Asterisk Realty: Advisory for Japanese real estate.

This is a Japanese real estate brokerage that I came across. Its website provides views of the real estate market in Japan from within.  It is a perspective which I find bracing.  

From the beginning of fiscal year 2010 in April, we expect CMBS and lenders to offer some excellent properties one by one throughout the year. 

With more confident buyers, we may see a gradual rise in market level. In 2009, there were a couple of very attractive properties that were on sale at discount prices in order to take precaution against oncoming financial pressures, however many properties were unsold due to strict financing conditions during recession. 

This year, a number of these properties successfully underwent transactions as a result of optimism that the worst of the recession has passed. Economic recovery is imminent and the overall attitude towards buying seems to be becoming optimistic. 

Many non-Japanese Asian investors are taking initiative to acquire Japanese prime trophy properties. They are expected to have a significant future presence in the Japanese prime asset market. Japan real estate market generates strong demand from global buyers for its maturity, stability and one of a kind trophy assets in all of Asia.


Due to stable and high occupancy rate, residential is still the most popular investment sector for all investors relative to office, retail, and hotel markets


 We are recently seeing less opportunities of residential opportunities of 300 million to 1 billion JPY in Tokyo. Large size  residential properties (above JPY 3 billion) will be available one by one from loan lenders and merged REIT for downsizing debt. 

Middle class residential occupancy remains stable due to sustainable demands and some upper class residential occupancy start recovering due to an overall decrease in rent prices.


Related post:
Saizen REIT's properties: Would I buy?

Tea with AK71: A couple of thoughts.

Thought number 1:

Most of the time, I am so self absorbed that I do not think about socialising. Blogging has given me a means of socialising with many more people than I could ever imagine possible while remaining self absorbed. The internet is truly an amazing place. Virtual reality it might be but it is still a form of reality.

Thought number 2:

I spend a lot of my time thinking about things. I have always been a thinker. I remember those long bus rides between home and school and how I would spend time thinking about stuff. I was not a physically active kid. The ECAs I joined were rather bookish in nature: English LDDS, Chinese Society and the Library in secondary school; Drama Club and Chinese Society in JC.

I have always believed that the pen is mightier than the sword but perhaps I am just hiding my indolence.

Tea with AK71: Envious? Find our own way.

I recently had a conversation with a friend about how a friend of his keeps saying that he is envious of how rich my friend is and so on.

My friend keeps telling his friend that he is not rich and that he is using leverage to improve his cash flow.  My friend got fed up with his friend on one occasion and told him to stop whining and to do something about his life.

Make changes and be richer. 

This calls to mind a recent blog post of mine which asked "Do you want to be richer?"

Apparently, this person in question is in his early 30s and has a comfortable salary of $6K a month.  He is single, stays out and spends quite a bit of money having a good life.

So, to me, for him to become richer, he does not really have to work much harder to increase his income. He should work at reducing his expenses. He should think of planning for the next stages in his life.

For a person like him, if he is willing to listen, I would tell him that there are many roads to Rome and there are many roads to becoming richer. I have a couple of blog posts which were written with this in mind: "Roads to wealth creation in the stock market" and "Seven steps to creating passive income from the stock market".

For sure, there are many more ways to make money and my friend has found his own way to do so and that is to invest in real estate and renting them out for cash flow, taking advantage of the very low interest rate environment. It is something he does well and something he is comfortable with.

For me, a personal experience at a very young age of twelve when my family was on the verge of bankruptcy taught me that banks are fair weather friends and I try my best not to owe the banks large amounts of money if I can help it.

I do understand the need for leverage sometimes in order not to miss out on money making opportunities but I would try to repay my debts in the shortest time possible.

What am I saying? Everyone is different. Certain methods which are comfortable for some might not be so for others.

Finding the most comfortable path which would meet our goals in life is most probably a journey of self-discovery. Having reliable guides on this journey would be most helpful but decisions have to be made ourselves.

Ultimately, we have to find our own way.

NOL: Multi-month uptrend.

On 1 Nov, I suggested that "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."

On 3 Nov, the counter hit a high of $2.32 before closing at $2.30. So, the closing price was just 5c shy of the 138.2% Fibo line. Volume expanded significantly, providing the fuel which created an impressive white candle. With the MACD rising strongly above the signal line in positive territory and the MFI yet to break into overbought territory, it looked as if it would retest resistance at $2.35.

On 4 Nov, price action formed a hangman (a black hammer at a peak) which suggested the presence of selling pressure. However, the relatively low volume suggested that the selling pressure was weak. Indeed the OBV confirms a lack of distribution. With MFI and RSI both in overbought territory, this counter could face some short term resistance in moving up further in price. A pullback to $2.16 would be a good price to accumulate if we believe in the multi-month uptrend.

NOL +5.0%; Fed, liquidity behind rally: DBS Vickers 
Wednesday, 03 November 2010

© 2010 - The Edge Singapore

Related post:
NOL: $2.21 and moving higher?

Japanese real estate: Has it bottomed?

Many asked me if I think the real estate prices in Japan has bottomed. After 20 years of decline, I believe it has.  Why am I so confident? Well, I do not have a PhD in Economics but I understand that price is a function of demand and supply.

The Japanese are fearful of buying any real estate because anyone who bought a piece of real estate in the country within the last 20 years would more likely than not have lost money and this could be as much as 50% of the original purchase price! If the person had taken a bank loan to buy that piece of real estate, including interest on the mortgage, the losses could be even higher.

Little wonder that 40% of the Japanese population rent the roofs over their heads.  Little wonder why Japanese residential real estate's rental rate declined little relative to the decline in real estate prices over the years.

OK, so the rental demand is strong and this means that rental rates would remain resilient but what about the prices of real estate in Japan? Well, the US$ is probably going lower in time. With QE2 (quantitative easing part 2) by Mr. Ben Bernanke, the fate of the US$ is sealed. Anyone who wants to get a better rate of return would be bonkers to put any money in US Treasuries.

So, what are investors to do? They want to invest in assets denominated in currencies which would gain against the US$. They want to invest in assets which would generate cash flow in currencies with relative strength against the US$. Many Asian countries offer opportunities to these ends.

The fact that Saizen REIT managed to sell quite a few of their properties in their YK Shintoku's portfolio is testament to the fact that buyers are back in the Japanese real estate market and they are looking for better returns on their investments. Money will go to where it is treated best.  Borrowing at very low interest rates and getting more than 10% yield in net property income from Japanese residential real estate is a mouth watering deal!

Even if the market has not bottomed in Japan, I believe it nearly has. This could be the next big story.

Related posts:
Saizen REIT's properties: Would I buy?
Japan's debt issue and Saizen REIT.
Invest in Asian equities and inflation is here to stay.
Buy Japanese real estate.

Tea with AK71: Advertlets, owe money, pay money!

One way we bloggers get some income from blogging is through the selling of ad space in our blogs. Advertlets is an online advertising agency based in Malaysia which I signed up with in the early days of my blog. All their ads were metered which means that the higher my blog's traffic, the more they pay.  No clicking on ads required. 

I lost my Glitterati status (aka exclusive status) with Nuffnang, another online advertising agency, by signing up with Advertlets, thinking that it made more sense. The earnings from Advertlets grew quickly and even though I could cash out at every RM100, I chose to wait.  In March this year, I decided to cash out after reading some negative comments regarding Advertlets and how they did not pay.  I waited the requisite 45 to 60 days and did not get any payment.  So, I sent them a ticket (an online enquiry) but did not get any reply, confirming my fears. 

Date          Username Amount   Status

Mar-16-10 AK71        159.42     Unpaid

Removing all ad space for Advertlets, I recovered my Glitterati status with Nuffnang shortly.  Since then, Nuffnang has given me a few metered ads which usually run for 4 days to a week on top of the usual pay per click ads.  Nuffnang also got me to do an advertorial for a financial seminar by an Australian bank a few months ago. I have yet to cash out because every time I cash out, I have to pay a small fee.  Hearing very good things about Nuffnang from fellow bloggers makes me confident that Nuffnang would pay when I choose to cash out. Not worried.

Why did I wait so long before blogging about my negative experience with Advertlets? Honestly, I didn't think of blogging about it. Just another bad experience in life was how I thought of it. However, while chatting in LP's cbox a couple of days ago, I learned that other finance bloggers also didn't get paid by Advertlets! So, I am taking up LP's suggestion to blog about it and tell the world! We should not let Advertlets off so easily! Grrr! 

I found this very creative artwork on WayangTimes.com, another victim of Advertlets

Really apt! Owe money! Pay money! O$P$! Ok, ok, I shall stop here.

Golden Agriculture: Toppish.

On 1 Nov, I asked "Would the rising 20dMA be able to push the price higher? My suspicion is that sellers would turn out in force if price moves closer to 70c as it is a thrice tested resistance in recent memory.  Therefore, 70c remains the resistance to watch."  That resistance was breached on 3 Nov, the second time in 7 sessions. It suggested that 70c was no longer as strong a resistance as before.  However, closing at 70c means that it was still the resistance to watch. With the 20dMA still rising, immediate support moved higher to 66c from 65c.

Although volume improved, the picture of a negative divergence between price and volume was still obvious. The MFI and RSI were both descending and suggested that they could go lower to retest their respective uptrend supports. Momentum was weakening. The long upper wick on the white candle suggested some selling pressure beyond 70c.

On 4 Nov, the following session, this counter traded the whole day at 70c or higher. Closing at 70c seems to have confirmed it as the new support. The very low volume suggested a wait and see attitude ahead of the long weekend. Could we be seeing the formation of a rising wedge? This pattern could be valid if volume keeps decreasing which seems to be the case thus far and the downside target would be 61c.

With improving CPO price now a reality, it seems less risky loading up on CPO counters and that is precisely what market participants have done. Loading up on a pullback would be the prudent thing to do, however.

Palm oil plays rise again; CPO price catalyst 
Wednesday, 03 November 2010

© 2010 - The Edge Singapore

Related post:
Golden Agriculture: Up or down?

LMIR: Foreign exchange forward contracts.

LMIR reported stronger earnings for 3QFY2010. Distributable income at $11.7 million. DPU at 1.09c is higher than the 1.04c in the last quarter. This represents a marginal increase of 4.8% over the previous quarter despite revenue increasing 53% year on year. LMIR also managed to have rate increase in rental renewals to the tune of 16%! Indonesia is doing well, as I expected.

Unfortunately, the management lost $2.9m in foreign exchange forward contracts. Without these contracts, the distributable income would increase by 24%! A DPU of 1.35c for an annualised DPU of 5.4c? Now, that would be in line with its actual performance on the ground!

The management is singing the old tune that these contracts are a prudent measure to protect its income denominated in the Indonesian Rupiah. The very strong Rupiah has caused it to lose money quarter after quarter on these contracts. Who is making money, I wonder?

What do they expect from an economy that actually weathered the last financial crisis unscathed? Indonesia was one of only three Asian economies that did not go into a recession, the other two being China and India! These contracts should have been reduced significantly in the last three quarters! I have wondered on various occasions why the CFOs of LMIR could never last very long. Did they go against the idea of having foreign exchange forward contracts? I keep wondering.

Having said this, the REIT remains a relatively safe investment that should generate consistent income for unitholders although its inability to deliver significantly higher DPU is galling, given such impressive growth in revenue.

Lippo-Mapletree Indonesia Retail Trust achieves higher 3Q distributable income of $11.7m. In 3Q 2010, there was a realised loss on foreign exchange forward contracts of $2.9 million as the cross currency swap remained “out of the money”, compared to 3Q 2009 when a realised loss of $0.4 million was recorded as the IDR was weaker at that time.
Wednesday, 03 November 2010

© 2010 - The Edge Singapore

Related post:
LMIR: DPU reduced 20%.

Saizen REIT: Huge sell down in consolidation phase.

Just as I said on 2 Nov, "I noticed that there seems to be more buying interest in Saizen REIT today too. Of 3,260 lots that changed hands today, 2,968 lots were bought up at 16c. This could just be an anomaly or this could be the beginning of something bigger. Who can say for sure? A crack in the wall of worries? Perhaps.", the counter experienced heavy volume sell down on 3 Nov. The wall of worries was very much intact.

The golden cross between the rising 20dMA and the 50dMA failed to materialise as 20,291 lots were sold down at 15.5c out of 24,231 lots traded. MFI sank deeper into oversold territory, suggesting very weak demand.  This is confirmed by the OBV which showed extreme distribution activity that day. The consolation seemed to be that the selling at 15.5c was very well absorbed, considering that volume was at least 6 times more than the previous session which in itself was a rather high volume day for such a thinly traded counter.

On 4 Nov, I was kind of disappointed that the volume dried up.  I was hoping for more panic selling which might allow me to buy some at 15c.  Wishful thinking, it seems.

Related post:
Saizen REIT: More buying interest.

The best way to trade the Singapore Index: SiMSCI warrants.

Macquarie introduces a new warrant to the Singapore market. Macquarie's SiMSCI warrants allow investors to take a leveraged view on movements in the broader Singapore sharemarket.

Macquarie's warrants allow you to take a leveraged exposure to the SiMSCI with no margin calls or forced selling, thus limiting your capital at risk. Macquarie has listed both call and put warrants, so you can potentially profit from both rises and falls in the market.

99.9% correlation with Straits Times Index (STI)
The MSCI Singapore Index has a basket of 30 stocks and tracks the Straits Times index (STI) very closely. In fact, the MSCI Singapore Index has a 99.9% correlation with the STI over a period of two years, and a 99.6% correlation over five years.

SiMSCI - the only liquid alternative to the STI
The SiMSCI is the name for the futures over the MSCI Singapore Index, and tracks it closely. The SiMSCI is much more liquid than the STI futures in terms of volume traded. In fact, the SiMSCI is the only liquid alternative to trade a Singapore sharemarket index.

For both futures expiring in August, the SiMSCI had 228,287 contracts traded (for the month of Aug 2010) while the STI futures only had 6 contracts traded over the same period of time.

Why SiMSCI warrants?
As the SiMSCI is a liquid and efficient futures market it provides a live tradable market reference price for the warrants to track, this makes it a more transparent and easy reference point for warrant investors. Investors can now see the live SiMSCI price at this website and also the dedicated live SiMSCI pricing page which includes a list of the current warrants.

Read more about it at http://www.warrants.com.sg/en/warrants/simsci_live_e.cgi

FAQ: What are warrants?

A warrant is a powerful investment tool that enables you to gain exposure to a security for a fraction of its price. Warrants can be used to either increase or decrease your level of risk and, unlike ordinary shares, they can be used to profit from both a rise and fall in asset price.

Macquarie Warrants are available over individual shares or indices, they are listed on the SGX and can be bought and sold like ordinary shares.

A warrant gives the holder the opportunity to buy or sell a share at a future date for a fixed price. The two basic types of Warrants are "Call Warrants" and "Put Warrants". Call Warrants give investors the potential to profit from share price rises. Put Warrants give investors the potential to profit from share price falls.

A Call Warrant gives the holder the right, but not the obligation, to buy the underlying share at a fixed price known as the "exercise price" at a future date or, in the case of a cash settled warrant to receive a cash settlement amount reflecting the amount by which the share is above the exercise price. A Put Warrant gives the holder the right, but not the obligation, to sell the underlying share to the Warrant Issuer at the exercise price, or, in the case of a cash settled warrant to receive a cash settlement amount reflecting the amount by which the share price is below the exercise price.

The price at which a warrant holder may buy or sell the underlying shares or the price used in determining the cash settlement amount is known as the exercise price.

A call warrant is said to be out-of-the-money when the exercise price is higher than the share price and in-the-money when the exercise price is lower than the share price.

A call warrant will be worthless if the share price is lower than the exercise price on the expiry day. However, with upward movements in the share price, the holder can still earn excellent returns trading the warrant prior to the expiry date.

The opposite occurs for a put warrant. It will be in-the-money when the exercise price is above the share price and out-of-the-money when the exercise price is below the share price. With downward movements in the share price, the holder can make profits trading the put warrant prior to its expiry date.

Advertorial

Asian REITs 1H 2010.

The report by CBRE RESEARCH (ASIA) titled REITS AROUND ASIA 1H 2010 makes for interesting reading. See the following two paragraphs from the report regarding S-REITs:

The total market capitalisation of S-REITs stood at US$21.1 billion as of the end of the first half, making it the second largest REIT market in Asia after Japan. The outlook for S-REITs is stable as the sector continues to be supported by the strong rebound in Singapore’s economy, the stabilisation of rents across the retail, office and industrial property sub-sectors  as well as the steady performance and lower refinancing risk of many S-REITs.

The simplicity of S-REITs as an investment instrument, their strong underlying fundamentals and relatively risk averse nature continue to make them an attractive option for investors. The S-REIT market has developed and matured over the last eight years, in size as well as in complexity and depth. S-REIT portfolios now cover a wide array of assets in retail, commercial, industrial, healthcare, hospitality and residential sectors, all of which are situated in diverse locations around the region. Investors in REITs have also evolved and now look towards the potential of a REIT’s property portfolio. These include factors such as asset type, geographical location, occupancy rates, demographics, lease terms, tenant quality and diversity, all of which combine to provide support for the portfolio’s aggregate rental income and in turn the sustainability and stability of the REIT’s distributable income. Investors also consider the REIT manager as this directly involves the development and implementation of the REIT’s investment strategy, the management of its portfolio and capital structure to foster long-term profitability.

Read complete research paper here.

Saizen REIT: More buying interest.

I received an email from a reader today saying:

"Seems like u like japan. Saizen see pick up in vol today and yesterday"

My reply:

"I like Japan a lot. Beautiful country, nice people, good food. Everything works. It is like Singapore but costs more.

"Saizen REIT is very undervalued. It is a matter of time that more investors take notice. It also takes time for its troubled past to fade. I have been holding for a year. I can wait a few more months."

Reader's reply:

"About one of your question, if the yield at 6.5% is attractive. I think the current yield is not attractive, and if the price goes up, the yield will fall further?

"Even though it has upside potential due to the NAV, it may be cap by the yield, unless the revenues improve?"

My reply:

"6.5% is attractive because the properties are Freehold. It is perpetual. If the properties are leasehold, then, it is not very attractive.

"For such a portfolio, a fair yield should be 5% which means unit price should be about 21c."

This reader is not the only person with negative perceptions or reservations about Saizen REIT, I am sure. There are also those who are worried about Japan's future which includes its debts and its demographics. I have voiced my opinion about these concerns before and you might want to read it here.

How do I feel towards these negative feelings and perceptions? Glad. Yes, glad.  There are still many doubters and the wall of worries is still intact. When everyone is bullish about something, that is a sign that we should think of exiting.

However, I noticed that there seems to be more buying interest in Saizen REIT today too. Of 3,260 lots that changed hands today, 2,968 lots were bought up at 16c. This could just be an anomaly or this could be the beginning of something bigger. Who can say for sure? A crack in the wall of worries? Perhaps.

The very thin trading volume of this counter makes TA unreliable but, for want of a better tool, let us look at the charts anyway. In end May and early October, Saizen REIT touched a low of 15c. It is interesting to note that the MACD has formed a higher low in early October. This is interpreted as a positive. The MACD has, in fact, moved higher into positive territory which suggests the return of positive momentum.

The MFI, a function of volume and price, is in oversold territory. The OBV does not show any big moves of accumulation or distribution. All the daily MAs seem to be bunching together. I have seen such a gathering before and likened it to a spring coiling up with tension. The 20dMA is set to complete a golden cross with the 50dMA. Immediate resistance at 16c.  Immediate support at 15.5c.

Let us now look at the weekly chart which could be revealing for a counter with such thin trading volume like Saizen REIT. It is immediately apparent that 16c is a formidable resistance level as that is where we find the merged 20w and 50w MAs.  However, the gently upturning 100wMA and the rising MACD which just did a bullish crossover with the signal line suggests that the longer term trend of Saizen REIT is positive.

Related post:
Saizen REIT: AGM on 19 Oct 10.

Golden Agriculture: Up or down?

Golden Agriculture's share price staged a recovery today, forming a short white candle, closing at 68c. Note that the price moved higher today on relatively low volume. Since 18 Oct, this is the counter's second attempt to move higher. We need to see volume expansion to have a meaningful upward movement in price that is sustainable at the same time.

Would the rising 20dMA be able to push the price higher? My suspicion is that sellers would turn out in force if price moves closer to 70c as it is a thrice tested resistance in recent memory.  Therefore, 70c remains the resistance to watch.

Critical support is at 65c. If this were to break with high volume, we could see price retreating to 61c, a possible resistance turned support and this is also where the rising 50dMA is approximating soon.

Golden Agri +5.3%; Positive press helps a tad: Analyst. Analyst adds, fundamentally, no impact on company, RSPO compliance actually a money-losing issue, estimates RSPO compliance cost at U$3/tonne. “It’s a PR issue for Golden Agri, and now they’ve got some positive press, the stock has moved up.” $0.705 recent peak may cap medium term.
Monday, 01 November 2010

© 2010 - The Edge Singapore

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?