Earth shattering news: Yoga, CIT's rights issue, Japan's earthquake and Saizen REIT.

This is a momentous day. I went for my first Hot Yoga class! Yes, were you expecting me to talk about the correction in the USA or the earthquake in Japan? Well, jokes aside, I have not stretched myself in so many different directions and curled myself up in so many positions in ages, if at all! It was all done in a room set at a temperature of 38 degrees centigrade. I lost almost a kilo after the session. Had a dinner of salad, fish and rice after the session just to continue feeling good about myself doing something healthy for a change!

Anyway, when I came home, I saw 15 comments in my blog awaiting moderation and, of course, response. Wow! That's a record but one that is not taken note of by any analytical tools. I guess people must really be spooked today by all the happenings in the market, including Cambridge Industrial Trust's (CIT) rights issue.

OK, if you can't tell by now, this is going to be a mish mash of a blog post. I am going to talk about all the stuff that's on my mind and maybe more. I am still feeling very warm from yoga, despite having showered twice, once at the yoga studio and once at home (after replying to all the comments in my blog). Full from a very healthy dinner, I am feeling very drowsy at this moment.

Now, first off, CIT. I got in at 51c this morning and I blogged about it here. The sell down after lunch was rather unexpected. Well, so was the earthquake in Japan. These things happen. As long as we got in at a fair price, there should be no regrets.

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. With a DPU of 5.07c, post rights, it would be a distribution yield of almost 11%! Of course, owning more units could possibly entitle me to more excess rights as well.

Next, the biggie: earthquake in Japan. This has been described as the worst earthquake in Japan in many years. In my memory, the last big quake was the Kobe earthquake in 1995 and that measured 7.2 on the Richter scale. The earthquake in question now measured 8.9 on the Richter scale. It is a catastrophe that has triggered tsunami warnings "for countries to the west and across the Pacific as far away as Colombia and Peru". Read report here.

For investors of Saizen REIT, we are concerned as to how much of the REIT's portfolio is affected. Saizen REIT currently owns 146 buildings of which 28 are in the affected areas. These buildings jointly account for about 15% of the REIT's income and 15.5% of its NAV.

In a timely report by its co-CEO, Mr. Chang Sean Pey, it is revealed that "the asset manager of Saizen REIT are in the process of contacting the local property managers in Sendai, Koriyama and Morioka to find out their well being and to assess the impact of the Earthquake on Saizen REIT’s property portfolio.....(and) will continue to make appropriate announcements as and when it receives updates on the above matter." Read announcement here.

There is not much else we can do but to wait and I won't lose sleep over this. Why? The unit price of the REIT fell and hit 15c at one point before closing at 15.5c which is a support I just blogged about yesterday. It is where we find the upturned 100wMA now. Read blog post here.

Fundamentally, if Saizen REIT did not insure any of the buildings concerned and this is very unlikely, we could expect a revised NAV of about 22.67c/unit and a reduced DPU of 0.88c, bearing in mind that this could be 50% higher if not for the amortising nature of its loans. These numbers do not include potential contributions from YK Shintoku which is in default of its CMBS. Weaker numbers, no doubt, but not catastrophic.

So, stay calm and rational, wait for the management's report and if the market should overeact on the downside, I would buy more. That's what I'm doing and I am going to enjoy the weekend. You should too. :)

Mapletree Logistics Trust, Saizen falls on Japan quake
Friday, 11 March 2011

© 2011 - The Edge Singapore

GLP slumps on Japan quake; company checking properties
Friday, 11 March 2011

© 2011 - The Edge Singapore

Cambridge Industrial Trust: Friends again.

I chose a rather amusing title for this blog post (some might even say cavalier) and it shows that there are no forever friends or forever enemies in this world.

I was wondering if there would be a sell down of CIT's units today but I guess market participants are savvy to the benefits of this rights issue. The buy queue at 50.5c is very long.

So, I had a choice of either buying up at 51c or just wait and see how much the nil-paid rights would trade for later this month. The biggest attraction of buying up at 51c is that it would allow me to apply for excess rights which would bump up the distribution yield for me if I should be successful in getting some. Going by past experience, chances of success should be rather high.

Now, I am, once again, a CIT unitholder. I bought up 17 lots at 51c/unit today. This is a small investment to get my foot in the door, so to speak. This would guarantee me 3 lots of rights as I would basically apply for excess rights to round up the odd lot. The average price per unit would be (51c x 17 + 42.9c x 3) /20 = 49.785c. With a DPU of 5.07c, it would mean a distribution yield of 10.18%.

Without the attraction of possibly getting some excess rights, I would not have bothered to buy up at 51c today. So, assuming that I am awarded 1 lot of excess rights (on top of what is required to round up the odd lot), that would bring my average price per unit down to 49.457c which would mean a distribution yield of 10.25%. I hope I would be able to get more excess rights than just 1 lot.

I will also be keeping an eye on the price of the nil-paid rights when they start trading. In my last blog post on the subject, I mentioned that the rights should not trade higher than 7c. It would not make sense to buy at a higher price than 7c. In fact, at 7c, I would not bother either because it would mean a final price of 7c + 42.9c = 49.9c which is higher than my expected average price, post rights.

If the nil-paid rights should trade at 4c to 5c, it would be quite attractive as that would translate to 46.9c to 47.9c per unit which would have a distribution yield of 10.58% to 10.81%. Any price less than 4c would be a steal!

Related post:
Cambridge Industrial Trust: 1 for 8 rights issue.

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.