Tuesday, May 14, 2013

Tough Business Conditions - NOL, Vard Holdings

[Previous post: Twice Lucky in a Month? - Asian Pay Television Trust IPO]

NOL (Shipping & Logistics Chain)
NOL reported a US$76 million profit on the back of the sale of its NOL headquarters building. Without the gains from the sale, it would still be in the red with EBIT at -US$85 million. The company has been having a very tough 2-3 years due to supply glut of liner vessels putting pressure on shipping rates but it seems that with a new CEO and leadership team, the cost cutting measures have become more aligned and aggressive to unlock value for shareholders in these tough times. For both liner and logistics, core EBIT losses have been narrowed and it is now in a stronger cash position after tapping new loans and increasing investment in PPE with cash from its sale of the building. Having said these, its performance is still highly correlated with shipping rates where there still seems no end to the oversupply of vessels. Europe and US are still in the doldrums and economic trade has not improved much compared to 2012.

  • Black candlesticks for the last 5 weeks of trading. Share price has been plunging since the start of 2013 until a strong resistance at $1.10.
  • MACD - seems to be turning upwards weakly.
  • RSI (25w) - still downtrended
  • Chance of technical break on narrowing losses - $1.18 (8% from current levels) Chances are traders will take this chance to buy at a low/major resistance and attempt a short term trade on NOL. Given that prices have been sliding since the start of the year, this announcement today may give some relief to the selling pressure. 



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VARD (Shipbuilder,Offshore Services Company)
Previously known as STXOSV, Vard has had its share prices fall since Oct 2012 after poor quarterly results in Nov and a price offer for shares by Fincantieri at $1.22/share. Vard had secured new contracts for 3 OSCVs worth some 3 NOK million in the first quarter, one of the slowest start since 2009. Delivering only 5 out of its 24 vessels scheduled for delivery this year, EBITDA has fallen some 23% in 1Q2013. Cash position has also dipped to 2 NOK billion from 3 NOK billion in March 2012.
  • Share price slide since Oct 2012 with little indication that there will be a reversal in trend. 
  • MACD - is negative but with some chance of turning upwards.
  • RSI (25w) - trending downwards towards 30%. 
  • Bad news and bad technical chart - $0.90 (-15% from current levels). It does seem that investor interest in this stock has been waning since 2011 when its prices were on a one way trajectory. Oct 2012 has marked the start of its share decline and so far there is still no good news to send its prices up. Bad news, bad technicals. Go short.


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Monday, May 13, 2013

Twice Lucky in a Month? - Asian Pay Television Trust IPO

Previous post: [Upcoming IPOs - Croesus Retail Trust & Asian Pay Television Trust]

Introduction to Asian Pay Television Trust IPO
Asian Pay Television Trust will list in the shadows of Croesus Retail Trust that went live on 10 May to a tremendous investor appetite for the high-yielding IPO. So, will it be a repeat of the stellar performance of Croesus Retail Trust?

Key figures
  1. S$0.92 to S$1.00 per share indicative price range
  2. 7.29 to 8.25% dividend yield (2013-2014) on a semi-annual basis (30 June and 31 Dec) based on the highest offer price of S$1.00
  3. S$1.4 billion expected to be raised
  4. 9 cornerstone investors including Quantum Vehicle, the investing fund controlled by the legendary George Soros
[Link to lodged prospectus @ MAS here.]

If you are a new IPO investor, do check out my blog page on Guide to IPO Investing.
Even if you are a seasoned IPO investor, you may wish to check out 2012 and 2013 IPO listing performance at SG IPO Statistics for more insights to optimise your balloting chances!

Timetable
Prepare to start applications on 17 May till 27 May. Listing date targeted 29 May 2pm.


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Analysis of the IPO
Details are still tentative and dependent on the decided indicative price as the book building process is still underway so here are snippets of what I have read/heard/seen and my initial thoughts. More to follow when the figures are finally decided.
  1. High yield of 7-8% for 2013 and 2014
    1. [The good] This yield, similar to Croesus Retail Trust's yield range, is going to appeal to yield hunters. The performance of the Croesus Retail Trust IPO serves to remind many of us, purported contrarians, that the yield-hunt is yet to be over and there is still much more yield compression that we will see. The next high-yield equity IPO that listed before Croesus Retail Trust, Mapletree Greater China Commercial REIT, listed in March this year has already appreciated by 20% from its listing price and 8% from its first day close. More statistics here.
    2. [The good] A clear distribution policy where the trust will distribute 100% of its distributable free cash flows on a semi-annual basis.
    3. [The bad] that seems slightly more risky than initially thought (as with the Singaporean mentality, we favour questioning items that seem too good to be true; being critical is a trait though)
    1. High cornerstone and institutional take-up S$451 million of the IPO, almost 32%.
      1. [The good] There will be adequate price level support for the listing period
        1. <1% of total units (25 million units) offered in the Public Offer. 
        2. 66% placement tranche
        3. ~32% of total units will be held by cornerstone investors
      2. [The bad] If you had complained about your Croesus Retail Trust IPO balloting results, this public offer would have an even smaller chance of a successful ballot.
    2. Business trust concept
      1. [The good] Business trusts on the SGX tend to operate with a slightly higher forward-looking yield so it can be said that there is still further upside to their prices in this chase for yields. 
      2. [The bad] Truth is, business trusts listed in Singapore tend to be less favoured by investors as compared to REITs basically of their operating structure. In short, business trusts are more complicated in their value proposition. REITs also pay less taxes on their income in Singapore.
      3. [The good] Asian Pay Television Trust yield of ~7-8% (based on S$1 offer price) puts it as the 2nd highest forward-looking yield business trust on the SGX, where the next closest is Croesus Retail Trust (6.5% at S$1.145), K-Green trust and Hutchinson Port Holdings. It is only surpassed by Religare Health Trust of 8.4%.
    3. Taiwan infrastructure play that is also the only one listed on the SGX
      1. [The good] Ideal for retail investors seeking exposure to Taiwan and cable television market. The cable television market in Taiwan is the 5th largest in Asia by revenue.
      2. [The good] It has good comparative advantage in the pay-TV business as it is one of the 3 largest operators in Taiwan. 
    Market Outlook
    Just a quick highlight, Croesus Retail Trust closed with a first day gain of 23% above offer price. This just served to highlight the tremendous liquidity that the Singapore financial market has been enjoying and that high-yielding equity are still hot in demand despite the yields reflecting their relative risk. Contrary to some belief that the yield-chase is over in 2013 and beyond, the economic story has yet to brighten and we can see that yield compression is still taking place actively in the markets of today.
    More IPO statistics here.


    Conclusion of the IPO
    In essence, I am sensing a repeat of the stellar performance of the Croesus Retail Trust IPO. Maybe slightly more muted given that Croesus Retail Trust has already satisfied some demand but definitely not too far off. In fact, there are huge similarities to be drawn between these IPOs of 2 business trusts. They are similarly operated overseas, so Singapore will not be able to see their assets being put to work first hand. Like Croesus Retail Trust, which had a poor gearing ratio above many other concerns, this trust is not without them. But as it seems, the market is intent on ignoring these risks in search of high-yielding equities. This trust has a huge offering, surpassing the Mapletree Greater China Commercial Trust of S$1.3 billion, which will be a truer test of the capital market in Singapore and the clamor for yield even in 2013. For now, let's wait for the price to be finalised before making a decision based on the institutional demand.

    All quoted figures in Point 3 are derived from the OCBC Investment Research S-REITs Tracker Compilation dated 13 April 2013. As it is an uncirculated copy, I did not upload it; I am sure you can get it from your broker or more updated data from Bloomberg terminals.


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    Thursday, May 9, 2013

    Croesus Retail Trust IPO Ballot Results

    Previous post: [Update to Croesus Retail Trust IPO]

    Ballot Results of the Croesus Retail Trust IPO are out as of 9 May 2013 and can summarised as follow
    • 229 million shares for placement and public tranche
      • 207.6 million shares for placement tranche
      • 21.5 million shares for public tranche
    • 22.4x oversubcribed in total
      • 48.8x subscribed for placement tranche shares
      • 19.7x over subscribed for the public tranche shares
    • Shares at S$0.93 each
    • Expect 8% yield for the first year; Expect 8.1% yield for the next.
    Shares will commence trading on a "ready" basis at 2pm on Friday, 10 May 2013!



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    The big question is how will it fair on debut and thereafter?

    My Commentary on Croesus Retail Trust IPO dated 5 May 2013
    Blog post here - Wrong Gears for the Wrong Crowd? - Croesus Retail Trust

    Current IPO market conditions
    Here's a quick review of the recently listed IPOs and their performances. More data for the full 2012 to 2013 here at SG IPO Statistics page.



    In fact, only Logistics Holdings IPO has taken a beating, closing below IPO offer and first day last done prices (-9% and -21% respectively). The other notable counter is Geo Energy Group that is a +32% from IPO offer price but -1% from first day last done price.

    Statistically, it means that out of the last 12 IPOs, even if you bought at first day close (the irrational exuberance phase, or in layman 'the pop') you would have made a profit of at least 2% (GDS Global IPO)! If you had obtained the IPO on offer price, you could have made up to 70% by just holding the stock from offer price to date (Gaylin Holdings). In addition, the figures quoted here are unadjusted for dividends that had been paid out by these counters along the year.

    Current REITs/Trusts IPO market conditions
    If you refer to the table above, the yellow highlighted text pretty much sums up the whole IPO + REITs/Trusts story. Any of these 4 REITs/Trusts would have yielded a good +10% on capital whichever way you look at it, plus more from the dividends that they have been paying out. 

    Year 2012/13 IPO Demand Statistics
    For the more demanding investor, to have a greater feel of the local demand for IPOs, do check out my compiled "IPO SG Statistics" page for more details!



    Also, do bookmark this page // add Healthytrading blog to Twitter // subscribe to RSS feed // subscribe to email feeds to receive latest market news that will move your money


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    Wednesday, May 8, 2013

    Update to Croesus Retail Trust IPO

    Previous post: [Wrong Gears for the Wrong Crowd? - Croesus Retail Trust]

    Applications for Croesus Retail Trust IPO will close by Noon 8 May. If you have yet to apply, do so ASAP.

    For the undecided, you may wish to check out my review of the IPO here - Wrong Gears for the Wrong Crowd? - Croesus Retail Trust

    For the decided who has yet to execute, SG IPO Statistics page will help you make the decision to how many lots to apply for to maximise your cash and not over extend yourself during this application-before-funds-return phase. Of course, it is heartening to know that by 10 May results will be out and excess money will be returned.

    My view is that applying units worth ~$10,000 is typically the most cash-effective for a small retail investor with other cash commitments to handle. In other words, I am advocating applying for 11 lots as an optimised decision for this IPO (please still base your decision to apply on your investment/trading strategy and not on my advice).

    Statistically, for REITs/Trusts priced at 80-90c, one can apply 10-15 lots with $10,000. And in that range, you usually get 3-4 lots if successful. Examples are Mapletree Greater China Commercial Trust (3 lots with 11 lots applied), Religare (4 with 11), Far East Hospitality Trust (3 with 11) and Ascendas Hospitality Trust (3 with 11), all calculated with $10,000 cash for application. This uses about 25% of the $10,000. The number hardly changes with $15,000 used, and only varies after $20,000 cash and more. Of course, if you are cash-rich and these 2 days of not seeing your cash is of no sweat, then it does not matter that you are using say $100,000 to stag on obtaining like 10 lots (10% of cash utilised).

    For the decided who does not know how to apply, do check out Guide to IPO Investing. The deadline is Noon 8 May! Hurry.

    Lastly, do follow HealthyTrading on Twitter! We are live on Twitter! Follow to get updated financial news with a Singapore perspective for your investment and trading ideas.



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    Sunday, May 5, 2013

    Wrong Gears for the Wrong Crowd? - Croesus Retail Trust

    Previous post: [Upcoming IPOs - Croesus Retail Trust & Asian Pay Television Trust]

    So, all the hype of the Croesus Retail Trust IPO has started on the online sphere with several blogs catching up on this big IPO that will be the 2nd largest after Mapletree Greater China Commercial Trust in March this year. For a start, the timeline for this IPO seems quite tight and listing day is on 10 May.
    If you are a new IPO investor, do check out my blog page on Guide to IPO Investing.
    Even if you are a seasoned IPO investor, you may wish to check out 2012 and 2013 IPO listing performance at SG IPO Statistics.




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    Anyway, so here is a comprehensive summary that I hope to have compiled from reading all the various online literature (that you will already have come to realise hinge on the same old points) and some additional points from my analysis of this IPO.

    1. High yield of 8-8.1%
      1. [The good] is very good given the risk adverse outlook still persisting in the course of the year plus yield hunting has already driven many REITs and business trusts to yield compressions (~5-6% annual yield down from 10% in height of 2008). Mapletree Greater China Commercial REIT that listed in March this year has already appreciated by 20% from its listing price and 8% from its first day close. More statistics here.
      2. [The good] that Japan had unleashed a torrent of cash from its stimulus that should flow down to the individual retail customers and promote retail shopping in the coming years.
      3. [The bad] that seems slightly distasteful (as with the Singaporean mentality, we favour questioning items that seem too good to be true; being critical is a trait though)
        • that this yield does not seem sustainable given the outlook for yen and that the trust has to pay out in SGD. That means that there could be a possibility of digging into cash stockpile to pay their promised dividends on top of the distributable income.
    2. Gearing ratio of 47.5%
      1. [The bad] Well, nobody likes a trust with a high debt to assets ratio. Period. 
      2. [The good] Funny thing is, Mapletree Greater China Commercal REIT has a debt/asset ratio of 43%. Same with Keppel REIT.
    3. High cornerstone and institutional take-up out of the total 390 million units.
      1. [The good] There will be adequate price level support for the listing period
        1. Only 5% of total underwrited units (21.5 million units) offered in the Public Offer. 
        2. 38.5% of total units (163 million) are held by cornerstone investors
    4. Business trust concept
      1. [The good] Business trusts on the SGX tend to operate with a slightly higher forward-looking yield so it can be said that there is still further upside to their prices in this chase for yields. 
      2. [The bad] Truth is, business trusts listed in Singapore tend to be less favoured by investors as compared to REITs basically of their operating structure. In short, business trusts are more complicated in their value proposition. REITs also pay less taxes on their income in Singapore.
      3. [The good] Croesus yield of ~8% puts it as the 2nd highest forward-looking yield business trust on the SGX, where the next closest is K-Green trust and Hutchinson Port Holdings. It is only surpassed by Religare Health Trust of 8.4%.
    5. Pure Japan retail property play that is also the only one listed on the SGX
      1. [The good] Ideal for retail investors seeking exposure to Japan and its recent stimulus package.
      2. [The bad] Saizen REIT, a Japan focused REIT, debuted in 2007 at S$1.00 and it has since depreciated until S$0.20 on Friday's close. Perhaps, some of its decline was due to the deflationary pressures in Japan since 2007 while some of which may just simply be due to lack of investors interest in Singapore.
    Well, so my conclusion? Basically, I see this IPO trust as a good investment for the aggressive investor seeking to make a good bet on Japan while taking on the risks pertaining to business trusts in general. This is a good opportunity for an such minded investor to also play on yield compression in time to come as a result of yield hunting. It could also be a good stock for a quick buck on listing.
    However, I would gravely advise against keeping the stock for longer periods of time - the signs of an uptick in interest rates is getting ever closer from the US. Once stimulus ends and interest rates tick up, there goes the yield hunting story and we may see a collapse in the inflated REITs/Trusts regime.
    For the conservative investor, I would suggest that your money is better placed elsewhere in this already-inflated sector. Croesus Retail Trust is another business trust seeking to ride this bandwagon a little too late.

    All quoted figures in Point 2 and 4 are derived from the OCBC Investment Research S-REITs Tracker Compilation dated 13 April 2013. As it is an uncirculated copy, I did not upload it; I am sure you can get it from your broker or more updated data from Bloomberg terminals.


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    Thursday, May 2, 2013

    Upcoming IPOs - Croesus Retail Trust & Asian Pay Television Trust

    2 new trusts look set to be listed in Singapore in the coming weeks - Croesus Retail Trust and Asian Pay Television Trust. These IPOs come on the back of a very successful Mapletree Greater China Commercial Trust that was listed on 7 March on the SGX Mainboard. They will become the 3rd and 4th Mainboard new members for 2013. Asian Pay Television will become the 2nd largest IPO of the year following MGCCT and is seeking to raise S$1.4billion in this huge equity offering.

    Here's a fast and quick breakdown to what you need to know to catch onto the IPO bandwagon in the coming weeks.

    1. Croesus Retail Trust
      • S$372 million capital to be raised
      • 200 million to 250 million share units to be offered
      • Indicative price of S$0.93/unit
      • 8% yield in first year ending June 2013, 8.1% in subsequent
      • 4 x Japanese retail malls in portfolio
      • 11 cornerstone investors to subscribe to 164 million units (at least 65% of offered equity)
      • Backed by Marubeni and Daiwa House Industry
      • Expected public offer 3 May
    2. Asian Pay Television Trust
      • S$1.4 billion capital to be raised
      • 8.25 - 9% yield for 2014
      • It is an investment vehicle for Taiwan Broadband Communication, a pay-TV operator
      • 8 cornerstone investors secured
      • Expected public offer by end May
    On the sidelines, it is also definitely an exciting period to come with the rumour that OUE is planning to spin-off its hospitality assets in Singapore for US$800million. That's a total of 3 pretty decent-sized listing up for grabs on the Singapore capital markets in a short period of time. Definitely looking forward to this period with excitement!


    Anyway for newcomers to this IPO scene in Singapore, I suggest you take a look at the how this IPO application process works here. It is a short write-up that I compiled to ease the IPO process and clarify doubts. 
    Even if you are a seasoned-pro, there is another page on "SG IPO Statistics" that you may want to check out. It details 2012 to 2013 IPOs and their performance on first day launch as well as up to date. 


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