First REIT: Is the bear just resting?

I scanned the charts of the counters I am vested in and, for the first time in a while, I don't really have anything to say. I was actually thinking of not blogging tonight. However, the last chart I looked at gave rise to some thoughts, some bearish thoughts. The chart was a weekly chart belonging to First REIT.

Let us first look at the daily chart. First REIT is in the grip of a downtrend that started on 20 January. This downtrend is very much intact. In fact, the recovery of its unit price from recent lows with price bouncing off support at 72c as provided by the 100dMA seems to have hit a wall this session as a black candle was formed. The reducing volume as price rose is surely not encouraging.

The MACD although having completed a bullish crossover with the signal line is still in negative territory. The recent price recovery could just be a rebound. Without an increase in volume as price tries to move higher, it could indeed be just that. It might also interest investors to look at the OBV which suggests continual distribution since price peaked in middle of January 2011. This could be short term and mild in nature but we should keep it at the back of our minds nonetheless.

Fundamentally, this is still a very attractive REIT for anyone investing for income. However, it does not look very attractive from a technical perspective at the moment. A pullback to the 100dMA at 72c could happen again and I am not discounting a possible pullback to the 200dMA either which is now at 69.5c.

Look at the weekly chart and the bulls would feel somewhat happier because the longer term uptrend is obviously intact. All the weekly MAs are rising nicely. However, pair this picture with the lower highs and lower lows on the MFI and RSI, we have negative divergences. Not so happy anymore? Well, at the most basic level, it shows that longer term momentum is weak.

Remember this blog post: First REIT: Buying more? Well, the technicals are suggesting caution even in the longer term. The recent pullback to 72c (the 100dMA) could just be a precursor. After all, price goes down a river of hope. Never say never and the 200dMA could be called upon as support in the next flush downwards. You could see me loading more units of First REIT then.

Related post:
First REIT: Buying more?

High Yield Portfolio - Update.

Sometimes, we just stumble upon a good thing. One of my inaugural blog posts when I started ASSI on Christmas Eve 2009 remains the most popular blog post today. I am talking about "High Yield Portfolio".

In October last year, a reader asked if I would do an update on the portfolio and I did. However, it was a "Reply from AK71" kind of thing and were mostly one-liners. See it here.

Have I deviated much from the first time I introduced this portfolio for investors who are more interested in investing for income? Not much. I am still invested in all six counters although the weight of each counter in the portfolio could have changed somewhat.

My largest investment is based on rather contrarian ideas and has attracted some skepticism, putting it mildly. I started investing in Saizen REIT at 13c a unit and I kept loading up.  Even at 16.5c a unit, I bought some. For sure, this is an under-performer in terms of capital appreciation. However, I invested in this with a view that it is grossly undervalued and that things could not get any worse. So, if we take care of the downside, the upside should take care of itself. The annualised DPU of about 1c is much lower than my estimates from a year ago and, at first glance, seems unattractive. I did not take into account the amortising nature of its new loans then. However, when we realise that the DPU could actually be 50% higher if not for the amortising nature of its loans (unlike all the CMBS before), it is immediately apparent how strong this REIT's cashflow from operations actually is. See: 2Q FY2011 results.

My second largest investment is also rather controversial: AIMS AMP Capital Industrial REIT. Reading some other blogs as well as comments left in my blog, I realise how there is still deep seated mistrust of its management. This is despite the fact that it is quite a different animal from its MI-REIT days. It is financially stronger and it has two strong sponsors. It has all its financial requirements well looked after and even managed to refinance its loans at a lower interest rate. Some people say that they were the early investors in the REIT during its MI-REIT days and that they would never recover their money. It might surprise them to know that I was also an early investor but when the REIT was recapitalised, I looked at the numbers and decided that at 20.5c, it was a safe investment promising an almost 10% distribution yield. I increased my investment in the company by some 5x right away and I have recovered all my losses and more since, especially with the rights purchased at 15.5c/unit in September last year. See: Rights issue. Would I buy more now? At 20.5c and with an estimated DPU of 2c for a distribution yield of 9.76%, why not? See: Acquisition of Northtech.

My third largest investment is now in First REIT after its recent rights issue. A blog post of mine says that this one is for keeps and I still believe it is so. See: This one is for keeps. Actually, it is more so now after the rights issue and acquisitions. An expected DPU of 6.4c and the current price of 74c, it will deliver a distribution yield of 8.65%. With gearing low at 15% or so, it has more headroom to gear up for future acquisitions which could bump up DPU. See: FY2010 results.

My fourth largest investment is in LMIR. The investment was premised on a robust Indonesian economy with 60% of its GDP from domestic consumption. However, I do not like the idea of the management losing lots of money in foreign exchange forward contracts. See: Foreign exchange forward contracts. I do, however, recognise that this is a stable passive income generator and exchange rates (Rupiah/S$) should be quite stable from here. DPU for FY2010: 4.44c and at a unit price of 54c, that's a distribution yield of 8.22%.

My fifth largest investment is in SPH. No need to say much here. SPH is one of the highest yielding blue chips I know of. Although it is synonymous with The Straits Times and other publications, it is really its exposure to real estate that I really like. I especially like the fact that it owns and manages The Paragon on Orchard Road. I also like that fact that it is a co-owner of the soon to be completed Clementi Mall. Would I buy more now? The yield is still about 6.5% even at recently traded prices. I might buy more if price were to weaken further. See: Final dividend.

My smallest investment in this High Yield Portfolio is in Suntec REIT. This REIT was something I went in big at about $1.00/unit, give or take few cents, with a view that it would be a beneficiary of the expected improvement in tourist arrival numbers and improving office rentals. Technically, it was also looking good then. I think it is quite boring now with price at $1.50/unit or so. I have divested most of my investment in this REIT and still retain a small investment. Expected DPU for 2011: 9.7c. See: Buy calls.

Do I have any counters I would consider adding to this High Yield Portfolio? Yes, there is one: Cache Logistics Trust. I have blogged about it regularly and did so recently again. Read it here. I could replace Suntec REIT with Cache Logistics Trust if the conditions were right.