Defensive stocks and REITs outperform in volatile times.

Market volatility has become a norm and it is getting harder to time the market. Rather than sitting on the bench and having your savings eroded by inflation, REITs have what it takes to provide you the value protection barring any major exogenous shocks. Defensive play would be better option taking into condition of the current erratic climate. Above all, the compelling yield will support the price and smoothen the overall individual’s portfolio returns.

Source: Phillip Capital
Read: REIT Sector Update, 12 June 2012.


Related posts:
1. Investing in REITs: A flawed strategy?
2. Telcos and REITs are top performers in May.

Saizen REIT: Insiders are accumulating again.

I read this in The Business Times just last evening:

CEO, Chang Sean Pey and executive director, Raymond Wong, acquired units in Saizen REIT this month with a combined 602,000 units purchased from 4 to 7 June at 14 cents each.

This is the CEO's first on-market trade since September 2011. The CEO now holds 3.65 million units or 0.26%. He acquired 2.02m units from March 2009 to September 2011 at an average price of 15.5c each.

Executive director, Raymond Wong, now has a deemed stake of 24.909m units or 1.74%. Prior to the acquisitions this month, he acquired 6.7m units from February 2009 to August 2010 at 10c to 17c each or an average of 14.3c each.

Also positive this quarter, executive director, Chan Kin, purchased 530,000 units on May 25 at 13c each. His deemed holdings increased to 185.041m units or 13.8%.

Of course, with insiders buying, it does not mean that the unit price is only going up from now.  However, do they know something we don't? Or do we know what they know but are unwilling to act like they have?

I do know Saizen REIT would be paying its half yearly income distribution in September. Is it going to be a bumper distribution?

Related posts:
1. Saizen REIT: Why did I buy and would I buy more?
2. Saizen REIT: Insiders buying again at 14c.
3. Saizen REIT: Acquisitions to increase DPU.

China Minzhong: Too cheap to sell.

One of the things we hear is that we should buy at prices we would not sell at and to sell at prices we would not buy at. Not too long ago, on 5 June 12, I said that it is not a good time to sell China Minzhong's shares and that it would be more sensible to think of adding to any long positions. See the blog post: here.

In a research dated 11 June 12, Kim Eng says that:

We would not recommend investors to cut loss at this stage as stock valuations are still too cheap to do so. ... The next catalyst for the stock would be the full-year results ended in June 2012. We expect to see revenue recovery due to the late-winter season and the fact that Minzhong should also be able to collect the bulk of its receivables in 4QFY6/12. The full-year numbers should reveal the impact of the European problem on both demand and asset quality.

How low can the share price go? We conduct a scenario analysis to determine how low the share price can fall to ... Although we believe that the share price has already factored in the potential slowdown in demand in Europe and our target PER of 4.7x is 25% below the historical average, we have:

1. cut our sales volume further by an aggressive 40%,

2. written down CNY200m in receivables for FY6/13, and

3. revalued the share price at 3.7x PER, which is 1 standard deviation below the historical average PER.

The upshot is a target price of SGD0.51, which is only a little below the current price of SGD0.53.

Minzhong’s worst case NAV per share (we exclude land use rights, land improvement costs as well as 20% of trade receivables) also suggests the current share price provides a very safe floor.

Soup Restaurant: Special dividend?

Some of us might remember the recent saga of Soup Restaurant VS. Dian Xiao Er. For those not in the know, there was an announcement on 4 April by Soup Restaurant: read it here.

What interests me is this:

On 4 April 2012, the Plaintiffs communicated their acceptance of the Defendants’ 3 April 2012 offer. The Plaintiffs have agreed to purchase SRG and SRI’s shareholding of 50.98% in YES for the sum of S$7,901,900.00 (i.e. 50.98% of S$15,500,000.00), and for parties to withdraw or discontinue their respective claims and counterclaims in the Suit.

The Company is pleased that the Plaintiffs have accepted the Defendants’ offer without qualification, and that they have agreed to settle the Suit on the basis proposed by the Defendants. The Company is of the view that this outcome best ensures that shareholders’ value in the Company is preserved.

This was followed by another announcement by Soup Restaurant on what might they do with the money coming in. Read announcement by the Company: here.

Soup Restaurant said if the sale goes through, it has three options available to it on the use of the proceeds: distribute all the proceeds by way of a special dividend, use the proceeds to fund expansions, or distribute part of the proceeds to shareholders and deploy the balance for expansion.

Based on the number of shares on issue (298.5m shares), if Soup Restaurant were to pay out all the proceeds of $7.9m to shareholders, each share would get 2.6c in special dividend. If the Company decides to pay out half of the proceeds and retain half to fund its business expansion plans, it would still be an attractive 1.3c per share in special dividend.

Its share price closed at 12.5c in the last session.

Read the story: Dian Xiao Er no longer in the Soup.