Saizen REIT, First REIT, Golden Agriculture and Genting SP.

Markets in Asia seemed to have taken the lead from the dismal performance of Wall Street and the STI was no exception as it retreated 1.3%.

STI drops 1.3% to 3,252 at closing
Friday, 12 November 2010

© 2010 - The Edge Singapore

So, is this the beginning of the end? I actually find it re-assuring that such a question was making its rounds amongst local investors. It shows that the memory of the last crash is still fresh in the minds of many. Many are actually holding cash and waiting for the next big crash before moving in to cherry pick beaten down stocks.

The market could be perverse and the more we expect something to happen, the more unlikely it becomes. So, people waiting by the sides with chestfuls of cash could be disappointed.

Indeed, there is massive amount of liquidity in the market if the amazing over-subscriptions of GLP and MIT were anything to go by. Money is going where it is treated best. It is not going to be treated best in US Treasuries, for sure. The investments to be in are Asian assets. Asian countries with strong economies and currencies are the ideal investment destinations.

So, unless we have evidence to the contrary, I would say: Do not fear the selldown!  What are we to do then?  Invest in Asian equities (and inflation is here to stay)!

Personally, my portfolio which is primarily investing for income hardly budged in today's selldown. No roller coaster ride for my weak heart. Just dividend collection on a regular basis for me.

With regards to Saizen REIT, a reader sent me an email asking: "Was it your article in your blog that attracts sudden interest in this stock?  The volume is more than ordinary. I wonder." I doubt that my blog has such influence.  Anyway, there were some sessions in the past in which volume was much higher but the interesting thing about today was the number of trades with large buy ups at 16c. There was a total of 14 transactions with a total of 5,419 lots changing hands, of which 12 transactions were at 16c and 5,204 lots were bought up at 16c. 2 transactions were for 1,000 lots each and 1 transaction was for 2,000 lots. Has Saizen REIT caught the attention of some heavy weight investors? Your guess is as good as mine.
See my last blog post on Saizen REIT here.

I have been waiting the whole day for someone to sell me some First REIT units at 95c but to no avail. Some people are puzzled why am I so interested in getting some at 95c when I am already vested at 40+c and 70+c. Well, with the proposed acquisitions and rights issue, buying more even at 96c could be quite rewarding. With an average price of 70c, post rights, if we were able to buy at 95c now, a yield of 9.1% is not impossible with an estimated full year DPU of 6.4c in 2011. As the XR date is 1 Dec which is almost 3 weeks away, I will continue to wait patiently at 95c. Wish me luck.
Read announcement from First REIT here.
Read my last blog post on First REIT here.

Golden Agriculture suffered a downgrade by OCBC and broke its immediate support at 75c, closing at 73c. Just yesterday, I mentioned that "Although Golden Agriculture reported commendable results today with a 41% year on year increase in net profit to US$99 million (S$127 million) for the third quarter ending 30 Sep (3Q2010), the attempt by price to go higher was half hearted as it touched a high of 78.5c before closing at 76c. The very long upper wick on this short bodied white candle hints of strong selling pressure. Volume is relatively low and the negative divergence between price and volume is still all too visible." We could see 70c support tested sooner than later.
Read my last blog post on Golden Agriculture here.

Golden Agri cut to Hold by OCBC; Limited upside
Friday, 12 November 2010

© 2010 - The Edge Singapore

The counter on my watchlist that suffered the greatest decline in percentage terms is Genting SP, declining 15c or 6.6% to close at $2.13 after touching a low of $2.07. The question on the minds of anxious investors is whether it would go lower?

The price gapped down to start the day at $2.10 but formed a white spinning top after testing the 50dMA at $2.07 which was the low of the day. A spinning top suggests indecision which is a good thing for bulls on a day with massive selling pressure. If the price starts at $2.18 or higher in the next session and manages to break resistance at $2.21 which is the 50% Fibo line as well as the 20dMA, we could have a recovery. Having said this, the MACD has been moving lower as price moved higher, presenting an obvious picture of negative divergence. I would treat any rebound as a chance to reduce exposure.

Genting Singapore slumps as earnings ‘disappoint’.

Genting yesterday posted third-quarter net income of $187.8 million, compared with $396.5 million in the previous three months and a net loss of $93.3 million a year earlier.

Friday, 12 November 2010

© 2010 - The Edge Singapore

Sabana REIT: Shariah compliant.

We have another IPO coming up and it is a Shariah compliant REIT: Sabana REIT.

The REIT will sell about 605.8 million units at $1.00-$1.10 each with a distribution yield of 8.45% for 2011 and 8.48% for 2012 based on the minimum offer price.

Singapore’s Sabana REIT to raise at least $605.8m in IPO. Sabana controls 15 industrial properties in Singapore with an aggregate floor area of about 3.3 million square feet.
Tuesday, 09 November 2010

© 2010 - The Edge Singapore

What does it mean to be Shariah compliant?

Shariah prohibits the payment or acceptance of interest fees for loans of money, for specific terms, as well as investing in businesses that provide goods or services considered contrary to its principle. Source: Wikipedia.

So, we can imagine that businesses which deal in alcohol and pork would not be allowed as tenants, for examples. It would be interesting to see how this REIT performs in time. Something different to enrich the REIT landscape in Singapore.

Golden Agriculture: Negative divergence.

On 8 Nov, I mentioned that "Even though a very long white candle formed today to close at the day's high of 78c, it is worth noting that volume was not as high as 13 Oct. The picture of negative divergence between volume and price is still present. Price moved higher today due to a lack of sellers and not an abundance of buyers. It would take a very brave person to load up to go long at this stage."

Although Golden Agriculture reported commendable results today with a 41% year on year increase in net profit to US$99 million (S$127 million) for the third quarter ending 30 Sep (3Q2010), the attempt by price to go higher was half hearted as it touched a high of 78.5c before closing at 76c. The very long upper wick on this short bodied white candle hints of strong selling pressure. Volume is relatively low and the negative divergence between price and volume is still all too visible.

Immediate support is at 75c and if this breaks, we could see 70c tested. This could well happen as both MFI and RSI are bordering on overbought and could retreat to retest their respective trendline supports. Buying on pullbacks is still the prudent thing to do.

Golden Agri-Resources sees 41% rise in 3Q net profit to $127m. Golden Agri-Resources says demand for palm oil, which is predominantly used for food purposes, is expected to be well-supported into the medium to long term by the growing consumption of edible oils and fats particularly by the growing middle class in highly-populated developing countries such as China, India and Pakistan.
Thursday, 11 November 2010

© 2010 - The Edge Singapore

Kim Eng cautions against palm-oil over-exuberance. “Ultimately, supply shortfalls mean that there is less inventory of CPO for these companies to sell. CPO price increases would simply be offsetting this, and likely revenue-neutral.”
Thursday, 11 November 2010

© 2010 - The Edge Singapore

Related post:
Golden Agriculture: Breaking resistance.

Saizen REIT: 1Q FY2011 results.

Saizen REIT's 1Q FY2011 results did not disappoint. Here are the important points:

1. Gross revenue improved quarter on quarter from S$15,536,000 to S$16,274,000 or a gain of 4.75%.  This is largely due to a strengthening JPY against the S$.

2. Net property income (NPI) improved quarter on quarter from S$10,205,000 to S$11,389,000 or a gain of 11.6%! This is due largely to a reduction in property operating expenses.

3. Taking away fees and expenses shows net income from operations improved quarter on quarter from S$4,998,000 to S$6,012,000 or a gain of 20.29%!

What I find most bracing about the report is on page 6 which details the distributable income from operations for 1Q FY2011.  Distributable income for the period is JPY 204,943,000.  This amount could have been 50% higher if not for the amortising nature of Saizen REIT's loans. JPY113,397,000 was used for loan amortisation.

Loan amortisation will reduce funds used in interest payment for the REIT, going forward. This would translate to more funds available for distribution to unitholders in future, everything else remaining constant. There was also a one-off expense of JPY14,976,000 which was incurred due to the refinancing of GK Choan's loan. This is non-recurring. We could, therefore, expect the distributable income for 2Q FY2011 and subsequent quarters to be higher.

Everything else remaining constant, I estimate the distributable income for 2Q FY2011 to be JPY 220,000,000 or 7.4% higher than 1Q FY2011. Total distributable income for 1H FY2011 is, therefore, estimated to be JPY 424,943,000. Number of units in issue now at 1,111,003,000.  DPU estimated at JPY 0.38. Based on the rate of S$1 = JPY63.3, it means a DPU of 0.6c in March 2011.

Update on YK Shintoku loan

To-date, YK Shintoku has divested a total of 16 properties (5 properties in FY2010, 5 properties in 1Q FY2011 and 6 properties in October and November 2010) as part a deleveraging plan implemented to reduce the absolute amount of the loan of YK Shintoku and the leverage of the corresponding property portfolio, so as to facilitate refinancing efforts.

The loan of YK Shintoku has been reduced from JPY 7.1 billion (S$111.6 million1) as at 30 June 2010 to about JPY 5.6 billion (S$88.1 million) as at the date hereof. Taking into account applicable cash reserves of JPY 0.6 billion (S$9.4 million) maintained by YK Shintoku under the loan agreement, the net outstanding loan of YK Shintoku amounts to approximately JPY 5.0 billion (S$78.6 million). Several divestments of YK Shintoku’s properties are expected in the coming months to reduce the loan amount further.


The amount of S$14.9 million, or approximately JPY 0.9 billion, of warrant proceeds received as at 9 November 2010, have yet to be deployed. Saizen REIT has 328,082,705 warrants which are outstanding and could potentially result in S$29.5 million, or approximately JPY 1.9 billion, of further warrant proceeds being raised1. These warrant proceeds may be applied towards the refinancing of the loan of YK Shintoku (if such refinancing is possible). Saizen REIT also has an aggregate of approximately JPY 12.0 billion (S$188.7 million) of unencumbered properties which can be used as collateral for new loans.

Update on next distribution

Property operations are expected to remain stable, generating steady cash flow to enable Saizen REIT to continue paying out semi-annual distributions. The next distribution payment is expected to take place in March 2011 in respect of distributable cash accumulated in the six months financial period ending 31 December 2010.

Results announcement here.

Related post:
Saizen REIT: AGM on 19 Oct 10.