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Wilmar: Not a time to sell.

On 5 June 12, I did a blog post on whether it was time to go long on Wilmar. Yesterday, someone asked me as well if it is now a good time to go long on Wilmar.

To any seasoned market watcher, Wilmar's share price must look quite tantalising as it hit a low of $3.41 on 14 June 12. That was a good 43% lower than its one year high of $5.99 a share.

Now, if we should think of a reason for the decline in price, it is clearly because of the company's disappointing earnings. The company's crushing business is likely to remain very difficult for some time to come. In fact, the CEO said it could take a few years for excess capacity in China to be absorbed. As this business is about 25% of the company's revenue, a decline in its share price is to be expected but the decline has been disproportional. I have no doubt that short sellers made quite a bit of money here as well.

Wilmar's share price has seemingly found a floor and has rebounded somewhat. I see immediate resistance at $3.70 or so. If it should break resistance, we would probably see short sellers covering their positions which would send share price higher to test the next resistance.

If the company's share price should test a new low, everything remaining constant, we should see stronger buying interest returning. Technically, the momentum oscillators are rising and, so, support this thesis. Look out for a higher low in the momentum oscillators then. That would be a clear signal to go long as the share price is set up for a reversal.

Is it time to buy Wilmar's shares? I feel, at least, it is not a time to sell.

Related post:
Wilmar and China Minzhong: Time to go long?

SPH: Better investment than retail S-REITs?

SPH is still my largest investment in a Singapore blue chip and it is an important part of my high yield portfolio. CIMB now suggests that investing in SPH is better than investing in retail S-REITs. It would be a happy coincidence for me if CIMB should be right as my only exposure to retail S-REITs is a small long position in Suntec REIT, much smaller than my investment in SPH.

Singapore Press Holdings is becoming increasingly like a retail real estate investment trust (REIT), CIMB Research said, noting its growing retail property arm and stable media business, as well as typical payouts of more than 90%...


The broker also said SPH is a cheaper alternative for investors seeking exposure to retail Singapore REITS after the stock’s underperformance, offering yields of 6.4% versus an average of 6.1% for retail Singapore REITs...


CIMB said revenue compound annual growth rate for SPH’s “gem asset”, Paragon shopping mall in Singapore, stood at 8.3% over 2006-2011, outstripping growth for comparable assets under retail Singapore REITs.


Related post:
SPH: Interim dividend of 7c per share.

CIMB says SPH a “pseudo retail REIT”. It upgraded its rating on SPH to outperform from neutral and raised its price target to $4.19 from $4.13.
Tuesday, 19 June 2012

© 2012 - The Edge Singapore

Singapore property prices to stay resilient?

If the latest report by Maybank is correct, then, the expected 20 to 30% decline in Singapore property prices over the next couple of years might not transpire. The expectation is now for a mere 10% decline in property prices over the next 18 months. This suggests that any dip in prices could see showflats packed with buyers again.

Related post:
Affordability of housing in Singapore.

Singapore residential sector to see soft landing. Shares in CapitalMalls Asia have jumped nearly 32% this year, while CapitaLand rose 22% and Keppel Land is up nearly 39%.
Tuesday, 19 June 2012

© 2012 - The Edge Singapore

Marco Polo Marine: Persistent insider buying.

I find Marco Polo Marine, an offshore and marine company, a rather interesting proposition at current prices of 31.5c to 32.5c a share.

1. PER of about 8x
2. Net profit margin just under 20%
3. NAV per share at 37c
4. Interest cover ratio at 8.3x
5. Gearing at 30%

Marco Polo Marine has the intention of listing an Indonesian subsidiary on the Jakarta Stock Exchange. This could unlock value as Kim Eng estimates the listing could value the company's stake in the Indonesian subsidiary at more than 30% of the company's current market cap.

Perhaps, it is the persistent insider buying over the last 12 months that really nailed it for me here:

Announce Date [Date of Effective Change]	Buyer/ Seller Name [Type*]	S/ W/ U **	Bought/ (Sold) ('000)	Price ($)
					After: No. of Shares ('000) ***	% Held ***
05/06/12 [05/06/12]	LEE WAN TANG [DIR]	S	1,095	0.325	195,311	57.02
05/06/12 [05/06/12]	NAUTICAL INTERNATIONAL HOLDINGS LTD [SSH]	S	95	0.325	191,399	56.17
01/06/12 [01/06/12]	LEE WAN TANG [DIR]	S	110	0.335	194,216	57.00
01/06/12 [01/06/12]	NAUTICAL INTERNATIONAL HOLDINGS LTD [SSH]	S	110	0.335	191,304	56.14
16/05/12 [16/05/12]	LEE WAN TANG [DIR]	S	114	0.340	194,106	56.96
16/05/12 [16/05/12]	NAUTICAL INTERNATIONAL HOLDING LTD [SSH]	S	114	0.340	191,194	56.11
10/05/12 [10/05/12]	LEE WAN TANG [DIR]	S	100	0.340	193,733	56.85
10/05/12 [10/05/12]	NAUTICAL INTERNATIONAL HOLDING LTD [SSH]	S	100	0.340	191,080	56.08
15/12/11 [14/12/11]	LEE WAN TANG [DIR]	S	159	0.335	193,892	56.90
14/12/11 [13/12/11]	LEE WAN TANG [DIR]	S	100	0.335	193,733	56.85
05/12/11 [02/12/11]	LEE WAN TANG [DIR]	S	100	0.341	193,633	56.83
05/12/11 [02/12/11]	NAUTICAL INTERNATIONAL HOLDINGS LTD [SSH]	S	100	0.341	190,980	56.05
02/12/11 [02/12/11]	LEE WAN TANG [DIR]	S	70	0.345	193,533	56.80
02/12/11 [02/12/11]	NAUTICAL INTERNATIONAL HOLDINGS LTD [SSH]	S	70	0.345	190,880	56.02
28/11/11 [28/11/11]	LEE WAN TANG [DIR]	S	11	0.330	193,463	56.77
28/11/11 [28/11/11]	NAUTICAL INTERNATIONAL HOLDINGS LTD [SSH]	S	11	0.330	190,810	56.00
28/11/11 [25/11/11]	LEE WAN TANG [DIR]	S	500	0.330	193,452	56.77
28/11/11 [25/11/11]	NAUTICAL INTERNATIONAL HOLDINGS LTD [SSH]	S	500	0.330	190,799	55.99
07/09/11 [06/09/11]	LAI QIN ZHI [DIR]	S	71	0.337	192,952	56.63
07/09/11 [06/09/11]	LAI QIN ZHI [DIR]	S	100	0.343	192,881	56.60
07/09/11 [06/09/11]	LEE WAN TANG [DIR]	S	71	0.337	192,952	56.62
07/09/11 [06/09/11]	LEE WAN TANG [DIR]	S	100	0.343	192,881	56.60
07/09/11 [06/09/11]	NAUTICAL INTERNATIONAL HOLDINGS LTD [SSH]	S	100	0.343	190,299	55.85
05/09/11 [02/09/11]	LAI QIN ZHI [DIR]	S	117	0.350	192,781	56.58
05/09/11 [02/09/11]	LEE WAN TANG [DIR]	S	117	0.350	192,781	56.58
31/08/11 [29/08/11]	LEE WAN TANG [DIR]	S	100	0.350	192,664	56.54
31/08/11 [29/08/11]	NAUTICAL INTERNATIONAL HOLDINGS LTD [SSH]	S	100	-	190,199	55.82
29/08/11 [26/08/11]	LEE WAN TANG [DIR]	S	64	0.345	192,564	56.51
25/08/11 [25/08/11]	LEE WAN TANG [DIR]	S	299	0.338	192,500	56.49
25/08/11 [25/08/11]	NAUTICAL INTERNATIONAL HOLDINGS LTD [SSH]	S	299	-	190,099	55.79
24/08/11 [23/08/11]	LEE WAN TANG [DIR]	S	50	0.340	192,201	56.41
23/08/11 [22/08/11]	LEE WAN TANG [DIR]	S	251	0.332	192,151	56.39
22/08/11 [19/08/11]	LEE WAN TANG [DIR]	S	170	0.333	191,900	56.32
19/08/11 [18/08/11]	LEE WAN TANG [DIR]	S	300	0.347	191,730	56.27
21/06/11 [20/06/11]	LEE WAN TANG [DIR]	S	100	0.374	191,430	56.18
20/06/11 [17/06/11]	LEE WAN TANG [DIR]	S	150	0.373	191,330	56.15
16/06/11 [15/06/11]	LEE WAN TANG [DIR]	S	120	0.376	191,180	56.10
14/06/11 [13/06/11]	LEE WAN TANG [DIR]	S	150	0.377	191,060	56.07
10/06/11 [09/06/11]	LEE WAN TANG [DIR]	S	100	0.386	190,910	56.02
07/06/11 [06/06/11]	LEE WAN TANG [DIR]	S	200	0.385	190,810	56.00

AIMS AMP Capital Industrial REIT and Sabana REIT: Performance fees.

This issue of The EDGE has a very interesting article by Goola Warden on S-REITs. In a nutshell, it looks at potential conflicts of interest between their external managers and unitholders. To this end, it looks at the layers of fees charged by the managers.

As investors, we want to make sure that the REIT managers are fairly rewarded since no one would work for free. However, we have to safeguard our interests too especially when there is a lack of uniformity in the way the fees are calculated.

On the issue of performance fee, CLSA says that AIMS AMP Capital Industrial REIT and Sabana REIT are amongst S-REITs with the most equitable performance fee structures. The managers are only paid performance fees upon satisfying certain conditions.

The manager of AIMS AMP Capital Industrial REIT gets paid 0.1% of the deposited property value if distribution per unit (DPU) growth exceeds 2.5% per annum. The manager gets paid 0.2% of the deposited property value if DPU growth exceeds 5% per annum.

The manager of Sabana REIT gets paid 0.5% of the net property income (NPI) if the REIT achieves DPU growth of 10% per annum for unitholders.

So, if unitholders get a meaningfully higher DPU, the managers are rewarded with a performance fee. I doubt if anyone would quarrel with this. It appeals to my sense of fair play.

Between the two REITs, however, I believe that Sabana REIT's performance fee structure is fairer. Rewarding the manager with a percentage of the NPI makes sense because a higher DPU is probably due to a higher NPI. 

So, having the REIT manager rewarded a percentage of the NPI makes more sense to me than rewarding them with a percentage of the deposited property value.

Nonetheless, AIMS AMP Capital Industrial REIT's conditional performance fee is still better than those of REITs like Suntec REIT which pays 4.5% of the REIT's NPI as performance fee to its manager regardless of performance. 

Er... Am I missing something here?

Seems like there is more reason to like Sabana REIT now apart from its very high distribution yield. ;)

Reference:
"Growth versus value.", Goola Warden, The EDGE, pages 22 to 24, 18 June 2012.

Related posts:
1. Sabana REIT: 1Q 2012 DPU 2.26c.
2. AIMS AMP Capital Industrial REIT: 4Q FY2011.