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Charts in brief: 5 May 10.

Wednesday, May 5, 2010

Saizen REIT: FA is about value. TA is about price. Although this REIT is still severely undervalued, when negative sentiments rule, its price could get pushed down lower. My overnight buy queue at 16c was not done.  I am back in the queue.

For people who are hoping to make a quick buck, this might not be a good time to buy in. MFI has formed a lower low and OBV is down. MACD is under zero. All technicals are bearish except for a consistent picture of low volume pullback. If this counter tests the rising 200dMA at 15.5c, I would buy more.

AIMS AMP Capital Industrial REIT: Technically, this REIT is stronger than Saizen REIT.  MFI has formed higher lows and OBV has hardly declined.  The MACD is poised for a bearish crossover with the signal line though. The merged 50d and 100d MAs provide an important support at 21.5c and 23c remains the resistance.

CapitaMalls Asia:  Could this be a morning star setup? If the price opens above today's closing price of $2.08 and trades to close at or above $2.12 tomorrow, there is hope. The MFI is still in oversold territory but the decline has halted.  OBV is still declining and amidst the distribution activity, price managed form a white candle today.  This, I view as positive. In the event of a successful morning star setup, I expect initial resistance at $2.19.

SPH: Fourth consecutive black candle day. Black spinning top today. Looking at the MFI, we see that this counter was overbought for quite a while.  The index is now moving towards 50%.  50% on the MFI sometimes function as a support or resistance.  Together with the black spinning top today, which suggests indecision in a downtrend, we might see a rebound.  This is especially the case when price is now trading at the lower end of the Bollinger bands.

In the event of a rebound, the downturning 20dMA should provide a strong resistance.  This is at $4.04 now. The set up now might give rise to a morning star pattern just like for CapitaMalls Asia.  We will have to wait and see.  100dMA provides support at $3.79 and 200dMA provides support at $3.67 in the event of a further decline in price.

Golden Agriculture: MFI declines. OBV declines.  MACD has gone under zero. Overall, a bearish picture. The price managed to close at 55.5c, the support identified in previous TAs.  However, that this support was punctured today is a negative. If the 200dMA at 50.5c is tested, it has to hold.  If it does not, the uptrend is compromised. No prize for guessing where I am putting my buy queues.

Healthway Medical: Nothing much has changed apart from the fact that price touched a low of 14.5c today. 14c next? Possibly but the picture of low volume pullback is intact. We do not want to see the rising 200dMA breached.  This is currently just below 14c.  I might join the buy queue at 14c as a hedge.

FSL Trust: Heavy reduction in volume as price moved lower today to close at 52c. MFI has moved deeper into oversold territory.  OBV declined further. Another probable morning star setup. In the event of a reversal, strong resistance could be found at 60c.

I still see support at 51c in the event of a continuing decline. I bought some units today at 52c with a view that most of the heavy selling is done and over with.  Of course, I cannot say that the selling is over but any selling would probably be less vigorous from now on. The panic we see here approximate that of what was seen during the onset of the financial crisis in late 2008 and such panic, I believe, has to be overdone.

Courage Marine: Got my shares today at 20.5c and 20c.  MFI declining towards 50%. OBV declining. MACD moving towards zero and would probably go under. The best case scenario, technically, for this counter now is some sideway movement for some time to come, it would seem. What is left for me to do now is the easy part: hold.  Of course, I might buy more on any further weakness.

Related posts:
Charts in brief: 4 May 10.


la papillion said...

Hey AK,

Waiting for the warrants :)

AK71 said...

Hi LP,

Saizen warrants? So am I. Would I get a chance to buy more at 7c or, maybe, even 6.5c? ;)

Anonymous said...

Hi AK71
I visit your blog everyday. Thanks for your effort.
I know that I may sound stupid by asking this question. But for not asking, I will never know.
You guys are buying Saizen Warrants. I understand that you would need to convert themnto shares before the due date and you need to pay a certain sum. It will become worthless if you did not act before the due date.
Why take the risk? Why not buy the shares instead?
CS Tan

Anonymous said...

Hi AK,
I feel that the NAV of a reit does not really matter in the markets as the market expect a yeild of around 8 to 10% for reits in general, even if a reit is trading at 20% NAV with a yeild of 9%, its price will not rise.
On the other hand even if its trading at NAV with a yeild of 15% its price will eventually rise to reflect a yeild of say 9%.
Of course a reit with a hugh discount to NAV will be a better bet comparing reits with similar yeild.
Whats your opinion AK?

AK71 said...

Hi CS Tan,

Exactly, if we don't ask, we would never know. :)

There is no risk in buying Saizen REIT's warrants unless you have no intention of converting them into regular units before the expiry date. So, if your intention is just to make some nice capital gains before the warrants expire AND those gains do not materialise, are you in trouble? No, just sell the warrants away in the stock market before they expire.

The warrants are an attractive proposition to many because of the very long expiry date and the fact that holders would make a lot more money in percentage terms with every 0.5c increase in price compared to holding the regular units. The warrants' price, of course, is determined by the price of the regular units, more or less. So, if the regular unit is trading at 16.5c, the warrants should theoretically be priced at 16.5c - 9c = 7.5c.

Personally, I hold a lot more Saizen REIT units than warrants. Warrants are not entitled to income distribution which will resume in another couple of months. Converting warrants to units also entails extra work. I am a bit lazy. ;)

Thanks for visiting daily! :)

AK71 said...

Hi KL,

You have raised a question regarding value (NAV) and market price. You are right in that value and price are not usually the same. As investors, we capitalise on this discrepancy to purchase undervalued stocks.

I am not sure that the market expects a yield of 8 to 10% from REITs. Not many REITs are now giving a yield so high in Singapore. I can think of a few off hand:

1. First REIT
3. AIMS AMP Capital Industrial REIT
4. Saizen REIT (when distribution resumes)

Usually, yields are higher for REITs which investors are less interested in. Sounds like a paradox, doesn't it? Look at CMT which attracts a lot of institutional investors. It has a more modest yield and is trading at a premium to NAV.

Personally, I still believe that buying any REIT is the same as buying a piece of real estate. We want to look for value, yield and low risk. Translated, it would mean a discount to NAV, high yield and low gearing.

Buying into REITs should, primarily, be for the income distribution. Capital appreciation is a secondary consideration. Just my thoughts. :)

Anonymous said...

Hey AK,
You becoming sort of a reit specialist,lol. Anyway thanks for your input, appreciate it. Please keep up the good work man.

AK71 said...

Hi KL,

REITs are relatively easy to understand compared to some businesses.

Thanks for the words of appreciation. :)

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