NeraTel: A voluminous day of fear.

There is lots of fear in the air for some people trading the stock of NeraTel today. I won't be surprised if some people lost money as well. Why? A long black candle was formed on the back of relatively high volume. There must have been some panic selling as share price touched a low of 74.5c before closing at 76.5c.

However, this could be good news for some. Who? For people who have been waiting to buy into NeraTel because of its strong fundamentals and attractive dividend, of course.

The question on their minds might be whether it is the best time to buy now?

Well, if we remove the word "best" from the question, then, it becomes easier to find an answer. Linked to this, ask what is our motivation for investing in NeraTel.

My primary motivation for investing in NeraTel is for income. It was not to trade the stock. However, with the rapid and significant rise in the share price, I turned partial trader by reducing my long position in the stock last week.

As my primary motivation for investing in NeraTel is unchanged, the dramatic pull back in share price is a boon for me as I bought back what I sold recently. This means that the planned passive income from NeraTel's dividends in my portfolio is now restored.

Of course, I received a nice little bonus from trading around the investment as well. Quite happy to get some pocket money from Mr. Market, for sure.

Next question, will I increase the size of my long position in NeraTel at current prices?

Well, I think it is now common knowledge what NeraTel's full potential is. Apart from impressive growth potential, it is also a net cash company with a recurring income base. So, it is a stock anyone investing for income and growth would be attracted to. For anyone who is not in the know, I have provided links at the end of this blog for further reading.

Technically, a weak immediate support is at 76c. This is followed by the rising 20dMA which approximates 73c today. Failure of the support provided by the rising 20dMA to hold means a possible decline in share price to 66c.

Fundamentally, at 66c, we are looking at a PER of less than 10x once more and an estimated dividend yield of 6.06%. So, expectation for strong support at that price is not premised only on the technical picture but also on more attractive numbers.

I will be adding to my long position if supports are tested.

Related posts:
1. NeraTel: Trading around an investment.
2. NeraTel: A very good investment.

NeraTel: Trading around an investment.

Today, I divested some of my investment in NeraTel. Why? Do I not think that the share price could go higher?

Well, high could go higher. With the MACD and RSI still rising, the positive momentum is strong for price to possibly go higher. We also see a higher high in the CMF.

However, there seems to be an established pattern in the recent meteoric rise of NeraTel's share price. A high volume long white candle day seems to be followed by a short period of low volume pull back.

So, sell some close to the high and buy in again as price pulls back seems to be a good trading strategy. It also seems like a good idea for a long only investor to do this and make some pocket money in the process.

Fundamentally, my main motivation for investing in NeraTel is for a relatively high dividend yield. With its share price having run up so much in so short a time, dividend yield has compressed rapidly. At 84c, we are looking at a yield of 4.76%, far less than the 6.35% to 6.67% just a month or so ago.

With the uptrend intact, I will be looking to add to my long position if a retracement to support should happen. Where is immediate support? Possibly at 79.5c, give or take a bid.

Related post:
NeraTel: Is there no telling how high it could go?

Motivations and methods in investing (UPDATED August 2018).

I recently started to blog about NeraTel and revealed that I increased my investment in the company. 

Someone asked me what led me to increase the size of my long position when I did since its share price shot up shortly after I made my move. 

Did I have inside information?

Well, I cannot say for sure if I did have a distant relative or two in Myanmar or not. 

Such is the reach of the Chinese diaspora. 

However, I am quite sure that I do not have the benefit of knowing anyone who might be in the know with regards to the Telco contracts awarded by the Myanmar government recently.

Indeed, increasing my investment in NeraTel had much more innocent motivations.




I have been blogging for some time about how the very low interest rates cannot persist forever and that they will one day rise. 

I have also cautioned that we should not be overly optimistic when it comes to real estate investments in Singapore and also S-REITs. 

So, what is someone who is investing for income to do?

A big portion of my investment portfolio is in income investing. 




I got into S-REITs in a big way during the GFC and bought more of AIMS AMP Capital Industrial REIT and Sabana REIT in late 2011 when prices took a hit. 

Whenever prices took a hit, I would buy more. 

For example, I quadrupled my investment in Saizen REIT in mid 2012 when its warrants were close to expiring and its unit price plunged. 

Conditions were benign for REITs and buying more with an increased margin of safety was, well, safe.

Now, with the spectre of increasing interest rates on the horizon, the sea that is called REITs could become less placid. 

It could become choppy. 




Of course, thinking that REITs will go the way of the Dodo simply because interest rates are going to rise is ridiculous. 

However, not recognising that S-REITs will face headwinds as interest rates rise in future is myopic.

So, the 10x increase in my long position in NeraTel stems from a need to look for alternative investments which are high yielding but with a low or zero probability of being affected negatively by interest rate hikes. 

I like the comfort that comes from having a steady stream of dependable passive income and this remains my biggest motivation for investing in the stock market. 




The following graphic gives a good idea of how I think.

Source: edwardjones.com

..




My investments for income, together with my war chests, form the wide base of the pyramid. 

On top of these but smaller in total value are my investments in certain stocks for growth and income or for growth only. 

At the tip of the pyramid and also representing the smallest total value are more speculative investments which sounds like an oxymoron, doesn't it?

Certainly, like I have always said, there is more than one way to growing our wealth in the stock market and I am not trying to say otherwise by showing the above graphic. 




My methods which are by no means immutable simply reflect my motivations for investing in the stock market.

Ask what are we trying to achieve (i.e. our motivations) and we will know where our money should go. 

Use the right tools (i.e. methods).

If you have read this blog carefully, position sizing is important too.

There is nothing to say that good investors cannot have speculative positions but good investors should keep speculative positions relatively small.




Related posts:
1. Never lose money in real estate?
2. Be cautious climbing S-REIT tree.
3. CPF or SGS?
4. Perpetual bonds: Good or bad?
5. For those who have paid higher prices.

NeraTel: A very good investment.

There has been much said about how the recent surge in NeraTel's share price could be due to expectations that they could be the only Singapore company to benefit from the Telco licences awarded by the Myanmar government. Although it is not ironclad, NeraTel's expertise in the microwave radio transmission segment gives the company a high chance of winning the tenders.

What is more certain, however, is that, by early 2014, NeraTel will be able to move into its own engineering business and develop its own products and this change will improve the company's profit margins. In the meantime, the successful acquisition of Nera Malaysia recently will result in a one time profit of about $7 million.

Samuel Ang, NeraTel's president and CEO has this to say to investors:

"When you look at NeraTel as a company, you need to look at the whole year because we are in a market that involves a lot of capital expenditure. We cannot recognise revenue at one go, we need to look at the work progress, and there may be some delays with some customers"

Therefore, it is more important to note the order intake which represents the health of the business.

OSK-DMG believes that there could be an interim dividend this year and that the current dividend payout of 4c a year is also sustainable.

Reference:
Pages 12 and 13 in The EDGE, July 15, 2013 issue.
AK says: "An excellent write up in The EDGE and if you are interested in NeraTel, go get a copy."

Related post:
NeraTel: Is there no telling how high it could go?

NeraTel: Is there no telling how high it could go?

The share price of NeraTel broke 65c resistance yesterday and it has been rocketing up since. A friend told me that I have done it again! Honestly, I think Lady Luck's the one who is working hard here. I am just lucky.

Last month, I increased my investment in NeraTel by about 10x, recognising its strong numbers and also its attractive dividend yield. At 60c, a 4c dividend represents a yield of some 6.67% which is pretty decent. Even at 63c, 4c gives us a yield of some 6.35%.

Technically, it is quite easy to see from the chart why I accumulated at 60c to 63c. The counter seemed to be basing in that range.

The new found strength in NeraTel's share price probably has a Myanmar connection. Two of NeraTel's customers, Telenor and Ooredoo, won contracts in Myanmar and have 9 months to commence operations. They will have to open up project tenders soon and NeraTel has a good chance of winning the tenders. OSK DMG has a target price of 79c for the counter.

What is my plan now?

I really have to examine my motivation for investing in NeraTel. When I first bought in at 40.5c, it was primarily for the attractive dividend. Recently, I increased my exposure to the counter with a slightly better understanding of the company, still liking the numbers and the attractive dividend.

Even if its share price should hit 79c, dividend yield is still a reasonably attractive 5.06%.

However, I suspect that Mr. Market is now pushing up the share price of NeraTel based on expectations. So, although I do not think NeraTel's shares are expensive even now, things could get bubbly if this continues. Traders chasing the breakout must do so knowing the risks.

Breaking a many times tested resistance at 69c on the back of high volume is very bullish. However, parabolic movements in prices are usually unsustainable and we could see a pull back as price tries to find support.

69c could be the resistance turned support and, for anyone who is thinking of buying on weakness, that is probably a price to watch out for.

In the meantime, to all fellow NeraTel shareholders, if we would like to divest partially (or fully) to lock in gains, there is certainly nothing wrong with taking profit. However, I would ask that we look once more at our motivations for being vested in the counter to be sure. In any case, congratulations!

Related post:
Which stocks have I been accumulating in June 2013?

Which stocks have I been accumulating in June 2013?

As share prices decline over a prolonged period, Mr. Market's hope for a swift recovery becomes weaker and weaker. As Mr. Market despairs, he is going to sell stocks at even lower prices. Everything else remaining equal, this means that we can buy stocks with greater margins of safety from Mr. Market.

However, remember that Mr. Market is a fickle creature. His mood swings are well known. So, although waiting for the market to bottom sounds like a great idea, it is only possible to really call the bottom once it has come and gone. Therefore, I made a list of stocks which I would like to buy more of, including the prices which might be good to do so at.

Mr. Market's negativity is centred around expectations of a reduction in global liquidity and increase in interest rates. However, such concerns are really premature since what is really going to happen is a reduction in the growth of global liquidity and, by Ben Bernanke's admission, any increase in short term interest rates is farther into the future.

This suggests that S-REITs which are fundamentally sound will continue to deliver, distributing the income which I have become accustomed to receiving. With prices 15 to 20% lower than the peaks achieved not too long ago, valuations are more reasonable now although I would not say compelling.

So, which stocks have I been accumulating in the current correction?

Marco Polo Marine

I bought more shares of Marco Polo Marine at $0.37 to $0.375. I really like the news that the company bought a new 9,000 BHP AHTS at a bargain from a distressed yard. It would take the company's shipyard 18 months to build one from scratch and buying this AHTS allows Marco Polo Marine to more quickly meet market demands in Indonesia.

"Given the robust demand for OSVs and the gradual and consistent rise in daily charter rates experienced over the past  few months, the Group expects its offshore business to continue to spearhead the growth of its overall chartering revenue," Mr. Sean Lee, CEO, Marco Polo Marine.

Marco Polo Marine's listed Indonesian subsidiary has another 2 AHTS on order and these are being built in their own shipyard. Expected to be delivered sometime in 2014, Marco Polo Marine is likely to register much stronger performance next year. Buying at $0.37 to $0.375 is also a bargain as it is at >15% discount to NAV.

SPH

I got more shares of SPH at $4.22. That is some 10% lower than the top of $4.68 touched in early April a couple of months ago. Volume has also been reducing as price weakened. Sellers are less enthusiastic but without strong buying interest, price could drift lower.

Well, as Mr. Market would have it, SPH's share price went even lower today, closing at $4.16, the low of the day. The optimism surrounding SPH's plan to bundle Paragon and Clementi Mall into a REIT seems to have evaporated, hinting at the pessimism surrounding all things S-REITs at the moment.

At this time, remind ourselves that the listing of SPH REIT is a good thing for SPH's shareholders. It strengthens SPH's balance sheet without really compromising its revenue stream from its real estate holdings. SPH will see its gearing level reducing to almost zero.

With the promise of a special dividend of 18c per share, post SPH REIT's listing, there is a cushion against further decline in share price which, using Fibo retracement lines, will find support at:

$4.11 (123.6%)
$4.04 (138.2%)
$3.99 (150.0%)
$3.93 (161.8%)

Remember that TA shows where the supports are. There is no promise that the supports will be tested.

Certainly, if the opportunities should present themselves, offers at $3.93 or $3.99 a share cum special dividend of 18c would be more attractive propositions.

NeraTel

This is a stock which I got in at 40.5c a share some time back. This was after the failed take over bid by ST Engineering. I didn't do much research on this company on my own. Neither did I have any experience with it. Instead, I relied on some advice by a very good friend who has been a shareholder for years.

This is a net cash company and has a record of paying consistent and meaningful dividends. Its last payout was 4c a share with an EPS of 5c. At today's closing price of 61c, we are looking at a dividend yield of 6.56% which is very decent. With its recurring revenue streams, dividends are probably sustainable.

So, I bought more shares of NeraTel as its share price retreated from a high of 69.5c. With buy prices of 60c to 63c, the dividend yields are from 6.35% to 6.67%. Any further weakness and a possible test of the rising 200d MA (approximating 57.5c now) for support would see me increasing my long exposure.

Certainly, I cannot tell how share prices will move tomorrow. So, I cannot tell if my additional investments made recently will result in paper losses but I can tell if I have made relatively sound decisions.

By looking at charts, I can tell where supports are expected to be found. So, I can tell where I might be adding to my long positions, given the chance.

Some things we know. Some things we don't.

I know, for sure, that we should have a plan and we should stick to it.

Related posts:
1. Spotlight on Marco Polo Marine.
2. SPH: A REIT investment.
3. REITs: When to buy?
4. REITs: Are we asking the right questions?
5. Be cautious climbing the S-REIT tree.
6. Have a plan, your own plan.