BHG Retail REIT

BHG Retail REIT (S$0.80): Poor public demand on unattractive yields
The Singapore Exchange’s first main board listing this year might be off to a shaky start with BHG Retail REIT’s IPO attracting just 6% more unit applications for its public tranche.

In all, only 584 subscribers applied for a total of 8.5m out of the 8m offer shares available for the public.

To provide some context, the last mainboard listing, Keppel DC REIT, saw 7,024 public subscriptions for 514.7m units in the REIT, with only 53.8m units on offer.

This could mean relatively soft demand for the float probably due to concerns of the sponsor's waiver of distribution, which artificially inflates the yield of the REIT.

The distribution waiver, lasting from 2016 to 2020, is expected to boost BHG Retail REIT’s yield from 4.5% to 6.3% in 2016. It is hoped that by then, the REIT’s shopping malls would have stable operations to support the 6.3% yield, post waiver.

Another possible reason for the lack of demand from the public could be the attractive valuations of rival trusts, CapitaLand Retail China Trust, and Mapletree Greater China Commercial Trust which have strong sponsor backing and pipeline in China

The two rival trusts are currently offering DPU yields of 7.3% and 7.6% respectively.

Nevertheless, BHG is going ahead with its PO at $0.80 per unit, with trading expected to begin at 2pm on 11 Dec.