Treasury China Trust: A chat with Nick.

While chatting with Nick earlier this evening in LP's cbox, he said that he is looking at Treasury China Trust (TCT). A trust to consider for passive income plus growth, perhaps? The following exchange is reproduced with Nick's permission:

Nick @ Home: Treasury China Trust is an interesting company to ride the property boom in China. I must study it more
Nick @ Home: Trading at 70% discount to its NAV......
AK71 @ home: 70% discount to NAV?!
Nick @ Home: Yea...despite owning 3 high quality assets
AK71 @ home: what's the gearing?
Nick @ Home: 35%
Nick @ Home: Debt: S$658 million. Asset: $1.94 billion
AK71 @ home: debt profile?
Nick @ Home: Debts was recently refinanced...mature in 2015
Nick @ Home: Interest expense will be halved
AK71 @ home: hmmm... nice yield?
Nick @ Home: DPU forecast is $0.05. They will use equity (profits earned from property sales last year) to fund dividend payout near term. Once their development projects come online, they expect cash-flow to triple.
Nick @ Home: From now to 2012, dividend payout ratio will be 80% after which it will drop to 50% to fund more development projects
AK71 @ home: very promising... sounds tempting
Nick @ Home: This year yield will be around 3%...I guess with the rising rentals and lower interest expense, DPU can rise in 2011....in 2012, its development projects come online and DPU should increase significantly
Nick @ Home: But being a development trust, it has a growth element inside unlike a REIT
Nick @ Home: So its yield won't be high but it more growth potential since they can build and sell assets to other REITs haha
AK71 @ home: huge interest in the last 2 sessions
Nick @ Home: Yea...they announced that they renew their lease at over 8% higher rates
AK71 @ home: short term overbought but very strong momentum...
AK71 @ home: $1.60 is resistance turned support... can consider Nick @ Home: http://www.treasurychinatrust.com/
Nick @ Home: JP Morgan gave a very bullish report on 16 August
Nick @ Home: available in the tct website JP Morgan's report at this link: http://www.treasurychinatrust.com/Pics/httpmarklogic-b.jpmchase.net8005GPS-434739-0.pdf

Healthway Medical: Up or down?

Price hit 16c on 31 Aug.  That was exactly on the rising 200dMA.  Today, the counter hit a high of 17.5c.  Technically, 17.5c is a formidable resistance level as it is a many times tested resistance and it is also where we find the declining 20dMA and the flat 100dMA.  Healthway Medical is at a critical crossroads, it would seem.

Looking at the 20dMA, there is no doubt that the counter is in a downtrend in the short term. With the 50dMA declining as well and the 100dMA flatlined, the short term picture is not encouraging.  However, the 200dMA is still rising and if it holds, Healthway Medical could just be going through a period of consolidation.

Today's upward movement in price is probably in response to the oversold situation as suggested by the RSI which has risen out of the oversold territory. The MFI, which has been rising since 18 Aug, signalling a return of demand, however weak, is testing the downtrend resistance.  If it breaks this in the next session, it would provide some much needed momentum to help push price higher.

The MACD, although still declining in negative territory, is seeing its distance with the signal line narrowing and we could be seeing the early stages of a bullish crossover. Remember, TA is about probabilities, not absolutes. Punters could make some nice gains here if everything pans out nicely.

Related post:
Healthway Medical: A low of 16c.

MIIF: Seeing value.

I used to have a very large position in MIIF about a year ago but I've divested most of it.  I still have a smallish investment left in the trust but I am not really doing anything with it.  It broke out yesterday and I blogged about it.  See: MIIF: Breakout.

Today, I received this very interesting email from The EDGE and it seems that we could see MIIF's price going higher in the near future:

Market punters have been fixated on Macquarie International Infrastructure Fund of late, a mutual fund which owns four assets. After selling British broadband operator Arqiva for $238.4 million and Canadian Aged Care for $91 million this March, the fund now owns primarily Asian assets. These are a 38% stake in Changshu Xinghua Port (Jiangsu), an 81% interest in Hua Nan Expressway in Guangdong, 20% stake in Taiwan Broadband Communications (TBC) and a 100% stake in Miaoli Wind, a wind farm in Taiwan.
                   

For 1H10, MIIF announced a distribution of 1.5 cents per share which will be paid on Sept 9. The fund has no borrowings at the corporate level, cash of 36 cents per share, and NAV is 80 cents. Dividends for 2H10 are expected to be maintained, and Macquarie Research has forecast a full-year dividend of three cents for FY10, rising to 3.4 cents for FY11.
 

Why have investors suddenly woken up to the value in MIIF? In a tough market, investing in an infrastructure trust offers yield potential and turnaround potential if it sells its assets. And it isn’t quite the same as investing in property via REITs. For one thing, China isn’t clamping down on infrastructure investment. On the contrary, the country continues to build roads, railroads, renewable energy assets and money is still available to fund their construction.

However, the real reason for the interest in MIIF is probably not China but Taiwan. In the past few months, there has been corporate activity in the broadband and cable TV industry on the island. Taiwan-exchange listed Kbro, owned by Carlyle, was sold in July to the Tsai family, who are Taiwan Mobile’s shareholders. Reuters reported that the price was around NT$65 billion ($2.7 billion), implying a 12–13x EV/EBITDA multiple.
                

Macquarie Research says such pricing implies that TBC is worth NT$51 billion. If so, MIIF’s interest is worth $221 million, the research report states. In 2007, the fund acquired the stake for just $161 million. Meanwhile, another Taiwanese broadband company, CNS, is being auctioned off by MBK Partners and Macquarie Bank and Providence Equity Partners were identified by Reuters as bidders. Macquarie Research says that MIIF could sell its stake in TBC to Macquarie and Providence which could use TBC to acquire CNS. A sale of TBC would add 14 cents to MIIF’s cash balance, Macquarie Research says. TBC accounts for 17% of MIIF’s asset base.
 

Already, MIIF’s discount to its NAV has been narrowing, from almost 70% to the current 30%. Macquarie Research has a target of 70 cents for MIIF. On Aug 26, MIIF announced that Macquarie Bank had raised its stake from 8.88% to 9.06%.

The EDGE Weekend Comment Sept 3, Goola Warden.
Disclaimer: The Edge Publishing Pte Ltd does not accept any liability whatsoever for any direct, indirect or consequential losses or damages that may arise from the use of information or opinions in this newsletter. The information and opinions are not to be considered as an offer to buy or sell any of the companies discussed.

China Hongxing: Taking a break?

On 1 Sep, I suggested that the technicals were pretty strong and the immediate target of 19.5c seemed attainable.  In the last two sessions, however, volume shrank as price got stuck between resistance turned support of 17c and what is now the near term resistance at 18c.

The MFI is declining and it could decline further to retest the support line which would approximate 50% soon.  This could happen if the volume simply declines further without the price having to decline below 17c.  This is a likely scenario given a picture of constant accumulation as suggested by a rising OBV.  A slowdown in momentum is good as some weaker holders are weeded out.

In case 17c support is broken, there should be a rather strong support at 16c.  This is a many times tested resistance and should be a strong support, if tested.  16c is also where we would find the rising 20dMA in the next session.

Related post:
China Hongxing: Immediate target in sight?