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Cambridge Industrial Trust: Going for excess rights.

Sunday, March 27, 2011

My entry into Cambridge Industrial Trust could not have been better timed. I became a unitholder again in the morning of 11 March at the price of 51c/unit. Of course, we know what happened in Japan on that day.

In my blog post that day, I said that "If the nil-paid rights should trade at 4c to 5c, it would be quite attractive ... Any price less than 4c would be a steal!" Well, the nil-paid rights are not trading below 4c and I didn't manage to "steal" any. Read blog post here.

I also missed the opportunity to accumulate at 47c/unit when the REIT was still trading CR. You might remember me saying this "What are my plans now? Buy more if its price weakens further? Looking at the daily chart, CIT is trading below the 200dMA. So, I look at the weekly chart for hints of the next support. The rising 100wMA is at 46.5c now and should provide relatively strong support. 46.5c? That is some way to fall from here! Yes, it is but remember that TA shows us where the supports are and not necessarily that they would be tested. If it should be tested while the counter is still CR, I would buy more.

"Buying 16 lots more at 46.5c would mean an average price of 46.11c... Of course, owning more units could possibly entitle me to more excess rights as well." Read blog post here. It never hit 46.5c where I was waiting and the lowest it went to was 47c. Tough luck.

So, since I got 17 lots at 51c, I would get 2,125 rights. I would, of course, round it up to 3,000 rights by applying for excess 875 rights. I will also apply for more excess rights in the hope of lowering my average price. With its unit price closing at 48.5c and hitting a high of 49c in the last session. This rights issue would be the first one I might not be making any money from in quite a while.

Would I stay invested? Well, the REIT's numbers have improved and should be a reliable passive income generator although I discovered something in small print and I replied to a reader on 19 March saying: "I looked at the announcement by CIT's manager again. We have to read the fine print. Tricky. 5.07c DPU would only kick in end of 2012 once the Extension Development Works are completed. Otherwise the DPU is 4.84c, post rights. So, to secure a 10% yield, buying at 48.5c per unit or lower would do it." See comments here. Yes, this was in fine print. Nothing wrong but it would have been better if the numbers were included in the table proper. I almost said something scathing when I read the announcement again.

So, although I am disappointed in more ways than one, I would probably stay vested unless I have a good reason to divest. Worst case scenario? A distribution yield of 9.7% for my investment.


Anonymous said...

Dear AK

just to enquire, after we paid for our rights, when will the units be released to our CDP account? and how do we know if our application for excess right is successful or not? Thanks!


AK71 said...

Hi Confused,

The rights units will begin trading on 15 April. You can get all the details here on page 12:

CIT's Rights Issue.

You will know if your application for excess rights is successful or not by seeing how much money is refunded from your application. At least, that is how I do it. ;)

Anonymous said...

Hi AK,

i would like to ask you, what is the "Cambridge 25" counter in SGX for? Isst the trading of rights, or isst the trading of 25 shares per lot of Cambridge?

If its the latter, then how do i trade rights? How do i renounce my rights, for example?

If its the former, then how do i pay for the $0.429 per share After i buy the rights on that counter? Also, do i need to buy on this counter if i've applied for excess rights weeks back using the ATM?

Anonymous said...

Sorry i published the comment too quickly... Forgot to say Thank you for your time for reading :)

AK71 said...

Hi Anonymous,

Cambridge 25 is probably for people with odd lots. So, if you do not have odd lots, don't bother yourself with it. :)

The nil-paid rights no longer exist. If you have applied for excess rights and if you should be successful in getting some, it will show up in your CDP account on 15 April. :)

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

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