First REIT: XR and fair value.

A friend called me yesterday and said he might buy into First REIT with a view of getting more excess rights. I gave him my full support and told him he is likely to make money in this exercise. It turned out that he didn't get any yesterday.

Assuming that he had bought 4 lots at 98.5c /unit, his average price including rights units would be:

98.5 x 4 + 50c x 5  /9 = 71.55c /unit

At the estimated annualised DPU of 6.4c for 2011, it would mean a yield of 8.94%.  Not bad.  If he managed to get 1 lot of excess rights later on, the average price would be 69.4c which means a yield of 9.22%! I like this.

My expectation is for the REIT to trade closer to an 8% yield.  That means I expect the REIT to trade closer to 80c per unit with the estimated annualised DPU revised upwards to 6.4c for 2011.

I had people asking me if they should sell their First REIT units when it went CR. My advice to them was to keep the units and to accept and pay for their rights.  The proposed acquisitions and rights issue is a good thing for existing unit holders: a strong yield on investment with a good chance of capital gains.  Of course, there were still some who sold which allowed me to buy more at 95c /unit.

In an earlier blog post, I mentioned that I did not see any reason why the REIT should trade below the TERP of 70c, XR, and if it did, I would buy more. Today, it touched 70c only to bounce higher. It closed at 73.5c after touching a high of 74c. Congratulations to fellow unit holders!

Allow me a little indulgence as this is something I have always wanted to do:

Rating: BUY.
Fair value: 80c/unit.

Related posts:
First REIT: Rights issue.
First REIT: Bought more at 95c.

Starhub, CapitaMalls Asia and CitySpring.

A reader asked me what's happening to Starhub and another one asked me what's happening to CapitaMalls Asia. The recent price weakness must be spooky for quite a few investors.

Starhub's uptrend is clearly broken. The support at 20dMA broke five sessions ago and closing at $2.63 today on high volume looks ominous as a long black candle was formed. $2.63 is where we find the rising 50dMA. Could we see price bouncing off the 50dMA? We could but there is no clear sign of a reversal. So, if price bounces off the 50dMA, it could be just that: a bounce.

The MFI has been forming lower highs and in a rebound, we could see it testing its downtrend resistance which approximates 50% which itself is a natural resistance.  If the MACD continues to descend towards zero, we could see it crossing into negative territory. We could see price testing the 100dMA as support then. Using Fibo lines as a guage, $2.51 is also where we find the 161.8% Fibo line. It would take a brave person to go long at this point in time. Immediate resistance at $2.72.

CapitaMalls Asia's share price closed below $2.00 once more. A long black candle was formed on high volume as price closed at $1.97. Will this counter test its low of $1.91 touched on 7 May 10? With all the momentum oscillators trending down, it could.

Time to go long? I don't think so. I would let the downtrend run its course and wait for clearer signs of a reversal. Watch out, in the meantime, for signs of stabilisation. See if the candlesticks start moving inwards away from the lower Bollinger.

I fully divested my investment in CitySpring, an investment which I have long regarded as a mistake, in early October. Kim Eng has downgraded the trust to a SELL now: Kim Eng Securities downgrades Cityspring Infrastructure Trust to Sell from Hold, cuts target price to $0.52 from $0.62 on prospect of lower distribution payouts, dilution risks.

Cityspring Infrastructure cut to Sell by Kim Eng
Tuesday, 30 November 2010

© 2010 - The Edge Singapore

Related post:
CapitaMalls Asia: Uptrend broken.
CitySpring Infrastructure Trust: Thoughts on divestment.