Golden Agriculture: Eyeing 96c per share.

Are you rubbing your eyes? Are you pinching yourself? 96c per share for Golden Agriculture? What's the price now? 67c per share. Wah! Quick, put in a buy order for Wednesday! Wait a minute, who came up with that target? OCBC Research. The link is provided here:

OCBC ups Golden Agri price target, keeps buy.OCBC said it raised its earnings forecast for Golden Agri by 22.7% for this year to reflect improving margins and after it reported strong quarterly results.
Monday, 16 May 2011

© 2011 - The Edge Singapore

I have been bullish on crude palm oil for a long time and, in recent weeks, I increased exposure to Golden Agriculture. The long term uptrend is intact and if anyone is thinking of going long here, the long term support provided by the rising 50wMA is currently at 65.5c. I believe that this is a relatively safe entry price if it should be tested again. If it were to break, the next support is provided by the rising 100wMA at 57.5c this week. That is some way to fall. So, one has to be mentally prepared.

The share price has been trapped between the 20wMA and the 50wMA for more than 4 weeks now. It could be due to the spectre of the sharply declining 200wMA. Could it force the price of this stock downwards? It could but it is also interesting to note that the rising 50w and 100w MAs would probably form golden crosses with the falling 200wMA towards the end of 3Q 2011 or early 4Q 2011. So, stronger performance in the next few months could be on the cards as per OCBC Research's opinion.

On the weekly chart, it is easier to see that a symmetrical triangle is forming. A symmetrical triangle is usually a sign of price consolidation. A break below the support on high volume could see the next support provided by the rising 100wMA tested. A break above the resistance on high volume would be good news for the bulls. However, expect resistance at 70.5c and 72c thereabouts to weigh in before that.

The outlook for crude palm oil is benign. Demand from India and the Middle East will likely pick up ahead of Ramadan, underpinning prices. China may also need to restock in the coming months. Source: Dow Jones Newswire, May 16, 2011 07:46 ET.

My strategy to accumulate on any weakness remains unchanged.

Related posts:
Golden Agriculture: Excellent results.
Golden Agriculture: A picture says a thousand words.
Golden Agriculture: Accumulation mode.

Saizen REIT: 3Q FY2011 results.

(Something is wrong with Blogger. This blog post appeared on 13 May 2011, not 15 May 2011.)

As expected, YK Shintoku's CMBS is to be fully repaid very soon by end of May 2011. The repayment is funded by the REIT's internal cash resources (including proceeds from the exercise of warrants) and proceeds from the divestment of properties. It is expected that the operational cashflow from YK Shintoku's properties would contribute towards distributable income from the month of June 2011, therefore. Annually, this could bump up distributable income by some 10%.

I do not know if this would provide a positive catalyst to the unit price of the REIT. It could well have been priced in. Any upside could be capped at 15.5c which was the highest the unit price went to when the counter recovered from the panic selling which took place in the wake of the disastrous earthquake and tsunami.

It was revealed in its 3Q FY2011 report that JPY200m (S$3m) will be spent to repair properties affected by the disasters. It was also revealed that these would be funded by the REIT's reserves and would not affect income distributions.

How much is the estimated DPU for 2H 2011 payable sometime in September 2011? Distributable income for 1H 2011 was JPY383,858,000. Distributable income for 3Q 2011 came in at JPY187,213,000. If we simply double it, we would have JPY374,426,000. This is slightly lower than for 1H 2011 due to the continuing divestment of properties. However, 4Q 2011 would probably see 1 month of income contribution from YK Shintoku's properties. This could make up the difference.

In 1H 2011, we had a DPU of 0.52c. If distributable income remains largely the same for 2H 2011, we could see a lower DPU. This is due to a larger number of units in issue after the exercise of almost 52,000,000 warrants, seeing an increase of some 4.6% (which suggests a potential DPU of 0.5c).  A complete exercise of all warrants could see a further 23% decrease in DPU (which suggests a potential DPU of 0.385c). This is assuming that the exchange rate between the JPY and S$ remains largely the same as in 1H 2011.

In 2012, however, we should see the full contribution from YK Shintoku's properties which would bump up the distributable income by some 10% in all instances. We must not forget also that due to the amortising nature of Saizen REIT's loans, the distributable income is some 33% lower than what it could be.

Over time, distributable income in JPY terms is most probably going to increase. Imagine if the REIT were allowed to pay only interest on its loans and not make any capital repayment. The distributable income would be higher by 50%! Now that the REIT is made to amortise its loans, it would have smaller interest repayments in future as the loans would reduce in size. One has to think long term in order to appreciate the attractiveness of the arrangement.

Saizen REIT remains an investment that would appeal to anyone looking to invest in freehold residential properties in Japan with a relatively attractive yield. In FY2012, assuming all warrants were to be exercised, expect a full year DPU of approximately 0.385c x 2 + 10% = 0.85c, which at the REIT's current unit price of 14.5c means a distribution yield of 5.84%. This is premised upon the JPY staying strong against the S$, however.

I still have a large investment in this REIT although much smaller than before. It would be interesting to see what is the DPU when 4Q 2011 results are announced in another three months from now. It would also be interesting to see how the market would react to the REIT's results. Good luck to fellow unitholders.

See Saizen REIT's quarterly announcement here.

AIMS AMP Capital Industrial REIT and Sabana REIT.

(Something is wrong with Blogger. This blog post appeared on 12 May 2011, not 15 May 2011.)
In life, good and bad things happen. We just have to hope that more good things than bad things happen. If good things happen, we have to know it when we see it and take advantage of them. If bad things happen, we must know to take remedial action and not sink deeper. Easy to say and hard to do? Probably.

I believe that a good thing is happening now with Sabana REIT. OK, it is a matter of perspective. For those who bought it at $1.05 a unit at IPO, it might not look good at all. However, look at it from a different angle and it is a chance to accumulate more on the cheap. Well, some might say cheap could get cheaper. Indeed, it could.

I indicated in an earlier blog post where I think the supports for Sabana REIT's unit price would be if 91c were to be compromised as immediate support. You might want to read the blog post here. Today, price went to a low of 90.5c.

Regular readers know that Saizen REIT was my single largest investment until the recent partial divestment as its unit price rebounded from a serious bout of panic selling. AIMS AMP Capital Industrial REIT is now my largest investment.

At today's price of 20.5c and an annualised DPU of 2c, AIMS AMP Capital Industrial REIT has a distribution yield of 9.756%. Comparatively, Sabana REIT has an annualised DPU of 8.81c and at today's closing price of 91c, the REIT has a distribution yield of 9.68%.

AIMS AMP Capital Industrial REIT has a gearing level of 32% and an interest cover ratio of 5.7x while Sabana REIT has a gearing level of 24.9% and an interest cover ratio of 7.9x.

I also like Sabana REIT for having 44% of its portfolio in high tech industrial buildings. This compares favourably against AIMS AMP Capital Industrial REIT's 17.7%.

I could very well do some re-allocation of funds through a partial divestment of my investment in AIMS AMP Capital Industrial REIT and increasing my investment in Sabana REIT if the latter's unit price should weaken further, everything else remaining equal.

See presentation slides for AIMS AMP Capital Industrial REIT here.

See presentation slides for Sabana REIT here.

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Sabana REIT: Still waiting for a 10% yield?

Sabana REIT has an annualised distribution yield of some 9.68% now, with DPU at 8.81c and unit price at 91c. In an earlier blog post, I mentioned that this is a better buy at the current price compared to AIMS AMP Capital Industrial REIT.

Sabana REIT has lower gearing, higher interest cover ratio and better quality assets overall; all these with a distribution yield that is comparable to AIMS AMP Capital Industrial REIT. Buying at 90.5c or 90c (if we were lucky enough in the last session) would close the difference in yield between the two REITs.

Now, many, including myself, would like to buy more of this REIT if it should give a 10% distribution yield which would imply a unit price of some 88c. Is this possible? An earlier blog post suggested that this would be a very strong support. Read it here.

88c a unit? A salivating proposition. Some would know that I bought more units in the last session at 90.5c. Why not wait for 88c? Well, TA shows where the possible supports and resistance would be, it does not say if they would be tested. I always hedge.

Continuing on TA, let us look at the daily chart for Sabana REIT. This chart has been adjusted to take into account the recent income distribution. It is interesting to note why 90c has proven to be a strong support in the last session. It approximates the low of 31 March 2011.

Next, look at the declining volume over the last two weeks as price declined from a high of 93.5c (pre-adjustment would be 95.5c). A low volume pull back. Are the bears losing steam? Indeed, in the last two sessions, we saw the formation of dragonfly dojis. These are bullish candlesticks but single stick patterns could be unreliable.

What about the MACD? It has completed a negative crossover in negative territory. A double negative! Do I see worry lines on your forehead? Well, I am inclined to believe that Sabana REIT has gone into a trading range. Its downtrend was broken earlier in April.

In sideways trading, I would look at the Stochastics. What do we see? It is in oversold territory. Could it get more oversold? It could, of course. However, TA is about probability and the probability of further downside is smaller now. That is for sure. For sure? Confirm? Double confirm. Yes, there are certain things we can still be sure about. Isn't that a relief? Hossan Leong would be happy.

90c would be a sweet price to get more units of Sabana REIT and I have put in my buy order for tomorrow. Good luck to fellow unitholders.

Related posts:
AIMS AMP Capital Industrial REIT and Sabana REIT.
Sabana REIT: Bought more at 91.5c.

NOL: Reporting a loss.

NOL reported that it has made a loss due to increasing fuel prices and too much new capacity entering the market. Marine bunker fuel averaged US$600.02 per metric ton in the first quarter in Singapore trading compared with US$469.19 a year earlier, according to data compiled by Bloomberg.

Will things improve for NOL?

“Too much new capacity has entered the market this year,” said Jee Heon Seok, an analyst at NH Investment & Securities Co. in Seoul. “It should get better as we go into the peak season in the third quarter and fewer new ships enter service.” Source: The Edge.

Oil prices have come off their highs and are now under US$100 a barrel. Supply worries have eased. The spike in oil prices was probably due to speculative activities rather than a real increase in demand. As circumstances surrounding the supply of crude oil turn benign once more, it would benefit NOL and other transport companies, everything else remaining equal.

Technically, NOL's chart is spotting a positive divergence. There is a higher low on the MACD as price spotted a lower low. Volume has also reduced significantly over the last five sessions as price hugged the 20dMA for support.

I believe that there could be a knee jerk reaction to the news and we could see price decline to cover the gap at $1.86. Any further decline in price and we want to see support at $1.80 holding up.  If it does hold up, it might be a good opportunity to buy some.

Now, we know that Mr. Market has a perverse streak. Could not the price move up instead? Yes, why not? And the reason would be that things are not as bad as analysts had feared. I'm just guessing, of course. Then, expect immediate resistance in a band between $1.92 and $1.93, after which, there is the declining 50dMA at $1.95.

NOL reports first loss in year on fuel, cargo rates. Average revenue per box rose 3% in the period, trailing a 28% jump in fuel prices, as the introduction of more ships on Asia-Europe routes sapped rates.
Friday, 13 May 2011

© 2011 - The Edge Singapore

Golden Agriculture: Excellent results.

Golden Agriculture reported a sterling set of results as expected. My faith in the company was not misplaced and my expectations were met. Year on year, revenue increased 134% while net profit increased 161%. Quarter on quarter, net profit increased 47%.

I have mentioned before that I like how the company is expanding its downstream operations to be closer to consumers. I also like how it is expanding its business in China to diversify its customer base away from Indonesia. Its Chinese operations saw a year on year increase in net profit of 220% while its Indonesian operations saw a year on year increase in net profit of 159%.

However, it is clear that its Indonesian business is still the more profitable one as it has a gross profit margin of 43%, up from 33% a year ago, while its Chinese business has a gross profit margin of only 7%, up from 6% a year ago. Could gross profit margin of its business in China be improved further? I am hopeful that it would.

Golden Agriculture's share price formed a white spinning top in the last session on the back of increased volume. This could be in response to the company's excellent results which were announced mid-day. It is easy to see that immediate although weak resistance is at 67.5c. Stronger resistance is at 68.5c and if this were taken out, we could see 70.5c tested next. 70.5c is also where we find the declining 100dMA and the upper Bollinger band. So, I expect this to be a strong resistance.

We want to see 70.5c taken out convincingly and we want to see the price form a higher high. The last high was at 73.5c. If a lower high should be formed, we could see a head and shoulders pattern. That could be ominous.

See presentation slides here.

Golden Agri profit doubles to record on surge in palm oil. Net income rose to US$230.7 billion ($287 billion) for the quarter ended March 31 from US$88.5 million a year earlier.
Friday, 13 May 2011

© 2011 - The Edge Singapore

Capitaland: More downside?

A low volume pullback would suggest that weak holders were selling. A high volume sell down is something else and investors should turn cautious. The volume which accompanied the formation of a long black candle today is the highest since 11 Feb 2011. The bearish tide is very strong.

My purchases made on 12 April at the prices of $3.38 and $3.36, above the 50dMA, are now in the red.  Will I buy more to average down my price? Capitaland's NAV/share is about $3.30. At today's closing price of $3.17, it is trading at a discount to NAV. Fundamentally, Capitaland is a strong company. However, it does not mean that its share price cannot go lower from here.

I have said this before and I will say it again as a reminder to myself: FA is about value and TA is about price.

The reverse head and shoulders did not give rise to a powerful upward surge in share price. The rising price was stopped by the declining 100dMA, trapped for many sessions before finally breaking the support provided by the 50dMA. Any trader worth his salt would have cut loss then. However, I am a bad trader and held on. As price declined, volume seemed to reduce which was heartening. Of course, today's explosive volume as price plunged destroyed that illusion.

All the MAs are declining and the 20dMA seems ready to form a dead cross with the 50dMA. -DI has been rising and, with it, the ADX. The downward movement in price seems to be gathering momentum. Further downside cannot be discounted and if price were to decline further, supports are at $3.11 and $3.08. I will wait for the dust to settle before deciding on my next move.

CapitaLand down on policy tightening worries
Wednesday, 11 May 2011

© 2011 - The Edge Singapore

Sabana REIT: Bought more at 91.5c.

91.5c. Does this price sound familiar? It was the price I bought into Cache Logistics Trust some weeks back. See blog post here.

Today, I bought more units of Sabana REIT at 91.5c. The REIT's unit price touched a low of 91c after going XD before closing at 91.5c, forming a black hammer in the process. Buying at 91.5c XD is similar to buying at 94.5c CD (which, incidentally, was the highest price I paid although most of my purchases were made between 92.5c to 93.5c). Similar? That's because the REIT's maiden DPU was 3.04c.

I must be feeling quite bullish about the REIT if I bought more at 91.5c today. Well, feelings of bullishness aside, I feel that this REIT is a rather safe passive income generator at this level. NAV/unit of 98c means that the REIT is now trading at a 6.6% discount to NAV. Gearing level is conservative at 24.9%. Interest cover ratio is 7.9x. Annualised DPU of about 8.81c would mean a distribution yield of 9.63% at 91.5c per unit.

Some people asked me if Sabana REIT is still a good investment even though it has gone XD. Well, look at the numbers I have laid out above. What do you think? As an investment for income, I cannot find any big negatives with the REIT at this point in time. Indeed, I expect its performance over the next two years to be rather stable, everything else remaining equal, and that's a primary objective when we are investing for income.

Technically, the price gapping down today and going beyond the lower Bollinger band is very bearish. Notice, however, that the volume is the lowest in the last five sessions. This suggests that there is little selling pressure even though the REIT is trading XD, well, not at the current price level anyway. 91.5c is also supported by the 161.8% Fibo line while 91c is immediate support.

Could price weaken further? Although I do not think it probable, yes, possibly. Placing the 100% Fibo line at today's low of 91c gives us an idea of where the next downside supports might be found. 90c, 89.5c, 89c and 88c. At 88c, the distribution yield would be about 10%.

If price were to weaken further, I would not bother guessing why people were selling down the REIT. I would simply march in and buy more.

NOL: A favourable wind is blowing.

NOL was a star performer today as its share price advanced 9c or 4.9% to close at $1.93, the day's high. A long wickless white candle was formed on the back of very high volume. This bodes well for the bulls and we could see the company's share price pushing higher tomorrow.

Higher up, much stronger resistance would be felt in a band from $1.98 to $2.00.  The trendline resistance also approximates $2.00. To go higher, the downtrend that started on 5 January has to be broken decisively. Could it happen this week?

The MACD has formed another higher low although the counter's share price formed a lower low. Positive divergence? Yes, looks like it. So, to take advantage of the positive divergence, buy and hold?

Well, I am somewhat apprehensive as NOL is in a multi-month downtrend and conventional wisdom which believes that the trend is our friend would say that we sell at resistance in a downtrend. It might be prudent to err on the side of caution. When in doubt, I divest partially.

NOL up on improving container sector outlook. NOL said last week it carried 12% more cargo in the four weeks to April 8 from a year ago, helped by higher traffic on intra-Asia and Asia-Europe routes.
Monday, 09 May 2011

© 2011 - The Edge Singapore

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Golden Agriculture: A picture says a thousand words.

A picture says a thousand words and that is really the appeal of technical analysis. This is, of course, if we are able to interpret the picture and sort out the signs.

I keep saying that the long term uptrend of Golden Agriculture is intact. Well, it is still intact. Take a look at the weekly chart here, starting from the week of 27 Oct 2008:

The counter's share price is retesting the long term trendline support which coincides with the rising 50wMA. Since the week of 17 Jan 2011, trading volume has declined. The black candles formed in the last three weeks have relatively short bodies, suggesting a tight range of prices.

The spring is coiling up and tension is building. Immediate upside target is 70.5c while a failure of the trendline support could see price going down to 57c which is where we find the rising 100wMA.

General Election results and the stock market.

I have kept politics out of my blog. It is an investment and personal finance blog. However, some have asked me what I think the General Election results would mean for Singapore and for the stock market.  Well, I guess we could talk about this while having "tea".

The PAP had the slimmest of margins since 1963, capturing 60.1% of valid votes, but they did manage to retain 81 out of the 87 seats in Parliament. The loss of the Aljunied GRC helmed by BG George Yeo who was our Minister for Foreign Affairs is perhaps the biggest setback for the PAP. However, politics aside, to me at least, losing Aljunied GRC would not derail Singapore's economy. Nor would it affect the local stock market adversely.

There is no doubt in my mind that Singapore's economic miracle since independence is the result of the astute leadership by the PAP and their founding members like Mr. Lee Kuan Yew and Dr. Goh Keng Swee. Over the decades, the economy strengthened, the country prospered and the people's lives improved under the leadership of Mr. Goh Chok Tong and Mr. Lee Hsien Loong in their terms as Prime Ministers. Things have definitely changed for the better over the decades but, in the last couple of years, a mood of discontent became more evident.

This General Election was a very emotional one and the electorate have sent a strong signal to the PAP that not everything is well.  When did things start to change? If the election had taken place right after the recovery from the global financial crisis in 2009, I am willing to hazard a guess that the PAP would have done better, being responsible for myriad ideas like the Job Credits which helped to keep hundreds of thousands of Singaporeans employed during the depths of the crisis. Human beings have a short memory and a focus on the immediate is quite normal.

So, has the PAP fallen short? I would say that their position weakened as they did not keep up with the changes on the ground. In so many aspects of life, change is the only constant. Ignore change and we become irrelevant. It is either we change together and stay relevant or we get left behind. I certainly hope that the PAP learn from this experience and emerge a stronger and more sensitive government.

We are investors and, naturally, we are concerned about the economy and continuing prosperity of the country. We have vested interests. The PAP has been good for the economy of Singapore. Will the investment community lose confidence in the Singapore economy because the PAP has lost a GRC? I do not think so.

The PAP's leadership over the decades transformed Singapore into a small economic powerhouse but Singapore's domestic economy remains very small (yes, even with five million people living and working here) and we are more affected by externalities. Our economy remains very open and vulnerable to externalities. If the stock market should suffer a decline, more likely than not, it would be because of some global shifts in liquidity or fundamentals. Soon, GE 2011 would just be a memory and I would not dwell on or read too much into the results.

CapitaMalls Asia: A reversal signal.

When price touched a high of $2.05 per share on 9 Feb 2011 and declined to a low of $1.57 on 15 Mar 2011, the OBV declined rather sharply as well, suggesting heavy distribution.

However, as price declined from a high of $1.92 on 11 April 2011 to touch a low of $1.66 in the last session on 6 May 2011, the OBV declined much lesser and, in fact, the OBV is much higher compared to where it was on 9 Feb 2011. This, to me, suggests that some accumulation is happening and that smart money could have returned to the counter, quietly. In the last session, price closed at $1.69, forming a white spinning top, a reversal signal. It remains to be seen if the signal is a valid one.

All the momentum oscillators are suggesting that the counter is oversold. The MACD is declining in negative territory but we could see a rebound in price. In the event a rebound takes place, expect initial resistance at $1.75 and stronger resistance at $1.83 which is provided by the declining 100dMA.

Whether the 100dMA could be overcome is crucial in determining if the stock could move higher in price. That's for another blog post on another day, perhaps.

NOL: Fundamentals and technicals.

NOL's decline in price came to a halt as news of falling price of crude oil gave a boost to the share prices of transportation companies. NOL should also benefit in time from the "tight capacity of container boxes as well as almost full deployment of container ships (which) would make freight rates very sensitive to any upturn in demand." Could we be seeing the early days of a reversal?

Citi cuts Neptune Orient target price, keeps buy
Friday, 06 May 2011

© 2011 - The Edge Singapore

Well, I bought into NOL at $1.95 and $1.90, believing that it was range bound with support at $1.90. We know what happened after the counter went XD. Price went on to touch a low of $1.80 two sessions ago, confirming that the counter is still in a downtrend. If price were to rise from here, where would the resistance levels be?

Employing a Fibo fan with high at $2.40 (5 Jan 11) and the low at $1.90 (17 Mar 11), it is clear to see that the 38.2% Fibo fan line provides a credible resistance but it was overcome on a few occasions. Therefore, I would expect the 50% Fibo fan line which coincides with the declining 50dMA to provide a stronger resistance if tested. The 61.8% Fibo fan line coincides with the confluence of 100d and 200d MAs and this could provide the ultimate limit to any upward movement in share price resulting from any possible bullish sentiments.

Although the share price has been declining, the MACD has not formed a lower low. Indeed a higher low looks likely. A higher share price with the MACD turning up could mean a test of those resistance levels identified. Good luck to fellow shareholders.

Sabana REIT: Bought more at 93.5c.

Today, I increased my investment in Sabana REIT once more. Price? 93.5c /unit. I still have the same question and that is why are people selling at this level?

I have a faint suspicion that a former substantial shareholder, Moore Capital Advisors, who last made a divestment which brought their investment in the REIT to less than 5% of the total units in issue back in December 2010, are still divesting. Of course, they no longer need to declare any sale of units although they still had some 29,752 lots on hand since that divestment in December 2010.

Why am I bullish on the REIT? The REIT is still trading CD with a DPU of 3.04c. Granted that this is an extraordinary payout as it represents distributable income from the REIT's listing in November 2010 to end March 2011. Quarterly, expect a DPU of about 2.2c as the norm. So, the distribution yield is about 9.4% at a unit price of 93.5c.

There are certain arguments that the REIT has a weak sponsor, an untested management and that the quality of its assets is questionable. However, looking at the strength of its balance sheet, its low gearing of 24.9%, its NAV/unit of 98c and its interest cover ratio of 7.9x, it would have to take a very incompetent manager to foul things up. Well, I can only hope that the CEO, Mr Kevin Xayaraj, is a competent one. He was with Ascendas Land (Singapore) Pte Ltd for two years in 2004 to 2005 before moving on to Cambridge Industrial Property Management Pte. Ltd. where he stayed till August 2009.

It is reassuring that the manager's performance fee is only payable if the REIT generates an annual growth in DPU of at least 10% over the previous financial year. If the DPU does not grow 10%, no performance fee. If the manager makes income accretive acquisitions which are financed through debt, DPU is likely to grow as well. However, if such acquisitions are financed through equity fund raising, the manager will have to be very careful to ensure that DPU does not suffer a dilution. How will the manager perform? This is a wild card, isn't it?

As for the quality of assets, DTZ revealed that Sabana REIT has some high quality assets such as Pantech 21 (72 years remaining) and Geo-Tele building (45 years remaining). In fact, 44% of the REIT's portfolio is made up of high-tech industrial buildings when compared to the number of warehousing buildings. The land leases on the REIT's high-tech industrial buildings do not start expiring until year 2051.

Investing in anything has attendant risks. Investing in Sabana REIT at its IPO price of S$1.05/unit might not have been the most prudent thing to do. With smallish REITs, there were better yielding alternatives out there. However, at 93.5c/unit, the risk premium has been watered down significantly. Could I be totally wrong about this? I think it unlikely but the possibility exists. After all, we can and should reduce risk in investments. It is near impossible to eliminate risk.

Looking at the chart, the lowest the REIT's unit price has been to was 92c while 93c can be said to be a rather strong, many times tested immediate support. Upon XD next Tuesday, we would probably see the REIT's unit price weaken.

Could we see 92c tested again? Possibly. Could we see price form a new low? Why not? How low? I do not know. However, I do know that if it gets much lower as to give a distribution yield of 10%, I am buying many more units. Unit price would have to be about 88c to give that kind of yield.

STI declines again: CapitaMalls Asia, Golden Agriculture and Sabana REIT.

I caught a hint of panic in the air today. It is not abject terror but a slight panic.

STI declines 1.3% to 3,113.76 at closing, lowest since 31 March 2011. Shares on the measure trade at an average 14.3 times estimated earnings, compared with about 15.6 times at the end of 2010, according to data compiled by Bloomberg. The world’s biggest builder of oil exploration and production platforms declined as crude oil futures fell for a third day on concern demand will weaken as stockpiles rise in the U.S., the world’s biggest consumer of the commodity.
Wednesday, 04 May 2011

© 2011 - The Edge Singapore

Is this hint of panic a good opportunity to load up some stocks on the cheap? Well, I took the opportunity to load up on some:

CapitaMalls Asia: The last time I bought some shares in this company was at $1.80 per piece. Today, my overnight buy order at $1.70 was filled. I had another buy order at $1.68 which was not filled. Incidentally, $1.68 was the low of the day. What is next?

Looking at the daily chart, expecting a more bearish scenario could see the 150% Fibo line, which coincides with the lower limits of the MA envelope, providing stronger support at $1.64 next. We might even see the strongest of the 3 golden ratios tested on the downside. The 161.8% Fibo line approximates $1.62.

Golden Agriculture: Look at the daily chart and find the uptrend support originating from 28 October 2008. This is a very long term support and likely to be a very strong one.

It is approximating the lower limits of the MA envelope which is at 62.5c in the next session. With the support at 65c, which is where I bought more of the stock today, compromised on higher volume, we could see price weakening again in the next session. With the fundamentals strong and the longer term uptrend intact, I am buying more on weakness.

Sabana REIT: I bought more units of this REIT today at 93.5c/unit. For reasons unknown, the REIT was sold down heavily today.  Two transactions, each with more than 1 million units, sold down the REIT at 93.5c /unit. It is strange that the individuals or institutions responsible for these two transactions did not sell in the last three sessions when unit price touched a high of 95.5c but chose to sell at 2c lower today instead. This is especially puzzling as the units are still being transacted CD.

A DPU of 3.04c will go XD on 10 May, next Tuesday. Paying 93.5c/unit today is a good deal, I believe, representing a discount of 5.6% to NAV/unit and a relatively secure distribution yield of 9.4%. Until next Monday, I am accumulating on any further weakness.

Courage Marine: Profit warning.

Courage Marine's management issued a profit warning, expecting 1Q 2011 to turn in a loss: "The Board of Directors of the Company wishes to inform Shareholders that, despite efforts by the Group to secure deployment of its fleet, fleet utilisation was low during the first quarter of 2011. The Chinese New Year holidays in February resulted in a decrease in our fleet utilisation over the period. In addition, the Japanese quakes, tsunami and nuclear power plant disaster had temporarily halted the shipment of cargo to and from Japan, which resulted in a temporary over-supply of vessels within the Asian region. In addition, freight rates during the period remained generally low, with the BDI averaging around the 1,500 level during such period." Read announcement here.

I took the opportunity to divest most of my investment in the company at 22c/share when the price spiked on news of dual listing plans by the management. This was on 18 Jan 2011. I still retain a small investment in the company despite dismal BDI numbers as I want to see if dual listing would help reflect the value of the stock more accurately. Well, we win some and we lose some. Here is the latest BDI chart:

Technically, the counter had been range bound with resistance at 19.5c and support at 17c. Today, price broke support and touched 16.5c briefly before closing at 17c.

Gapping down today, we could see gap fill happening at 18c and that would be a good price to reduce exposure or to divest completely. Sell at resistance, that is what I would do. Panic selling would not do us any good.

Mapletree Industrial Trust: A simple analysis.

I looked at the results of Mapletree Industrial Trust (MIT) briefly when it was announced a few days ago. It didn't interest me much and so, I did not blog about it. Someone asked me a couple of days ago what I thought of it and if I would invest in the trust now.

I like industrial properties S-REITs because they probably offer a more stable source of passive income compared to office S-REITs or retail S-REITs. At least, in theory, that's how it is. I also like First REIT which is into healthcare properties. I usually choose to invest in REITs with relatively higher yields compared to their peers in the same sector. After all, investing for income, distribution yield has to be a very important consideration.

MIT's distribution yield, at the last done price of $1.08 per unit and an annualised DPU of 7.72c, is about 7.15%. I cannot say I am excited by the yield. Investing in AIMS AMP Capital Industrial REIT, Cache Logistics Trust or Sabana REIT would give a higher distribution yield.

At $1.08, MIT is also trading above its NAV/unit of 95c (a rich premium of 13.7%). MIT has a gearing level of 36.1% and an interest cover ratio of 6.6x. Occupancy rate is at 93.2%. So, we could possibly see distributable income increasing again in future if occupancy rate improves. This could bump up DPU by a few % but distribution yield would probably not surpass 7.8% even so (ceteris paribus).

Some numbers for easy comparison:

AIMS AMP Capital Industrial REIT (20.5c):
Yield: 9.76%.
NAV/unit: 27c (24% discount).
Gearing: 32%.
Interest cover ratio: 5.7x.

Cache Logistics Trust (95.5c):
Yield: 8.18%
NAV/unit: 88c (8.5% premium).
Gearing: 26.4%
Interest cover ratio: 9.5x.

Sabana REIT (94.5c):
Yield: 9.3%.
NAV/unit: 98c (3.6% discount).
Gearing: 24.9%
Interest cover ratio: 7.9x

For people who were lucky enough to invest in MIT during at its IPO at 93c per unit and are still holding on, they would be enjoying a distribution yield of 8.3% which is more attractive. What about investing in MIT now? The biggest attraction in investing in MIT now is probably its pedigree. Mapletree is, after all, an arm of Temasek Holdings. Ironclad? Probably.

What about Mapletree Logistics Trust (MLT) which has expanded through acquisitions? Back in July 2010, I mentioned that I was wary of this trust because of its high gearing of 43.6%. The management has since brought the gearing level down through equity fund raising. Its numbers are now somewhat stronger:

Mapletree Logistics Trust (90.5c):
Yield: 6.85%.
NAV/unit: 85c (6.5% premium).
Gearing: 39.4%.
Interest cover ratio: 6.7x

MLT's distribution yield is even lower compared to MIT's. Its gearing is also higher. MLT's occupancy rate is >98% and has less room to increase revenue by filling vacancies compared to MIT. If I have to choose between MLT and MIT, the latter has my vote.

See MIT presentation slides here.
See MLT presentation slides here.

Golden Agriculture: Accumulation mode.

Anyone who has been following my blog recently would know that I have been accumulating shares of Golden Agriculture. Today, I bought more shares in the company at 66.5c a share. Do I intend to buy more if price should weaken? Yes, I would.

I am confident that the demand for crude palm oil (CPO) will strengthen as an edible oil as well as for the production of bio-fuel. With increasing affluence in Asia, especially in India and China, consumption is on an upward trajectory. With crude oil once again north of US$100 a barrel, we could see a stronger return of bio-fuel as a less expensive alternative. The fundamentals support higher CPO prices in future.

CPO has retreated to RM3,270 a ton from a high of RM3,960 in February. This is a decline of more than 17%. There are signs that the steepest part of the correction is over as price has managed to stay above RM3,230 a ton since late March.

Golden Agriculture's fortunes are probably the most levered to the price of CPO amongst the CPO companies listed in Singapore. Its share price took a dive from a high of 83c on 4 Jan 2011 to just 61c on 23 Feb 2011 for a loss of 26.5%. Devastating for anyone who got in at or near the high? Quite. Could price continue to move south?

Well, technically, I get the impression that the counter is oversold. As the ADX is at 11 and the DIs approximate 20, there is no strong trend or a trend per se. Volume has reduced again today as price found support at 66c and this is where the uptrend support which originated on 23 Feb is found. Stochastics is still in oversold territory and could we see it forming a higher low?

I always say that TA is about probabilities and never certainties. So, in the event that price moved lower, where is the next support? If the trendline support originating from the low of 23 Feb were to break, I see the next support at 65c. This is also a more ideal entry price I identified some time back when I was thinking of re-initiating a long position in this stock. More ideal because it was the top of a very lengthy basing process which started in early January 2010 and ended in October of the same year.

By drawing a Fibo fan using the low of 23 Feb and the high of 11 Apr, 65c is also where we would find the 78.6% Fibo fan line next week. For good measure, I used the low of 25 May 2010 and connected it to the low of 23 Feb 2011 which gave me another trendline support. Guess what. This line actually approximates the 78.6% Fibo fan line mentioned earlier.

65c could be the next strong support. If price were to test 65c, I am buying more.

LMIR: 1Q 2011 results.

LMIR is one of my long time investments. My only grouse is with its losses which stem from foreign exchange forward contracts. In 1Q 2011, it lost $2.1m from these contracts. Some degree of hedging is necessary, I believe, but in an environment which has seen the Indonesian economy and its currency strengthening quarter after quarter, 100% hedging is unnecessary. Distributable income could have been almost 20% higher if not for these contracts.

DPU: 1.17c
Payment date: 31 May.

Gearing: 10%.
NAV/unit: 86c.

See presentation slides here.

Related post:
LMIR: 4Q FY2010 results.

What did AK71 buy today?

Sabana REIT at 94.5c.

In the morning, before the letters "CD" came on, there was some heavy selling but it was rather well absorbed and there was a long buy queue at 94c. This was after the price touched a high of 95.5c. After some initial hesitation, I decided to add to my long position and bought more units at 94.5c which happens to be where we find the 50dMA.

Technically, things continue to look up for this REIT's unit price. OBV shows strong accumulation. The MACD looks like it would be crossing into positive territory soon, heralding the return of positive momentum. MFI spiked upwards, suggesting strong demand. All in all, rather encouraging. Immediate resistance is at 96c which is where we find the 100dMA approximating.

See earlier blog post on Sabana REIT here.

Golden Agriculture at 67c.

I increased my long position in Golden Agriculture today at 67c as the 200dMA was retested as support. Volume today is the lowest in at least a week as price pulled back to 66.5c at the trendline support which originates from the low of 23 Feb 2011.

ADX is below 20 and the DIs are approximating 20 which suggest that there is no trend. Look at the Stochastics and we see an oversold situation. Indeed, price action has reached the lower Bollinger band.

Time for a rebound? Very likely. In such an event, it would be interesting to see if price could form a higher high and that would mean higher than 73.5c, the high of 11 April. This could turn out to be quite rewarding.

See earlier blog post on Golden Agriculture here.

Cambridge Industrial Trust: 1Q 2011 results.

I must say that Mr. Chris Calvert, CEO of Cambridge Industrial Trust, has not failed suspicions that he could underdeliver. He did so and did so stupendously.

DPU declared for 1Q 2011 is 1.001c (XD 5 May 2011). This is to be paid on 14 June 2011. Annualised DPU is provided by the management as 4.06c. This is much lower than the DPU of 4.84c, post rights, as suggested by the manager. I blogged about the tricky nature of the rights issue and DPU forecast in an earlier blog post. Read it here.

At today's closing price of 51c, the annualised DPU of 4.06c would mean a distribution yield of only 7.96%. This is greatly disappointing! Has Mr. Chris Calvert outdone himself? A rhetorical question.

Property manager's fees increased a whopping 46.4% while manager's management fees increased 8% year on year. All these while the gross revenue of the REIT increased only 3.8% year on year.

Regular readers know that I do not have a high opinion of Mr. Chris Calvert and I have blogged about how the Trust has failed to deliver in the past. An example? Please read blog post here. However, I decided to be friends with Cambridge Industrial Trust again (read blog post here) and it seems that I could have been too forgiving.

Given a chance for a small gain, I would probably divest my smallish investment in this Trust. Yes, the consolation is that my investment in this Trust is a very small one. Perhaps, a wary subconscious prevented me from foolishly investing too much in this Trust.

With gearing at 33.3%, an interest cover ratio of only 4.8x and a distribution yield of less than 8%, I am better off investing in Cache Logistics Trust, AIMS AMP Capital Industrial REIT and Sabana REIT. All of these have lower gearing, higher interest cover ratios and higher distribution yields. Cambridge Industrial Trust is a loser.

See manager's report here.
See presentation slides here.

Sabana REIT: DPU of 3.04c.

While chatting with some friends, I mentioned that I expect a maiden DPU of no less than 2.8c for Sabana REIT. I also said that I could be wrong and the DPU could be higher. I am happy to be wrong and a DPU of 3.04c was announced. The REIT will go XD on 10 May and the income distribution will be made on 16 June.

Some important numbers:

NAV/unit: 98c.
Gearing: 24.9%
Interest cover ratio: 7.9x

See presentation slides here.

Not too long ago, I initiated a long position in Sabana REIT very close to its low and, similar, to my investment in Cache Logistics Trust, I would not be averse to some profit taking if its unit price were to rise meaningfully in the near future.

Immediate resistance is provided by the declining 50dMA at 94.5c. This is more likely than not to give way and the next resistance level is at 96c which is where we find the 100dMA as well as the 138.2% Fibo line, the first of three golden ratios. I am hopeful that we could see 98c tested as per my previous blog post on this REIT.

Related post:
Sabana REIT: Turning positive.

Sabana REIT announces distributable income of $19.3m for Nov 26-Mar 31
Wednesday, 27 April 2011

© 2011 - The Edge Singapore

Cache Logistics Trust: Reverse head and shoulders.

I am rather excited by the price action of Cache Logistics Trust today. Price formed a wickless white candle as it closed at 96c, the neckline of the potential reverse head and shoulders pattern I mentioned in earlier blog posts. It remains to be seen if this resistance could be overcome. 96c is also where we find the 200dEMA.

If resistance at 96c were taken out, using Fibo lines, I see more significant resistance provided by the golden ratios at 98c (138.2%), 98.5c (150%) and 99c (161.8%). I initiated a long position in this trust at its lowest not long ago and added to my position shortly after. So, if the resistance levels identified should be tested, I would not be averse to some profit taking. Locking in some nice gains? Sure, why not?

Related post:
Cache Logistics Trust: 1Q FY2011 results.

First REIT: Weakness on XD.

First REIT went XD today and its unit price gapped down, closing at 73.5c on the back of higher volume. Could its unit price continue to weaken? Acknowledging the lack of trend, let's look at the Stochastics and it is obviously falling from overbought territory. It could continue falling and we could see First REIT's unit price testing the support of its trading range at about 72c, given time. However, this might  not happen since price is currently at a confluence of MAs (i.e. 20d, 50d and 100d) which could act as support.

What would I do? Sell at resistance and buy at supports. If price should have a bounce up, selling at 74.5c or a bid lower at 74c could be a good idea. If price were to retest 72c support, buying more is what I would do. If you guess I am putting more faith in the possibility of the REIT's unit price weakening further in the short term, you are right. Just remember, however, that I could be wrong. ;-)