Cambridge Industrial Trust: 1 for 8 rights issue.

As a retail investor and minority shareholder, I prefer a rights issue to private share placement as it allows me to participate in the enlarged capital base of the business entity. Cambridge Industrial Trust (CIT) is having a rights issue to help fund three acquisitions in Singapore. I won't go into the details. You can get all the details here.

Foremost on my mind is how can I benefit from this rights issue. Although I am no longer invested in the REIT, I will not let my past experience stop me from a possible money making opportunity. Rights issues have, so far, been profitable for me.

The rights are at an issue price of 42.9c each. 1 rights unit for every 8 units of CIT owned.

Current price is 50.5c/unit. 

Current DPU is 4.89c. Current NAV/unit is 61c. Current gearing is 34.7%.

Post rights, DPU will be 5.07c. NAV/unit will be 58c. Gearing will be 35.9%.

Therefore, if we are after a 10% distribution yield, getting units in CIT at 50.5c or lower would secure that for us. So, we could either buy some units at the current price and take part in the rights issue or we could wait to see how much the nil-paid rights would go for when they start trading later this month. Since the rights are at an issue price of 42.9c, the nil-paid rights should go for 7c at the highest. It would not make sense to pay more for them.

If the unit price of CIT were to be hammered down for some reason or if the nil-paid rights were to be sold at very low prices when they start trading, we could have ourselves a bargain.

Important dates:

Last day of CR: 15 March 2011.

Trading of nil-paid rights: 23 March to 31 March 2011.

Last date for acceptance and payment: 6 April 2011.

Saizen REIT: Support provided by the 100wMA.

Anyone vested in this REIT would have noticed some strength in its unit price lately. There has been plenty of buy ups and yesterday saw 408 lots bought up at 17c in a single transaction. That all this is happening after the REIT went XD just a few weeks ago is rather impressive.

The OBV shows a picture of steady accumulation since hitting a low on 12 Nov 2010. The MACD has completed a bullish crossover with the signal line in negative territory while the MFI and RSI have risen to test their respective 50% lines.

While we cannot say for sure that Saizen REIT is going much higher from here, we can say that the downside seems pretty limited. On the daily chart, 15.5c is established as a strong support. A retest of 15c is possible but the probability of it happening is much lower. Looking at the weekly chart, we understand why this is so.

The 100wMA has completed its turn up and is currently providing support at 15.5c and should limit further downside. Strong resistance on the upside could be found at 17.5c while strong support is at 15.5c. The darkest days of this REIT are more or less over.

Related post:
Saizen REIT: Divestment of Kinyacho Grande.