Isetan Singapore

Thought to start a thread about this perennially undervalued company which am sure many people know about. The company has a market cap of S$190m and a net cash (including financial assets) position of ard S$130m… giving an EV of around S$60m.

Their core department store business faces serious issues and was lost making for FY14. However the real gem is of course its ownership of around 100,000 square feet of prime retail space in Wisma Atria. This asset is held under PPE at cost less depreciation since the mid-1980s and has not been revalued in the company’s balance sheet.

Taking a look at Starhill Global REIT, which owns the remaining retail space in Wisma and the office tower, you can see that they have placed a S$980m valuation on their Wisma property. http://www.starhillglobalreit.com/wisma-atria.html

Just taking a broad application of the valuation on psf basis will give a valuation of Isetan’s Wisma property of around S$400 to 500m. Very substantially higher than the current EV.

Of course the problem is that for years, management has never even remotely looked interested in unlocking this value or maximising returns for shareholders. However in Dec 2014, most likely due to market conditions, they announced that they will be closing down the Isetan store in Wisma and leasing out the full space. http://www.channelnewsasia.com/news/busi...50990.html

Could this be a step towards value unlocking? I think really depends on management which looks happy to be entrenched.

Isetan lost S$3.1m last year as rents surged

Classic Value trap.

Very little div payout even when earnings were better as evident looking at their stash of cash. OPMI can just wait long long...

If you have spare cash to just dump and wait, maybe just someday it will do a revalue of properties or decide to do a bonus dividend. But given rising rents and slowing singapore economy, probably no upside catalyst in the short/medium term.

PPE to investment property usually means revaluation. At least
a market valuation at the Notes to accounts.

Inv property will also have rental income. At least can offset Isetan Shaw rental expenses

Agree with BlueKelah. Net cash and/or undervalued properties does not mean it is a good buy. One can possibly wait until neck long long and face turned blue the value won't be realised if the management doesn't plan to do with anything and just wants to keep things status quo.

Classic example is Lion Teck Chiang now known as LTC Corp. Fundamentalists have been raving about how grossly undervalued its property portfolio but in reality, its share price performance to date has been nothing to shout about.

Kingboard Copper is another classic. Just go ahead and calculate how much cash the company has. Certainly ultra grossly undervalued but end of the day, the value will, in my view, never be realized.

Of course, if one is patient and has plenty of spare cash, no harm investing and waiting it out but that money invested has opportunity costs associated with it and could very well have been placed elsewhere for higher returns.

(24-03-2015, 02:58 PM)bchang Wrote: Could this be a step towards value unlocking?

History might provide some hints to your question. 8 years ago, Isetan minorities fought for their Section 44 tax credits, by attempting to oust the ID's. Some related articles are archived here:

http://www.myinvestmentforum.com/categor...48-25.html

(25-03-2015, 09:21 AM)lanoitar Wrote: History might provide some hints to your question. 8 years ago, Isetan minorities fought for their Section 44 tax credits, by attempting to oust the ID's. Some related articles are archived here:

http://www.myinvestmentforum.com/categor...48-25.html

They (management) could have quite easily retained status quo - given that the Wisma Store incurs no direct occupancy costs (opportunity costs - yes). So there are other drivers, and suggests that past historical behaviour may not be a good indicator this time round. Interested to hear your views - if you are willing to give. Cheers.

(25-03-2015, 11:10 AM)thefarside Wrote:

(25-03-2015, 09:21 AM)lanoitar Wrote: History might provide some hints to your question. 8 years ago, Isetan minorities fought for their Section 44 tax credits, by attempting to oust the ID's. Some related articles are archived here:

http://www.myinvestmentforum.com/categor...48-25.html

They (management) could have quite easily retained status quo - given that the Wisma Store incurs no direct occupancy costs (opportunity costs - yes). So there are other drivers, and suggests that past historical behaviour may not be a good indicator this time round. Interested to hear your views - if you are willing to give. Cheers.

Maybe the merger with Isetan and Mitsukoshi in JP has something to do with it.

Opmi Its been 6 years since the merger in 2008. Isetan mitsukoshi have done some restructuring post merger and operations not doing well for their china expansion, with closure of some stores. Unlikely any big changes on singapore side unless we see a change of people in top management

sent from my Galaxy Tab S

(25-03-2015, 09:21 AM)lanoitar Wrote:

(24-03-2015, 02:58 PM)bchang Wrote: Could this be a step towards value unlocking?

History might provide some hints to your question. 8 years ago, Isetan minorities fought for their Section 44 tax credits, by attempting to oust the ID's. Some related articles are archived here:

http://www.myinvestmentforum.com/categor...48-25.html

Yes 8 years ago there was action by minorities and though they did not manage to oust the IDs, Isetan did pay a special dividend to appease them. Small consolation for MIs... most of the value in the company still to be unlocked.

Separately, noted that Starhill's Jan 15 quarterly presentation talks about possibility to unlock unutilised GFA (100,000 sq ft) at Wisma. See slide 25 of their quarterly presentation. Wld Isetan benefit??http://starhillglobalreit.listedcompany.com/newsroom/20150127_204426_P40U_OOEY4BZLYQRSCC7V.3.pdf

I am quite wary of these so call undervalue stock, take sinotel, super undervalue, if you bought it anytime for the last 1 year, your "value investing" thesis have proven correct, you will make 100%, but i am not sure if that is counted a victory. another local company AP oil, trading at $0.2, cash is almost $0.19 per share, good cashflow, steady dividend, very profitable business, you can see the profit that make out of asset every year, very good business, but i am not sure you can make money also with this stock. from what i see anytime you buy this stock for the last 10 year, you can only earn the dividend which is only about 2.5 yearly return, if this is call "value investing", i might put as well put money in fixed deposit