CPA - Commonwealth Property Office Fund

[nulla nulla]

Slowly drifting back down after the merger/takeover hype ran out of puff and the global volatility slapped our market arround. Monday will probably have further downward movement if the lead from Europe and the U.S.A is anything to go by.



Could present a buy opportunity for another trade, however it could continue to get cheaper in the next few days as our market flops arround.

 

[nulla nulla]

The volitility of the market is reflected in the price swings in cpa. Plenty of opportunity for the stout hearted / foolhardy. Trying to read where the market is going and the mood swings of the herd is harder than....(insert own preference here).



Any rate I thought $0.90 was a good entry point on Friday even if it did close at $0.895 and the rest of the world tanked overnight. Might have to hold for a few days for the upswing. Might even accumulate more if it really tanks. As always dyor.

 

[nulla nulla]

Accumulated more at $0.87 (so naturally the share price dropped to $0.86, tested $0.855). Bloody crystal balls are getting very unreliable lately. However the three year chart suggests that, in the abscence of Greece sinking into the mediteranean sea, cpa should recover from this point.



After the surge in the close on the djia, combined with the big jump on the ftse and dax last night, our markets should be good for another small lift before the friday afternoon sell off. No doubt there will still be a lot of "smart" sellers selling into the rises of the "Smart" buyers chasing bargains. As always dyor.

 

[nulla nulla]

Two weeks on from the last post and cpa has jumped off the bottom of the channel and is once again head butting the top of the channel.



Question 1: Can cpa consolidate, break out and go higher to close the gap to the NTA value? or
Question 2: Is cpa due for a retrace?

Your call, as always dyor

 

[nulla nulla]

CPA appears to be consolidating at the current levels. If the Euro issues continue to work toward resolution it seems the REIT's may look attractive again for the longer term investors and may even become bullish.



Mind you the gap to NTA is narrowing and there isn't much play room between
Fridays closing price and the top of the recent channel. There may be a tight trade for the stouthearted and supremely confident (crazy?), otherwise it might pay to wait until the crystal ball is giving clearer signals. As always DYOR.

 

[nulla nulla]

After trading in a tight band between $0.935 and $0.955 cpa faded this last week falling past the support level of $0.925 to close on $0.92 (after testing $0.91). It would appear that the off market buy back has created more uncertainty than clarity with this stock.

Another issue for cpa, which is hanging in limbo, is the previously mooted special dividend to unit holders involving some of the proceeds from the Western Australian property sales. Returning $50 - $100 million to share holders (through the off market buy back) is only a fraction of the proceeds realised from all the property sales. Also, buying back between $50 - $100 million worth of shares will barely make a dint in the number of shares on issue. It will be interesting to see the level of acceptance/participation and the buy back price. Setting a maximum of $0.97 was certainly optimistic if the recent price levels are anything to go by. Maybe cpa are trying to mop up the smaller holdings rather than do a real share market buy back like those being run by IOF, GPT and SGP.



Gearing (debt) is already at good low levels so the pressure to pay down debt is non existant. There is obviously more funds available for distribution unless the managment is planning to acquire more properties and roll the funds back in. I hope they aren't planning to distribute it via bonuses and pay rises.

 

[nulla nulla]

For thirteen straight trading days the cpa share price has slumped from the recent high of $0.955 and looks to have lost all prospects of reaching the "Off market share buy-back" cap of $0.97 or narrowing the gap to the alleged nta.



The paperwork for the Off Market buy back arrived and the invitation is for holders to nominate minimum prices of $0.86, $0.88 and $0.90 with options of nominating premiums of 2% - 5% with a maximum price of $0.97. Further the market price will be set by determing the average of the daily average for the five days preceding the close of the offer. At the current rate of decline the market value will be less than $0.90.

If cpa received a take over offer of $0.90 you would expect the independent directors to knock it back. Yet here they are with an "Off Market buy back offer" to shareholders for a price that will be way off the nta and likely no where near the offer "cap" of $0.97.

Sometimes you wonder if the directors stopped to consider whether there are some share holders on their books who purchased cpa before the GFC. Shareholders that have seen the share price slump, been diluted by capital raisings and seen yields on their original investment drop to basement levels.

These people would probably have been greatful for a capital return or special div and probably see the "Off market" buy back as a furtive attempt by the board to mop up their shares eliminating any prospects of them ever recovering a better proportion of their capital. Personally I think the directors could have looked at how GPT, IOF, MAP and SGP have gone about returning capital to shareholders.



IMO the longe term paterns have been disrupted by the buy back and any trading entry at the moment would be tenative looking to exit on a tight margin. Mind you if the share price drops below $0.88 I might look for an entry with a hold for the December div and try for a combo trade of div and capital gain. Nothing is easy, dyor and good luck.

 

[nulla nulla]

You might as well rely on reading tea leaves if you are trying to determine where cpa is going at the moment. After being pushed down in the run up to the close off for the right to participate in the off market buy back, the cpa share price soared to touch $0.97 yesterday before closing on $0.96.

This is despite all the negative news out of Europe and the likelihood of a credit squeeze between European banks and the banks funding Australian REIT's, flowing on to REIT's as higher financing costs. Go figure.

I am confident that the market would not be so pernicious as to deliberately push the price down to accumulate before the close of the "off market" buy back, then push the price up and hold it up in the period where the "market price" is calculated, to ensure the "market price" and premium are equal to or greater than $0.97. That wouldn't happen would it. It will be interesting to see what the final price is, the level of take up and whether or not there is a scale back.



In the meantime, the rises and falls provide plenty of trading opportunities for the nimble. DYOR and watch out for sharks

 

[nulla nulla]

Since the last post cpa has held the high ground trading above the $0.97 level and testing $1.00 on at least two occaisions interday. With only two dips below $0.95 (and one of them was so quick, if you blinked you missed it) it is hard to determine a reasonable re-entry point.



With the negativity of the euro mess still to be resolved and the recent off market buy back by cpa stirring up the share price, I am waiting for the dust to settle before I buy back in. At the current levels the gap between share price and NTA has narrowed. CPA probably has the least discount to nta of all reits at the moment (except possibly GMG, which is overpriced in my opinion).

 

[nulla nulla]

CPA has continued to defy gravity, until the last few days. Where $0.97 has been a resistance level for some time it will be interesting to see whether it can now be a support level being the bottom range of the upward trend since October 2011.



If not, the next support level is $0.945 and if it doesn't hold there, the long term channel bottom is arround $0.88. Watching and waiting.

 

[nulla nulla]

It looks like $0.955 has become a recent support level and $0.985 a level of resistance.



Getting in at $0.955 could be an option for those looking for the combo of div and capital gain on low percentages but you may have your capital tied up longer than you like waiting for any ex-div rebound. Too tight a range (with potential to retest lows on market whims) for me to trade. Better oppotunities elsewhere for now, imo, until cpa presents a better entry price. As always dyor.

 

[nulla nulla]

Currently I am working from the view point of "what goes up must come down". CPA trading just under the nta is very nice but from a p/e ratio perspective and a reduced yield perspective, I can't see it holding this level.

There is a rumour that dexus is looking to take over the management of cpa from colonial but I can't see this a justification of the recent share price increase.



Looking ahead it will be interesting to see whether CPA can turn the previous resistance level of $1.01 into a support level or whether it will drop back to the range $0.96 to $1.01?

 

[nulla nulla]

And now comes the acid test. Can cpa hold the previous resistance level as a support level and move back up to retest the new resistance level, then break through? Or are we doomed to see cpa retreat back to the previous trading range?



Watching and waiting. I'll buy a train ticket when i'm sure the train is heading north. Good luck

 

[nulla nulla]

Against all odds cpa has clung to the support at $1.00 - $1.005 for the past week while other reit's have been dragged down by the prevailing market sentiment. Unfortunately $1.02 has been pretty much a resistance level.



It is a braver man than me that would risk sufficient capital to make a profit after brokerage, trading the region $1.005 to $1.015. I can wait.

 

[nulla nulla]

It appears that cpa is enjoying a new "upward and sideways" channel, narrowing the gap between the share price and the rta. This is not entirely unreasonable when you consider the earnings multiple of cpa versus some of the other reit's. $0.98 is being tested atm as a support level with resistance at the $1.02 level.



Be careful making any long term decisions, bearing in mind that cpa will announce a distribution this month (payable in August). The share price will likely drop when it goes ex-div. It could be worth a punt with entry arround the $0.99, hold for the distribution and sell down the track, on the recovery, for a capital gain as well. . As always do your own research and no responsibility taken.

 

[nulla nulla]

CPA was tracking along nicely apparently moving up and down in a generally upward sideways channel closing the gap between the share price and the nta backing when it seems to have faltered and started drifting down.



For the moment cpa looks like falling into the long term sideways channel of trading between $0.96 and $1.01. Hopefully it will find more support at $0.98 and won't test the previous $0.96 support area. It is a bit surprising for it to fall so quickly in recent weeks when other stalwarts such as GPT and SGP are holding up (for this period of volatility). Like other reit's cpa is also due to announce a dividend next week and go ex-div around the 25/6/12. Not really big enough to warrant dividend stripping but usually enough to attract a little interest?

 

[nulla nulla]

CPA seemed range bound this week between $0.99 and $1.005 only bursting up to $1.01 before close on Friday. Even the prospect of a div couldn't lift cpa out of the doldrums and it wouldn't surprise me to see the share price test the recent lows of $0.98 and possibly the lower channel support area of $0.96 after it goes ex-div.

 

[nulla nulla]

CPA was rangebound last week struggling to make $1.01 before it went exdiv. On Monday it dropped to tap $0.97 after open then started a recovery that saw it climb back above the exdiv price, tapping $1.03 on Friday.



Part of the recovery is due to the (poorly timed) announcement that property revaluations meant the nta has lifted from $1.11 to $1.15 per share. Fantastic result for those that held for the dividend and capital gain.

As always do your own research.

 

[nulla nulla]

The rise and rise of cpa continues as nervous investors turn to perceived secure shares like the reits paying good yields, trading at discount to nta and trading at low price earnings multiples. If you bought back in december 2010 you are riding a capital gain of almost 25% plus you have enjoyed regular annual dividends above 5% p.a. These days the borrowings ratio's are low and the dividends are paid out of earninngs. The bonus of course is the share buy back program continuing to increase the nta of the remaining shares and encourage new investors.




If you are a short term investor, you have had to get your timing right on entries, exits and hopefully picking up a dividend or two along the way. The share price has gone up in steady increments over the past two (2) years (The chart looks like a step ladder). There is still a gap to nta. You have to decide whether price retraces are an entry opportunity or the start of a significant retrace. Lately the share price has been ticking over in the $0.98 to $1.04 range. As always d.y.o.r and good luck.

 

[nulla nulla]

I have to admit that cpa was easier to trade when it ranged between $0.875 and $1.01. Recently cpa has narrowed the gap to nta and is trading in the range $0.98 to $1.06. Making hard work out of it.



Interestingly I am reminded of the start of the GFC in early 2008 when investors turned to the reit's for their high yields. Unfortunately the hedge funds knew the yields were financed by significant borrowing levels and had no hesitation in pushing the prices down forcing the reits to recapitalise and reduce borrowings as the share prices collapsed. Unfortunately so did the dividends.

Today most aussie reit's are operating with borrowing ratios to assets of 20% - 26% versus the pre GFC levels of 80% or so. Significantly most aussie reits are also now paying dividends out of earnings (arround 80%) and the yields are down to 5%-8%. However this is better than bank rates and it would seem some large funds are quietly accumulating for the income stream and pushing the price ever so slowly up, closing the gap on NTA per share.

I would be surprised to see the cpa share price go above the nta value. I wouldn't be surprised if there was another push downwards on the price by the hedge funds, on the basis that there will be an international credit squeeze making the cost of financing for aussie reits higher. Time will tell. As always d.y.o.r and good luck