LMIR: Up against a wall?

LMIR staged an up day as well but on rather lacklustre volume. Price hit a high of 47c before retreating to close at 46c. 47c is a many times tested support and could be a strong resistance now.  For those who wish to, it is a good price to reduce exposure at. Price could touch a high of 47.5c for this REIT tomorrow and the downtrend would still be intact.

However, the momentum oscillators are encouraging with MFI forming a higher high and the OBV continuing to rise. The MACD looks like it would do a bullish crossover with the signal line in negative territory.  Let's see what tomorrow brings.

My strategy in a downtrend: Sell into strength as price rebounds to test resistance. Buy more when price shows signs of bottoming or when the trend shows signs of reversing. Bearing this in mind, I would queue to sell some at 47.5c, the trendline resistance, tomorrow

AIMS AMP Capital Industrial REIT: A strong up day.

AIMS AMP Capital Industrial REIT staged an impressive up day on high volume today.  It has been a long time since this REIT has had a white candle day on such high volume. Immediate resistance provided by a confluence of MAs was taken out at 21.5c as it closed unequivocably at 22c.  There were quite a few big trades today:

9.07 AM at 21c, 1,086 lots bought up.
9.28 AM at 21.5c, 1,185 lots bought up.
11.59 AM at 22c, 1,821 lots bought up.

It is my guess that this REIT has attracted the attention of more funds and big time investors. Something might just be brewing. The OBV is rising strongly, a sign of heavy accumulation.  The MFI is rising towards 50%, a sign of positive buying momentum.  The MACD has turned up sharply towards the signal line, ready for a bullish crossover in negative territory. Unless the MACD crosses upwards back into positive territory, what we have today could just be a rebound although the very high volume is encouraging.

A further upmove in price should test 23c, a many times tested resistance level, once more. Is this REIT going to move up out of its trading range finally?  Only time will tell. 

My strategy in a rangebound situation: Sell into strength at resistance and accumulate on weakness at support.  I sold the units I collected at 20.5c last week at 21.5c resistance for a quick gain today.  I am queueing to sell more at 23c, the top of the trading range, tomorrow. 23c is a long term resistance and would be harder to overcome. If I do manage to sell more at 23c tomorrow, I would be left with 75% of my original position which I would leave to enjoy any breakout if it should take place. Always hedge.

Create more passive income with limited capital.

I have blogged about how Warren Buffet is a "know something" investor whereas I started out as a "know nothing" investor to being a "know a bit more" investor and, now, a "know a bit more than a bit" investor. Warren Buffet buys a lot of something which he thinks is a winner whereas for the rest of us it seems that diversification is the way to go. See: Excuse me, are you an investor?

Obviously, as is seen in my blog's header, I am more interested in building a reliable passive income stream than anything else. So, yield is a big thing for me and REITs naturally have a role to play in my strategy.

The meltdown in the global stock markets after the Lehman Brothers crisis shocked me out of complacency and into action, action which saw me beefing up my FA and picking up TA. I refused to be beaten and I was furiously reading and updating my knowledge, reviewing my past mistakes and planning for the future. 

REITs are a big part of my portfolio and they gave me much angst during the crisis. I also blogged about the lessons learnt. See: High yields: Successes, failures and the in betweens.

I went on to accumulate more units in REITs which met my selection criteria and currently the top three holdings in my portfolio are REITs.  They are Saizen REIT, AIMS AMP Capital Industrial REIT and LMIR.  These are all trading at big discounts to their respective NAVs, they have low gearing (or in Saizen REIT's case, lowered gearing) and high yields (or in Saizen REIT's case, potential high yield).

I was not a unitholder of Saizen REIT when they recapitalised.  I do not have any historical baggage.  I only looked at the numbers in mid 2009 and decided that there was immense value and that there was potential for a very high yield when income distributions resume. Today, the fundamentals have improved and my opinion has not changed. Persistent insider buying suggests a high level of confidence that the REIT is undervalued and that income distribution will resume as promised.  I also like the fact that Credit Suisse is now a major unitholder of the REIT.  See: Saizen REIT: 3Q FY2010 results.

I was a unitholder of MI-REIT and I was not very pleased with the recapitalisation package proposed late last year but I recognised that it was the best way to strengthen the REIT as there were no other viable alternatives (even though the CEO of CIT claimed there was). The renamed REIT is stronger in its balance sheet which is the most important thing in any business, in my opinion.  Why bother objecting to the recapitalisation plan on the grounds that unitholders' equity would be heavily diluted if the balance sheet remained terminally ill? The renamed REIT has the lowest gearing for industrial property REITs in Singapore now, next to the new kid on the block, CLT.  See: AIMS AMP Capital Industrial REIT (MI-REIT).

I have always been a unitholder of LMIR and I stayed positive on the Indonesian economy through the crisis. LMIR's very low gearing means there is little chance of it going to unitholders for funds. In fact, it has more room to gear up if there should be yield accretive purchases available. Even though some might be unhappy with a lack of growth in dpu in the current timeframe and how the forward hedging of the Rupiah/S$ exchange rate does not allow dpu to benefit from the stronger Rupiah, I remain sanguine about the situation largely because this REIT is still delivering a very healthy yield in excess of 10% at the current price. See: LMIR: More units at 10% yield.

Recently, some suggested that I might be overexposed to REITs.  In my usual way, I told them that it really does not matter to me if something I am investing in is a REIT or a company as long as it is able to satisfy certain criteria I have of which high yield is one. I rather concentrate my limited resources on a few good REITs than to spread out over tens of REITs and companies for the sake of safety through diversification.  I think Warren Buffet got it right to concentrate rather than diversify, in such an instance.

Many bloggers are quite comfortable revealing how much they receive in dividends on a monthly basis. I am somewhat less open but I will say that in the month of May, a big chunk of my dividends came from LMIR.  In the month of June, I am expecting a similar amount of income distribution from AIMS AMP Capital Industrial REIT.  Between LMIR and AIMS AMP Capital Industrial REIT, the annualised income distributions I receive could be as much as 4x my monthly salary. It is like getting 4 extra months of bonus every year. You like the idea? I do too.

Things should get better from here as from the month of September, income distribution from Saizen REIT would add to my passive income stream. I might just stop trading the market and sit back, relax and let the passive income stream in.  Of course, it remains to be seen if my calculations as to Saizen REIT's potential income distribution would come to pass.  See: Replies from AK71: All things Saizen REIT.

I remember watching and very much enjoying a cooking program in my teenage days, "If Yan can cook, so can you!". Now, I say to anyone who wants to create more passive income with limited capital, "If AK71 can do it, so can you!"  See: Seven steps to creating passive income from the stock market.

Saizen REIT: Insider purchases continue.

26 May 2010:

Ms. Yvonne Ho Yuk Yee, spouse of Mr. Raymond Wong Kin Jeon, has purchased 300,000 warrants of Saizen REIT (“Warrants”) on the open market. Mr. Wong is therefore also deemed to be interested in the 300,000 Warrants owned by Ms. Yvonne Ho Yuk Yee and held by HSBC as depository agent.

Amount of consideration (excluding brokerage and stamp duties) per share paid or received: 6.5c.

Mr. Raymond Wong Kin Jeon's deemed interest now stands at 19,373,390  Units or 2.033% of current issued share capital. 

Given the weakness in the stock market which has made valuations more attractive, I have considered increasing my exposure to Saizen REIT through purchasing more of its warrants.  Warrants, however, do not get any income distribution and that is a big negative for me. 

Technically, things remain somewhat dicey as it remains to be seen if the unit price of Saizen REIT would be pushed down further by the declining 100wMA or if the support provided by the 50wMA would prevail.  If I were not informed by TA, I would have simply gone ahead and bought many more Saizen REIT units as the price retreated.  Marrying FA and TA has made me more cautious and a recent purchase made with the retreat in price was a smallish hedge.
 

Related post:
Saizen REIT: Recent insider purchases.
Charts in brief: 27 May 10 (Part 2).