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LMIR: More units at 10% yield.

Wednesday, March 17, 2010

I have liked the Indonesian economy for some time now.  In fact, I've liked it before the onset of the last crisis.  I was accumulating units in LMIR when many others were giving it the "Indonesian discount".  During the last crisis, I bought more units in LMIR.  Just like units in First REIT which I bought at 42c during this last crisis, these units are for keeps as they have an estimated annual yield of 14.5% on average.  They have also appreciated nicely in price, of course.

Much of my funds was held in my investments in Healthway Medical and Golden Agriculture for many months.  I divested much of my positions in these two counters in January 2010 and again earlier this month, bagging some nice gains in the process.  See: Rationale for partial divestment. 

With the gains from the partial divestments, I have since increased my exposure in AIMS AMP Capital Industrial REIT and Saizen REIT to increase the size of my high yield portfolio.  After all, the core aim of my investment activities is to generate passive income streams with high yields. 

I have also been waiting for a chance to buy more LMIR at 45c to 46c since January when it declined after forming a high of 53c.  Unfortunately, it never did sink that low.

In LMIR's latest report, its NAV is a higher 83c per unit with gearing at a very healthy 10.5%.  At today's price of 50.5c, the discount to NAV is almost 40%! Yield is also a very attractive 10% at the current price of 50.5c.  The numbers are good.

Fundamentally, I believe in the strength of the Indonesian economy.  Susilo Bambang Yodoyono has led the country through the recent crisis without it sinking into a recession and the economy is likely to register even stronger growth in the next two years.  Indonesia has a large domestic economy and domestic consumption accounts for 60% of its GDP.  LMIR will be a key beneficiary of such a situation in an improving economy.

On the REIT level, LMIR's very low gearing will allow it to make yield accretive purchases without having to resort to asking for funds from existing unitholders.  LMIR will also have a ready stock of malls from its sponsor, Lippo, in Indonesia.  In the event that such purchases take place, we would most likely see an increase in the REIT's distributable income.  I also like the fact that Singapore's Mapletree, a Temasek company, is a partner in the joint management of LMIR.  LMIR has a strong pedigree.

Although I like the fundamentals of LMIR, I have been waiting for an entry point using TA.  On hindsight, when LMIR was testing the lower limits of the Bollinger bands at 47c, those instances could have been good opportunities to buy some units but the MACD was negative and the price could have gone lower.  So, I held back.

Anyway, I have been waiting for a couple of months but the merged 20d and 100d MAs are moving up in tandem now and seem to be giving LMIR a much needed push upwards.  Also, the price action seems to have formed a mini double bottom in February with the neckline at 50c.  This neckline is also a many times tested resistance for LMIR and will be a strong support one day, as a result.  Today, LMIR traded at and above 50c.  We will need confirmation on whether 50c is the new support in future sessions.

MACD has turned positive and the the OBV shows gradual long term accumulation.  All signs point to an increased level of safety in buying LMIR now.  Any negatives?  The volume remains low which seems to indicate a lack of sustainability.  However, if we remember, apart from a few occasions, LMIR has always been a relatively thinly traded counter despite having 1.075 billion units in issue.  If we look at the list of shareholders, we will know why:

1. Lanius Ltd                         19.7%
    (includes Lippo Karawaci)
2. Mapletree                          13.2%
3. Stichting Pensioen              9.9%

4. CPI Capital Partners Asia  8.4%
5. ABN Amro Asset Mngmt  6.4%

The free float is only 42.4% of all available units!

So, I decided to buy up some units today at 50.5c to increase the weight of LMIR in my high yield portfolio.  If 50c is confirmed as the new support for LMIR, I will buy more.  More units at 10% yield in the bag!

The following was added on 18 March 2010:

Indonesia revises up GDP, sees low H1 prices

JAKARTA, March 11 - Indonesia's central bank has revised up its 2010 economic growth forecast to 5.5-6.0 percent from an earlier 5.0-5.5 percent rise, helped by stronger exports, deputy governor Hartadi Sarwono said in a statement on Thursday.

The central bank, which maintained its economic growth forecast for 2011 at 6.0-6.5 percent, also forecast no significant inflationary pressure in the first half of 2010. Stronger economic growth was being partly led by exports, Sarwono said.

"Besides strong domestic demand, the recovery especially comes from external factors, which is in line with the global economic recovery," he said in a statement on the central bank's website .

Southeast Asia's biggest economy reported a surge of nearly 60 percent in exports in January to $11.57 billion, bouncing back from a low base a year earlier... - Reuters - Friday, March 12

Related posts:
High yield portfolio.
New global economic leadership.
Lippo Mapletree Indonesia Retail Trust.
First REIT: This one is for keeps.


Anonymous said...

i think i have mentioned before that indeed i've been waiting for LMIR to drop, but it hasnt. now that the STI is closing on the "magical" 3000, it might be better to buy in now (which i have not yet. procrastination and praying that the prices would miraculously drop). i have, however, purchased Saizen at 16.5cents today, but my remiser suddenly sent me the financial report for it right after my transaction was done. (wondering if he's hinting that i made a bad choice. yikes, as if im not worried about it enough)


AK71 said...

Hi Raelynn,

I was waiting for LMIR to have a more significant correction too before buying more but unfortunately, it did not materialise. I gave in and bought more today since, based on FA, it's still a very good buy at the current price. If the price weakens to the 200dMA, I would just buy more.

You bought some Saizen REIT units today? Welcome. :) I was just looking at the daily chart earlier and saw that that the MACD spots a buy signal today, the first in many sessions.

If you are worried about Saizen REIT's financials, you might want to read my post titled "Saizen REIT: March 2010 Presentation" and the comments which follow. I did quite a bit of calculations in reply to some readers' questions.

It might not be a bad idea to talk to your remisier as well and ask him for his opinion. Get a second opinion and then decide for yourself. :)

Raelynn said...

Dear AK71,

the financial report that the remiser send me was for the second quarter ending 31st dec, and in it, the information was more or less what you had mentioned in the march 2010 presentation. i have to admit that Marc Faber's comment on Japan and your various posts have influenced my decision to dive into Saizen. Not too keen on talking to the remisier, there's already a lot of various info and noise going on about the stock market, his opinion would probably end up being the 4th 5th 6th opinion, which clouds judgement or hinder activity even more. issit possible to give an estimate of a price at 200dMA for LMIR?

i'm also quite concerned that my portfolio seems to be vested in Reits and only one company stock (thai beverage), not too sure if that's the way to go, although i dont feel that there's much to complain if the passive income is good.

AK71 said...

Hi Raelynn,

Yes, there are camps against and for Saizen REIT. We just have to remain objective and look at hard quantitative data. Of course, if we have some qualitative data, it doesn't hurt to consider them as well but if things get emotionally charged or speculative, we have to draw the line.

The rising 200dMA for LMIR is currently at 46c. This should provide a strong support in the event of a huge correction in price for the counter. As the 200dMA is rising, the support will move higher in time.

As long as you are invested in entities with strong fundamentals, it does not matter really if they are all REITs. I mean I know of people who are only invested in companies and no REITs. Should they be worried because of this alone? ;)

Raelynn said...

=) thank you for your advice AK71, the last comment made me feel much better. =) do keep readers updated on the 200dMA for LMIR =)

AK71 said...

Hi Raelynn,

You are welcomed. :) I usually track counters I have an interest in but not necessarily vested in. So, if I observe anything interesting, I will blog about it.

In the meantime, I will stay the course and look forward to a constant stream of passive income. :)

Anonymous said...

hi ak,
credit sussie turn seller for saizen today. selling 729,000 shares at 0.165. funny why they should do that.

cheers ws

AK71 said...

Hi WS,

Thanks for sharing the information. :)

There could be many reasons for selling. I won't wonder why someone is selling. I've done a thorough FA on Saizen REIT. So, I bought with confidence and will continue to hold with conviction. :)

Anonymous said...

don't be fooled by the high yield that some of the reits traded in s'pore are offering.

especially the oversea (property) ones like japan and australia.

why not get some that are based in s'pore like Ascendasreit, suntec etc, the yield are still very attractive.

best wish/coconut.

Anonymous said...

and does anyone knows that Saizen REIT will not be paying any dividend in fy2010? and why?


AK71 said...

Hi coconut,

You missed out Indonesia. ;) My decisions are based on FA, looking at hard quantitative data and, sometimes, qualitative data. I go for value which is measured by NAV, yield and gearing. Then, I use TA to help search for entry prices and exit prices.

I actually do not like CIT which has its properties in Singapore. Its yield is 12% but we must not invest in a REIT based on yield alone. Its gearing is in excess of 42%!

A-REIT appears capital hungry to me as they had a couple of share placements in the last year. I wonder about the dilutive effects of those placements for existing unitholders. I will not buy A-REIT mainly due to its lower yield of 6.6% and the fact that it is trading at a 25% premium to its NAV at the current price. I don't like to pay $1.25 for something worth $1.00. To be fair, A-REIT appears well run if we look at how they manage their debt. A gearing of 31.2% is also manageable.

Frankly, if I want to have exposure to industrial properties REITs in Singapore, I would choose AIMS AMP Capital Industrial REIT for its stronger numbers. Vested.

Suntec REIT, I'm vested at lower prices. At the current price, they are trading at a 23% discount to NAV, have a yield of about 8.4% and gearing of under 34%. Still worth considering if one is not already vested.

I hope I am less easily fooled these days. ;)

AK71 said...

Hi Anonymous,

You might want to take a look at my latest analysis on 14 March 10, "Saizen REIT: March 2010 Presentation".

"Saizen REIT is on track to resuming income distribution to unitholders in mid 2010...."

Anonymous said...

i guess you have done your homework well.

stock pick are individual, risk vs rewards.

i like to buy stocks that are the best "runner", not the cheapest.

you have a point too.

unfortunately your picks and mine is quite different.

riets that i own (in preference order)

- Ascendasreit
- SuntecReit
- MapletreeLog
- CDL Htrust
- CapitaComm
- PLife REIT
- AscottREIT
- CapitaMall

riets that i will not buy,

- SaizenREIT
- FraserComm

may be CIT will be my next no buy list.


AK71 said...

Hi coconut,

I don't buy the "cheapest" REITs per se. The words "cheap" and "value" are not synonymous. Something might be cheap but does not provide value for money while something might provide value for money but is not cheap. ;)

I see you are also a believer in passive income generation through REITs. :) I don't see LMIR and First REIT in your lists. You might want to consider these as well. Which list they end up in is up to you, of course. ;)

Thanks for sharing your perspective and do visit again. :)

Anonymous said...



AK71 said...

To all readers of my blog,

You might have read my posts on AIMS AMP Capital Industrial REIT. Here is a well written post in another blog on the REIT:

The writer also uses a combination of FA and TA before making a decision to purchase some units in the REIT.

Raelynn said...

regarding the post about Credit Suisse selling the 729lots of Saizen, it might be related to the point that Credit Suisse is the loan provider for the YK Shintoku which had the maturity default.

AK71 said...

Hi Raelynn,

The CMBS, I understand, has several parties as lenders involved. I do not know who are the ultimate bondholders. Of course, there might be a chance that these lenders are also holding Saizen REIT units. This is somewhat speculative, I feel.

Even if the lenders are also unitholders, there could be many reasons for them to sell their investment in Saizen REIT. I won't give this too much thought. :)

VJ said...

Hi AK71,

I have significant investments in First REIT and LMIR. While First REIT is going strong, LMIR is showing weakness even in bull market. Somebody seems to be offloading LMIR in big quatities. I am aware of Matahari's sale. Do you think it is time to increase exposure to LMIR ? Please share your views.

AK71 said...

Hi VJ,

In a bull market, sideway movement is more bullish than bearish. I believe buying on weakness in a bull market is generally a good idea.

As for LMIR, recently, I have been accumulating on weakness down to 48c. A very long term MA is rising and the longer term uptrend is still intact.

However, if you already have significant investments in First REIT and LMIR, you might want to consider other counters to diversify your investments to reduce risk.

Anonymous said...

Hi AK71

I am also heavily vested in reits with Saizen, FSL, AIM, Cambridge, First and LMIR (Saizen & FSL making up 70% of my portfolio).

Have been thinking of buying more LMIR as it looks very very attractive fundamentally. However, i do have a the malls located at earthquake prone region? If it is, it is probably not a good choice for worry-free passive income purpose.

AK71 said...

Hi Anonymous,

From what I can remember from my Geography classes, the entire country of Indonesia is in an earthquake prone zone. ;)

All their buildings are insured, I am sure. This won't protect the income stream but it would provide the funds to rebuild the malls.

Frankly, there aren't many worry free passive income generating tools in this world.

Could you leave your name or initials in your next comment please? Thanks :-)

Anonymous said...

Hi AK71

I also read on the article last few days that the whole of Jakarta is sinking to the ground at the rate of 5-10 mm per year or cm per year...sorri can't really remember. And LMIR has 5 shopping malls located in Jakarta ?
Anyway, i am still vested in LMIR counter....

AK71 said...

Hi Anonymous,

Aiyoh, you forgot to leave your name or initials again. ;)

Yup, Jakarta is sinking and so are quite a few other Asian cities. I think Bangkok is one of them, if I remember correctly. It is a gradual process due to ground water extraction.

I visit Jakarta more than I do Bangkok. I enjoy the malls and they are always crowded with people even on weekdays. Very vibrant. I like what I see. LMIR is a good investment and, frankly, I hope it stays at this price level for a while more so that I can buy more. ;)

Aspire said...

Hey AK!
Reading your posts helps lots, especially when I'm still learning about REITs and technical analysis.

Any thoughts on Starhill Global though?


AK71 said...

Hi K,

Took me a while to find your comment since it was not in response to one of my recent posts. My "Recent Comments" widget is a bit slow and I want to reply to your comment before I go to bed.

I am happy that you found my posts helpful. Honestly, I find them helpful in reminding me of my own thoughts too. Haha.. My grey cells are less in numbers these days. ;)

As for Starhill Global, JW of Wealth Buch has blogged a lot on this one. So, I am going to be lazy and refer you to his blog. Just go to a section he has labelled "Companies Analysis" and you will find Starhill Global.

My criteria for assessing REITs remain the same as before. I am sure you must know them well by now since I am always repeating myself. Old people tend to do that. ;p

Aspire said...

Hey AK,
Thanks for the reply and for the redirection.

I'm wondering though, why Starhill isn't in your radar? Just like to have a look from all sides, erm, know what I mean? before I make any decisions.

Btw, hey great stuff on the Q1 results for our AIMs & LMIR buy. Wow, you're right. These are for keeps. Your advice & posts have been most helpful.

Anyway all the best.

Cheers mate,

AK71 said...

Hi K,

I try to go for maximum yield and Starhill's 6.7% annualised yield based on the current unit price of 56.5c is not attractive enough for me.

Gearing of 29.3% is comparable to AIMS. NAV is 81c. So, the discount to NAV is about 30% which is similar to AIMS. As most of Starhill's portfolio will not see lease expiry till after 2012, it is unlikely that we will see income and dpu increasing significantly in the meantime.

With yield at almost 7%, it is also difficult for Starhill to make yield accretive purchases. Given a choice, I would put my money to work in AIMS and LMIR rather than Starhill. The returns are higher. :)

Aspire said...

Hi AK,
Heh, not bad (tap myself on back heh), I had the same train of thought too, which is why I held back.

From the recent news of Starhill acquiring Lot 10 & another property (forgot the name), wouldn't that cause the dpu to increase? as well as NAV?


AK71 said...

Hi K,

We share the same thoughts. :)

Well, there are people who would sacrifice some yield for the sake of diversification. That is not a bad thing either. It depends on one's risk profile, I suppose.

As for the acquisition of Lot 10 and Starhill Gallery in Bukit Bintang, I actually like those malls, having visited them many times. The acquisition will cost S$440.8m. This is going to be financed with more debt by issuing medium term notes (MTNs) which attract a coupon of 7.1% pa. There will also be convertible preference units (CPUs) issued which would attract a distribution rate of 5.65% pa. The cost of debt is not exactly cheap.

In its circular to unit holders on 10 May, it was stated that the two properties would yield 6.82% pa for the first three years. This is barely yield accretive as its current yield is already 6.7%. It falls short of covering the coupon rate of 7.1% on the MTNs.

Personally, I do not think it makes good business sense for unit holders but it makes good sense for YTL to offload the two shopping malls in question.

The circular here:$file/StarhillGbl_UnitholdersCircular_10May2010.pdf

Aspire said...

Hi AK,
Thx for the highlight.

I'm a bit puzzled though. I thought offload would be to "get rid off". So how issit they get to offload the 2 properties when they're acquiring it?


AK71 said...

Hi K,

The two shopping malls in question are actually owned by another REIT in YTL's stable. So, strictly speaking, I should not say that YTL is offloading the properties as they were offloaded before. My mistake.

It is basically shifting the properties from one REIT to another REIT, both substantially owned by YTL. If you are a Starhill Global REIT unit holder, all you have to question is whether the new arrangement makes business sense for you.

So, the sale is similar to, say, CMT selling a property to CapitaRetail China, for example. This is hypothetical, of course. Both these REITs are substantially owned by CapitaMalls Asia. I hope this makes it clearer. :)

Aspire said...

Good jolly morning AK,

Ah, ok that clears things up & thx for the reply.

I'm curious. If gearing level, discount to NAV & yield are what you look out for as the most impt criteria, why are you holding onto Suntec REIT?

It's gearing's more than AIMS & yield lower, 1% more than Starhill @ ~8%. Are current prices attractive to you, enough to invest still?


AK71 said...

Good morning K,

Yes, you are right. I am still vested in Suntec REIT but I got my units at an average price of $1.00 and I offloaded most of my investment by the time it went to $1.30. Of course, it went higher but I have made some money. At $1.00, you would agree that it was much more attractive. :)

The smallish investment I have left in the REIT now is fully paid for by my gains from divestment. So, I am just keeping the units for regular "free" money. ;)

At the current price, I am less attracted to the REIT which is why I hardly talk about it, I suppose. I am a little surprised that you remember I am vested. :)

Aspire said...

Ah I see, yes at $1.00, the yield would be fantastic.

And of course I remember heh. After all, if one wants to be great, one must imitate those who are great yes? =D

What about share price potential, do you think AK? Do you expect it to increase or remain flat for the next 6mths or so?

Unfortunately, for this REIT, I caught the boat late & invested close to the current top despite being advised to buy it when it was $1.16. Am considering diverting the funds elsewhere, to AIMs or LMIR perhaps. Any opinion on this? It's an investing mistake this. But I'm still learning so I'll take it in stride.

Back to Starhill btw. How does this make good business sense to the REIT Managers?


P.S. You're up pretty early for a night owl haha. I expected a reply earliest being 10 or 11am. Have a great day.

AK71 said...

Hi K,

Er.. I am not great. I am just your average AK who has opened his fair share of canned worms in the past. I am still making mistakes now and I've blogged about them. :(

Will prices go up or remain flat? That is a really tough call. Nothing in my toolbox can give me an answer. All I can do is to make investment decisions based on sound FA and try to pick a fair entry price using TA. Even that is not fool proof. :)

As for whether you should put more of your money in AIMS and LMIR, you really have to question your risk appetite. By concentrating on fewer counters, the benefits arising from positive developments in those counters would be magnified but if things go awry, the negatives would be magnified too. If you are comfortable with this, go for it.

REIT managers acquiring properties will always get a fee. That is part of their income. ;)

I had trouble sleeping last night. So, I'm up bright and early. Yawn.

Aspire said...

Heh, well AK, you're definitely more experienced than I am, so I would think that I could learn a lot from you anyway. If you're willing to share of course. And so far, you seem most kind from your posting & replies in educating us "ignorant folk". =)

Glad you brought up fundamental analysis. What's your opinion on the fundamentals of Suntec REIT?

AK71 said...

Hi K,

I found out a while back that many gurus in trading and investing visit my blog. There are also quite a few HNW individuals. So, if I do say something here, I make sure I really know what I am talking about. Otherwise, I better keep quiet. ;-p

Suntec REIT's fundamentals are strong. I like the retail properties in the REIT. Suntec City is situated at the right place at the right time. The office properties will be under pressure for a couple more years as new office space comes on stream. I like how the REIT is now part owner of the Suntec Convention Centre too which is still a very popular location for conventions in Singapore.

Valuation wise, at this point, it is a bit rich for my liking. Its gearing is manageable but not low enough for me. However, if you want to diversify away from AIMS and LMIR, why not? Look out for opportunities. :)

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