DIF, worth considering for high tax free 8.30% yield.
DIF, worth considering for high tax free 8.30% yield, which is actually a touch more as its paid-out Quarterly.
DIF (12.60) is an interesting high Quarterly income investor opportunity, in my view. This is the Digital Telecom fund which in recent quarters paid 0.261 Baht in dividends, tax free! They own and operate thousands of telecom stations and towers etc around Thailand..then lease them out to mostly TRUE (but read about it at the below link). Hence, 4 times 0.261 Baht quarterly represents a 8.28% tax free annual yield on a unit price currently of 12.60 Baht. as its paid out Quarterly. You can see the funds summary company "tear sheet" here:
As I mentioned foreigners cannot buy the NVDR units, instead should enter DIF-F if they chose to invest. I think currently DIF-F at 12.60-12.70 should work/match and at this price I view it favorably, due to its very high and likely to remain so, tax free dividend yield. These F units do not trade frequently and so are less liquid then the DIF units. But in my experience in time it should not be difficult to sell at one or two spreads below the then current market price. This is a high income idea to keep, not for trading!
This fund's units used to trade around 15-17 Baht for many months in 2019-20. Then its price took a nose dive when its largest shareholder TRUE decided to just block sell some 300 million units, collapsing the price last September. TRUE remains DIF's largest shareholder. TRUE sold units only to plug (i.e. its high debt) elsewhere as its a leveraged company. (298m units on Oct 1 2020 @ Bt13.5) TRUE's last D/E ratio is shown at 6.2 times. I never much liked TRUE as a stock, nor ever wrote it up here! Despite many buy recommendations by brokers, for years on going in the past. TRUE used to be a 14 Baht stock, dropping to 6 in 2019 (again there advocated by many brokers) and now barely at 3.20 Bref, while DIF's dividend income stream looks secure, the risk is TRUE runs into "trouble", i.e. CAPEX investment needed, and sells out more DIF units?? This is an overhang and why the DIF is trading at a low 12.60 currently, but in my view its overdone.
This is the overhang and why the units are sold off just now in my view resulting in such a high yield on the current price of 12.60. I am confident DIF's income is secure (unless users of its digital infrastructure defaults, of which TRUE is a big user), but the unit price may fluctuate depending on rumors and fact on what TRUE does, or not with its over 23% stake in DIF. Perhaps it will sell out a stake directly to a third party? TRUE it was just reported late last week received the 26GHz Spectrum License Worth ฿3.57Bn
I just don't think they would dump more at this low(est) price and looking at DIF graph shows substantial support at 12.50. In my view a default by TRUE on DIF's secured digital contracts with them would be a major catastrophe and could well send TRUE into bankruptcy! Hence my take is to view DIF as a great way to enhance high Q tax free income while awaiting TRUE's troubles to get stabilized. In the meantime enjoy very high income, its next Q dividend is going XD tomorrow Feb 23 and payment date is shown March 12th. DIF posted last NAV, net asset value is show at 16.21 Baht per unit. Hence trading at 78% of its stated/audited net asset value.
Here is how one knowledgeable analyst in this sector, just wrote me back, my questions are in italic:
1) any reason you think why DIF unit price keeps dropping? Is there a new risk of a True dumping?
"Market fears that TRUE will continue to divest its stake in DIF. This is the main overhang".
2) Is True balance sheet better now, past peak after passing peak, as you wrote me before:
"Balance sheet remains weak but the CAPEX cycle should pass its peak in 2020. TRUE will report 4Q20 result on 25 Feb and analyst meeting on 1 Mar. We expect to see lower CAPEX guidance and direction on DIF investment after the meeting".Paul A. Renaud. www.thaistocks.com