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CapitaMalls Asia: Pre-emptive strikes failed.

Monday, August 15, 2011

Quite a few regular readers and friends are perplexed why I was buying shares in CapitaMalls Asia when it is clearly in a persistent downtrend. I replied that I was pre-empting a possible reversal as it looked like a positive divergence could emerge. Today, that possibility went out the window as the MACD formed a lower low as price weakened.

So, the technical reason I had for buying more shares in CapitaMalls Asia is no longer valid and I will not add to my long position anymore until the picture changes. Will I cut loss? I will only do so in a rebound. I will not do so as price goes lower. That has been my practice.

Prices rarely go up or down in a straight line. They climb a wall of worries and go down a river of hope. With CapitaMalls Asia, a rebound in share price could see gap filling at $1.325 per share. Whether this will happen or not, nobody knows for sure. If it happens, I will reduce my exposure.

Fundamentally, I still like the company's exposure to the growing middle class in China. These people have greater discretionary spending power and shopping malls in China will see strengthening demand over time. This will translate to higher asking rents and higher valuations for malls.

I also like how the RMB is likely to strengthen in time and this would mean that the NAV of the company will only go higher in S$ terms. How long will this take? Your guess is as good as mine.

Only one person knows for sure and he is Mr. Market. He will decide when the share price of the company will trade higher. Having failed to pre-empt Mr. Market's movements successfully, it is now back to basics while I wait for clearer signs.

Related post:
An elaboration on my methods.


Royston said...

CMA and Capitaland are just going down in a free fall...unfortunately.. as i hold rather substantial quantities of both.

Nevertheless, fundamentally i think they're doing many things right. For example, offloading some assets and holding onto large amount of cash. This will allow them to buy things on the cheap during a downturn.

But i think technically, its hard to expect much in the short term with the current macroeconomic situation. Especially the constant tightening in China and risks of overheating. This, in addition to the problems in US and Europe.

chnrxn said...

I've managed to get some lots during the CMA IPO @2.12. Missed the chance to sell at the 2.72 high, but was lucky enough to get out @2.41. Since then it has been down all the way without ever recovering convincingly. I know people who are still hanging on to those IPO shares. I believe this is one of those counters that will defy all TA and FA. The parent CapLand is the only counter I would still buy. Good choice to NOT add to your long position. Good luck.

Marco said...

What is the dividend yield for Capital Mall Asia?

financialray said...

Perhaps keep long enuf will see the shares rise back in value.
My weakness has always been buying shares hopefully to make a quick buck.
Sometimes it maybe better to buy shares with SRS. Lock the money in for long term so that before any share is bought, the aim is for a long term, as long as the company will survive.
I am sure CMA will be around 5 to 10 years later and on hindsight, judge the share performance then.

AK71 said...

Hi Royston,

Although my long positions in Capitaland and CapitaMalls Asia are less than 10% of my portfolio, their downtrends are a drag. It was a possible consequence I was prepared for when I decided to pre-empt.

I will reduce exposure if a meaningful rebound materialises.

AK71 said...

Hi chnrxn,

First time commenting in my blog? Welcome. :)

I was of the opinion that the share price went crazy when it went to $2.70+. It was parabolic. Irrational exuberance? For sure.

Congratulations on making money from the IPO. I didn't take part in the IPO, having avoided IPOs for years now.

The current share price offers much better value. Of course, value is based on FA. TA is telling us to wait and not jump in now although a rebound is likely.

AK71 said...

Hi Marco,

Full year dividend estimate: 3.0c.

Dividend yield at $1.20: 2.5%.

AK71 said...

Hi financialray,

I have no doubt that CapitaMalls Asia will be a most valuable company if we are willing to wait 5 to 10 years. Its near term performance, however, is likely to stay weak. :)

In fact, I am almost sure that CapitaMalls Asia will start to attract more positive attention from mid or late 2012 as more of its malls in China mature and contribute to its revenue. Currently, its bottomline is also hurt due to the continual opening of new malls. Short term pain? I think so.

There will come a time when I add to my long position in a big way. My recent purchases of its shares will be nibbles in comparison. ;)

FoodieFC said...

Hi AK 71

sadly for me, with my little total investment, I have ard 33% tie up in CMA. I bought at 1.44. But I do believe tht long run, CMA will do well esp in china & india, as fundamentally it is still sound. But the question is how long and the opportunity cost

AK71 said...

Hi FoodieFC,

Longer term fundamentals are definitely sound. However, we have to bow to the technical realities and accept the fact that CMA's share price has yet to reverse its downtrend.

Paul said...

I make the following comments on HWZ: CMA - jury is still out. Seems like an unwanted child of Capitaland and IMO Capland's image has been badly tarnished by CMA. But its an OK company fundamentally and does not deserve its low valuation. (Vested but not looking to add more for now)

I got it at IPO and my only consolation is I have just 1 lot and its not the biggest % paper loss in my portfolio <-- Self consolation. Haha

AK71 said...

Hi Paul,

I get the sense that most agree that CMA has strong fundamentals. It, perhaps, needs more time to prove critics wrong.

Anyway, Mr. Market is always right. I will wait for clearer signs from him. :)

Raelynn said...

hello AK,

yeap, my mom is one of those who held units from the IPO days and then only recently added some units when it was $1.3+ while i purchased 3 lots at $1.45.

i believe that the China malls have potential, but on the condition that the global outlook is at a point of volatility that is acceptable, afterall, malls can only make money when people feel confident enough to spend. the three lots that i have in my portfolio, i believe, are going to be sitting there for a pretty long time. if there is any consolation that i can give myself, it is that my boyfriend is losing more money over investment in noble and wilmar without doing his due analysis and homework.

i am however in yet another dilemma. both starhill glb and thaibev are at prices where i can take a smallish profit, starhill glb has better prices when the economy is doing better, thaibev has generally been a stable stock. to take profit or to ride the storm out and wait for the better times to come..

AK71 said...

Hi Raelynn,

Yes, I remember you mentioned your boyfriend before. He is an FA guy and was vested in F&N, correct?

As for whether you should divest and take profit or ride out the storm, I would ask what are your motivations for being vested in the counters you mentioned.

Just last evening, I met up by chance with a friend and we had dinner together. I mentioned to him that I invest for income and if there should be capital gain, it is a bonus. For him, however, he invests for capital gains and dividends are a bonus.

I hope this is useful to you. :)

Raelynn said...

Dear AK,

Indeed, he had reaped in some profits from being invested in F&N and StraitsAsia. But i suppose after that he just had the general gut feeling that economies were going to only be better, then he just bought those two. oh well.

that is excellent advice AK. i had bought thai beverage with the purpose of being the more "stable"/"low risk" component of the portfolio. after basic calculations, the profit is only slightly more than the dividends declared so i would most likely be holding on to it. starhill global.. hmm, this one is slightly trickier. i had bought it for the purpose of income investment.. in fact, most of the counters that i am vested in are for income, the only capital appreciation purpose is CMA, which ironically had fallen like lead. To take the profit of 12%, or to ride out the storm and continue with the 7% yield, that would be the main concern with this counter. my boyfriend was asking me to consider, do you think that the price of starhill glb will fall further? has the dividend of starhill glb been increasing?

AK71 said...

Hi Raelynn,

I think you have thought through your strategy quite well. It is just a matter of sticking to it or abandoning it. ;)

As for the future direction of Starhill Global REIT's unit price, I really can't say. Of course, with the current climate of uncertainty and some would say negativity, the chances of further downside seem higher. You have to decide for yourself. :)

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