Cache Logistics Trust: Weakness after XD.

Cache Logistics Trust went XD and the price gapped down, forming a big black candle, rebounding a tad as it hit support at 97c provided by 2 longer term MAs, the 100d and the 200d MAs. This is a familiar pattern. If we look at the candlestick of 3 Nov 10, it was the same story of weakness after XD. Could we see the unit price fall further? Quite likely. I have been waiting for a nice entry price for some time now. When to buy?

On 23 October 10, I said, "On 29 July, CLT was trading at $1.01 per share. This would give a yield of 6.77% based on an annualised DPU of 6.84c. Its unit price is now 98.5c, not much lower. That's unattractive for me although I recognise that it is a relatively safe investment." Read blog post here.

On 16 December 10, I went on to say, "With an annualised DPU of 7.76c, at today's closing price of 94c, the distribution yield would be 8.26%. Still not attractive enough for me but I recognise its strong numbers which would convince me to start a small long position if price would decline to test its historical low of 91.5c for a yield of 8.48%." Read blog post here.

Technically and on hindsight, 94c would have been a great entry price as price touched a low of 93.5c on 16 Dec and went on to touch a high of S$1 on 28 Jan. Fundamentally, I notice the annualised DPU increased from 6.84c to 7.76c. This is a strong passive income generator and the numbers show it. More than ever, I want a slice of the pie.

Now, 94c would stay in the heads of market participants. People like myself who were waiting for a retest of 91.5c would now wait for a retest of 94c instead before entering. Judging from past data, price could continue to weaken for the next 4 to 6 weeks. I am going to watch this as I definitely like this REIT for its strong numbers which justify the lower distribution yield.

The MACD in the last session completed a bearish crossover with the signal line while the RSI broke its trendline support as it falls further from the overbought territory. OBV is rather flat but definitely lower than  2H2010. Signs suggest that people currently vested in this Trust are strong holders investing for income. However, momentum is suffering as some are selling after the counter went XD. I shall wait and see.

Gearing: 23.7%
NAV/unit: 89c
Annualised DPU: 7.76c
Interest cover ratio: 9.3x

It is important to note that Cache Logistics Trust is currently paying out 100% of its income and this would come to an end in December 2011. From 2012, it would pay out at least 90% of its income. As an aside, AIMS AMP Capital Industrial REIT is paying out 97.1% of its income on 15 March (3Q FY2011).

See 4Q2010 presentation slides here.