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Healthway Medical and First REIT: Good news and good bad news.

Monday, December 13, 2010


First, the good news. In my last blog post on Healthway Medical, I mentioned that "If the buying interest follows through, we could see its share price rising to test resistance provided by the merged 100d and 200d MAs and that is at 17c." The counter closed at 17.5c today on expanded volume. Momentum oscillators have all turned up. Beyond 17.5c, I expect resistance to be found at 18.5c, a many times tested support and should be a strong resistance.


I expected 17c to be a strong resistance as it is where we find the merged 100d and 200d MAs as well as the downtrend resistance line.  So, a trading position entered on 22 Nov last month at 15.5c was divested at 17c today. I made some pocket money and that is the good news. Do I have any interest left in the company? Yes, I still retain 5% of my original stake in the company and I will continue to monitor its progress or the lack of progress in time to come.


Now, what's a good bad news? Well, it is a piece of news which seems bad but which is actually good. I am referring to the declining unit price of First REIT.

I mentioned in an earlier blog post that I see long term support at 67c as this was underpinned by the rising 200dMA. We see that 67c is also where we find the 123.6% Fibo line. Price, today, touched 66c which is where we find the 138.2% Fibo line.  38.2% is one of the three golden ratios and provided a stronger support.

My original intention was to wait to buy at 67c but, last Friday, I changed my mind and queued for the rights at 16c instead at the influence of fellow finance bloggers who bought the rights at 16.5c. Guess what, my buy queue for the rights at 16c was filled today. So, my effective cost would be 16c + 50c = 66c which means a yield of 9.7% based on the 2011 DPU guidance of 6.4c by the REIT's management. I am a happy man.

Am I not worried whether the price would decline further? No. Why should I worry? I cannot do anything to influence the price movement of the REIT. If the market is willing to sell a good thing to me at a lower price, I would buy. It's simple. So, would I buy again if the price declines further. Yes, I would. When?


If we look at the chart, we find the 150% Fibo line at 65.5c and the 161.8% Fibo line at 64.5c. As 65.5c is only a half cent difference from 66c (my effective buy price today), I would not bother putting in a buy queue at that price. I have put in a buy queue at 64.5c and I would be very surprised and very pleased if it could be filled in the next few days. At 64.5c, the yield would be 9.92%!

Some may be puzzled by how someone who bought more of First REIT at 95c and 96.5c, CR, could feel pleased with the declining unit price in recent sessions. Well, it is true that the TERPs of my purchases at 95c and 96.5c are 70c and 70.7c which are now in the red. However, let's be rational.

The recent weakness in First REIT's price is due to the selling down by one of its cornerstone investors, Golden Rainbow International Limited, which owned more than 9% of the REIT. I won't be surprised if they continued to sell down today. What's the reason for their massive sell-down?  Well, only they know the reason, I don't. It is a waste of time for me to guess why they have decided to sell.

The REIT's CEO, Dr Ronnie Tan Keh Poo, who is also a director, however, has been buying up the REIT's nil-paid rights as they got sold down. I like it when a REIT's management's interests are aligned with unitholders'. Dr Tan is unlikely to throw his hard earned money down the drain.

Technically, today's volume at 8.04m units is the REIT's highest in its history. However, notice how the black candlestick formed this session is not as bearish as the three black candlesticks before it. It actually started in the middle of the previous session's candlestick and it also formed a lower wick unlike the previous three candlesticks. Support is at hand. This is another reason I said that if my buy queue at 64.5c could be filled, I would be very surprised and very pleased. Good luck to us all.

Related post:
Healthway Medical: Broke out of resistance.
First REIT: Waiting at 67c.

20 comments:

Anonymous said...

Hi AK,

Guess I bought First REIT a day too early (at 68c). After reading your comment, I'm hoping to average down this week. I like the candlesticks talk - not much of a TA guy myself :)

Victor

AK71 said...

Hi Victor,

It is most difficult to time the market. People who are consistently able to buy at the bottoms and sell at the tops are rare indeed.

Buying First REIT at 68c is still good value for money. Investing for income, that would give a yield of 9.41% in 2011.

I also believe that First REIT would see its unit price rise in future. The fair value of 80c which I identified not too long ago is not unreasonable. :)

First REIT is a strong buy based on fundamentals. FA gives it the thumbs up. Based on TA which is more about market sentiments, I believe that further downside could be limited to 64.5c, if it happens at all.

Anonymous said...

Hello! AK,

Impressive analysis. Noted that Golden Rainbow International is incorporated in BVI, thus cannot participate in rights issue. That probably explains the selling in rights. Should still have some more to go. But not sure why they are exiting the mother share though. In any case, good chance to collect. Good luck!

bluebox

AK71 said...

Hi bluebox,

Thanks for sharing this. Yes, it is an opportunity for us to buy more at very reasonable prices.

This could prove to be a window that will not open again for a long time to come. :)

Anonymous said...

Healthway has take over potential

JW said...

AK,

different la. Opportunity to buy must also have opportunity funds to buy too. :x

AK71 said...

Hi Anonymous,

That possibility exists, of course. :)

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

AK71 said...

Hi JW,

That is true. We must always have a warchest ready. ;)

Anonymous said...

Hi AK71
Thank you for your comments. In my broker account, I can find FIRST REIT R and FIRST REIT R250. Both of them are meant for rights trading but what is the difference between them? I cannot find such information in SGX nor UOB Kay Hian.

Thank you very much.

Anonymous said...

Sorry just happen to pass by. I do not hold any of this share hence i am not entitiled to the right. Am i right to say that i should queue at 66cent?

Karen.

AK71 said...

Hi Anonymous,

The R250 is meant for people with odd lots.

For example, someone might own 2 lots of First REIT and he would be entitled to 2500 rights. Or someone might own 1 lot of First REIT and he would be entitled to 1250 rights.

Could you include your name or initials in future comments? :)

AK71 said...

Hi Karen,

You could queue to buy First REIT's units at 66c but I don't know about whether you should. ;)

66c was the low touched yesterday. It is hard to say if it would be retested in the near future. It seems that the counter has re-captured the support at 67c but, of course, we can only be sure at the end of the day.

WK said...

can i apply for 500 units as excess?

AK71 said...

Hi WK,

Sure. Your chances would be quite good if you have odd lots to round up. :)

ZHANG Zheng said...

Hi AK71
Thank you for your reply. So FIRST REIT R is traded with unit of 1000 shares while FIRST REIT R250 is traded with unit of 250 shares?

Thank you.

AK71 said...

Hi Zhang,

Yes, you got it. That is right. :)

WK said...

somebody was saying the other day that applying thru the ATM, the first screen is for those rights allocated upon X + those purchase from the market and the second screen is to apply for any excess rights...

so in my case can i key in 1500 on the first screen & 500 on the second screen?

AK71 said...

Hi WK,

Yes, the first entry is for what you have been allocated plus any nil-paid rights you might have bought in the open market.

The second entry is for any excess rights you might want to apply for.

Your personal example sounds correct. :)

WK said...

so they do allow u to key in 500 units? not minimal 1000 units?

AK71 said...

Hi WK,

Yes, we have to key in the exact number of units we want. It could be 250 units, 500 units, 750 units or in 1000s. :)

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