Boustead Projects

Good afternoon CP san and everyone.

If CES and Boustead Projects both hit 70c and below and you can buy Only One-which one will you buy?

<both nv><not a call to buy or sell>

If both drop to 70 cents, BP is still better. Sustainability of recurring income is a "rare commodity"
With its intention and drive to achieve REITs status, it is very clear that BP is building up its recurring income. (pls check prospectus, just in case I interpret wrongly).

If CES is 70 cents and stuck with 50% unsold units, it is a very bad scenario. The QC penalty would drain its EPS every year. If u realize it by now, CES and many other developers are trying to build up their recurrent income to tide over the "dry years"...some are slow and some are faster in this game...

Thank you Sir.

<not vested><not a call to buy or sell>

Developers have to compete with each other and bid for the land first. Developers need to build up its land bank. The developer has to bid for a land. He risks buying a piece of land with no buyers for his developed units. The bigger the piece of land, the bigger the risk. Of course, the upside is also much higher if developers manage to pull off like how CES managed to pull off the Alex mall. Now the buyers are all stuck with their 99-year leasehold shops and cannot seem to find any tenants. But this feat does not happen all the time. Now party is over and we seem to be just at the start of a long-drawn down cycle in residential market

On the other hand, BP only leases the land from JTC (leasehold basis) when end users have been secured. Hence, if there are no end users, BP will not lease land from JTC in first place. . BP works very closely with EDB and MNCs. Only when the MNCs have decided on the sites/locations for their factories, then BP will decide whether to bid for the project (DB or DBL). So it is a very a different model but more prudent model compared to the developer's model.

Pls correct if I am wrong. tks.

(02-06-2015, 02:19 PM)GFG Wrote:

(02-06-2015, 11:33 AM)Curiousparty Wrote: BP (2016 Forecast)
a. recurrent EPS (4.7 cents)
b. development profit (5 cents)
Total EPS = 9.7 cents.
% of recurring income = 48%.

CES (2016 Forecast)
a. recurrent EPS (4 cents); hotel ops might be incurring losses in initial 2-3 years, dragging down EPS
b. development profit (12 cents from Nine Residence/Junction 9, excluding Fulcrum)
Total EPS = 16 cents.
% of recurring income = 25%.
Hence, CES is trading closer and closer to 80 cents...

_______
1. The quality of recurring income is very different. BP's lease is 12 leases for MNC/high quality end users (e.g. high VA industries, etc). CES has to bid for construction projects every year.

2. BP is not in the business of "selling" properties and hence has no inventory risk (i.e. does not bid for land and build ahead of orders). Each and every of its properties is leased out for recurrent income. Not sure why the huge discount to RNAV. Some discount is no doubt warranted but not sure about such a huge discount, unlike developers like Wing Tai, CES, etc.

3. REITS trade at slight discount to RNAV, ~10% discount. This is understandable. This is the ultimate aim of BP as stated in prospectus.

So what you are saying is that BP doesn't have to bid and buy land.
Instead, in Design-build projects, BP just does the building? Who bids and owns the land then?
In DBL projects, BP still has to bid and buy the land, but the end user (client) commits to a long term lease to amortize the costs of building, but the ownership is still with BP right

I do get your point about BP having end user secured before building, so that mitigates the risk a bit, compared to other developers who have to build and try to sell. But BP still has to bid and maintain a land bank so there's still inventory risk and associated costs

<vested from Boustead dividend in specie>

(02-06-2015, 03:16 PM)Curiousparty Wrote: If both drop to 70 cents, BP is still better. Sustainability of recurring income is a "rare commodity"
With its intention and drive to achieve REITs status, it is very clear that BP is building up its recurring income. (pls check prospectus, just in case I interpret wrongly).

If CES is 70 cents and stuck with 50% unsold units, it is a very bad scenario. The QC penalty would drain its EPS every year. If u realize it by now, CES and many other developers are trying to build up their recurrent income to tide over the "dry years"...some are slow and some are faster in this game...

CES has the Alexandra Central hotel operating and they have eliminated the risk of holding unsold commercial units within the alexandra central mall. Full year hotel revenues should kick in 2016. You are quite rite about some being faster and others slower. And CES has relatively poor pipeline this year.

TS is also likewise a strong counter, with their Robinson Tower project coming, but only TOP in 2017. Not forgetting that office property at Shenton area (with parking space) commands a slight premium over those without carparks. Retail space on 1st floor easily command 40 psf (correct me if i'm wrong). And, its competitive to get a retail rental space in shenton. And, TS acquired 100% of GHG in Dec 2014. This adds 50% more earnings (for hotel segment) for the fy2015 results. A bird in hand is worth 2 in the bush. With much of their residential property substantially sold, their exposure to the dull residential market has been heavily minimised. Just my thoughts.

Both CES and TS have clear certainty 12 months forward. At least, we know whats "worst" case. Both are managed by prudent management, which still convinces me to continue holding both. Would you consider both CES and TS slower or faster players in the evolution towards "recurring income" biz model?

BP still has challenges in bringing in deals. Actually, from the discussion, all three CES, TS and BP are good holdings. Depends much on personal preferences and how far one agrees on the biz direction.

PS: Sorry for the OT. Thought of sharing some views.

After Fulcrum and Nine Residence/Junction 9 obtain TOP this year, CES will be "quite dry" in 2017 and 2018. Doncaster will bring in very little profit.
IMHO, for full hotel revenue to kick in, it will take at least 2-3yrs. (can just google a bit to find out how long other hotels take to reach the steady state occupancy rate. think there are a few researches out there.)

High Park Residence and TM will only TOP in 2018/2019. EPS for 2016/2017 likely to drop back to around 10 - 12 cents level.
_____________

TS is good and is more "advanced" than CES in building up the recurrent income. But gearing is on the high side.

The biggest problem is that management is not friendly at all to shareholder. Super unlikely to do any share buyback even if share price is 10 cents.
Very unlikely for dividend to be increased too. Can check with TS at their AGM to double confirm.

many tks (IMHO).

(02-06-2015, 10:39 PM)vesfreq Wrote:

(02-06-2015, 03:16 PM)Curiousparty Wrote: If both drop to 70 cents, BP is still better. Sustainability of recurring income is a "rare commodity"
With its intention and drive to achieve REITs status, it is very clear that BP is building up its recurring income. (pls check prospectus, just in case I interpret wrongly).

If CES is 70 cents and stuck with 50% unsold units, it is a very bad scenario. The QC penalty would drain its EPS every year. If u realize it by now, CES and many other developers are trying to build up their recurrent income to tide over the "dry years"...some are slow and some are faster in this game...

CES has the Alexandra Central hotel operating and they have eliminated the risk of holding unsold commercial units within the alexandra central mall. Full year hotel revenues should kick in 2016. You are quite rite about some being faster and others slower. And CES has relatively poor pipeline this year.

TS is also likewise a strong counter, with their Robinson Tower project coming, but only TOP in 2017. Not forgetting that office property at Shenton area (with parking space) commands a slight premium over those without carparks. Retail space on 1st floor easily command 40 psf (correct me if i'm wrong). And, its competitive to get a retail rental space in shenton. And, TS acquired 100% of GHG in Dec 2014. This adds 50% more earnings (for hotel segment) for the fy2015 results. A bird in hand is worth 2 in the bush. With much of their residential property substantially sold, their exposure to the dull residential market has been heavily minimised. Just my thoughts.

Both CES and TS have clear certainty 12 months forward. At least, we know whats "worst" case. Both are managed by prudent management, which still convinces me to continue holding both. Would you consider both CES and TS slower or faster players in the evolution towards "recurring income" biz model?

BP still has challenges in bringing in deals. Actually, from the discussion, all three CES, TS and BP are good holdings. Depends much on personal preferences and how far one agrees on the biz direction.

PS: Sorry for the OT. Thought of sharing some views.

(02-06-2015, 07:37 PM)Curiousparty Wrote: Developers have to compete with each other and bid for the land first. Developers need to build up its land bank. The developer has to bid for a land. He risks buying a piece of land with no buyers for his developed units. The bigger the piece of land, the bigger the risk. Of course, the upside is also much higher if developers manage to pull off like how CES managed to pull off the Alex mall. Now the buyers are all stuck with their 99-year leasehold shops and cannot seem to find any tenants. But this feat does not happen all the time. Now party is over and we seem to be just at the start of a long-drawn down cycle in residential market

On the other hand, BP only leases the land from JTC (leasehold basis) when end users have been secured. Hence, if there are no end users, BP will not lease land from JTC in first place. . BP works very closely with EDB and MNCs. Only when the MNCs have decided on the sites/locations for their factories, then BP will decide whether to bid for the project (DB or DBL). So it is a very a different model but more prudent model compared to the developer's model.

Pls correct if I am wrong. tks.

(02-06-2015, 02:19 PM)GFG Wrote:

(02-06-2015, 11:33 AM)Curiousparty Wrote: BP (2016 Forecast)
a. recurrent EPS (4.7 cents)
b. development profit (5 cents)
Total EPS = 9.7 cents.
% of recurring income = 48%.

CES (2016 Forecast)
a. recurrent EPS (4 cents); hotel ops might be incurring losses in initial 2-3 years, dragging down EPS
b. development profit (12 cents from Nine Residence/Junction 9, excluding Fulcrum)
Total EPS = 16 cents.
% of recurring income = 25%.
Hence, CES is trading closer and closer to 80 cents...

_______
1. The quality of recurring income is very different. BP's lease is 12 leases for MNC/high quality end users (e.g. high VA industries, etc). CES has to bid for construction projects every year.

2. BP is not in the business of "selling" properties and hence has no inventory risk (i.e. does not bid for land and build ahead of orders). Each and every of its properties is leased out for recurrent income. Not sure why the huge discount to RNAV. Some discount is no doubt warranted but not sure about such a huge discount, unlike developers like Wing Tai, CES, etc.

3. REITS trade at slight discount to RNAV, ~10% discount. This is understandable. This is the ultimate aim of BP as stated in prospectus.

So what you are saying is that BP doesn't have to bid and buy land.
Instead, in Design-build projects, BP just does the building? Who bids and owns the land then?
In DBL projects, BP still has to bid and buy the land, but the end user (client) commits to a long term lease to amortize the costs of building, but the ownership is still with BP right

I do get your point about BP having end user secured before building, so that mitigates the risk a bit, compared to other developers who have to build and try to sell. But BP still has to bid and maintain a land bank so there's still inventory risk and associated costs

<vested from Boustead dividend in specie>

I haven't had the time to analyse BP in detail, but BP projects are mostly design-build and sometimes design-build-lease
Does this mean for DB, they secure client, build for client, but the land leasing is done by the client?
For DBL, the land or lease is carried in BP books for recurring income. That is, the party who owns the lease is BP, not the client
IMHO, the price of BP is not likely to move drastically in the ear future. But in the longer term, if the DBL portfolio keeps building up, the recurring income is very attractive. Let's not forget to attach a premium to BP for the excellent track record of Boustead. I m sure FF Wong still has a say in BP activities

(03-06-2015, 02:15 PM)GFG Wrote:

(02-06-2015, 07:37 PM)Curiousparty Wrote: Developers have to compete with each other and bid for the land first. Developers need to build up its land bank. The developer has to bid for a land. He risks buying a piece of land with no buyers for his developed units. The bigger the piece of land, the bigger the risk. Of course, the upside is also much higher if developers manage to pull off like how CES managed to pull off the Alex mall. Now the buyers are all stuck with their 99-year leasehold shops and cannot seem to find any tenants. But this feat does not happen all the time. Now party is over and we seem to be just at the start of a long-drawn down cycle in residential market

On the other hand, BP only leases the land from JTC (leasehold basis) when end users have been secured. Hence, if there are no end users, BP will not lease land from JTC in first place. . BP works very closely with EDB and MNCs. Only when the MNCs have decided on the sites/locations for their factories, then BP will decide whether to bid for the project (DB or DBL). So it is a very a different model but more prudent model compared to the developer's model.

Pls correct if I am wrong. tks.

(02-06-2015, 02:19 PM)GFG Wrote:

(02-06-2015, 11:33 AM)Curiousparty Wrote: BP (2016 Forecast)
a. recurrent EPS (4.7 cents)
b. development profit (5 cents)
Total EPS = 9.7 cents.
% of recurring income = 48%.

CES (2016 Forecast)
a. recurrent EPS (4 cents); hotel ops might be incurring losses in initial 2-3 years, dragging down EPS
b. development profit (12 cents from Nine Residence/Junction 9, excluding Fulcrum)
Total EPS = 16 cents.
% of recurring income = 25%.
Hence, CES is trading closer and closer to 80 cents...

_______
1. The quality of recurring income is very different. BP's lease is 12 leases for MNC/high quality end users (e.g. high VA industries, etc). CES has to bid for construction projects every year.

2. BP is not in the business of "selling" properties and hence has no inventory risk (i.e. does not bid for land and build ahead of orders). Each and every of its properties is leased out for recurrent income. Not sure why the huge discount to RNAV. Some discount is no doubt warranted but not sure about such a huge discount, unlike developers like Wing Tai, CES, etc.

3. REITS trade at slight discount to RNAV, ~10% discount. This is understandable. This is the ultimate aim of BP as stated in prospectus.

So what you are saying is that BP doesn't have to bid and buy land.
Instead, in Design-build projects, BP just does the building? Who bids and owns the land then?
In DBL projects, BP still has to bid and buy the land, but the end user (client) commits to a long term lease to amortize the costs of building, but the ownership is still with BP right

I do get your point about BP having end user secured before building, so that mitigates the risk a bit, compared to other developers who have to build and try to sell. But BP still has to bid and maintain a land bank so there's still inventory risk and associated costs

<vested from Boustead dividend in specie>

I haven't had the time to analyse BP in detail, but BP projects are mostly design-build and sometimes design-build-lease
Does this mean for DB, they secure client, build for client, but the land leasing is done by the client?
For DBL, the land or lease is carried in BP books for recurring income. That is, the party who owns the lease is BP, not the client
IMHO, the price of BP is not likely to move drastically in the ear future. But in the longer term, if the DBL portfolio keeps building up, the recurring income is very attractive. Let's not forget to attach a premium to BP for the excellent track record of Boustead. I m sure FF Wong still has a say in BP activities

I have a different take of this. For ff wong to carve out a big piece of his empire to let thomas chu run, it must mean something about thomas chu's competence.

The thing uncertain to me is how soon can the recurring income build up. Attractive stock nonetheless.

Not vested.

For D&B, the land is leased by clients.

For D&B&L, the land is leased by BP only after the clients have been secured. The cost of leasing the land would be reflected in the rental rate charged out to clients. It should be a pass-thru cost plus some margin from BP's pt of view. Clients would be asset-light but would definitely have to pay up more over the lease period compared to the case where the client owns the land and gets BP to only do D&B. It is win-win for both parties.

Pls correct if I am wrong. tks.

(03-06-2015, 02:15 PM)GFG Wrote:

(02-06-2015, 07:37 PM)Curiousparty Wrote: Developers have to compete with each other and bid for the land first. Developers need to build up its land bank. The developer has to bid for a land. He risks buying a piece of land with no buyers for his developed units. The bigger the piece of land, the bigger the risk. Of course, the upside is also much higher if developers manage to pull off like how CES managed to pull off the Alex mall. Now the buyers are all stuck with their 99-year leasehold shops and cannot seem to find any tenants. But this feat does not happen all the time. Now party is over and we seem to be just at the start of a long-drawn down cycle in residential market

On the other hand, BP only leases the land from JTC (leasehold basis) when end users have been secured. Hence, if there are no end users, BP will not lease land from JTC in first place. . BP works very closely with EDB and MNCs. Only when the MNCs have decided on the sites/locations for their factories, then BP will decide whether to bid for the project (DB or DBL). So it is a very a different model but more prudent model compared to the developer's model.

Pls correct if I am wrong. tks.

(02-06-2015, 02:19 PM)GFG Wrote:

(02-06-2015, 11:33 AM)Curiousparty Wrote: BP (2016 Forecast)
a. recurrent EPS (4.7 cents)
b. development profit (5 cents)
Total EPS = 9.7 cents.
% of recurring income = 48%.

CES (2016 Forecast)
a. recurrent EPS (4 cents); hotel ops might be incurring losses in initial 2-3 years, dragging down EPS
b. development profit (12 cents from Nine Residence/Junction 9, excluding Fulcrum)
Total EPS = 16 cents.
% of recurring income = 25%.
Hence, CES is trading closer and closer to 80 cents...

_______
1. The quality of recurring income is very different. BP's lease is 12 leases for MNC/high quality end users (e.g. high VA industries, etc). CES has to bid for construction projects every year.

2. BP is not in the business of "selling" properties and hence has no inventory risk (i.e. does not bid for land and build ahead of orders). Each and every of its properties is leased out for recurrent income. Not sure why the huge discount to RNAV. Some discount is no doubt warranted but not sure about such a huge discount, unlike developers like Wing Tai, CES, etc.

3. REITS trade at slight discount to RNAV, ~10% discount. This is understandable. This is the ultimate aim of BP as stated in prospectus.

So what you are saying is that BP doesn't have to bid and buy land.
Instead, in Design-build projects, BP just does the building? Who bids and owns the land then?
In DBL projects, BP still has to bid and buy the land, but the end user (client) commits to a long term lease to amortize the costs of building, but the ownership is still with BP right

I do get your point about BP having end user secured before building, so that mitigates the risk a bit, compared to other developers who have to build and try to sell. But BP still has to bid and maintain a land bank so there's still inventory risk and associated costs

<vested from Boustead dividend in specie>

I haven't had the time to analyse BP in detail, but BP projects are mostly design-build and sometimes design-build-lease
Does this mean for DB, they secure client, build for client, but the land leasing is done by the client?
For DBL, the land or lease is carried in BP books for recurring income. That is, the party who owns the lease is BP, not the client
IMHO, the price of BP is not likely to move drastically in the ear future. But in the longer term, if the DBL portfolio keeps building up, the recurring income is very attractive. Let's not forget to attach a premium to BP for the excellent track record of Boustead. I m sure FF Wong still has a say in BP activities

Frankly, this BP story was the story of 2011/12. Since then Boustead Group as a whole has almost double. The main question that I have currently is not about the quality of mgt at both parent and subsi but the valuation accorded by the mkt.

Overall the landscape has changed so drastically that the outlook facing the entire group is challenging. Challenging has been repeated several in its most recent outlook statement. Unfortunately for some vested interests that were caught via wrong timing of entry in a new listing, a lot of time is wasted focusing on the wrong aspect on BP.

As a seasoned investor of Boustead group since 2002, I have never seen such challenging conditions facing the entire Boustead Group. I urged caution to be exercise by all readers in assessing so much infomation (and potentially noise) that has been thrown out on a thread on BP that has been newly listed via introduction.

Having said all the above, I have all my due respect for FF Wong and his team. Boustead group in my opinion has emerged much stronger than the previous down cycle with the cashhoard and higher level of recurrent income stream build up since then. This in my opinion will help Boustead transform into an even stronger entity should the right moves come along - accretive acquisition being added on both in existing core and new areas. FF Wong has mentioned in his teleconference that he is only willing to pay between 4 - 6x for such acquisitions. I think FF will eventually has his day as he is a patience and seasoned businessman.

The following is an outlook statement extracted from BP's latest financial statements:

http://infopub.sgx.com/FileOpen/Boustead...eID=353373

In FY2015, the BP Group secured eight contracts totalling $284 million in value, a record level. The BP Group’s order book backlog of approximately $216 million as at the end of FY2015 remains healthy. Since the beginning of FY2016, the BP Group has secured an additional $34 million contract. Nonetheless, the BP Group continues to operate in a highly challenging and competitive industrial real estate market, with the expectation that the difficult business conditions of the past three years are set to continue in FY2016 and will likely have an impact on future gross margins.

The BP Group was successfully demerged from Boustead Singapore Limited, with approximately 48.8% of Boustead Projects Limited’s shares distributed to Boustead Singapore Limited’s entitled shareholders as a dividend in specie. Boustead Projects Limited was listed on the Main Board of the Singapore Exchange on 30 April 2015. Following the successful demerger, the BP Group is positioned to be more focused, quicker to react to opportunities, able to directly tap equity markets for its own capital requirements. This will enable the BP Group to be more adaptable and flexible in addressing the challenges of the industrial real estate market.
During FY2015, the BP Group also embarked on various strategic initiatives to enhance its competitive position. Firstly, the BP Group expanded into Malaysia through a joint development of a clean and green business park, iBP @ Nusajaya, as well as securing a contract from a multinational healthcare corporation for its facility at the Kulim Hi-Tech Park. Secondly, the BP Group established the Boustead Development Partnership to pursue design-build-and-lease, development and
redevelopment opportunities in industrial real estate in Singapore. In March 2015, the Boustead Development Partnership secured its first two development projects in the healthcare and aerospace industries, which will expand the industrial leasehold portfolio and increase future recurring rental income.

In FY2016, the BP Group will continue to seek out development and investment opportunities either on its own or with strategic partners in Singapore, Malaysia, China and potentially other parts of South East Asia. The BP Group believes that notwithstanding the challenging business environment it can continue to
deliver a reasonable level of profit in FY2016.