Friday, December 17, 2010

CapitaMallsAsia and First REIT Purchase

Recently I bought 3 counters, FIRST REIT, Silverlake, and CapMallsAsia (CMA). This post will focus on CMA and FIRST REIT, and the simple reasons why I bought it.


The first and foremost reason is that CMA has fallen below it's IPO price of $2.12. While on hindsight, it would have been better to load GLP at $2.11, I went with CMA for the reason above :x

The second reason is more technical. Doing a basic Fibonacci retracement, 1.844 appears to be a nice support. However, I was a little impatient, and went in 3 lots at $1.86, along with 1 lot at $1.85.  

Of course, it could go lower. However, I believe in its business, another reason why I decide to buy into this. I'm willing to load at a lower price if it goes lower.

There have been talks about CMA's NAV and P/E ratio. In my opinion, CMA is in the business of development. NAV isn't a good judge because in developing malls, you are basically in the business of enhancing and increasing the NAV.

You buy a land for $X, you build a mall for $Y, you enhance and improve visibility and attractiveness of mall to draw crowds for $Z. The final valuation would and should be greater than $X +$Y +$Z, else they should just get out of business. What this means to me is that they "grow" their NAV over time.

Who to sell to after that? Pick CMT, CRCT or CCT. Job done for CMA, buy another land for $X next. The P/E ratio will then increase accordingly. 

In other words, NAV should logically grow over time, while P/E ratio will likely fluctuate rather widely. 

The only concern is that CMA isn't dividend friendly, or so it seems. I would still sell it eventually for a capital gain just for this reason.

While it is not technical discipline to catch a falling knife (one should catch a fallen knife instead), I'm too tempted by what I perceived as value in a blue chip that is linked to ah gong. Shall see how it goes.

This is another quick technical buy without much analysis. First REIT is basically one of two healthcare REITs listed in Singapore.

I bought 12 lots of rights at 0.165, which translates to an average price of 0.665 after paying for the rights and an eventual expected yield of 9.6%.

First REIT is a REIT which I had wanted for a long time since the days of 40+c. Subsequently, it shot up to 0.985 before giving rights, which gives a TERP of 0.7+. At 0.665, it's a small bargain, given that the rights are for acquisition purposes and hence yield accretive.

The expected reason for the sell-down is because international investors are not eligible for the rights issue. Hence, the nil paid rights are being sold on behalf of these international investors. At the same time, if the spread between the mother share and the rights are too big, it's worth it for investors to sell the mother share and buy the rights to capitalise on the difference. Hence the overall selling pressure.

And with the expected reason, I scooped up some. Hopefully it will turn out right eventually.

With my loadings, my warchest has dwindled substantially. I'll be looking to cut loss and take profit for some counters before year 2010 ends. Just to rebalance the game of numbers....


  1. Hi JW,

    As you know, I loaded up on these same two counters. :)

    CMA: Downtrend is intact. Although I believe in its longer term fundamentals, I could do a quick trade in case of a rebound.

    First REIT: This REIT has been good to me through good and bad years. I have paid for my entitled rights as well as the nil-paid rights bought in the open market. I also applied for excess rights.

    Good luck to us all. :)

  2. Hi AK,

    good luck to us!

    First REIT has already shown some luck in giving our early xmas present :)

  3. hey Wealth Buch,

    nice blog you've got here.
    Not sure if u remember me, but i used to be active on sgforums, under the nickname unclebutcher. haha.

  4. Hi Isaac,

    Of course I still remember you! Come back to help out at homework forum leh.

  5. haha. very busy learning stocks. and teaching tuition :X

    pls visit my blog yea :)

    ps i think you're damn good btw. Full time job, tuition, plus still got the energy to do great FA on stocks.

    and i agree with you. ppl keep saying abt the power of compounding...but no one say "earn more from your day job!"

  6. Hi Issac,

    I did visit your blog while in office. I have a few comments and thoughts... shall gather them together and post on your blog soon :)

    Thanks for the compliment. It's a lull period of tuition at the moment.

  7. hey JW do you mind if i place a link to your blog on mine?

  8. Hi Issac,

    sure. I will add yours too.

  9. how do u pay for the First REIT rights?
    u bid for it @0.165, but how do u pay the 0.5?

  10. Hi Anonymous,

    you can pay for the First REIT rights, or any rights issue, via POSB, UOB and OCBC ATM.

  11. icic, thnks. its my first time lol.

  12. Oh, 1 more thing. after i bid and acquire the excess rights online. Will sgx immediately update the number of rights that i have to pay via atm? or do i have to wait?

  13. Hi Anonymous,

    I guess you meant to say you bought rights off the market. Excess rights application and rights bought off the market are two different things. I'm not very sure when SGX will update, but I believe the process shouldn't take too long.

    The rights application for FIRST REIT has already completed on 22nd Dec. Tomorrow will be the first trading day for these rights.

  14. hmm, so for rights bought off the market, how do i pay the 0.5? i know i will pay 0.165 when i bid on open market, but how do i pay the 0.5? atm?

  15. Yep, I paid via ATM. That's a more services at the ATM, where you can click and link to rights payment.

    If it's your first time, you need to have your CDP account number, unless you have linked your CDP to your bank account earlier.


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