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Sabana REIT: Safe to buy now?

Someone who managed to get some units of Sabana REIT at IPO asked me if it is safe to buy more units of the REIT now? Before the counter announced its first income distribution of 3.04c, I blogged about how I felt Sabana REIT was a great investment then.

Of course, there were nay sayers and people who told me I was wrong. There were also many who got in at the REIT's IPO and were burnt, refusing to look at the REIT anymore. There was also a friend who refused to be vested in the REIT simply because it is Shariah compliant. Now, that really boggles the mind but I suppose there is no accounting for such things.

Before I drift off too much in my discourse, back to the original question. Answer: I don't know if it is safe to buy more units of the REIT now. How's that for an answer? People keep asking me for absolutes and assurances. Well, they will keep getting disappointed.

Fundamentally, Sabana REIT is likely to continue doing well. Its numbers are strong and future income distributions over the next few quarters are likely to remain in line with forecast, everything else remaining constant. Even at today's high of 94.5c/unit, the REIT would still be trading at a discount to its NAV/unit of 98c. Distribution yield is 9.32% at 94.5c/unit with an annual DPU of 8.81c.

Technically, it is clear that Sabana REIT has seen its bottom. Price has been rising and seems to have hit resistance at 94.5c. Does it mean that price would go back down from here? No but if it does, the immediate support is at 93.5c (20dMA). This is followed by 92.5c (50dMA) and 92c (many times tested candlestick support). In the last session, it closed at 93.5c.

On the weekly chart, it is interesting to see that the Bollinger Bands are in the early stages of a squeeze. With unit price rising steadily in the past few weeks and staying above the 20wMA, chances that price could go higher in the coming weeks are fairly good. I have an immediate target of 95.5c, followed by 96.5c in case price moves higher.

A reader asked me for my estimate on the fair value for the REIT, seeing how the fair value I ascribed to First REIT some time back has come to pass. For a smallish REIT such as this, I expect an 8% distribution yield to be fair and that would, in turn, suggest a fair value of $1.10/unit for the REIT. Now, before you get too excited, that's only what I feel the fair value is. It is, by no means, the Gospel truth.

If Sabana REIT were to retest supports at 92.5c and 92c, I would probably be buying more. Good luck to all vested.

Related post:
Sabana REIT: DPU of 3.04c.
First REIT: XR and fair value.

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Noble Group: Caught a falling dagger?

Today, for the first time ever, I became a shareholder of Noble Group. I will confess that I do not understand the business and that going long here is taking on quite a bit of risk. Then, why did I do it? Let me share with you what's on my mind.

The share price of Noble Group is, undoubtedly, in a downtrend. I drew two trendlines, one connecting the lower highs and one connecting the lower lows. A down channel becomes quite clear. I see the channel support at $1.78 and that explains why I put in a buy order at that price, which was filled in the late afternoon today.

That a big black candle formed on the back of heavy volume is very ominous and it would not surprise me if the share price were to sink even lower next week. So, why take the risk of going long now? Why did I not cancel my buy order? After all, it was only filled late in the afternoon.

Well, the fact that the share price tested channel support alone would not have enticed me to enter. The MACD which looks like it has a nice chance of forming a higher low is an important factor too. Therefore, even if the price were to sink lower, as long as the MACD forms a higher low, we would have a positive divergence.

Am I not pre-empting then? Yes, I am and, yes, I agree that disciplined traders should not do that. I have said before that I am not a good trader and this is still true. After all, there is a chance that the MACD could form a lower low which means no positive divergence.

If the share price were to move higher next week, I would use the declining 20dMA as a guide to determine a price for divestment. Price could move higher to test resistance as provided by the trendline as well. I guess it is up to the individual to decide how much risk he is willing to take and how much gain is enough for him.

In the event that the share price were to move lower, I would not rush to average down my price, I would wait and see how things develop. Losing money in a trade is not as bad as losing our cool because of one.