AFTER JUST A few hours of trading, units of today’s new debut Sabana Shari’ah Compliant Industrial REIT managed to end the day at $1.02, down three cents from their IPO price of $1.05. This was despite the relatively positive sentiment on this new issue. In a note to clients that was put out just before the commencement of trading, CIMB said that the stock “should do well in debut”.

“In view of its attractive prospective dividend yields and potentially strong interests from the Muslim community, Sabana REIT should perform well,” CIMB says. The brokerage likes it for its attractive dividend yield – over 8% based on its issue price – and the possibility of fund interest from neighbouring countries like Malaysia, Indonesia and the Middle East.

Meanwhile, Kim Eng notes that demand for the IPO was more than double the number of shares on offer, signalling a healthy level of interest. And, it is “backed by strong cornerstone investors and substantial shareholders.” 

 

The downside with Sabana REIT, CIMB says, is that its sponsor, Freight Links Express Holdings, only has a market cap of $200 million, with a rather small balance sheet of around $250 million as of its latest quarter. “A sponsor’s financial strength usually determines the success of a REIT. Typically, REITS fall back on the support of strong sponsors with large balance sheets to raise cash for accretive acquisitions through capital raising exercises,” CIMB notes.