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Sabana REIT: Bought more at 91.5c.

Tuesday, May 10, 2011

91.5c. Does this price sound familiar? It was the price I bought into Cache Logistics Trust some weeks back. See blog post here.

Today, I bought more units of Sabana REIT at 91.5c. The REIT's unit price touched a low of 91c after going XD before closing at 91.5c, forming a black hammer in the process. Buying at 91.5c XD is similar to buying at 94.5c CD (which, incidentally, was the highest price I paid although most of my purchases were made between 92.5c to 93.5c). Similar? That's because the REIT's maiden DPU was 3.04c.

I must be feeling quite bullish about the REIT if I bought more at 91.5c today. Well, feelings of bullishness aside, I feel that this REIT is a rather safe passive income generator at this level. NAV/unit of 98c means that the REIT is now trading at a 6.6% discount to NAV. Gearing level is conservative at 24.9%. Interest cover ratio is 7.9x. Annualised DPU of about 8.81c would mean a distribution yield of 9.63% at 91.5c per unit.

Some people asked me if Sabana REIT is still a good investment even though it has gone XD. Well, look at the numbers I have laid out above. What do you think? As an investment for income, I cannot find any big negatives with the REIT at this point in time. Indeed, I expect its performance over the next two years to be rather stable, everything else remaining equal, and that's a primary objective when we are investing for income.

Technically, the price gapping down today and going beyond the lower Bollinger band is very bearish. Notice, however, that the volume is the lowest in the last five sessions. This suggests that there is little selling pressure even though the REIT is trading XD, well, not at the current price level anyway. 91.5c is also supported by the 161.8% Fibo line while 91c is immediate support.

Could price weaken further? Although I do not think it probable, yes, possibly. Placing the 100% Fibo line at today's low of 91c gives us an idea of where the next downside supports might be found. 90c, 89.5c, 89c and 88c. At 88c, the distribution yield would be about 10%.

If price were to weaken further, I would not bother guessing why people were selling down the REIT. I would simply march in and buy more.


Anonymous said...

Me too.


Anonymous said...

you forgot to mention NAV of 98cts will drop by 3cts once it goes XD?

Unless NAV of 98cts has already factored in the XD?


AK71 said...

Hi SnOOpy168,

So, we are both waiting to accumulate on further weakness. ;)

AK71 said...

Hi Verbatim,

98c NAV/unit has already taken the DPU of 3.04c into consideration. Otherwise, the NAV/unit is $1.01.

You might want to go through the presentation: Q1 2011 Presentation

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