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Charts in brief: 19 April 10.

Monday, April 19, 2010

Most of my portfolio hardly budged as the STI retreated 1.5% today.  The exceptions are the likes of CapitaMalls Asia and SPHAIMS AMP Capital Industrial REIT, LMIR, First REIT and Saizen REIT are holding steady.  I believe that any further weakness would bring out the buyers as the problem in the USA with Goldman Sachs should not have any material impact here in Asia.  It is not a financial meltdown or anything like it.  It is a legal matter and the proceedings are domestic in nature.

CapitalMalls Asia: Closed at $2.21.  I have put in my buy queue for tomorrow at $2.20.  In the last three sessions (today inclusive), the volume has been reducing as price retreated.  Stochastics has dipped into oversold territory.  MFI is declining fast and OBV shows some distribution.  Overall, not a pretty picture.  Any purchase of shares in this company is now based on fundamentals, not technicals as expectations of a feisty reversal is out the window for now.

Golden Agriculture: Price closed at 59c, supported by the rising 20dMA.  A doji is formed.  This is, of course, a possible reversal signal.  The MACD has just completed a bearish crossover.  Further weakness will see support at 56.5c, provided by the rising 50dMA.  I might reload then.

Healthway Medical: >2.6m shares sold down at 16c at 5.05pm, creating a gravestone doji in the process.  This is the first time the counter has closed at 16c since 3 March 2010.  The MACD has gone under zero, suggesting an end of positive momentum.  16c remains a critical support.  If this goes, the next support is at 15c.  That would be a nice price to accumulate some.

Saizen REIT: Some profit taking continues. MFI has formed a lower high but the OBV is flat, suggesting that although the buying momentum has stalled, there is no heavy selling down going on. The rising 50dMA is at 16.5c which coincides with my believe that 16.5c is the new floor for the counter and should be a strong support.  Uptrend is intact.

SPH: A big black candle day as price managed to close just 1c above $4.00.  Any further weakness will see support at $3.89 where we find the rising 20dMA.  The rising 50dMA is at $3.82.  I would accumulate on weakness.  Uptrend is intact.

Courage Marine: Down 1c, MFI is dipping out of overbought territory.  Any weakness should find support at 21.5c.  The flat 200dMA should provide support at 20c in case of further weakness.  I would accumulate on weakness as I like the fundamentals over the next few months at least.  Uptrend is intact.

China Hongxing: Closed 0.5c lower on lower volume. Signs are still good that this counter is probably prime for a breakout. Price action is now trapped between the 50dMA (15.5c) and the 20dMA (15c) in a crab-like pincer.  Going by the rising MFI and OBV since 30 March, the chances are good that price is likely to move higher.

Related post:
Charts in brief: 16 Apr 10.


Pathfinder said...

Ak, appreciate your ongoing updates.

Was checking out the 3 telcos and was surprised to see Singtel fall below 3.10. Ever considered this counter before?

AK71 said...

Hi Pathfinder,

Telcos are usually considered defensives and, now, with the economy firmly on the mend, investors are looking to increase exposure in companies which are proxies to the recovery. An example that comes to mind is SPH. :)

Personally, I am a small shareholder of SingTel (thanks to the government's effort to make every Singaporean a shareholder years ago). ;p

You might be interested in this:

Anonymous said...

Hi AK71,

Actually why the interest in CMA? Right from the start, i feel that it is 'not right' for capitaland to benefit from this 'spin-off', and most importantly the china policy risk is so high. Why not wait till everything stabilise? I believe the chinese govt will act really soon, be it revaluing the yuan or more tightening.


AK71 said...

Hi Kelvin,

CapitaMalls Asia's FY2009 captured my attention. Profit after tax surged 233%, it is in a Nett Cash position and it has very strong positive cash flow. NAV at $1.41 per share and EPS at 20c per share.

At the last closing price of $2.21, it's trading at a 57% premium to NAV and a PE of 11x. Not expensive.

That CapitaMalls Asia is doing better over time is obvious when it announced three months later that earnings before interest and tax (EBIT) were $110.9 million for 1Q 2010, 174% higher than the $40.5 million for 1Q 2009. Fundamentally sound? For sure.

The Chinese government will have to let the RMB appreciate. I have been of this view for a long time now. Keeping the RMB low contributes to higher inflation which the Chinese people are griping about. As the RMB appreciates, the asset value of CapitaMalls Asia's Chinese properties will rise. I like that.

As for monetary tightening, I fail to see how that would affect CapitaMalls Asia adversely. Monetary tightening would affect Capitaland adversely since they build condominiums in China but it should not have much negative effect on CapitaMalls Asia which would beneift from the rise of the Chinese consumers in general. I will continue to accumulate on weakness. :)

Anonymous said...

Hi AK71,

I agree with CMA growth story. And i believe that the appreaciation of the yuan will be a boost in revaluing CMA portfolio and the profit that is denominated in sing dollar.

But i feel that trading at more than 50% above its NAV gives it very little upside. Plus more cooling measures in the property market will be rolled out, more or less all china-related stocks will be affected and there is a imbalance in the risk-return.

Anyway i'm curious as to why would trading at a premium deem as not expensive, as many property stocks, including reit and office landlord are trading at par or below nav?


AK71 said...

Hi Kelvin,

When we buy into a REIT, we are really buying real estate. When we think of the Capitaland family, examples would be CapitaMalls Trust and CapitaRetail China. I don't like buying into REITs trading at a premium to NAV.

However, CapitaMalls Asia is not a REIT, it is a company. It is a mall owner, developer and manager. So, I assess it differently.

REITs are mostly income instruments while investing in companies like CapitaMalls Asia is primarily for growth. It is worthy to note that CapitaMalls Asia does have the ability to pay out more in dividend. 1c is paltry compared to an EPS of 20c.

So, when we look at CapitaMalls Asia, we should not compare it to REITs, we want to compare it with its peers. For example, we could compare it with ARA, a company which manages REITs and private funds investing in real estate and real estate securities.

ARA currently trades at $1.13. Since we are on the topic of NAV, ARA's NAV per share is only 22c as stated in their FY2009 results. It is trading at a 513% premium to NAV!

Buying into CapitaMalls Asia is buying into a growth story. It is different from just buying a piece of real estate for regular rental income which is more or less the case with REITs and being a landlord.

As for the Chinese government's cooling measures to reign in runaway property prices, the effects would be most felt by the residential properties speculators. Genuine buyers would not be affected too much and would in fact welcome such measures.

CapitaMalls Asia develops malls and rent out retail space with a view of offloading them to their REITs in future. I do not think CapitaMalls Asia would be affected much.

Anonymous said...

Hi AK71,

Thanks for always replying. Learn new things from you everyday!


AK71 said...

Hi Kelvin,

Thanks for the comments as they give me a chance to clarify your doubts which I am sure must be on the minds of some other readers as well. In the process, I also get to relook at the reasons for my confidence in the company and it's always good to refresh my failing memory. ;)

As if to confirm that my grey cells are dying faster these days, I realise that I made a mistake in my previous reply. ARA's NAV at 22c means that it is trading at a 413% premium to NAV or 5.13x its NAV, the premium is not 513%. My mistake.

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