Hock Lian Seng: Buying more?

On 12 Oct, I mentioned that I bought some shares of Hock Lian Seng at 30c support. I also said "Although the uptrend is still intact, could prices weaken further? Why not? The MFI is still in overbought territory while the MACD has just completed a bearish crossover with the signal line.  We could see price weakening to test the 50dMA at 29.5c or even the 200dMA at 29c. The latter being a long term MA should provide a rather strong support and I would probably buy more at 29c, if ever tested." Has the technical picture changed?

The rising 50dMA is now at 30c and 29c is still where we find the 200dMA, a long term MA which should provide a stronger support. If price tests 29c, I would buy more. 29c is also where we find the 138.2% Fibo line. This should lend support in case of retracement.

The MFI is now below 50% and is no longer overbought.  OBV does not show any sign of distribution.  I believe we are seeing weaker holders selling out. The 100dMA is rising strongly and seems on course to forming a golden cross with the 200dMA in time.

Related post:
Hock Lian Seng: 30c support.

Raffles Education: Oriental Century to delist.

News of delisting of Oriental Century seems to have impacted the share price of Raffles Education negatively today as price closed at 28c on higher volume. That 28c support is still holding up perhaps shows that the bad news has already been factored into the price.

Although we could see price going lower once the news is digested by market participants, fundamentally, I do not see Raffles Education's numbers too badly affected since Oriental Century is really old news.

Despite today's somewhat higher volume, a picture of low volume pullback is still quite clear. Higher lows on the MFI and RSI also suggest underlying support in momentum. OBV does not show any signs of distribution.

If 28c breaks, the next support is at 26.5c. Immediate resistance is at 29c.

I would keep an eye on the technicals as this counter could still have a nice recovery story.

Oriental Century to liquidate, delist from SGX. As Oriental Century is insolvent with very limited resources, it will not be able to make any exit offer to its shareholders. Raffles Education holds 29.9% of Oriental Century.
Wednesday, 27 October 2010

© 2010 - The Edge Singapore

Tea with AK71: MacDonald's Monopoly game.

The last time MacDonald's conducted a game of chance with Monopoly, I was not aware of it until it was halfway through. I found the idea quite ingenious. However, by then, the top prize had been won.

This time round, I am quite early in my discovery and I stand a chance of winning the top prize of S$80,000 cash! I have "Marina Bay" and need "Sentosa Cove".  There is only one "Sentosa Cove" tile in the whole of Singapore since there is only one top prize.  Whoever wins in the end is very lucky.

There is also one car to be won, a 1.6 litre KIA SOUL.  I have two of the three tiles now: "Ardmore Park" and "Holland Road".  I need "Orchard Road".  There is probably only one "Orchard Road" tile in the whole of Singapore too.

It seems that I will be having more value meals at MacDonald's for some time to come.

Suntec REIT: MBFC.

Suntec REIT is purchasing the one-third interest in Marina Bay Financial Centre (MBFC) held by Choicewide Group Limited, Cavell Limited and Hutchison Whampoa Properties Limited for S$1,495.8 million. This is hot on the heels of the announcement by K-REIT that it would purchase Keppel Land's one third interest in the same project. See slides here.

"The Manager is currently reviewing various financing options for the Acquisition to determine an optimal capital structure for the Acquisition. Details for the financing structure will be set out in the circular to be issued to Unitholders in due course, together with a notice of an extraordinary general meeting of Unitholders, for the purpose of seeking the approval of Unitholders for the Acquisition" and "The Acquisition is expected to improve the earnings and distributions for Unitholders". Read press release here

As per Suntec REIT's latest report, its current gearing is at 32.9%.  Total assets at S$5.275 billion.  Debt at S$1.733 billion. The REIT currently has 1,881,862,143 units in issue. See Financial Results for 3Q2010 here.

The net property income (NPI) of Suntec REIT is about S$200 million, annualised. NPI yield is 3.8%.  So, the acquisition at S$1,495.8m should at least have an annualised NPI of about S$60m (for a NPI yield of 4%) to make it NPI yield accretive.

Details as to the NPI of the acquisition has not been made available. However, it was made known that the acquisition will increase Suntec REIT’s office portfolio nett lettable area (NLA) from approximately 1.9 million sq ft to approximately 2.4 million sq ft. Using K-REIT's one third share of the same project as a guide which gives a NPI of S$37.396 million and if we include the income support of S$113.9 million payable over 60 months to be provided by the Vendor, giving us S$ 22.8m per year, we would get S$60.196m per year. So, the purchase looks to be NPI accretive.

It would be interesting to see what kind of financing structure would be decided upon. It is my assumption that Suntec REIT would issue rights to fund the purchase instead of having a share placement exercise if it is sincere about improving the distributions for unitholders. It could also gear up to 45% (on existing properties, excluding the proposed acquisition) and get about $600 million in loans which would reduce the size of any accompanying rights issue. Perhaps, in such an instance, they would have a 1 for 2 rights issue at about $1.00 per rights which would obtain an additional $909 million in funds. It could also gear up on the proposed acquisition (a 40% gearing would secure another $600 million in loans). This would further reduce the size of any accompanying rights issue.

Of course, this is all guesswork on my part. It is very late and I am half asleep. Let's wait for the circular.