4.00% with almost no chance of a loss.

    Shareholders on the other hand are faced with the very real prospect of NTA decreases and the continuation of the well entrenched downturn continuing.

    2022 is a year where its all about focusing on capital preservation. My 2 cents.

    All REIT's look vulnerable to me, see comments in KPG thread today.
    Last edited by Beagle; 21-02-2022 at 03:17 PM.
    Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.
    Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine

  5. #15
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    Put this in the wrong place. Didn't realise there was a bond section:

    https://recastinvestor.substack.com/...store-property

  6. #16
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    Quote Originally Posted by Beagle View Post
    New issue was priced at 4.00% yesterday, senior ranking 5 years maturity. I like their very modest gearing and the fact that the vast majority of their properties are leased to big name retailers like Countdown and Bunnings that will be in business no matter what happens to the economy.

    I put my paw up for a few and got half what I asked for.

    I might get into more medium term high quality bonds as things unfold during the year using a dollar cost averaging approach. A hundred here, a hundred there a few months later and so on. That reduces the risk of being stuck with too many that were issued at too low a price. A lesson I am sure a few are lamenting who went into 7 year bonds in the low 2% range at the bottom of the interest rate cycle.

    Companies that issued long bonds at below 2.5% a while back, on a risk-reward basis really scalped bond investors in my opinion. Wouldn't mind betting there's a few people licking their wounds over what they choose to invest in 2020. (Famous last words, 4.00% might look pathetic in 18 months time and then I get egg on my face lol).

    One good thing, I only got half what I asked for so can only be half right or half wrong lol.
    Interesting 'buy' and 'sell' offers on the Investore bond market today as I print my market 'snapshot'.

    Buy Sell
    IPL010 4.4% coupon bonds maturing 18-04-2024 No Bid 4.14%
    IPL020 2.4% coupon bonds maturing 31-08-2027 No Bid 4.6%
    IPL030 4.0% coupon bonds maturing 25-02-2027 4.52% No offer

    Looks like you are already underwater Beagle in your liquidity trap. An 11.5% loss if my back of the envelope calculation is correct? Although until an IPL030 bondholder blinks, it is all a paper loss - right?

    Quote Originally Posted by Beagle View Post
    I looked at buying the shares instead which were $1.73 at the time of my review compared to last stated NTA of $2.20. This initially got me excited but as I looked deeper into the issues you've outlined Snoopy my enthusiasm waned. I then considered that we are well past the low of the interest rate cycle so with higher cap rates going forward the NTA will decline and the share price is merely front running that a little bit, (market is a forward looking beast).

    Shareholders on the other hand are faced with the very real prospect of NTA decreases and the continuation of the well entrenched downturn continuing.

    2022 is a year where its all about focusing on capital preservation. My 2 cents.
    IPL shares last traded at $1.72. So a 0.6% loss. Not great. But those who bought the shares are looking a helluva lot more secure than the IPL 4.0% bondholders from a 'capital preservation' perspective.

    SNOOPY
    Last edited by Snoopy; 29-03-2022 at 10:18 AM.
    Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7

  7. #17
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    Company's timing with its bonds was excellent. Little bank debt on the b/s.

    I did an analysis of the company including the bonds recently:

    https://recastinvestor.substack.com/...roperty-iplnzx

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