Hyflux and Sound Global.

Regular readers know that I invested heavily in Hyflux Water Trust during the last crisis. I was drawn towards its very high distribution yield of some 17% and zero gearing at one stage as well as its very stable businesses. The Trust helped to grow my wealth significantly.

I continue to like the water business and believe that the world will continue to need solutions to water problems. In an earlier blog post, I said I would like to become an investor in Sound Global (the former E-pure) once again. Of course, I would also be interested in Hyflux. It is just a matter of finding an entry price I would be comfortable with.

If we look at Hyflux's chart, the downtrend is definitely intact. What interests me is the higher low on the MACD as its price formed a lower low. Yes, we have a positive divergence which is a reversal signal. What got me even more interested is that the white hammer formed yesterday was confirmed today as price opened and closed higher on the back of much greater volume.

I certainly do not know if Hyflux's share price has bottomed. It might be bottoming but we cannot call a bottom until it has formed. However, I might initiate a long position as a hedge and will not add to this initial position unless a clearer picture is seen.

Sound Global, on the other hand, is exhibiting more strength although it has come up against a significant resistance, it would seem.

As its downtrend is arguably intact, I am wary about initiating a long position when price looks like it could be testing the immediate resistance. So, for Sound Global, I will wait a bit more.

How did AK71 overcome his losses and grow his portfolio?

I get quite a few comments in my blog and some comments require more detailed replies than others. I have decided that for more detailed replies, I should put them up as blog posts from now. This one is in reply to Ray's comment here.

Hi Ray,

Actually, when I finally fully divested from CitySpring, I did not lose money.

See: CitySpring Infrastructure Trust: Thoughts on divestment.

I was also spared the subsequent rights issue.

See: CitySpring Infrastructure Trust: Rights issue.

Up till now, for me, the trusts which I count as heavy losses are MPSF and FSL Trust. For REITs, I lost on FCOT (the former Allco REIT) and Saizen REIT but these were not heavy losses if I take into consideration dividends received and trading gains, if any. I would consider 5 figure losses as heavy losses. That's just me.

All other REITs I am vested in are in the black. Many, like AIMS AMP Capital Industrial REIT, were in the red but recognising the improving fundamentals, I used the weakness in the last crisis to add to my investments. Such decisions have been rewarding and I am likely to repeat such decisions if history should repeat itself.

The value of my stocks investment portfolio practically doubled as we emerged from the last crisis. Many investments were divested as I moved most of my funds into high yielding REITs resulting in what I have now.

The divested investments were growth stocks mostly. The one which was not was Hyflux Water Trust and that was privatised. So, it was a forced divestment but at a premium of 150% to my purchase price, I couldn't complain.

See: Hyflux Water Trust: Privatisation.

Overall for me, in the last three years, trading gains outweigh trading losses 3 to 1 but in the last one year, all the gains to my portfolio of stocks were from the hefty dividends received as circumstances did not and still do not favour long investors. Honestly, I booked some paper losses trying to trade the market in recent months. The decision to focus more on investing for income, however, paid off.

Dr. Marc Faber said the last crisis was a once in a lifetime opportunity to make a lot of money in the stock market. Is it likely to be repeated in the near future? I do not know and, hence, my current strategy of being partially invested.

Generally, how did I grow and manage my wealth? I have shared my thoughts here in my blog but I have left out the specifics because I care about my privacy and I believe it to be extremely unlikely that two unrelated persons would have the exact same path anyway. For anyone who might be interested, the relevant blog posts are in the right sidebar under the headings of "Passive Income Journey" and "Wealth Creation".

There are many roads to wealth creation and each of us should choose our own path. Some well known bloggers like Musicwhiz and Createwealth do not invest in properties, for example, and they are doing well following their own paths.

Personally, I invested in properties and their recent divestments gave me some handsome gains which are now in my warchest awaiting deployment.

Know what we want. Know ourselves and what we can deal with given our circumstances. Finally, strategise and work towards a target.

It is the toughest at the beginning and this I can say for sure. However, whichever school we decide to follow, it gets easier with time. So, do not lose heart. There is no short cut but do not cut short your journey towards financial freedom.

The Muppets movie!

Jim Henson created the Muppets in the mid-1950s and The Muppet Show ran from 1976-1981.

The Muppets have long been known for their big musical numbers and Disney’s The Muppets movie not only maintains the tradition but also takes it to new levels with original songs, audience favorites and signature classic covers.

This is the first Muppets movie in 12 years and throughout the whole filming process, the Henson family has been on board together with the cast and crew.

Find out more about the movie which will hit the big screen on 8 December:
http://sg.churpchurp.com/AK71SG/share/muppets

Enjoy the movie!

REITs and rights issues: A Singaporean tale.

Some readers told me I should let my hair down and try blogging with a more local flavour. Should I try to inject some local flavour into my blog? Hmmm...

REITs have been getting a lot of attention lately and, generally, I think it is a good thing. However, I would like to see more balanced write ups which would do the subject justice.




Recently, another article in the newspapers was brought to my attention. The article is by Teh Hooi Leng, titled "The REIT myth busted." With a title like this, despite any claims to the contrary, the immediate impression given is a negative one.

At least two bloggers I know of have referred to the article and one highlighted that "Whatever Reits pay out in dividends, they will take back a few years later in the form of rights issues". A statement like this is not just simple, it is simplistic.

Indeed, a reader commented on the same newspaper article and expressed his displeasure. I replied to his comment in my usual fashion. See it here.




Now, let me see if I could inject some local flavour into this blog post with a somewhat simplistic analogy since being simplistic seems to be in vogue:

Once upon a time in Singapore, there was a father and son investment team. They invested in a condominium unit next to Bedok reservoir. Every year, the father would distribute 90% of the income from the rental collected from the condominium unit.

Ten years later, the father told the son that he wanted to invest in another condominium unit and asked the son if he would like to put down some capital for this new investment. The son did some calculations and realised that he would have had to "give back" all the money his father had distributed to him from the rental collected from the Bedok reservoir condominium unit over the last ten years!




"Wah, lao peh, how can liddat one?! You taking back all the money you gave me in the last ten years! You cheat my money izzit?", the son was indignant.

The father smiled indulgently at his son and explained that, with the proposed investment, he would be able to double the income distributed every year to him from rental collected from two condominium units instead of one but, of course, the son could choose not to be a part of the second investment. The son had a choice.

The father was not taking back whatever he had paid out to the son in the last ten years as the father didn't have the right to do so. The father was offering the son the right to either accept or refuse a part in the new investment.




Remember: When asked for money, ponder on the reason why. This is more important than the money involved. Looking at only the money involved is myopic.

With so many voices against REITs and their rights issues, it is easy to sing in a choir but to sing solo, that is much harder. OK, what do I know? I am just a retail investor.

Related posts:
1. REITs and rights issues: Dilutive or not?
2. Investing in REITs: A flawed strategy?

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DBS cuts Ascott Residence Trust rating Monday, 28 November 2011

© 2011 - The Edge Singapore

Bearish or bullish? Listen to experts?

Towards end of the year, often investors look forward to a run up in share prices. Some look forward to the Capricorn Effect which is expected to happen at the start of the new year. Could it happen again or would the mountain trekking herbivore do a disappearing act?

Personally, I am sticking to my plan of holding on to dividend generating investments and not adding unless compelling value is evident. I do not know if the bear is going to strengthen or if the bull would make a dramatic return. I definitely do not know when either scenario might happen.

There is quite a bit of pessimism and fear in the air, that we know. Whether we have hit extreme fear and pessimism, I am not so sure but people (including myself) are still looking forward to that big crash before we roll out our warchests. So, I suppose there is still some optimism and hope.

Conventional wisdom would say that when the last iota of hope has been crushed, we would see the market bottom. That would be when no one wants to talk about stocks anymore. Be savvy. Be brave. That would be when we pick up undervalued stocks with abandon although we might not talk about them. ;)

You might be interested in reading the following article for some expert opinions but I would say to anyone that it is important to have a plan in place and act upon it when the time comes. Do not get distracted by the news:

Article in CNA: Investors brace for bearish market.

Bear:
"Sani Hamid, director of wealth management at Financial Alliance, said: "What I suspect is that this market still has a bit way to go to downside before it burns itself out, which is a point of capitulation whereby everybody is just really gloomy and bearish. When the situation reaches that point, I think that's when markets will bottom."

Bull:
Mr Brice said: "Ultimately we believe that we will get that rebound and that quantitative easing in the US will happen in the first quarter of next year. And we believe eventually Europe will get its head around the problem and gradually move towards some sort of resolution. We do believe we will see progress there. In that environment we could see quite a significant risk rally."

Related post:
No change to my plan as I plan changes to my life.

CLINIQUE Special Deals!

Some time back, I revealed that I use hand moisturisers.

See blog post here: Should guys use hand moisturisers?

That blog post received quite a few comments in the affirmative. Yes, why not?

While surfing at an online shop for good deals, I came across this:

CLINIQUE

Dramatically Different Moisturising Lotion ( Unboxed ) 200ml/6.7oz

S$66.00 (With free shipping to your Singapore address.)

This is a lightweight moisturiser that my mom uses for her face. I tried it at my mom's recommendation and found that it absorbs quickly and does not leave an oily feeling on the skin. Good stuff.

You might want to try this or get it as a gift for someone special. If so, click on this link: Extra Special Discounts Up to 50% Off (Free shipping worldwide!)

There are plenty of other things on special offer. Happy shopping!

An article on REITs by Colin Tan.

A reader, Ray, brought to my attention an article in TODAY. This was in the comments section of a recent blog post. To read the comments, see:

REITs with pedigree are safer? - Comments.

A few lines from the article concerned:

... it must be said that REIT managers have mostly had to acquire their properties on the higher side of valuations if only because it is the only way they can get the owners to sell it to them.

A REIT can get a property on the cheap only when the owner is ignorant of its true market value or if it is a forced sale - many investors still do not realise this. At the same time, the REIT manager can only justify the acquisition to shareholders if it is yield-accretive. Otherwise, the REIT is better off not doing anything.

... As more properties in Singapore are acquired by the REITs, there will be fewer available on the market. As such, the asking price by the remaining landlords can only get higher. Given more time, it will become clear, if it is not so now, that the current model is not sustainable in the long run.

Read full article here.

S-REITs are getting more attention over time. That is a good thing, is it not?

REITs with pedigree are safer?

Many have told me that I am playing with fire investing in the REITs that I do and by now, regular readers would know how I would reply to them.

Some who do invest in REITs tell me that they only invest in "blue chip" REITs because these have strong "blue chip" sponsors and more likely to survive a downturn. They would still avoid the REITs I am invested in. I don't have a problem with that.

I just read this in The EDGE:

"Moody’s Investors Service said it has a stable outlook for Singapore Real-Estate Investment Trusts. However, stress tests show CapitaMall Trust, Suntec REIT, Mapletree Logistics Trust, and K-REIT run the most risk of exceeding Moody’s expected leverage parameters in the event of a downward revaluation of properties, the ratings company said in a statement, reported Bloomberg."

Some say just invest in all things blue chips and we should be safe. However, the blue chips card could be played so much that it could turn black. Blue could and some did become blue black.

Oh dear, I just remember that I have vested interest in Suntec REIT and K-REIT too!

Moody’s says stable outlook for Singapore REITs, notes risks
Wednesday, 23 November 2011

© 2011 - The Edge Singapore

A S$50 shopping voucher from MasterCard?

Register your Singapore-issued MasterCard cards for ‘A Season of Giving’ and you could qualify for a S$50 shopping voucher! You could also be supporting the Singapore Children’s Society at the same time!

So, do your bit for charity and stand a chance to be rewarded as you shop this festive season! Spread some festive cheer while you shop!

Register today at:
http://sg.churpchurp.com/AK71SG/share/mastercard1

Thank you. :)

Cambridge Industrial Trust: Templeton and acquisition.

In a blog post dated 14 October, I said that Cambridge Industrial Trust is worth another look as I expect its income to bump up in 2012 and 2013 without any need for further fund raising. It is interesting to note that subsequently on 1 November, Templeton became a substantial unitholder. Announcement here.

More recently, the Trust has proposed the acquisition of 3C Toh Guan Road East for S$35.5m. This acquisition to be completed in the first quarter of 2012 is to be part funded by debt and the rest by cash.

The acquisition is expected to bump up annual DPU by 0.24c. If the unit price of CIT were to decline to 46c, we would be looking at a prospective annual distribution yield of 9.92%. That could be attractive enough to increase long exposure to the trust.

Is this increase in DPU sustainable? Everything else remaining equal, it is. This is because it is secured through a three years leaseback agreement to the seller of the said property.

Any potential pitfalls. I do see one which is some 10 years away. This is a 30+30 years leasehold property which saw its land lease commencing in 1991.  So, it is only 10 years away before the land lease has to be renewed. At what price? We will know then. For the next few years, it should be a productive asset.

See announcement here.

Related post:
Cambridge Industrial Trust: Worth another look.

K-REIT: Better buy now?

Unlike the recent rights issue for LMIR, there is little to be gained from selling units in K-REIT and buying the rights. The former so far touched a low of 88c while the latter, a low of 2.4c. 

Buying the rights at 2.4c would mean a total price of 87.4c per unit when they are converted into regular units.

In my blog post of 18 Oct, I said that "given my very small position in K-REIT, I will most probably subscribe to the rights issue. If I were not invested in the first instance, I would not bother buying in now to gain exposure."

By a stroke of luck, any potential investor who took my musings to heart would be happier today.

Why do I say this? Read the relevant blog post here:
K-REIT: 17 for 20 rights issue.

For anyone who wants to invest in K-REIT, buying into K-REIT now at 88c or even 88.5c is a better proposition than buying at 93c, the low of the morning of 18 Oct to be entitled to the rights. That would have worked out to an effective unit price of 93c x 20 + 85c x 17 /37 = 89.32c, post rights.

Of course, buying the rights now at 2.4c or even 2.5c would be an even better proposition as this would mean effective unit prices of 87.4c or 87.5c. However, this option is probably sensible only to people with deeper pockets or people who are with Standard Chartered's brokerage which does not charge a minimum transaction fee.

Not all rights issues are created equal, for sure.

Win Burger King sandwiches and an iPad2!

Win Spicy Panini Chicken sandwiches and an iPad2 from Burger King when you play the "Spice and Slice" game!





Go on and try it, you might just be a winner:
Updated link: http://sg.churpchurp.com/AK71SG/share/bkwayofchicken
Old link: http://sg.churpchurp.com/AK71SG/share/bkchicken

Stakeholders should worry as credit is tightening.

Credit is the lifeblood of businesses and credit is tightening.

Banks in the eurozone are finding it harder to get funding and they have begun repatriating funds from overseas. These banks now refrain from lending and liquidity is drying up. Eurozone governments are also struggling to raise funds and even France was recently forced to pay higher interest rates on newly issued debt.

"The euro zone debt crisis is turning into a global liquidity crisis, and leading to a vicious cycle of intensifying funding tightness spurring dumping of risk assets," said Kazuto Uchida, an executive officer and general manager of the global markets division at the Bank of Tokyo-Mitsubishi UFJ. Read article here.

Things could get a lot worse before they get better, it would seem.

I remember Margaret Thatcher, a former Prime Minister of the United Kingdom, once saying that she did not believe in "artificially formed" countries. The breakdown of the former Yugoslavia is a good example of how such entities would not withstand the test of time. The EC and the eurozone although not a country could be current day examples of such an entity.

Some believe that the ECB has to take more definite steps to shore up confidence in the eurozone. This probably means buying up bonds in a massive exercise. Germany, however, believes that the ECB cannot be expected to solve the problems eurozone is now facing by buying up massive amount of bonds.

Of course, some people would argue that the weak Euro is actually good for Germany as its export driven economy continues to boom and some would further say that Germany's prosperity is now built on the misery of weaker members in the eurozone. Divisive? I think so.

In an earlier blog post, I asked a question:
"In order to stay optimistic about Singapore's economy, we have to be optimistic about the world economy and we have to stay optimistic that there will not be any significant credit tightening in the world banking system. Do you think it is easy to be optimistic about these?"

With differences aplenty, one wonders if the eurozone would see more stresslines forming and if it could withstand the test of time. Stakeholders should be worried.

Do you believe that we are immune to the problems in the eurozone? Do you think that we are not stakeholders because we are not part of the eurozone?

"MAS highlighted that key risks facing Singapore included a protracted global economic slowdown, financial contagion and pressures in the property market. It warned that a protracted global slowdown could weigh on the domestic economy, cause corporate earnings to fall, with knock-on effects on employment and wage growth." Read article here.

Think again.

Related post:
Further credit tightening is almost a given.

LMIR: Sell the rights?

For those who bought some LMIR rights in the fire sale recently, a question could have formed as to whether they should sell the rights and lock in some hefty gains which could be as much as 100%. That it took just two days means it is basically free money since it is within the contra period.

Indeed, from a trading perspective, why not? Traders would say that taking profit is never wrong. If price of the rights were to go higher tomorrow, I could sell some as well since I have accumulated a sizeable long position. Question, at what price? Answer, look to the Fibo lines to see where possible resistance levels are.

Beyond 4.3c, I see stronger resistance at 5.2c and 5.4c. I could do a partial divestment at those prices if they should be tested. In such an instance, I would retain half to two thirds of all the nil-paid rights I bought to convert into regular units as I still believe that at unit prices of 33c to 36.5c, we are getting great value with distribution yields of 9% or more.

Why not just keep all the rights if they are such a bargain? Indeed, I thought of that which is why I would only divest partially if higher resistance levels should be hit. This is to satisfy the trader in me which is shouting out to take profit.

If the higher resistance levels are not tested tomorrow, I will not sell any of the nil paid rights I have accumulated in the last few sessions. This will satisfy the investor in me which thinks that we are seeing compelling value in the rights.

Related post:
LMIR: Why did the rights plunge in price and what did I do?

LMIR: Why did the rights plunge in price and what did I do?

To say that I was not surprised by the plunge in price of LMIR's rights is definitely untrue. I did expect further weakness but the steep plunge downwards was unnerving, made worse by the spike in trading volume. Going by the number of comments in my blog, many others were similarly affected.

So, do we press the panic button and start frothing at the mouth? Nah, we should get really greedy. Hey, there is a fire sale going on.

Some asked me if I had any idea why the price was plunging. It is quite simple, really. Price of the rights plunged because:

1. There are people who cannot exercise their rights.

2. There are people who do not want to exercise their rights.

3. The number of rights which sellers have is greater than the number of rights which buyers are ready to absorb.

Now, should we ask why some cannot or do not want to exercise their rights? Do we ask why there are more sellers than buyers? Well, we could but I wouldn't bother. As an investor, I did my due diligence and decided that I like the REIT's numbers even more at the current price. So, accordingly, I buy more.

Needless to say, my overnight buy orders at 3.8c and 3.4c were filled. At lunch time today, I looked at the chart and Fibo lines suggested a strong support at 2.1c (150% Fibo line) and I entered a buy order which was subsequently filled. Could we see further weakness? Of course, we could and if we should, I see stronger support at 1.6c (161.8% Fibo line) and I have entered a buy order at that price.

1.6c is also somewhat magical because at an estimated annualised DPU of 3.26c, post rights and acquisitions, buying the rights at 1.6c would translate to a total cost of 32.6c per unit which means a 10% distribution yield.

LMIR: Sinking rights.

LMIR's rights sank today. It gapped down, touching an intraday low of 4.4c before closing at 4.6c. Is it going to sink further tomorrow?

Thus far, I have only discussed LMIR's rights issue from the perspective of its fundamentals. What about a TA? For seasoned and orthodox practitioners of technical analysis, they will say that it is impossible to do a TA on this counter with only three sessions so far.

As I am neither seasoned nor orthodox, I have in the past done TA on such counters. One that comes to mind is Sabana REIT during its IPO days. So, for anyone who might be interested, here is my TA on LMIR's rights.


Trading volume has been on the rise as three black candles were formed. This bearish tone is reinforced by the gap down in price today. Although price averted closing at the day's low, it did not close high enough to form a hammer. A hammer would see the lower wick at least twice as long as the body of the black candle. In this case, the body is twice as long as the wick. Further weakness in price would not surprise me.

However, Mr. Market is known to be perverse. Although an immediate reversal would be surprising, it is definitely not impossible. So, what would I do?

In such situations, we can only use Fibo lines to see where the possible supports and resistance levels are. Regular readers would also remember that I like to use two or more sets of Fibo lines to identify very strong supports and resistance. I have done that in this case.

I see strong support in the region of 3.3c to 3.4c where two Fibo lines approximate. That is where I have put in a buy order. However, it does not mean that the support would necessarily be hit. I also see a 138.2% Fibo line at 3.8c. I have also put in a buy order there. Again, it does not mean that the support would be tested. Fibo lines simply show approximate positions of important resistance or supports with no promise that these would ever be tested.

I bought into the rights at 5.6c last Friday and I bought more today at 4.6c. I have accumulated a significant position and unless price should hit those supports I have identified, there is little incentive for me to continue adding. For anyone who has yet to initiate a long position, I would say that the rights are at the right price for me as an investor (pardon the pun) as I see greater value now.

Related post:
LMIR: Bought some nil-paid rights.

LMIR: Bought some nil-paid rights.

I made my first transaction in the stock market since my return to Singapore. I bought some LMIR nil-paid rights at 5.6c each. Some might ask why not buy LMIR units instead as they are trading at 38.5c each cum distribution of 1.06c now.

At a conversion price of 31c per rights, getting nil-paid rights now at 5.6c means a total price of 36.6c. With an estimated annualised DPU of 3.26c, post rights issue and acquisitions, we are looking at a distribution yield of 8.9% and a very low gearing of under 10%. I think this is pretty attractive.

Now, if we were to buy the units at 38.5c and secure the 1.06c income distribution, our cost (to make a fair comparison) would be 38.5c - 1.06c = 37.44c. Compared to buying the nil-paid rights, it is a tad pricier (at about 2.3% more).

For anyone who would prefer to secure the said income distribution for any reason, the REIT goes XD on 16 Nov.

Last day of trading of nil-paid rights is 18 Nov. I will wait to see if I could collect more on the cheap.

Related post:
LMIR: Circular to unitholders.

Tea with AK71: A short break.

I have not been blogging for a few days. I did not even look at the stock market.

My portfolio is not a trading one. It is basically one that generates regular and reliable passive income. So, it is not unthinkable to just leave it alone while I take a short break.

I did receive a SMS from my broker today regarding LMIR's rights issue and how much I should transfer to subscribe to it. Other than that, I have been out of touch.

Where did I go the last few days? Here is a clue:

I might be blogging about my trip in my travel blog over the next few weeks. Look out for it. :)

Related post:
No change to my plan as I plan changes to my life.

Project 360: Girls' night out!

In the final episode of Project 360 brought to you by P&G (Olay) and Nuffnang, the girls get together for a night of fun, laughter and pampering while they catch up and find out who the winner of the series is!

Watch the final episode here:
 http://sg.churpchurp.com/AK71SG/share/olay360finalepisode

STI in retreat: Sound Global, Golden Agriculture, Keppel Corporation and REITs.

STI 2,789.35

- Down 66.42 pts.

STI 2,789.35

- Down 66.42 pts.

Not a pretty sight, is it? Scream in panic? Run around in circles? Sell everything and jump off a cliff like lemmings? There is plenty of fear. What should I do? Stay calm and look out for opportunities. I have spent time looking at various counters and I will talk about a few here.

More than two years ago, I went in big on E-pure, the current Sound Global, believing that the water industry is the logical beneficiary from constant efforts by governments around the world to improve water quality for their people. China is still underinvested in this area and Sound Global is a natural beneficiary.

Sound Global's share price touched a low of 40.5c in the recent sell down. As I got in at 20c more than two years ago, I was wondering if the price could go lower. After all, we can't tell if a bottom has been formed until after the fact. Could we see a retest of 40.5c now that sentiments have soured? We could, of course.

However, seeing how volume was not very high as black candles were formed, the bears seem to be lacking in conviction. I will probably start buying in at 48.5c. Why 48.5c? 48.5c could be a significant near term support as that is also where we find the trendline support and the rising 20dMA.

I also subscribe to the idea that there will be increasing demand for food and oil as the middle class in Asia expands. Golden Agriculture is a likely beneficiary of this long term trend.

The counter's price weakness in the last two sessions was on the back of decreasing volumes. This is again a sign that the bears lack conviction. I would like to get back in at supports. I see immediate support at 62c. In very bearish conditions, we could see gap filling at 58c.

I also want to re-initiate a long position in Keppel Corporation. This is a company I held rather short term long positions in both in the Asian Financial Crisis in the late 90s as well as in the Subprime Crisis a couple of years back.

I would like to re-initiate a long position in the conglomerate, believing that it will continue to be a beneficiary of the global race for oil which is a theme I firmly believe in although there could be short term setbacks.

Further weakness could see a retest of $8.40, a natural candlestick support which broke on 23 Sep after being tested multiple times. I would buy in slowly as there are quite a few gaps which could be filled at lower prices if $8.40 should give way. That volume expanded as a long black candle was formed today does not inspire confidence.

I also have my eyes on a few REITs which are seeing weakening unit prices and rising distribution yields. Prices could weaken further if sentiments continue to sour. I will judiciously add to my long positions to benefit from the sell down. Panic? Not me.


Related posts:
1. Why do I not panic?
2. Sleep well at night with a plan.

Singapore Kindness Movement.

I always believe in being courteous. However, there are times when I just feel like bashing in some people's faces. These are people who do not appreciate courtesy and are totally inconsiderate.

This world would be a much nicer place to live in if everyone is more considerate and courteous towards one another. Is it so hard to show consideration and courtesy?

Do you use ‘please’ and ‘thank you’ often? What you say matters and how you do so – politely and graciously – also makes a difference.
- Singapore Kindness Movement.

Make Singapore a kinder, more courteous place.
Let us all do our part. Find out more at:
http://sg.churpchurp.com/AK71SG/share/makesomeonesday

Thank you. :)

REITs and rights issues: Dilutive or not?

I was not the best Science student, that is for sure. I made the switch from Science to Arts at the advice of my school principal when I was in secondary school and that was probably the best advice during my school days in terms of my academic life.

I do, however, remember the scientific concept of "dilution". To me, it is quite simple. 




If I had half a glass of orange juice and I added half a glass of water to it, it would taste quite bad. Diluted and, in this case, half as concentrated.

However, if I had half a glass of orange juice and I added another half a glass of the same type of orange juice to it, would it taste any different? 

No, it would taste the same. 

Concentration stays the same. Not diluted.

There has been quite a bit of talk in cyberspace that rights issues by REITs are dilutive if we as unitholders do not participate in them. 




Some would even say that the REITs are taking back the income they distributed to unitholders before. 

Thinking of rights issues in such a manner is like suffering from cataracts. These people are not seeing things clearly.

If a REIT's distribution yield was 10% and after rights issue, it remained at 10%, would it "taste" less delicious? 




No, it would still be giving me the yield I had enjoyed before the rights issue. 

The rights issue would be simply providing me an option to increase my investment in the REIT for the same distribution yield, doubling future income in nominal value.

However, if I did not participate in the rights issue and chose to sell away the nil-paid rights instead, would the distribution yield for my remaining investment in the REIT be lower? Probably so.

However, since we had sold the nil-paid rights, the cost of our original investment would be lowered and the distribution yield would, thus, be higher. 

Theoretically, therefore, we would not be worse off in terms of distribution yield if we chose not to subscribe to the rights issue.




Most arguments which say that unitholders would see dilution if they did not take part in rights issues are referring to how their shares of the enlarged capital base would shrink in percentage terms. 

This argument, apart from being academically appealing, holds no pragmatic significance for me.

Having said this, not all rights issues are distribution yield accretive. Each rights issue should be assessed based on the circumstances leading to it and its pro forma numbers. 




Equity fund raising as a concept is simple enough to understand. 

To have a simple blanket statement that unitholders not taking part in rights issues would see dilution is, however, too simplistic and ignores what is most important about investing in REITs: income.

Cache Logistics Trust: 3Q 2011.

A DPU of 2.095c has been declared and this is an 8% increase year on year. Annualised at 8.38c, it would translate to a distribution yield of 8.38% at the last traded price of $1 per unit. Not bad. That would explain the strength of the unit price in the days running up to the announcement.

Occupancy: 100%.
Gearing: 30.4%.
Interest cover ratio: 8.3x.
Total assets: >$830m.
Financing cost reduced from 3.92% to 3.81%.

It would be a natural course for Cache Logistics Trust to eventually have total AUM of $1b. With gearing at 30.4%, it could borrow another $150m easily before hitting the 40% mark as it embarks on acquisitions to hit the $1b AUM mark.

The REIT might not have to do any equity fund raising at all. This would be good for unitholders since all acquisitions in such an instance would be distribution yield accretive, all else remaining equal.

A good set of numbers and I will look out for opportunities to accumulate more units of this REIT on pullbacks.

Technically, when a REIT goes XD, we usually see a pullback in its unit price. We have seen it with AIMS AMP Capital Industrial REIT, Sabana REIT, Cambridge Industrial Trust and First REIT recently.

I have identified the supports for Cache Logistics Trust where it could be more rewarding to enter long positions at. Now, I wait. Wait to receive income for my current investment. Wait for weakness to accumulate more.

See presentation slides: here.

Related post:
Cache Logistics Trust: Initiated long position at 91.5c.

My weaknesses (Part 2).

Not too long ago, I indulged in one of my weaknesses... on two occasions... at Andersen's of Denmark.

Visit 1: Fondue for one. I chose this because there were bits of fruits and being the rational me who is trying to lead a healthier lifestyle, it was a healthier choice. Wait a minute, a healthier choice in an ice cream outlet? Hmmm... Nah, I am over-analysing. Healthier, it is! ;p

Visit 2: Apple pie! An apple a day keeps the doctor away. I am sure a slice of apple pie would do the trick too, right? Why am I not saying anything about the ice cream? Oh, the two scoops of ice cream were just accompaniments and, honestly, I did not touch the big dollop of fresh cream you see on the extreme left. Healthier choice, remember? ;p

In a pretty crowded scene which Swensen's probably has an advantage as being the most entrenched player and Haagen Daz has the honour of being probably the most atas, Andersen's has been doing pretty good business if my observations are anything to go by.

Related post:
Tea with AK71: My weaknesses.

McDonald’s Monopoly has found its $80,000 cash winner.

I guess I will try to win the Volkswagen Touran now. Actually, just winning a Macbook Air would make me really happy. I need Tanjong Rhu!

See all remaining prizes at http://sg.churpchurp.com/AK71SG/share/mcd-monopoly2011-3

Get your game labels at McDonald’s restaurants today! Double labels on weekends! Good luck!

CPL, CMA and NOL: Resistance levels to look out for.

We had a very nice rally today. The upward march on the STI was almost uninterupted all the way from the start of the session. In an earlier blog post on 17 October, I mentioned that there seems to be a bias for further upward movement and it has taken almost two weeks to materialise.

Now that a rally is underway, for investors who are already vested, do we ask if the rally could continue tomorrow? No. We should ask if the rally were to continue tomorrow, where are the resistance levels? We should be looking for exit prices.

For investors who are not vested and who are knocking themselves on the heads for being overly bearish, they want to know where are the supports so that they could consider buying on pull backs. However, given the strength of the rally in Europe right now, chances of a retest of supports could be rather slim. If I had missed the boat, so be it. That's my take.

For CapitaMalls Asia,  a long white candle tested the high of 17 Oct at $1.31. Overcoming this resistance level will see a cluster of resistance levels ahead: $1.33 as provided by the declining 100dMA followed by $1.36, a many times tested resistance level in early September.

In very bullish conditions, we could see the gap at $1.395 filled. Where should I place my sell order? As is my usual style, I will partially divest at each resistance level.

Capitaland could test resistance at $2.71 as a white candle was formed today on the back of very much higher volume.

If $2.71 were to be taken out convincingly, we could see the gap at $2.79 filled eventually. Before $2.71, we have the declining 100dMA to contend with. This MA approximates $2.68 in the next session.

NOL formed a nice white candle today on the back of relatively high volume. Immediate resistance is at $1.19, the high of 13 Oct. Given the momentum of the upward movement, chances of a continuation in the next session is high.

Overcoming $1.19 would see $1.24 and $1.27 as the next two resistance levels, the 123.6% and 138.2% Fibo lines respectively. $1.27 also approximates the position of the declining 100dMA.

With container shipping business very much in the doldrums, the 138.2% Fibo line could be a strong resistance, if tested at all. Remember that 38.2% is also a golden ratio.

Good luck.