AIMS AMP Capital Industrial REIT: Consolidation and corporate rating.

Some readers left comments here in my blog while others wrote me emails asking me about the proposal by AIMS AMP Capital Industrial REIT to consolidate 5 units into 1.

Personally, I am not really concerned with this exercise. Why? 

The fundamentals will not change with this exercise. It is still the same REIT with the same fundamentals. As for whether the REIT's unit price will do better or worse after consolidation, if only I knew.

Am I not doing anything with regards to this exercise? I will continue to monitor the REIT's unit price. If its valuation becomes very compelling, I will buy more at supports. If the unit price were to retest resistance, I could divest.

A more important and positive development is the upgrading of the REIT's corporate rating by Moody's. The new rating is Ba1 with a stable outlook. A stronger rating improves investors' confidence and could make borrowings cheaper and more accessible for the REIT.

The improvement in rating is even more significant when we take into consideration the redevelopment of 20 Gul Way.

In an earlier blog post, I said that the redevelopment is a step in the right direction as the REIT moves to maximise the use of its plot ratio of 1.4x from the current 0.46x.

However, there will be short term pain manifested in various forms during the redevelopment period. The most immediately apparent would be the loss of rental income from 20 Gul Way during the redevelopment period.

I estimate a reduction of about 9% in distribution income which means that the DPU per year once the proposed redevelopment is underway could be lowered to 1.99c, assuming that the REIT pays out 100% of its distributable income.

At a unit price of 20c, therefore, the REIT still offers an attractive proforma distribution yield of almost 10%. If the REIT were to reduce payouts to 90% in view of the said redevelopment, we are still looking at a proforma distribution yield of almost 9%.

AIMS AMP Capital Industrial REIT and Sabana REIT have almost equal weightage in my portfolio and, together, form about 50% of my total investment in the stock market. They are likely to remain significant passive income generators for me.

Read full report from Moody's here.

Related post:
AIMS AMP Capital Industrial REIT: Higher DPU and 20 Gul Way.

Tharman Shanmugaratnam has spoken.

I think Tharman Shanmugaratnam is a really brainy guy. He also did our country proud when he was selected as the Chairman of the International Monetary and Financial Committee.

When Tony Tan talks about the economy, I listen. When Tharman S. talks about the economy, I listen too and he has spoken.

"Tharman Shanmugaratnam told a conference that the world has now “entered a phase where there is a self reinforcing cycle” of a loss of consumer confidence, which is leading companies to hold back on investing.

“Asia will not be immune to a global slowdown,” Tharman said. The Singapore economy is highly reliant on international trade."


Related posts:
Wage slaves should be fearful.

Singapore says global recession more likely than not
Tuesday, 06 September 2011

© 2011 - The Edge Singapore

Courage Marine: Added at 10.5c a share.

It has been some time since I wrote about Courage Marine. With the BDI in a downtrend, there was no reason to go long on this counter. The last time I did something pertaining to this counter was a divestment when news of a dual listing in Hong Kong was made known.

However, as I like the company, I have been tracking its performance which is of course closely tied to the BDI as most of its revenue is derived from spot rates.

The BDI was consolidating for many months. Since hitting a low in early 2011, 1,250 has been established as a support, four times tested no less. 1,500 was breached recently and retested successfully as support. The BDI has broken out of its consolidation phase and we could be seeing a trend reversal starting in earnest.

Courage Marine's share price went lower than its low of end 2008 recently. This means that the market expects the company to do worse than it did in the last recession but with the BDI breaking out of its consolidation phase to the upside, the fundamentals seem to suggest something else.

So, I have tip-toed back into Courage Marine, re-initiating a long position in the company. Technically, I am wary of initiating too big a long position because the declining 20dMA could push price lower again. If price were to overcome the 20dMA convincingly, we could see 12.5c and 13.5c tested next.

Related posts:
Courage Marine: Profit warning.

Bullish on Noble, IndoAgri, Genting and DBS?

I was reading The Straits Times online edition. Yup! AK71 is catching up with the Times! I love this pun!

There is an interesting article by Andy Mukherjee titled "Don't get seduced by analysts' darlings" and he selected four stocks as examples.

Andy is of the opinion that "analysts are overly bullish. They are beginning to turn nervous, but are far from throwing in the towel."

He also said that "for choppy markets to get better, sentiment must first hit rock bottom. Like it did in the first quarter of 2009."

Stock #1: Noble Group

"Analysts are still wildly bullish about Noble... (with) consensus estimate for the stock (suggesting) a 35 per cent upside.

"Noble shares fell more than 80 per cent between June and October 2008."

Stock #2: Indofood Agri Resources

"With the hiving off of Salim Ivomas Pratama, .. the company is sitting S$860 million in cash, with little clarity from management on future expansion. Meanwhile, the profit accruing to Indofood shareholders grew less than expected in the June quarter... The consensus estimate for the stock's target price is about 33 per cent higher than the current price."

Stock #3: Genting Singapore

"Chip volumes declined 13 per cent from the previous three months... Overall, though, the analyst community is still gung-ho on Genting... (and) the consensus target price is still 28 per cent higher than the market price."

Stock # 4: DBS

".. local currency interbank rates in Singapore... have collapsed. One key rate - the swap offer rate - has even turned negative.... The consensus in the analyst community, however, is that DBS Group's fair value is 28 per cent higher than what the stock currently sells for.

"If the Singapore economy slips into a technical recession this quarter and loan growth slows markedly, then the lingering optimism on DBS could dissipate. That could be risky for investors.

"For now, the cash in your mattress is quite safe where it is. If you really want to do something with your money, consider stocks with high dividend yields."

I do not think staying in cash 100% is a good idea since Mr. Market has a way of surprising us sometimes. Will we have a recession for sure? What if markets simply continue to trade sideways while inflation rages on?

Even famed New York University economist Nouriel Roubini, a perpetual bear, puts the risk of a double dip recession at 60 per cent probability and not anything closer to 100 per cent certainty.

The more we expect something to happen, the more it might not happen. So, without perfect knowledge, the best strategy, in my opinion, is to have a warchest ready even as we stay invested.

Oh, I am not vested in any of the above stocks.

Related posts:
1. Should we be staying invested or in cash?
2. Sleep well at night with a plan.
3. Stock market analysts.
4. A capital question: How much to have or how much to use?
5. Investing in REITs: A flawed strategy?
6. Dr Marc Faber: How not to lose money?

Wage slaves should be fearful.

I had a conversation with someone who said he is living hand to mouth and that he is somewhat worried with how things are developing in the world now.

Although Asia is where we find economic growth these days and it explains why people are flocking here as they look for better opportunities, if a global recession should transpire, Singapore is unlikely to be spared. 

In fact, we are likely to suffer more than others due to our very open economy which is highly dependent on external demand. Many are likely to lose their jobs in such a situation.






So, my friend is right to be fearful if he was indeed living hand to mouth. If he should become unemployed, he would be in deep trouble. For people like him, we cannot even start talking about investing in the stock market.

Using some common sense, what would I do if I were him? He must first get his finances in order:

1.  Look at his expenses. See what are necessities and what are not. Remove the latter, mercilessly.

For example, I know someone who sold his 5 year old car recently because the very bouyant COE prices now means that he could sell his car at a higher price than two years ago, minimising losses, losing $6K instead of >$10K. He now saves $800 a month in monthly repayment and is taking public transport for now. The car was not a necessity.

2.  Save money! Make sure he saves enough money to cover at least a year's worth of expenses. This will be his emergency funds. In case he should be retrenched in the next recession, he would have ample time to look for a job.

Some financial advisors say putting aside 6 months salary is the rule of thumb. For me, I would say measuring how much we should put aside in terms of expenses is more meaningful. If we should have enough money put aside to cover expenses for 10 years, not considering inflationary pressures, are we recession proof?






3.  Any money in excess of the emergency funds, he should put to work, investing for greater returns. Having excessive savings is silly given the paltry interest payment on savings.

Having said this, with the stock market weakening continually now, we should be prudent and not throw everything including the kitchen sink into stocks.

4.  I would also suggest that he looks into ways of increasing his income in his current job or a new job. He might also want to look for supplementary income. Be more productive.

No one owes us a living. Unless we can show that we can make valuable contributions, no one will think we are valuable enough to pay us!

Living hand to mouth is being a wage slave. Wage slaves are pitiful but someone who is living like a wage slave when he does not have to is NOT pitiful.

Note:
Wage slavery refers to a situation where a person's livelihood depends on wages, especially when the dependence is total and immediate. (Source: Wikipedia.)

Related posts:
1. Needs and wants.
2. Do you want to be richer?

Tea with AK71: Durians tidak boleh?

This photo was taken at a MRT station on the Circle Line. See why people say Singapore is a "fine" country?

No durians but no fine if we were caught har?

Are the authorities partial to durians?

Does anyone know the reason why there is no fine for being caught with durians on MRT trains?

Could it be that the powers that be have not decided on how much the fine should be? If so, I have a suggestion!

To be fair, they should have a weighing scale at every station and the quantum of each fine should be determined by the weight of the offending fruit which was brought onboard!

Bring more, fine more. Bring less, fine less.

If the reason for banning durians on MRT trains is because of its endearing fragrance, what about durian mooncakes, durian puffs, durian puddings and other such yummy delights?

Heavens forfend! ;)

Sabana REIT: 90c sell order filled.

My overnight sell order at 90c was filled. Those units which were bought at 87c and 88c were divested. I liken the gains to locking in income distributions in advance.

As I still have a sizeable investment in Sabana REIT, divesting those bought at lower prices for capital gain does not seem like a bad idea with market volatility likely to be the norm for a while. I could well have opportunities to buy in again on the cheap in future.

What if its unit price were to stay strong? That would make me happy too since I am still very much vested. Either way, I have a plan and that means I sleep better at night.

Although the MACD has completed a bullish crossover with the signal line, momentum is still negative. This is a rebound and not an uptrend.

90c is a natural resistance level. If this were to be broken convincingly, we could see its unit price rising higher to retest resistance in a band of prices from 91.5c to 92.5c.

Related post:
Why I do not panic?

CapitaMalls Asia: Rebounding.

At this point in time, the recent upmove of CapitaMalls Asia's share price is still a rebound. The MACD made a bullish crossover with the signal line but momentum is still negative. Make no mistake. The downtrend is still intact.

Volume has been declining over the last three sessions. How do we interpret this?

Although the bears were roughed up three sessions ago, bulls seem to lack conviction in following through. We can only wait and see if they do in the next session. For now, bears are staying sidelined, nursing their wounds, while bulls remain somewhat cautious.

Price touched a high of $1.375 in the last session which coincides with the resistance presented by the 50dMA. Overcoming this resistance could see gap fill at $1.395 and that is where I have put in my next sell order.

If we look at the orange line I have drawn, we will see that $1.395 also approximates the immediate downtrend resistance in the next session.

Breaking the immediate downtrend could send share price higher to test resistance provided by the declining 100dMA which is currently at $1.52.

Related post:

CapitaMalls Asia: Gap closed at $1.325.

Tea with AK71: Sambal mooncake.

There was much talk about mooncakes in LP's infamous cbox over at Bully the Bear today.

Fancy having some sambal mooncake at tea time? This must be the most "innovative" mooncake I have ever had.

My parents got this in a box of mooncakes from Star Cruises.

Quite clever the way they separated the spicy centre from the lotus paste, using dried coconut as a wall.

The taste is surprisingly good although for some who do not like spicy food or dried coconut, it might be difficult to accept.

Cache Logistics Trust: Gap closed at 96c.

The unit price of Cache Logistics Trust closed the gap at 96c in the last session.  A white candle with an extremely long upper wick was formed, suggesting strong selling pressure at 96c. 96c is also where we find the flatlined 50dMA which should also act as resistance.

I decided last Friday to put in a sell order over the weekend at 96c for a partial divestment in case gap resistance should be retested today. My sell order at 96c was filled this morning and I made some pocket money.

For people who believe in mini double bottoms, we could see the unit price test $1 if 96c should be taken out convincingly. I would divest more then. Otherwise, we could see unit price retreat to test recent lows once more and that is at 91.5c, my entry price months ago.

I will also be collecting income distribution from the REIT today. So, this is a nice combination of investing for income and capital gains. Regular readers would know that I am not averse to trading my investments in REITs from time to time.

Related posts:
Cache Logistics Trust: Initiated long position at 91.5c.

Tea with AK71: Family, friends, Abercrombie & Fitch and BPA free water bottles.

I had a restive long weekend. Long weekend? Yes, for someone who has to work half days on weekends, this was a nice long weekend for me. Hmmm, well, I did visit a customer for slightly more than an hour on Saturday but that's not really work. Just delivered mooncakes and had a chit chat.

So, what did I do this "long weekend"? I had tim sum with my family, caught up with some friends and did some shopping. Spent some money (quite a lot by my standards) and helped to stimulate the economy, not that the economy needs much stimulating. The restaurants were packed! The shopping malls were packed!

Tim sum was at East Ocean Teochew Restaurant in Shaw Centre. I took some photos of the more creative pieces (only available on weekends and public holidays) with my trusty Samsung phone camera (as usual):

Penguins! These had lotus paste and salted egg fillings. Yummy!

So cheerful, right? Almost couldn't bear to eat it.

The one on the right didn't look as cheerful but it was still cute. :)

Called "Ugly Ducklings", these were a bit like "wu kok".

These were filled with "mei cai", the same vegetable that they would have with stewed pork.

Looks like a duckling, doesn't it?

This is a photo of the gigantic poster at Knightsbridge (the former Crown Prince Hotel) some two or three stories tall where Abercrombie & Fitch  is going to have their second branch in Asia.

Apparently, it caused a Singaporean auntie some distress, enough to write in to the papers, saying that it was indecent and that people turned away when they walked past it. I don't see why is it indecent.

Actually, I saw people (male, female, young and old) taking out their phones and snapping pictures of it while waiting to cross at the traffic lights. So, what do you think of it?

Apart from spending money at restaurants and cafe, the only other place I spent money at was in a Nike shop, where I bought four BPA free plastic water bottles for myself and my family.

Barley drink not included.

I think not enough people realise that harmful chemicals leach from plastic water bottles into the water they hold. We should make sure that the plastic water bottles we use are BPA free.

I also paid my bills at an AXS machine, got a friend a belated birthday present, got a pair of socks and had a haircut at QB House in 313 Somerset. I like the haircut too. Definitely a nice weekend!

Tuesday is a holiday again! Selamat Hari Raya! Yeah!

CapitaMalls Asia: Gap closed at $1.325.

The last time I blogged about CapitaMalls Asia was on 15 August. At that time, I detailed the reason for not adding to my long position. That reason was technical in nature and is still valid today.

I did not sell as price went lower, saying I would only sell as price rebounds to test resistance. Downtrends are rivers of hope.

Yesterday, CapitaMalls Asia's share price rose dramatically on extremely heavy volume from an oversold position. Such moves usually have strong momentum which would carry over to the next session. This morning, it did just that and my overnight sell order at $1.325 was filled.

Why $1.325? This is where we find a gap resistance and gaps would usually be filled. Price touched a high of $1.33 and if we look at the chart, this is where we find the immediate downtrend resistance.

If $1.33 should be overcome convincingly, we would almost certainly see the counter's share price going higher. Why? Closing above $1.33 would signal to market participants that the immediate (and steeper) downtrend is broken. Long holders might return and more short sellers would cover their positions. This is a powerful combination that would usually push price higher.

In case the immediate downtrend is broken, we will find the next two gap resistance at $1.395 (approximating the 50dMA) and S$1.55 (approximating the 100dMA). I also expect the next downtrend resistance (which I drew in orange color) to be more formidable.

Related post:
CapitaMalls Asia: Pre-emptive strikes failed.

Money continues to flow into Singapore.

Singapore continues to attract inflows of money. I have friends from USA and Europe who are parking their money in savings accounts in Singapore although they get only 0.1% interest. Why? The Singapore Dollar has been appreciating against their home currencies and is likely to get stronger.

Singapore also has a AAA rating when it comes to sovereign bonds. This has been attracting much attention. The latest to announce intention to invest in Singapore bonds is Schroder Investment.

Does it stop at bank deposits and bonds? Emphatically, no. Hot money is hungry for productive assets in Singapore. The rising supply of money has kept interest rates low, creating a credit boom. This is a big reason why prices of condominiums, especially those in the luxury segment, have shot through the roof in recent times.

The last I heard, some people with a lot of money have turned their attention to industrial properties in Singapore as yields on residential properties are relatively low at about 4% now. Will industrial properties see their prices pushed up next?

The rising value of the Singapore Dollar and continuing inflow of money into our country has created problems for our industries as well because our exports become less competitive. As it is, our GDP shrank 7.8% in the last quarter.

I believe that the Monetary Authority of Singapore has to limit hot money inflows or cap gains on the Singapore Dollar and soon.

Singapore bonds attract Schroder with Asia’s sole AAA ratings
Thursday, 25 August 2011

© 2011 - The Edge Singapore

FREE Pepper Chicken McGrill!

The new Pepper Chicken McGrill is a sandwich that is made for those with fire in the belly!

It starts with a whole chicken thigh, grilled to perfection. Then, it is dipped in a smoky black pepper sauce and dressed with slivered onions. Put in between a savoury, gourmet sourdough bun and it is the smouldering taste that Singapore deserves!

To make things even more mouth watering, McDonald’s is offering a sizzling deal from 26th till 31st August 2011!

Flash this mobile coupon to redeem a FREE Pepper Chicken McGrill with any à la carte Chicken McGrill sandwich purchase! (Terms and conditions apply and while stocks last!)

Download the coupon: HERE.

Spread the word, and grab yours today!

Get a $50 discount and a free charger!

What's this? The new BlackBerry Bold 9900 with the latest BlackBerry 7 OS!

With a brushed stainless steel frame, it’s the boldest and thinnest BlackBerry yet.

Take advantage of the pre-launch special with SingTel!

Get $50 off your purchase of the new BlackBerry Bold 9900 and get a FREE BlackBerry battery charger worth $98!!!

You have to be fast!

Find out more about the pre-launch special: HERE.

Saizen REIT: Full Year 2011 results.

I have not blogged about Saizen REIT for some time now because there is nothing really significant to analyse after its CMBS for YK Shintoku was successfully paid up a few months ago.

I divested my investment in the REIT partially when its unit price rebounded after hitting a low in the aftermath of the triple disaster of earthquake, tsunami and nuclear crisis in March this year. This is because of the possibly more difficult economic circumstances which would plague the country as it feels the impact of the immense damage fully over time. Technically, it also looked as if further upside in unit price could be capped. As the situation lacks a level of clarity which I would require to invest with a peace of mind, partial divestment was the way to go.

Yesterday, Moody's cut Japan's government bond rating to Aa3 from Aa2. The new rating is three notches below Moody's top Aaa rating.

While pointing out that more than 90% of Japan's debt is held domestically, I have also acknowledged in the past that debts will have to be repaid in time as its ageing population draws down on its savings increasingly. While the downgrade by Moody's is hardly surprising and does not mean that Japan is collapsing in the immediate future, it does remind us that Japan's slide downwards has not stopped.

Having said this, I still retain a rather significant investment in Saizen REIT in absolute dollar terms as I still like the idea of having exposure to freehold residential property in a country where two thirds of its population rent the homes they stay in.

The REIT's gearing level has also dropped to just 24% and its NAV per unit (adjusted for warrants) is a relatively high 29c. Interest cover ratio is a tad low at 3.1x. DPU of 0.5c has been declared for 2H 2011 (payable on 16 Sep). An annualised DPU of 1c with a unit price of 14.9c would mean a distribution yield of 6.7%. Pretty decent.

In 1H 2012, six months later, we could see a higher DPU as a full six months income generated by YK Shintoku would be distributable to unit holders. However, bearing in mind that many properties were divested to repay its CMBS, some might question if such contribution would be significant? From memory, YK Shintoku had a very large portfolio of properties and, again based on memory, we could see DPU bumping up some 10% possibly.

The same rating agency that downgraded Japan's debt rating raised Saizen REIT's debt rating from Caa1 to B1. This is good news as it could make financing more readily available and at a lower price for the REIT. The management has mentioned its desire to raise gearing level to 35% and the better rating should help.

Saizen REIT remains a recovery story in the making. We can only wait and see if the expected more difficult economic conditions in Japan will present any challenges for the REIT in time.

Read article here:
Moody's downgrades Japan's debt rating citing large budget deficits and government debt.

See Full Year 2011 presentation slides: here.

Related articles:
Japan's debt issue and Saizen REIT.
Sanity prevails with more good news.

Dr. Marc Faber: How not to lose money?

I have the greatest respect for Dr. Marc Faber and his insights have so far been spot on. In a recent interview, he said "I am ultra-bearish about everything geopolitically. In an environment of money printing, we have to ask ourselves, how do we protect our wealth? ... Where do we allocate the money?"

In summary:

1. Treasuries:

"U.S. government bonds are junk bonds," Faber said. "As long as they can print, they can pay the interest. But another way to default is to pay the interest and principal in depreciating currency." (AK71: Yup, countries inflating their way out of hard times has been done before.)

2.  Cash:

Specifically, the problem in Faber's view is the loss of purchasing power as inflation whittles away the value of money. (AK71: I believe he is referring more to the US$ and also the Euro. The S$ has been strengthening and we are still seeing inflationary pressures but it would be much worse for the US$ and the Euro.)

3. Stocks:

If you print money, stocks will not collapse. (AK71: I am sticking to my plan like glue! Remember my plan?)

4. Emerging markets:

Faber's own stock portfolio is centered on dividend-paying Asian shares, particularly in Malaysia, Singapore, Thailand and Hong Kong. These include a variety of real estate investment trusts and utilities. (AK71: Honestly, I knew that he was a fellow investor in Hyflux Water Trust but I did not know that he is also into REITs! I like this. Stick to the plan!)

5. Gold:

Faber is convinced that the price of gold will continue rising and that any pullback is a buying opportunity. And as a currency, Faber said gold should be held in its physical form and not in shares of gold miners or even exchange-traded funds. (AK71: I have recently replied to a reader that I feel that I am underinvested in gold and silver. However, being in Singapore and having S$ denominated assets, I feel much safer.)

Read complete article here.

Related post:
1. Sleep well at night with a plan.
2. Hedging and precious metals.
3. Hyflux Water Trust: Privatisation.
4. Staying positive on S-REITs.

Sleep well at night with a plan.

Today's selling in the stock market here has not affected all counters in equal measure. In fact, for the vast majority of my portfolio, the selling has not been a big thing.

When there is strong selling down in the market, I am more interested in buying but not indiscriminately, mind you. I have a plan and I am sticking to it like glue.

Regular readers might remember me saying that I would like to accumulate the following counters if they should hit their next support levels:

1. AIMS AMP Capital Industrial REIT @ 19.5c/unit
2. Sabana REIT @ 83c/unit
3. First REIT @ 71.5c/unit

So, did I buy anything today? Nope.

Some people have advised me, with good intentions I am sure, to wait longer and I could perhaps get these at even lower prices. Indeed, what they think could happen just might. Really.

However, remembering how no one can time the market bottom, I have decided to pace myself as I buy at supports. I am more an investor than a trader, after all. I invest in these REITs for income and with distribution yields of 8+% to 10+%, everything remaining equal, they are pretty good investments.

In the last bear market, many who were expecting the market to bottom at 1200 points were sorely disappointed and quite a few missed the ride up. Those who bought at 1400 points or higher anyway were amply rewarded over the next one year and more.

This time round, I see many people are once again predicting where the bottom might be over the next few months. I won't go there.

So, what is my plan in a nutshell?

I might still indulge in some counter trend trading if the technicals look promising and I will continue to invest for income, adding at critical supports. I will continue to be invested in the stock market but keep a warchest for future acquisitions at bargain prices if they should present themselves.

This way, if the stock market reversed to move higher, I would not bang my head against the wall. Of course, if the stock market should move lower instead, I would have the resources to add to my long positions.

My plan is good for me but it might not be good for you. In fact, I am very sure that it is not good for everybody. Take stock of your own situation and decide what is best for you.

What is best for anyone, however, I believe, is usually a strategy that will allow the person to sleep well at night. That is priceless.

STI drops 3.2% to 2,733.63 at closing
Friday, 19 August 2011

© 2011 - The Edge Singapore

Another bloodbath?

At this very moment, stock markets in Europe and the U.S.A. are down between 3+% to 6+%! Will Asian markets be drenched in another bloodbath tomorrow? Buckle up because it seems like it would be a rough ride.

What am I going to do? Stick to my plan. What else?

If some of the counters I am eyeing should fall to my target prices, I will collect more. I am pacing myself as there is no way of knowing how much worse this will get.

Being invested for income, having regular dividends and income distributions will provide me with reliable cashflow during leaner times as I wait for the recovery which is bound to take place one day.

Stay invested in Asia. This is where all the growth is and will continue to be.

Read: DJIA falls below 11,000.