LMIR: 1Q 2012 DPU 0.69c.

I remember saying that LMIR was too cheap to sell in December last year. It was trading at 36.5c a unit then.

I also remember saying that unitholders should be more patient after the rights issue because the REIT's DPU would bump up in time. The rather low DPU of 0.53c for 4Q 2011 would not be the norm. I estimated the norm to be a DPU of 0.815c per quarter or 3.26c per year. In fact, quarterly DPU could surprise on the upside in time.

LMIR announced a higher DPU for 1Q 2012 as expected but the quantum of 0.69c is lower than the 0.815c I estimated. Is the management taking too long to deliver the goods, post rights issue?

I have, of course, questioned the quality of the management a few times before and readers who have been following my blog from its inception would remember some scathing remarks I had made in the past.

Whatever the negativities, LMIR, with its very low gearing level of 9.2% and interest cover ratio of 13.3x, would take a fool of epic proportion to sink. Therefore, it remains, in my opinion a bullet proof REIT with plenty of room to grow.

What is worth highlighting is that any further growth is likely to be funded 100% by debt and, thus, DPU would grow, everything else remaining equal.

For anyone investing for income with a good dose of patience, investing in LMIR could be a very rewarding decision. So, is it a good time to buy into LMIR now?

Well, at last Friday's close of 42.5c, the annualised distribution yield, using 1Q 2012's DPU of 0.69c, is 6.49%. This is not attractive enough for me to add to my long position.

Assuming that the REIT would, over the course of 2012, deliver a DPU of 3.26c as per my estimates, the distribution yield would be 7.67% at the same unit price of 42.5c. This is definitely more attractive but it would mean investors must be more optimistic and place more confidence in the management to deliver. This is a judgement call.

Investors could consider adding if price should weaken to offer distribution yields upwards of 8% for a bigger margin of safety. Is this to be based on annualising 1Q 2012's DPU or the DPU I estimated, post rights? That's your call.

Related posts:
1. LMIR: Too cheap to sell.
2. LMIR: 4Q 2011 results.

See press release: here.

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Suntec REIT: Q1 2012 DPU 2.453c.

I still retain a small position in Suntec REIT at a cost price of about S$1.00 a unit which I purchased towards the tail end of the last financial crisis. This small position is free of cost, actually, since the gain from selling most of my investment in the REIT more than covers its cost. For me, this is what some would call a pillow stock. Sleep on it and get free money.

Gearing: 37.4%

Interest cover ratio: 4.2x

Credit rating: Baa2

NAV/unit: $1.962

DPU: 2.453c (XD 30 April. Payable on 29 May.)

Would I add to my long position or would I sell? I would not be doing either. The REIT's unit price at $1.285 is not expensive but neither is it cheap. So, I am keeping the status quo.

Although the office market remained subdued in the first quarter of 2012, the trust said its overall committed occupancy for the office portfolio enjoyed a strong occupancy of 99.4 per cent as at 31 March 2012.

Committed occupancy for the retail portfolio stood at 97.3 per cent as at 31 March 2012.

The trust is starting asset enhancement works at Suntec City, which is expected to complete by the second quarter of 2013.

Several established brands have signed up for retail space in the newly refurbished Suntec City Mall, including Swedish clothing giant H&M, which will take up 20,000 square feet.

Another major international fashion retailer has also committed approximately 22,000 sq ft with the mall.

In the coming year, the trust said it will focus on the smooth execution of its refurbishment works for Suntec City Mall as well as maintain a high occupancy level for the rest of the mall.

Source: CNA, 24 April 2012.

See slides presentation: here.

Sabana REIT: 1Q 2012 DPU 2.26c.

The REIT's yield accretive purchases of five properties last year has helped to push DPU to 2.26c for 1Q 2012. Annualised, this would give us a DPU of 9.04c. Based on the REIT's last closing price of 97.5 per unit, we are still looking at a distribution yield of more than 9%. 9.27% to be more exact.

With a NAV/unit of $1.04, the REIT is still trading at a discount to NAV even though its unit price has risen significantly in the last few months.

Gearing: 33.9%.

Interest cover ratio: 5.5x.

Occupancy: 96% to 98.4%.

WALE: 2.6 years

Weighted average remaining land lease: 39.9 years.

The REIT will go XD on 25 April and income will be distributed on 29 May.

I would like to see the managers working to increase occupancy and negotiate lease renewals with positive rental reversions this year. If successfully executed, we could see DPU improving marginally in the next few quarters.

For anyone interested in investing in an industrial S-REIT for regular income, Sabana REIT would appear to be an attractive proposition even at current prices.

Related post:
Sabana REIT: 4Q 2011 results.

See presentation slides: here.

First REIT: 1Q 2012 DPU 1.93c and a higher fair value?

First REIT has declared a DPU of 1.93c. The unit price of First REIT has been rising steadily. It is clear that Mr. Market is willing to pay a gradually higher price for the REIT's units which leads me to wonder if we could see First REIT's distribution yield compressing to 6% which would bring it closer to PLife REIT's distribution yield which is currently under 6%. This could see the REIT's unit price going to $1.06.

When calculating distribution yield, I would rather use a DPU of 1.6c per quarter instead of 1.93c. Why? When we look at the numbers, we would see that the net property income (NPI) has improved 6% while distributable income has improved some 22%. This is because First REIT is still paying out its gains from divesting its Adam Road property. If we remove this component, the DPU should hover at 1.6c or so.

In fact, year on year, if we look at the distributions from operation, it has actually declined a marginal 1.4%. Total comprehensive income, even after the removal of the one off gain from the divestment of its Adam Road property, saw a reduction of some 7%; this is due to higher income tax expense. So, one would not be wrong to wonder if its estimated post rights DPU of about 1.6c per quarter in future could be maintained, everything else remaining equal.

When the REIT acquired its first property in South Korea, freehold Sarang Hospital, many were optimistic. However, the acquistion increased the REIT's gross revenue by 6.3% while increasing its operating expenses by 51.1%. Expectations for a higher DPU due to the acquisition has yet to be met.

Some might say that the underperformance is to be expected since being the REIT's only facility in South Korea, there is no economies of scale per se. In fact, I wondered about this when the acquisition was announced last year.

See the relevant blog post: here (First REIT: Yield accretive purchase in South Korea).

Although S-REITs distribute a minimum of 90% of their income to unitholders unlike companies which pay dividends from their earnings, it might still be of interest to some to note that First REIT's earnings per unit has declined year on year from 2.13c to 1.51c. This takes into consideration its rights issue, of course.

With its NAV per unit at 79.99c, the REIT is now trading at a 15% premium to NAV.

What remains largely in the REIT's favour is its very low gearing level and if it were to gear up to 40% to make yield accretive purchases in locations where it could benefit from economies of scale, we could see its DPU bump up by more than 20%.

At current prices, I would hold and not add to my long position.

See financial statement: here.

Related post:
First REIT: To sell or not to sell?

SPH: Interim dividend of 7c per share.

SPH remains my largest investment in a blue chip. Over the years, it has been very good to me. Last year, I had hoped to buy more SPH shares if price should dip to $3.60 a piece but it never did.

Clementi Mall.

Singapore Press Holdings’ (SPH) 2QFY12 PATMI came in at S$83.9m, or 5 S-cents per share, which was 16% higher YoY. 1HFY12 PATMI now make up 46% of our full year forecast, falling short mainly due to lower investment income.

2QFY12 topline was S$298.5m - in-line with our expectations - and making up 50% of our full year forecast. An interim dividend of 7 S-cents was declared.

We continue to view SPH favorably as it continues to ramp up on its retail mall strategy - a stable counterweight to its print business going forward. Group investible funds currently stand at S$0.9bn, which points to sufficient capacity for further allocation into its retail strategy ahead.

Maintain BUY with a higher fair value estimate of S$4.05 (versus S$3.99 previously) mostly due to stronger assumptions for Clementi Mall.

Source: OCBC Research, 16 April 2012.

AIMS AMP Capital Industrial REIT: 4Q FY2012.

AIMS AMP Capital Industrial REIT has declared a DPU of 2.7c for 4Q FY2012. Total DPU for FY2012 is, therefore, 10.45c. At the last session's closing price of $1.185 a unit, this means a distribution yield of about 8.82%. The REIT goes XD on 2 May and will distribute income on 19 June.

Gearing: 30% (which would drop to 28.8% upon completion of sale of 31 Admiralty Road). 25 properties revalued upwards and this probably helped to lower the REIT's gearing.

NAV/unit: $1.406.

Interest cover ratio: 6.2x

Occupancy: 99.2%.

Weighted average land lease expiry: 41.7 years.

Weighted average lease expiry (WALE): 2.62 years.

Average security deposits: 8.1 months.

The REIT also saw positive rental reversions of 10 to 15% in FY2012.

With 38.9% of leases expiring in 2013, the management has either commenced negotiations to extend the leases with tenants and sub-tenants or completed re-leasing for the affected properties. It is also good to know that 88.2% of Master Leases expiring in 2013 are supported by underlying sub-leases.

The REIT is offering a Distribution Reinvestment Plan this time. For unitholders who would like to own more units at current prices without having to pay any brokerage fees, this is probably a good thing.

"By the implementation of the Distribution Reinvestment Plan, the Manager is providing Unitholders with an option to receive Distributions, either in the form of Units or cash or a combination of both, declared on the Units held by Unitholders. It enables Unitholders to acquire additional Units without having to incur transaction or other related costs.

"AIMSAMPIREIT will also benefit from Unitholders’ participation in the Distribution Reinvestment Plan as, to the extent that Unitholders elect to receive distributions in the form of Units, the cash is retained by AIMSAMPIREIT to fund its continuing growth and expansion. The retention of cash and the issue of Units in lieu of cash under the Distribution Reinvestment Plan will also enlarge AIMSAMPREIT’s capital base, strengthen its working capital reserves and improve the liquidity of Units."

Personally, I would not be taking part as I am investing for income. Also, I am not looking to increase my long position at current prices.

See presentation slides: here.

See announcement on Distribution Reinvestment Plan: here.

Related posts:
1. AIMS AMP Capital Industrial REIT: 3Q FY2012.
2. AIMS AMP Capital Industrial REIT: Accumulate on weakness.

FCOT: DPU up 16.8% in the last 18 months.

I did a piece on FCOT in October 2010 when I said that the REIT has probably turned the corner. At that time, it was trading at 15.5c a unit (which would have been 77.5c a unit, post consolidation). It closed at 87.5c in the last session.

DPU was 0.5549c then (which would have been 2.7745c, post consolidation). FCOT has declared a DPU of 3.2423c for 1H FY12 which means that DPU has increased some 16.8% from 18 months ago. It will go XD on 25 April and income distribution will take place on 30 May.

Annualised, we are looking at a distribution yield of 7.4% at a unit price of 87.5c.

Distributable income increased 7.7% YoY to S$15.9m as a result of lower interest expenses.

Average portfolio occupancy eased marginally to 96.1% from 97.6% seen in 1Q.

Weighted average lease to expiry as at 31 Mar was maintained at 3.4 years, with 17.0% of its leases due to expire in FY12.

NAV/unit: $1.33

Gearing: 36.1%

Interest cover ratio: 3.25x.

Related post:
FCOT: Turning around.

See OCBC Research: here.

See presentation slides: here.

Cache Logistics Trust: 1Q 2012 DPU 2.086c.

It is no secret that I like industrial S-REITs as passive income generators. I am also vested in Cache Logistics Trust although my long position here is quite a bit smaller compared to my investments in Sabana REIT and AIMS AMP Capital Industrial REIT.

DPU for the quarter came in at 2.086 S cents and represented a 6.9% YoY increase. 

Income distribution is payable 30th of May 2012.

CACHE’s portfolio properties remained 100% occupied.

The weighted average lease expiry (WALE) stood at 4.4 years.

Aggregate leverage improved from 29.6% as at 31 Dec 2011 to 27.7%. This gives the REIT an estimated S$110m of additional debt headroom for future investment opportunities.

Interest cover maintained at a strong 8.0x.

Related post:
Cache Logistics Trust: 4Q and 2011 results.

See OCBC Research, 19 April:
Cache Logistics Trust: Positive start to FY12.

See presentation slides: here.

AIMS AMP Capital Industrial REIT: Credit rating.

Life has been somewhat stressful for me lately. Lots of things happening. That explains the paucity of blog posts.

I am trying to get up to speed with things and also trying to catch up on my reading of business periodicals which I have neglected lately.

In today's The Business Times, I read that AIMS AMP Capital Industrial REIT has received an investment grade credit rating of BBB- from Standard & Poor's. This is good news indeed. This rating is the same as the one received by Sabana REIT last year in August.

This means that AIMS AMP Capital Industrial REIT would be able to access investment grade debt and capital markets from now on. It would also allow the REIT to gear up to a maximum of 60% if necessary.

Anyone who has been following my blog would know that I have been walking the talk when it comes to AIMS AMP Capital Industrial REIT. So, for anyone who has walked the walk with me although there has been no lack of naysayers, good on you. Congratulations!

Fair value for AIMS AMP Capital Industrial REIT, I believe, remains closer to S$1.25 per unit which would see its distribution yield compressing to about 8% per annum.

Related posts:
1. AIMS AMP Capital Industrial REIT: How much higher?
2. OCBC Research: Industrial REITs.

Fraud: Taking money from some adults is like taking candy from a baby.

If people promise us easy money, we should have to be very cautious. What is it about? How is it possible? Why is it so? Don't be a victim of fraud.

Just a few weeks ago, a client told me how he was given some physical gold for investing some money in a company. Apparently, the gold given to him was worth some 60% of the money he invested. In case the company went belly up, a new investor would only lose 40% of his capital.

The promised annual return was some 25% of the initial sum he invested, if I remember correctly. So, after holding for two years, an investor would be "safe" even if the company were to close down.

The person who got him involved in this "investment" was with him at the time and tried to get me to join them. After all, a consistent 25% annual return is a mind-boggling feat! Needless to say, I declined. Yup, I declined. It sounds too good to be true and probably is. This could be another OilPods or The Gold Label Pte. Ltd.

About OilPods: "More than 2,000 investors, mostly Singaporeans, were victims of this multi-million dollar Ponzi scheme, which involved purported investments in oil and gas. They were paid even before the oil was extracted, with existing investors receiving dividends from subscriptions of new investors." (The Business Times, 4 April 2012)

Another example of fraud has to do with land banking. In June 2010, the Monetary Authority of Singapore (MAS) issued a warning on Land Banking plots schemes warning they may be a scam with specific focus on companies offering land from the UK and Canada. (Source: Wikipedia)

A multi level marketing company, Sunshine Empire, was also in the news. The company had gathered up to S$189 million in funds through investment schemes, alleged to have never materialised and in fact a Ponzi scheme. Initial trial revealed that over S$115m were paid out as 'investment returns', while another S$40m were transferred to associates as 'interest free loans' and the remaining believed to have been expended or paid out to directors as fees. (Source: Wikipedia)

Unfortunately, there will always be people who would join the party. I dare say that a vast majority of the population is probably naive enough to believe in such "investments".

Money is hard to make and my heart always goes out to victims of fraud. Often, they are quite naive but hard working common people who just want a better return on their hard earned money.

I still remember how a female clerk in her 50s sent all her life savings of S$20,000, which, to her, was a princely sum, to an offshore investment firm after receiving a cold call promising her higher returns. She cried buckets later on.

Fraud: In criminal law, a fraud is an intentional deception made for personal gain or to damage another individual. (Source: Wikipedia)

Yes, it is a crime! 

Fraudsters should be put behind bars for life!

Tee International: Initiated long position at 22.5c.

Tee International is a mechanical and electrical engineering company and sometime real estate developer. As its engineering business accounts for more than 90% of its revenue, it seems like another logical beneficiary of the increase in expenditure on public building projects in the region.

As of 12 March 2012, the company has an order book of S$350.7m for its engineering segment alone. See: here.

Today, I bought some shares at 22.5c a piece as news that "Bertie Cheng, its chairman, and Phua Chian Kin, the group's CEO and managing director, are the subject of CAD investigations on the possible contravention of market rigging provisions in the Securities and Futures Act" (Source: CNA) for the period of July 2008 to March 2009 sent its share price tumbling from 25c to a low of 21.5c.

Do I think that 22.5c is cheap enough to long the stock? Fundamentally, I do not think it is cheap but, in nominal terms, it is cheaper than it has been in a long time. The last time the stock was traded at under 22.5c a share was in late 2010.

Technically, there is also some support at the price of 22.5c. Stronger support is to be found at 21.5c, however, and I could add to my position if it should be tested once more.

As I cannot see how investigations into alleged indiscretions which might have happened over a 9 months period in 2008 and 2009 could possibly derail the company's business in the current time frame, the sell off is probably a knee jerk reaction which presents an opportunity to buy in.

Fundamentally, Tee International's high gearing is something of a concern although it has come down substantially from the year before. A closer look reveals that its interest cover ratio is quite strong as its earnings could easily cover its cost of debt 8x. Expectations are for the company to continue paying down its borrowings over time. The current low interest rate environment is a boon for a highly leveraged company like this.

Half year EPS is at 1.7c. Annualising this gives us a PE ratio of 6.6x. NAV is at 17.9c per share. Assuming that the company maintains its dividend payout ratio of 30%, we could be looking at a dividend yield of 4.5% or so at a share price of 22.5c.

Arguably, however, investors are probably not interested in Tee International as an investment for income. They are probably more interested in its growth trajectory. Indeed, the analyst reports I have read so far expect the company to do much better in its second half and into 2013. If their expectations are correct, the numbers I have presented in the preceding paragraph would have underestimated the company's future performance by a wide margin.

Personally, I am interested in Tee International as a shorter term trade. Let's see if Mr. Market recovers from its initial panic and regains its composure. If the dragonfly doji formed today is anything to go by, it could indeed happen. Confirmation is required tomorrow.

I expect immediate support at 22.5c and immediate resistance at 24c. Gap closing at 25c could happen in time although the 100d MA could be a barrier as it acts as resistance at 24.5c.

On a lighter note, the fact that their largest shareholder who owns more than 50% of the company is someone called Phua C.K. puts a smile on my face.

See: 2Q and half year financial statement.

Analysis by SIAS Research: here.

TEE International rated 'increase exposure' by SIAS. Intrinsic value: 45c.
Wednesday, 18 April 2012

© 2012 - The Edge Singapore

Cache Logistics Trust: Retreating to supports.

Cache Logistics Trust is a favourite of many REIT investors. It has also received many glowing reports from analysts. I also have a small long position in the REIT.

Today, a reader left a comment in my blog asking me if it is a good time to invest in the REIT as it closed at $1 a unit in the last session. Fundamentally, the REIT is a well run entity with 8.4% distribution yield per annum. If one is happy with its numbers, why not? Technically, however, I see possibly further weakness and there could be stronger supports at 98.5c and 97c.

I thought I would share in this blog how I arrived at these numbers.  Quite simply, I looked at the longer term chart, the weekly chart. Daily charts show shorter term price gyrations while weekly charts show possible longer term directions. The MAs on the weekly chart for a trending counter are likely to be stronger supports and resistance, therefore.

Notice how the black candles of the last two weeks formed on the back of increasing volumes? Positive momentum is obviously weakening and further weakness in price would not be surprising.

On the daily chart, the MACD is on the verge of entering negative territory. A return of negative momentum could send unit price lower. The Stochastics is upturning in negative territory. This suggests an oversold situation but if this momentum oscillator should turn up successfully, there could be support and downside could be limited. 98.5c or 97c in the near term? Possibly.

What is interesting to note is how the OBV has been declining which suggests distribution activity has been going on for some time. For sure, it did not happen in a straight line but the trend is clear. This signal suggests that we should exercise caution when initiating long positions. Better to err on the side of caution it would seem.

Related post:
Cache Logistics Trust: 4Q and FY2011 results.