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Saizen REIT: More buying interest.

Tuesday, November 2, 2010

I received an email from a reader today saying:

"Seems like u like japan. Saizen see pick up in vol today and yesterday"

My reply:

"I like Japan a lot. Beautiful country, nice people, good food. Everything works. It is like Singapore but costs more.

"Saizen REIT is very undervalued. It is a matter of time that more investors take notice. It also takes time for its troubled past to fade. I have been holding for a year. I can wait a few more months."

Reader's reply:

"About one of your question, if the yield at 6.5% is attractive. I think the current yield is not attractive, and if the price goes up, the yield will fall further?

"Even though it has upside potential due to the NAV, it may be cap by the yield, unless the revenues improve?"

My reply:

"6.5% is attractive because the properties are Freehold. It is perpetual. If the properties are leasehold, then, it is not very attractive.

"For such a portfolio, a fair yield should be 5% which means unit price should be about 21c."

This reader is not the only person with negative perceptions or reservations about Saizen REIT, I am sure. There are also those who are worried about Japan's future which includes its debts and its demographics. I have voiced my opinion about these concerns before and you might want to read it here.

How do I feel towards these negative feelings and perceptions? Glad. Yes, glad.  There are still many doubters and the wall of worries is still intact. When everyone is bullish about something, that is a sign that we should think of exiting.

However, I noticed that there seems to be more buying interest in Saizen REIT today too. Of 3,260 lots that changed hands today, 2,968 lots were bought up at 16c. This could just be an anomaly or this could be the beginning of something bigger. Who can say for sure? A crack in the wall of worries? Perhaps.

The very thin trading volume of this counter makes TA unreliable but, for want of a better tool, let us look at the charts anyway. In end May and early October, Saizen REIT touched a low of 15c. It is interesting to note that the MACD has formed a higher low in early October. This is interpreted as a positive. The MACD has, in fact, moved higher into positive territory which suggests the return of positive momentum.

The MFI, a function of volume and price, is in oversold territory. The OBV does not show any big moves of accumulation or distribution. All the daily MAs seem to be bunching together. I have seen such a gathering before and likened it to a spring coiling up with tension. The 20dMA is set to complete a golden cross with the 50dMA. Immediate resistance at 16c.  Immediate support at 15.5c.

Let us now look at the weekly chart which could be revealing for a counter with such thin trading volume like Saizen REIT. It is immediately apparent that 16c is a formidable resistance level as that is where we find the merged 20w and 50w MAs.  However, the gently upturning 100wMA and the rising MACD which just did a bullish crossover with the signal line suggests that the longer term trend of Saizen REIT is positive.

Related post:
Saizen REIT: AGM on 19 Oct 10.


Anonymous said...

The sell down which i had missed ? Perhaps some investors are tired of waiting for dividends or the price appreciation and decided to recycle their funds for other (better or more exciting?)use.


AK71 said...

Hi SnOOpy168,

Who knows for sure why the big sell down took place today?

For me, if the price goes lower while we have the status quo, I would accumulate.

I do not see any reason in Saizen REIT's fundamentals to sell it down.

Anonymous said...

Hi AK,

I'm a new reader to your blog as well as a relatively new investor.Saizen REIT is one which I have been studying since u have so much hopes in it.16c seems to be the resistance (as you have pointed out) and 15.5c the support,not much change the past few weeks.Is it wise to enter at 15.5c or to queue for 15c (not much of a difference I know).And if I understand from one of your articles,the nxt CD is in March 2011?

Another question I have is among the few healthcare counters left on SGX,would you recommend Healthway,Plife or First REIT?

Thanks in advance

AK71 said...

Hi Anonymous,

I started buying units of Saizen REIT when it was 13c a year ago and I even bought some at 16.5c.

I cannot tell you if it is wiser to buy in at 15.5c or 15c. I did buy more during the recent sell down at 15.5c. Well, you decide. ;)

As for Healthway Medical, I blog regularly about it and I was heavily invested in this counter too. You might want to read some of my analyses of the company and decide for yourself.

Healthway Medical: Second quarter results.

I am vested in First REIT. I like its yield over PLife's but that's me. There are some who prefer to buy bigger REITs despite the lower yields as they are more likely to attract interest from institutional investors which could lead to more opportunities including capital appreciation. Again, you decide. ;)

First REIT: This one is for keeps.

Could you include your name or initials in future comments? Thanks.

Siew Mun said...

AK, whats your take on Saizen after they announce DPU 0.031.
I see a positive point that loan repayment is pushed out to 5 years. Otherwise is flatish.

AK71 said...

Hi Siew Mun,

I really like what the management is doing. A longer debt maturity is definitely a good thing. :)

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