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Sound Global: Would I buy now?

Saturday, July 7, 2012


Fundamentally, a top down approach suggests that the industry Sound Global is in will continue to do well as governments invest in solutions to water related problems. My past research and experience with the company when it was known as E-pure also gave me the confidence required to invest in the company again although my initial re-entry price of 59c was less than ideal.

In the subsequent market sell down, I bought more shares at 46.5c on 31 May 2012 which means that my long position is now in the black. I am looking to possibly locking in some gain as the charts seem to suggest that this could be a good idea.



In the last session, a black candle was formed on the back of higher volume, suggesting that the bulls had a hard time pushing the share price higher. Do I see signs of distribution? Well, the OBV is still rising which does not suggest that smart money is leaving as price moves higher. Accumulation is still going on.

However, the lower high on the MFI which measures demand suggests to me that buying momentum is slowing down. Then, looking at the MACD histogram (MACD-H) which is a measurement of the distance between the MACD and the signal line, we see lower highs too. The MACD-H usually precedes the MACD itself. So, a change in trend could be on the horizon.

Could Sound Global's share price move higher from here? It could but the technicals suggest that it could be a slow grind upwards if it should happen. Would I buy more then? Probably not as I feel that, technically, selling could be a more palatable proposition.

Capitaland: Leveling up.

"People’s Bank of China slashed its one-year deposit and lending rates by 25bps and 31bps respectively just a month after it cut interest rates by 25bps. Beijing also announced further easing of interest rates, with banks expected to lower lending rates by as much as 70% against benchmark rates." Further expectations are for the bank RRR (required reserve ratio) to be cut by another 50bps in 3Q 2012.  (Source: The EDGE)

All these measures would serve to improve liquidity, helping businesses and consumers gain easier access to cheaper loans. As Capitaland has a significant presence in China, improving liquidity in the country will only benefit its projects over there.

Capitaland's share price has been climbing steadily higher on the back of higher volumes. This has attracted the attention of bulls and bears alike. Yes, undoubtedly. Although bulls are enjoying the ride, at the first sign of weakness, bears would rush back in.

Volume is the fuel that drives rallies. With the high volume seen, we won't be wrong to expect price to possibly go higher. Now, how high can the share price go? No one can say for sure. Bummer!




However, what I can say is that price has touched a major resistance, a many times tested resistance. People who bought at this level during the period of 11 April 2012 to the first few days of May 2012 could be looking to break even. The desire to break even is why this resistance is likely to be a tougher one.

The bullish momentum has to be strong enough to break through the barrier decisively. Any hesitation by the bulls will bring back the bears. Even as the OBV suggests that accumulation is powering on, there is no sign that the counter is overbought on the MFI.

Managing to break the immediate resistance could possibly see the double top formed in February and March 2012 tested. This is at $3.15. Incidentally, the 150% Fibo line approximates this price level as well which adds to the expectation that this resistance could be a stronger one.

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Friday, July 6, 2012



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Cambridge Industrial Trust: 30 Teban Gardens.

Thursday, July 5, 2012

Cambridge Industrial Trust is looking at buying 30 Teban Gardens for S$41m.

"Cambridge Industrial said 30 Teban Gardens Crescent is a high quality asset, with prominent exposure to the Ayer Rajah Expressway. The acquisition will further reduce the reliance of the trust’s income stream on any single asset or tenant."

Eurosports Auto at 30 Teban Gardens distributes Lamborghinis.

What I am immediately interested in is how are they going to fund the purchase and how will it impact my income received from the REIT.

The REIT has a gearing level of some 35.9% as of March 2012. Not excessive but it is not low either.

The manager has said that the acquisition will be funded through a mixture of equity fund raising and debt. In what proportion and in what form is the equity fund raising going to take? I guess we will have to wait for more details.

If the acquisition goes through, the manager expects the net property income (NPI) of the trust to improve some 4.6%. If the acquisition is fully funded by debt, DPU could be impacted similarly but with equity fund raising involved, depending on how many new units are issued, DPU would probably not increase by as big a percentage. If a rights issue is involved, we would also have to see the asking price before we can calculate the distribution yield.

Cambridge Industrial Trust has improved on its DPU for four consecutive quarters and it seems like a relatively good investment for income. However, I am unable to forget Chris Calvert's spotted track record before this. So, this remains a smallish investment in my portfolio.

I have a nagging feeling that this acquisition is not a good idea. Although the acquisition would only go through on a condition that the vendor (seller) obtains a further 22 years lease from JTC, the initial lease term was for 10 years only (from 1 July 2007). This means that 5 years have lapsed. Even with a further 22 years of lease, it would mean a total of only 27 years is left to the lease and would expire in 2039.

Is the valuation overly optimistic and is the REIT overpaying?

Slides presentation 26 - 28 June 2012: Here.

See announcement on acquisition: Here.

Croesus Retail Trust.

Wednesday, July 4, 2012

"Croesus Retail Trust is planning a Singapore initial public offering of about $800 million (US$634.22 million), backed by mainly Japanese assets, IFR reported on Wednesday."


It is an interesting choice of name. Croesus was the wealthy King of Lydia (part of modern day Turkey) and in Greek culture, the name is synonymous with a wealthy man. Would the REIT live up to its name?

Although I find this REIT interesting, I am not too excited about it at least for now because I remember Starhill Gobal REIT's Japanese retail properties to be a drag on its performance. The lacklustre Japanese economy has caused its retail sector to decline year after year.

Unlike demand for housing which is rather inelastic (which is a reason for liking Saizen REIT), demand for retail spaces is very sensitive to a country's economic performance.

This was what Starhill Global REIT's management said in its 2011 Annual Report:


The Japanese retail environment remains challenging. The Manager is continuously optimising asset performance through active management of the leases.
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Let us wait for more details.

AIMS AMP Capital Industrial REIT: Making money.

Tuesday, July 3, 2012

The issue of how REITs must constantly raise funds in order to expand has been beaten to death and I have also blogged about it more than once. The debate can and probably will go on forever but, as far as I am concerned, it has little value and serves to distract us from what really matters.

If REITs are raising funds for activities that are yield accretive, I would readily support the exercise and would, in fact, try to subscribe for more than my entitlement of rights if the offer is very attractive. Bearing this in mind, I have been able to profit from rights issues. To me, as an investor, I want to make money and if I could profit from rights issues, I would.

To this end, one of the rights issues which I have made the most money out of was AIMS AMP Capital Industrial REIT's. The rights were priced at 15.5c per unit. I applied for many excess rights and received quite a large number of rights units in that exercise. Post consolidation, these rights units cost 77.5c per unit. At today's price of, say, $1.22 per unit, there is a capital gain of about 57.5%. From then till now, I have also enjoyed an annual distribution yield (on cost) of some 13% on these units.

Of course, there are some who would point out that the units I was holding on to, pre-rights issue, suffered some dilution and loss in value. The suggestion is that Mr. Market would recognise this and that it could be reflected in the unit price. Well, at today's price of $1.22 a unit, it would translate into a pre-consolidation price of 24.4c per unit. I don't remember ever paying as much as 24c a unit, pre-consolidation, for AIMS AMP Capital Industrial REIT. There is something to be said about a penchance for buying into REITs which are trading at a (large) discount to their NAVs, perhaps.

Why am I quite suddenly talking about AIMS AMP Capital Industrial REIT and rights issues?

OK, before you go clicking on SGX looking for announcements, no, they are not having a rights issue. Then why?

Well, some people say that I am always using First REIT as an example of how investing in REITs can be very rewarding. So, this is another example to the same effect, isn't it?

It is also a more powerful example since there were many who cursed George Wang et al. from the days when it was known as MI-REIT and in need of recapitalisation, declaring that the REIT would never amount to much after the rescue.

(Pause...)

29 Woodlands Industrial Park E1.


OK, if you have guessed that this is not the real reason behind this blog post, hurrah! You guessed correctly.

I try to be forward looking and care more about the future than I do about the past. Caring more about the past could become an obsession as I grow older though. I hope it would not happen although I am sure it is only a matter of time. I see enough examples of how it is happening to older people all the time.

The catalyst for this blog post is the annual report from AIMS AMP Capital Industrial REIT which I was flipping through over the weekend. Specifically, it has to do with the fact that quite a number of properties in the REIT's portfolio have re-development potential.

As we have seen in the current redevelopment of 20 Gul Way which is to be completed in two phases (phase 1 by November 2012 and phase 2 by December 2013), redevelopment is a very good way of delivering more value to unitholders.

The redevelopment of 20 Gul Way did not require any rights issue although there was a private placement to CWT Limited (and regular readers know that I would very much prefer rights issue but the private placement was rather small and a rights issue would have been rather costly.)

10 Soon Lee Road

Well, there are a few more properties in the REIT's portfolio which could be considered for re-development to take advantage of the maximum plot ratios allowed. Examples are:

10 Changi South Lane (Lease expiry: June 2056)
Current plot ratio: 1.60
Maximum plot ratio: 2.50

541 Yishun Industrial Park A (Lease expiry: June 2054)
Current plot ratio: 1.28
Maximum plot ratio: 2.50

2 Ang Mo Kio Street 65 (Lease expiry: March 2047)
Current plot ratio: 1.31
Maximum plot ratio: 2.50

103 Defu Lane 10 (Lease expiry: June 2043)
Current plot ratio: 1.20
Maximum plot ratio: 2.50

8 Senoko South Road (Lease expiry: October 2054)
Current plot ratio: 1.30
Maximum plot ratio: 2.50

10 Soon Lee Road (Lease expiry: March 2041)
Current plot ratio: 0.88
Maximum plot ratio: 2.50

With gearing level at 30% or so, I would not be surprised if a major rights issue is required if there should be plans to redevelop these sites. In fact, I expect it to take place. When will it take place? Ah, that one, I don't know.

If you think that I am quite excited with the prospect of another rights issue, you are right (pun unintended). I am pretty sure I am not the only one too.

Related posts:
1. REITs and rights issues: Dilutive or not?
2. REITs and rights issues: A Singaporean tale.
3. AIMS AMP Capital Industrial REIT: Accumulate on weakness.

My very first blog post on AIMS AMP Capital Industrial REIT in December 2009:
AIMS AMP Capital Industrial REIT (MI-REIT).

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Monday, July 2, 2012


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Sunday, July 1, 2012


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