Cambridge Industrial Trust: Templeton and acquisition.

In a blog post dated 14 October, I said that Cambridge Industrial Trust is worth another look as I expect its income to bump up in 2012 and 2013 without any need for further fund raising. It is interesting to note that subsequently on 1 November, Templeton became a substantial unitholder. Announcement here.

More recently, the Trust has proposed the acquisition of 3C Toh Guan Road East for S$35.5m. This acquisition to be completed in the first quarter of 2012 is to be part funded by debt and the rest by cash.

The acquisition is expected to bump up annual DPU by 0.24c. If the unit price of CIT were to decline to 46c, we would be looking at a prospective annual distribution yield of 9.92%. That could be attractive enough to increase long exposure to the trust.

Is this increase in DPU sustainable? Everything else remaining equal, it is. This is because it is secured through a three years leaseback agreement to the seller of the said property.

Any potential pitfalls. I do see one which is some 10 years away. This is a 30+30 years leasehold property which saw its land lease commencing in 1991.  So, it is only 10 years away before the land lease has to be renewed. At what price? We will know then. For the next few years, it should be a productive asset.

See announcement here.

Related post:
Cambridge Industrial Trust: Worth another look.

K-REIT: Better buy now?

Unlike the recent rights issue for LMIR, there is little to be gained from selling units in K-REIT and buying the rights. The former so far touched a low of 88c while the latter, a low of 2.4c. 

Buying the rights at 2.4c would mean a total price of 87.4c per unit when they are converted into regular units.

In my blog post of 18 Oct, I said that "given my very small position in K-REIT, I will most probably subscribe to the rights issue. If I were not invested in the first instance, I would not bother buying in now to gain exposure."

By a stroke of luck, any potential investor who took my musings to heart would be happier today.

Why do I say this? Read the relevant blog post here:
K-REIT: 17 for 20 rights issue.

For anyone who wants to invest in K-REIT, buying into K-REIT now at 88c or even 88.5c is a better proposition than buying at 93c, the low of the morning of 18 Oct to be entitled to the rights. That would have worked out to an effective unit price of 93c x 20 + 85c x 17 /37 = 89.32c, post rights.

Of course, buying the rights now at 2.4c or even 2.5c would be an even better proposition as this would mean effective unit prices of 87.4c or 87.5c. However, this option is probably sensible only to people with deeper pockets or people who are with Standard Chartered's brokerage which does not charge a minimum transaction fee.

Not all rights issues are created equal, for sure.

Win Burger King sandwiches and an iPad2!

Win Spicy Panini Chicken sandwiches and an iPad2 from Burger King when you play the "Spice and Slice" game!





Go on and try it, you might just be a winner:
Updated link: http://sg.churpchurp.com/AK71SG/share/bkwayofchicken
Old link: http://sg.churpchurp.com/AK71SG/share/bkchicken

Stakeholders should worry as credit is tightening.

Credit is the lifeblood of businesses and credit is tightening.

Banks in the eurozone are finding it harder to get funding and they have begun repatriating funds from overseas. These banks now refrain from lending and liquidity is drying up. Eurozone governments are also struggling to raise funds and even France was recently forced to pay higher interest rates on newly issued debt.

"The euro zone debt crisis is turning into a global liquidity crisis, and leading to a vicious cycle of intensifying funding tightness spurring dumping of risk assets," said Kazuto Uchida, an executive officer and general manager of the global markets division at the Bank of Tokyo-Mitsubishi UFJ. Read article here.

Things could get a lot worse before they get better, it would seem.

I remember Margaret Thatcher, a former Prime Minister of the United Kingdom, once saying that she did not believe in "artificially formed" countries. The breakdown of the former Yugoslavia is a good example of how such entities would not withstand the test of time. The EC and the eurozone although not a country could be current day examples of such an entity.

Some believe that the ECB has to take more definite steps to shore up confidence in the eurozone. This probably means buying up bonds in a massive exercise. Germany, however, believes that the ECB cannot be expected to solve the problems eurozone is now facing by buying up massive amount of bonds.

Of course, some people would argue that the weak Euro is actually good for Germany as its export driven economy continues to boom and some would further say that Germany's prosperity is now built on the misery of weaker members in the eurozone. Divisive? I think so.

In an earlier blog post, I asked a question:
"In order to stay optimistic about Singapore's economy, we have to be optimistic about the world economy and we have to stay optimistic that there will not be any significant credit tightening in the world banking system. Do you think it is easy to be optimistic about these?"

With differences aplenty, one wonders if the eurozone would see more stresslines forming and if it could withstand the test of time. Stakeholders should be worried.

Do you believe that we are immune to the problems in the eurozone? Do you think that we are not stakeholders because we are not part of the eurozone?

"MAS highlighted that key risks facing Singapore included a protracted global economic slowdown, financial contagion and pressures in the property market. It warned that a protracted global slowdown could weigh on the domestic economy, cause corporate earnings to fall, with knock-on effects on employment and wage growth." Read article here.

Think again.

Related post:
Further credit tightening is almost a given.

LMIR: Sell the rights?

For those who bought some LMIR rights in the fire sale recently, a question could have formed as to whether they should sell the rights and lock in some hefty gains which could be as much as 100%. That it took just two days means it is basically free money since it is within the contra period.

Indeed, from a trading perspective, why not? Traders would say that taking profit is never wrong. If price of the rights were to go higher tomorrow, I could sell some as well since I have accumulated a sizeable long position. Question, at what price? Answer, look to the Fibo lines to see where possible resistance levels are.

Beyond 4.3c, I see stronger resistance at 5.2c and 5.4c. I could do a partial divestment at those prices if they should be tested. In such an instance, I would retain half to two thirds of all the nil-paid rights I bought to convert into regular units as I still believe that at unit prices of 33c to 36.5c, we are getting great value with distribution yields of 9% or more.

Why not just keep all the rights if they are such a bargain? Indeed, I thought of that which is why I would only divest partially if higher resistance levels should be hit. This is to satisfy the trader in me which is shouting out to take profit.

If the higher resistance levels are not tested tomorrow, I will not sell any of the nil paid rights I have accumulated in the last few sessions. This will satisfy the investor in me which thinks that we are seeing compelling value in the rights.

Related post:
LMIR: Why did the rights plunge in price and what did I do?

LMIR: Why did the rights plunge in price and what did I do?

To say that I was not surprised by the plunge in price of LMIR's rights is definitely untrue. I did expect further weakness but the steep plunge downwards was unnerving, made worse by the spike in trading volume. Going by the number of comments in my blog, many others were similarly affected.

So, do we press the panic button and start frothing at the mouth? Nah, we should get really greedy. Hey, there is a fire sale going on.

Some asked me if I had any idea why the price was plunging. It is quite simple, really. Price of the rights plunged because:

1. There are people who cannot exercise their rights.

2. There are people who do not want to exercise their rights.

3. The number of rights which sellers have is greater than the number of rights which buyers are ready to absorb.

Now, should we ask why some cannot or do not want to exercise their rights? Do we ask why there are more sellers than buyers? Well, we could but I wouldn't bother. As an investor, I did my due diligence and decided that I like the REIT's numbers even more at the current price. So, accordingly, I buy more.

Needless to say, my overnight buy orders at 3.8c and 3.4c were filled. At lunch time today, I looked at the chart and Fibo lines suggested a strong support at 2.1c (150% Fibo line) and I entered a buy order which was subsequently filled. Could we see further weakness? Of course, we could and if we should, I see stronger support at 1.6c (161.8% Fibo line) and I have entered a buy order at that price.

1.6c is also somewhat magical because at an estimated annualised DPU of 3.26c, post rights and acquisitions, buying the rights at 1.6c would translate to a total cost of 32.6c per unit which means a 10% distribution yield.

LMIR: Sinking rights.

LMIR's rights sank today. It gapped down, touching an intraday low of 4.4c before closing at 4.6c. Is it going to sink further tomorrow?

Thus far, I have only discussed LMIR's rights issue from the perspective of its fundamentals. What about a TA? For seasoned and orthodox practitioners of technical analysis, they will say that it is impossible to do a TA on this counter with only three sessions so far.

As I am neither seasoned nor orthodox, I have in the past done TA on such counters. One that comes to mind is Sabana REIT during its IPO days. So, for anyone who might be interested, here is my TA on LMIR's rights.


Trading volume has been on the rise as three black candles were formed. This bearish tone is reinforced by the gap down in price today. Although price averted closing at the day's low, it did not close high enough to form a hammer. A hammer would see the lower wick at least twice as long as the body of the black candle. In this case, the body is twice as long as the wick. Further weakness in price would not surprise me.

However, Mr. Market is known to be perverse. Although an immediate reversal would be surprising, it is definitely not impossible. So, what would I do?

In such situations, we can only use Fibo lines to see where the possible supports and resistance levels are. Regular readers would also remember that I like to use two or more sets of Fibo lines to identify very strong supports and resistance. I have done that in this case.

I see strong support in the region of 3.3c to 3.4c where two Fibo lines approximate. That is where I have put in a buy order. However, it does not mean that the support would necessarily be hit. I also see a 138.2% Fibo line at 3.8c. I have also put in a buy order there. Again, it does not mean that the support would be tested. Fibo lines simply show approximate positions of important resistance or supports with no promise that these would ever be tested.

I bought into the rights at 5.6c last Friday and I bought more today at 4.6c. I have accumulated a significant position and unless price should hit those supports I have identified, there is little incentive for me to continue adding. For anyone who has yet to initiate a long position, I would say that the rights are at the right price for me as an investor (pardon the pun) as I see greater value now.

Related post:
LMIR: Bought some nil-paid rights.

LMIR: Bought some nil-paid rights.

I made my first transaction in the stock market since my return to Singapore. I bought some LMIR nil-paid rights at 5.6c each. Some might ask why not buy LMIR units instead as they are trading at 38.5c each cum distribution of 1.06c now.

At a conversion price of 31c per rights, getting nil-paid rights now at 5.6c means a total price of 36.6c. With an estimated annualised DPU of 3.26c, post rights issue and acquisitions, we are looking at a distribution yield of 8.9% and a very low gearing of under 10%. I think this is pretty attractive.

Now, if we were to buy the units at 38.5c and secure the 1.06c income distribution, our cost (to make a fair comparison) would be 38.5c - 1.06c = 37.44c. Compared to buying the nil-paid rights, it is a tad pricier (at about 2.3% more).

For anyone who would prefer to secure the said income distribution for any reason, the REIT goes XD on 16 Nov.

Last day of trading of nil-paid rights is 18 Nov. I will wait to see if I could collect more on the cheap.

Related post:
LMIR: Circular to unitholders.

Tea with AK71: A short break.

I have not been blogging for a few days. I did not even look at the stock market.

My portfolio is not a trading one. It is basically one that generates regular and reliable passive income. So, it is not unthinkable to just leave it alone while I take a short break.

I did receive a SMS from my broker today regarding LMIR's rights issue and how much I should transfer to subscribe to it. Other than that, I have been out of touch.

Where did I go the last few days? Here is a clue:

I might be blogging about my trip in my travel blog over the next few weeks. Look out for it. :)

Related post:
No change to my plan as I plan changes to my life.

Project 360: Girls' night out!

In the final episode of Project 360 brought to you by P&G (Olay) and Nuffnang, the girls get together for a night of fun, laughter and pampering while they catch up and find out who the winner of the series is!

Watch the final episode here:
 http://sg.churpchurp.com/AK71SG/share/olay360finalepisode

STI in retreat: Sound Global, Golden Agriculture, Keppel Corporation and REITs.

STI 2,789.35

- Down 66.42 pts.

STI 2,789.35

- Down 66.42 pts.

Not a pretty sight, is it? Scream in panic? Run around in circles? Sell everything and jump off a cliff like lemmings? There is plenty of fear. What should I do? Stay calm and look out for opportunities. I have spent time looking at various counters and I will talk about a few here.

More than two years ago, I went in big on E-pure, the current Sound Global, believing that the water industry is the logical beneficiary from constant efforts by governments around the world to improve water quality for their people. China is still underinvested in this area and Sound Global is a natural beneficiary.

Sound Global's share price touched a low of 40.5c in the recent sell down. As I got in at 20c more than two years ago, I was wondering if the price could go lower. After all, we can't tell if a bottom has been formed until after the fact. Could we see a retest of 40.5c now that sentiments have soured? We could, of course.

However, seeing how volume was not very high as black candles were formed, the bears seem to be lacking in conviction. I will probably start buying in at 48.5c. Why 48.5c? 48.5c could be a significant near term support as that is also where we find the trendline support and the rising 20dMA.

I also subscribe to the idea that there will be increasing demand for food and oil as the middle class in Asia expands. Golden Agriculture is a likely beneficiary of this long term trend.

The counter's price weakness in the last two sessions was on the back of decreasing volumes. This is again a sign that the bears lack conviction. I would like to get back in at supports. I see immediate support at 62c. In very bearish conditions, we could see gap filling at 58c.

I also want to re-initiate a long position in Keppel Corporation. This is a company I held rather short term long positions in both in the Asian Financial Crisis in the late 90s as well as in the Subprime Crisis a couple of years back.

I would like to re-initiate a long position in the conglomerate, believing that it will continue to be a beneficiary of the global race for oil which is a theme I firmly believe in although there could be short term setbacks.

Further weakness could see a retest of $8.40, a natural candlestick support which broke on 23 Sep after being tested multiple times. I would buy in slowly as there are quite a few gaps which could be filled at lower prices if $8.40 should give way. That volume expanded as a long black candle was formed today does not inspire confidence.

I also have my eyes on a few REITs which are seeing weakening unit prices and rising distribution yields. Prices could weaken further if sentiments continue to sour. I will judiciously add to my long positions to benefit from the sell down. Panic? Not me.


Related posts:
1. Why do I not panic?
2. Sleep well at night with a plan.

Singapore Kindness Movement.

I always believe in being courteous. However, there are times when I just feel like bashing in some people's faces. These are people who do not appreciate courtesy and are totally inconsiderate.

This world would be a much nicer place to live in if everyone is more considerate and courteous towards one another. Is it so hard to show consideration and courtesy?

Do you use ‘please’ and ‘thank you’ often? What you say matters and how you do so – politely and graciously – also makes a difference.
- Singapore Kindness Movement.

Make Singapore a kinder, more courteous place.
Let us all do our part. Find out more at:
http://sg.churpchurp.com/AK71SG/share/makesomeonesday

Thank you. :)

REITs and rights issues: Dilutive or not?

I was not the best Science student, that is for sure. I made the switch from Science to Arts at the advice of my school principal when I was in secondary school and that was probably the best advice during my school days in terms of my academic life.

I do, however, remember the scientific concept of "dilution". To me, it is quite simple. 




If I had half a glass of orange juice and I added half a glass of water to it, it would taste quite bad. Diluted and, in this case, half as concentrated.

However, if I had half a glass of orange juice and I added another half a glass of the same type of orange juice to it, would it taste any different? 

No, it would taste the same. 

Concentration stays the same. Not diluted.

There has been quite a bit of talk in cyberspace that rights issues by REITs are dilutive if we as unitholders do not participate in them. 




Some would even say that the REITs are taking back the income they distributed to unitholders before. 

Thinking of rights issues in such a manner is like suffering from cataracts. These people are not seeing things clearly.

If a REIT's distribution yield was 10% and after rights issue, it remained at 10%, would it "taste" less delicious? 




No, it would still be giving me the yield I had enjoyed before the rights issue. 

The rights issue would be simply providing me an option to increase my investment in the REIT for the same distribution yield, doubling future income in nominal value.

However, if I did not participate in the rights issue and chose to sell away the nil-paid rights instead, would the distribution yield for my remaining investment in the REIT be lower? Probably so.

However, since we had sold the nil-paid rights, the cost of our original investment would be lowered and the distribution yield would, thus, be higher. 

Theoretically, therefore, we would not be worse off in terms of distribution yield if we chose not to subscribe to the rights issue.




Most arguments which say that unitholders would see dilution if they did not take part in rights issues are referring to how their shares of the enlarged capital base would shrink in percentage terms. 

This argument, apart from being academically appealing, holds no pragmatic significance for me.

Having said this, not all rights issues are distribution yield accretive. Each rights issue should be assessed based on the circumstances leading to it and its pro forma numbers. 




Equity fund raising as a concept is simple enough to understand. 

To have a simple blanket statement that unitholders not taking part in rights issues would see dilution is, however, too simplistic and ignores what is most important about investing in REITs: income.

Cache Logistics Trust: 3Q 2011.

A DPU of 2.095c has been declared and this is an 8% increase year on year. Annualised at 8.38c, it would translate to a distribution yield of 8.38% at the last traded price of $1 per unit. Not bad. That would explain the strength of the unit price in the days running up to the announcement.

Occupancy: 100%.
Gearing: 30.4%.
Interest cover ratio: 8.3x.
Total assets: >$830m.
Financing cost reduced from 3.92% to 3.81%.

It would be a natural course for Cache Logistics Trust to eventually have total AUM of $1b. With gearing at 30.4%, it could borrow another $150m easily before hitting the 40% mark as it embarks on acquisitions to hit the $1b AUM mark.

The REIT might not have to do any equity fund raising at all. This would be good for unitholders since all acquisitions in such an instance would be distribution yield accretive, all else remaining equal.

A good set of numbers and I will look out for opportunities to accumulate more units of this REIT on pullbacks.

Technically, when a REIT goes XD, we usually see a pullback in its unit price. We have seen it with AIMS AMP Capital Industrial REIT, Sabana REIT, Cambridge Industrial Trust and First REIT recently.

I have identified the supports for Cache Logistics Trust where it could be more rewarding to enter long positions at. Now, I wait. Wait to receive income for my current investment. Wait for weakness to accumulate more.

See presentation slides: here.

Related post:
Cache Logistics Trust: Initiated long position at 91.5c.

My weaknesses (Part 2).

Not too long ago, I indulged in one of my weaknesses... on two occasions... at Andersen's of Denmark.

Visit 1: Fondue for one. I chose this because there were bits of fruits and being the rational me who is trying to lead a healthier lifestyle, it was a healthier choice. Wait a minute, a healthier choice in an ice cream outlet? Hmmm... Nah, I am over-analysing. Healthier, it is! ;p

Visit 2: Apple pie! An apple a day keeps the doctor away. I am sure a slice of apple pie would do the trick too, right? Why am I not saying anything about the ice cream? Oh, the two scoops of ice cream were just accompaniments and, honestly, I did not touch the big dollop of fresh cream you see on the extreme left. Healthier choice, remember? ;p

In a pretty crowded scene which Swensen's probably has an advantage as being the most entrenched player and Haagen Daz has the honour of being probably the most atas, Andersen's has been doing pretty good business if my observations are anything to go by.

Related post:
Tea with AK71: My weaknesses.

McDonald’s Monopoly has found its $80,000 cash winner.

I guess I will try to win the Volkswagen Touran now. Actually, just winning a Macbook Air would make me really happy. I need Tanjong Rhu!

See all remaining prizes at http://sg.churpchurp.com/AK71SG/share/mcd-monopoly2011-3

Get your game labels at McDonald’s restaurants today! Double labels on weekends! Good luck!

CPL, CMA and NOL: Resistance levels to look out for.

We had a very nice rally today. The upward march on the STI was almost uninterupted all the way from the start of the session. In an earlier blog post on 17 October, I mentioned that there seems to be a bias for further upward movement and it has taken almost two weeks to materialise.

Now that a rally is underway, for investors who are already vested, do we ask if the rally could continue tomorrow? No. We should ask if the rally were to continue tomorrow, where are the resistance levels? We should be looking for exit prices.

For investors who are not vested and who are knocking themselves on the heads for being overly bearish, they want to know where are the supports so that they could consider buying on pull backs. However, given the strength of the rally in Europe right now, chances of a retest of supports could be rather slim. If I had missed the boat, so be it. That's my take.

For CapitaMalls Asia,  a long white candle tested the high of 17 Oct at $1.31. Overcoming this resistance level will see a cluster of resistance levels ahead: $1.33 as provided by the declining 100dMA followed by $1.36, a many times tested resistance level in early September.

In very bullish conditions, we could see the gap at $1.395 filled. Where should I place my sell order? As is my usual style, I will partially divest at each resistance level.

Capitaland could test resistance at $2.71 as a white candle was formed today on the back of very much higher volume.

If $2.71 were to be taken out convincingly, we could see the gap at $2.79 filled eventually. Before $2.71, we have the declining 100dMA to contend with. This MA approximates $2.68 in the next session.

NOL formed a nice white candle today on the back of relatively high volume. Immediate resistance is at $1.19, the high of 13 Oct. Given the momentum of the upward movement, chances of a continuation in the next session is high.

Overcoming $1.19 would see $1.24 and $1.27 as the next two resistance levels, the 123.6% and 138.2% Fibo lines respectively. $1.27 also approximates the position of the declining 100dMA.

With container shipping business very much in the doldrums, the 138.2% Fibo line could be a strong resistance, if tested at all. Remember that 38.2% is also a golden ratio.

Good luck.

Tea with AK71: Healthy and economical lunch.

What am I having for lunch today?

This is easy to prepare and to bring to work. Easy to wash up too.

This meal is high in fibre and full of natural goodness. Lower in glycaemic index than ground oats, I also prefer raw rolled oats to instant oats which are pre-cooked and dried.

Although instant oats are convenient, just add hot water and they are ready to eat, they are not as chewy, flavourful and nutritious. Anyone in the know would tell you the less processed, the better.

How do we prepare something like this? Remember this? Tea with AK71: A healthy low cost meal.

A healthy lunch that is also gentle on our wallets. I like it.

Mind Your Money: Budgeting.

I have the pleasure of watching "Mind Your Money" on XIN MSN this evening. The first episode is on budgeting. It is basically about managing personal cash flow.

If people were to ask me how I grew my money, I would say that I spend as little as possible and save and invest the rest. So, it all starts with budgeting.

I wrote a piece on wage slaves before which attracted quite a few comments. Obviously, people who spend as much as they make are not about to grow their money since there is nothing left to grow.

If you find that you have been working for a few years with reasonably good income but you are not saving much money, if any, this program could be for you. I think it is quite good for anyone who has never done any budgeting before.

Watch "Mind Your Money": http://video.xin.msn.com/watch/video/episode-1/1gqq74i6l?cpkey=6b6b1cb2-3c96-4fcc-9001-271abc9c19fa%7c%7c%7c%7c&src=v5:share:sharepermalink:&from=sharepermalink


Related posts:
1. Wage slaves should be fearful.
2. Money Management: Needs and wants.

Further credit tightening is almost a given.

I was talking to a friend whose family controls a public listed company in Singapore and he is very optimistic about Singapore, very confident that we will not suffer a recession. Although I reminded him that in the last global financial crisis, only China, India and Indonesia escaped a recession, he remains very optimistic. Is this optimism the norm?

Many think that the housing prices in Singapore are being driven up by foreigners. Numbers released not too long ago shows that foreigners accounted for some 16% of condos sold so far this year. The rest were sold to Singaporeans and PRs. If I remember correctly, PRs accounted for 5% or less of total HDB flats transactions. So, the vast majority of transactions in residential real estate here belong to Singaporeans. Logically, a great number of Singaporeans are doing well.

Indeed, if the recent astronomical COE prices are anything to go by, I would say that people and companies here are doing extremely well. Therefore, a pervasive sense of optimism and even invincibility is not difficult to understand.

Personally, I have a blog post not too long ago which questioned whether there would be a double dip recession or whether we would simply see very slow growth. Do I have the answer? If I were to say I do, would you believe me?

Do I know anything for sure? I know that if there should be a prolonged slowdown in the world economy, Singapore will not be spared. I know that if there should be a credit tightening in the world banking system, Singapore will not be spared. Singapore has a very open economy and to think that we will be spared any negative ramifications is simply naive.

In order to stay optimistic about Singapore's economy, we have to be optimistic about the world economy and we have to stay optimistic that there will not be any significant credit tightening in the world banking system. Do you think it is easy to be optimistic about these?

"In July, banks and insurers agreed to contribute to reducing Greece's debt via a 21-percent writedown on their holdings of Greek bonds... But recently there has been growing speculation that Athens needs to reduce the value of its debt by 50 percent -- or perhaps even more -- to make its finances sustainable." Read article here.

This speculation is likely going to be a reality.

"Diplomatic sources said Europe and the IMF would only proceed with a second planned Greek bailout of 109 billion euros if banks accepted losses of "at least 50 percent" on their debt holdings." Read article here.

This is going to be disastrous for European lenders holding Greek debt. How would this affect us in Asia?

In a discussion I had with my father a few weeks ago, I told him that we could see European lenders tightening on credit and recalling funds from Asia where they have a significant presence.  Although this could be a welcome development as Asia is sloshing in funds in search of higher returns, resulting in strong inflationary pressure, people and companies who have thus far done well by leveraging on cheap money could suffer.

I am not an economist but some form of credit tightening with the proposed Greek "debt haircut" of 50% is more likely to take place than not. I can only hope that the negative effects will not be as fearsome as some have made them out to be.

For any who recently borrowed to the max buying a dream private property or a dream car at record high prices here on our tiny island, I can only hope that the dreams will not become nightmares.

First REIT: Bumper distribution 3Q 2011.

Ex-rights, with a pro forma DPU of 6.4c for 2011, I estimated First REIT's fair value to be at 80c per unit many moons ago. This was based on an expectation that 8% distribution yield was fair for the REIT. With the latest announcement of a DPU of 1.92c for 3Q 2011, is the estimated fair value of 80c outdated and probably too low?

I still hold the units I bought during the last bear market at 42c per unit as well as the rights units at 50c per unit. I also bought quite a number of nil-paid rights at 16c per unit and the final cost on those units is 66c per unit. In the recent market weakness, I bought more units at 73c, 74.5c and 76c. These, I partially divested as price tested resistance. On cost, the distribution yields on my current positions in the REIT are between 8.8% to 16%.

First REIT's unit price ended the last session at 79.5c. NAV/unit stands at 77.88c. So, the REIT is trading above NAV now. This could change in future even if the REIT's unit price stays at the current level as the management is in the early stages of talks with its sponsor for more acquisitions. With gearing level at 16.4%, the REIT has a very comfortable debt headroom. Another round of equity fund raising is, of course, possible but there is less necessity for one in the near future.

With news of higher DPU for 3Q 2011, could we see unit price testing and probably even breaking the psychological resistance at 80c in the new trading week? We could, of course.

Am I going to increase my investment in the REIT at current prices? I won't. Why?

The DPU of 1.92c for 3Q2011 includes 0.34c which is a special non-recurring distribution. This is from divestment gains of the REIT's Adam Road property. If we remove 0.34c, the DPU is 1.58c which is more in line with expectations. 0.34c is just a bonus.

So, although some want to increase their investment in the REIT tomorrow, I won't.

XD: 28 October.
Payable on 29 Nov.

Maintaining my current investment in the REIT, I am very pleased with the bumper distribution and look forward to its payment on 29 Nov.

Read announcement here.

Related post:
First REIT: XR and fair value.

Tea with AK71: Breakfast at Long John Silver's.

I think breakfast at Long John Silver's compared to McDonald's offers better value for money.

Thick slices of toast with turkey bacon, eggs and cheese. Yummy! I am not crazy about the hash brown though.

Iced Milo! Slurp!

Price: $5.10 with tea or coffee. Add 50c to upgrade to an iced Milo. :)

From their website:

Caution: Waiting time can be quite long if they are busy. I would usually avoid if I see long queues or many tables with a number standee which means diners are waiting for their meals to be sent to them. In terms of efficiency, McDonald's still takes the top spot.

Sabana REIT: 3Q FY2011.

Sabana REIT together with AIMS AMP Capital Industrial REIT are my top investments at the moment. Together, they account for a lion's share of my passive income generated from investments in the Singapore stock market.

Sabana REIT has declared a DPU of 2.14c for 3Q FY2011. Based on today's closing price of 91c per unit, this represents a distribution yield of 9.4% based on an annualised DPU of 8.56c. Beats leaving money in a savings account and being paid an interest income of 0.05% per annum, doesn't it? The best one year fixed deposit I know of pays an interest income of only 1%.

Sabana REIT will also legally complete acquisitions of four properties in 4Q 2011. These acquisitions are DPU accretive since they are fully funded by debt. This is possible due to its very low pre-acquisition gearing level. So, expect DPU to bump up in the coming quarters. Good news for anyone investing for income, surely.

NAV per unit after distribution: $1.05
Interest cover ratio: 7.6x
Estimated gearing, post acquisitions: 35%

Sabana REIT's total AUM is set to cross $1b with the completion of the said acquisitions and the REIT is bound to deliver on its promises made during its IPO.

The counter will go XD on 25 October and the income distribution is payable to unitholders on 29 November.

Read related posts on Sabana REIT: here.