Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

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Japan Hotel Reit Investment / Equity Capital Markets

The deal scores well on our Momentum-Adjusted Deal Stag Framework for its track record and price momentum. We would take the deal given: <ol><li>Management plans to use the proceeds of the deal to buy 6 hotels worth JPY23bn, resulting in DPU growth of 9%pa in FY15, despite the 7% dilution from equity issuance; </li><li>The shares have rallied 6.3% since the deal was announced, implying that investors are positive on the acquisitions; </li><li>The company has a strong track record, with the stock having delivered 59% CAGR over the past five years; </li><li>Even though on an average the stock has returned -0.3% in the first month in its past three deals, however, the stock did return 7% in 1 month in its last deal, and 43% on aggregate over one year for its past three deals; and </li><li>In addition, the ongoing attempts by BoJ and Prime Minister Abe to reinvigorate the economy will likely ensure the continuance of easy monetary policy, which will lend support to REITs </li></ol>The primary risk, in our view, stems from the prolonged settlement, which would expose investors to market risk.

The deal scores well on our Momentum-Adjusted Deal Stag Framework for its track record and price momentum. We would take the deal given: Management plans to use the proceeds of the deal to buy 6 hotels worth JPY23bn, resulting in DPU growth of 9%pa in FY15, despite the 7% dilution from equity issuance; The shares have rallied 6.3% since the deal was announced, implying that investors are positive on the acquisitions; The company has a strong track record, with the stock having delivered 59% CAGR over the past five years; Even though on an average the stock has returned -0.3% in the first month in its past three deals, however, the stock did return 7% in 1 month in its last deal, and 43% on aggregate over one year for its past three deals; and In addition, the ongoing attempts by BoJ and Prime Minister Abe to reinvigorate the economy will likely ensure the continuance of easy monetary policy, which will lend support to REITs The primary risk, in our view, stems from the prolonged settlement, which would expose investors to market risk.

Japan Hotel REIT (8985 JP) - Acquisition to aid DPU growth; take the deal

Japan

Japan Hotel REIT Investment Corporation is a real estate investment trust(REIT) which invests in securitized real estate products. The Company mainly invests in real estate properties used in hotels.

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Japan Hotel Reit Investment (8985 JP)

Japan Hotel REIT (8985 JP) - Acquisition to aid DPU growth; take the deal

The deal scores well on our Momentum-Adjusted Deal Stag Framework for its track record and price momentum. We would take the deal given:...

Sumeet Singh

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