Golden Agriculture: Eyeing 96c per share.

Are you rubbing your eyes? Are you pinching yourself? 96c per share for Golden Agriculture? What's the price now? 67c per share. Wah! Quick, put in a buy order for Wednesday! Wait a minute, who came up with that target? OCBC Research. The link is provided here:

OCBC ups Golden Agri price target, keeps buy.OCBC said it raised its earnings forecast for Golden Agri by 22.7% for this year to reflect improving margins and after it reported strong quarterly results.
Monday, 16 May 2011

© 2011 - The Edge Singapore

I have been bullish on crude palm oil for a long time and, in recent weeks, I increased exposure to Golden Agriculture. The long term uptrend is intact and if anyone is thinking of going long here, the long term support provided by the rising 50wMA is currently at 65.5c. I believe that this is a relatively safe entry price if it should be tested again. If it were to break, the next support is provided by the rising 100wMA at 57.5c this week. That is some way to fall. So, one has to be mentally prepared.

The share price has been trapped between the 20wMA and the 50wMA for more than 4 weeks now. It could be due to the spectre of the sharply declining 200wMA. Could it force the price of this stock downwards? It could but it is also interesting to note that the rising 50w and 100w MAs would probably form golden crosses with the falling 200wMA towards the end of 3Q 2011 or early 4Q 2011. So, stronger performance in the next few months could be on the cards as per OCBC Research's opinion.

On the weekly chart, it is easier to see that a symmetrical triangle is forming. A symmetrical triangle is usually a sign of price consolidation. A break below the support on high volume could see the next support provided by the rising 100wMA tested. A break above the resistance on high volume would be good news for the bulls. However, expect resistance at 70.5c and 72c thereabouts to weigh in before that.

The outlook for crude palm oil is benign. Demand from India and the Middle East will likely pick up ahead of Ramadan, underpinning prices. China may also need to restock in the coming months. Source: Dow Jones Newswire, May 16, 2011 07:46 ET.

My strategy to accumulate on any weakness remains unchanged.

Related posts:
Golden Agriculture: Excellent results.
Golden Agriculture: A picture says a thousand words.
Golden Agriculture: Accumulation mode.

Saizen REIT: 3Q FY2011 results.

(Something is wrong with Blogger. This blog post appeared on 13 May 2011, not 15 May 2011.)

As expected, YK Shintoku's CMBS is to be fully repaid very soon by end of May 2011. The repayment is funded by the REIT's internal cash resources (including proceeds from the exercise of warrants) and proceeds from the divestment of properties. It is expected that the operational cashflow from YK Shintoku's properties would contribute towards distributable income from the month of June 2011, therefore. Annually, this could bump up distributable income by some 10%.

I do not know if this would provide a positive catalyst to the unit price of the REIT. It could well have been priced in. Any upside could be capped at 15.5c which was the highest the unit price went to when the counter recovered from the panic selling which took place in the wake of the disastrous earthquake and tsunami.

It was revealed in its 3Q FY2011 report that JPY200m (S$3m) will be spent to repair properties affected by the disasters. It was also revealed that these would be funded by the REIT's reserves and would not affect income distributions.

How much is the estimated DPU for 2H 2011 payable sometime in September 2011? Distributable income for 1H 2011 was JPY383,858,000. Distributable income for 3Q 2011 came in at JPY187,213,000. If we simply double it, we would have JPY374,426,000. This is slightly lower than for 1H 2011 due to the continuing divestment of properties. However, 4Q 2011 would probably see 1 month of income contribution from YK Shintoku's properties. This could make up the difference.

In 1H 2011, we had a DPU of 0.52c. If distributable income remains largely the same for 2H 2011, we could see a lower DPU. This is due to a larger number of units in issue after the exercise of almost 52,000,000 warrants, seeing an increase of some 4.6% (which suggests a potential DPU of 0.5c).  A complete exercise of all warrants could see a further 23% decrease in DPU (which suggests a potential DPU of 0.385c). This is assuming that the exchange rate between the JPY and S$ remains largely the same as in 1H 2011.

In 2012, however, we should see the full contribution from YK Shintoku's properties which would bump up the distributable income by some 10% in all instances. We must not forget also that due to the amortising nature of Saizen REIT's loans, the distributable income is some 33% lower than what it could be.

Over time, distributable income in JPY terms is most probably going to increase. Imagine if the REIT were allowed to pay only interest on its loans and not make any capital repayment. The distributable income would be higher by 50%! Now that the REIT is made to amortise its loans, it would have smaller interest repayments in future as the loans would reduce in size. One has to think long term in order to appreciate the attractiveness of the arrangement.

Saizen REIT remains an investment that would appeal to anyone looking to invest in freehold residential properties in Japan with a relatively attractive yield. In FY2012, assuming all warrants were to be exercised, expect a full year DPU of approximately 0.385c x 2 + 10% = 0.85c, which at the REIT's current unit price of 14.5c means a distribution yield of 5.84%. This is premised upon the JPY staying strong against the S$, however.

I still have a large investment in this REIT although much smaller than before. It would be interesting to see what is the DPU when 4Q 2011 results are announced in another three months from now. It would also be interesting to see how the market would react to the REIT's results. Good luck to fellow unitholders.

See Saizen REIT's quarterly announcement here.

AIMS AMP Capital Industrial REIT and Sabana REIT.

(Something is wrong with Blogger. This blog post appeared on 12 May 2011, not 15 May 2011.)
In life, good and bad things happen. We just have to hope that more good things than bad things happen. If good things happen, we have to know it when we see it and take advantage of them. If bad things happen, we must know to take remedial action and not sink deeper. Easy to say and hard to do? Probably.

I believe that a good thing is happening now with Sabana REIT. OK, it is a matter of perspective. For those who bought it at $1.05 a unit at IPO, it might not look good at all. However, look at it from a different angle and it is a chance to accumulate more on the cheap. Well, some might say cheap could get cheaper. Indeed, it could.

I indicated in an earlier blog post where I think the supports for Sabana REIT's unit price would be if 91c were to be compromised as immediate support. You might want to read the blog post here. Today, price went to a low of 90.5c.

Regular readers know that Saizen REIT was my single largest investment until the recent partial divestment as its unit price rebounded from a serious bout of panic selling. AIMS AMP Capital Industrial REIT is now my largest investment.

At today's price of 20.5c and an annualised DPU of 2c, AIMS AMP Capital Industrial REIT has a distribution yield of 9.756%. Comparatively, Sabana REIT has an annualised DPU of 8.81c and at today's closing price of 91c, the REIT has a distribution yield of 9.68%.

AIMS AMP Capital Industrial REIT has a gearing level of 32% and an interest cover ratio of 5.7x while Sabana REIT has a gearing level of 24.9% and an interest cover ratio of 7.9x.

I also like Sabana REIT for having 44% of its portfolio in high tech industrial buildings. This compares favourably against AIMS AMP Capital Industrial REIT's 17.7%.

I could very well do some re-allocation of funds through a partial divestment of my investment in AIMS AMP Capital Industrial REIT and increasing my investment in Sabana REIT if the latter's unit price should weaken further, everything else remaining equal.

See presentation slides for AIMS AMP Capital Industrial REIT here.

See presentation slides for Sabana REIT here.

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Sabana REIT: Still waiting for a 10% yield?

Sabana REIT has an annualised distribution yield of some 9.68% now, with DPU at 8.81c and unit price at 91c. In an earlier blog post, I mentioned that this is a better buy at the current price compared to AIMS AMP Capital Industrial REIT.

Sabana REIT has lower gearing, higher interest cover ratio and better quality assets overall; all these with a distribution yield that is comparable to AIMS AMP Capital Industrial REIT. Buying at 90.5c or 90c (if we were lucky enough in the last session) would close the difference in yield between the two REITs.

Now, many, including myself, would like to buy more of this REIT if it should give a 10% distribution yield which would imply a unit price of some 88c. Is this possible? An earlier blog post suggested that this would be a very strong support. Read it here.

88c a unit? A salivating proposition. Some would know that I bought more units in the last session at 90.5c. Why not wait for 88c? Well, TA shows where the possible supports and resistance would be, it does not say if they would be tested. I always hedge.

Continuing on TA, let us look at the daily chart for Sabana REIT. This chart has been adjusted to take into account the recent income distribution. It is interesting to note why 90c has proven to be a strong support in the last session. It approximates the low of 31 March 2011.

Next, look at the declining volume over the last two weeks as price declined from a high of 93.5c (pre-adjustment would be 95.5c). A low volume pull back. Are the bears losing steam? Indeed, in the last two sessions, we saw the formation of dragonfly dojis. These are bullish candlesticks but single stick patterns could be unreliable.

What about the MACD? It has completed a negative crossover in negative territory. A double negative! Do I see worry lines on your forehead? Well, I am inclined to believe that Sabana REIT has gone into a trading range. Its downtrend was broken earlier in April.

In sideways trading, I would look at the Stochastics. What do we see? It is in oversold territory. Could it get more oversold? It could, of course. However, TA is about probability and the probability of further downside is smaller now. That is for sure. For sure? Confirm? Double confirm. Yes, there are certain things we can still be sure about. Isn't that a relief? Hossan Leong would be happy.

90c would be a sweet price to get more units of Sabana REIT and I have put in my buy order for tomorrow. Good luck to fellow unitholders.

Related posts:
AIMS AMP Capital Industrial REIT and Sabana REIT.
Sabana REIT: Bought more at 91.5c.

NOL: Reporting a loss.

NOL reported that it has made a loss due to increasing fuel prices and too much new capacity entering the market. Marine bunker fuel averaged US$600.02 per metric ton in the first quarter in Singapore trading compared with US$469.19 a year earlier, according to data compiled by Bloomberg.

Will things improve for NOL?

“Too much new capacity has entered the market this year,” said Jee Heon Seok, an analyst at NH Investment & Securities Co. in Seoul. “It should get better as we go into the peak season in the third quarter and fewer new ships enter service.” Source: The Edge.

Oil prices have come off their highs and are now under US$100 a barrel. Supply worries have eased. The spike in oil prices was probably due to speculative activities rather than a real increase in demand. As circumstances surrounding the supply of crude oil turn benign once more, it would benefit NOL and other transport companies, everything else remaining equal.

Technically, NOL's chart is spotting a positive divergence. There is a higher low on the MACD as price spotted a lower low. Volume has also reduced significantly over the last five sessions as price hugged the 20dMA for support.

I believe that there could be a knee jerk reaction to the news and we could see price decline to cover the gap at $1.86. Any further decline in price and we want to see support at $1.80 holding up.  If it does hold up, it might be a good opportunity to buy some.

Now, we know that Mr. Market has a perverse streak. Could not the price move up instead? Yes, why not? And the reason would be that things are not as bad as analysts had feared. I'm just guessing, of course. Then, expect immediate resistance in a band between $1.92 and $1.93, after which, there is the declining 50dMA at $1.95.

NOL reports first loss in year on fuel, cargo rates. Average revenue per box rose 3% in the period, trailing a 28% jump in fuel prices, as the introduction of more ships on Asia-Europe routes sapped rates.
Friday, 13 May 2011

© 2011 - The Edge Singapore

Golden Agriculture: Excellent results.

Golden Agriculture reported a sterling set of results as expected. My faith in the company was not misplaced and my expectations were met. Year on year, revenue increased 134% while net profit increased 161%. Quarter on quarter, net profit increased 47%.

I have mentioned before that I like how the company is expanding its downstream operations to be closer to consumers. I also like how it is expanding its business in China to diversify its customer base away from Indonesia. Its Chinese operations saw a year on year increase in net profit of 220% while its Indonesian operations saw a year on year increase in net profit of 159%.

However, it is clear that its Indonesian business is still the more profitable one as it has a gross profit margin of 43%, up from 33% a year ago, while its Chinese business has a gross profit margin of only 7%, up from 6% a year ago. Could gross profit margin of its business in China be improved further? I am hopeful that it would.

Golden Agriculture's share price formed a white spinning top in the last session on the back of increased volume. This could be in response to the company's excellent results which were announced mid-day. It is easy to see that immediate although weak resistance is at 67.5c. Stronger resistance is at 68.5c and if this were taken out, we could see 70.5c tested next. 70.5c is also where we find the declining 100dMA and the upper Bollinger band. So, I expect this to be a strong resistance.

We want to see 70.5c taken out convincingly and we want to see the price form a higher high. The last high was at 73.5c. If a lower high should be formed, we could see a head and shoulders pattern. That could be ominous.

See presentation slides here.

Golden Agri profit doubles to record on surge in palm oil. Net income rose to US$230.7 billion ($287 billion) for the quarter ended March 31 from US$88.5 million a year earlier.
Friday, 13 May 2011

© 2011 - The Edge Singapore

Capitaland: More downside?

A low volume pullback would suggest that weak holders were selling. A high volume sell down is something else and investors should turn cautious. The volume which accompanied the formation of a long black candle today is the highest since 11 Feb 2011. The bearish tide is very strong.

My purchases made on 12 April at the prices of $3.38 and $3.36, above the 50dMA, are now in the red.  Will I buy more to average down my price? Capitaland's NAV/share is about $3.30. At today's closing price of $3.17, it is trading at a discount to NAV. Fundamentally, Capitaland is a strong company. However, it does not mean that its share price cannot go lower from here.

I have said this before and I will say it again as a reminder to myself: FA is about value and TA is about price.

The reverse head and shoulders did not give rise to a powerful upward surge in share price. The rising price was stopped by the declining 100dMA, trapped for many sessions before finally breaking the support provided by the 50dMA. Any trader worth his salt would have cut loss then. However, I am a bad trader and held on. As price declined, volume seemed to reduce which was heartening. Of course, today's explosive volume as price plunged destroyed that illusion.

All the MAs are declining and the 20dMA seems ready to form a dead cross with the 50dMA. -DI has been rising and, with it, the ADX. The downward movement in price seems to be gathering momentum. Further downside cannot be discounted and if price were to decline further, supports are at $3.11 and $3.08. I will wait for the dust to settle before deciding on my next move.

CapitaLand down on policy tightening worries
Wednesday, 11 May 2011

© 2011 - The Edge Singapore

Sabana REIT: Bought more at 91.5c.

91.5c. Does this price sound familiar? It was the price I bought into Cache Logistics Trust some weeks back. See blog post here.

Today, I bought more units of Sabana REIT at 91.5c. The REIT's unit price touched a low of 91c after going XD before closing at 91.5c, forming a black hammer in the process. Buying at 91.5c XD is similar to buying at 94.5c CD (which, incidentally, was the highest price I paid although most of my purchases were made between 92.5c to 93.5c). Similar? That's because the REIT's maiden DPU was 3.04c.

I must be feeling quite bullish about the REIT if I bought more at 91.5c today. Well, feelings of bullishness aside, I feel that this REIT is a rather safe passive income generator at this level. NAV/unit of 98c means that the REIT is now trading at a 6.6% discount to NAV. Gearing level is conservative at 24.9%. Interest cover ratio is 7.9x. Annualised DPU of about 8.81c would mean a distribution yield of 9.63% at 91.5c per unit.

Some people asked me if Sabana REIT is still a good investment even though it has gone XD. Well, look at the numbers I have laid out above. What do you think? As an investment for income, I cannot find any big negatives with the REIT at this point in time. Indeed, I expect its performance over the next two years to be rather stable, everything else remaining equal, and that's a primary objective when we are investing for income.

Technically, the price gapping down today and going beyond the lower Bollinger band is very bearish. Notice, however, that the volume is the lowest in the last five sessions. This suggests that there is little selling pressure even though the REIT is trading XD, well, not at the current price level anyway. 91.5c is also supported by the 161.8% Fibo line while 91c is immediate support.

Could price weaken further? Although I do not think it probable, yes, possibly. Placing the 100% Fibo line at today's low of 91c gives us an idea of where the next downside supports might be found. 90c, 89.5c, 89c and 88c. At 88c, the distribution yield would be about 10%.

If price were to weaken further, I would not bother guessing why people were selling down the REIT. I would simply march in and buy more.