Chip Eng Seng

(15-05-2015, 11:29 AM)Teletubby Wrote: What specuvestor proposes sounds good in theory but hard to execute in practice when valuing companies like CES. Looking at the situation from the perspective of a property developer, how do you estimate the cashflow? Do you use a year's worth of operating cashflow? Or three years? Or five? And what exactly are the "assets" you are talking about that generate this cash flow? Do these include the properties under development? Or also the PPE?

That's why we need to understand the business and structure properly of the company we are valuing, and not apply ROIC blindly, even though the principle might be valid. Of course valuing tech companies using the RNAV approach makes no sense, a more appropriate approach could be the PEG approach.

What I'm suggesting, if you read my previous posts carefully, that you value a developer by first estimating it's RNAV, and then applying an appropriate discount to that RNAV to get an estimate of its fair value. This is the method that makes most sense.

Also, thinking back on the recent waves of privatizations, I cannot recall any one company which was a pure cash company. Perhaps someone can kindly point one out to me.

IMO, estimating future cash flows, theory is there but showing numbers is another thing

If any experienced vb can give an example..pardon my ignorance

If you read my previous posts again carefully, I never mentioned that you were a theorist. What I said was that the method of valuing all businesses based on their ROIC is not a practical approach. Of course, theory has to fit observations, and theory is derived from observations, such as your comment on the 15% discount for cash companies.

For a property development company, it doesn't take good management to have a working knowledge of their cashflow projections, as properties sold are subjected to the standard S&P agreement payment schedule. However, it is very difficult for the layman investor to estimate this, primarily due to timing issues and development cost estimation uncertanties. And also, what do we use as the asset base to calculate ROIC? I'm still waiting for the answer.

All these issues make the ROIC approach impractical when using it on a developer. Which is why estimating the RNAV and then applying a reasonable discount would make more sense with regards to valuation. I notice that you agree with me, so it seems this issue is settled.

A REIT is a totally different creature from a property developer (with caps on gearing, limits on capital allocated for property development, minimum distribution requirements etc), so why bring it into our discussion? Not that relevant IMO. In any case, the RNAV approach would not be suitable for valuing a REIT. In fact, the RNAV is unlikely to be materially different from the NAV for a REIT. Rather, a more sensible approach would be to value the REIT based on your ROIC approach, as the cashflow is more predictable and easier to quantify.

(15-05-2015, 11:51 AM)specuvestor Wrote:

(15-05-2015, 11:29 AM)Teletubby Wrote: What specuvestor proposes sounds good in theory but hard to execute in practice when valuing companies like CES. Looking at the situation from the perspective of a property developer, how do you estimate the cashflow? Do you use a year's worth of operating cashflow? Or three years? Or five? And what exactly are the "assets" you are talking about that generate this cash flow? Do these include the properties under development? Or also the PPE?

That's why we need to understand the business and structure properly of the company we are valuing, and not apply ROIC blindly, even though the principle might be valid. Of course valuing tech companies using the RNAV approach makes no sense, a more appropriate approach could be the PEG approach.

What I'm suggesting, if you read my previous posts carefully, that you value a developer by first estimating it's RNAV, and then applying an appropriate discount to that RNAV to get an estimate of its fair value. This is the method that makes most sense.

Also, thinking back on the recent waves of privatizations, I cannot recall any one company which was a pure cash company. Perhaps someone can kindly point one out to me.

If you read some of my 2000+ posts, I'm not a theorist. Theory has to fit observations, not the other way round. I'm not here to help you analyse but I can say any projections above 3 years is funny numbers. So how does management do it? That's why there are management, and there are good management. Key is to understand business model, the historical track, the moat vis a viz Porter's 5 forces, and how the 3 A-B-S layers interact. People keep thinking it's a science when accounting itself is not even science.

If you put a suitable/ reasonable discount to CES RNAV then it will make more sense. Check out then the discount for other developers and why discount for REITS are much lesser.

Watch Ocean Sky. Cash companies dont get privatised. They get delisted (downside) or RTO (upside).

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(15-05-2015, 11:59 AM)Curiousparty Wrote: Just wondering if entire market is just pricing ahead of the impending rate hike?

Seems that other property counters also quite red...

(15-05-2015, 11:38 AM)westin1 Wrote: Guess most traders have cut loss... 0.84 was the key.... a guru states that ces is on a permanent down trend...

Sad mistake that i made on this so called undervalued gem... a total disappointment...

Hope forummers will discern what is truly a gem...

Gem or disappointment is a matter of perspective.
My time frame is about 1 to 2 years.
For CES, first bought in in early 2010 at about 38 c (average).
Sold in early 2012 at about 50c (average). I thought I sold too early.
Bought in again in early 2013 at 76 c (average, this time bigger quantity). Sold out about one-third at about 95 c. Also collected 14 c
dividend while waiting.
So, for me, I think CES is a gem.
Just my view, no offence intended. I am sorry if anyone experienced a
loss investing in CES.

Yes, it is a matter of perspective. When I first "discovered" CES, it was slightly below 80 cents or trading at market cap of only $500mil, but it had more than $500mil worth of profits (including revaluation surplus) yet to be reflected into its book at that point in time. I remembered that at 80 cents, many critic were saying that everything had been reflected into share price. At 97/98 cents, they were still saying the same thing. If share price were to go beyond $1, they would continue to say the same thing... hahaha.. So the conclusion is we have to do our own judgment. No one can help u in this...

Anyone who bought at 80 cents and sold at say 96 cents would have easily made about 18%.

______
separately, would like to check with VBs whether anyone has paid a visit to its Alex hotel?
Is it already opened for business?

Many tks.

CP you very good leh,buy 80c can sell 96c......you must have divine help or you are a guru .can teach me?

I was at alex hotel last week evening. Hotel not opened yet. Shops - an express cut, a money changer and gain city were open. Rest were available for rent.

I am unimpressed considering that they could have secured more tenants prior. Then again, it's hard without the hotel in function.

Not vested.



Sent from my D5503 using Tapatalk

Even big property developer with good mall manger has trouble leasing out in this weak market,what are your chances as strata title owner. I have seen a lot of empty strata shops wanting to lease.

----------------------------------------

New mall in prime location, but no shoppers
The Straits Times 5 hrs ago Syndigate.info
ORCHARD Road's newest mall has been open for only a year but already the shutters have come down on at least five shops.

Tenants at Orchard Gateway who spoke to The Straits Times last week said footfall and business have been poor, with some businesses reporting no sales on weekdays.

Orchard Gateway has two diagonally facing buildings on either side of Orchard Road, connected by a glass link bridge and an underpass.

The larger 21-storey building, with six retail floors, also houses a hotel and a library. It is in a prime spot in Somerset wedged between Orchard Central and 313@somerset.

But it is this location that may be the cause of its problems.

Retailers say the mall's layout, insufficient signs and poor marketing have led to shoppers bypassing the mall or mistaking it as part of Orchard Central despite direct access on either side of Somerset MRT.

Mr Ray Lee, 40, owner of clothing store The Little Flower At The End Of The Rainbow, said: "Signs and posters on the pillars to indicate where the mall is were put up only after we (tenants) requested them.

"It is also puzzling that the information counter is on the fourth floor, which does not help lost customers much."

Tenants said the mall's fashion shops are not immediately visible to shoppers entering via the street-level passageway from 313@somerset, resulting in them turning left towards Orchard Central instead.

Public relations and communications officer Jon Lim, 28, said: "I can't differentiate whether I'm at Orchard Gateway or Orchard Central, and I honestly don't know which shops are specific to Gateway or if they are worth going to."

When The Straits Times visited the mall last week, there were only a handful of people browsing in the shops, visibly fewer compared with the two other malls.

"There are days when I don't sell anything at all," said Mrs Joanna Johnston, 54, the owner of clothing store Anna Rainn.

She, like a number of other tenants, have asked the management for rental rebates. The Straits Times understands that some have received rebates of varying amounts.

Savills Singapore, the mall's property manager and leasing adviser, said the mall is considering mutual pre-termination agreements with a few tenants as part of an ongoing "tenant-mix review". It added that it will work with the 115 tenants to boost shopper traffic. This will include exhibitions and performances at the mall and joint promotional activities with 313@somerset and Orchard Central.

Location marker signs have also been installed at strategic locations in the three malls to help shoppers navigate, added the spokesman.

Mr Ong Kah Seng, director of property consultancy R'ST Research, said setting up a "geek corner" - or tech shops - or giving special discounts to hotel guests could help the mall. "It will give the mall more vibrant, creative, energising vibes," he said.

* 2 cents worth

As the base you can use adjusted asset and ROA as an approximation, or segmental breakdown, or some VB uses on a per project basis. Other clues include the capitalisation of the subsidiaries that are used to perform these projects. Depends how precise you want your analysis to be

Neither have you answer nor agree that developers have a much high capital base due to higher working capital which is why the huge discount is valid. Once you understand the business model then your MOS will have to adjust accordingly. But saying a discount should be 20 or 50% has no real fundamental basis except as relative to peers until you understand the cashflow impact

We can have a discussion on the investment merits but i am not remunerated to answer your questions. There is a difference and the tone has to be set properly.

I brought out the REIT to let u understand the difference in business model and working capital has a huge impact on the "discount to RNAV". The regulators know that and is also why there is a restriction on development business and leverage for REIT

(15-05-2015, 03:00 PM)Teletubby Wrote: If you read my previous posts again carefully, I never mentioned that you were a theorist. What I said was that the method of valuing all businesses based on their ROIC is not a practical approach. Of course, theory has to fit observations, and theory is derived from observations, such as your comment on the 15% discount for cash companies.

For a property development company, it doesn't take good management to have a working knowledge of their cashflow projections, as properties sold are subjected to the standard S&P agreement payment schedule. However, it is very difficult for the layman investor to estimate this, primarily due to timing issues and development cost estimation uncertanties. And also, what do we use as the asset base to calculate ROIC? I'm still waiting for the answer.

All these issues make the ROIC approach impractical when using it on a developer. Which is why estimating the RNAV and then applying a reasonable discount would make more sense with regards to valuation. I notice that you agree with me, so it seems this issue is settled.

A REIT is a totally different creature from a property developer (with caps on gearing, limits on capital allocated for property development, minimum distribution requirements etc), so why bring it into our discussion? Not that relevant IMO. In any case, the RNAV approach would not be suitable for valuing a REIT. In fact, the RNAV is unlikely to be materially different from the NAV for a REIT. Rather, a more sensible approach would be to value the REIT based on your ROIC approach, as the cashflow is more predictable and easier to quantify.

(15-05-2015, 11:51 AM)specuvestor Wrote:

(15-05-2015, 11:29 AM)Teletubby Wrote: What specuvestor proposes sounds good in theory but hard to execute in practice when valuing companies like CES. Looking at the situation from the perspective of a property developer, how do you estimate the cashflow? Do you use a year's worth of operating cashflow? Or three years? Or five? And what exactly are the "assets" you are talking about that generate this cash flow? Do these include the properties under development? Or also the PPE?

That's why we need to understand the business and structure properly of the company we are valuing, and not apply ROIC blindly, even though the principle might be valid. Of course valuing tech companies using the RNAV approach makes no sense, a more appropriate approach could be the PEG approach.

What I'm suggesting, if you read my previous posts carefully, that you value a developer by first estimating it's RNAV, and then applying an appropriate discount to that RNAV to get an estimate of its fair value. This is the method that makes most sense.

Also, thinking back on the recent waves of privatizations, I cannot recall any one company which was a pure cash company. Perhaps someone can kindly point one out to me.

If you read some of my 2000+ posts, I'm not a theorist. Theory has to fit observations, not the other way round. I'm not here to help you analyse but I can say any projections above 3 years is funny numbers. So how does management do it? That's why there are management, and there are good management. Key is to understand business model, the historical track, the moat vis a viz Porter's 5 forces, and how the 3 A-B-S layers interact. People keep thinking it's a science when accounting itself is not even science.

If you put a suitable/ reasonable discount to CES RNAV then it will make more sense. Check out then the discount for other developers and why discount for REITS are much lesser.

Watch Ocean Sky. Cash companies dont get privatised. They get delisted (downside) or RTO (upside).

Key at the end of the day is the management.

Problem now is CES is "headless" at the moment...sigh...no CEO...