NOL: $2.21 and moving higher?

NOL's share price pushed higher today, forming a nice white candle, to close at $2.21, just 2c shy of the intra day high at $2.23. Volume expanded nicely as well.

All technical indicators show that the uptrend has positive momentum: MFI has formed higher lows suggesting a sustained demand and this is reinforced by the OBV which shows consistent accumulation. Every single pullback in NOL's share price in the past few months was an opportunity to accumulate, it would seem.

Taking in the Fibo lines, we could see 138.2%, which coincides with the high of 15 April, retested.  This is at $2.35. This, of course, is based on the assumption that the current bullish momentum follows through. With the MFI poised to enter overbought territory, taking some profits off the table in such a situation is not a bad idea although in extremely bullish conditions, the MFI could stay overbought for a long while.

Rare earth minerals: A new old frontier?

On 21 Oct, I blogged about rare earth minerals and how China mines 93% of the world's supply.  I concluded the blog post by saying "Mining almost all of the world's rare earth minerals, non-renewable resources which seem to have no viable alternatives at the current point in time, makes the Chinese a force as formidable as OPEC and possibly more."

Well, the recent belligerent attitude of China towards its trading partners in the West could possibly backfire at least in the rare earth minerals trading department as I read this just now:

The rising global demand for rare earth metals - the elements needed to make items like hybrid electric cars and laptop batteries - have caused the value of rare earths mining companies to soar in just a few months.

We've told you about one company, Rare Element Resources, that saw its stock surge 1200% in the last year.

But China's outright monopoly in the industry, along with fears that it will cut down on its rare earth exports, are driving plenty of other stocks higher too.

Posted Oct 28, 2010 01:00pm EDT by Gregory White and Hannah Kim, Yahoo! Finance.

Read article here.

Related post:
Control of non-renewable resources!

Tea with AK71: Hand sanitiser.

I started using hand sanitisers after the SARS outbreak years ago. Basically, everyone became a bit more conscious of the need for good personal hygiene. It is very sad but we usually need some earth shattering tragedy to effect some positive changes in society. I guess society evolves more rapidly due to such seismic events.

For many years now, I carry in my sling bag a small bottle of hand sanitiser. I would use it before meals or after doing some work with my hands. It gives me a peace of mind.

In the last two or three years, I switched to Dettol's hand sanitiser as it is the only one that did not leave a sticky feeling after use. The stickiness from using hand sanitisers is what puts off some people.  Dettol's formula solved that problem although it costs more.

Today, while driving to work, I saw a large bus ad announcing that Dettol's hand sanitiser kills 99.9% of all bacteria.  I guess this claim must be on the bottle too but I never really bothered to think about it before.  99.9% of all bacteria? What are the 0.1% of bacteria that remain alive and well?

Is that statement just a quantitative one which means that the sanitiser kills all types of bacteria but some are lucky enough to fall through the cracks? Or is the statement a qualitative one which means it kills 99.9% of all types of bacteria but 0.1% of bacteria types are so strong that they could resist elimination?  I would be very worried if 0.1% of bacteria types are strong enough to resist elimination!

Mapletree Commercial Trust: IPO in early 2011.

For anyone who did not get any shares in MIT's IPO, here's a chance to own some of Mapletree Commercial Trust's. This is a S$1.3 billion IPO expected to take place early next year.

The commercial REIT will draw its initial portfolio from Mapletree Investments’ $6.4 billion worth of Singapore commercial properties, including assets like Vivocity, the island’s largest mall, and several office buildings west of the city-state’s central business district. 

Besides its plan to list its commercial trust, Mapletree Investments also intends to launch several private property funds including a US$300 million Japan fund focused on IT-related infrastructure, a US$300-500 million Vietnam fund in which Mapletree may inject existing commercial and residential projects, and a US$500 million China-focused fund that will invest in a wide range of sectors.

Read full article here:

Mapletree hires bankers for $1.3b IPO: Update
Friday, 29 October 2010

© 2010 - The Edge Singapore

Tea with AK71: A better car.

Reading the latest issue of Newsweek and this really makes sense:

"Instead of jumping through hoops to make an electric car that most people can't even afford, why not just develop an internal-combustion engine that gets really amazing gas mileage? That's the premise of Troy, Michigan based EcoMotors...."

"Our carbon footprint will be smaller than a full blown electric car running on electricity generated in the U.S., where about 50 percent of electricity is made by coal.  In places like China, where 90 percent of the electricity comes from coal, we'll be far below the carbon footprint of an electric car," says EcoMotors CEO Don Runkle.."

Source:  "Finding more in the tank" by Daniel Lyons in Newsweek, 1 Nov 10.

I have never heard people questioning whether electric cars are really environmentally friendlier, questioning how the electricity that would run the cars is produced.  This is a pertinent question.

There is also the question of wastage as other forms of fuel are combusted to produce electricity which would in turn run the electric cars.  How much is wasted in the conversion process? Would it not be better to build a more efficient internal combustion engine?

I am not an engineer but this idea makes a lot of sense to me. Any thoughts?

AIMS AMP Capital Industrial REIT: 2Q FY2011.

The REIT saw lots of buying interest today as more than four fifth of the 49 trades were Buy Ups at 22.5c, a total of 1,613 lots out of a total of 1,923 lots that changed hands. I guess market participants were expecting a good set of numbers today as the management reported on its 2Q FY2011 results after market closed at about 7pm.

DPU for the quarter which would be payable on 17 Dec 10 is 0.3968c instead of the anticipated 0.52c.  This is because of the issue of 513.3 million rights units on 14 October 2010 and 7.2 million units to the Manager on 19 October 2010 for payment of the acquisition fee in relation to the acquisition of 27 Penjuru Lane.

Distributable income from 27 Penjuru Lane would be included in the next distribution, not this one, since the acquisition was done in 3Q FY2011 and not in 2Q FY2011.  Expect the DPU for 3Q2011 to be much higher, therefore.

Substantial Unitholders:
16.07%  AMP Capital Investors (Luxembourg No. 4)
11.46%  Dragon Pacific Assets Limited
9.45%   APG Algemene Pensioen Groep N.V
8.24%   Universities Superannuation Scheme Limited
7.65%   George Wang

I have mentioned a few times before that I am waiting to accumulate more at 21.5c. The last time I said this was on 25 Oct: "A reason why I am not in a hurry to accumulate is because I already have a sizeable investment in this REIT. I don't need to accumulate at 22c. I can wait. The technicals suggest that waiting might not be a bad idea too."

If there should be some panic selling next Monday, I would be ready to buy more.

See presentation slides here.

Related post:
AIMS AMP Capital Industrial REIT: Accumulation price?

FCOT: Testing supports.

On 22 Oct, when I blogged about FCOT turning around, I suggested that 17c is a formidable resistance and we know that buying at resistance is not a good idea. We want to buy at supports and, strictly speaking, these supports should be confirmed.

"FCOT has probably turned the corner and the numbers speak for themselves. However, would I buy at the current price level? The encouraging numbers could give FCOT's unit price a lift upwards but it is obvious to any chartist that 17c is the immediate resistance. 17c is the top of a base formation and a thrice tested resistance level in mid-January this year....

"From the looks of it, volume seems to be reducing since hitting a high on 24 Sep. In subsequent up days, volume had been lower. So, it could turn out to be a case of "sell on news". Immediate support is at 16c but I see a stronger support to be provided by the 50dMA which coincides with an uptrend line.  That might be a better entry price.  I do not like to chase."

Closing today above the 20dMA at 16c shows that the shorter term uptrend is still intact although price did touch an intra day low of 15.5c.

What are the chances of price declining further? No one can say for sure but it is obvious that upside momentum is somewhat limited with the RSI forming a lower high and the MACD poised to form a bearish crossover with the signal line.

Although the MFI has formed higher lows, which suggest sustained demand, we could see it retreating to retest its uptrend line or 50%.  So, I won't be surprised to see price declining a tad more and/or volume declining further.

With the fundamentals having improved, buying in at 15.5c or 15c seems like a good idea for a possible annualised DPU of 1.24c, assuming that the last quarterly DPU of 0.31c is sustainable.  This would translate to a yield of 8% at the entry price of 15.5c.  Pretty decent.

Related post:
FCOT: Turning around.

Saizen REIT: Divestment of Kamei Five.

Saizen REIT's YK Shintoku portfolio divested a smallish property, Kamei Five, today for JPY 70,401,250 (S$1.1 million). This piece of real estate is located in Hiroshima, was built in July 1989 and comprises 22 residential units, 2 commercial units and 2 car park lots.

A quick check in the annual report shows that Kamei Five was 92% occupied as of 30 June 2010 and took in JPY 9.9 million in annual rental income. That represents a gross income yield of 14%! What would I not do to buy a building from YK Shintoku's portfolio.

"Following loan repayment using sale proceeds from the divestment of Kamei Five, the remaining balance of the loan of YK Shintoku is estimated to be approximately JPY 5.9 billion (S$94.6 million). Taking into account applicable cash reserves of JPY 0.6 billion (S$9.6 million) maintained by YK Shintoku under the loan agreement, the net outstanding loan of YK Shintoku amounts to approximately JPY 5.3 billion (S$84.9 million)." Read announcement here.

On another matter, Saizen REIT’s quarterly financial results for the period ended 30 September 2010 will be released before market opens on Wednesday, 10 November 2010.

Related post:
Saizen REIT: AGM on 19 Oct 10.
Saizen REIT's properties: Would I buy?

Suntec REIT: BUY calls.

Suntec REIT is enjoying BUY calls from DBS Vickers and CIMB even as it prepares to acquire a one third stake in MBFC. Some salient points:

DBS Vickers

The group revalued up portfolio by 3.6% translating to NAV of $1.828/share. Going forward, Suntec has c14% of office and 27% of retail NLA due for reversion in 2011 and we expect office rents to show some uptick while retail component to remain stable.

Recent refinancing exercise of $700m due in FY12 are likely to lower its current overall cost of debt of 3.77% as the new loans were concluded at a lower spread of 1.5%, as well as smoothen out the group’s debt maturity profile.

We are tweaking our FY11 numbers by 3.1% to reflect the impact of recent refinancing exercise but exclude the effect of the MBFC1 acquisition. Maintain Buy call pending more information on the transaction. Based on FY10 and FY11 DPU of 9.8cts and 9.7cts, Suntec is trading at decent DPU yields of 6.3-6.2%. Our target price of $1.66 offers 12% total return.

CIMB

3Q10 NPI grew 7.6% yoy, led mainly by a 2.1% yoy increase in gross revenue on stronger office contributions and a lower property tax. Portfolio occupancy continued to strengthen on the back of better office occupancy which mitigated lower retail occupancy in the quarter.

Our DDM-based target price, however, has been raised to S$1.63 (discount rate 8.1%) from S$1.60 as we roll over to end-CY11. Maintain Outperform on further improvements in the retail and office outlook. We see near-term catalysts from more concrete signs of DPU accretion from the latest acquisition.

I would wait for the circular on the proposed acquisition and method of financing to be released to unitholders before commenting further.

Related post:
Suntec REIT: MBFC.

K-Green Trust: A bad investment?

There has been much discussion regarding K-Green Trust (KGT) and its yield. I agree that KGT's estimated DPU of 7.82c represents a partial return of capital.

Unlike Saizen REIT which owns freehold properties, for example, KGT's assets have limited lifespans. At the end of their lifespans, they would be returned to the Singapore government and there is no guarantee that their concessions would be renewed and if they were renewed, at what price?

KGT has a total of 3 assets:

1. Senoko Waste-to-Energy Plant

(Concession: 15 yrs fr 1 Sep 09: 14 yrs left)

2. Keppel Seghers Tuas Waste-to-Energy Plant

(Concession: 25 yrs fr 30 Oct 09: 24 yrs left)

3. Keppel Seghers Ulu Pandan NEWater Plant

(Concession: 20 yrs fr 28 Mar 07: 16.5 yrs left)

The Senoko Waste-to-Energy Plant is estimated to contribute to 50% of the Trust's income.  The Tuas Plant is estimated to contribute to 35% while the NEWater Plant is estimated to contribute to 15% of income.

Assuming that KGT pays out 100% of its free cash flow (and this makes it a self liquidating trust), does not engage in any acquisitions over the lifespans of its three existing assets and continues to have a DPU of 7.82c (representing 100% of its free cash flow) while it still has ownership of the said assets, buying KGT at $1.11 would take 14 years to get back my investment.  By then, KGT would be left with its Tuas Plant and NEWater Plant, the Senoko Plant's concession having ended.

Assuming that its DPU is halved after taking away the Senoko Plant, DPU would become 3.9c. This would continue for 2.5 years before the NEWater Plant's concession terminates and we would get a total DPU of 3.9 x 2.5 = 9.75c. Then, we would be left with 7.5 years of concession for the Tuas Plant and assuming the DPU is then reduced by 30% to 2.7c, we would get a total DPU of 2.7c x 7.5 = 20.25c.  In total, I would gain 30c for the $1.11 I invested earlier in August over a 24 years period or a total of 27% return which means a simple return of 1.13% per annum.  This rather simplistic estimation, however, assumes that KGT maintains the status quo which I think is highly unlikely.

KGT is a business trust and it does not have a gearing cap. It could have a gearing level of more than 45% and as long as it is able to generate income in excess of its interest payments and any regular debt repayment, we could see DPU increasing.

If it could land lucrative acquisitions with cheap debt, we could also see it reducing its payout ratio and keeping cash for asset renewal purposes. To think of KGT as a static business trust with no growth opportunities could be rather short sighted.  Why? Because it has zero gearing unlike CitySpring Infrastructure Trust.

Remember that KGT has Right of First Refusal (ROFR) granted by Keppel Corp on four projects which, more likely than not, would be DPU accretive acquisitions as KGT would most probably fund these with debt to begin with since its gearing level is zero:

1. Biopolis DCS Plant Biopolis@one-north, Singapore
2. Changi DCS Plant Changi Business Park, Singapore
3. Woodlands DCS Plant Woodlands Wafer Fab Park, Singapore
4. Amotfors Energi WTE Plant Sweden

Of course, this assumption has its premise on KGT having a competent management team that would take care of unitholders' interests. This remains to be seen.

Would I buy more of KGT? At $1.00, the price I originally thought of on 3 July, I would.

Related post:
K-Green Trust: Weak technicals.

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.

K-Green Trust: Weak technicals.

In my first blog post on K-Green Trust on 3 July, I mentioned that "I would be quite happy to collect some units at $1.00 which would give a yield of 7.82% to begin with." With its price in decline lately, could I get my wish?

On 22 August, I said that "a near term support seems to have formed at $1.10" and "I would buy some at the current price of $1.11 instead of waiting as per my original plan". I also said "With an estimated yearly DPU of 7.82c, buying at $1.11 would give a yield of 7.05%."

Well, as things turned out, K-Green Trust's support was at $1.09 and this broke on 21 Oct. Today, price closed at $1.06, a natural candlestick support level. This could break and a stronger support would be at $1.04. Could we see $1.00 eventually, the buy price I thought of in my maiden post on the trust?

With the lower highs on the MFI and RSI plus the MACD plunging in negative territory, we could see price going lower in the near future. Look at the OBV and we see ongoing distribution. All technicals point to a higher probability of price going lower.

Related posts:
K-Green Trust: A stable source of passive income.
K-Green Trust: Possibly stabilised.

China Hongxing: Correction.

Recently, a reader asked me what do I think of China Hongxing. I have not done any fundamental analysis of this company, having gone in only once for a trade based on technical analaysis.

Looking at the charts, the 20d and 50d MAs are about to complete a dead cross while the MACD is declining in negative territory.  Momentum is clearly negative.  However, look at the OBV and we would notice that there is no massive distribution.  In fact, a quick look at the trading volume confirms that volume has been dwindling as price declined from the peak formed on 15 September. A low volume pullback is underway, it seems.

The 100dMA has just completed a golden cross with the 200dMA at 16c.  This is likely to be strong support level and would be ideal as an entry to go long on this counter. In the meantime, 17c is immediate support and could be a nice hedge in case price does not test support at 16c.

Related post:
China Hongxing: CD.

Marco Polo: BUY call by KIM ENG.

This could have happened in early October. A relative of mine bought some Marco Polo at 48c after reading a BUY call by Kim Eng with a target price of 60+c.  I cannot remember the exact target price now.  On hindsight, that was a high and price has been retreating since.

Although price closed at 43.5c today, the uptrend is still intact.  Connecting the lows of 2 June and 31 August makes this quite apparent. The MACD dipped into negative territory last week and together with the momentum oscillators, it paints a negative picture. The OBV shows massive distribution took place on 5 October and it has not shown any signs of sustained accumulation since.

What do we do if we want to go long here? We either wait for signs of a positive divergence or for price to test longer term MAs before entering.  The 100dMA is currently at 42.5c.

If we look at the weekly chart, we see that the rising 20wMA looks like it could form a golden cross with the 50wMA in another few weeks. The rising 100wMA is at 39.5c.  This MA has proven to be a strong support earlier this year in May/June. It is more reliable as a support than the 100dMA, therefore.  Based on the weekly chart, the longer term picture looks fairly good.

These observations are based purely on TA which is about probabilities. You have been cautioned. ;)

Healthway Medical: A floor at 15c?

On 20 Oct, I mentioned that "A gravestone doji formed today as price closed at 15.5c.  As the MFI is in very oversold condition, price could experience a brief rebound and it might be a good chance for stale bulls to lighten their long positions, if any. Strong resistance could be expected at 17c.  This is where we find the 200dMA and it is also where the falling 20d and 50d MAs would be approximating soon."

Two identical dojis formed one after another. One today and one in the previous session. Both closed at 15.5c. Both with a low of 15c. It would seem that Healthway Medical's share price has found a floor at 15c. The volume today was much lower than that of the previous session. This coupled with how dojis suggest indecision indicates a reduction in selling pressure which could help lay the foundation for a rebound or reversal. Indecision in a downtrend is good news for bulls.

The MFI is deep in oversold territory. The RSI is also in oversold territory. The OBV has gone flat, suggesting a respite from distribution activities. Could this be a false calm? Personally, I do not think that the downtrend has played out its full potential.  The lower highs on the MFI and RSI suggest negative demand and momentum and the price action of the counter is obviously caught in a down channel but it is now possibly at channel support. 

Therefore, a rebound to 17c remains probable and it still looks like it would be a good chance for stale bulls to lighten their positions in such an instance.

Related post:
Healthway Medical: Business diversification.

AIMS AMP Capital Industrial REIT: Accumulation price?

Today, after market closed, there was a big sell down of more than 3 million units at 22c.  A reader asked if I managed to get more at 22c today. No, I didn't. I am waiting at 21.5c.

On 12 Oct, I mentioned that "It is quite obvious that the range is still 20c to 23c with the midpoint of 21.5c being an important, many times tested support. 21.5c is also where the rising 50dMA would be approximating soon.  This should lend strength to the support. So? I would buy more at 21.5c if I feel inclined to add to my position in this REIT."

22c has been a strong support thus far but with the MACD declining below the signal line and the MFI yet to retest its uptrending support, there could be further weakness.  The lower high on the MFI suggests weaker demand and the lower high on the RSI suggests weaker buying momentum.

21.5c is also where the rising 50dMA is approximating and it is also where we find the lower Bollinger band. A reason why I am not in a hurry to accumulate is because I already have a sizeable investment in this REIT. I don't need to accumulate at 22c. I can wait. The technicals suggest that waiting might not be a bad idea too.

Related post:
AIMS AMP Capital Industrial REIT: Buying more?

ASTI: Low volume pullback.

On 19 September, I mentioned that "NRA has a target price of 21c for ASTI.  That is a 100% upside from my entry price of 10.5c.  Nice but I see resistance at 12c which was tested several times in recent months.  It is, however, also interesting to note that we might be seeing the formation of an ascending triangle here with 12c being the top of the formation."

Immediately the next day, "12c resistance was weakened as price briefly touched 12.5c before ending the day at 12c.  This means that 12c is still resistance and we need to see if it could be taken out in the coming sessions." and I asked "should my friend buy some shares of ASTI at 12c? Buying at 12c would be buying at resistance. Not a very good idea."

In the last session, ASTI's share price closed at 10.5c on very low volume. To me, it seems as if the counter is doing a classic low volume pullback. If we draw trendlines connecting the highs of 11 May and 20 Sep as well as the lows of 25 May and 2 Sep, ASTI's share price is clearly in an up channel.  In the last session, the closing price of 10.5c was right smack on the channel support.

We have a sell signal on the MACD histogram and the MACD has been forming lower highs, calling for caution. The OBV is, however, showing no signs of active distribution and, in fact, the picture of continual accumulation is very much intact.

ASTI would be announcing 3Q results soon in the first two weeks of November, next month.  With improving fundamentals, 3Q should turn out to be quite satisfactory. To recapt, EPS for the half year ended 30 June 2010 was at 1.31c and NAV/share was at 17.75c. I like how ASTI has been repaying bank loans which resulted in the lowering of financing costs year on year by 81.8% from $1.2 million (2Q2009) to $0.2 million (2Q2010). Its gearing now stands at only 8%.

ASTI paid out a dividend per share of 0.5c to 1.1c between 2005 to 2007. This translates to a yield of 4.76% to 10.48% based on the last done price of 10.5c per share.

Buying more at 10.5c seems like a good idea, given the improving fundamentals and the benign technicals.

See 2Q10 results here.

Related post:
ASTI: A doubling of share price in time?

Tea with AK71: Travel photos and videos.

Some readers would like to know more about me as a person and the section in the right sidebars "About AK71" was added in response to this particular email from a reader last month:

I read your blogs just recently. They are interesting and informative.

I think it may be good to tell the readers a little more about yourself. I am not looking for specifics but would like to know who we are reading about. For example, your age group, which field you are working in, are you close to retirement, male or female, years in investment? Just generics.

Recently, a fellow blogmaster also gave some suggestions as to how to make my blog more interesting:

Sadly, I do find your blog boring sometimes. Not saying that it isn't good or informative, but sometimes it's akin to reading a newspaper- you know, the same titles again and again.

To me it's not about the colours, but try putting in more creative titles or blog posts about your personal experiences. Charts and news are good but don't talk about them all the time- life isn't just about stocks and making money. Just my point of view.

ASSI has grown rapidly in readership and I might be doing something right but it does not mean that I cannot do better. So, I take all suggestions seriously but I have to think them through.

I am aware that my blog could be quite dry. Well, finance isn't exactly good material for blogbusters (pardon the pun). That's why I started a section "Tea with AK71" where I talk about non-finance matters.  However, I am also trying to stay true to the mission of ASSI and don't want to clutter it up.

Well, I have started another blog, again more accidental than intentional. It will be a blog with some of my travel photos and videos, Travel Photos and Videos. This should give AK71 a less financial flavour and I hope you like it. :)

A new blog on gold and silver.

I have started a new blog, "Investments: Gold and Silver."  All my future posts on precious metals would be in this new blog instead of ASSI.

Strictly speaking, the mission of ASSI is to talk about investing in the stock market and more specifically, investing to secure a reliable stream of passive income from the stock market. However, I have so many ideas in my head that I use ASSI to blog about all of them.

Investing in precious metals does not generate any cashflow at all. So, hiving off the section on precious metals would help to give ASSI a bit more focus.  If the new blog on precious metals works out nicely, I could hive off other sections of ASSI.  It's a bit like asking banks in Singapore to divest their non-banking assets not so long ago. There I go day dreaming again. ;)

I would like to hear what readers think about this idea. I am still a new hand at blogging and would need to learn through trial and error. Your feedback is invaluable. Thanks in advance.

Cache Logistics Trust: Low gearing.

I have only mentioned Cache Logistics Trust (CLT) once before in my blog and it was in relation to AIMS AMP Capital Industrial REIT (AA REIT) in a blog post "Create more passive income with limited capital" on 29 May.

Anyone who has been following my blog would know that I like REITs with low gearing. On 29 May, I mentioned that AA REIT had the lowest gearing amongst industrial properties S-REITs next to the new kid on the block, CLT.  Of course, CLT is no longer the new kid on the block but its gearing level remains the lowest amongst industrial properties S-REITs.

In its report on 29 July, CLT's gearing level was at 25.5%.  DPU was 1.71c for the quarter (annualised = 6.84c).  NAV (excluding income for distribution) was 87c per unit. Interest cover ratio was 9.3x which is even higher than MLT's and this is definitely a positive.  See slides here.

On 29 July, CLT was trading at $1.01 per share. This would give a yield of 6.77% based on an annualised DPU of 6.84c. Its unit price is now 98.5c, not much lower. That's unattractive for me although I recognise that it is a relatively safe investment.

Price hit a low of 91.5c in late May which is still well above its IPO price of 88c per unit.  The price decline to late May showed classic signs of a low volume pullback and anyone who picked up some then got a fair deal.

Recent trading volume has been thin although the impending income distribution scheduled for later in November could give its unit price a nudge upwards.  Technically, the MACD has formed lower highs and lower lows while the 20dMA has gone flat after completing a dead cross with the rising 100dMA.  The 50dMA is still declining and seems set on forming a dead cross with the rising 100dMA.  All bearish signs although with volume so thin, we would be right to question the reliability of the charts.

CLT would be announcing its results on 28 October. Let's see how things go.

Related post:
Office S-REITs VS Industrial S-REITs.

Golden Agri, Kencana Agri and IndoAgri.

Crude Palm Oil has crossed the RM3,000 mark today. The long term resistance at around RM 2,780 which was taken out days ago is most probably the new support now.  The fortunes of CPO counters should continue to improve.

If not for its problems with the environmentalists, I expect Golden Agriculture to be a big beneficiary to strengthening CPO price.  If it loses more customers like it did in the past, it might not be able to ride on the improving CPO price firmly like the rest.  Technically, Golden Agriculture is correcting from overbought conditions.  It should see support at 61c and that would be a safer entry price.

A friend sent me an email a couple of weeks ago, maybe more, which he received from his broker. His broker recommended a buy on Kencana Agriculture which is much smaller than Golden Agriculture in many ways. Looking at the charts now, I am wary of this counter because it seems to display classic signs of negative divergence between price and volume, price and MACD, price and MFI as well as price and RSI.  The shorter term 20dMA seems to be flattening.  Could this loss of momentum suggest something more ominous?

IndoAgri has clear signs of being overbought.  $2.44 is the top of a double bottom like formation and it is also where the 20dMA is approximating soon. When we look at the Fibo lines, it is also the 138.2% line. It is the support to watch in case of a retreat in price. A fair entry price? It could be but it does not mean that price could not retreat further.  The longer term uptrend support is where the 100dMA is approximating.  This is currently about $2.31.

My very first post on Golden Agriculture:
Why Golden Agriculture?

FCOT: Turning around.

On 24 Sep, we observed some large volume buy ups, pushing the unit price of FCOT to 15.5c. I asked "Could it go higher in price?" and said, "From a technical perspective, it does look promising.  Volume is, after all, the fuel that drives rallies and today's volume was impressive."

FCOT released its full year results today and they are encouraging, which possibly explained the recent strength of its unit price. Total distributable income increased 78% year on year. 

The marked improvement in its distributable income has been put down to improving NPI and lower finance costs. The strong A$ also made its contribution.

DPU which is what matters to most unitholders is up 55% at 0.31c for the quarter.  This is after paying CPPU holders their due of 5.5%.  

For the full year, DPU is up 29% at 1.12c.  This is higher than my earlier estimate of 1c on 24 Sep when I said "the 3Q DPU was 0.25c. So, the annualised DPU should be about 1c. Based on today's closing price of 15.5c, the yield is 6.45%."  

So, based on the last closing price of 16.5c, the full year DPU of 1.12c represents a yield of 6.79%. (and based on 15.5c when I last did my analysis, the yield is 7.2%).

FCOT would be paying 0.5549c per unit on 29 Nov 10. FCOT's income distribution takes place half yearly.

Have things turned around for FCOT? Is it now a good investment at the current price of 16.5c? Let us look at some numbers:

1. Gearing level is now at 39.6%, lower than the 40.4% a quarter ago.  This is probably because its property portfolio saw an increase of 1.9% in valuation.

2.  NAV per unit is now at 27c due to the positive revaluation of its properties.  If all the CPPUs were converted, NAV would decline to 26c.

3. Interest coverage ratio is down at 2.48x compared to 2.74x a quarter ago.  This is a negative.

If we use FCOT's 4Q performance as a gauge as to how well it might do in the new FY, assuming that its 4Q DPU is sustainable, we would have an annualised DPU of 0.31 x 4 = 1.24c.  Based on the last closing price of 16.5c, that would give a yield of 7.5%.  This is an improvement.

Assuming that all the CPPUs are converted, it would provide FCOT with funds to the tune of $81m.  This is equivalent to about 10% of FCOT's gross borrowing.  This could bring gearing down to 36%.  Assuming that positive asset revaluation continues, gearing level could come down more in time.

However, if all the CPPUs are converted, we should also expect the total number of FCOT units in issue to increase by about 11%. This could water down the DPU of FCOT but it should not have a significant impact since FCOT would also be saving on distributions to CPPU holders at the rate of 5.5% in such a situation.

So, my answer? 

FCOT has probably turned the corner and the numbers speak for themselves. However, would I buy at the current price level? The encouraging numbers could give FCOT's unit price a lift upwards but it is obvious to any chartist that 17c is the immediate resistance. 

17c is the top of a base formation and a thrice tested resistance level in mid-January this year. However, if 17c resistance is taken out, we would have an eventual target of 20.5c.

From the looks of it, volume seems to be reducing since hitting a high on 24 Sep. In subsequent up days, volume had been lower. So, it could turn out to be a case of "sell on news". 

Immediate support is at 16c but I see a stronger support to be provided by the 50dMA which coincides with an uptrend line.  That might be a better entry price.  I do not like to chase.

See presentation slides here.

Related post:
FCOT, CCT and K-REIT.

-->

Frasers Commercial Trust’s distributable income for FY10 up 31% to $34.5m
Friday, 22 October 2010

© 2010 - The Edge Singapore

FSL Trust: US0.95c DPU.

FSL Trust has declared a DPU of US0.95c, payable on 26 November 2010. The EDGE has a good write up and the following provides some solace to unitholders worried about the early termination of charters by Groda for the two ships:

"Revenue for 3Q FY10 declined 4.9% year-on-year (y-o-y) to US$23.4 million compared to US$24.6 million in 3Q FY09. The 3Q FY10 revenue includes freight revenue of US$2.5 million earned by the vessels FSL Hamburg and FSL Singapore deployed in the product tanker spot market during the period.

"This mitigated the loss of bareboat charter lease rentals of US$3.8 million for the quarter due to the premature termination of bareboat leases for FSL Hamburg and FSL Singapore."

The decline in overall revenue is expected but it was not as bad as feared. This could possibly explain the strengthening unit price of the trust over the last couple of months.

Technically, it seems that price has hit resistance at 48c.  Could the rising 20dMA give a much needed nudge for price to move higher?  Could the more benign news plus income distribution be positive catalysts?

OBV has been gently rising which suggests that some quiet accumulation has been taking place. MFI, with its higher lows, suggests sustained demand.  Indeed, we could see the MFI decline a bit more to retest 50% and the uptrend would still be intact. MFI is a function of price and volume. So, a slight decline in price or volume or both would see it coming down.

The declining 200dMA should provide a rather strong resistance at 50c in the event of a further upmove in price. I would do a partial divestment if unit price should rise to that level.

Related post:
FSL Trust: Approaching target.

First Ship Lease Trust to distribute US0.95¢ per unit for 3Q
Friday, 22 October 2010

© 2010 - The Edge Singapore

Tea with AK71: ASSI is on Twitter!

Some time back, a reader, Chu Yeow, asked if I was considering getting a Twitter account.  Being an IT dinosaur, I was already caught up with blogging and I was not sure what Twitter did and I didn't see the need for it. What I do know is that it has a little bird logo.

Anyway, today, I decided to just register for a Twitter account and see how it goes (although I still do not know if it would be something useful or not).  After all, I see many blogs with "Follow me on Twitter" buttons too.  OK, ok, I know. I should not just do something because other people are doing it.

My Twitter ID is "AK71SG".  It is a shame that the ID "AK71" was already taken.  So, "AK71SG" is the next best thing since I am AK71 and I am in Singapore. Very clever, don't you think? ;-p

If anyone has any idea as to how I could derive benefits from having a Twitter account, please share with me by leaving me a comment.  I would be most grateful as, obviously, I am not the most IT savvy person around. :-)

Control of non-renewable resources!

I was first introduced to the concept of non-renewable resources probably during my days as an "A" level student.  It was believed that crude oil would be depleted in 30 years back then.  Well, 20 years have gone by but it seems that we have more proven reserves of crude oil than ever before but it does not change the fact that it is still a non-renewable resource.

OPEC has 12 members and between them, they control 60% of the world's proven crude oil reserves and produce 40% of the world's oil currently. OPEC's importance cannot be underestimated although there are more non-OPEC oil producers since the 1980s.  This is because oil output by non-OPEC oil producers is likely to fall over the next decade.

Although the world is still very much dependent on oil for its energy needs, there are many alternatives to oil.  The increasing awareness of global warming and climate change issues has encouraged efforts to produce energy cleanly and sustainably.  These efforts would only intensify over time.  So, crude oil might be non-renewable but it is replaceable.

Today, in the papers, I learned that there are some other non-renewable resources which are controlled to a large extent by a single Asian country. I first learned of this only a few weeks ago. Some of you might already know what I am talking about: rare earth minerals.  A quick check on Wikipedia reveals that "the majority of rare earth minerals are mined in Asia, with China producing 93 percent of the world's supply, and more than 99 percent of the most valuable supply!"

In the recent case of Japanese authorities arresting a Chinese fisherman in disputed waters, the Chinese stopped the export of such rare earth minerals to Japan. Apparently, these rare earth minerals are so important in the production of many advanced products that the Japanese authorities bowed to pressure and released the fisherman.

The papers today reported that the Chinese seem to have halted the shipments of these rare earth minerals to the United States and Europe as well.  This is in response to the rising trade and currency tensions China has with the West.  How long would this embargo last?

It is also reported that the Chinese plan to further reduce their annual export quota for rare earth minerals from next year.  Mining almost all of the world's rare earth minerals, non-renewable resources which seem to have no viable alternatives at the current point in time, makes the Chinese a force as formidable as OPEC and possibly more.

Cambridge Industrial Trust: Equity fund raising again.

Very quickly on the heels of its dismal third quarter results, Chris Calvert, the CEO of CIT, has given me more writing material.  This time, it is an equity fund raising which includes private placement (Oh, why am I not surprised?) of 56,498,000 new units at 53.1c per unit and a 1 for 25 "preferential offering" for a total of 38,483,354 new units to existing unitholders also at 53.1c.

The whole engineering effort plus the proposed acquisitions would increase the REIT's total assets by 7.5% from $926.2m to $995.9m.  However, the number of units in issue would increase 10.4% from 909,988,000 units to 1,004,969,000 units! This would lead to a further dilution of NAV/unit from 57.6c to 57c!

It is claimed that the distributable income would increase from S$10,813,000 to S$12,126,000 for a 12.14% increase after the acquisitions are completed.  DPU would, however, increase 1.5% from 1.187c per quarter to 1.205c per quarter. Annualised DPU is estimated at 4.82c which means that the yield based on the "preferential" price of 53.1c is 9.08% and, if based on the last closing price of 56.5c, it would be 8.53%.

Gearing is supposed to reduce from 39.2% to 38.6% after the transactions are completed. This is not genius but simple mathematics.  If we increase the size of assets under management by 7.5%, without paying down or taking on more debts, gearing which is a function of debt to asset size would reduce. CIT is, however, taking on more debt to fund the proposed acquisitions and the resulting decrease in gearing level is not significant.

Existing unitholders should feel indignant because:

1. Most of the funds would be raised through private placement.

2. Existing unitholders are only given 1 "preferential unit" for every 25 units they hold.  Why not enlarge this to 3 units for every 25 units they hold and do away with the private placement (point 1 above)? This would be more equitable and would raise more funds.

3. The "preferential units" are different from "rights".  There is no window period for unitholders who might not want to subscribe to these "preferential units" to gain some compensation by selling away their entitlements, which they could do if they were issued rights instead.  Why did CIT not issue rights instead? (As informed by Musicwhiz in the comments section, CIT is issuing rights but they have chosen to call them "preferential units" and the difference is that these rights are non-transferable which means there is no window period to sell them away as nil-paid rights if unitholders choose not to subscribe and pay for them.)

4. The dismal third quarter results announced yesterday would likely have some downward pressure on the REIT's market price anyway and the offer price of 53.1c per "preferential unit" is not very attractive.

Unitholders would end up having their stakes diluted.  There is a promise of a "higher" quarterly DPU but seeing how the management could not deliver on promises made earlier in August as seen in the disappointing third quarter results announced yesterday, one could not be faulted for being unsure this time round.  This leads me to add one more point:

5. The DPU of CIT was 5.36c before all the recent placements and acquisitions were announced (starting in August 2010).  It would become 4.82c after this latest round of equity fund raising and acquisitions. This is more than 10% in reduction. It is immediately apparent that all the recent proposals by CIT's management have been value destructive for shareholders despite any claim to the contrary.

Read announcement here.

Cambridge Industrial Trust to launch an equity fund raising comprising of the private placement of 56.5 million new units to raise gross proceeds of $30 million; and a preferential offering of up to 38.5 million new units to raise gross proceeds of up to $20.4 million.
Thursday, 21 October 2010

© 2010 - The Edge Singapore

Related posts:
Cambridge Industrial Trust: Fails to deliver.
Cambridge Industrial Trust: Acquisitions and private placement.

Healthway Medical: Business diversification.

I received a circular from Healthway Medical. This is in respect to a proposed business diversification.  Diversification? Aren't they having enough trouble trying to keep their numbers from worsening? Well, maybe, I should not jump to conclusions. Let us take a look at what is happening.

A new company, Healthway Medical Development (Pte) Limited was set up on 22 Sep 2010 as an investment holding company. This joint venture company in which Healthway Medical holds a 25% interest, hopes to "capitalise on the numerous real estate opportunities in the region, in particular the PRC, by tapping on the Medical Development Business to develop real estate projects with medical and healthcare facilities with the aim of accessing new and emerging private healthcare services markets." (on page 9 of circular)

Honestly, this sounds attractive. Any risks? Just as in its proposal to expand its business into the PRC, Healthway Medical listed the risks involved in the proposed business diversification: a total of 12 points (3.4.1 to 3.4.12, pages 13 to 17)! It seems to me that the company is taking on too much risk.

Although it is stated that this proposed business diversification has no significant financial impact on Healthway Medical's NTA per share or EPS for 2010, it was further stated that "should there be any material impact.... for FY2011, the company will make the necessary announcements at the appropriate time."  Has this been deliberately left vague? I do not appreciate this.

I feel that Healthway Medical's management have their hands full. The numbers in the last two quarters have been disappointing, to put it diplomatically. Could this proposed business diversification put further stress on resources which could already be spread thin? If Healthway Medical's share price is anything to go by, its recent weakness hints that I am not the only shareholder who is unimpressed by its performance.

A gravestone doji formed today as price closed at 15.5c.  As the MFI is in very oversold condition, price could experience a brief rebound and it might be a good chance for stale bulls to lighten their long positions, if any. Strong resistance could be expected at 17c.  This is where we find the 200dMA and it is also where the falling 20d and 50d MAs would be approximating soon.

Related post:
Healthway Medical: Second quarter results.
Healthway Medical: Testing 16c support.

K-REIT: 10.2% DPU accretion.

On 11 Oct, I blogged that "the actual DPU forecast following the completion of the transactions will be disclosed in the Unitholder Circular which is not available yet. Will this swap agreement be DPU accretive?  It should be since we are seeing a more than doubling of gearing ratio from 15.2% to 39.1% and a boost to K-REIT’s assets to about $3.4 billion from $2.5 billion."

On 18 Oct, K-REIT's management announced that upon the completion of the transactions, the REIT's DPU would increase from 6.06c to 6.68c which represents a 10.2% DPU accretion for 2011. Although this increase is relatively modest given the fact that the REIT's assets would grow 36% because of the transactions, some other benefits of the said transactions could inject more stability into the REIT. A couple of such benefits are its weighted average debt maturity profile extending to approximately 4 years and its weighted average lease to expiry (WALE) extending from 5.7 years as at 30 June 2010 to 7.8 years.

However, as I try to optimise income from my investments, an annualised DPU of 6.68c or a yield of 5.02% based on the last traded price of S$1.33 per unit is not quite as attractive for me.  I have halved my smallish investment in K-REIT and will redeploy the funds.

Related post:
K-REIT: Swap agreement.

Cambridge Industrial Trust: Fails to deliver.

I have blogged about how I dislike CIT's share placements which dilute current unitholders' shares of the REIT.

On 14 August, I blogged that "Due to the acquisitions, total distributable income is expected to increase 5.7%.  However, in order to fund the acquisitions, the private placement would lead to an increase of 10.15% of units in issue.  This effectively dilutes the DPU of CIT, post acquisition. DPU is estimated to fall from 5.36c to 5.14c.  NAV per unit will also fall from 60c to 58c."

The 3Q2010 results released today show the following changes quarter on quarter:

1. Net assets increased from S$522.8m to S$554.1m.

2. Number of units in issue increased from S$873.2m to S$962.1m.

3. NTA per unit decreased from 59.9c to 57.6c.

4. Net property income decreased from S$16.1m to S$15.9m.

5. Distributable income remains unchanged at S$10.8m.  This is despite expectations that it should increase 5.7% due to acquisitions announced in August!

6. DPU reduced from 1.238c to 1.187c.

Although the REIT has grown in net asset value by 5.99%, the number of units in issue has grown by 10.18%. NTA per unit has, naturally, suffered a decrease in value.  Although net assets increased, the REIT suffered a decrease in net property income.  Overall, DPU which is what matters to most unitholders suffered a 4.1% decrease.

The annualised DPU has decreased to 4.709c.  This is much worse than the estimates in August which was for the DPU to fall from 5.36c to 5.14c. A DPU of only 4.709c gives a yield of 8.33% based on the last traded price of 56.5c before trading was halted at 3.08pm.  This pales in comparison to AIMS AMP Capital Industrial REIT's DPU of 2.08c which translates to a yield of 9.24% based on a unit price of 22.5c.

Although the REIT's gearing has been reduced to 39.2%, it is still much higher than AIMS AMP Capital Industrial REIT's 34.8%.  Its interest cover ratio of 3.8x is also lower than AIMS AMP Capital Industrial REIT's 4.21x. With NTA per unit at 57.6c, it is trading at less than 2% discount while AIMS AMP Capital Industrial REIT is trading at a 13.5% discount to NTA per unit of 26c.

If I have to choose between the two industrial S-REITs, it is quite clear to me that CIT is a distant second to AIMS AMP Capital Industrial REIT.  Indeed, I have chosen, having divested all my interest in CIT while increasing the size of my investment in AIMS AMP Capital Industrial REIT.

See presentation slides here.

Related post:
Office S-REITs VS Industrial S-REITs
Cambridge Industrial Trust: Acquisitions and private placement.
AIMS AMP Capital Industrial REIT: Buying more?