Path to prosperity

Markets crashed a few earlier in the week as the US failed to pass a bill to alleviate the impact of the coronavirus with Democrats arguing that it supports Wall Street more than Main Street. 

Accordingly, in light of the above developments, Stapled Securityholders should note and expect that there is no certainty or assurance as to the period of the delay in receipt of the Distribution or that such Distribution will be made at all.

At its last close of US$0.137, the half-yearly dividend payment would have implied an annualized yield of ~50%. Warning signs have been flashing throughout the past few months as substantial shareholders have been selling down their stakes and EHT has also gone through multiple management changes, in particular at their CFO position. While there have been nagging issues, these were exacerbated by the onset of the Covid-19 virus which has effectively destroyed the hospitality sector. Trading at only ~17% of its IPO price, there have to be questions about the due diligence process undertaken by the SGX, listing banks and lawyers. 
1. Were there sufficient checks for interested-party transactions as highlighted by the past few months selldown by substantial shareholders who sold EHT their initial portfolio
2. What was the sponsor's true purpose in listing the Trust
3. Was there sufficient safeguards and education for retail investors who may not have had the time and expertise to go through all clauses in the prospectus
4. Did the due diligence process not raise any red flags regarding the financial viability of the master lessee

While it is impossible to reverse what has happened, it would be interesting to see what measures MAS and SGX put in place to prevent a repeat of the EHT saga. While there have been no indications of fraudulent behaviour unlike the Best World saga, we hope that this serves as a notice to retail investors who only use yield to evaluate stocks. As the saying goes, 'High risk high return, low risk low return', the yield is a function of the risk that the market applies to stocks and investors should only invest within their risk appetite.