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Before you write to AK

I spend a lot of time replying to emails from readers, even more time than I spend blogging. So, I treat these conversations as blog posts and share what I feel is worth sharing in my blog. In doing so, I am always careful not to reveal names or email addresses, for examples, so that privacy is not compromised. I believe that such sharing will benefit many and hurt no one. I hope readers who choose to write to me agree. :)

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.

Singapore Kindness Movement.

Monday, October 31, 2011

I always believe in being courteous. However, there are times when I just feel like bashing in some people's faces. These are people who do not appreciate courtesy and are totally inconsiderate.

This world would be a much nicer place to live in if everyone is more considerate and courteous towards one another. Is it so hard to show consideration and courtesy?

Do you use ‘please’ and ‘thank you’ often? What you say matters and how you do so – politely and graciously – also makes a difference.
- Singapore Kindness Movement.

Make Singapore a kinder, more courteous place.
Let us all do our part. Find out more at:

Thank you. :)

REITs and rights issues: Dilutive or not?

I was not the best Science student, that is for sure. I made the switch from Science to Arts at the advice of my school principal when I was in secondary school and that was probably the best advice during my school days in terms of my academic life.

I do, however, remember the scientific concept of "dilution". To me, it is quite simple. If I had half a glass of orange juice and I added half a glass of water to it, it would taste quite bad. Diluted and, in this case, half as concentrated.

However, if I had half a glass of orange juice and I added another half a glass of the same type of orange juice to it, would it taste any different? No, it would taste the same. Concentration stays the same. Not diluted.

There has been quite a bit of talk in cyberspace that rights issues by REITs are dilutive if we as unitholders do not participate in them. Some would even say that the REITs are taking back the income they distributed to unitholders before. Thinking of rights issues in such a manner is like suffering from cataracts. These people are not seeing things clearly.

If a REIT's distribution yield was 10% and after rights issue, it remained at 10%, would it "taste" less delicious? No, it would still be giving me the yield I had enjoyed before the rights issue. The rights issue would be simply providing me an option to increase my investment in the REIT for the same distribution yield, doubling future income in nominal value.

However, if I did not participate in the rights issue and chose to sell away the nil-paid rights instead, would the distribution yield for my remaining investment in the REIT be lower? Probably so. However, since we had sold the nil-paid rights, the cost of our original investment would be lowered and the distribution yield would, thus, be higher. Theoretically, therefore, we would not be worse off in terms of distribution yield if we chose not to subscribe to the rights issue.

Most arguments which say that unitholders would see dilution if they did not take part in rights issues are referring to how their shares of the enlarged capital base would shrink in percentage terms. This argument, apart from being academically appealing, holds no pragmatic significance for me.

Having said this, not all rights issues are distribution yield accretive. Each rights issue should be assessed based on the circumstances leading to it and its pro forma numbers. Equity fund raising as a concept is simple enough to understand. To have a simple blanket statement that unitholders not taking part in rights issues would see dilution is, however, too simplistic and ignores what is most important about investing in REITs: income.

Cache Logistics Trust: 3Q 2011.

Saturday, October 29, 2011

A DPU of 2.095c has been declared and this is an 8% increase year on year. Annualised at 8.38c, it would translate to a distribution yield of 8.38% at the last traded price of $1 per unit. Not bad. That would explain the strength of the unit price in the days running up to the announcement.

Occupancy: 100%.
Gearing: 30.4%.
Interest cover ratio: 8.3x.
Total assets: >$830m.
Financing cost reduced from 3.92% to 3.81%.

It would be a natural course for Cache Logistics Trust to eventually have total AUM of $1b. With gearing at 30.4%, it could borrow another $150m easily before hitting the 40% mark as it embarks on acquisitions to hit the $1b AUM mark.

The REIT might not have to do any equity fund raising at all. This would be good for unitholders since all acquisitions in such an instance would be distribution yield accretive, all else remaining equal.

A good set of numbers and I will look out for opportunities to accumulate more units of this REIT on pullbacks.

Technically, when a REIT goes XD, we usually see a pullback in its unit price. We have seen it with AIMS AMP Capital Industrial REIT, Sabana REIT, Cambridge Industrial Trust and First REIT recently.

I have identified the supports for Cache Logistics Trust where it could be more rewarding to enter long positions at. Now, I wait. Wait to receive income for my current investment. Wait for weakness to accumulate more.

See presentation slides: here.

Related post:
Cache Logistics Trust: Initiated long position at 91.5c.

Tea with AK71: My weaknesses (Part 2).

Not too long ago, I indulged in one of my weaknesses... on two occasions... at Andersen's of Denmark.

Visit 1: Fondue for one. I chose this because there were bits of fruits and being the rational me who is trying to lead a healthier lifestyle, it was a healthier choice. Wait a minute, a healthier choice in an ice cream outlet? Hmmm... Nah, I am over-analysing. Healthier, it is! ;p

Visit 2: Apple pie! An apple a day keeps the doctor away. I am sure a slice of apple pie would do the trick too, right? Why am I not saying anything about the ice cream? Oh, the two scoops of ice cream were just accompaniments and, honestly, I did not touch the big dollop of fresh cream you see on the extreme left. Healthier choice, remember? ;p

In a pretty crowded scene which Swensen's probably has an advantage as being the most entrenched player and Haagen Daz has the honour of being probably the most atas, Andersen's has been doing pretty good business if my observations are anything to go by.

Related post:
Tea with AK71: My weaknesses.

McDonald’s Monopoly has found its $80,000 cash winner.

Thursday, October 27, 2011

I guess I will try to win the Volkswagen Touran now. Actually, just winning a Macbook Air would make me really happy. I need Tanjong Rhu!

See all remaining prizes at http://sg.churpchurp.com/AK71SG/share/mcd-monopoly2011-3

Get your game labels at McDonald’s restaurants today! Double labels on weekends! Good luck!

CPL, CMA and NOL: Resistance levels to look out for.

We had a very nice rally today. The upward march on the STI was almost uninterupted all the way from the start of the session. In an earlier blog post on 17 October, I mentioned that there seems to be a bias for further upward movement and it has taken almost two weeks to materialise.

Now that a rally is underway, for investors who are already vested, do we ask if the rally could continue tomorrow? No. We should ask if the rally were to continue tomorrow, where are the resistance levels? We should be looking for exit prices.

For investors who are not vested and who are knocking themselves on the heads for being overly bearish, they want to know where are the supports so that they could consider buying on pull backs. However, given the strength of the rally in Europe right now, chances of a retest of supports could be rather slim. If I had missed the boat, so be it. That's my take.

For CapitaMalls Asia,  a long white candle tested the high of 17 Oct at $1.31. Overcoming this resistance level will see a cluster of resistance levels ahead: $1.33 as provided by the declining 100dMA followed by $1.36, a many times tested resistance level in early September.

In very bullish conditions, we could see the gap at $1.395 filled. Where should I place my sell order? As is my usual style, I will partially divest at each resistance level.

Capitaland could test resistance at $2.71 as a white candle was formed today on the back of very much higher volume.

If $2.71 were to be taken out convincingly, we could see the gap at $2.79 filled eventually. Before $2.71, we have the declining 100dMA to contend with. This MA approximates $2.68 in the next session.

NOL formed a nice white candle today on the back of relatively high volume. Immediate resistance is at $1.19, the high of 13 Oct. Given the momentum of the upward movement, chances of a continuation in the next session is high.

Overcoming $1.19 would see $1.24 and $1.27 as the next two resistance levels, the 123.6% and 138.2% Fibo lines respectively. $1.27 also approximates the position of the declining 100dMA.

With container shipping business very much in the doldrums, the 138.2% Fibo line could be a strong resistance, if tested at all. Remember that 38.2% is also a golden ratio.

Good luck.

Tea with AK71: Healthy and economical lunch.

What am I having for lunch today?

This is easy to prepare and to bring to work. Easy to wash up too.

This meal is high in fibre and full of natural goodness. Lower in glycaemic index than ground oats, I also prefer raw rolled oats to instant oats which are pre-cooked and dried.

Although instant oats are convenient, just add hot water and they are ready to eat, they are not as chewy, flavourful and nutritious. Anyone in the know would tell you the less processed, the better.

How do we prepare something like this? Remember this? Tea with AK71: A healthy low cost meal.

A healthy lunch that is also gentle on our wallets. I like it.

Mind Your Money: Budgeting.

Tuesday, October 25, 2011

I have the pleasure of watching "Mind Your Money" on XIN MSN this evening. The first episode is on budgeting. It is basically about managing personal cash flow.

If people were to ask me how I grew my money, I would say that I spend as little as possible and save and invest the rest. So, it all starts with budgeting.

I wrote a piece on wage slaves before which attracted quite a few comments. Obviously, people who spend as much as they make are not about to grow their money since there is nothing left to grow.

If you find that you have been working for a few years with reasonably good income but you are not saving much money, if any, this program could be for you. I think it is quite good for anyone who has never done any budgeting before.

Watch "Mind Your Money": http://video.xin.msn.com/watch/video/episode-1/1gqq74i6l?cpkey=6b6b1cb2-3c96-4fcc-9001-271abc9c19fa%7c%7c%7c%7c&src=v5:share:sharepermalink:&from=sharepermalink

Related posts:
1. Wage slaves should be fearful.
2. Money Management: Needs and wants.

Further credit tightening is almost a given.

Monday, October 24, 2011

I was talking to a friend whose family controls a public listed company in Singapore and he is very optimistic about Singapore, very confident that we will not suffer a recession. Although I reminded him that in the last global financial crisis, only China, India and Indonesia escaped a recession, he remains very optimistic. Is this optimism the norm?

Many think that the housing prices in Singapore are being driven up by foreigners. Numbers released not too long ago shows that foreigners accounted for some 16% of condos sold so far this year. The rest were sold to Singaporeans and PRs. If I remember correctly, PRs accounted for 5% or less of total HDB flats transactions. So, the vast majority of transactions in residential real estate here belong to Singaporeans. Logically, a great number of Singaporeans are doing well.

Indeed, if the recent astronomical COE prices are anything to go by, I would say that people and companies here are doing extremely well. Therefore, a pervasive sense of optimism and even invincibility is not difficult to understand.

Personally, I have a blog post not too long ago which questioned whether there would be a double dip recession or whether we would simply see very slow growth. Do I have the answer? If I were to say I do, would you believe me?

Do I know anything for sure? I know that if there should be a prolonged slowdown in the world economy, Singapore will not be spared. I know that if there should be a credit tightening in the world banking system, Singapore will not be spared. Singapore has a very open economy and to think that we will be spared any negative ramifications is simply naive.

In order to stay optimistic about Singapore's economy, we have to be optimistic about the world economy and we have to stay optimistic that there will not be any significant credit tightening in the world banking system. Do you think it is easy to be optimistic about these?

"In July, banks and insurers agreed to contribute to reducing Greece's debt via a 21-percent writedown on their holdings of Greek bonds... But recently there has been growing speculation that Athens needs to reduce the value of its debt by 50 percent -- or perhaps even more -- to make its finances sustainable." Read article here.

This speculation is likely going to be a reality.

"Diplomatic sources said Europe and the IMF would only proceed with a second planned Greek bailout of 109 billion euros if banks accepted losses of "at least 50 percent" on their debt holdings." Read article here.

This is going to be disastrous for European lenders holding Greek debt. How would this affect us in Asia?

In a discussion I had with my father a few weeks ago, I told him that we could see European lenders tightening on credit and recalling funds from Asia where they have a significant presence.  Although this could be a welcome development as Asia is sloshing in funds in search of higher returns, resulting in strong inflationary pressure, people and companies who have thus far done well by leveraging on cheap money could suffer.

I am not an economist but some form of credit tightening with the proposed Greek "debt haircut" of 50% is more likely to take place than not. I can only hope that the negative effects will not be as fearsome as some have made them out to be.

For any who recently borrowed to the max buying a dream private property or a dream car at record high prices here on our tiny island, I can only hope that the dreams will not become nightmares.

First REIT: Bumper distribution 3Q 2011.

Sunday, October 23, 2011

Ex-rights, with a pro forma DPU of 6.4c for 2011, I estimated First REIT's fair value to be at 80c per unit many moons ago. This was based on an expectation that 8% distribution yield was fair for the REIT. With the latest announcement of a DPU of 1.92c for 3Q 2011, is the estimated fair value of 80c outdated and probably too low?

I still hold the units I bought during the last bear market at 42c per unit as well as the rights units at 50c per unit. I also bought quite a number of nil-paid rights at 16c per unit and the final cost on those units is 66c per unit. In the recent market weakness, I bought more units at 73c, 74.5c and 76c. These, I partially divested as price tested resistance. On cost, the distribution yields on my current positions in the REIT are between 8.8% to 16%.

First REIT's unit price ended the last session at 79.5c. NAV/unit stands at 77.88c. So, the REIT is trading above NAV now. This could change in future even if the REIT's unit price stays at the current level as the management is in the early stages of talks with its sponsor for more acquisitions. With gearing level at 16.4%, the REIT has a very comfortable debt headroom. Another round of equity fund raising is, of course, possible but there is less necessity for one in the near future.

With news of higher DPU for 3Q 2011, could we see unit price testing and probably even breaking the psychological resistance at 80c in the new trading week? We could, of course.

Am I going to increase my investment in the REIT at current prices? I won't. Why?

The DPU of 1.92c for 3Q2011 includes 0.34c which is a special non-recurring distribution. This is from divestment gains of the REIT's Adam Road property. If we remove 0.34c, the DPU is 1.58c which is more in line with expectations. 0.34c is just a bonus.

So, although some want to increase their investment in the REIT tomorrow, I won't.

XD: 28 October.
Payable on 29 Nov.

Maintaining my current investment in the REIT, I am very pleased with the bumper distribution and look forward to its payment on 29 Nov.

Read announcement here.

Related post:
First REIT: XR and fair value.

Tea with AK71: Breakfast at Long John Silver's.

Saturday, October 22, 2011

I think breakfast at Long John Silver's compared to McDonald's offers better value for money.

Thick slices of toast with turkey bacon, eggs and cheese. Yummy! I am not crazy about the hash brown though.

Iced Milo! Slurp!

Price: $5.10 with tea or coffee. Add 50c to upgrade to an iced Milo. :)

From their website:

Caution: Waiting time can be quite long if they are busy. I would usually avoid if I see long queues or many tables with a number standee which means diners are waiting for their meals to be sent to them. In terms of efficiency, McDonald's still takes the top spot.

Sabana REIT: 3Q FY2011.

Wednesday, October 19, 2011

Sabana REIT together with AIMS AMP Capital Industrial REIT are my top investments at the moment. Together, they account for a lion's share of my passive income generated from investments in the Singapore stock market.

Sabana REIT has declared a DPU of 2.14c for 3Q FY2011. Based on today's closing price of 91c per unit, this represents a distribution yield of 9.4% based on an annualised DPU of 8.56c. Beats leaving money in a savings account and being paid an interest income of 0.05% per annum, doesn't it? The best one year fixed deposit I know of pays an interest income of only 1%.

Sabana REIT will also legally complete acquisitions of four properties in 4Q 2011. These acquisitions are DPU accretive since they are fully funded by debt. This is possible due to its very low pre-acquisition gearing level. So, expect DPU to bump up in the coming quarters. Good news for anyone investing for income, surely.

NAV per unit after distribution: $1.05
Interest cover ratio: 7.6x
Estimated gearing, post acquisitions: 35%

Sabana REIT's total AUM is set to cross $1b with the completion of the said acquisitions and the REIT is bound to deliver on its promises made during its IPO.

The counter will go XD on 25 October and the income distribution is payable to unitholders on 29 November.

Read related posts on Sabana REIT: here.

Old Chang Kee: Initiated a long position at 26c.

Tuesday, October 18, 2011

If we go out in the evenings or on weekends, we will see most of the restaurants packed and some of the more popular ones even have long queues. A friend of mine invested in Soup Restaurant which gives its shareholders a card that gives a 15% discount off the total bill for dining at their outlets.

Personally, I like going to Soup Restaurant too. However, I think of it as more upmarket, similar to Lao Beijing. In a recession, their businesses could take a hit. In this respect, I find Old Chang Kee to be a more attractive proposition.

Old Chang Kee's food kiosks are ubiquitous and always seem to be doing good business. Well, at least for those I see. I doubt very much that, in a recession, we will see people cutting back on their favourite curry puffs, sotong sticks or yam cakes in a big way.

Old Chang Kee's shares are thinly traded and it is rather risky to put in overnight buy orders.  I look at it from time to time but did not do so recently for a few days when it touched a low of 22.5c a share. Less than 200 lots changed hands in 4 sessions at under 26c a share.

When it was trading at 38c and higher just a few months ago, I found it too expensive for my taste (pardon the pun). Now, at 26c, I decided to take a nibble (sorry, another pun) as it is definitely more attractive.

Six months basic EPS improved from 1.03c to 1.28c, year on year. However, as the company issued warrants in August last year, on a fully diluted basis, EPS improved from 1.03c to 1.07c year on year. It is quite obvious to me that this is a growth company.

Warrant holders are also in the money since they paid only 5c per warrant which has an exercise price of 10c. A good investment they made in Old Chang Kee, no doubt.

Gross profit improved 11.6% while net profit improved 25.9%, year on year. A pro forma full year EPS of 2.14c would give a PE ratio of 12.15x for the company. The company's balance sheet has also strengthened with lower outstanding bank loan balances. Cash and cash equivalents also increased almost 50%, year on year. Strong cash flow from operations has been cited as being the main reason for this.

The company could continue to pay a dividend of 1.5c per share which means a dividend yield of 5.77% at 26c a share.

The only other blog post I had on Old Chang Kee was rather tongue in cheek, if you remember. Now that I am a shareholder of the company, eating a curry puff will be a somewhat more savoury experience. I hope so, anyway. ;)

Read the Half Year 2011 report here.

Related post:
Old Chang Kee: Filling not enough.

K-REIT: 17 for 20 rights issue.

K-REIT will be seeking approval at an EGM for a rights issue priced at 85c per rights unit. This is to partially fund the purchase of Ocean Financial Centre. Mr. Market does not like this whole deal and sold down the units to a low of 93c this morning.

What do I think? Well, the whole exercise is expected to be DPU accretive which is something investors for income want to see. DPU is expected to increase from 6.37c to 6.72c.

Using the low of 93c per unit this morning, the TERP is 93c x 20 + 85c x 17 /37 = 89.32c.  A pro forma DPU of 6.72c means a distribution yield of 7.52%.

Ocean Financial Centre is currently about 80% occupied. If the REIT manager is able to bump up the occupancy rate, we could see DPU and yield increase further. However, with the current softening office rentals which is likely to get worse, it could be an uphill battle. 

Commitment by the vendor to provide rental support for a period of five years.

Personally, I have a very small position in K-REIT from a long time ago. When I was deciding to invest between K-REIT and Suntec REIT more than two years ago, I chose Suntec REIT for its almost equal exposure to office and retail spaces. I have pared down my investment in Suntec REIT some time ago since, expecting its exposure to office space to be a drag on future performance. In short, I am not feeling sanguine about office space rentals and have not increased exposure to the corresponding REITs.

Having said this, given my very small position in K-REIT, I will most probably subscribe to the rights issue. If I were not invested in the first instance, I would not bother buying in now to gain exposure.

Some important numbers:
Gearing: Increases from 39.8% to 41.6%
All in cost of debt: Decreases from 2.48% to 2.23%
Interest cover ratio: 4.6x to 4.3x

See the slides presentation here.

Related post:
Office S-REITs VS Industrial S-REITs (2).

Hock Lian Seng: Insider buying.

Monday, October 17, 2011

There has been quite a bit of insider buying going on in Hock Lian Seng as its share price plunged in recent weeks to hit a new low of 23.5c. I know Hock Lian Seng to have a rather robust business although it is in a cyclical industry. So, I decided to take a look at its numbers.

Revenue for 1H 2011 reduced 32.3% compared to 1H 2010 due to the completion of  Marina Bay Station project. Other than this, the rest of its numbers still look good.

I like very much how its cash and short term deposits increased 11.7% from $149.7m to $167.156m. Order book stands at $272m as of 30 June 2011.

Hock Lian Seng is most probably capable of continuing a dividend payout of 1.5c per share when the time comes. At today's closing price of 24c per share, we are looking at a potential dividend yield of 6.25%.

Could its share price weaken further? It could and I would like to buy at a price closer to its NAV/share which is 17.8c. Having said this, at 24c per share, it is already a value proposition, I believe.

See 1H 2011 report here.

NOL: A messy ascending triangle?

Could this be an ascending triangle I see in NOL's chart?

Although ascending triangles are usually seen as a continuation pattern in an uptrend, a breakout could send NOL's share price higher to test resistance provided by the descending 100dMA which is currently at $1.32.

The 20dMA is set to form a golden cross with the 50dMA and is likely to provide immediate support at $1.115 in case of a pull back.

MACD shows that momentum is clearly positive now while the MFI shows higher lows, suggesting that demand is strengthening. The MFI which takes into account both share price and trading volume could test the 50% line for support if volume continues to dwindle while price stays at resistance.

As NOL's share price seems to be finding a floor if not bottoming, looking at the Stochastics provides us with insight as to why it seems to be having a hard time moving higher. This momentum oscillator is, after all, more accurate in situations where prices are moving sideways. The Stochastics has risen into overbought territory.

All in all, this TA seems to suggest that buying if the share price should pull back to support is a good idea because there seems to be a bias for an upward movement in the shorter term.

Tea with AK71: Visit a sky garden.

Saturday, October 15, 2011

In the last few years, sky gardens have become the rage or at least I think so. Many condominiums also have sky gardens these days and they are apparently good selling points.

The very enterprising Marina Bay Sands even charge a fee to enter their sky garden (aka SkyPark) which is probably the tallest one in Singapore at 200m above ground. Personally, I wouldn't bother paying $20 just to gain entrance.

If we want to experience a sky garden, try the one at the National Library in Bugis. I was there recently and I really like it. No entrance fee too.

I like this. Creepers growing up some pillars which reminds me of a jungle.

Pandan! This spot smells really nice and will probably stay roach free!

If you like nature but are asthmatic like me, you will like this place.

I used to have a pot of Aloe Vera at home, if you remember. ;)

Open seven days a week, this is one sky garden all of us can enjoy for free.
A view of the Hotel Inter-Continental and Illuma Shopping Mall from the garden.
Go visit and see for yourself. Have a good weekend. :)
P.S. All photos taken with my trusty Samsung mobile phone, which, by the way, is also free, or have I said this before? ;)

You might want to read these:

Cambridge Industrial Trust: Worth another look.

Friday, October 14, 2011

I was looking at Cambridge Industrial Trust's latest presentation slides. It could be worth another look as its income could bump up quite meaningfully in 2012 and 2013.

Latest numbers:
Gearing: 33.1%
(No refinancing due till 2014.)
NTA/unit: 61.7c
Interest cover ratio: 5.1x
DPU: 1.082c

What I find attractive:
1. Built-To-Suit Project at Tuas View Circuit. Completion by 3Q 2012.
2. Built-To-Suit Project at Seletar Aerospace Park. Completion by 3Q 2013.
3. AEI for 30 Toh Guan Road. Completion by 4Q 2012.
4. AEI for 88 International Road. Completion by 4Q 2013.
5. AEI for 4 & 6 Clementi Loop. Completion by 4Q 2012.
6. Proposed acquisition of 25 Pioneer Crescent.

With gearing level at 33.1%, the Trust has ample debt headroom to finance items 1 to 5 if the management should decide to take on more debt. This would mean greater distribution yield accretion.

Item 6 is to be financed with internal cash resources which means gearing level will not go up and the purchase will be distribution yield accretive, everything else remaining equal.

Buying now at 46c per unit will give a distribution yield of about 9.4%. Even with all the initiatives announced, I would like to see this yield going nearer to 10% before increasing my investment in the Trust.

See presentation slides here.

Capitaland, CapitaMalls Asia and NOL: Closing charts.

Thursday, October 13, 2011


Volume increased over the last session but the bulls were not strong enough to have the share price close above the 50dMA. Closing at $2.52 is where we find resistance provided by the declining 50dMA.

Although price did touch a high of $2.56, forming a white spinning top suggests indecision and is a sign of weakness.

The counter has, in the meantime, broken out of its immediate downtrend. Immediate support is provided by the flat 20dMA at $2.49.


CapitaMalls Asia's chart looks more promising. Another white candle was formed today on higher volume. $1.25 could be resistance turned support.

Further upward movement in price could see the gap at $1.33 filled. Immediate support is at $1.25.


Although a black candle was formed today on relatively higher volume, there is reason to be optimistic. Why?

The decline in price only travelled halfway down the white candle from the previous day. This suggests that the bears were lacking in conviction and there were enough buyers to keep the share price from falling too much.

A decline to immediate support at $1.125 could see more buying momentum.

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