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Capitaland: To sell or to buy?

Sunday, March 27, 2011

I read an article in The EDGE with interest as JP Morgan "upgraded the Singapore property sector from underweight to overweight largely because it believes the market is discounting physical market price declines of 12-40% which are too bearish." At the top of its buy list are Capitaland and CDL.

When I first commented on Capitaland on 10 Feb this year, I said that "A reader asked me if it was time for her to buy more Capitaland shares last evening. I told her I expect more downside today. In confirmation, the low of May 10 at $3.46 was taken out today without any hesitation by Mr. Market. The formation of three black crows now suggests that price could go lower. Some would say that it is more accurately described as two and a half black crows but I am sure the distinction is just academic.

"The next low to look at is $3.28 of July 09 and another reader today asked if it is time now to buy some especially if that low were tested. It would take someone very brave to buy in the current conditions, I feel. Could we see $3.28 taken out without hesitation by Mr. Market just like $3.46 was taken out today? Why not?" Read blog post here.

Price went on to touch a low of $3.08 on 17 March. However, anyone who bought some at the low of 17 March or thereabouts would be in the money now. The positive divergence on the MACD and share price is quite obvious: higher lows on the MACD and lower lows in share price. The ADX is also declining as the +DI crossed over the -DI on the upside: the downtrend is weakening.

For anyone still holding and for those who are thinking of entering, the question might be: "Would the price go higher?" I don't have the answer. I will say that the upward momentum seems to be weakening as long legged dojis were formed in the last two sessions. So, the downside risk is higher. The MACD, although rising, is still in negative territory and, so, we could just be seeing a rebound. Momentum is still negative.

If price should go higher, I see resistance at $3.40, a neckline. If that should break, I see a resistance band between $3.46 to $3.48. Beyond that? $3.56. If price should weaken? I see immediate support at $3.27, followed by $3.24.

I have only an academic interest in this counter (for now) but if I were to go long on this counter, I would do so on weakness as it retests supports. If I owned some shares bought at $3.08 thereabouts recently, I would sell some as it tests resistance at $3.40, if it should happen. If price goes higher, I would have more to sell. If price goes lower, I have the funds to buy more.


WK said...

SABANA reit also offering high yield. have not gone over the IPO price yet...

when they gonna declare their first distribution?

AK71 said...

Hi WK,

Sabana REIT, for some reason, does not seem to be enjoying much support from the market.

Personally, I am willing to try for a a small position at 92.5c again. This is way lower than the IPO price of $1.05 and would give me a distribution yield of about 9.2%.

After Sabana Shari’ah Compliant REIT is admitted to the Main Board of the SGX-ST, it will make
distributions to Unitholders on a quarterly basis, with the amount calculated as at 31 March,
30 June, 30 September and 31 December each year for the three-month period ending on each
of the said dates.

Interesting tables comparing Industrial S-REITs in the Appendix:
10th Anniversary Islamic Finance Summit.

WK said...

checked out ur link...

i m impressed with a-reit, comparing the properties at hand and during ipo.. ballooned so much. whats the full name of a-reit?

AK71 said...

Hi WK,

Ascendas REIT. Impressive, isn't it? However, it is too expensive now, in my opinion. There is a big premium over NAV and the distribution yield is not very attractive.

WK said...

well it could have been cheap before just not now...

if its good then you have to pay the premium n there goes the yield.. :)

hope FIRST can be something like that.. haha...

AK71 said...

Hi WK,

It certainly could have been. ;)

Let us hope that First REIT would one day be like PLife REIT. Then, we would laugh to the bank. :D

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