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Cache Logistics Trust: Initiated long position at 91.5c.

Tuesday, March 15, 2011

"I said in an earlier blog post that I am willing to pay a small premium above NAV which is acceptable for a lower risk investment. So, if a retest of the low of May 2010 at 91.5c were to happen, I could buy some units." This was what I said in my blog on 8 March, a few days before the terrible disaster hit Japan. Today, I bought some units of CLT at 91.5c.

With the acquisitions the manager announced yesterday, this REIT is looking more attractive as its gearing level remains under 30% while its DPU could bump up by a few percentage points. Could its unit price weaken further? It could as its downtrend is technically very much intact.

Well, 91.5c/unit was my target entry price and, I dare say, is a fairly good one with a smallish 3.98% premium to NAV/unit which is at 88c. I have gotten my foot in the door, so to speak.

I have a few more blog posts which I would like to put up this evening but it really depends on my condition later on. My second hot yoga session is in less than an hour!

Related post:
Cache Logistics Trust: Why not buy at 94.5c?
Cache Logistics Trust: Acquisitions.


14 comments:

Drizzt said...

pared down 50% at 0.925 today. more downside i am afraid.

AK71 said...

Hi Drizzt,

Wow! A speedy comment. :)

Yes, technically, it looks like more downside is likely.

la papillion said...

Hi AK,

Likewise, I initiated a position on cache at the same price as you :)

AK71 said...

Hi LP,

Brothers in arms? Hahaha... Good luck to the both of us? :)

Kc Lee said...

Hi AK71

Have you seen this:

cache.listedcompany[dot]com/stock_insider.html

Insiders mass selling shares...wondering what you make of it since you are vested.

Thks

AK71 said...

Hi KC,

There could be many reasons for insider selling but usually only one reason for insider buying, says Peter Lynch. :)

I don't know why insiders are selling in CLT, frankly.

However, given the headwinds industrial S-REITs will be facing, I will caution against any overly optimistic view of the sector. I have blogged about this since late 2012, if I remember correctly.

Kc Lee said...

Hi AK71

Thanks for replying. Just one more question hope you don't mind.

Do you think it's still good to hold reits for the long term after QE tapering hits?

Prices have dropped a lot now.

AK71 said...

Hi KC,

I have no issues with having REITs in an investment portfolio. In fact, if you read some of my earlier blog posts, I think that REITs are good to have in any portfolio.

The thing to remember is that, like any investment, if we get in with a margin of safety, there is no reason to panic. In such an instance, if prices should fall even more, then, we should logically think of adding to our positions, everything else remaining equal.

I am holding on to most of my investments in S-REITs. I have made a couple of divestments (i.e. in LMIR and Sabana REIT) this year and I blogged about them. Otherwise, largely unchanged.

If there should be an opportunity to buy into S-REITs cheaply, I hope I will be brave enough to take advantage of it. :)

Jing Quan said...

Dear AK,

Cache has drop quite abit from the 94cents dilution of shares. I am considering to average down (holding at $1++) however, I am mindful of the possible low low with the coming fed hikes which can drive the price lower hence, holding my horses. 10-15% drop on a reits portfolio is quite alarming most instance i would have cut losses but I took in view, I am getting decent dividends yield!!

Secondly, with shareholders demanding for 8% yield per year might not allow the share price to go back up to the $1++ glory days. Do you agree?

Was wondering on your long term view on this counter.

Cheers to Mid -week!!!!

AK71 said...

Hi Jing Quan,

In a comment I made, you might remember that I am not very impressed by CLT's management.

You will find the comment here:
http://singaporeanstocksinvestor.blogspot.sg/2015/09/9m-2015-passive-income-from-s-reits.html#comments

I won't be adding to my long position unless its unit price declines enough to compensate for the dilution to its DPU.

Jing Quan said...

Thanks AK!
" unless its unit price declines enough to compensate for the dilution to its DPU" very chiam leh. Not sure what that meant but I know overnight from the dilution my holdings drop at least 6% which is alot!

AK71 said...

Hi Jing Quan,

No lah. Not cheem. Basically, there will be many more units in issue. So, we should work out the percentage of dilution. Then, we would know how much the DPU would be watered down. Then, if we want the same distribution yield like before, what would be the price to pay?

Actually, even if the unit price declines sufficiently to compensate for the dilution, I might not add to my long position because I am not impressed by the management thus far. More margin of safety required? Probably. :)

Jing Quan said...

Hello AK,

Thanks! I will take it up as homework to work that out over the weekend.


I just want to pick your brain on they rational behind it on the psychology of a shareholder Eg: holding at $1.10 and not averaging down when possible and choosing to hold at paper loss.

Surely, we cannot always average down due to limited resources.

Market has been bleed in the Cold November rain. Come December be showering!!!

AK71 said...

Hi Jing Quan,

Paper losses don't really bother me unless I think that the company's fundamentals have very much changed for the worse.

In Cache Logistics Trust's case, I think my average price is probably in the mid 90 cents. I have been a shareholder for a few years and I cannot remember exactly by now.

However, my average price really has nothing to do with my equanimity.

The business isn't growing but it isn't going down a slippery slope either which was something I saw coming for Sabana REIT. Having said this, the business is facing similar challenges but not to the same degree.

If things are not looking up, the only time that makes sense to add is when the valuation is so cheap that we are sufficiently compensated for the risk of being invested.

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