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

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