Chip Eng Seng

I feel that 4 cents dividend is the baseline dividend that would be paid out year after year. With the build up of investment properties and a recurring income base, the ability to maintain 4-cent dividend per year thru good and bad times becomes much stronger.

Given that 2014 was an extra-ordinary year where $0.44 EPS was made, 2015 EPS performance should be 110% below that of 2014.

Not sure how is Mr Market going to take this piece of info?

But on the NAV front, 2015 should be better because of the revaluation gain from hotel, which will only be reflected in Q4 2015, as per usual norm to update PPE based on market valuation at end of FY.

Mr Market can be stupid at times but not that stupid currently. Even with such a stellar EPS last year, the price of CES did not get bidded up to stratospheric levels. I predict a certain ambivalence to the "disappointing" results this year.

(10-05-2015, 09:18 AM)Curiousparty Wrote: Given that 2014 was an extra-ordinary year where $0.44 EPS was made, 2015 EPS performance should be 110% below that of 2014.

Not sure how is Mr Market going to take this piece of info?

But on the NAV front, 2015 should be better because of the revaluation gain from hotel, which will only be reflected in Q4 2015, as per usual norm to update PPE based on market valuation at end of FY.

There is also additional macro risk from the possibility of rate hike in Sept. If this happens, then there might be some market reaction in all property counters, e.g. a downward adjustment in share price (not sure how much?? 10-20%?). Once the FED starts the tightening cycle, we will be on the trajectory of raising interest rate, albeit at a calibrated manner as alluded to.

But of course, there is also the likelihood that Spore Govt might pull back some of the cooling measures in response.

(10-05-2015, 09:59 AM)Teletubby Wrote: Mr Market can be stupid at times but not that stupid currently. Even with such a stellar EPS last year, the price of CES did not get bidded up to stratospheric levels. I predict a certain ambivalence to the "disappointing" results this year.

(10-05-2015, 09:18 AM)Curiousparty Wrote: Given that 2014 was an extra-ordinary year where $0.44 EPS was made, 2015 EPS performance should be 110% below that of 2014.

Not sure how is Mr Market going to take this piece of info?

But on the NAV front, 2015 should be better because of the revaluation gain from hotel, which will only be reflected in Q4 2015, as per usual norm to update PPE based on market valuation at end of FY.

(10-05-2015, 09:59 AM)Teletubby Wrote: Mr Market can be stupid at times but not that stupid currently. Even with such a stellar EPS last year, the price of CES did not get bidded up to stratospheric levels. I predict a certain ambivalence to the "disappointing" results this year.

(10-05-2015, 09:18 AM)Curiousparty Wrote: Given that 2014 was an extra-ordinary year where $0.44 EPS was made, 2015 EPS performance should be 110% below that of 2014.

Not sure how is Mr Market going to take this piece of info?

But on the NAV front, 2015 should be better because of the revaluation gain from hotel, which will only be reflected in Q4 2015, as per usual norm to update PPE based on market valuation at end of FY.

This is the ironic part. Stellar results but prices not on par. Assuming 4 cts return for fy2015, the current dividend yield is still attractive. If prices hit 80 cts, buying in for 5 pct dividend return is must.

with low oil prices and inflation rates at the moment, and global economy recovery still sluggish, what is the possibility of a interest rate hike? And even there is, will it be a sharp one?

Putting market sentiment aside, how will this interest rate hike affect the profits and financials? Looking back at history where interest rates were high, were profits adversely affected?

jjlim84 Wrote:with low oil prices and inflation rates at the moment, and global economy recovery still sluggish, what is the possibility of a interest rate hike? And even there is, will it be a sharp one? Putting market sentiment aside, how will this interest rate hike affect the profits and financials? Looking back at history where interest rates were high, were profits adversely affected?

Like it or not , there will surely be market reaction to FED interest rate hike . One can pull out historical chart of property counters and juxtapose FED rate hike schedule

(10-05-2015, 01:49 PM)jjlim84 Wrote: with low oil prices and inflation rates at the moment, and global economy recovery still sluggish, what is the possibility of a interest rate hike? And even there is, will it be a sharp one?

Putting market sentiment aside, how will this interest rate hike affect the profits and financials? Looking back at history where interest rates were high, were profits adversely affected?

Given current property sentiments, if RNAV of CES is sitting at $1.60, trading range at 80-90cents (50% discount) could be considered pretty normal given some other industry peers that have debt are also around this discount at the moment.

Yield will unlikely be such a big factor on share price given that CES is still a property developer and not a REIT though it is trying to shift into recurring income market rather than property development. So for this counter using yield as a guide is not that helpful. RNAV and future big projects would be more useful.

current share price looks pretty fairly valued and with the exposure this counter has had, most of the good news should have already been priced in.

Have to "emphasize" again that CES's projected NAV (not "RNAV") is $1.60 by year end 2015.

RNAV (as of now) is much higher than the 2015 year-end forecast of $1.60 as it still has a pipeline of projects. Of course, RNAV may be adjusted up or down depending on the development of these pipeline projects. E.g. if TM project is called off, then RNAV will take quite a big hit, etc. If Fulcrum is sold out within 3 mths at just slight discount, then RNAV should be re-adjusted up again and so on. RNAV is based on a set of assumptions which may change over time based on macro and company-specific developments.
At this stage, I can only roughly estimate the RNAV to be around $2.10, subject to further adjustment as explained above.

Many tks.

RNAVs are not directly comparable between companies as there's varying levels to risk of achievement. A project with RNAV of 30c that is in the planning phase should have a much greater discount than one that is six months away from TOP.

In Chip Eng Seng`s case, the actual NAV today is probably around $1.30 (reported NAV adjusted for dividend and adjusted for hotel revaluation). The hotel revaluation will not happen for accounting purposes until end of year, but its silly to call it RNAV and apply a 50% discount as I can book a room there now - for economic purposes its realised NAV.

Now, a counter can always trade at a discount to NAV and to make money you're relying on either a) others buying to boost stock price or b) nav value to be proven economically correct through dividends, asset sales or takeovers.

In CES`s case the buyback will do a). If actual NAV is truly 1.30 and the share price is 85c, the company has an amazing opportunity to buy large amounts and realise a 50% return immediately. That's much better than anything you can get in the property market and I expect them to do a lot of it.