Queen Mary (EHT)

It has been almost a month since my last post. There was no new inspiration that came to me to want to pen something down in the last few weeks.

However, its a different story on the trading front. Reflecting on my trading activities for the last few weeks, I realise that I did quite a fair of churning – good news for my brokers and their companies. I will share more about it in my next post … today it is about Eagles Hospitality Trust (EHT)

I have been accumulating EHT in the last few weeks. It is now occupying the #2 position in my portfolio in terms of holding. I accumulated as it crept down slowly before the plunge yesterday …

Oh-o, you may say. Yes, what to do ….

The Queen Mary issue is not new and has been a constant risk to EHT’s valuation ever since their IPO. Having said that, it is disappointing that the company have not acted proactively to address investors’ anxiety and perception and in fact, allowed it to worsen by being passive. The widening valuation over the last few months is a warning sign and something that they should have addressed as their first priority of the business but they didn’t.

The final straw that broke the camel’s back was the report from Edge Magazine (thanks for highlighting it!). If the company has been more responsive and caring for their shareholders, then maybe they could have mitigated the drastic impact we saw yesterday.

No one like surprises and especially so in a stock market when shareholders place their trust on highly paid managers to do the right and best things for the shareholders’ interest. Most shareholders are passive investors and do not have ability to influence or direct the operations of the company they invested. They pay good money to highly competent managers to do just that.

My trust in EHT has been shaken tremendously. When trust and credibility are lost, they are very difficult to get back.

I believe EHT is undervalued. Its share price is now 40% below the book value of their assets. Even if Queen Mary is totally written off, it is 30% below.

At current share price and with an expected dividend of 6.4 cents, the yield is almost 11.5%. And if the income from Queen Mary is fully discounted, i.e. bringing dividend to 5 cents, yield is still decent at 9.0%.

However, it is the management credibility issue that EHT is facing and in my opinion, that is a bigger problem than Queen Mary.

They have to act and act fast and transparently to shareholders in order to regain the trust they lost if they want to get themselves out of this crisis and close the valuation gap.

Since I am already in, I bought a few more shares yesterday at 55 cents. I probably won’t add more from now onwards as it is hitting my 5% limit on a single stock.

Once again, this brings home the importance of diversification. Losing 5% (if it happens, I personally think the chance is remote) is very painful but it is definitely way better than losing 100%.

If you are not in yet and happy to take on some risk, this may be the “fire-sale” moment to get something but with your eyes fully opened. But if you are concerned, then wait for a while for the air to clear.

I do hope EHT management understand how critical this moment is. If they get it right and be transparent, open and communicative, they may help to set the stock on the journey back. If not, it will remain in the troughs for a long time and difficult for EHT to be a “STAR” on the Singapore Reit markets as investors are not short of Reit options here.

As I also reflect, there is a reason why the Reits by our local companies – Ascendas, Capitaland, Mapletree and Frasers command a premium and we are willing to pay for it.

Hope EHT act and act fast and act well. Finger crossed!

With regards

Warriortan

man looking at waterfalls
Photo by Moe Shammout on Pexels.com

 

 

 

 

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2 thoughts on “Queen Mary (EHT)

  1. just think carefully and don’t draw the wrong conclusions. i think there is always a middle ground somewhere. I felt that for a new company, the posture should be to have more skepticism and only after interacting with them for some time, u can be more trusting of the things that is being said. that said, basing our evaluation on qualitative things can be problematic as well. if it is 5% of your portfolio still ok. in all honesty, after seeing some poor management, i doubt in worst case you will lose all of it.

    Liked by 1 person

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