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CapitaMalls Asia: TA and FA.

Wednesday, August 3, 2011

CapitaMalls Asia sank lower although it is still trading cum dividend. I added to my long position at $1.335/share today based on the following considerations:

1. Fundamentally, CMA has a NAV/share of $1.52. At $1.335, it is trading at a 12+% discount to NAV. CMA is likely to do better in time.

2. Technically, the MACD seems set to form a higher low as the counter's share price forms a lower low. A positive divergence is almost a given.


Flip side of the coin?

A. Fundamentally, CMA's increasing exposure in China is a double edged sword. China's efforts to temper inflationary pressures could lead to a slowing down in its economy which could affect CMA's business negatively as retailers feel less confident taking up more space in the malls.

B. Technically, after a gapping down and the formation of a long black candlestick on the back of very high volume, we could see price going lower in the next session. The selling pressure is very strong, no doubt about it.

In case we see a reversal in price action, we could expect gap cover at $1.395 to take place. A quick trade once again? Perhaps.

In case price declines further? Let me use Fibo lines to see where we might find stronger supports.


See how price hit the 123.6% Fibo line before closing a bit higher today? However, this is not a golden ratio and further weakness could see price testing $1.30 (138.2% Fibo line),  $1.285 (150% Fibo line) or $1.265 (161.8% Fibo line) for support.

Good luck!

12 comments:

Zelphon said...

Hi AK,

LOL... I also initiated a small position in CMA today at 1.335...

Reason:

1) Trading below NAV
2) It is pretty high growth
3) Way oversold
4) Technically ripe for rebound

AK71 said...

Hi Zelphon,

Good luck to both of us. :)

financialray said...

Hmmm,

CMA is a property play and looks very attractive at current price.
But property value will take some time to realise and CMA value may come in 1-2 years later.
Problem is a downturn may occur in 2012-13 depending on how US, CHina and Europe maneouvre their economies.
Never say never. All the hopes pinned on China may burst like a bubble. Crisis occurs when the unexpected happens.
Sorry, just a wet blanket today.

AK71 said...

Hi financialray,

While I believe that there is a growing bubble in the Chinese residential real estate market, I am more sanguine about its commercial real estate.

CMA is in the business of developing and managing malls as we know. With domestic consumption at just 35% of GDP, there is much room to grow.

Just to put things in perspective, domestic consumption forms 60% and 70% of Indonesia and USAs'GDP numbers, respectively.

There is also much fear about a hard landing in China. However, with the largest reserves in the world at US$3.2 trillion, I doubt that there will be a hard landing.

Never say never though. So, it is always good to be cautious.

Anyway, what I have said so far is all about value. Price could go lower, of course. ;)

Hubert wee said...

Dear me..well anyway I have managed to make more from shorting recently than longing..and there aren't any buy signals in CMA yet

AK71 said...

Hi Hubert,

Congratulations. :)

Hubert wee said...

Thanks, AK...was my T.P 1.50?

AK71 said...

Hi Hubert,

I remember you said something about buying at $1.50 but I said you might want to wait for $1.40 since you did not want to buy at above NAV.

At that time, CMA's NAV/unit was about $1.40. ;)

Anonymous said...

Hi AK,

I agree that at this price, CMA looks quite attractive, especially when you consider its growth trajectory. However, one thing I don't understand is why the PER is so high. When I compare with another property counter, UOL, I notice that the PER for CMA is almost 3 times that of UOL. Does this suggest that perhaps CMA may be overvalued from an earnings perspective?

Thanks for your thoughts.
Apachesmo

AK71 said...

Hi Apachesmo,

CMA is a developer and shopping mall manager. When it divests its malls to its REITs, it will book a profit. So, you can imagine how its earnings can be quite lumpy. There would come a time when the PER is much lower.

On the other hand, CPL develops and sells residential properties. As projects are launched, units are sold to individual buyers and you can imagine the earnings to be less lumpy. :)

CapitaMalls Trust, CMA's REIT in Singapore, already mentioned not too long ago that it would look at buying CMA's share of ION Orchard later this year or next year. Look out for it. ;)

Anonymous said...

Thanks for the insights. I blindly have 1 lot of CMA at it's IPO ages ago. Topped up some today @ 1.335 to lower the average price. Looks slightly less red on the portfolio then before, but still red. :0(

Let's hoped that I had not misplaced my faith & $ here and that it will appreciate.

Huat ah...

SnOOpy168

AK71 said...

Hi SnOOpy168,

Well, there is nothing wrong with hoping that things will get better. What is life without hope?

However, tempering our expectations is probably a good idea here. ;p

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