Property market Stocks and Reits - What now?

Let's analyze Capitaland buyout of Capitalmall Asia

Capitaland Asia being offered $2.35

However the buyout is positive for CMA investor as it is liken to being offered a 20% premium for payout. The $2.35 payout price is about 20% premium to book value.

CMA should be trading at price weakness going forward given the negative prospect of property market in Singapore, Hongkong and China.
It is a good business move as with an IPO price of $2.12 a share in late 2009, privatising CMA with an offer price of $2.35 means the borrow cost from public is only 1.05% per annum over a 4 and a half year period.

I see it that the Parent company is trying to consolidate all investments as the property market is going through a tough challenging times going forward whether here or China and Hongkong.

However for the Capitaland investors, it is like they are forced to pay 20% or more to ingest CMA at a time when they may be able to buy from open market going forward, probably at 20% cheaper. So all in they are paying as much as 50% more for CMA which means Capitaland share value is diluted by up to 20% in real term as of now.

Therefore it is an avoid on buy for Capitaland for now If you discount the share price by 30% A fair price to buy is about $2

With US economy recovering and interest rate moving up in the next decade, the cost of borrowing at low% is over. The borrowing cost will eat into profit margin of every business, more so for Reits and Property.

The dividend payout for Reits is likely to be adjusted down and with share price expected to be trading on weakness, buying or holding Reits going forward is not a good investment proxy. Moreover property may have peaked since 2012 and have entered into a prolonged bear phase for the next decade.

Technically on all fronts Singapore, Hongkong and China have already entered into a prolonged slow economic growth. Layoffs worldwide are eccelerating at a faster pace since 2013.


What Warren Buffett once said of IPOs

The idea that an IPO, offered with significant commissions, with all kinds of publicity, with the seller electing the time to sell, is going to be the single best investment that I can make in the world among thousands of choices is mathematically impossible.
Buffet is the reason why I have not bought any initial public offerings in many years. If I do it is more for punting than holding for investment.