putting the "o" in dyor

Hello All,

I reference the previously posted GSJBW issues below:

1- Shinjuku is BJT best asset, got sold 18% below valuation so they wonder how much write down are the other asset
2- dividend confirmed by BJT but not clear on what are the cash component and shares
3- why they payin div when there are debt to reduce."


At the moment I am reading up on some of the postings of who seem to be the regulars on this thread. I am a new holder of BJT and new to this thread but I would like t offer my thoughts on a few topics some of which you may initially think are not specifically relevant to BJT but I feel they are by proxy. I think this will be a lengthy post but give it a good chance and a good read. Then feel free to Thumb Me Down if you do not like my post content or style….

I have posted before on other threads that I work in the Financial Services Industry. For my personal protection I will not disclose my actual occupation. Take these comments as general in nature and not specific to any of your individual needs or circumstances.

First, in response to Marri’s post about GSJBW’s concerns, quite frankly I would largely ignore them. As a Financial Services Industry worker I have come to realize one thing: As a whole, due to its structure and history the Financial Services Industry is hopelessly conflicted. Hopelessly.

Marri, GSJBW’s aim first and foremost is to make a profit and it does so by facilitating transactions where they earn money from buying and selling shares on behalf of their clients. Their business of providing “research and advice” is a monumental distant second to their primary function as a transaction facilitator. They make no money when you are their client and you hold your shares. If nothing else, you should at least ignore their advice/concerns. They have a conflict of interest in providing research and/or buy and sell recommendations. The only advice that is free from conflict in the Financial Services Industry is advice that is strategic in nature. Pure and simple.

Nonetheless, GSJBW’s concerns are easily dismissed. Point number 1 is now irrelevant since the Shinjuku property is no longer owned by BJT. It is now history. Move on from it. The second most valuable BJT asset is now the most valuable.

Point number 2 is also moot. You will find out when you find out. This will be very soon. The fact that a distribution will be paid so as to avoid wasting tax losses and being penalized at 46.5% is significant.

Point 3 is again also moot. Profit must be distributed. It is a trust and not a taxable entity. They either give it to you or give it to the respective ATO’s of Japan/Australia or wherever they would happen to be taxed if they retained profits.

My final diatribe on this is DYOR. Reading someone else’s research or even utilizing research reports from brokers or research houses is NOT your OWN research.

You do your own research in three ways and three ways only (this is my opinion only)

1. Direct inspection and analysis of financial statements
2. Observing the behaviour of the market and other investors
3. Paying heed to your taxation circumstances

Point 3 here is probably the most important. I also wish to revise some of my earlier comments about the dilution issue. If you hold your shares that are issued in lieu of the distribution you will not be diluted. However if you sell them to “claim your distribution as cash, you will in fact be diluted. I am trying to be balanced when I look at this.

On the one hand I can understand that this aspect could be viewed by the market as slightly unfair. On the other hand, it pleases me that this method of distribution is going to punish day traders and those in for a quick profit as BJT will inevitably get dumped down on the ex-dividend date. The only way traders will make money from BJT therefore is good old-fashioned capital appreciation. And for that they have to hold.

Objectively speaking however, BJT have been very clever and I must say rather shifty. If they do not make a distribution then they have to pay 46.5% of taxable income to the ATO. That’s cash!! They can’t issue the ATO with shares. They can do that to you and leave you with a semi-determined tax bill due and payable in cash by you (me) once the distribution is paid.

Everybody understand this? This is why GSJBW had point two from above as an issue. But you really didn’t need them to point it out.

If you get 10 cents distribution as 100% stock and (let us assume) your tax rate is 46.5% including the Medicare levy then you need to sell just under half your stock that has been issued to pay your tax bill. And if you have to do this then, yes you will get diluted.

If BJT had said that the distribution would be 10 cents, where 5-6 cents would be in cash and 4 cents in stock, the share price would already be over $1. This is why I said paying heed to your taxation circumstances is an important aspect of your research.

I also think that there will probably be an asset sale or two in the next few weeks. They hinted at this and if this was not the case it would be quite simple to project incoming receipts on a pro-forma basis for the coming month and tell us immediately what the anticipated cash component will be.

This brings me to VALUE. My PERSONAL VIEW is that in the present climate I value a property trust that is in supposed strife at either 10% of NTA and therefore at 10 times the annual dividend.

Last half BJT had distributable earnings at 6.33 cents per unit and if you were holding you got 4 cents and they retained 2.33 cents. Correct?

This is a ratio of about 63%. However, this 2.33 cents has to be rolled into and accounted for in the 10 cents for the second half as it is the end of the financial year and tax bills are due. They retained roughly one third for cash flow and working capital so I can only assume that the second half will be similar. Realistically there is no other reasonable alternative assumption.

So I estimate using deductive logic only (I could be wrong) that 5-6 will in fact be in cash and 4-5 cents will be in scrip. Anything else basically means everyone has a tax issue that BJT has flicked to you. At this ratio though, taxable earning are effectively paid out and real cash is retained for debt reduction/working capital or whatever purpose management see fit.

This then takes the annual distribution to say 9-10 cents in cash (including 4 cents from the first half). On this basis BJT is really worth 90 cents (to me) and when the market realizes this fact in the ensuring days I believe BJT will gap upwards reasonably significantly.

PS: It’s not that hard to believe that 90 cents is fair value and that BJT has been discounted by some 60%. Our 4 banks have been equally if not more discounted and they are not going to disappear tomorrow.

PPS: Point number 2 about observing the behaviour of the market and other investors is very interesting to me. I know Vanguard Investments and Maple Brown Abbott intimately well. They have used our Superannuation money to invest in BJT. Vanguard is a Value Style Manager and Maple Brown Abbott has a bent towards investing in companies that have consistent dividend growth.