Tea with AK71: My new car's fuel consumption.

My Mazda 2 is more than a month old now and I am still trying to get 15.5km per litre out of it.  This is the official number from Mazda.  Initially, I got only 12km and now, I am able to get almost 14km but it seems that I have hit resistance, so to speak.

With my old Mazda 6 which had a 2.0 litre engine, I was able to do 11km+ per litre which from the reactions I got from friends must have been pretty amazing.  In fact, the salesperson at Mazda was amazed as well.  Then, why am I not able to get 15.5km per litre out of the Mazda 2 which has a 1.5 litre engine?

This was one of the things I thought about over the weekend and I compared what I did to the Mazda 6 that I might have to do to the Mazda 2.  Precious little since I am not the type to spend money on bodykits, sound systems and HID lights. I did spend money to run my Mazda 6 on synthetic engine oil and I did spend money on some good tires which were supposed to reduce CO2 emission.  There, I have my answers.

Running my car on synthetic oil reduced internal friction and I didn't have to wait for the engine to warm up before I drove.  Since, my Mazda 2 is new and has a free service by the agent at 5,000 km, I would just have to live with mineral oil till the car hits 10,000km.  That's when I would make the switch to synthetic oil.  This should improve the performance of the car.

New cars are usually bundled with OEM tires.  Apart from keeping tires properly inflated, swtiching to better tires could reduce resistance when driving. There could be less friction and we could cover more distance without stepping on the accelerator as much. Hence, the claim that good tires could reduce CO2 emission. Since tires usually last for 2 years or so, I would not be changing them in a hurry.  Will make a mental note.

I am rather light footed and do not rev the engine.  So, in terms of driving behaviour, I think I'm safe.  I am not sure if there could be other ways of improving my car's fuel consumption. If you have an idea, please feel free to share it. :)

Related post:
Tea with AK71: Bought a new car!

AIMS AMP Capital Industrial REIT: Excess rights.

A friend who applied for 2,500 excess rights was given 100% of his application.

Another friend who applied for 365,000 excess rights was given 39,000 rights or 10.7% of his application.

A reader, SnOOpy88, commented this morning:
"Results are out in CDP A/C.
I got only 17% of excess over my rights. Good start for me.
Wonder what will be the pricing direction now, given that some of us had got shares at $0.155 ?
Huat ah..."

SnOOpy88 did not mention how many excess rights did he apply for.

From my friends' experience, it seems that the less excess rights we applied for, the larger the percentage of our application would be successful. I wonder how many excess rights I would be alloted.  I would know this evening when I open the mailbox, I guess. ;)

Congratulations to fellow unitholders who are successful in getting some excess rights.  Each lot of excess rights secured is equivalent to an immediate gain of S$65.00 based on the current market price of 22c per unit. That's a 42% gain! In the money! :-)

Related post:
AIMS AMP Capital Industrial REIT: Results of rights issue.

Healthway Medical: Uptrend threatened.

On 11 Aug, I blogged about how Healthway Medical's support at 18.5c had been compromised and that price could go lower. I said that "It is likely that 17c could be tested as a support sooner than later".  Then, for a few days in late August and early September, price actually sank below 17c before recovering.

Today, the support at 17c crumbled on high volume.  That 17c was taken out when it is where the rising 200dMA is approximating is very bearish since the 200dMA is supposed to be a rather strong support. The last time this happened was in the second half of May this year but price rapidly recovered.  How high are the chances of such a recovery this time round?

Take note that the volume today was very much higher than back in May as the counter was sold down.  Back in May, the MACD was also poised to do a bullish crossover with the signal line while, this time round, it is dipping into negative territory. Lower highs spotted on the MFI and RSI, suggesting a weakening demand and slowing buying momentum.

Drawing a trendline support connecting the lows of 30 Dec 09 and 25 May 10, we see this support approximating 16c which happens to be a many times tested support from March to April this year.  16c is likely to be psychologically important as a support.  So, if it could hold up, it could provide the base for a rebound.

If the support at 16c breaks, the uptrend is well and truly over.  We could witness a massive selling down to 14c then (the 138.2% Fibo line), followed by 13c (the 161.8% Fibo line).  So, all eyes would be on 16c.

I have a very small position in Healthway Medical left which consists of rights shares and scrip dividends, average cost should be in the region of 12c, having divested >95% of my investment in the company earlier this year.  Good luck to all shareholders.

Singapore to allow stronger currency; economy shrinks: Update
Thursday, 14 October 2010

© 2010 - The Edge Singapore

Related posts:
Replies from AK71: Entry price for Healthway Medical.

Saizen REIT: Divestment of 3 properties.

Saizen REIT divested 3 more properties in its YK Shintoku portfolio:

Higashi Hakushima Y Building was sold for JPY 145,000,000 (S$2.3 million).  This property is located in Hiroshima, was built in March 2003 and comprises 19 residential units and 4 car park lots. It has an annual property income of approximately JPY 15.1 million or a gross yield of 10.41%. This was sold at a discount of approximately 7.1% to valuation.

Otemachi Y Building was sold for JPY 170,170,000 (S$2.7 million). This property is located in Hiroshima, was built in March 2001 and comprises 24 residential units and 2 car park lots. It has an annual property income of approximately JPY 17.0 million or a gross yield of 9.99%. This was sold at a discount of approximately 5.5% to valuation.

Kinyacho Y Building was sold for JPY 180,542,826 (S$2.9 million).  This property is located in Hiroshima, was built in February 2002 and comprises 24 residential units and 2 car park lots. It has an annual property income of approximately JPY 18.3 million or a gross yield of 10.14%. This was sold at a discount of approximately 4.0% to valuation.


A total of JPY 495,712,826 (S$7.9 million) was fully paid up by the buyers on 13 October 2010. The proceeds will be used for partial repayment of the YK Shintoku CMBS.

Read announcement here.

Related post:
Saizen REIT's properties: Would I buy?

SPH: Negative divergence.

SPH's volume exploded as it declared a dividend of 20c to be paid in December. However, the explosion in volume only managed to produce a doji yesterday.  Not good.  Higher volume but price remained stagnant which means that the bears were too strong for the bulls.  Today, price plunged below the 20dMA ($4.20) to close at $4.18 on comparatively high volume.

I guess the market does not like the announcement that SPH "will restore the remaining portion of the pay cuts introduced in April 2009. In addition, SPH will give a special one-off sum to staff to thank them for the sacrifice and contributions they have made. These payments will take effect by January 2011 and will effectively restore the pay cuts in full. They will be paid together with the usual increments, and profit and performance related bonuses." Read announcement here.

Looking at the MACD, we see lower highs formed as price formed higher highs.  This negative divergence is a warning that recent price appreciation in the blue chip could be unsustainable.  $4.20 could be support turned resistance.  This needs confirmation.  

Next support is at $4.13 which is underpinned by the rising 50dMA on top of being a natural candlestick support level.  The uptrendline approximates the 50dMA and the lower Bollinger band at $4.10.  A break below this trendline would signal the end of the existing uptrend.  We could see a new and gentler uptrend forming if the 100dMA (now at $4.00) or the 200dMA (now at $3.91) hold up as the next support levels.

I remember someone asking me if it was too late to buy into SPH yesterday, if it was too expensive.  I guess the answer could either be found in the fundamentals or the technicals.  Technically, $4.10 to $4.13 seem to be pretty ok entry prices but if these go, there could be as much as a 5% downside which could be covered by the 20c dividend in December anyway.  Just my thoughts.  Not an inducement to buy. Vested. ;-)

Related post:
SPH: Final dividend.

>1000 unique visitors in a day!

Not too long ago, I was impressed when a local investment blog proclaimed it was visited by 1000 unique visitors on that day. That was really something! After all, local investment blogs are usually not known for generating high traffic. We are in a very small niche and, to make it tougher, it is a very small niche in a very small country. ;)

Anyway, yesterday, on 13 October 2010, Wednesday, A Singaporean Stockmarket Investor (ASSI) was visited by 1069  unique visitors.  This is another milestone for my blog and I sincerely thank one and all who helped to make this a reality! I hope you enjoy reading my blog as much as I enjoy blogging. :)

14 Oct 2010 (Thursday)

 

Raffles Education: Golden cross.

On 4 Oct, I mentioned that "it looks to me like a positive divergence is forming between the downtrend in price and the MACD.  As price formed lower highs, the MACD has been forming higher lows". This picture has not changed.  The positive divergence is still quite obvious.

Price has been moving in a tight range between 28c and 29.5c of late.  The declining 100dMA is adding pressure to resistance at 29.5c.  To move higher, the resistance provided by the 100dMA would have to be taken out decisively.  Could this happen soon?

The rising 20dMA which recently completed a golden cross with the 50dMA tells us that the shorter term price movement has an upward bias.  The 20dMA is still rising and seems on track to form a golden cross with the declining 100dMA next. 

Today, volume expanded as a doji was formed, a hint that a reversal could be on hand.  This happened as a higher low was formed on the MFI, suggesting strengthening demand, and the RSI shows a similar pattern, suggesting stronger buying momentum.

The Bollinger bands are squeezing and the channel seems to be pointing upwards.  If price does break through the 100dMA to move higher, it would meet with initial resistance at 31c.  This is followed by the eventual target of 34c.

Related post:
Raffles Education: A trading opportunity.

Golden Agriculture: Going higher?

On a day that saw the STI broke the 3,200 mark, Golden Agriculture's share price shot through resistance to touch a high of 66.5c, closing at 65.5c as CPO made a new high at RM 2,930 (up RM30 or 1.03%). 65.5c was the high reached on 11 Jan 2010.

The question on many punters' minds is whether it would go up higher.  The upmove is accompanied by explosive volume (>60% higher than the volume two sessions ago).  Volume is the fuel that drives rallies. The MFI, a momentum oscillator based on volume and price, although has moved higher has yet to reach overbought levels.  Demand could push price higher but it is definitely riskier to go long at this stage.

The longer term uptrend is intact but I would be wary of a correction which could bring the price to test the 200dMA as support in time. To those who are still vested, stay nimble and good luck.

Palm oil companies rise on firm prices
Wednesday, 13 October 2010

© 2010 - The Edge Singapore

Related post:
Golden Agriculture: CPO at a new high.

SPH: Final dividend.

SPH is declaring a final dividend of 20c per share, comprising a Normal Dividend of 9c per share and a Special Dividend of 11c per share in respect of the financial year ended 31 August 2010. These dividends are on tax-exempt (one-tier) basis and will be paid on 23 December 2010. Together with the Interim Dividend paid during the year, total Dividend payout for FY 2010 will be 27c.

SPH remains my largest investment in a blue chip company. I continue to favour SPH amongst blue chip companies because of its generous dividend payouts.  At $4.22, the full year payout of 27c represents a 6.4% yield.

Highlights:

1. Net investment income of S$39.3m was a turnaround from a loss of S$6.2m for FY 2009.

2. Equity holdings consist mainly of M1and Starhub.

3. Paragon was revalued at S$2.28b as of Jul 2010.

4. Rental income increased by S$11.3m (9.2%) mainly from Paragon.

5. Final profit of S$154.2m was recognised for Sky@eleven, which obtained its Temporary Occupation Permit in May 2010.

6. Print advertisement revenue surged S$84.8m (13.1%) to S$733.1m.

7. Circulation revenue decreased by S$5.1m (2.4%).

See presentation slides here.

Related post:
SPH: Closing above $4.20.

AIMS AMP Capital Industrial REIT: Results of rights issue.

Valid acceptances:
506,083,252 units (98.6 % of Rights Issue).

Excess applications:
163,926,201 units (31.9 % of Rights Issue).

"The balance of 7,226,529 Rights Units which were not validly accepted, will be allotted to satisfy excess applications. In such allotment, preference will be given to the rounding of odd lots (if any) while directors of the Manager (the “Directors”) and Substantial Unitholders1 will rank last in priority.

"Successful subscribers with The Central Depository (Pte) Limited (“CDP”, and the securities accounts with the CDP, the “Securities Accounts”), will be sent, on or about 15 October 2010, a notification letter from CDP stating the number of Rights Units that have been credited to their respective Securities Accounts."  

Read announcement here.

It seems that people who applied for massive numbers of excess rights would be disappointed, myself included.

Related post:
AIMS AMP Capital Industrial REIT: Rights issue.

AIMS AMP Capital Industrial REIT: Buying more?

A reader sent me an email saying that he bought more of this REIT at 23c recently and he is dismayed that price has retreated. He asked if I am buying more of this REIT.  Well, firstly, 23c is the upper end of the trading range for this REIT and buying at 23c is buying at resistance.  Never a good move, technically speaking.

On 8 Oct, I said "Looking at the trade summary, of the 58 trades done, more than half (36) were buy ups at 23c but the volume was only 260 lots out of a total of 2,339 lots which changed hands.  This suggests to me that the buy ups at 23c lacked conviction.  23c is still a significant resistance to watch, it would seem."

Fundamentally, however, I don't see a problem with buying at 23c. With a DPU of 2.08c per annum, it still gives a handsome yield of 9.04%.  However, I have been corrupted by TA and I use the charts to help me plan entry points.

Looking at the chart, one can roughly make out that the old trading range has been "revived", XR.  It is quite obvious that the range is still 20c to 23c with the midpoint of 21.5c being an important, many times tested support. 21.5c is also where the rising 50dMA would be approximating soon.  This should lend strength to the support. So? I would buy more at 21.5c if I feel inclined to add to my position in this REIT.

Both the MFI and RSI seem to have formed lower highs which suggest a weaker demand and a weaker buying momentum.  Volume is thinner compared to the first half of September.  This suggests that the recent upmove in price was to due to a lack of sellers and not an abundance of buyers.  Current holders are unwilling to sell and people who want a piece of the pie have to pay a higher price. However, most potential buyers are probably waiting to see what the units would trade at once the rights units start trading on the 15th.

Technically, the uptrend is intact but the momentum oscillators suggest that we could see continuing weakness in price.  Fundamentally, the yield is probably the highest amongst industrial S-REITs.  Its gearing level is acceptable and it is still trading at a big 20% discount to NAV, XR. Buying more at 21.5c? I might.

Related post:
AIMS AMP Capital Industrial REIT: Nick's FA.
AIMS AMP Capital Industrial REIT: Resistance.

Hock Lian Seng: 30c support.

I mentioned on 5 Oct that I sold off some shares of Hock Lian Seng at the 32c target.  On 8 Oct, I said "notice that the 20dMA has been guiding the price of this counter higher? See the uptrend support is in between the 20dMA and 50dMA? This would be at about 30c.  The 50dMA is at 29.5c.  I would buy more at these price levels." Today, I bought some at 30c as price retreated.

Although the uptrend is still intact, could prices weaken further? Why not? The MFI is still in overbought territory while the MACD has just completed a bearish crossover with the signal line.  We could see price weakening to test the 50dMA at 29.5c or even the 200dMA at 29c. The latter being a long term MA should provide a rather strong support and I would probably buy more at 29c, if ever tested.

Fundamentally, this company is sound and investors are accumulating shares in the company which is quite obvious when we look at the OBV.  The recent price weakness as the counter retreated from a high of 32.5c on relatively low volume is an opportunity to accumulate.  What we are witnessing is a low volume pull back which shakes out the weaker holders.

Related post:
Hock Lian Seng: Retreating.

K-REIT: Swap agreement.

"Keppel Land, the Singapore- based developer controlled by Keppel Corp., agreed to sell its stake in the first phase of Marina Bay Financial Center (MBFC) to K- REIT Asia for $1.43 billion, as part of a swap agreement...


"Keppel Land will buy two properties, Keppel Towers and GE Tower (KTGE), from K-REIT for $573 million for redevelopment into about 620 premium residences."

Keppel Land sells Marina Bay property stake to K-REIT: Update
Monday, 11 October 2010

© 2010 - The Edge Singapore

What does this mean for K-REIT?

On 24 Sep, in "FCOT, CCT and K-REIT", I mentioned that "K-REIT closed at $1.31 today. NAV as of Jun 10 at $1.47. K-REIT is trading at an 11% discount to NAV. Gearing ratio is at 15.2%.  This is very attractive to me as it gives the REIT plenty of room to leverage up for potential yield accretive purchases. 1Q 2010 DPU at 1.33c.  Annualised DPU should be 5.32c which means a yield of only 4% based on the current price of $1.31.  K-REIT has, arguably, the strongest balance sheet amongst the three office property REITs discussed here.  The low yield might put off investors but its low gearing paves the way for future acquisitions which could bump up its DPU." Well, it has happened.

Some effects of the swap agreement:

1. The aggregate leverage of K-REIT after completion of the MBFC Acquisition and the KTGE Divestment is approximately 39.1%.

2. K-REIT’s weighted average debt maturity profile will be extended to approximately 4 years. In addition, the portfolio’s average borrowing cost will also be reduced from 3.54% to approximately 3.05%.

3. Weighted Average Lease to Expiry (WALE) from 5.7 years as at 30 June 2010 to 7.8 years.

Read announcement here.

The actual DPU forecast following the completion of the transactions will be disclosed in the Unitholder Circular which is not available yet. Will this swap agreement be DPU accretive?  It should be since we are seeing a more than doubling of gearing ratio from 15.2% to 39.1% and a boost to K-REIT’s assets to about $3.4 billion from $2.5 billion.

Jade Technologies: Rights issue.

A friend asked me what do I think of Jade Technologies Holdings Ltd.  Apparently, it is issuing rights and my friend would like to have my take on this.  Frankly, apart from a faint impression that this company was involved in some scandal in the past, I do not know what it does.  So, I dug around for details.

It seems that the company is now investing in the production of titanium dioxide in China.  It has a substantial stake in Daqing XinLong Chemical Company Ltd, a titanium dioxide producer in China. The decision to move in this new direction has transformed Jade from a loss making company to a profitable one as it reported a profit of S$1.6m in its 3QFY2010 (ending June 2010) after experiencing losses in the first two quarters (and indeed for the last 9 years).  It would be interesting to see if it continues to be profitable by end of FY2010 (September 2010).  By all indications, it seems that it would be so.  See slides here.


As a result of its return to profitability, Jade’s Earnings Per Share (EPS) is now 0.02 cents for 3QFY2010, reversing from a loss of 0.10 cents in 3QFY2009. The Group’s Net Asset Value (NAV) per share also improved from 0.31 cents to 0.67 cents over the same corresponding period. Read announcement here.

Jade is currently trading at 1.5c. With a NAV of 0.67c, it is trading at more than twice its NAV. Assuming that its 4Q could turn in similar results as its 3Q (i.e. a net profit of S$1.6 million), it would mean a full year profit of >$2m.  Assuming that in FY2011, the company is able to replicate $1.6 million in profit every quarter, it would have a full year net profit of S$6.4m.  Based on approximately 2.461 billion shares in issue, it has a market capitalisation of S$36.9 million (at a share price of 1.5c) and we would have a forecast PE ratio of 5.77x.

What about the rights issue? The company is proposing 3 rights for every 4 shares owned.  For every 3 rights accepted and paid for, 1 warrant would be given free.  Price of rights at 1c each.  Warrants must be exercised within 2 years at a price of 0.3c each.  This effectively means that the number of shares in issue will double in the near future.  This means a halving of EPS and a doubling of the PE ratio, ceteris paribus.

Rationale of this exercise: The Company is currently exploring certain business expansion opportunities but none of these plans has progressed to a stage where they may be announced. The Company proposes to undertake the Rights Shares and Warrants Issue to raise funds and to strengthen the capital base of the Company for its expansion aspirations.  Read announcement here.

Anyone who is investing in this company and subscribing to the rights must be a firm believer that it could double (in order to keep its PE at the forecast FY2011 level), triple or quadruple its earnings (post rights and warrants) in the near future.

What's my take on MIT and GLP?

A reader sent an email asking me what is my take on the IPOs of Mapletree Industrial Trust (MIT) and Global Logistic Properties (GLP).  My reply was:

"I don't have enough data on hand to make an informed commentary on these.  That's why I have kept quiet about these although I have friends who would like me to blog about them.

"However, IPOs are not usually available at a bargain, especially in these bullish times. So, generally, I would avoid IPOs.

"With MIT, the expected yield of 7.6% seems ok. I do not know what is the NAV per share. I know it is using some of the proceeds to pay down debts to bring its gearing level to 30% to 35%.  Exact figures, I do not have.

"With GLP, it is being offered at a 10% premium to NAV. It does not even have any income distribution guidance. So, we don't know what is the yield.  What would be its proforma gearing level?  Too many unknowns. I would avoid."

Mapletree Industrial IPO priced at top of range. Mapletree Industrial will sell units at $0.93 each, which translates to an annualised dividend yield of about 7.6%.
Monday, 11 October 2010

© 2010 - The Edge Singapore

Singapore’s GLP confirms IPO price of $1.96 a share
Monday, 11 October 2010

© 2010 - The Edge Singapore

Saizen REIT's properties: Would I buy?

Saizen REIT reported on 8 Oct that they have managed to sell another property in its YK Shintoku's portfolio.  Villa Kaigancho was sold for JPY 250,710,000 (S$3.9 million) which was at a 3.9% discount to valuation. 

The proceeds would go to repaying partially YK Shintoku's CMBS. After this repayment, the remaining balance of the YK Shintoku CMBS is estimated to be approximately JPY 6.3 billon (S$99.1 million). See announcement here.

Saizen REIT has been announcing a slew of sales in recent weeks and I mentioned that this is a good sign as it signals the return of buying interest.  

Saizen REIT owns freehold residential real estate in Japan.  

I have also mentioned before that although the real estate values in Japan have been declining, rental rates have declined at a much slower pace. Buying residential real estate in Japan now and being a landlord is a very lucrative proposition.  

So, would I buy Saizen REIT's residential real estate in Japan, assuming that I have the spare cash and if I were allowed to do so under Japanese laws?  Without a doubt, I would.

Take for instance Villa Kaigancho located in Hakodate, comprising 50 residential units, 1 commercial unit and 24 car park lots. The buyer paid JPY 250,710,000 (S$3.9 million) for an annual revenue of JPY 41.4 million (98% occupied).  That is a gross yield of 16.5% per annum!  Remember, the property is freehold! 

In Singapore, if we invested S$3.9 million in a condominium, we would be lucky to get a 6% gross yield per annum!  Sadly, I do not have that kind of money.

Related posts:
Saizen REIT: Divestment of properties.

Golden Agriculture: CPO at a new high.

I am certain that price of CPO would go higher in time given all the economics which I have blogged about before.  Today, CPO price went to a new high of RM2,919, up RM159 or 5.76%.  I have been bullish on Golden Agriculture for the longest time given its inexpensive valuation and highly leveraged position to the price of CPO. I have made a few rounds of profits trading the shares of Golden Agriculture for more than a year now.

On 30 Sep, I mentioned that "56c is only one bid shy of 55.5c which is where we find the rising 200dMA which coincides with the uptrend support line.  This is, therefore, likely to be a rather strong support.  So, buying at 56c for anyone who would like to have a stake in Golden Agriculture seems fairly safe.  Personally, I am waiting for the dust to settle."  For those who went long at 56c, congratulations as Golden Agriculture broke out on extremely high volume today to touch a high of 61.5c before closing at 60.5c.

Unfortunately, Golden Agriculture's problems with the Roundtable on Sustainable Palm Oil (RSPO) and how it lost customers such as Burger King Holdings, Nestle and Unilever, who have said they will stop buying from Sinar Mas (which controls Golden Agriculture) because of environmental concerns, have cast a pall on an otherwise clearly undervalued proposition.

There is just too much uncertainty for my liking.  I rather err on the side of caution. By not having a substantial long position in Golden Agriculture anymore, I might not gain from any positive price movement but at least I would not lose money either.

Related posts:
Golden Agriculture: 56c support.
Golden Agriculture: Unable to break out.

Courage Marine: Steady as she goes.

On 30 Sep, I said "A friend asked me what I think of Courage Marine and I told him I like its numbers and I like how the BDI seems to have stabilised at $2,500 thereabouts.  I feel that Courage Marine shouldn't have bad news with regards to earnings. The main reason why I have not really talked about Courage Marine very much recently is the lack of anything newsworthy." Things have hardly changed since.

The BDI is currently at US$2,696 which is quite comfortable and at an investor meeting on Thursday, Chairman Hsu Chih-Chien said he was very bullish on the ability of China in particular to continue driving the market for bulk cargo going forward.

“Our Capesize vessel mainly transports coal, bauxite and iron ore while our four Panamax ships focus on thermal coal mainly for the energy needs of China. We feel there is huge potential for growth in the Chinese coal market,” he added.

“This country still relies on coal for the vast bulk of its energy needs. So if you want to know if I expect any slowdown in China’s coal demand, I would say – Not in my lifetime,” Mr. Hsu said.

My opinion that Courage Marine is a good investment at current prices has not changed and from what was revealed on Thursday, it seems that Courage Marine could continue to deliver a good set of numbers in time.  I remain vested.

Read complete article in Next Insight here.

Related post:
Courage Marine: Lengthy consolidation.

CitySpring Infrastructure Trust: Thoughts on divestment.

On 5 Oct, OCBC reported that they were suspending coverage on CitySpring Infrastructure Trust as they see limited positive price catalysts in the near term. Furthermore, Hydro Tasmania which is owned by the Australian government is proceeding with dispute resolution and is demanding for A$6.9m in commercial risk sharing mechanism (CRSM).

For a long time now, I have regarded my investment in CitySpring Infrastructure Trust as a mistake. I blogged about it in "High Yields: Successes, failures and the in betweens."

With a quarterly DPU of 1.05c, the yield is 6.94% at the current unit price of 60.5c.  As of 30 June 2010, it had S$1,450,941,000 in borrowings against S$2,014,838,000 of total assets. This gives a gearing level of 72%. This is being optimistic as intangibles account for S$432,026,000 of total assets. Yield is not fantastic and gearing level is extremely high.

Comparing CitySpring Infrastructure Trust with K-Green Trust, we see that the latter has a similar yield but with zero gearing, it is almost immediately apparent that K-Green Trust presents a more compelling proposition.

At CitySpring Infrastructure Trust's current unit price, removing it from my frozen portfolio would result in a small loss but with the many quarters of income distribution collected, I would probably end up with a small gain.  Time to close a chapter, I think.

View slides here.

Related post:
K-Green Trust: Possibly stabilised.