First Reit bloodbath

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First Reit (AW9U.SI) share price has dropped 17% (1.15 to 0.955) over the last 3 days. Even Sabana cannot match the speed of this spectacular drop.

First Reit’s bond prices hardly moved in the last 3 days, trading at about 90.

Many have asked me if I know why the price is falling. Here are my guesses:

  1. The trigger – Lippo Karawachi downgrade

The news that triggered this drop seems to be the downgrading of Lippo Karawachi from B to CCC+ by Fitch. About 80% of First Reit’s rental income is contributed by Lippo Karawachi and its subsidiaries. They are First Reit’s sponsor, key tenant, and main revenue contributor.

2. Rumour – Lippo Karawachi may sell remaining 20% stake in First Reit

According to https://www.theedgesingapore.com/lippo-karawaci-says-fitch-credit-downgrade-regretted-fund-raising-progressing-smoothly, Lippo Karawachi may sell their remaining stake in First Reit.

3. Rumour –  First Reit may issue rights

Only 1 month ago, OUE Com Reit (TS0U.SI) issued a deeply discounted rights. Is First Reit going the same direction?

4. Rumour –  Selling by institutions

I read this from https://www.facebook.com/gabrielyap17/, which I will paste here:

“The pace and magnitude of sell-down is certainly coming from Institutions.  It is apparent that institutions need to sell as Lippo Karawachi rating has been downgraded.  Otherwise, the fund managers have no room for defense why First Reit is still inside their portfolio.  The selling volume in the past 3 days –
Fri     3.3 m
Mon  4.67 m
Tue so far  5.64 m
Japanese institutions hold approximately in total 23 million of First Reit shares, so if all needs to sell, it is almost there.  Key is if other institutions need to sell on the same down bandwagon.”
Summary
At the current price now, the yield for First Reit is 9%. What makes it even more amazing is that First Reit’s DPU has been increasing yearly.
For all the news that is known, there is no big concern for First Reit that deserve this bloodbath. What is probably more important is the news that is not released yet.
For me, I will wait for the price to settled down first. If there is a rights issue, I want to know the rights price. The price will probably settle near the rights price.
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