Hyflux: 6% perpetual Class A preference shares.

I owned units in Hyflux Water Trust in the past. That investment did very well for me and, unfortunately, the Trust was privatised not too long ago. Read blog post here.

Back in 2009, I was also considering between Hyflux and E-pure as beneficiaries of a global search for solutions to water problems. I went with E-pure simply because of valuation reasons. I have no doubt that Hyflux is a strong company in a strong industry too except that its valuation has always been too rich for me.

However, the news that Hyflux is issuing preference shares with an annual dividend rate of 6% is somewhat surprising to me. In an environment of low interest rates, isn't paying a 6% interest a bit expensive? It would only make sense to do this if borrowing from a financial institution would be costlier and it would only be costlier if the company and/or its business is perceived to be high risk.

The only preference shares that I have ever owned is DBS NCPS 6%. This was something I bought 10 years ago. Intuitively, and we won't be too wrong to say this, DBS is less risky compared to Hyflux. Indeed, if DBS should default, I think that's the end for Singapore.

In a nutshell, if I were to invest in Hyflux, it would not be for income, it would be for growth. To invest for growth, I would not invest in Hyflux preference shares. To me, it is that simple.

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Hyflux to offer $200m of perpetual preference shares
Wednesday, 13 April 2011

© 2011 - The Edge Singapore

Mapletree Commercial Trust: Strong demand.

I have been asked by many people if I would be interested in the IPO of Mapletree Commercial Trust.

While I am a regular shopper at VivoCity, I am not enthusiastic about the IPO of this Trust. Why? The distribution yield of 5.5 to 5.9% seems a bit low. This is based on the price range of $0.84 to $0.91 per unit.

Mapletree Commercial Trust to raise $924m in IPO: Update
Wednesday, 06 April 2011

© 2011 - The Edge Singapore

It has just been reported that the initial public offering has already been five times covered and the IPO is likely to be priced between the midpoint and top of the price range of $0.84 to $0.91 a unit.

It seems to me that there is still a lot of liquidity out there searching for better returns. Could we see a spillover effect to other S-REITs since there would be a lot of excess liquidity as this IPO is expected to be many times oversubscribed? Why not?

Mapletree Commercial Trust’s $924m IPO 5 times covered
Wednesday, 13 April 2011

© 2011 - The Edge Singapore

Allgreen: Looking to initiate a long position.

I was just reading Allgreen's 2010 Annual Report and I must say that I like the numbers:

EPS: 14.23c which means a PER of just 7.65x at today's closing price of $1.09 per share.

NTA per share: $1.62 which means it is currently trading at almost 33% discount to NTA.

Gearing (Net debt to equity): 0.18x (which I believe is very conservative).

Dividend per share: 5c (XD 5 May 2011) or a yield of 4.59% at today's price.

Technically, the counter could experience some near term weakness as recent attempt to move higher was half-hearted on lackluster volume. The descending 100dMA is still the resistance to watch and that is currently at $1.12. Volume has been increasing as price retreated. OBV has turned down rather sharply, a clear sign of distribution.

Connecting the lows of 24 Feb and 15 Mar would give us a trendline support and a move to test this support is likely as the Stochastics is still bordering on overbought. A correction of the overbought condition could see a weaker share price and I could initiate a long position at $1.06 or $1.07 (50dMA).

Capitaland: Testing support at $3.36.

I initiated a long position in Capitaland today at $3.38 and $3.36. This was after what I said in the last blog post on this counter: "The Fibo Fan connects the low of 17 March and the high of today. Now, what I am interested in are the positions of the golden ratios in the next few sessions. 38.2% would be at $3.38 and 50% would be at $3.32 in the next session. Notice how the 20dMA seems to coincide with the 50% line? This is likely to be a strong support, if tested. In between these two golden ratios, we find the 50dMA, still declining but gently so, at $3.36. This could provide some support as well."

So, am I going to put in another buy queue for tomorrow at $3.32? Nope, looking at the charts at the end of every day is what I do and the 50% Fibo Fan line is at $3.33 tomorrow. Before that, however, we could see price supported as it closes the gap at $3.34 (1 April). So, buy queues for tomorrow would be at $3.34 and $3.33 for me.

If I were to choose between Capitaland and CapitaMalls Asia, it would seem that the latter has stronger technicals. However, it would be wise not to put all the eggs in one basket, I guess.

Coincidentally, OCBC Investment Research just did a piece on Capitaland and I would like to share what they said here. Remember to take everything with a pinch of salt:
Chinese worries overwrought - BUY. With the Chinese government’s plan to build 36m low-income homes by 2015 and its increasing determination to curb property prices, we recognize the down-side risks from Chinese property prices. However, given CAPL’s current share price, we believe Chinese residential worries on CAPL are likely overwrought due to two reasons. First, Chinese residential exposure only takes up around 12% of CAPL’s total book assets (FY10, ex. cash). In addition, we believe major projects, such as the Paragon, are well thought-out and likely resilient in a weak market. We update our assumptions and maintain a BUY rating with a revised fair value of $4.10 (at parity to RNAV) versus $4.05 previously. Read complete report here.