Follow Up on Cache Rights Issue

2 posts ago, i set out to investigate if subscribing for excess rights, and subsequently, maintaining your cost, would result in a maintained or slightly lower yield.

So i had friends who participated and got around double the entitled rights. One had, 1062 entitled, applied 2000 in total, and got full 2000. The other had 1422 entitled applied 7000 in total, and got 2900. So i am assuming that getting 2000 shares in excess is common. This is very bad as data points but i work with what i have.

Here's the maths.

Price before annoucement: 88c
Average Price on Day after (5th Sep): 86.5c (High + Low, divide by 2)
Buying 10000 shares on Day After: 10000 x 0.865 = 8650 SGD
Rights Entitled: 1800
Excess Awarded: 2000
Total New Units: 1800 + 2000 = 3800
Cost per Unit: 63.2c
Rights Cost: 2401.60 (ATM fees excluded)
Cost Total: 8650 + 2401.60 = 11,051.60 SGD

Average Price on First Day of Trading (10th Oct): 84c (High + Low, divide by 2)
# of shares to sell back to 8650 cost: 2401.60 / 0.84 = 2859 ~ 2900 (rounded up to avoid odd lots)
Total Shares left:  10000 + 3800 - 2900 = 10900

Using latest 2Q Dividend numbers
Dividend per unit (DPU): 1.8c
Total Received on 10000 shares: 180 SGD
Original yield (annualized): 180 x 4 / 8650 = 8.3%

Diluted Dividend (assuming no increase in income): 1.8 / 1.18 = 1.525c
Total with 10900 shares: 10900 * 1.525c = 166.22 SGD
New yield (annualized): 166.22 x 4 / (11,051.60 - (2900 x 0.84)) = 7.7%

There you have it. At the same cost, there is a slight decrease in yield. Definitely better than the initial dilution.

Obviously i excluded the cost of the transactions which will impact the numbers a little bit.
Also, the whole price movement cannot be predicted. There are plenty of examples where the price did not recover like it did here between announcement date and trading date. This recovery is broad based because STI went up and even the FTSE ST REIT Index went up.

That aside, you could have gotten Cache at a cheaper price from the 2nd day after the announcement was made. So you might luck out a bit more there as well. Again, this cannot be predicted. And most importantly, the amount of excess cannot be predicted. You may not get much excess for you to make it even worthwhile to consider this move.

Final point, you may see a slightly higher DPU in the coming quarters than the one i calculated as there would be cost savings due to the paying down of debt and that might go in favor of maintaining the yield.

Like all good scientific, data-based studies, here's a conclusion. Maintaining or slightly lower yield is possible. But my personal take is this, there are far too many factors that can screw with you to even make this viable.