Accordia Golf Trust

Accordia Golf Trust ("AGT" or the "Company") is the first business trust with golf course assets in Japan. 

The IPO will close on 24 July at 12pm (page 77 says 24 July 4 pm). I am not sure why the manager chose to give public investors a pathetic 2 days to make a decision. Probably this is because the placement tranche is fully subscribed. The listing will happen on 1 August 2014 at 2pm. 

There will be up to 782m placement units of which 164.592m units are to placement holders in Singapore, 41.163m units for public investors and 576.27m units for Japanese investors.  The price is between S$0.97 to $1 and will be finalized when the IPO closes. There will also be an over allotment of 41.22m units. The market cap will be around $1.066 to $1.099 b depending on the final agreed price. 

I have to say the business trust structure is getting innovative with more interesting assets even though in general, they have not really done well on the local bourse. (Just look at Hutchison Port). 

Principle business

The initial portfolio consists of 89 golf courses and related assets valued at S$1.85b. Most of the assets are centrally located in Japan. 

Yield

The yield projected to be about 9.1% for  FY2015. However it will drop to 7% if we include non recurring items. 

What I like about the Company

• High barriers of entry in land scarce Japan created obstacles for competitors 

• Aging population as retired people has more time to pursue this hobby but that can also be a weakness if the earning power decline. 

•  The return of golf as a sporting event for the Olympics and Tokyo hosting the event in 2020. 

• High brand awareness and utilization rates on the courses with 5% market share. 

• Strong sponsor who has earmarked 26 golf courses that could be offered to AGT.

• The sponsor will continue to hold at least 25% of the trust post IPO to ensure alignment of interest. 

My concerns

•  The game is waning in popularity among younger generation. There is a chart on the declining number of golfers. 

•  Transfer pricing issues between related parties. 

•  The post IPO performance for business trusts (Asian Pay TV, Hutchison Port) are really disappointing and Japanese assets have never performed well (Saizen, Croesus Retail Trust). 

• If you look at the financials on page 64, the revenue is stagnant and the profits increase is derived from declining labour cost. I am concerned about future profitability. 

• JPY exposure for Singapore investors. Less so for Japanese investors. 

Valuation

I didn't have the time to analyze the NAV per share. Perhaps some readers can help but purely evaluated this from a yield perspective. You have seen how HPHT and Asian Pay TV, despite the yields are languishing. The 9% initial yield is more like the sponsor giving a price discount on his assets. The yield will drop further if it is priced at $1 instead of $0.97. 

My ratings 

I will give it a one chilli rating and will give it a miss. Buy only if you like the assets, is happy with a 6-7% yield and believes it is sustainable. 

On a side note, I have forgotten how to play golf as it is too time consuming. Perhaps it is a timely reminder to clean up the clubs in my store room and put it on eBay. Any takers? 

Happy goofing :-P