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SoundGlobal: The former E-pure.

Thursday, January 27, 2011

I was vested in E-pure when it was 20c a share thereabouts. This was back in early 2009. 

I was convinced that China's drive to keep its economy humming in the wake of the Lehman Brothers crisis would benefit the water infrastructure businesses. 





I was also heavily vested in Hyflux Water Trust at that time from 30c for the same reason.  

Read related blog post here.

E-pure was a Chinese company and was likely to be favored over Hyflux in China while Hyflux Water Trust was a business trust with zero gearing treating water for Chinese industrial estates and had a yield of about 17% at a unit price of 30c. 





I divested E-pure completely by the time it neared 60c a share and watched dumbfounded as the share price went on to form new highs, almost doubling from my sell price of close to 60c. 

Hyflux Water Trust was, of course, privatised a few months ago. 

Read related blog post here.





I have been wondering if I should re-invest in E-pure which has been renamed SoundGlobal for some time now. 

It remained on my watchlist but I simply refused to buy any of its shares at prices higher than 60c. 

That's just the memory effect working and, in this case, it seems to have paid off. Related post here.





I just told myself that if the price did not come down to more reasonable levels, there are always other investments out there.


Since hitting a high of $1.04 on 7 April 2010, this counter has not formed a higher high. It is currently hugging the lower Bollinger band as it fast approaches the lows of early September 2010 at 70c a share. 

The obvious difference is that the low of early September 2010 was part of a bottoming process and the MACD was getting ready for a bullish crossover with the signal line. 





The MACD is now declining rapidly in negative territory as its distance with the signal line widens. This is very bearish.

Having said this, both the MFI and RSI are in oversold territories and 70c, being a low that was the price of a successful bottoming process could provide some support. 

Whether it would hold up is another question. I would not speculate on the strength of the support here.





When to accumulate? 

We want to look out for possible positive divergence between price and the momentum oscillators or volume. 

We want to look out for the downtrend halting and clearer signs that price is breaking out of downtrend. 

I like to use Fibo lines in such an instance to see how low price could go in case support breaks. Support is, of course, at 70c. 





Looking at the chart, the three golden ratios are at 62c, 59.5c and 57c. Buy some at those levels? 

I might if the other signs are encouraging.

CapitaMalls Asia: Doji at $1.91.

Wednesday, January 26, 2011

CapitaMalls Asia broke the trendline support today with price reaching $1.89 at one point before pushing back up above the trendline at $1.91 where it closed. For those who have been following my analyses so far, the question is how are things looking now?


Well, the weakness in price today brought out the bargain hunters as they pushed price back up to $1.91 and volume expanded modestly in the process. This suggests to me that at lower prices, buyers are waiting. However, it is quite obvious that the descending 50dMA is a strong resistance and people are probably just waiting to see if it could be overcome convincingly in future sessions. Breakout traders are waiting, I am sure. The 50dMA is currently at $1.94. Expect a wave of buying if resistance is taken out.

Volume has remained thin as trendline support is tested. Although I remain optimistic that price could move higher in the near future, that's just me. We really have to wait and see. I am no longer accumulating at the current support as I already have a sizeable position. We could very well see the counter trading sideways too.

Related post:
CapitaMalls Asia: Closed at $1.90 support.

Suntec REIT: Broke resistance.

I was just having a chat with Nick in LP's cbox not so long ago regarding REITs and their fair values. Nick mentioned that REITs with high gearing have little growth prospects and therefore will not see their unit price go up (i.e. yield will not compress). I think he mentioned that the stock market is rather efficient when it comes to REITs.

In theory, I agree with Nick. However, I mentioned that it is hard to be sure since how much a REIT should trade at is very often a matter of sentiments, this is the same with stocks. Certain REITs are small and are not covered by analysts. They could also be too small to interest institutional investors. Their unit prices could continue to languish even if they provide decent yields with relatively safe gearing. Certain REITs are obviously overvalued and give very low yields with relatively high gearing but they continue to enjoy much attention. For example, I would not bother buying into CMT. The yield is so unattractive.

Nick used Suntec REIT as an example of a REIT with high gearing and therefore it did not see its yield compress much. However, the last session saw Suntec REIT's unit price close at a high of $1.61, forming a wickless white candle, on the back of heavy volume. Yield is compressing and quite significantly too. The last time this REIT was at $1.61 was in Jun 2008!


Could we see this REIT's unit price move higher? A wickless white candle coupled with heavy volume is bullish. So, expectation is for price to move higher. However, the MFI is nearing overbought territory. In case of a pull back, it would be interesting to see if $1.58 could be resistance turned support.

Mr. Market is always right and he enjoys his hat tricks.

AIMS AMP Capital Industrial REIT: 3QFY2011.

My first night on a working trip in Hong Kong and I am having trouble sleeping although I was feeling quite tired earlier. So, I went to the reception and purchased a card which allows me to have internet access for 3 hours for a fee of HK$40. Quite reasonable, I think.

First thing I did online was to check on results announced by AIMS AMP Capital Industrial REIT. Its unit price touched 21c with 8 lots changing hands at that price in 4 transactions. Almost all of last session's trades were at 21.5c.

The recent weakness in this REIT's unit price could be attributed to some heavily vested investors anticipating a lower than expected DPU which came in at 0.51c, payable on 15 March 2011. The guidance was for 0.52c in a circular dated 22 Sep 2010. I am not at all surprised since I had expected a lower DPU of 0.5c myself when I revised the DPU and fair value of this REIT on 11 Dec 2010. Read my blog post here.

So, a DPU of 0.51c is rather pleasant for me. This could be due to the fact that "I did not take into consideration the other positive developments in the Market Update which is the 100% occupancy achieved for 15 Tai Seng Drive (85.7% as of 31 March 2010) and 23 Tai Seng Drive (84% as of 31 March 2010).  Conservatively, this should add about $400,000 to the REIT's annual rental income."

In its report, the management also said that the newly acquired property of 27 Penjuru Lane only contributed 78 days of rental income, being only acquired on 15 October 2010. So, could we expect next quarter's DPU to be marginally higher when the property contributes three month's worth of rental income to the REIT? Perhaps.

This REIT is still a strong proposition for anyone looking for a reliable stream of passive income. I have put in a BUY order at 21c in case the selling continues in the next session although I do not think anyone in his right mind would want to sell at that price.

Annualised DPU: 2.04c
Gearing: 32.7%
NAV/unit: 27c

See presentation slides here.


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