Cambridge Industrial Trust: Going for excess rights.

My entry into Cambridge Industrial Trust could not have been better timed. I became a unitholder again in the morning of 11 March at the price of 51c/unit. Of course, we know what happened in Japan on that day.

In my blog post that day, I said that "If the nil-paid rights should trade at 4c to 5c, it would be quite attractive ... Any price less than 4c would be a steal!" Well, the nil-paid rights are not trading below 4c and I didn't manage to "steal" any. Read blog post here.

I also missed the opportunity to accumulate at 47c/unit when the REIT was still trading CR. You might remember me saying this "What are my plans now? Buy more if its price weakens further? Looking at the daily chart, CIT is trading below the 200dMA. So, I look at the weekly chart for hints of the next support. The rising 100wMA is at 46.5c now and should provide relatively strong support. 46.5c? That is some way to fall from here! Yes, it is but remember that TA shows us where the supports are and not necessarily that they would be tested. If it should be tested while the counter is still CR, I would buy more.

"Buying 16 lots more at 46.5c would mean an average price of 46.11c... Of course, owning more units could possibly entitle me to more excess rights as well." Read blog post here. It never hit 46.5c where I was waiting and the lowest it went to was 47c. Tough luck.

So, since I got 17 lots at 51c, I would get 2,125 rights. I would, of course, round it up to 3,000 rights by applying for excess 875 rights. I will also apply for more excess rights in the hope of lowering my average price. With its unit price closing at 48.5c and hitting a high of 49c in the last session. This rights issue would be the first one I might not be making any money from in quite a while.

Would I stay invested? Well, the REIT's numbers have improved and should be a reliable passive income generator although I discovered something in small print and I replied to a reader on 19 March saying: "I looked at the announcement by CIT's manager again. We have to read the fine print. Tricky. 5.07c DPU would only kick in end of 2012 once the Extension Development Works are completed. Otherwise the DPU is 4.84c, post rights. So, to secure a 10% yield, buying at 48.5c per unit or lower would do it." See comments here. Yes, this was in fine print. Nothing wrong but it would have been better if the numbers were included in the table proper. I almost said something scathing when I read the announcement again.

So, although I am disappointed in more ways than one, I would probably stay vested unless I have a good reason to divest. Worst case scenario? A distribution yield of 9.7% for my investment.

First REIT: Accumulate on weakness.

On 21 March, I mentioned that "Technically, the REIT is still in a downtrend which started on 20 Jan 2011. The trend resistance is at 74c. If price is able to break 74c convincingly, by this I mean with higher volume, we could see old highs tested as the downtrend breaks." In the last session, the REIT touched 74c although it closed at 73.5c which is still within the downtrend. Volume was relatively thin.

Checking the ADX, we see the -DI declining while the +DI has turned up. In fact, the +DI is close to crossing the -DI on the upside. The ADX keeps declining which suggests that the downtrend, although intact, is weakening. So, waiting to accumulate at the 200dMA could be wishful thinking in the near future.

In a change of plan, I would increase exposure to this REIT on any weakness and this would be at 73c (100dMA), 72c (lower Bollinger) and 71.5c (the recent low of 17 Mar).

Related post:
First REIT: Rising on low volume.