STI declines again: CapitaMalls Asia, Golden Agriculture and Sabana REIT.

I caught a hint of panic in the air today. It is not abject terror but a slight panic.

STI declines 1.3% to 3,113.76 at closing, lowest since 31 March 2011. Shares on the measure trade at an average 14.3 times estimated earnings, compared with about 15.6 times at the end of 2010, according to data compiled by Bloomberg. The world’s biggest builder of oil exploration and production platforms declined as crude oil futures fell for a third day on concern demand will weaken as stockpiles rise in the U.S., the world’s biggest consumer of the commodity.
Wednesday, 04 May 2011

© 2011 - The Edge Singapore

Is this hint of panic a good opportunity to load up some stocks on the cheap? Well, I took the opportunity to load up on some:

CapitaMalls Asia: The last time I bought some shares in this company was at $1.80 per piece. Today, my overnight buy order at $1.70 was filled. I had another buy order at $1.68 which was not filled. Incidentally, $1.68 was the low of the day. What is next?

Looking at the daily chart, expecting a more bearish scenario could see the 150% Fibo line, which coincides with the lower limits of the MA envelope, providing stronger support at $1.64 next. We might even see the strongest of the 3 golden ratios tested on the downside. The 161.8% Fibo line approximates $1.62.

Golden Agriculture: Look at the daily chart and find the uptrend support originating from 28 October 2008. This is a very long term support and likely to be a very strong one.

It is approximating the lower limits of the MA envelope which is at 62.5c in the next session. With the support at 65c, which is where I bought more of the stock today, compromised on higher volume, we could see price weakening again in the next session. With the fundamentals strong and the longer term uptrend intact, I am buying more on weakness.

Sabana REIT: I bought more units of this REIT today at 93.5c/unit. For reasons unknown, the REIT was sold down heavily today.  Two transactions, each with more than 1 million units, sold down the REIT at 93.5c /unit. It is strange that the individuals or institutions responsible for these two transactions did not sell in the last three sessions when unit price touched a high of 95.5c but chose to sell at 2c lower today instead. This is especially puzzling as the units are still being transacted CD.

A DPU of 3.04c will go XD on 10 May, next Tuesday. Paying 93.5c/unit today is a good deal, I believe, representing a discount of 5.6% to NAV/unit and a relatively secure distribution yield of 9.4%. Until next Monday, I am accumulating on any further weakness.

Courage Marine: Profit warning.

Courage Marine's management issued a profit warning, expecting 1Q 2011 to turn in a loss: "The Board of Directors of the Company wishes to inform Shareholders that, despite efforts by the Group to secure deployment of its fleet, fleet utilisation was low during the first quarter of 2011. The Chinese New Year holidays in February resulted in a decrease in our fleet utilisation over the period. In addition, the Japanese quakes, tsunami and nuclear power plant disaster had temporarily halted the shipment of cargo to and from Japan, which resulted in a temporary over-supply of vessels within the Asian region. In addition, freight rates during the period remained generally low, with the BDI averaging around the 1,500 level during such period." Read announcement here.

I took the opportunity to divest most of my investment in the company at 22c/share when the price spiked on news of dual listing plans by the management. This was on 18 Jan 2011. I still retain a small investment in the company despite dismal BDI numbers as I want to see if dual listing would help reflect the value of the stock more accurately. Well, we win some and we lose some. Here is the latest BDI chart:

Technically, the counter had been range bound with resistance at 19.5c and support at 17c. Today, price broke support and touched 16.5c briefly before closing at 17c.

Gapping down today, we could see gap fill happening at 18c and that would be a good price to reduce exposure or to divest completely. Sell at resistance, that is what I would do. Panic selling would not do us any good.

Mapletree Industrial Trust: A simple analysis.

I looked at the results of Mapletree Industrial Trust (MIT) briefly when it was announced a few days ago. It didn't interest me much and so, I did not blog about it. Someone asked me a couple of days ago what I thought of it and if I would invest in the trust now.

I like industrial properties S-REITs because they probably offer a more stable source of passive income compared to office S-REITs or retail S-REITs. At least, in theory, that's how it is. I also like First REIT which is into healthcare properties. I usually choose to invest in REITs with relatively higher yields compared to their peers in the same sector. After all, investing for income, distribution yield has to be a very important consideration.

MIT's distribution yield, at the last done price of $1.08 per unit and an annualised DPU of 7.72c, is about 7.15%. I cannot say I am excited by the yield. Investing in AIMS AMP Capital Industrial REIT, Cache Logistics Trust or Sabana REIT would give a higher distribution yield.

At $1.08, MIT is also trading above its NAV/unit of 95c (a rich premium of 13.7%). MIT has a gearing level of 36.1% and an interest cover ratio of 6.6x. Occupancy rate is at 93.2%. So, we could possibly see distributable income increasing again in future if occupancy rate improves. This could bump up DPU by a few % but distribution yield would probably not surpass 7.8% even so (ceteris paribus).

Some numbers for easy comparison:

AIMS AMP Capital Industrial REIT (20.5c):
Yield: 9.76%.
NAV/unit: 27c (24% discount).
Gearing: 32%.
Interest cover ratio: 5.7x.

Cache Logistics Trust (95.5c):
Yield: 8.18%
NAV/unit: 88c (8.5% premium).
Gearing: 26.4%
Interest cover ratio: 9.5x.

Sabana REIT (94.5c):
Yield: 9.3%.
NAV/unit: 98c (3.6% discount).
Gearing: 24.9%
Interest cover ratio: 7.9x

For people who were lucky enough to invest in MIT during at its IPO at 93c per unit and are still holding on, they would be enjoying a distribution yield of 8.3% which is more attractive. What about investing in MIT now? The biggest attraction in investing in MIT now is probably its pedigree. Mapletree is, after all, an arm of Temasek Holdings. Ironclad? Probably.

What about Mapletree Logistics Trust (MLT) which has expanded through acquisitions? Back in July 2010, I mentioned that I was wary of this trust because of its high gearing of 43.6%. The management has since brought the gearing level down through equity fund raising. Its numbers are now somewhat stronger:

Mapletree Logistics Trust (90.5c):
Yield: 6.85%.
NAV/unit: 85c (6.5% premium).
Gearing: 39.4%.
Interest cover ratio: 6.7x

MLT's distribution yield is even lower compared to MIT's. Its gearing is also higher. MLT's occupancy rate is >98% and has less room to increase revenue by filling vacancies compared to MIT. If I have to choose between MLT and MIT, the latter has my vote.

See MIT presentation slides here.
See MLT presentation slides here.

Golden Agriculture: Accumulation mode.

Anyone who has been following my blog recently would know that I have been accumulating shares of Golden Agriculture. Today, I bought more shares in the company at 66.5c a share. Do I intend to buy more if price should weaken? Yes, I would.

I am confident that the demand for crude palm oil (CPO) will strengthen as an edible oil as well as for the production of bio-fuel. With increasing affluence in Asia, especially in India and China, consumption is on an upward trajectory. With crude oil once again north of US$100 a barrel, we could see a stronger return of bio-fuel as a less expensive alternative. The fundamentals support higher CPO prices in future.

CPO has retreated to RM3,270 a ton from a high of RM3,960 in February. This is a decline of more than 17%. There are signs that the steepest part of the correction is over as price has managed to stay above RM3,230 a ton since late March.

Golden Agriculture's fortunes are probably the most levered to the price of CPO amongst the CPO companies listed in Singapore. Its share price took a dive from a high of 83c on 4 Jan 2011 to just 61c on 23 Feb 2011 for a loss of 26.5%. Devastating for anyone who got in at or near the high? Quite. Could price continue to move south?

Well, technically, I get the impression that the counter is oversold. As the ADX is at 11 and the DIs approximate 20, there is no strong trend or a trend per se. Volume has reduced again today as price found support at 66c and this is where the uptrend support which originated on 23 Feb is found. Stochastics is still in oversold territory and could we see it forming a higher low?

I always say that TA is about probabilities and never certainties. So, in the event that price moved lower, where is the next support? If the trendline support originating from the low of 23 Feb were to break, I see the next support at 65c. This is also a more ideal entry price I identified some time back when I was thinking of re-initiating a long position in this stock. More ideal because it was the top of a very lengthy basing process which started in early January 2010 and ended in October of the same year.

By drawing a Fibo fan using the low of 23 Feb and the high of 11 Apr, 65c is also where we would find the 78.6% Fibo fan line next week. For good measure, I used the low of 25 May 2010 and connected it to the low of 23 Feb 2011 which gave me another trendline support. Guess what. This line actually approximates the 78.6% Fibo fan line mentioned earlier.

65c could be the next strong support. If price were to test 65c, I am buying more.

LMIR: 1Q 2011 results.

LMIR is one of my long time investments. My only grouse is with its losses which stem from foreign exchange forward contracts. In 1Q 2011, it lost $2.1m from these contracts. Some degree of hedging is necessary, I believe, but in an environment which has seen the Indonesian economy and its currency strengthening quarter after quarter, 100% hedging is unnecessary. Distributable income could have been almost 20% higher if not for these contracts.

DPU: 1.17c
Payment date: 31 May.

Gearing: 10%.
NAV/unit: 86c.

See presentation slides here.

Related post:
LMIR: 4Q FY2010 results.

What did AK71 buy today?

Sabana REIT at 94.5c.

In the morning, before the letters "CD" came on, there was some heavy selling but it was rather well absorbed and there was a long buy queue at 94c. This was after the price touched a high of 95.5c. After some initial hesitation, I decided to add to my long position and bought more units at 94.5c which happens to be where we find the 50dMA.

Technically, things continue to look up for this REIT's unit price. OBV shows strong accumulation. The MACD looks like it would be crossing into positive territory soon, heralding the return of positive momentum. MFI spiked upwards, suggesting strong demand. All in all, rather encouraging. Immediate resistance is at 96c which is where we find the 100dMA approximating.

See earlier blog post on Sabana REIT here.

Golden Agriculture at 67c.

I increased my long position in Golden Agriculture today at 67c as the 200dMA was retested as support. Volume today is the lowest in at least a week as price pulled back to 66.5c at the trendline support which originates from the low of 23 Feb 2011.

ADX is below 20 and the DIs are approximating 20 which suggest that there is no trend. Look at the Stochastics and we see an oversold situation. Indeed, price action has reached the lower Bollinger band.

Time for a rebound? Very likely. In such an event, it would be interesting to see if price could form a higher high and that would mean higher than 73.5c, the high of 11 April. This could turn out to be quite rewarding.

See earlier blog post on Golden Agriculture here.

Cambridge Industrial Trust: 1Q 2011 results.

I must say that Mr. Chris Calvert, CEO of Cambridge Industrial Trust, has not failed suspicions that he could underdeliver. He did so and did so stupendously.

DPU declared for 1Q 2011 is 1.001c (XD 5 May 2011). This is to be paid on 14 June 2011. Annualised DPU is provided by the management as 4.06c. This is much lower than the DPU of 4.84c, post rights, as suggested by the manager. I blogged about the tricky nature of the rights issue and DPU forecast in an earlier blog post. Read it here.

At today's closing price of 51c, the annualised DPU of 4.06c would mean a distribution yield of only 7.96%. This is greatly disappointing! Has Mr. Chris Calvert outdone himself? A rhetorical question.

Property manager's fees increased a whopping 46.4% while manager's management fees increased 8% year on year. All these while the gross revenue of the REIT increased only 3.8% year on year.

Regular readers know that I do not have a high opinion of Mr. Chris Calvert and I have blogged about how the Trust has failed to deliver in the past. An example? Please read blog post here. However, I decided to be friends with Cambridge Industrial Trust again (read blog post here) and it seems that I could have been too forgiving.

Given a chance for a small gain, I would probably divest my smallish investment in this Trust. Yes, the consolation is that my investment in this Trust is a very small one. Perhaps, a wary subconscious prevented me from foolishly investing too much in this Trust.

With gearing at 33.3%, an interest cover ratio of only 4.8x and a distribution yield of less than 8%, I am better off investing in Cache Logistics Trust, AIMS AMP Capital Industrial REIT and Sabana REIT. All of these have lower gearing, higher interest cover ratios and higher distribution yields. Cambridge Industrial Trust is a loser.

See manager's report here.
See presentation slides here.