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AIMS AMP Capital Industrial REIT: Worried?

Saturday, January 22, 2011

A friend told me that a friend of his is desperate for reassurance regarding her investment in this REIT. Reassurance? I was baffled why his friend needs reassurance. Then, he explained that it is because there were massive sell downs at 21.5c in recent sessions, yesterday inclusive.

I told my friend I was happy that there was a sell down yesterday because my overnight BUY queue at 21.5c was filled.  Well, his friend's overnight BUY queue was filled too at 21.5c but she's worried now. I find that mind boggling. We put in an overnight BUY queue in the hope that it would be filled and when it was filled, we worry? Something is wrong here. I think popping the champagne could be overdoing it but some happiness is more appropriate, don't you think?

A quick look at the daily chart shows immediate support at 21.5c. The MFI is still uptrending and is now testing resistance at 50%. The confluence of 20d, 50d and 100d MAs at 22c makes this price level a strong resistance. What is the chance of this resistance being taken out?


Let us take a look at the weekly chart for clues on the longer term trend. The trend is obviously still up. If we think of the white candle formed in the week of 13 Sep, could we be seeing the formation of a flag? Is price consolidating before moving up further?


Now, look at the Bollinger Bands and they are definitely narrowing. So? Volatility is reducing which supports the idea that price is consolidating. Will price go up or down? An educated guess is that it is more likely to go up than to go down because the upcoming DPU is likely to increase over the last one by a large margin. Numbers are likely to improve and we will know for sure next week when the results are announced on the 25th (Tuesday).

Does this mean that price would not weaken at all in the meantime? Who can say for sure? However, in view of the fact that the REIT is on a longer term uptrend and that the rising 50wMA is at 21c, I have already put in a BUY order at 21c and if this price level was ever tested, I hope my BUY order could be filled.  At 21c and an estimated DPU of 2c per year, that is a distribution yield of 9.52%.

Finally, someone told me that his broker advised him against investing in AIMS AMP Capital Industrial REIT because it has been losing money for years. I find this baffling as the REIT is only slightly more than a year old since the old MI-REIT was recapitalised.

Looking at the last quarterly report, we see positive net income and positive cash flow. MI-REIT is a thing of the past, AIMS AMP Capital Industrial REIT is a much stronger outfit and I am putting my money where my mouth is.

See 2Q FY2011 Unaudited Financial Results here.

Related posts:
AIMS AMP Capital Industrial REIT: Sell down at 21.5c.
AIMS AMP Capital Industrial REIT: Revised DPU and fair value.

18 comments:

Drizzt said...

why would you say all is over AK. the gearing is back to 34% and we have not see crisis 2. perhaps we should reserve judgement.

credit crunch probably kills all.

la papillion said...

Hi AK,

I think buyer's remorse at work, haha :) Some people queue but have no intention to really get it :)

AK71 said...

Hi Drizzt,

I said MI-REIT is a thing of the past. I don't recall saying "all is over". ;p

As for crisis number 2, if that comes, we are all in trouble anyway. In the last crisis, none of the REITs were spared the sell down. So, it won't be just this REIT that would suffer.

In the meantime, given the current set of circumstances, this REIT is a good investment. :)

AK71 said...

Hi LP,

It is a strange idea to me. Why queue for anything if we had no intention of getting it? It is really mind boggling. 8-p

Gerard said...

Hi AK,
just to check, on the weekly chart from Sept 20 is a downward resistance line, so why is it still an uptrend? rising MAs?

AK71 said...

Hi Gerard,

You got it. Look at the MAs and they are still rising.

After all the charting which I have done for this REIT, I have to remember that this is a very thinly traded REIT most of the time. So, the charts might not be very reliable.

We are probably still better off relying on FA for this REIT. ;)

Gerard said...

I see. Thank you ;)

AK71 said...

Hi Gerard,

No problem. Keep the comments coming. :)

Anonymous said...

Hi AK,

I tend to agree with Drizzt here. AIMS remains un-tested by any recession yet.

Personally, I wouldn't say a REIT with 34% gearing is entirely safe. If recession strikes, AIMS write down its asset value by 5-10%, its gearing will rise even further. Interest rates will increase since it breached the 35% rule. A lot of bad things can occur.

AIMS is a new beast. So while I wouldn't blame the Management for the 2009 mess, I wouldn't consider it to have successfully braved any recession either. Can't have it both ways. Same applies to Cache and Sabana. Until AIMS do succeed in getting thru one set of a recession cycle without compromising its distributions and risk profile significantly, it cannot be termed as an experienced safe REIT investment. Guess this is why it is priced at such yields. CIT went thru the bear cycle and didn't go bust and DPU remained stable so its yield is slightly lower. Market is pretty efficient !

Cheers,
Nick

Raelynn said...

sometime's it's because as non-commercial investor with no insider information, we worry that sell downs are a result of certain things which insiders know and get other people to react while we are the last to know. *does it make sense?*. sometimes for me, something that shoots up rapidly or something that falls rapidly (unless it's a crisis) makes me apprehensive

AK71 said...

Hi Nick,

If we look at the numbers for why MI-REIT failed to hold up and almost went under in the last recession, we would realise that those numbers are not present in the current REIT's case.

The current REIT did not acquire overpriced assets nor are they over leveraged. In fact, the chances of assets being revalued upwards is higher than not.

For sure, the current management has not been through any recession (and I did not claim that it has) although George Wang et al did rescue it from the grip of one. However, the fact that it started on the right note, on a firm footing, has already differentiated it from the old MI-REIT. This REIT is a stronger outfit.

AK71 said...

Hi Raelynn,

Yes, I know what you are saying. However, extending your line of reasoning, we would worry almost incessantly because we are non-commercial investors with no insider information. ;)

With what information is available to us, we try to make the best possible decisions and that's all we can do.

Try not to get emotional. Have a plan and stick to it. :)

Anonymous said...

There are many reason for institutions or insiders to sell a stock - fund redemption, need money for personal needs, better investments etc.

But there is only one reason for them to buy a stock - they believe the price will go higher.

So don't read too much about insider selling unless it is over a sustained period on the back of shaky results. But on the other hand, if there is massive buying from insiders, it should be viewed positively.

AIMS will be declaring 0.5 SG cent dividend. If the unit price goes lower, use the opportunity to average down and increase your yield if you believe in this REIT.

Just look at First Reit - Golden Rainbow sold it down from 73 cents to 66 cents in a week ! Investors who believed in it (including the CEO) bought the units and now we reap a nice capital gain. So don't always view sell down as negative events...they could be opportunities in the making.

(Not Vested in AIMS. Vested in First REIT)

Cheers,
Nick

AK71 said...

Hi Nick,

Good to hear from a former fellow investor of AIMS AMP Capital Industrial REIT again. I couldn't resist this. ;p

I notice the backhanded way you are promoting First REIT but I don't mind since I am heavily vested in it too. Haha.. ;)

JW said...

Reminds me of my sis when she followed me to buy CCT at 80.5c.

She queued lower than me by a few cents after I mentioned I bought it, and when it was filled, she was so shocked and worried. She even called and asked me what to do... was totally at a loss...

Weird....

And now CCT is at $1.5+, she's happy. -.-"

AK71 said...

Hi JW,

If a person is buying based on a call by others, this could happen. If we have a clear idea of what we are buying and its fundamentals, I think this is less of an issue.

I am back in the queue to buy more of this REIT but, informed by TA, at 21c this time. Fundamentally sound, getting more at 21c would make me quite happy. :)

Anonymous said...

perhaps the common sense of "if it is too good to be true, then it isn't (true)" kicks in here. Perhaps over the recent news about those pyramid schemes (eg Swiss Gold, which 2 good friends almost con me into), that this friend of a friend is concerned.

AAR has the highest payout of any REIT and the law requires them to payout 90%. So is this DPU sustainable over the period of time ? Or they are just digging one hole to fill another ?

I asked these questions without digging deep into the books or past discussion. No malice intended.

AK71 said...

Hi Anonymous,

In this case, it is good and it is true. ;)

The REIT's reports are quite transparent. The money is tangible and not phantom cash. The buildings they own are tangible and are not just descriptions on paper.

Is the distribution sustainable? Well, it depends on what you mean by "period of time". If the economy hums along nicely like now, sure, it is sustainable. If another recession comes along and some of their tenants default on their rentals, then, its income would be impacted negatively and unitholders might get a lower DPU.

The REIT managed to get their loans refinanced at lower rates and they managed to achieve higher occupancy rates in the last few months. Things look benign as of now and I think would continue to be so for the rest of the year.

You might want to take a look at this:
AIMS AMP Capital Industrial REIT: 3QFY2011

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

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