Right timing: With ParkwayLife REIT at new highs, will traders choose First REIT?
Brokers’ digest
If there is a choice between ParkwayLife REIT (PLife REIT) and First REIT which one would traders choose? Apparently neither as one intrepid trader pointed out that REITs are not for punting but for investing. “Their volume is very low. PLife REIT has 1.9 million units traded and First REIT only 700,000,” he said and it was already mid-afternoon. Still, with PLife REIT trading at all-time highs and with indicators in overbought territory, traders may be tempted to punt First REIT.
The chart patterns of the two REITs look very different too. PLife REIT has been on a multi-year uptrend. Its units are up 25% since January and up 46% over a one-year period.
First REIT’s units are up 10% this year. However, on a oneyear basis, its units are down 59% excluding distributions. But at 27 cents, First REIT is significantly above its rights price of 20 cents which was announced in December 2020 and completed in February. However, it remains below its theoretical ex-rights price of 31 cents, a level that is likely to be a resistance. Support has been established at 20 cents.
It is partly because of the rights issue that First REIT lags the performance of PLife REIT although there are other more important reasons like sponsor strength, jurisdictions and lease structures.
Based on a five-year look-back window, PLife REIT’s units have almost doubled and are up 90%. On the other hand, First REIT’s units have lost 78% of their value. Of course, these figures are augmented in the case of PLife REIT and mitigated in First REIT by its DPU to unitholders.
Technically, all that can be said is that Dow Theory states that a trend is in force till it shows definite signs of a reversal. These signs are in the form of certain signals and tests.
In the short and medium term, it can be said that PLife REIT is somewhat overbought and based on charts alone, it is difficult to gauge an upside. But there are no clear negative signals. In addition, not all the analysts have a “buy” recommendation on the stock and there are buyers on the sidelines. Unit prices could go higher eventually as investors who had sold earlier and may want to return and those waiting to enter are waiting on sidelines.
Therefore, traders are likely to give both healthcare REITs a miss or punt First REIT briefly. However, investors may decide to stick with the REIT with greater relative strength.
Elsewhere, Keppel DC REIT has rebounded off $2.44, a oneyear low. Support had appeared around $2.40. Now, it appears prices have moved above a breakdown level of $2.53 which was meant to provide resistance. On the other hand, at $2.62, prices were not able to rise significantly above the declining 100day moving average at $2.64. In addition, the candlestick chart has formed a minor shooting star, which may cause prices to move sideways rather than downwards, as Keppel DC REIT’s results for 1HFY2021 ended June are due out in about a week.
As an update, City Developments did a rebound, which was good for traders, but its shares did not seem to pass from weak hands to strong as prices have started drifting lower again. The level to watch is $6.84. A break below this level could cause the formation of a bear flag. Resistance appears at $7.24.
In contrast, CapitaLand has remained remarkably steady. Unfortunately, its trading range has been narrow and that is a negative for traders. Investors appear to be holding on to their shares till CapitaLand splits into CapitaLand Investment Management and the privatised development business. Shareholders will receive 95.2 cents in cash and the valuation per share based on a March announcement is $4.102 per share including cash and scrip, or $3.969 on a fully diluted basis.
The STI continues to meander. The index was unable to “follow through” on a rebound early in the week towards a resistance area. Prices rose to as high as 3,169, above the resistance at 3,158. Support stays at 3,092 for the time being.