ASTI: A doubling of share price in time?

I recently bought some shares of ASTI Holdings Limited.  This company is engaged in the provision of solutions and technologies in the backend (ie assembly, test and finishing) arena of the semiconductor industry as well as the distribution of electronic components and products plus the provision of semiconductor application in consumer electronics, computer peripheral and communication solutions. The description of  ASTI's business is taken from its homepage.

Anyone who knows me well would be somewhat surprised at this move of mine since I am not in tune with high technology at all and IT is as Greek to me as, well, Greek. However, I am not a hermit and I do keep in touch with the real world.  There is much news of how the cyclical demand for semiconductors has been ramping up and that this momentum has yet to run its course.

I read an article in The Straits Times (22 Aug 10) by Tan Ai Teng on why tech stocks are a good buy then:

1. Tech stocks are in a period of strong earnings recovery.

2. The second half of this year would have been stronger if not for a shortage of components.

"I am bullish on the semiconductor equipment related business. According to Semiconductor Association's (SEMI) forecast, global semiconductor equipment sales are expected to climb 104% this year... and rise a further 9% next year."

Since I am so unfamiliar with tech stocks, I was wondering which company's shares offer good value.  As luck would have it, I read an article in Next Insight where NRA reported on Innotek and ASTI.  Both companies seem promising. However, Innotek's share price has appreciated enormously while ASTI seems like a laggard. 

The following factors drew me to ASTI:

1. A share price of 10.5c then with a PER of 3.8x and NTA/share of 16.9c.

2. Improving balance sheet with its gearing level falling from 22% to 8%.

3. Gross margin (GP) expanded from 7.1% to 22% year on year.

Read article here.

As per my usual style, I looked at the chart to find a fair entry price.  ASTI bottomed in late November 08 with price touching a low of 4.5c.  It made a higher low of 6.5c on 16 March 2010. It broke above the 200dMA in April 2010 and has been trading above this MA since. Using candlesticks and the 200dMA as references, strong support at 9c is spotted.  Seeing how the 20d, 50d and 100d MAs are bunching together at around 10.5c, however, I decided to buy some at 10.5c as a hedge.  Price might or might not retest  support at 9c.  If it does not, I'm already in.  If it does, I would buy more as the uptrend is intact.  Looking at the OBV, it is obvious that there is longer term accumulation going on and once all the sellers are done selling, the share price could rise.

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.  If  the resistance at 12c is taken out, I see immediate resistance at 13.5c with a near term target of 15c. Over a longer term, we could even see 17.5c, a support level which broke in early 2008, tested.  Of course, in extremely bullish circumstances, prices could go parabolic in which case all resistance levels identified could be destroyed like butter cut by a hot knife. Then, it would be time for me to let go and run for the hills.

Overall, ASTI looks rather promising.  Wish me luck. :)

This video describes how the semiconductor industry may experience shortages due to capacity constraints, increased demand, and low inventory levels (June 14, 2010):

P.S. I am having trouble saving charts from ChartNexus in Lim&Tan. So, I am unable to put up the chart for ASTI here.

Roads to wealth creation in the stock market.

I have a friend who is very risk averse and views the stock market as being fraught with danger. He basically thinks it is a jungle with snake pits and poisonous gas bogs. I am inclined to agree with him which is why it would be most advantageous if we could find a guide who would walk with us.

Having read some personal finance blogs, my friend decided that he wants to try to grow his wealth by investing in the stock market. A commendable change in attitude, if I do say so myself. He wondered if he should try his hands at trading the market and maybe he could grow his wealth quickly that way. I told him candidly that he could make a lot of money that way, the operative word being "could".

I shared with him how I made a lot of money from March 2009 to January 2010.  However, that was a once in a lifetime opportunity to make a lot of money and I was lucky to have participated. Was I smarter than the average investor during the months of March 2009 to January 2010? I don't think so. I was probably just at the right place at the right time. I also told him how I lost a lot of money as well prior to the aforesaid winning streak. So, to me, it's quite simply all about timing.

I told him he might want to invest in some companies and REITs which could give him a yield of 6 to 10% per annum.  This took into consideration his risk averse personality and the current high prices of stocks. I believe that investing in some companies and REITs with strong fundamentals and high yields would be best for him. I also impressed upon him that these companies and REITs could see their share prices fluctuate but since he is investing for income, he should not have to worry too much about the day to day fluctuations in price.  This is a big advantage of this strategy.

How much could he afford to invest?  After doing some calculations with him, setting aside some money for emergencies and daily expenses which amounted to several months of his salary from active employment, he had a capital of about $100k to invest with. I suggested a basket of REITs and companies which he could invest in when prices next pull back (as prices do not usually go up in a straight line). Even then, don't put in all his money at one go but split his funds into 4 or 5 tranches.  This is hedging in case prices do fall lower.  If he has some knowledge of TA, he would be able to spot supports and trends and would be able to decide if he should pump in more funds each time prices fall or if he should wait.  So, learn some TA, he shall.

After saying all these, he was quite pleased but at the back of his mind, there remained a nagging thought that he could grow his $100k to $500k in the next 10 to 20 years if he traded actively. I simply smiled and told him to go learn TA and trading strategies.  There are courses, websites and blogs aplenty.  Could I not teach him? I told him honestly that I am not a very good trader. I use a combination of FA and TA, FA to spot undervalued stocks and TA to spot entry and exit prices. The high yield counters I am vested in could possibly go higher in price as they are mostly undervalued.  I am quite confident and comfortable with my approach. It might or might not be for him.

I also suggested that he could simply wait for the next crash before going into the market. Buy at a time when there is abject pessimism and when most have given up on the market. Is it that simple? Well, it could be, I said. Why bother to trade actively (especially if we are not very good at it)? Just save his money and continue saving as much of his monthly salary as he could.  When the next crash comes, he would be ready.  Load up then and get ready to see his wealth double ... or even triple.

The Chinese have a saying that "one type of rice feeds a hundred types of people". There are many strategies to wealth building and we simply have to find a strategy that works for us.  Age and how much money we have to start out with have a part to play, perhaps, but I believe that ultimately, we must be able to sleep well at night with our decisions in life.

Related posts:
Risks and rewards: TA and FA.
Excuse me, are you an investor?
Seven steps to creating passive income from the stock market.

AIMS AMP Capital Industrial REIT: Target price?

Closing at 23.5c on higher volume shows a continuing and heightened interest in this REIT.  This is especially true when we remember that this is after the counter has gone XR!  Buying at 23.5c and with an expected DPU of 2.08c, the yield works out to be 8.85% per annum.  Apparently, many feel that this yield is still attractive for them.  If we think of it objectively, it is still rather high, relative to some "blue chip" REITs, for example.

MFI continues to climb higher but is not yet overbought.  OBV too continues its climb upwards.  Demand remains strong and accumulation is relentless.  RSI rose higher into overbought territory suggesting that the buying momentum is somewhat overdone but the MACD continues pulling away upwards from the signal line in positive territory.  Momentum is currently positive and in very bullish situations, the RSI could stay overbought for a while longer.

This is a long shot but if 23.5c should be taken out convincingly, we could even see 25c tested.  At 25c, a DPU of 2.08c would translate into a yield of 8.32% per annum.  Still attractive for some? Perhaps.

Related post:
AIMS AMP Capital Industrial REIT: XR.

Healthway Medical: 20c target.

Standard Chartered has suggested a target price of 20c for Healthway Medical. They arrived at this target price after highlighting a slew of difficulties the company faces:

1. Opening chain of clinics in China and setting up specialist center in Singapore are facing challenges in execution.

2. The group has not delivered good execution in its specialist services in the past and has limited experience of organic expansion.

3. Mass exodus of prominent specialist doctors from Healthway’s employment is also troublesome. 

4. Cost pressure mounting due to aggressive expansion.

I am almost 100% divested and I am still waiting for its share price to fall to a more reasonable level before I load up once more because if the management does deliver on its expansion plans, the company's share price would fly. At the current price, valuation is simply astronomical.

Standard Chartered's target price of 20c implies a PE of 36x!  This is almost as ridiculous as Q&M Dental Group's valuation when they first listed!  Please bear in mind that my considerations here are based on FA.  There is no accounting for sentiments.

Related post:
Healthway Medical: Second quarter results.

SPH: $4.20 is still resistance.

On 9 September, I said "although a correction could be avoided if volume expands in the next few sessions as price pushes upwards, such a move would have a formidable sell queue to clear at $4.20. If ever this resistance was cleared, SPH's share price could fly.  At the moment, chances are slim that this would happen".  Well, $4.20 is still the resistance to watch.

Today, another black candle was formed, the third in a row, as price touched a low of  $4.13 before closing at $4.16.  The MACD seems set to form a bearish crossover with the signal line while the OBV continues to decline. Distribution is underway. The MFI has emerged from the overbought region which suggests that demand is no longer zealous.  The RSI although declining is still in the overbought territory and this suggests that we could see buying momentum slow down further.

The rising 20dMA should provide immediate support at $4.10 and this was also a natural candlestick resistance level. Would $4.10 hold as a support? We would have to wait and see.

Related post:
SPH: Touched $4.20.

AIMS AMP Capital Industrial REIT: XR.

This REIT went XR today. Closing at 22c, it shows a great deal of resilience and is much better than the expected TERP (theoretical ex-rights price) of 21c. If we look at the trade summary, of the total 3,307 lots which changed hands today, most of these, 2,487 lots to be exact, were bought up at 22c.  There is still a great deal of demand for this REIT.  In fact, anyone who went ahead and bought some at 22c or 22.5c when the counter first went CR would be in the money now.

We will get 7 rights for every 20 units which we currently hold. If we had bought these 20 units at 22c, we could sell these 7 rights when the nil-paid rights start trading on 23 Sep.  Since the price to pay to convert these rights is set at 15.5c, theoretically, they are worth 6.5c a piece (22c - 15.5c = 6.5c).  This would bag a gain of 6.5c x 7= 45.5c.  Based on an initial investment of 22c x 20 = 440c, 45.5c represents a gain of  more than 10% if we sell away the nil-paid rights! Detractors' aplenty but I believe the numbers here speak for themselves. Of course, bear in mind that these calculations are done assuming that this is a perfect world (which it is not).  So, it would be realistic to expect some deviation.

The question some might have on their minds is whether this is still a good time to enter?  Well, the estimated DPU, XR, is 2.08c per year.  This gives a yield of 9.45% at the current price of 22c.  If that is good enough for you, why not?

Personally, I would wait to see what the the nil-paid rights might be trading at come 23 Sep. I do not expect the nil-paid rights to trade below 5.5c since 5.5c + 15.5c = 21c which is the expected TERP and would enjoy a yield of almost 10% per annum.  However, if I were proven wrong and the nil-paid rights do trade at 5c or less, I would probably end up buying more. The yield would be simply irresistable at more than 10% per annum.

See slides from EGM here.

Related posts:
REITs: Simply explained?
AMPS AMP Capital Industrial REIT: Sell the rights.

China Hongxing: CD.

China Hongxing went CD today and the market rewarded its share price in a most sporting way as it touched a high of 22.5c before closing at 22c. The 19.5c target identified earlier this month is probably resistance turned support at this point.

Volume expanded significantly as price formed an impressive white candle. The OBV turned sharply upwards suggesting strong accumulation.  With volume so high, there could be a follow through. 22c target was based on the 138.2% Fibo line. We could see the 161.8% Fibo line tested next and this is at 23.5c.

Although the sell signal of the previous session as seen in the MACD histogram was negated today, the MFI and RSI are both in overbought territories. So, although price could push higher, this counter is rather overbought and anyone choosing to go long at the current price would have to be very nimble and might have to settle for smaller gains. The risk premium is definitely higher.

Related post:
China Hongxing: New target.

Courage Marine: Awakening.

On 11 Sep, a reader, Wong, asked if it would be a good idea to accumulate more units at 18c.  I avoided giving a straight answer as usual and replied:

"If you have excess funds lying around and if you think that the shipping industry has turned the corner, 18c seems inexpensive.

"If you already have a large investment in Courage Marine, then, you have to question how comfortable are you to increase exposure to this company.

"In my opinion, Courage Marine is fundamentally sound. If there should be nasty surprises in the macroeconomic environment, Courage Marine would most probably survive because of its strong balance sheet. Shipping is a cyclical business. We have to ride the waves."

Courage Marine's share price has been trapped in a range between 18.5c and 19.5c for a long time and there are some whom I "overheard" in Bully the Bear's cbox being sick of holding on to the shares.  Patience is a rare commodity, after all.

With more people conversant in TA, charts are revealing its secrets to more market participants and there was a huge sell queue at 19.5c today as many recognise it as a strong resistance. However, there was heavy buying up in the first half hour of trading and 3,696 lots were bought up at 19.5c.  Trading volume is also impressive so far with a total of 5,247 lots changing hands.

Is Courage Marine awakening? If the resistance at 19.5c is taken out convincingly, it could very much be the case. Good luck to fellow shareholders.

Related post:
Courage Marine: Range bound.

Rights and wrongs: Charlesming's perspective.

Charlesming is the blog master of Time to Huat and also the person who introduced me to the world of Technical Analysis (TA). 

For anyone who might have wondered how a techno dinosaur like me would start a blog, well, although it was primarily because of boredom last Christmas Eve, Charlesming was the person who planted in my head the idea which led me to find out more about blogging during that night of boredom! Reminds me of the movie "Inception"! 

A comment from him recently shows the thinker that he is and I am putting it up as a separate blog post here:

I personally feel that not all rights issue are equal. Rights are issued for various reasons. The exercise price is important to find out if we are getting a good deal. Another important aspect is to figure out what the funds raised are for. I agree REITs need to continue to 'trade'. 

Ideally there is no need to buy and sell assets, save on the cost of doing so and just generate a stable yield forever. The world doesnt stay the same forever. With a large portion of the income distributed via dividends, REITs simply dont have the funds to make accquisitions. Question is, do we agree the accquisition they are interested in, is in good taste and value? If I deem so, I dont see a problem in supporting the rights issue. If I dont let go of 10c, how to gain $1? That is not to say that all rights issues are worth me putting up that 10c.

 So I feel it is inaccurate to downplay rights issue as a return of dividends. While partially true,there are some deals where I would like to pay them back some dividends so that they can grow and get more dpu for investors. On the other hand if they make a 'hopeless accuisition' where I cannot see how my 10c can be made to work harder to generate that $1 then I will not support it. I may sell the rights, and/or I may let go of the entire stake I own even.

 Taking it one step further, a rights issue gives me a choice. A placement to a private investor(s) gives me zero choice and I cannot help but watch my stake get diluted . This is where I may get a little annoyed.

It is inevitable rights issue (and in some cases placement) is a way of life in REITs and companies looking to expand their business. All are not equal and investors have to figure if the company is doing the right thing, at the right price, and ultimately, at the right time too (market sentiment).

 As for the word 'fool' I suppose it can be subjective depending on the context used. An investor, whether buying it at a cheap or overvalued price is a fool or not, could depend on many factors. Could we be fools who over analyze? Could we be fooling others and ourselves, with our own biased opinions? Fool or not, the market is the only one who is right.

One of the lil quotes that I like - "Listen to your heart. It is on the left, but it is always right'.

I prefer to think (as a trader and investor) if I profit after selling something and the price continues to head up, I just take it as its for someone else to profit. One of my own strategies is to take partial profit along the way up. This makes me a winner regardless of the price action thereafter.

 Just my 2 cents worth from my very limited knowledge. I hope to learn over the years.

Related post:
REITs: Simply explained?

Gold and Silver highest in the last 12 months.

Gold is currently at US$1,267.51 an ounce while silver is currently at US$20.42 an ounce. These prices are higher than in June 2010 when I blogged (again) about how we should hold some gold and silver as a hedge against all other forms of investments and against fiat currencies. What little exposure I have to these two precious metals is turning out rather nicely.

In the short run, I see immediate support for gold at US$1,260.00 an ounce and immediate support for silver at US$20.20 an ounce.  Gold is now challenging resistance at US$1,270.00 and if it does break this, it could go much higher.

On 20 June 2010, I blogged that "if we believe in charting, silver's longer term trend is still up and I would buy more on weakness." That view has not changed.

Related post:
Hedging and precious metals.

Gold hit $1,269.45 on the London Bullion Market on Tuesday afternoon, beating the previous record of $1,265.30 struck on June 21. Read article here.

Addition on 15 Sep 10:
Gold prices under the continuous contract set a new all-time high of $1274.60 per ounce, well above the previous all time high of $1266.50 per ounce. Silver prices continued their ascent as well. Specifically, the December contract for the precious metal hit $20.55 per ounce.

K-REIT: Trading bands.

It seems that the worst is over for office rentals in Singapore. There is a general expectation that things have stabilised and we could even see some upside next year.  I have a small position in K-REIT in my frozen portfolio and this small investment is actually enjoying a paper gain now.  So, when would I sell my stake?

We could do a very simple TA for K-REIT even if I do not have access to today's data on ChartNexus. Price touched a high of $1.28 before closing at $1.26. It opened at $1.27 and touched a low of $1.25. So, picturing it mentally, it formed a black spinning top today. That it touched a high of $1.28 is significant as it confirms $1.28 as an important resistance level. Volume was only half of yesterday's which suggests a lack of conviction by sellers today even as price action formed a black candle.  So, the indecision suggested by the black spinning top does not have strong downside pressure, I feel.  In case of continuing downside, where do I see support?

Looking at the chart, it is quite obvious that $1.22 was a major resistance level and I expect this to provide immediate support in case of a move downwards. If this breaks, the next support is at $1.16.  Having said this, you could have noticed an interesting phenomenon. K-REIT seems to be trading in a 6c trading range recently: $1.16 to $1.22 and $1.22 to $1.28.  This is useful information for anyone who is interested in profiting from some range-bound trading.

In the event that $1.28 resistance is taken out, one could therefore expect $1.34 to be the next resistance level if this phenomenon continues to play out.

Singapore office plays better bet vs developers: Morgan Stanley
Tuesday, 14 September 2010

© 2010 - The Edge Singapore

Golden Agriculture: Trading Buy by OSK.

On 8 Sep 10, I mentioned that "I am vested in Golden Agriculture because I believe in its fundamentals." So, even if the technicals were somewhat directionless, I was willing to take the risk going long. Today, OSK upgraded Golden Agriculture's target price to 68c. Fundamentally, I think that is a fair price.  However, how does the technical picture look?

Today, its share price hit a high of 60.5c before closing at 59c, forming an inverted black hammer in the process. That this happened on much higher volume than the previous session is not promising.  On a brighter note, it does mean that price action broke out of the triangle suggested on 8 Sep 10 on the upside.  Could this be sustained?  I don't know about 68c but I spot a major resistance at 62c. This has been tested many times and price has closed above this level only once this year and that was on 11 Jan 10.  Many people who bought at 62c are probably waiting to break even at that price. Hence, the expected resistance.  So, if price does test 62c again, I would sell some.  In case of a further decline in price, I see immediate support at 58c.

I am not able to comment on the momentum oscillators or OBV this evening and I am afraid I do not have a chart to put up as, for some reason, my broker's version of ChartNexus has not been updated yet.

Golden Agri-Resources raised to Trading Buy by OSK. Expects "very strong" 3Q10 results after 2Q10 weakness due to dry weather, as production recovering.
Tuesday, 14 September 2010

© 2010 - The Edge Singapore

Related post:
Golden Agriculture: Triangle.

Alexa (Part 2) - Updated 2 Nov 10.

According to Alexa, my blog's traffic ranking in Singapore has improved.  However, its global traffic rank has slipped.  This probably means that although my blog is gaining in popularity in Singapore, there are many more websites in the world now and they are more popular than my blog on a global scale.

Our country's government is always telling local companies to go global and that the domestic market here is just too small.  Even if my blog becomes more popular locally, on a global scale, it is still insignificant and, in fact, is getting more so.  That's the message Alexa is sending to me.  This message from Alexa reinforces the perception of how small Singapore really is.


According to Alexa:
Singaporeanstocksinvestor.blogspot.com has a three-month global Alexa traffic rank of 730,608.  Visitors to the site view an average of 2.3 unique pages per day. Visitors to Singaporeanstocksinvestor.blogspot.com spend approximately two minutes on each pageview and a total of eight minutes on the site during each visit. Roughly 33% of visits to the site consist of only one pageview (i.e., are bounces).

Global traffic rank: 730,608 (was 667,393 on 28 July).
Traffic rank in SG: 2,506 (was 3,808 on 28 July).

Updated on 14 Oct 2010:

Singaporeanstocksinvestor.blogspot.com has a three-month global Alexa traffic rank of 684,209. Visitors to the site spend approximately two minutes on each pageview and a total of nine minutes (up from eight minutes) on the site during each visit. Roughly 28% of visits to the site consist of only one pageview (i.e., are bounces) - down from 33%. Visitors to Singaporeanstocksinvestor.blogspot.com view an average of 3.3 unique pages per day - up from 2.3 unique pages per day.

Global traffic rank: 684,209. 

Traffic rank in SG: 2,218.

Updated on 2 Nov 2010:

 

Singaporeanstocksinvestor.blogspot.com has a three-month global Alexa traffic rank of 630,248. Visitors to the site spend approximately two minutes on each pageview and a total of ten minutes (up from nine minutes) on the site during each visit. Visitors to Singaporeanstocksinvestor.blogspot.com view an average of 4.0 unique pages per day. up from 3.3 unique pages per day.

Global traffic rank: 630,248. 

Traffic rank in SG: 2,021 .

Related post:
Alexa


Visit Alexa: here.

Hock Lian Seng: Resistance broken.

On 9 Sep, I wondered if the 30c resistance level could be taken out soon and went on to say that "I believe so as the massive 30c sell queue was wiped out today."  Today, Hock Lian Seng touched a high of 31c before closing at 30.5c.

Although volume is lower than the previous session which saw the shares trading at only one price, 30c, we could have seen the effective weeding out of weaker holders.  30c could be resistance turned support.

OBV has continued its upward trajectory suggesting continual accumulation.  MFI shows formation of higher lows which suggests sustained demand.  RSI has lower highs which suggest that buying momentum is weak.  So, this counter has support but its share price is not going up in a hurry, it seems.  Another counter that requires more patience, perhaps?

Related post:
Hock Lian Seng: Ready to break resistance?

AIMS AMP Capital Industrial REIT: 23c support?

This REIT is attracting more interest as volume expanded again today as price rose to close the day at 23.5c.  23c resistance has been taken down.  Could we see 23c turn support this time round after it failed to do so in early August?

Taking a look at the momentum oscillators, the MFI has formed a higher low which signifies strengthening demand while the RSI has risen sharply into the overbought region which suggests strong buying momentum and that buying in now could bring with it higher risk. OBV has turned up sharply, suggesting accumulation.  All the technicals are promising and whether 23c could be the new support needs confirmation.

This REIT would go XR on 15 Sep, 2 days from now.  Expectations are for the price to weaken to around 21c (TERP) then.  It would be interesting to see if it pans out.

Related post:
AIMS AMP Capital Industrial REIT: Rights issue.

REITs: Simply explained?

The diversity of opinions in this world is what makes it colorful and interesting.  Everyone is free to express his opinions on diverse subjects.  We should remember, however, it is not just what is said which is important.  Of equal importance is how it is said.

I have been following a series of posts on the subject of REITs by a certain local blogger. Are his posts on REITs objective? I don't think so but I respect the blogger's right to express his opinions and I am sure readers will arrive at their own conclusions.  However, I do hope that this blogger would exercise restraint and not make insinuations beyond what is civil.

In his latest post, he took a quote from the writings of another blogger:

"For those existing investors who could raise the capital to subscribe for their rights, they are returning most (if not all or more) of the dividends they had collected back to the REIT. Don’t let the discounted price fool you as you are essentially paying just to maintain your percentage shareholding in the REIT." -Lion Investor

The blogger whom I am taking issue with went on to say:

I can't agree more with the truth on "the discounted price fool" as I recently overheard some joys near the Temple of Cows over AIMS AMP Capital Industrial REIT's right issues - discounted price fools?

Firstly, Lion Investor was expressing an opinion about how we should exercise caution and not let discounted price of rights fool us into thinking we are getting a good deal.  The word "fool" is used as a verb.  The blogger in question has twisted it and used it as a noun. Calling people names isn't very nice, is it?

Secondly, going beyond language, let us objectively evaluate what Lion Investor has said and consider the proposed rights issue by AIMS AMP Capital Industrial REIT in the same vein.  Are we paying more money just to maintain our "percentage shareholding in the REIT"? 

In the case of AIMS AMP Capital Industrial REIT's rights issue, the objectives are clearly communicated. 

We are putting down more money to participate in the REIT's income accretive activities which would benefit us as unit holders. 

We are paying more money but NOT just to maintain our percentage shareholding in the REIT. 

See: AIMS AMP Capital Industrial REIT: Rights issue.

At a level that is of greatest importance to most, unit holders could choose to participate and enjoy a higher yield in future or unit holders could choose to sell away their nil-paid rights when they start trading. 

This was what I said:

REITs are income instruments.  Therefore, we must remember that we are investing in REITs for regular income.  The DPU per unit would decline from 2.15c to 2.08c, post rights.  This is a DPU loss of 0.07c a year.  It is not dramatic.  We would also be able to sell away the nil-paid rights when trading starts.  At an exercise price of 15.5c and with expectations that price would see a modest decline to 21c per unit, post rights, we can expect the nil-paid rights to trade at around 5.5c each.  Selling these away would bag 30 months' worth of DPU (post rights) straightaway!  Now, is that such a bad thing?

On top of that, our current investment would still make an annual DPU of 2.08c!  This is provided that everything remains constant, of course.

Accept and pay for the rights or sell away as nil-paid rights, either way, unit holders end up winners.  There will always be detractors but as long as we are clear headed and know what to do in any given scenario, we will be fine.

Unit holders could sell away their nil-paid rights as compensation for dilution and their remaining units in the REIT would still enjoy a very high yield.  

Unit holders who choose to accept and pay for their rights would see their future income increase in dollar terms and at a higher yield.  They are paying more money for greater returns.

Respect has to be earned but sometimes we accord respect to people based on seniority.  Respect should also be reciprocated. Being civil is a great way to start.

Related post:
AIMS AMP Capital Industrial REIT: Sell the rights.

Be a real estate owner the easy way.

I have blogged about the importance of wealth building especially at a rate which would beat inflation.

I also mentioned that investing in real estate is part of a complete approach towards wealth building and how it could be a hedge against inflation.

I have shared on how this could be achieved and how there is no short cut.  Rome was not built in a day and for the vast majority of us, wealth building is an incremental process.

Recently, a customer whom I have known for many years had a conversation with me. He was quite excited and told me that there is a way to own real estate with no money or very little money. 

Right away, I remembered some ads I saw in the newspapers with some similar proposal.  I have always ignored the ads because there is simply no way one could own real estate without any money, or own anything for that matter without any money.

However, then, I was a captive audience and I listened as my customer went on to say all we had to do is to get 120% financing for a piece of real estate. Simple. With interest rates at record low and with rental yield at record highs, it is a no brainer. 

My customer is from Malaysia but I am not sure if he was referring to the situation in Kuala Lumpur. Rent out the property, pay the banks the required monthly repayment and the balance is ours to keep.  Simple again.  It sounds great from a cash flow perspective.


I asked if he would be buying a condominium unit using this method then.  He gave me a look that made me felt quite small and asked why only one?  Imagine the amount of money which could be flowing into our bank accounts every month if we had five or ten units! It is so simple!  It sounds irresistible from a cash flow perspective.

Easy money is always tempting but bearing in mind that there is no free lunch in this world, let us look at this proposal carefully.  Remember how I instinctively brushed away ads with similar proposals? 

Well, firstly, we cannot own anything unless we have paid in full for it with our own money.  If we had borrowed money to buy something, we do not own that thing, we simply have control and possession of it but we do not own it.  The lender could do a repossession if we failed to make repayments in a timely manner.

Secondly, 120% financing is leveraging in the extreme.  Yes, if the party continues for another decade, we could become quite rich.  The exact figures depend on how low the interest rate is for the loan and how high the yield could be from renting out the property in question. 

What if the party were to stop abruptly?

We would find ourselves suddenly under a ton of debt without any income. This would make Nightmare on Elm Street look like a walk in a park! Pardon my use of a piece of horror real estate as a comparison.

An environment of easy credit and rampant risk taking is helping to fuel inflation.  I continue to believe that we will see higher inflation in Asia (ex-Japan) over time. 

In Economics, linear relationships are the norm and this cycle will have its run.  Riding on this wave could be exhilarating but as any surfer would tell you, even the best surf would come to an end.

Related posts:
Grow your wealth and beat inflation.
Real estate as hedge against inflation.

Tea with AK71: Top 5 posts (Part 2).

On 17 April 2010, I mentioned that I was surprised to find that the most read post in my blog was one of my first blog posts written last year on Christmas Eve. That same post remained in the top spot until recently.  It is now in number three position.  Considering its age and having more time on its side, which later posts could have dethroned it?

The following ranking is based on the number of pageviews each post generated since the day they were published:

Number One:
Create more passive income with limited capital.
(29 May 2010)
- All of us have limited capital.  How do we make our capital work harder to give us more in return?  That is a question that many would like to have answered.  This post provides a possible answer to this question and this is probably why it is in the top position.

Number Two:
A minimum of 50k in annual passive income.
(5 Sep 2010)
- The interest this post has generated has been astounding thus far. The allure of passive income is unmistakable and when we put a value to what could be achieved annually if we work at it, it becomes a powerful statement.

Number Three:
High yield portfolio.
(24 Dec 2009)
- Previously Number One and the only post in the previous top 5 posts to retain a position in this ranking exercise.  The interest in building a high yield portfolio is perennial, it seems, and stronger than I could ever imagine.

Number Four:
K-Green Trust: A stable source of passive income.
(3 Jul 2010)
- Making it to the top 5 is my first post on K-Green Trust.  This is a very safe instrument for passive income generation.  I like this trust but wish it could be cheaper, of course.

Number Five:
AIMS AMP Capital Industrial REIT: Rights issue.
(23 Aug 2010)
- This is a post which could slowly fade into oblivion once the rights issue is done and over with.  For now, it is generating quite a lot of interest.

Related post:
Tea with AK71: Top 5 posts.

SPH: Touched $4.20.

SPH touched $4.20 today but that price saw few transactions although volume expanded.  Few were willing to buy at that price, it would seem.  A short legged doji was formed and this could be interpreted as a day of tight price action with price closing ultimately unchanged from the opening. There is little conviction by either the bulls or the bears today although an increase in trading volume suggests that the tug of war grew in strength.

A rising OBV suggests more accumulation activities while the momentum oscillators are flattening in overbought territories. This suggests that demand is faltering and buying pressure is tapering off. A correction from oversold conditions could very likely be next.

Although a correction could be avoided if volume expands in the next few sessions as price pushes upwards, such a move would have a formidable sell queue to clear at $4.20. If ever this resistance was cleared, SPH's share price could fly.  At the moment, chances are slim that this would happen.  TA is all about probability after all.

Related post:
SPH: Waiting for elusive $4.20.

Hock Lian Seng: Ready to break resistance?

Hock Lian Seng isn't the most exciting counter in the market, for sure. However, today, volume expanded as all shares transacted were traded at one price and one price only, 30c.  To me, this suggests that all the weak holders have been weeded out.  If anyone wants to buy shares of this company now, buying at 30c per share is the only choice.  This is a resistance level which has been tested a few times before in the last one month.  Could this resistance level be taken out soon? I believe so as the massive 30c sell queue was wiped out today.

We could draw an uptrend support line from 15 July and this would approximate the rising 20dMA.  Nice. Could we be seeing the formation of an ascending triangle? Possibly.  If this is this case, could we see price rising to 34c? We could but I would expect rather strong resistance at 32c.

The MFI has successfully stayed above 50% and the uptrend is still intact.  The OBV has risen very gently and consistently. Demand and accumulation are present. With this fundamentally sound counter, patience is definitely required.

Related post:
Hock Lian Seng: Steady accumulation.

Golden Agriculture: Triangle.

Accumulation of shares in Golden Agriculture seems to have come to a halt as the OBV flattens. Over a shorter term, momentum oscillators are still rising but this could change quickly.  The MACD histogram has turned red and volume shrank dramatically today as price action formed a doji, suggesting indecision.

The technicals are somewhat ambivalent at this stage.  Up or down?  The probability seems to be quite even either way.  If we look at the bigger picture, we would understand why.  It seems that price action is forming a large symmetrical triangle. Volume has also been declining.  Which way would its price go?  Being in a symmetrical triangle, price could go either way.

Personally, I am vested in Golden Agriculture because I believe in its fundamentals.  CPO price is up again today at RM2,674. This is an increase of 1.75%.  However, for anyone who is in doubt and feeling unsure, staying out is the best thing to do.

CapitaMalls Asia: Upgraded by Daiwa.

CapitaMalls Asia broke out of a downtrend on 2 Sep and touched a high of $2.25.  Today, Daiwa upgraded CapitaMalls Asia to outperform but the share price fell instead to $2.20.  Could price fall further?

The MACD histogram has turned red. This is a sell signal. MFI has formed a lower high which suggests weakening demand. OBV shows a slowdown in accumulation but there isn't any serious reversal.  RSI has dipped and left the overbought territory behind.  The current weakness could just be a correction from overbought conditions. If so, where is the next support?

I see the next support at $2.14, a many times tested candlestick resistance level and should be a strong support. This is also where we find the downtrend resistance line which the counter broke out of on 2 Sep. This price level is likely to be fresh on the minds of market participants.

CapitaMalls Asia upgraded to Outperform by Daiwa... says property group’s recent $788.9 million joint acquisition with CapitaLand (C31.SG) of Singapore’s Bedok Town Centre site, which can be developed into residential-cum-retail property, reinforces CMA’s dominance in local retail property market.

Wednesday, 08 September 2010

© 2010 - The Edge Singapore

China Hongxing: New target.

Yesterday, when Edmond asked if we should set a higher target for China Hongxing at 22c, I replied "22c is what could be the eventual target if 19.5c is taken out convincingly (ie. volume has to expand significantly as price rises). However, along the way to 22c, there are many minor resistance levels to overcome."

Well, 19.5c was demolished as the price touched a high of 20.5c before closing at 20c today. This was achieved on very high volume. 20.5c was a resistance level that broke in early January.  Based on Fibo lines, it looks like a minor resistance and we could see 22c tested next (138.2% Fibo line). Congratulations, Edmond. :)

OBV is still rising strongly signalling continuing accumulation. The uptrend in the MFI is intact as it formed higher lows.  Demand is still strong.  It is however on the verge of being overbought but this does not really mean anything apart from suggesting that we stay vigilant, especially with such strong underlying momentum.

This is possibly the reason for the breakout:

China Hongxing Sports bags $198m worth of orders from Xiamen trade fair. The order book of RMB 1 billion represented a 12.6% increase as compared to that held in August 2009.
Wednesday, 08 September 2010

© 2010 - The Edge Singapore

Related post:
China Hongxing: Pushing upwards.

SPH: Waiting for elusive $4.20.

On 1 Sep, I mentioned "if SPH does retest $4.20, I expect that to be a strong resistance as many who missed selling then would sell now.  So, I would sell some at $4.20 and buy back if price retraces to the 20dMA."

I reckon that many investors and traders are able to read charts and many know that SPH's resistance is at $4.20. When too many people anticipate something happening, then the event might not take place. Market participants are wary of buying too close to $4.20 as they recognise that as buying close to resistance.  Market participants waiting to sell at $4.20 might sell at a few bids lower just in case the resistance does not get retested.  In such a scenario, we need a day or two of massive buy ups to clear all the doubt and suspicions surrounding the major resistance.  In this case, it is $4.20.  How likely is this? Your guess is as good as mine.

Technically, it is easy to spot a short term negative divergence between price and volume. This probably explains the weak push upward in price as volume is the fuel that drives rallies. Today, the MACD histogram turned red.  This is a warning that price could face more downward pressure in the near future. The MFI and RSI are rising strongly into overbought territory and such overbought situations could not last too long, normally. Notice how the rising OBV is much gentler in its gradient in recent sessions.  Although there is no distribution, accumulation is slowing down.

Should we panic? Should we sell? The uptrend is still intact.  I want to draw your attention to the orange color trend line support I have drawn.  This would approximate $4.10 soon.  You want to also take a look at $4.13.  This looks like a natural support level and should serve as immediate support but, of course, it needs confirmation.  I expect some semblance of support between $4.13 and the orange color trend line support in the immediate term.  If these supports break,  look to the individual rising daily MAs for the next supports.

Related post:
SPH: Another white candle.

STI little changed at 3,036.09 at closing
Tuesday, 07 September 2010

© 2010 - The Edge Singapore

AIMS AMP Capital Industrial REIT: Buying up.

There has been quite a bit of buying up activities in this REIT in recent sessions.  Today, of the 2,595 lots transacted, 1,763 lots were bought up and, of these, 843 lots were bought up at 23c.  From the transaction sizes, it would seem that there is some amount of interest returning to this REIT from retail investors.  Why buy some units of this REIT now?  The attraction, I suppose, is the entitlement to rights at a price of only 15.5c.  Of course, unit holders will also be able to apply for excess rights and in the process, possibly, improve the overall yield of their investment.

A while back, some readers asked me if they should buy in at 22c and my advice was that it was a fair price.  Buying 20 lots at 22c would give us 7 rights at 15.5c.  That would give us an average price of 20.31c.  With an estimated DPU of 2.08c per annum, XR, that gives us a yield of 10.24%.

Technically, the MACD has completed a bullish crossover in negative territory. If the MACD crosses into positive territory, that signals a return of positive momentum. The MFI has just emerged from oversold territory and has formed a higher low which suggests a return of demand. A recovering OBV suggests some accumulation is underway.

For a second session running, this REIT is trading above all the daily MAs.  22.5c could possibly be resistance turned support.  This needs confirmation.  The long term resistance remains at 23c but remember that this was compromised in early August.  So, it is not as strong a resistance as it once was.

Related post:
AIMS AMP Capital Industrial REIT: Sell the rights.

Genting SP: Staying cautious.

The cautious tone in Genting SP continues today. There is talk that speculators have moved from Genting SP to Genting HK, contributing to the latter's spectacular run up in price.

Technically, the negative divergence between price and action here is rather glaring. Price has detached from the upper Bollinger and moved sideways. This could be the start of another consolidation period.  The detachment from the upper Bollinger is accompanied by reducing volume which is a good sign for the bulls.

Look at the MACD and we see it still rising above the signal line in positive territory.  Bulls want to watch out for signs of a bearish crossover with the signal line.

The MFI, although declining, formed a higher high before doing so and is still above the longer term uptrend support. OBV has flatlined in the immediate time frame but its longer term rise is unbroken.  Demand and accumulation seem healthy.

For anyone with a long position here, congratulations but look to the support at $1.70 for guidance.  If this support breaks, it might be a good idea to take some profit off the table as the next support is at $1.50.

Related post:
Genting SP: Flip flop.

Genting Hong Kong +3.6%; Earnings growth priced in: UOB
Monday, 06 September 2010

© 2010 - The Edge Singapore

STI climbs 1.1% to 3,034.58 at closing
Monday, 06 September 2010

© 2010 - The Edge Singapore

China Hongxing: Pushing upwards.

On 3 Sep, I suggested that China Hongxing might be taking a break with the near term resistance at 18c. Today, volume expanded significantly as the 18c resistance level was demolished.

Momentum oscillators are trending higher, forming higher lows.  The MFI's rise shows strong demand while the OBV's upward climb shows accumulation continuing. The MACD is still rising above the signal line in positive territory and the distance between the two is growing, a sign of strength.

On the flip side, the RSI is going into overbought territory, suggesting that the buying momentum is getting somewhat overdone.  Jumping in at this juncture to go long might be a risky proposition as the immediate upside target identified some time back at 19.5c seems within reach.

If price action starts detaching from the upper Bollinger and if the MACD's distance from the signal line starts narrowing, we could be seeing precursors of a reversal. So, we have to stay cautious and keep our eyes peeled.

Related posts:
China Hongxing: Taking a break.
China Hongxing: Retesting resistance.

Blog statistics: January to August 2010

It has been more than eight months since I started this blog and I am still blogging away. By now, regular readers could probably read me like a book.  I am, after all, almost forty and probably quite set in my ways.  The following is a summary of how my blog has performed in the last eight months:

The number of monthly unique visitors reduced dramatically in the month of June, from 19,449 in May to 15,500. That's a 20.3% decline!  The number of returning visitors fell from 10,297 in May to 8,173.  A 20.6% decline!  Terrible.  What could be the reason?  Well, I had the least number of posts in June, relatively.  Only 46, to be exact.  So, maybe, that has something to do with it.

The numbers recovered modestly in July and improved dramatically in the month of August when the number of monthly unique visitors formed a new record at 19,578.  This trumped the high formed earlier in May which saw 19,449 unique visitors.

I have no doubt that I have some very loyal readers who are spreading the word.  Your support is encouraging and you can bet that I will continue blogging!  Thank you. :)

Related posts:
Blog statistics: January to April 2010.
Alexa.

A minimum of $50k in annual passive income.

Anyone who has been reading my blog would know that I seek to build a strong stream of passive income through my investments in the stock market. On 29 May 2010, more than three months ago, I mentioned that "between LMIR and AIMS AMP Capital Industrial REIT, the annualised income distributions I receive could be as much as 4x my monthly salary".  In aggregate, this has not changed.  However, I have made some changes in allocation and shifted funds from LMIR to AIMS AMP Capital Industrial REIT.  This is because I am a little disappointed with the former and at the same time, I am feeling more optimistic about the latter.

In my post of 29 May 2010, I also said that "things should get better from here as from the month of September, income distribution from Saizen REIT would add to my passive income stream. I might just stop trading the market and sit back, relax and let the passive income stream in.  Of course, it remains to be seen if my calculations as to Saizen REIT's potential income distribution would come to pass."

I was pretty confident that things would go the way I think they would but we can never be too sure of anything. As things turned out, happily, Saizen REIT's results and DPU were better than expected.  It seems that their CEO is much more astute compared to LMIR's and did not engage in any 100% currency hedging.  To recapt, "LMIR announced a DPU of 1.04c payable on 27 August 2010.  This is lower than the 1.2c paid in the last quarter. This is due to a higher realised loss on the foreign exchange forward contract."

I did some back of the envelope calculations as to the passive income I would be receiving from my investments in Saizen REIT, AIMS AMP Capital Industrial REIT and LMIR in future:

Assuming that all of Saizen REIT's warrants are converted to regular units and assuming that YK Shintoku's CMBS is successfully refinanced with a conventional bank loan with an interest rate of about 4%, I estimate the DPU to be about 0.4c per quarter or 1.6c per annum from December 2010.

As for AIMS AMP Capital Industrial REIT, with the impending rights issue, I would probably increase my investment in the REIT by at least a third and enjoy a higher yield at the same time.  This would increase the amount of passive income I receive from this REIT from December 2010.  DPU is estimated at 0.52c per quarter or 2.08c per annum.

For LMIR, although I believe in the strength of the Indonesian economy and the strength of its currency, the management's decision to continue using foreign exchange forward contracts is likely to limit any DPU growth.  In fact, it has led to a DPU reduction in S$ terms so far as the Rupiah strengthened against the S$.  However, I expect the S$ to appreciate more robustly in future and it is unlikely that the DPU would reduce much more.  Conservatively, I estimate the DPU to be 1c per quarter or 4c per year from December 2010.

With Saizen REIT's contribution, I would probably exceed the target I have set for myself which is "to create a minimum of $50k in annual passive income from investments in the stock market alone."  I shared this aim here in my blog on 27 Feb 2010, more than half a year ago. Like with everything, however, this needs confirmation. Let us see what happens in December 2010.

Related posts:
Create more passive income with limited capital.
LMIR: DPU reduced 20%.
AIMS AMP Capital Industrial REIT: Steady performance.
Saizen REIT: Better than expected DPU.
Seven steps to creating passive income from the stock market.

Building and preserving our wealth.

When I was a secondary two student, I had to write an essay on whether television had brought more harm than good to our society?  The internet did not exist then. To own a 25 inch CRT TV set was a BIG thing.  I doubt school teachers would set an essay question like that today.

Well, I remember giving it much thought and decided that the television was just a tool and whether it did good or harm depended on how we used the tool.  This is true with any other tool as well.  A tool is just a tool.  How we use the tool is the important thing.  Similarly, in the world of investment, there are many tools at our disposal. All these tools, if used appropriately, could boost our wealth.

Human society has grown more complicated from the days of Socrates and Plato.  In those days, scholars were learned in different aspects of life.  As our knowledge base widened over time, we built colleges and universities. Within these institutions, we find different faculties and within faculties, we find different departments and within departments, we find different subjects.  Scholars have become specialists and not generalists in modern society.

We classify things, putting things in neat boxes with labels, to manage the complexities of modernity. This promotes efficiency as it helps us know exactly where things are and what they do.  However, compartmentalising also masks finer details which could set apart one item from another in the same box.

Two of the boxes in the world of investment are labeled "Blue Chips" and "REITs". 

Some prefer Blue Chips, believing that these are strong companies with stable dividend payouts with a nice possibility of share price appreciation.  I have been a shareholder of SPH and ST Engineering for as long as I can remember.  I was also a shareholder of Chartered Semiconductor and, unfortunately, I remember this too.  Certainly, not all Blue Chips are created equal.

Are REITs then all created equal?  Most certainly not. Some are stronger and better than others. REITs are primarily income instruments but they are not just income instruments.  Like any counter traded in the stock market, REITs have the ability to appreciate in price.  If they have the ability to appreciate in price, are they beginning to sound like certain entities with stable dividend payouts with a nice possibility of share price appreciation?  In fact, many S-REITs are now trading above their NAV.  There are still many S-REITs out there which offer value as they are still trading below NAV, have high yields and relatively low gearing levels.  The attraction of high yields coupled with the possibility of capital appreciation is universal.

Any undervalued counters could appreciate nicely in price once discovered by enough people who believe in them.  It does not matter if they are REITs or companies. The risks and rewards of investing in companies and REITs are similar, if we think of it less dogmatically.  Invest in the right ones and we could be rewarded. Invest in the wrong ones and we're sunk.  There are certain characteristics of a REIT which make it a REIT and not a company, for sure, but I would stop there and not over read.

Some might say that REITs are for the rich or the rich and old because these people don't need to grow their wealth aggressively, that they just need regular passive income since their wealth is sizeable already. I do not think that this is entirely correct as there could be the not so rich or the not so rich and young who just want to make sure that their wealth is not being eroded by inflation.  Choosing the right REITs could do this for these people. So, REITs are not just for the rich or the rich and old.  What we choose to invest in would depend on our motivations for being in the stock market in the first instance.

Finally, most wealthy people are wealthy because they run successful businesses. For most of us, having a well paying job and having good money management habits are the bedrock to building our wealth. Whether we choose to invest in Blue Chips or REITs later on could then build and preserve our wealth at the same time. Indeed, why not invest in both? I am not religious about either one.