So sian and disappointing – Accordia Golf Trust

A warm welcome to 5 new subscribers who joined us since the last post. And a big thank you to all the readers for the strong support that you have given to this blog – the number of viewership for 2018 so far has now overtaken the whole of 2017 and it is not even half way through the year yet. This is very encouraging and motivating to me personally and thank you once again for your support.

Back in end 2017, many people thought that 2018 will be a bland year for investments but boy, what a wild ride we had. The looming threat of rising interest rate, the speedy return of expensive oil, the geopolitical risks in Middle East, reimposing of economic sanctions on Iran by US, the return of trade tariffs between US and Chine and even its own allies, nuclear threat from North Korea, North and South Korea embraces, hot and cold US-North Korea summit, the dramatic change in Malaysia political landscape lately, the neglected and lost favoured bitcoins and its cousins and not forgetting our very own Singapore property prices is going up again … WOW! Each one of them can be an influential factor on the stock market and we had all of them in a short 5 months !!!

What a topsy-turvy ride we had with the stock markets across the globe in 5 months and even our very own SGX was not spared.

Each crisis will give birth to an opportunity – the more important question is whether we are prepared to ride out the storm and take full advantage of the situation. I hope you have. I tried but to varying success … hope you are better in this than me.

Back to the “specifics” as my boss like to say, with the full year results announcement by Accordia Golf Trust on Monday, I can now sum up my dividend yield for first half of this year. Well, well, well, even I can’t believe it, its a whopping 3.5% yield. The upcoming dividends from SIA Engineering and Singtel which will ex-div in July will bring me to 4.1%. I am pretty sure I will cross the 5% target by end of the year now. I am really happy with this.

silhouette of man playing golf during sunset
Photo by Pixabay on Pexels.com

While I am elated with this results, I was disappointed with Accordia Golf Trust. Kinda of an anti-climax being the last in my portfolio to announce its results.

Their dividend distribution for July to Dec 2017 declines again compared to previous year. They announced 2.2 cents dividend per share compared to 3.59 cents for the same period in 2016. This is an amazing 36% reduction! Once again, they have put the “blame” on their golf members withdrawing their deposits after the “locked in” period, which drained them of the cash required to distribute dividends.

When I first heard it last year, I thought it was once off and I didn’t quite pay much attention to it. But to hear for the second year, I decided that I needed to understand this better. If this continues on, I have to reconsider my investment in this company.

Examining at their latest financial statements, they carry about 10,521 Mil Yen of membership deposit on their current liabilities book on 31 Mar 2018. In the last financial year, about 1,500 Mil Yen was returned to their members. This amount was 35% of their annual net profit, 18% of their net cash flow from operations and 30% of their cash available for distribution (excluding deposit refund).

It is significant!

broken heart love sad
Photo by burak kostak on Pexels.com

The huge amount of membership deposit as current liability has also caused current liabilities to exceed current asset. This is undoubtedly another concern.

Although in the financial statement, it was stated that “based on historical redemption experience, the management believes that it is unlikely that there will be significant redemption of deposit for the next 12 months”, it did not reveal what they are going to do to prevent further redemption and what would be a credible worst case scenario. Is a full redemption of 10,521 Mil Yen even possible? I don’t know.

It seems that the amount of cash that they have currently and the positive cash flow that they are generating operationally is sufficient to fulfill this but it just means that unit holders like us will not get any dividend. Wow, that will be an earthshaking event if it really happens.

At the current dividend payout, the yield at the current share price of 63 cents is only 6%. I think the market is expecting a 8% dividend yield. To bring the dividend yield back to 8%, the share price will have to drop significantly.

The only saving grace is that they are still generating positive income and a healthy cash flow from operations. If they can maintain this, they should be able to ride through this challenge over the next few years. But are investors patient enough to wait so long? Waiting has its own opportunity cost too.

I fear of a major backlash tomorrow – Alas!

Sian 😦

Regards,

Warriortan

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3 thoughts on “So sian and disappointing – Accordia Golf Trust

  1. Always a danger sign when a company has to cut its dividend – especially when they try and explain it away on factors they can’t control. But I often can’t resist the temptation to buy in when a stock gets punished by investors for a dividend cut.

    Will be interesting to see if investors slice the stock price out into the deep rough 😉

    Cheers, Frankie

    Liked by 1 person

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