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STI in retreat: Sound Global, Golden Agriculture, Keppel Corporation and REITs.

Tuesday, November 1, 2011

STI 2,789.35 - Down 66.42 pts.

Not a pretty sight, is it? Scream in panic? Run around in circles? Sell everything and jump off a cliff like lemmings? There is plenty of fear. What should I do? Stay calm and look out for opportunities. I have spent time looking at various counters and I will talk about a few here.

More than two years ago, I went in big on E-pure, the current Sound Global, believing that the water industry is the logical beneficiary from constant efforts by governments around the world to improve water quality for their people. China is still underinvested in this area and Sound Global is a natural beneficiary.


Sound Global's share price touched a low of 40.5c in the recent sell down. As I got in at 20c more than two years ago, I was wondering if the price could go lower. After all, we can't tell if a bottom has been formed until after the fact. Could we see a retest of 40.5c now that sentiments have soured? We could, of course.

However, seeing how volume was not very high as black candles were formed, the bears seem to be lacking in conviction. I will probably start buying in at 48.5c. Why 48.5c? 48.5c could be a significant near term support as that is also where we find the trendline support and the rising 20dMA.

I also subscribe to the idea that there will be increasing demand for food and oil as the middle class in Asia expands. Golden Agriculture is a likely beneficiary of this long term trend.


The counter's price weakness in the last two sessions was on the back of decreasing volumes. This is again a sign that the bears lack conviction. I would like to get back in at supports. I see immediate support at 62c. In very bearish conditions, we could see gap filling at 58c.

I also want to re-initiate a long position in Keppel Corporation. This is a company I held rather short term long positions in both in the Asian Financial Crisis in the late 90s as well as in the Subprime Crisis a couple of years back.


I would like to re-initiate a long position in the conglomerate, believing that it will continue to be a beneficiary of the global race for oil which is a theme I firmly believe in although there could be short term setbacks.

Further weakness could see a retest of $8.40, a natural candlestick support which broke on 23 Sep after being tested multiple times. I would buy in slowly as there are quite a few gaps which could be filled at lower prices if $8.40 should give way. That volume expanded as a long black candle was formed today does not inspire confidence.

I also have my eyes on a few REITs which are seeing weakening unit prices and rising distribution yields. Prices could weaken further if sentiments continue to sour. I will judiciously add to my long positions to benefit from the sell down. Panic? Not me.


Related posts:
1. Why do I not panic?
2. Sleep well at night with a plan.

28 comments:

FoodieFC said...

Same. I am closely following the reits. But somehow some reits seems to defy gravity despite the other stocks going down.

AK71 said...

Hi FoodieFC,

The conditions that caused a meltdown of S-REITs in the last crisis are not present this time round. Mr. Market knows this. ;)

S-REITs now have stronger balance sheets and the interest rate environment is likely to remain benign.

Staying positive on S-REITs.

Hwang said...

Having divested Suntec Reit last week, i have some funds to buy on weakness again!! Hope i can get more of ARA at the cheaper end, though the movement these two days suggest otherwise. Instead Suntec Reit suffers.

By the way, instead of Keppel, have you considered before STX OSV, another O&G firm? Gearing is rather high, but order book looks fine. Dividend is fine too at 6%, but doesn't look consistent. Hah.

How about PEC as an O&G maintenance contractor? I understand that PEC has a large cash pile, though dividend is low at 3.5%.

lara said...

ak,i'm lara. i like to buy soundglobal...and goldenagri.
i aldy read up on the reits. hmm..goodnite. :-)

Anonymous said...

E-pure, SoundGlobal...how familiar

I went in big too, during the time of dual listing, betting that it will rocket sky high. But the reality is that I'm now stuck at 0.79. :(

Cut loss? No way, too big a loss for me...
Average down? Maybe, but I've lost confidence in this counter...

Maybe I'll just be a "long term investor".

financialray said...

Yes, fear is coming back but I think the game has just begun.
I am getting ready my helmet and full battle order.
Need to stock up live rounds over next 3 mths and see how.
I am waiting for Italy to give me the cue.
The day Italy waves the white flag, we fire the tracer round and it is own time own target.
By then, banks will fall like dominoes and property prices crash around the world. Financial world war.

AK71 said...

Hi Hwang,

I still have a smallish investment in Suntec REIT. I could add if Suntec REIT's unit price should retreat to $1 to offer a distribution yield of about 10%. ;)

I would like to reinitiate a long position in ARA too. However, it is stuck at my last divestment price of $1.30. Let's see if it goes down to $1.22 in time to come.

As for Keppel Corp et al, I will stick to what I am familiar with. At least, I would have the confidence to hold on in bad times. Thanks for the suggestions though. ;)

AK71 said...

Hi Lara,

Take your time to read up. The stock market is not going to close down. It will always be there.

Jumping into the deep end of the pool could be dangerous if we don't know how to swim. :)

AK71 said...

Hi Anonymous,

79c is too rich a price to pay for Sound Global. I believe I was 100% divested by the time it hit 60c. I just watched in awe as price went on rising, kicking myself all the time. :(

I might become a shareholder again at the right price. Let's wait and see. :)

AK71 said...

Hi financialray,

Wow! You make it sound like WW III is coming! Haha.. And you know what? If Dr. Marc Faber is right, we could have a large scale war.

Continuing the war theme, we have to get a warchest ready in case bargains are thrown at our feet. :)

SnOOpy168 said...

What did Dr. Marc Faber say this time ?

AK71 said...

Hi SnOOpy168,

Dr. Marc Faber didn't say anything new. If you listen to him often enough, he has recurring themes. One of these is that eventually the leaders of the western economies will go to war to distract people from problems at home. It is a brave thing to say and he is the only one to say it. Will it materialise? Possibly.

financialray said...

May be skirmishes here and there but the financial world war will be real. No no we will not see countries invading each other as long as got policemen around (US) and united nations. Of course, small wars like Libya where policemen also support cannot be avoided.
This financial world war is basically where the banks and financial institutions in many countries collapsed. Follow by properties and businesses. The French and Germans know their banks will fall if Greece falls. So cannot let that happen, at least not till after the French goes for election next year. Then Sarkozy can say he has been helping to hold Europe together as his achievement, or at least he saved the French banks.
The Italian PM trying the same trick and perhaps also see how much haircut he can get. Maybe not 50% but he will ask for it. Then when booted out by his own country men, he will let Italy fall.
Greece looks like it is doing the same thing now but actually it is only a matter of time when it falls, even if not now, it will go down with Italy and Spain eventually.
World War unlikely, maybe Taiwan will reunify with CHina, at least when it comes to business.

AK71 said...

Hi financialray,

I don't have a working crystal ball and I cannot see what will happen. However, I can see the present and I know that Greece is technically insolvent. It doesn't matter how they label their current situation and what financial engineering the eurozone does.

Are we going to have a contagion? I hope not. Many people will suffer and quite badly too.

I don't want to be too bearish thinking that things will start collapsing around us and I don't want to be too bullish thinking that Europe will get their houses in order.

I will remain pragmatic, keeping an eye on my goals and acting accordingly to meet those goals. :)

INVS 2.0 said...

Hi AK71,

Not panick either. Waiting to buy back some REITs again at low prices. :)

Anonymous said...

I also looking to buy Sound Global. Will you post if you long Sound Global?

Jaime

AK71 said...

Hi INVS 2.0,

If my suspicion is correct, REITs will probably weather this downturn better than in the last recession. Their unit prices could weaken but we might not see a halving of values or more which happened back then.

Whatever the case, I will be buying on weakness. :)

AK71 said...

Hi Jaime,

I cannot promise this but chances are I will. ;)

SnOOpy168 said...

which on-weakness-only REITs you guys will be eyeing on ?

Anonymous said...

Did anyone notice UOB's low of $14.42 yesterday? How does this happen??


Clueless Punter

AK71 said...

Hi SnOOpy168,

I would like to have some exposure to Singapore shopping malls REITs. I would also like to increase my investment in First REIT and Cache Logistics Trust. :)

AK71 said...

Hi Clueless Punter,

There was an article in The Straits Times on this. You might want to get your hands on a copy of the papers. ;)

Anonymous said...

you should have sold Sound Global at $1...

Ah John said...

Hi AK, any comment for this: "‘We expect business park rents to fall from the current $3.60 psf per month to $3 psf per month by end-2012E and $2.50 psf per month by end-2013E. This implies a 30 per cent decline over the next two years, ie back to 2007-levels.’"

From http://sreit.reitdata.com/2011/11/07/reits-–-news/

Roma said...

I am also waiting for some weakness on Reit prices also I doubt they will go down a lot because everyone knows that they are at the moment the best defensive instrument. Who is going to sell?
From the indusrials I like only cache otherwise Preit( even the dividend is low but a you get first quality) and First
Otherwise retail I prefer FCT ( because suburban malls)
with starglobal I don't like that they have also office spaces and there I see some weakness coming

AK71 said...

Hi Anonymous,

Too many "should haves". Anyway, I did divest my shares in Epure, booking handsome gains although not at $1/share. ;)

I am not vested now and waiting for a chance to re-enter.

AK71 said...

Hi Ah John,

In a recessionary environment, expect deflationary pressure. Rental for REITs would be similarly affected. Should we worry?

We should worry about REITs which are seeing bulk of their tenants' leases up for renewal in 2012 and 2013. Do you see this happening for the REITs you are vested in? ;)

AK71 said...

Hi Roma,

Thanks for sharing with us your ideas on the S-REITs you are looking at. :)

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