Hyflux: Continuing downtrend.

My recent decision to go long in Hyflux has turned out poorly. It was a decision heavy on TA and almost nothing FA wise. So, should I cut? Regular readers know that I do not like to cut as prices are declining.

Prices go down a river of hope and I would like to cut on rebounds and if prices should test resistance. If the opportunity does not present itself, then, it is another stock for the freezer.

I have always liked Hyflux's business but in the last crisis, I chose to invest in E-pure instead for its less demanding valuation. Some told me that Hyflux would be safer as E-pure was an S-chip. We are probably all affected at the subconscious level in the same way.

In the last crisis, Hyflux touched a low of $1.11 in October 2008. Today, this low has been taken out.  Does this mean that Mr. Market feel that Hyflux will do a lot worse compared to the last crisis? It does seem to be the case.

Despite all the concerns raised regarding Hyflux's debt, its numbers are still pretty good.

Net margin:
13%. This is a good business.

Net gearing:
0.1x. Concerns regarding Hyflux's debt overdone perhaps?

Contributions from Tuaspring Desalination Plant to start in FY2012.

See slides presentation 3Q FY2011: click here.

Technically, Hyflux is in a downtrend. Looking at the chart, the very long term support would be at $1 (a many times tested support back in 2002) and $0.86 (the low of 9 Sep 2002). Would these be tested in time? No one can say but if they should be tested, they would be buying opportunities.

Right now, $1.065 is immediate support provided by the 123.6% Fibo line. A stronger support would be at $1.015, the 138.2% Fibo line and a golden ratio.

AIMS AMP Capital Industrial REIT: Accumulate on weakness.

I bought more units of AIMS AMP Capital Industrial REIT today at 93.5c. 

Price touched a low of 93c on relatively high volume today. In the following days, if selling pressure does not let up, we could see the next support at 92c tested. That would bring us back to price levels not seen since December 2009.

Although the MFI and Stochastics both suggest that the REIT is terribly oversold, in very bearish circumstances, price could continue to drift lower with momentum oscillators remaining in their oversold territories.

If price should go lower to test 92c, I would like to see the MACD forming a higher low. This would hint that downside momentum has weakened. It would also give us a positive divergence.

The redevelopment of 20 Gul Way is NPI yield accretive and because it is funded fully by debt, it is also DPU accretive. It is estimated that contributions from the redevelopment will start from 1Q 2013. 

By early 2014 when both phases of the redevelopment are generating revenue, the management expects a positive DPU impact of +1.465c, everything remaining equal. This would mean a pro forma DPU of 11.465c or a distribution yield of 12.26% based on today's closing price of 93.5c per unit.

We could see continuing weakness in the REIT's unit price if sentiments remain bearish. I would capitalise on further weakness to accumulate as I could find nothing wrong with the REIT's fundamentals.

See slides presentation regarding progress in the redevelopment of 20 Gul Way: click here.