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Capitaland: More downside?

Friday, June 17, 2011

My purchase of more shares in Capitaland yesterday at $2.81 per share, unfortunately, did not turn out well. Today, its share price closed at $2.75, the day's low. There are some very determined shortists. The bears have won for now. Well, this is the risk one has to accept if one were to go long in a downtrend when there are no clear reversal signals. Too bad for me.

I am going to employ Fibo lines which have worked so well for me on other occasions to help determine where would we find the next support. Taking the high of $4.23 as 0% and $3.08, a natural support as 100%, we see a clearer picture.

$2.81 is where we find the 123.6% Fibo line, not a golden ratio and, as it turned out, it was a weak support which held up for a while in the morning. The next support is at $2.64. This is provided by the 138.2% Fibo line, a golden ratio and likely to be stronger. In the absence of a rebound, I would keep an eye on this price if it should be tested.

Fundamentally, Capitaland is now trading at a 21.4% discount to its NAV of $3.50 per share. I still get a feeling that it is very oversold and that a technical rebound is overdue. Of course, Mr. Market does not care two hoots what I feel.

For investors still keen on property stocks, the key is to be extra selective. Daiwa Securities recommends CapitaLand, which it notes has underperformed the local market “significantly” over the last 12 months. “We believe the market has sold down CapitaLand shares to a level where nearly all of the future policy risk (in China and Singapore) has been priced in.”

Daiwa adds what while home prices in Singapore and China may stagnate or even decline, CapitaLand’s combined residential property exposure in the two countries accounts for less than 20% of its overall assets. Daiwa has an “outperform” rating and $3.50 price target on CapitaLand. The stock closed at $2.75 on June 17.

(Source: The EDGE Weekend Comment Jun 17)

Related post:
Capitaland: Average buy price of $2.81.


Alan said...

Hello AK,

Do you think the rebound of capitaland will most likely lead to the rebound of CMA too?

Musicwhiz said...

Hi AK71,

Does the NAV of $3.50 per share included gains on revluation of property in Capitaland's portfolio?


AK71 said...

Hi Alan,

I believe that CMA is suffering from collateral damage.

Fundamentally, the monetary tightening in China has an impact on residential housing demand mostly. As CMA is in the business of developing and leasing out mall spaces, it should not suffer as much as Capitaland.

However, Mr. Market is a most sentimental being. Sentiments drive prices. So, although I see value, especially since I believe the RMB is severely undervalued and CMA has many of its properties in China, price could go lower.

Would a rebound in the share price of Capitaland mean a rebound for CMA too? Who can say for sure? ;)

AK71 said...

Hi Musicwhiz,

The NAV/share should be $3.30. I got mixed up with CMA's NAV/share of $1.50. Although your question is at a tangent, it alerted me. Thanks. :)

RNAV is a bit more subjective and would depend on which research houses we listen to. OCBC Research has a RNAV/share of $4.10 for Capitaland, for example.

Alan said...

Hi Ak71,

Thanks for explaining. Looking for a good chance to accumulate some blue chips in the bear market ahead :)

Good luck to both of us :)

AK71 said...

Hi Alan,

You are welcome. :)

Yes, we must crave the indulgence of Lady Luck. ;)

ortho said...

Do u stil hold CMA and NOL? Looking at the price now, I am tempted to go long :p What is yr view?

AK71 said...

Hi ortho,

Yes, I still have shares in CMA and NOL.

Currently, there are no signs of the downtrends reversing although all technicals are screaming oversold. A technical rebound is probably overdue.

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