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Cache Logistics Trust: Why not buy at 94.5c?

Tuesday, March 8, 2011

More than one person asked why not I buy units in Cache Logistics Trust at 94.5c since I like its fundamentals. Well, it is just like asking why not I buy an Audi A3 at the current price since I like it. It is not really a question of affordability. As usual, it is a question of value for money.

At 94.5c, I would be buying at 5.5c above NAV. That is a 6.18% premium. Regular readers would know that I loathe to pay above NAV for a REIT. It is just like many loathe to pay COV for HDB flats but in those instances, sometimes, they do not have a choice or they really like a particular flat. After all, it could be one of a kind thing. (Ask LP at Bully the Bear. He would tell you his experience.) With a REIT, however, I am willing to wait for the right price.

So, what is the right price for this REIT for me? Well, 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. Didn't I say 92.5c could see me buying some too? Yes, even at  92.5c.

What are the chances of its price going lower? Well, looking at the weekly chart, I would say there is a fair chance of it happening, given more time. In fact, we could be seeing the formation of a down trending channel.

A look at the MACD and we see a lower high. The previous low has already been surpassed and a lower low is a given. Look at the OBV and we see obvious signs of distribution over the longer term. However, the higher lows on the MFI and RSI show that some support is forming as price declined. So, downside could be limited.

Accumulating on weakness should be a fairly safe thing to do but for anyone who is willing to stomach the possibility of a 2c to 3c paper loss and would like to buy in at 94.5c, it's your call. Don't let my ideas affect you.

Related post:
Cache Logistics Trust: A retest of 91.5c low?


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