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.