Big Idea 10

Now you must be wondering, "where the h*** did this idea came from?"

Firstly, this is not a new idea. It has been in my portfolio since February 2018. As readers of my blog, you will have known that I had been consolidating my portfolio. But this idea has been in my portfolio and I realized I wanted to keep it. Thus, I decided to deem it as part of my Big Ideas Investing Theory.

Before I continue, it is important to note that Big Idea 10 is not a company. It is a Real Estate Investment Trust (REIT) in the retail industry.

Did you just said: "Oh My God? A Retail REIT? Don't you know that eCommerce is taking over the world? Retail shops has been closing here and there! Even Forever 21 is left with 1 shop in Singapore. Why did you choose a Retail REIT?"

To answer that, I have to state that I believe retail space are still required.

1. eCommerce giants has went into the retail space, although these businesses are minly supermarkets. 

This video shows Jack Ma showing us what he deems as "The New Retail". On the other hand, Amazon has also gone on to acquire Whole Foods, and started supermarket without checkouts.

2. "Online to Offline" (O2O) 

As per article, O2O commerce is a business strategy designed to bring online customers to brick and mortar locations as well as create a seamless digital experience before, during, and after. In the article, it also states that despite the superb growth in online sales, offline sales will still contributes to 88.1% of the global retail market.

3. Expansion of Online Shops

Closer to home, we have one of the most successful blogshop in Singapore - Love Bonito - opening a flagship store at 313@Somerset. Other blogshops, such as Hervelvetvase, MDS, as well as Love and Bravery, also having retail stores along the malls of orchard road. Reebonz, an online platform for buying and selling luxury products, also has a store in Vivocity. In my opinion, this just emphasize that the continuation expansion of an online platform could possibly just be offline. 

4. A Place to Hang Out

This is just my personal opinion. I believe people still want to hang out together. No one wants to just stay home and buy stuff online. Thus, shopping malls also becomes an alternative for people to hang out and spend their time together.

Therefore, these are the reasons on why I chose a retail REIT.

Reasons Why This REIT Qualifies as a "Big Idea"

1. Master Lease/Long Term Lease Agreement Contributes Over 49% of Gross Rent

With these agreements in place, there are less stakeholders for the REIT's management to deal with. In addition, this factor provides a stability to the occupancy rate and this will also lead to a stability on the dividend that it gave out.

2. Share Price Within Range 

Since June 2013, the share price of this REIT has been ranging between 60 cents to 90 cents. I believe one of the reasons is due to the law suits when it comes to the renewal of master lease agreements. The possibility of the master lease not being renewed could have caused the share price to drop.

However, if you have continued to purchase this REIT whenever the price drops, and along with a stable dividend, the dividend yield for this REIT remains high.

3. Master Lease Agreement Brings In "Atas Brand"

Over 20% of the gross rents comes from this master lease agreement that brings in "Atas brands". My point is that I do not think these brands will just leave the retail space when their lease period is up. This is because they will continue to have sales.

Not many will just buy a LV bag without looking at the actual product. Since customers will continue to go to their shops, there is no point to leave this retail space. Thus, these brands will still continue to lease the retail space for years to come.

4. A Global Retail REIT

Despite having over 60% of the gross rent coming from Singapore, but there is still some diversification in terms of the collection of gross rent geographically, as compared to other retail REIT in Singapore.   

5. No Rights Issue Since 2009

Other than having a 1 for 1 rights issue in 2009, this REIT has not declared another rights issue. This adds on to the stability of the share price over the years.

In Short

To be frank, I were never an income investor. Whenever I invest in REITs, it was more of a capital gain factor due to a foreseeable increment in dividend. In other words, you could say I were trading REITs.

However, I choose this Retail REIT as Big Idea 10 mainly due to the expected stability - stability in dividend due to diversification and master leases that led to a general share price range.

The strategy is to buy whenever the share price drop, so that the dividend yield will eventually be much higher. When its share price rises and Big Idea 10 contributes too much to the portfolio, sell some.

To me, investing in Big Idea 10 is like putting money in a fixed deposit with high interest rate. It is also the only REIT I invest in currently.

Please do your own due diligence before you invest this counter (if you knew what it is).

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