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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!

Choppy, choppy, chop, chop.

Tuesday, August 2, 2011

Global stock markets weakened today after strengthening the session before on news that the debt ceiling in the USA would most likely be raised successfully. Why?

Fundamentally, raising the debt ceiling means that the USA would not default and they will be able to continue paying their bills. Sounds like a good thing. However, closer at hand are still many problems which are worrying Mr. Market.

1. US credit rating could still suffer a downgrade. This could make borrowings more expensive.

2. Manufacturing has weakened in global economies. This could make debt problems worse.

Read full article here.

3. With all eyes on China as the bastion of economic prowess, news that its manufacturing growth slowed in July tempered sentiments.

Read full article here.

In response to a reader who said that the USA is the strongest country in the world since the day he was born, I put forth the question as to whether it still is the strongest country in the world today.

It is clear to me that USA's strength is an illusion built on borrowed funds and borrowed time. In fact, Putin calls USA a parasite which is unable to live within its means.

"Putin was insistent Monday that the world should be seeking new reserve currencies for trade and savings." Read full article here.

What about the Chinese? They are the largest holder of US Treasuries worth some US$1.16 trillion (more than a third of its US$3.2 trillion reserves).

A declining US$ is most damaging for the Chinese and they are not impressed by efforts in the USA which it says "was hiding "risks and troubles" for the world economy" and that "its sovereign debt problems remain unresolved". Read full article here.

If anything, global stock markets are likely to continue seeing choppy action. It is important for us to remain calm and collected in the midst of this.

I am ready to add to my long positions if I see value. If there should be some crazy run up in price, I am ready to reduce my long positions.

Anything else? I think that's about it for retail investors like us.

Sheng Siong's IPO and the American debt ceiling.

Monday, August 1, 2011

I received two emails today from readers. The first asked me about Sheng Siong's IPO and the second commented on how the Americans have come to a compromise on raising the debt ceiling.

To the first reader, I said that it has been a long time since I took part in any IPO, believing that they do not offer good deals for investors most of the time. I rather wait and see if I could get the shares when they provide better value for money.

Many believe Sheng Siong's business to be recession proof and that is probably correct. However, the business might be recession proof but the share price could be less so.

The business could be quite robust but negative sentiments in the broader market could drive prices down all the same during hard times. Mr. Market is given to extreme emotions, after all. I would buy if the shares become undervalued.

To the second reader, I said that I would not be too sure about the Americans raising their debt ceiling successfully until President Obama signs on the dotted line. After all, remember how "rebels" within the Republican ranks were unhappy with the compromises made?

Now, how will the Democrats react to some concessions made by President Obama to the Republicans? Apparently, he gave in and agreed not to increase taxes on the rich.

Of course, I am playing the Devil's advocate here but, like I always say, never say never. We can only hope for the best.

Read article here.

Tea with AK71: Tartlets and a view of the city.

Sunday, July 31, 2011

Life is unpredictable. Sometimes, we get nice surprises and, sometimes, we get nasty ones. Today, I had a surprise which resulted in me being quite free of work. So, I suppose this is a nice surprise. However, I found myself wondering what to do today.

I did the laundry in the morning, had breakfast with a friend in town and came back home. After washing up, I checked my blog, replied to comments and emails. Hmm... What to do next on a restive Sunday?

I took a couple of photos with my trusty IXUS and here they are:

I like these tartlets from Arnotts's but they are pretty expensive. So, I hardly buy them. However, a budget store that I visit regularly at Redhill Market was selling these at $1.05 per packet (150 gm). Irresistible!

Three flavors available: Blueberry, Raspberry and Strawberry. Er.. you don't see the strawberry flavored ones in the photo because those tartlets already found their way into my stomach.

This photo was taken from my balcony. I like being near the city but not in the city, if you know what I mean.

It is a nice view of the city, isn't it? I will miss this view as I have sold my place and moved back to stay with my parents in the western part of Singapore.

Not going to think of investments and finance for the rest of the day. Maybe, I will take a nap. Have a good Sunday, everyone. :)

U.S. Senate scuttled emergency legislation!

Saturday, July 30, 2011

So many want to have a two party government in Singapore. Personally, I always say that if something is not broken, don't fix it. Seeing how the two parties in the US government are acting, I am thankful Singapore is not on the same boat.

With National Day just round the corner, a week after the 2 August deadline for the US to raise its debt ceiling, I am counting our blessings. We never know we have a good thing until we have lost it. Let's not lose it.

Latest update on the US situation:

In an unforgiving display of partisanship, the Republican-controlled House approved emergency legislation Friday night to avoid an unprecedented government default and Senate Democrats scuttled it less than two hours later in hopes of a better deal.

"We are almost out of time" for a compromise, warned President Barack Obama as U.S. financial markets trembled at the prospect of economic chaos next week. The Dow Jones average fell for a sixth straight session.
Lawmakers in both parties said they were determined to avoid a default, yet there was little evidence of progress -- or even significant negotiations -- on a compromise during a long day of intense political maneuvering...

...Administration officials say that without legislation in place by Tuesday, the Treasury will no longer be able to pay all its bills. The result could inflict significant damage on the economy, they add, causing interest rates to rise and financial markets to sink.
Executives from the country's biggest banks met with U.S. Treasury officials to discuss how debt auctions will be handled if Congress fails to raise the borrowing limit before Tuesday's deadline.
But Carney said the administration did not plan to provide the public with details Friday on how the government will prioritize payments...

Read full article here.

How will a default by the US affect Singapore?

Friday, July 29, 2011

I read an article in the newspapers today and it confirmed my fears that Singapore could once again suffer a severe downturn if the US government does not raise its debt ceiling come 2 August. Many would have to face extreme hardship once more.

Salient points in the article:

1. US banks account for some 15% of domestic lending in Singapore.

2. If US defaults, US banks will withdraw their funds from Singapore.

'Should the US default and a credit crunch happen, it would make the fall of Lehman look like a picnic,' Robert Prior-Wandesforde, Credit Suisse.

I remember what happened when Lehman Brothers collapsed. The stock markets went into tailspins. All the buyers disappeared. Real estate was similarly affected as prices of condominiums here in Singapore declined some 30% in some cases.

I remember at the time, Soleil at Sinaran was newly launched and many buyers actually forfeited their 5% deposits and did not exercise their options to purchase. It was that bad.

My Geology professor once said to us that economists have made a mess of the world and it would be impossible for me to comprehend the mess totally. Thus, it would suffice for me to know what actions to take to position myself for whatever eventuality.

If the debt ceiling should be raised, the party will continue. Inflation could get worse and the stock market could see a new high. What to do? Stay invested.

If the debt ceiling fails to be raised, the party will end. Credit will become hard to come by or at least be more expensive. This affects costs in all its forms and will affect all businesses and individuals. What to do? Divest.

We should take a position that will allow us to benefit if either scenario should come to pass. How do we do this? The simplicity of my answer might just disarm you: be 50% invested.

Good luck.

Read article in The Straits Times here.

Debt ceiling gridlock: Who will get paid?

Banks are slashing jobs!

Thursday, July 28, 2011

Banks are retrenching. Should we be worried? Is a recession round the corner? Your guess is as good as mine. Best to have our emergency funds ready just in case. If we are thinking of buying shares on the cheap, make sure we have a war chest ready as well. Oh, make sure it is not empty. ;)

HSBC will slash more than 10,000 jobs as part of the global banking giant's recently announced cost-cutting drive, a report said.

Broadcaster Sky News said senior executives at the bank "are close to finalising costs cuts that will result in thousands of jobs being axed across the bank's sprawling global empire."

The report on Wednesday said London-headquartered HSBC may chop more than 10,000 positions across its operations, citing unnamed sources.

A bank spokeswoman in Hong Kong on Thursday declined comment on the report.

Read full report here.

Swiss banking giant Credit Suisse said on Thursday that its second quarter net profit plunged 52 percent, adding it would cut about four percent of its workforce worldwide.

Net profit for the three months ending June fell to 768 million Swiss francs (US$957 million, 667 million euros) from 1.6 billion francs a year ago, amid "disappointing performance" by its investment bank unit.

Concerns over the European debt crisis and weakening global economic indicators led to weak client demand and a poor trading environment, said the group.

Read full report here.

Good luck to us all.

Cache Logistics Trust: 2Q 2011.

The decision to use funds from the partial divestment of Saizen REIT to invest in Cache Logistics Trust at the right prices a few months ago continues to be rewarding.

The management has declared a DPU of 2.086c for 2Q 2011 which is much higher than the DPU of 1.71c the same quarter last year in 2010. At the high of 99c/unit hit this morning, the REIT had an annualised distribution yield of 8.43%. Income distribution will go XD on 2 August and is payable on 29 August.

Current gearing level is 29.1% and this will increase to 30.2% upon completion of acquisition of a warehouse facility in Loyang belonging to Air Market Express. This acquisition is expected to contribute 0.05c in DPU in time.

I also like how its cost of borrowing has come down with its all in interest cost now at 3.92% compared to 4.37% in the last quarter. This contributes to a higher level of distributable income.

Some other numbers:
NAV/unit: 88c.
Interest cover ratio: 9.2x

Interest cover ratio came down from 9.5x in the last quarter. This suggests that interest expense in dollar terms has gone up faster than net property income (NPI). However, at 9.2x, it is still much healthier compared to AIMS AMP Capital Industrial REIT, Cambridge Industrial Trust or even Sabana REIT. So, I am not unduly worried. Just have to keep an eye on things, as always.

See announcement here.
See presentation slides here.

Related post:
Cache Logistics Trust: 1Q 2011.

Sabana REIT: 2Q FY2011.

I have been accumulating units in Sabana REIT even after it went XD the first time round, convinced that it has many high quality assets and that the income distribution is sustainable for the foreseeable future.

Last night, it released results for 2Q FY2011 and results were largely in line. DPU of 2.18c was declared, slightly less than my expectation of 2.2c. At the current unit price of 94.5c, it means a distribution yield of 9.23%.

Some numbers:
NAV/unit: 98c.
Gearing: 25.1%
Interest Cover Ratio: 7.6x

Nothing exciting but I will be keeping an eye on gearing and interest cover ratio. Gearing increased by 0.2% while interest cover ratio went down from 7.9x to 7.6x. There was also a higher drawdown of rental support for 9 Tai Seng Drive. In the near future, these are perhaps not really big concerns but if they persist, they could be.

Better quality assets aside, if the management is not doing a good job, they could destroy a good thing. Well, we will have to wait and see. Meanwhile, enjoy the dividend.

See presentation slides here.

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