SoundGlobal: Rising 14.1% in a day!

I am having some difficulties uploading charts this evening. Don't know why. So, you would have to search out the chart for SoundGlobal if you want to look at it.

SoundGlobal's share price went up 7c (14.1%) today to close at 56.5c. The long white candle started the day at 50c which is where we find the 20dMA. It dipped below this MA and touched a low of 48.5c before rocketing to a high of 56.5c where it closed, breaching resistance provided by the 50d and 200d MAs in a single session.

Momentum oscillators like the MACD and MFI are rising strongly. OBV has formed a higher low which suggests that there is accumulation ongoing. The bulls seem to have returned to the stock.

I bought more shares of SoundGlobal on 22 May at 46.5c as price opened at 46c which was higher than the closing price of 45c in the preceding session which formed a long legged doji after touching a low of 44.5c.

A long legged doji is usually a sign that things could be reversing but the signal needs confirmation the following day. In this case, the signal was confirmed and, hence, my purchase. The purchase helped to average down my initial long position which was entered at 59c a share.

I would like to see volume expanding in the next session if price were to push any higher in order to have a more convincing case to be bullish. In the meantime, it is quite clear that the downtrend that started on 15 February 2012 when the share price hit a high of 68c has been broken. Things are looking up for SoundGlobal's share price, it would seem.

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Saizen REIT: Why did I buy and would I buy more?

There are so many ways to look at an event.  

Some might look at it positively and some might look at it negatively. 

Some might jump for joy and some might break out in cold sweat.

All of us have imperfect knowledge and what we think is reality very often is enough to push us into action. 

Of course, what we think is reality might not be reality and those who are eventually proven right might just have been lucky.






What is all this rambling leading to?

The recent weakness in Saizen REIT's unit price has been a source of concern or interest, depending on where we stand. 

Personally, I am not concerned. 

I am more interested. 

I also hope that I know Saizen REIT a bit better than most.

When I last blogged about Saizen REIT, its unit price had declined to 13.6c. 

That was already a 10% decline from its high of 15c a unit just a few weeks ago. 

In that blog post, I presented some numbers and asked that interested parties decide for themselves if 13.6c was a good enough entry price.

Well, I added to my long position yesterday at 12.8c to 13.1c a unit. 

Taking in the dilutive effect of the warrants, buying at these prices would give me distribution yields of 8.24% to 8.44%, all else remaining equal, which I believe to be rather attractive for freehold residential properties in Japan.

Some might even say that buying at these prices is similar to buying right after the triple disasters early last year when the REIT was sold down to 13c a unit. 

Is the REIT in a situation which is similar to last year's panic? 

Is a low of 12.7c per unit justified by worsening fundamentals? 

(This is really a rhetorical question since, often, there would be a mismatch between price and value.)





Well, the warrants outstanding, if fully exercised, would have a 12% dilutive effect on distribution yield, everything else remaining equal. 

However, the REIT is now without the problem it had with YK Shintoku back in early 2011. 

The REIT is currently in possession of a much stronger balance sheet and looks set to grow its DPU over time.

So, buying more of Saizen REIT now at 13c a unit has less uncertainty compared to buying at 13c in the aftermath of the triple disasters last year. 

Less uncertainty perhaps but what about value? 

Is buying at 13c now the same in value as buying at 13c back then?

The Palms Denenchofu, Tokyo. Acquired on 30 March 2012.

The NAV/unit now, taking into account the dilutive effect of the warrants would be 31c . 

This value, actually, has not changed since March 2011. 

Although it is good to know that we would still have the same value of asset backing each unit we purchase, we are really investing for income here and are not after discounted assets per se. 

What about its DPU?

With gearing, adjusted for warrants, reducing from 28.3% to 21%, the REIT has more resources to increase DPU through yield accretive purchases. 

Its DPU looks likely to be higher in future than not, all else remaining equal.

Would I buy more? 

I would continue to accumulate units of Saizen REIT next week if it should trade at 13c per unit or lower.




Related post:
Saizen REIT: To buy or not to buy.

Republished in NextInsight as:
Saizen REIT: Buy more of the REIT or no?

Saizen REIT: To buy or not to buy?

Regular readers would know my whole story with Saizen REIT. I remain invested in the REIT for various reasons which I believe are still valid.

This blog post is to answer a question which I have received from readers, friends and family alike. Is it a good time to buy more units of Saizen REIT?

This is a question which I would avoid giving a direct answer to. There is a great deal of subjectivity.

However, I would present some numbers here and you decide.

The annualised DPU is some 1.22c based on the last payout. At 13.6c a unit, the distribution yield is some 8.97%. Sounds good?

However, bearing in mind that its warrants will expire on the 1st of next month, I expect the warrants to be fully exercised within these few days. The exercise price is 9c. This would increase the units in issue by some 13%.

So, everything being equal, it would be reasonable to expect the DPU and distribution yield to reduce somewhat. Revised DPU is about 1.08c which would give us a distribution yield of 7.94% based on 13.6c a unit. Still sounds good?

I would also like to throw in the possibility of the JPY weakening further. The lowest the JPY has been against the S$, I remember, was S$12.50 to JPY1,000. That was a few years ago. It is currently about S$15.80 to JPY1,000. This is already weaker than late last year when it was more than S$16.00 to JPY1,000. Assuming that the JPY weakens another 20% from current levels, I expect the DPU to be 0.864c which would give us a distribution yield of 6.35%. Still good enough?

Of course, the weakening of the JPY is very unlikely to happen overnight in such a large magnitude. Neither is this a guaranteed scenario although it is highly probable with the Japanese government keen on weakening its currency.

What I have done so far is to assume the worst case scenario, barring more natural disasters and an attack by Godzilla. What I have not done yet is to take into consideration what the management might do to bump up DPU in JPY terms.

With the warrants exercised, the gearing of Saizen REIT would drop to the low 20+%. The REIT would probably continue looking for yield accretive purchases. Gearing is expected to hit the optimum 40% in such an instance. It is estimated that DPU could increase some 30% then. Promising, isn't it? Remember that this remains guesswork on our part, however.

I have mentioned this before but it pays to be reminded also that Saizen REIT's loans are amortising in nature. This means that its debt burden would reduce in time. In fact, I made the observation before that if the REIT's loans were not amortising in nature, its DPU would be some 50% higher than it is now.

Now, you decide if Saizen REIT is a buy for you at 13.6c a unit.

Related post:
Saizen REIT: Acquisitions to increase DPU.

See Saizen REIT's May 2012 presentation: here.

AIMS AMP Capital Industrial REIT: Scrip Dividend.

I have yet to participate in any distribution reinvestment plans. I like to buy more units or shares at prices I deem fair or undervalued. Now, this is probably a subjective exercise but I like the fact that I have control over the purchase prices.

When AIMS AMP Capital Industrial REIT announced that it would be offering a distribution reinvestment plan in April, I said that I would not be taking up the offer for two reasons:

1. I am investing for regular income and would like to have the quarterly distribution in cash.

2. I was not keen on increasing my exposure to the REIT at the prices then.

The REIT's unit price has taken a dive and the selling momentum could bring it closer to $1.00 a unit in time.

Those who accepted the distribution reinvestment plan would be getting new units issued at $1.1622 per unit which is closer to historical highs.

They would, of course, be saving on brokerage and other fees but I would rather buy more units from Mr. Market. Good luck to all of us.

Related post:
AIMS AMP Capital Industrial REIT: 4Q FY2012.

Charts: China Minzhong, Wilmar, Yongnam, Sabana REIT, AIMS AMP Capital Industrial REIT.

I have a friend who told me that he wants to buy more of China Minzhong at 50c. Why 50c? He can't quite say. Anyway, at 50c, I would have lost almost half of my initial investment in the company...

What does the chart say? Momentum is definitely negative and the MACD is still in decline. What is encouraging is the reducing volume over the last three sessions although it remains elevated. Today, a white spinning top was formed. Could this be a reversal signal?

Well. the OBV is still in decline which suggests distribution is ongoing even as price weakened. The MFI though seems to be forming a higher low.

The MFI takes into consideration both volume and price and is often seen as a measurement of demand momentum. So, it is telling us that there is some demand coming back as the stock was savagely sold down. A rebound could be on the horizon and we could see gap closing at 68.5c in such an instance.

Wilmar's technicals have nothing encouraging for the bulls apart for the formation of a black hammer today.

This reversal signal would need confirmation in the next session but with the other technicals very bearish, it would be a nice surprise if a reversal does happen.

Yongnam has been sold down. It touched 22c today, a level not seen since August last year.

I have looked through Yongnam's numbers and they actually still look quite good. However, the lower highs on the MFI are obvious and buying momentum is absent. So, price could drift lower which could see it testing the low of 21.5c hit last August.

Although there has been some distribution going on as suggested by a mildly declining OBV, most shareholders are just holding on. Look at the volume. Look at where the OBV was last August and where is it now. Although price has reached the low levels of last August, OBV is at a much higher level.

To me, the price weakness of recent sessions is nothing alarming. It is not a result of rampant selling. It is just that without buyers share price could continue to drift lower.

I know quite a few people are looking to possibly adding more units of Sabana REIT to their portfolios.

MACD has crossed into negative territory. MFI, a measure of demand hit 50% and turned down. The OBV suggests that distribution is ongoing. The very high volume today formed a black hammer. The high volume suggests a heightened state of activity and the black hammer suggests that bears had the upperhand. Further weakness could see supports at 93c (100dMA) and possibly 90.5c (200dMA) tested.

AIMS AMP Capital Industrial REIT's chart is similar to Sabana REIT's but uglier.

The MACD has plunged headlong into negative territory while the MFI went into oversold territory. Very bearish. The OBV suggests that strong distribution activity is ongoing. Indeed, look at the trading volume spiking today. Immediate support is at $1.08 and if that goes, we could see $1.035 tested.

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Old Chang Kee: Holey curry puff.

Asked my colleague to help me buy a curry puff from Old Chang Kee earlier as I didn't want to leave the office. Weather is too warm!

No, I didn't take a bite before I took these photos. You can tell that the exposed egg white and potato chunks are rather burnt. This is a holey curry puff...

This is proof that every curry puff is hand made and each one is different. ;-p

Related posts:
1. Old Chang Kee: Filling not enough.
2. Old Chang Kee: Initiated a long position at 26c.

Wilmar: Settling dust?

Bollinger bands are very popular in TA. Upper band acts as resistance and lower band acts as support. Look at Wilmar's daily chart, we see that price has pushed past the lower band. This gives us a very bearish picture. Support is weak. It also tells us that the counter is deeply oversold but remember that in very bearish conditions, oversold can stay oversold. It really doesn't say anything else.

Conventional TA tells us that we should buy when price breaks the lower band. This is to take advantage of oversold conditions. The belief is that, eventually, price would return to the lower band and then the middle band. The operative word here is "eventually". When exactly? Your guess is as good as mine, is it not?

Anyone who bought Wilmar's shares three sessions ago as it closed below the lower band at $4.70 would be licking serious wounds as the counter closed at $4.14 in the last session. Selling pressure has been enormous as share price went much lower.

The Lord Buddha said that nothing is permanent. Similarly, buying or selling pressure would come to an end one day. As our resources are limited, we want to buy when the selling pressure has dissipated.

Volume would be a good indicator if the sellers are done. In the last session, although Wilmar's share price closed lower, volume was less than half of the preceding session's which saw a huge gap down in price. A black spinning top was also formed and spinning tops, whatever the color, are usually signs of indecision on Mr. Market's part. Indecision in a downtrend? Doesn't that sound like good news for long holders? However, we should remember that one stick patterns are not very reliable. So, I would take this with a pinch of salt.

If price continues to decline with smaller magnitudes as volume reduces further, it would be a sign that selling pressure is dissipating and that the counter's share price could be looking for a floor, if not the bottom. This is when I would add to my long position. Bear in mind that it does not mean that price has bottomed as we can only call a bottom once it has been formed. Yes, only hindsight can call a bottom and hindsight, apart from being academically attractive, isn't terribly useful.

Dust is very much still in the air here and although it might not be in the same league as Long Men Ke Zhan's sandstorms, visibility is still not good enough for me. I am staying indoors for now.



Related post:
Wilmar: Mr. Market reacts to weaker earnings.

Saizen REIT: Acquisitions to increase DPU.

To me, there are only a few important points to note in the REIT's latest presentation:

1. Management is on an acquisition path as this is probably the only way to increase DPU as it seems difficult to bump up occupancy of existing portfolio. Occupancy: 91.6%.

2. Potential dilution of DPU to the tune of 12% as warrants are exercised (if funds thus obtained are not put to productive use).

3. NAV per unit (adjusted for warrants): 29c

4. Gearing (adjusted for warrants): 21%

5. Interest cover ratio: 5.2x

Assuming that the management is able to put funds from the exercising of warrants to good use and push gearing to 35%, we could see DPU improve some 30+% from current levels (in JPY terms) based on the management's guidance.

Remember that all the numbers here are based on the current exchange rate between the JPY and S$. As I believe that Singapore would continue to lean towards a gradual appreciation of the S$ while Japan favours a weakening of the JPY, future DPU could be negatively affected in S$ terms. So, unless valuation becomes very compelling, I am unlikely to add to my remaining long position in the REIT.

See Saizen REIT's 3Q presentation: here.

Related post:
Saizen REIT: 1H FY2012 DPU  of 0.61c.

NOL: Bleeding badly.

On 2 February, I cut losses on NOL as its share price rebounded believing that "shipping industry will face a chronic situation of oversupply and weakening demand this year and possibly the next."

Blow-out 1Q12 Net loss. Neptune Orient Lines (NOL) reported a 1Q2012 Net Loss of USD 253.6 mil, blowing away our already pessimistic FY2012 (read: full year) net loss estimates of USD 160 mil, not to mention consensus estimates of a FY2012 USD 31 mil loss. We maintain our SELL call on NOL and reduce our Target Price further to SGD 0.85 based on 0.8x forward P/B. The bleak outlook in the shipping industry, coupled with global economic uncertainties will likely push a firm recovery for NOL to 2014. (Source: Kim Eng Research)

Neptune Orient Lines (NOL) reported a net loss of US$254m in 1Q12. Logistic revenue grew 7% YoY to US$394m but was unable to offset the 4% fall in Liner revenue to US$2.0b. Group revenue slipped 3% YoY to US$2.4b. Liner revenue shrank despite a volume gain of 4% YoY because average revenue per 40-foot unit (FEU) came in at 7% lower. Management said NOL’s Efficiency Leadership Programme is on track to achieve US$500m of cost savings in 2012. Freight rates have so far in 2Q12 averaged 33% higher QoQ and current rates should see NOL return to profitability in 2Q12. And with NOL expected to turn profitable, we maintain our fair value estimate of S$1.38/share and BUY rating on NOL. (OCBC Research)

Who do you believe?

Related post:
NOL: Cutting losses on a strong rebound.

Wilmar: Mr. Market reacts to weaker earnings.

Wilmar's net profit for 1Q 2012 tumbled 34%, year on year. Mr. Market is showing his displeasure in the usual way.

Let us draw some Fibo lines. I am using the high of 15 February at $6.05 and the low of 9 April at $4.76. I am doing this in my office and cannot post the chart here. So, you would have to do it yourself if you want to see the chart.

It is interesting how price gapped down massively at the start of the trading session just now and hit the 138.2% Fibo line and bounced up. At this moment, we have a black hammer that fills the area between the 123.6% Fibo line ($4.46) and the 138.2% Fibo line ($4.26). Could we see price going to $4.11 which is where the 150% Fibo line approximates?

The very high volume up till now is ominous and if this continues throughout the day without price breaking resistance provided by the 123.6% Fibo line, it could herald further weakness to come. Momentum remains negative and the bearish crossover of the MACD with the signal line suggests that things could get worse. The OBV is in decline and it looks like distribution is ongoing.

Fundamentally, Wilmar's management has suggested that 1H 2012 is likely to be challenging. However, the longer term prospects for the company should remain positive as a growing middle class in emerging economies demand better nutrition. In fact, revenue improved 10% year on year which suggests that demand is robust. So, I will want to add to my long position when the dust settles.

Why not buy now? With price action wedged between 123.6% and 138.2% Fibo lines, anyone buying now would want to buy closer to the 138.2% line which is currently acting as support. Would it hold up or would we see the next golden ratio at 150% tested for support?

In any technical analysis book, we would find that a hammer either black or white is considered a bullish reversal signal. However, one stick patterns are not terribly reliable. Also, the trading session has only begun. How would things look at the end of the day?

I still like Wilmar's businesses and its large regional footprint. Its weakening share price presents a chance to accumulate which would allow me to benefit from the company's possibly stronger performance in future. I will keep an eye on things in the meantime.

See: 1Q 2012 Results Briefing.