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Saizen REIT had a high volume, white candle day. Could it be that Mr. Market is more than warming up to this once upon a time unloved REIT? It certainly looks that way.
Draw some Fibo lines and we see why 21c was a strong resistance today. With volume as high as today's, however, it would be natural for any chartist to wonder if there could be a follow through in the next session.
Of course, the very long upper wick on the candle suggests the presence of very strong selling pressure as unit price tried to push higher. Look at the CMF and we see a lower high and a lower low which suggest to me that money was flowing out of the counter as price pushed higher. This could limit upside in the short term.
Fundamentally, the NAV/unit of Saizen REIT as well as its DPU in S$ terms could reduce somewhat due to the weaker JPY. Against the S$, the JPY has weakened some 20% in the last one year. So, it would not be wrong to expect lower distribution yields, all else remaining equal.
However, Saizen REIT has been on an acquisition path and this would mitigate any reduction in NAV/unit as well as DPU in S$ terms. Indeed, unit holders would have been very pleased when a higher half yearly DPU of 0.66c was paid out recently. That was a bit higher than the DPU six months earlier.
On 31 December 2012, the REIT's NAV/unit was JPY 19.21. Based on the exchange rate of S$13.30 to JPY 1,000 today, NAV/unit works out to be S$0.255. So, at 20c a unit, Saizen REIT is still trading at a discount to NAV. Almost 22%, actually.
If units of Saizen REIT should trade at S$0.25, with an annualised DPU of 1.32c, we are looking at a distribution yield of 5.28%. For a portfolio of freehold residential properties in Japan which has seen a consistent occupancy rate of above 90%, is this good enough for Mr. Market?
There are really no comparable REITs listed in Singapore and we have to look at J-REITs to get a clue as to why Saizen REIT could look very attractive even at today's price. J-REITs' average distribution yield is just slightly above 4% now. So, at 20c a unit and with an annualised DPU of 1.32c, the 6.6% distribution yield from Saizen REIT looks extremely attractive.
With an aggressive Bank of Japan bent on their own brand of quantitative easing (QE), we could see the Land of the Rising Sun experiencing rising prices again. So, we could see Saizen REIT's portfolio of properties being valued higher in JPY terms over time. This could bump up NAV/unit in S$ terms.
However, if we look at the experience of the USA, it could take years and more than one QE before we see positive results. So, any optimism in the short term should be tempered but the longer term picture is very promising.
If Mr. Market is ready to accept a lower distribution yield of 5.5% from the REIT and 5.5% is still much higher than comparable J-REITs' distribution yields, then, we could see unit price trading higher at 24c in time to come, everything else remaining equal.
So, is Saizen REIT still undervalued now? Yes, even now, I believe that it is.
Technically, however, selling pressure was very strong as unit price tried to push past 21c. CMF shows an increase in the outflow of money from the REIT as unit price moved higher today. So, if you took some gains off the table today, I think it was a great idea. Just make sure to get back in at supports if given a chance.
Related posts:
1. Saizen REIT: Still a buy?
2. Saizen REIT: DPU 0.66c.
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27 comments:
I suspect that Saizen could at least maintain its distribution of .66cts with the latest purchase as well as its capabilities to refinance some of its loan at fixed rate lower than previous loan. In addition, the amortisation of loan will also act as sort of mitigation to reduce the impact of declining Yen.
Hi Poh Soon,
Indeed, the fact that the REIT's loans are amortising in nature is a big plus. If not for the amortising feature, DPU could be some 50% higher! :)
Saizen REIT is still very much undervalued.
While waiting for Mr. Market to revalue it higher, I am contented to be paid every six months. ;)
Was Away for Cheng Meng today. Thanks för the update as I was not watching the market today. Definitely look forward to more goodies from this gem!
buy more? hmmm.... I still got those tikam lots... apart from what i bought using cpf..
Hi seefei,
Saizen REIT is a gem indeed. In the world of S-REITs and also J-REITs, it is difficult to find a similar value for money proposition like it. :)
Hi mark,
Your tikam has turned out very well. Congratulations! :)
Hi Ak
would like to ask if Saizen's buildings are covered by insurance due to natural disasters, such as earthquakes. Japan's being prone to such disasters is abit worrying for me.
thanks
jeremy
The REITs have been running lately. SuntecR, capitaR, A-REIT and sabana have been doing very well despite the market turmoil. So not too surprise some love had been passed to this gem.
Think 2013 will be a good year for REITs too!!
Hi Jeremy,
It is too expensive to insure buildings for earthquake damage in Japan, unfortunately.
In the earthquake and tsunami two years ago, a few of Saizen REIT's buildings suffered damages which were repaired using internal resources.
With unit price at a 20+% discount to NAV currently, I think Mr. Market has more than factored in potential damages resulting from natural disasters in the country. ;)
Hi seefei,
Money will go to where it is treated best and S-REITs are definitely treating our money well. ;)
Conditions are likely to remain benign in 2013, it would seem.
Hi AK,
Managed to buy some at 18.8 cents, I did not buy more as I anticipant a significant drop in both distribution income and NAV in current quarter, and would buy more on the anticipated weakness. Wil I miss the boat again this time, like what it did at the 14-15 cents level?
Hi Casey,
People always fear the unknown and that it is only natural.
With Saizen REIT, when its unit price plunged, I pounced on the opportunity to load up and I only did so because I knew Saizen REIT better than the average Joe or so I believed.
We can anticipate many things but whether they will happen or not, no one can say for sure. It is just like some people who are staying 90% in cash waiting for a big crash before investing in stocks again. Is that a good idea?
Anyway, you already have a long position and you got in very close to a strong support level which is at 18.5c, iirc. Good move. :)
Got in at a high is better than to miss the boat. Had been following Saizen in this blog since 13cts and only got in at 19.3 cts (ouch!) when I see the price keep going up.
Price is what we pay and value is what we get. As long as the fundamental is sound and no one want to sell cheap, it is really our sense of "value" that will governs our buying decision.
Hi seefei,
This is one way of looking at it and quite a logical way too. :)
Over dinner, a friend said that many people are not comfortable with averaging up. People are more comfortable with averaging down.
Often, averaging up could prove to be more rewarding.
This is just a general statement and I am not saying anything about how we should invest in Saizen REIT. ;)
People don't like to average up because they like to chop winners and keep losers. In money term they like to cap winning and let their losses run hopefully the losses will become winners.
In fact when investing for long or mid term we must have a trader mentality as well. Ride the trend, average up when up and reduce holding when trend is trending down. Well, it is a fine balance that all investors in the share market has to grasp with.
Hi seefei,
You say it so well and this is something I will try to remember. I am still trying to do better. :)
While the lower JPY could offset some of Japanese real estate's asset-value rerating for Singapore plays under the BOJ's easing measures, the net impact may be positive due to lower debt costs, Credit Suisse says.
It believes JPY depreciation may have a positive impact on Mapletree Logistics Trust's (M44U.SG) earnings as JPY debt accounts for about 70% of its total debt despite Japan accounting for only around 30% of its portfolio.
It notes other Japan proxies not under coverage include Saizen REIT (DZ8U.SG), Parkway Life REIT (C2PU.SG) and Starhill Global REIT (P40U.SG).
Dow Jones & Co, Inc, 8 April
Happy to see it in the >20c bracket. After all these years of holding on to it.
Keep the distributions coming in. Perhaps at AGM, we can table a motion (or whats that action called ?) for quarterly distribution and perhaps a rights issue for us LTIs.
Hi SnOOpy168,
Technically, it seems that 20c could be established as the new support. Nice. :)
Fundamentally, now, we see a fairer valuation of the REIT. It is about time. ;)
Quarterly distributions would be nice but not really necessary. Of course, I won't complain if it should see a change.
I did missed the 13c days. But then hindsight 20/20.... still have a hand in the cookie jar.
Just checked was delighted to see Starhub over 4.2 !!! Again, I'd wished that I had....... (ok, I won't be another old man here rumbling of the past).
Tea time.
Hi SnOOpy168,
When it was 13c, people looked down on it. Those who bought at 13c were ridiculed. :(
Aiyoh, I know I am old and I talk about the past a lot but you don't have to be so direct mah. Pain. Oh, the pain! ;p
AK
I also bagged some at 12.5c. So it makes 2 of us, OLD MAN. Soon to retire and travel the world..... ^-^
Soooon. Very Sooooon.
Hi Jimmy,
I don't really enjoy travelling very much with perhaps the exception of going on cruises. ;)
I would be quite happy to escape the crap that is the business world and just spend time with me, my family and some close friends. Also want to spend more time learning new things which I have been putting off for too long. :)
Hi AK,
With the japan govt QE of their Yen, what is your view on SaizenREIT? Do you think the current SaizenREIT (0.2) is still undervalue?
Hi Raymond,
Based on NAV/unit, Saizen REIT is still undervalued.
However, expecting income in S$ to be affected negatively as well, we have to question if the yield is still attractive enough for us. :)
Ak71
now that it has break the support of 0.20, would you be motivated to accumulate more ?
is yield compression an issue now ?
Hi Mr. Chua,
I believe that the management of Saizen REIT are hedging against the further decline of the JPY against the S$.
So, if DPU stays unchanged, we are looking at a distribution yield of 6.3% at 19c a unit. Not attractive enough for me to add more to my holdings but it could be attractive enough for others.
With unit price declining, yield is expanding instead of compressing, everything else remaining equal. ;)
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