24-07-2015, 12:14 PM (This post was last modified: 24-07-2015, 12:16 PM by vesfreq.)
Dear folks,
I was reviewing the 2015 ar. Interesting insights.
1. Note 5 (pg 76) shows that the property rental income is 26.5 m (2015), while 2013 is 21.8 m. Looking at the gfa of the entire portfolio available for 199,698 sqm (pg 24) which is approx 2.1 m sqft of gfa. Factoring a discount of 20% for "deadweight space" and possible locations not rented out and then using $2 psf rental rate (some random figure from commercial guru based on light industrial property for rent located around ubi), its 2.1m x $2 x 12 months x 80% = 40m sgd of rental return per year. What seems very interesting is that the difference between this hypothetical potential rent return and the reported rental income is quite wide. 26.5 m (actual) vs 40 m (based on my simplistic assumption).
2. My assumption of $2 psf sounds very low. A search on commercial guru shows that rental psf at Edward boustead centre is already 3.50 psf. I haven't done much homework on this yet.
3. At the same time, using the 2015 book value of the industrial properties for lease which is 264 m sgd. The rental return is quite attractive. 26.5 m divide by 264 m is approx 10%. If we were to use the hypothetical 40m, the return is about 15 percent. Thats pretty good compared to the rental returns from residential property. Like a 3 room hdb may only command rental 2k per month whole unit (assuming at amk area not so near the mrt) and will only sell for 300k +- depending again on the location. Thus, hdb rental return also 8%, but one cannot have multiple hdb for rental and do so "legally" as a biz.
4. Based on mkt cap of (320 m shares x 87 cents) 278.4 m sgd, this is very close to the book value of the industrial property. (CP had a very good point). If one were to view it as an indirect way to property ownership, this is a good way to gain exposure to industrial real estate.
5. I think this counter deserves another look. I like to add also that the industrial properties are relatively young and still has about 25 years useful life remaining (assuming all are on 30 years lease). That gives very good certainty in terms of the future rental earnings.
Just some thoughts. Thanks to CP for his kind sharing.
The thing I am scared most is not nightmares or market crashes..... Its my greed that I fear the most.
When people ask what is my target price, I never have any good answer for it because Philip Fisher said before (in Common Stock Uncommon Profit) that the best time to sell is never. Equity investment is buying into ownership, not betting slips.
The path to greatness and wealth is necessarily dangerous.... because greed is a fearsome fore that threatens your success at every step.
24-07-2015, 10:38 PM (This post was last modified: 24-07-2015, 10:42 PM by Curiousparty.)
If one were to refer to Annex G of BP prospectus, one would notice that many of BP properties have remaining leases of > 50 years.
Just a very ballpark estimation using 30-year lease price PSF of $377
BP has 1.97mil sq ft of properties. (Non-BP equity has already been removed.)
Multiplying the 2 rates together, we have ~$743 mil worth of market valuation, compare this against its current market cap of $278mil now (87 cents x 320mil shares).
Or we can compare market valuation against book value of $200mil (investment properties + held for sales + JV).
Because BP builds these properties, they are able to keep cost low and hence the high implied rental yields based on "book value". Imagine the windfall if they were to dispose them one by one..
Insiders have a good reason to buy at ave price of 90 cents last month.
(24-07-2015, 12:14 PM)vesfreq Wrote: Dear folks,
I was reviewing the 2015 ar. Interesting insights.
1. Note 5 (pg 76) shows that the property rental income is 26.5 m (2015), while 2013 is 21.8 m. Looking at the gfa of the entire portfolio available for 199,698 sqm (pg 24) which is approx 2.1 m sqft of gfa. Factoring a discount of 20% for "deadweight space" and possible locations not rented out and then using $2 psf rental rate (some random figure from commercial guru based on light industrial property for rent located around ubi), its 2.1m x $2 x 12 months x 80% = 40m sgd of rental return per year. What seems very interesting is that the difference between this hypothetical potential rent return and the reported rental income is quite wide. 26.5 m (actual) vs 40 m (based on my simplistic assumption).
2. My assumption of $2 psf sounds very low. A search on commercial guru shows that rental psf at Edward boustead centre is already 3.50 psf. I haven't done much homework on this yet.
3. At the same time, using the 2015 book value of the industrial properties for lease which is 264 m sgd. The rental return is quite attractive. 26.5 m divide by 264 m is approx 10%. If we were to use the hypothetical 40m, the return is about 15 percent. Thats pretty good compared to the rental returns from residential property. Like a 3 room hdb may only command rental 2k per month whole unit (assuming at amk area not so near the mrt) and will only sell for 300k +- depending again on the location. Thus, hdb rental return also 8%, but one cannot have multiple hdb for rental and do so "legally" as a biz.
4. Based on mkt cap of (320 m shares x 87 cents) 278.4 m sgd, this is very close to the book value of the industrial property. (CP had a very good point). If one were to view it as an indirect way to property ownership, this is a good way to gain exposure to industrial real estate.
5. I think this counter deserves another look. I like to add also that the industrial properties are relatively young and still has about 25 years useful life remaining (assuming all are on 30 years lease). That gives very good certainty in terms of the future rental earnings.
Just some thoughts. Thanks to CP for his kind sharing.
[I am not here to promote any stocks. Please always do your own research before embarking on any investment decision. I will not be liable for any of your own decisions. Your use of any information or materials is entirely at your own risk. It is your responsibility to ensure that any products, services or information meet your specific requirements. I do not produce material which meets the objectives of any specific financial and risk profile of investors.]
Once again b4 everyone starts to speculate, the prospectus is a good read.
RNAV based on latest valuers' report are all there... unless anyone have any basis to prove that valuers have made mistakes, there is no need to restart the whole episode of speculation over the value.
Anyway, the outlook for industrial real estate, office real estate and that of residential real estate are not exciting at the moment.
There appears to be real concerns over the outlook of domestic economy.
Side track, I am still awaiting any buddies input on any bright spot in Singapore's economy currently. I see no road... pls help.
Once again b4 everyone starts to speculate, the prospectus is a good read.
RNAV based on latest valuers' report are all there... unless anyone have any basis to prove that valuers have made mistakes, there is no need to restart the whole episode of speculation over the value.
Anyway, the outlook for industrial real estate, office real estate and that of residential real estate are not exciting at the moment.
There appears to be real concerns over the outlook of domestic economy.
Side track, I am still awaiting any buddies input on any bright spot in Singapore's economy currently. I see no road... pls help.
"Most industrial Reits have signed long leases and are not likely to be too affected for larger parts of their portfolio", as mentioned in the article. I tend to believe that Boustead would have secured long term leases, for their DBL projects. Not likely their income would drop out of a sudden, since the DBL jobs would have a component for the long term leases and this mitigates risk of uncertainty in rental return.
However, those units under BP and not leased out would present a potential problem. The extent of which would be surely be interesting to know.
Good read nonetheless.
The thing I am scared most is not nightmares or market crashes..... Its my greed that I fear the most.
When people ask what is my target price, I never have any good answer for it because Philip Fisher said before (in Common Stock Uncommon Profit) that the best time to sell is never. Equity investment is buying into ownership, not betting slips.
The path to greatness and wealth is necessarily dangerous.... because greed is a fearsome fore that threatens your success at every step.
The point that I have been re-iterating is that BP is not a new entity. Their DBL business is not new as well but obviously the competitive landscape has changed drastically.
Ideally, there should already be a B REIT especially for Boustead's track record in the industrial real estate segment in Singapore. For whatever reasons, I think its all history.
Hence, the evaluation of the attractiveness of BP is not new at all given that the company has always been around under Boustead Singapore.
Vested
Certificate
(25-07-2015, 04:39 PM)vesfreq Wrote: Thanks GG,
"Most industrial Reits have signed long leases and are not likely to be too affected for larger parts of their portfolio", as mentioned in the article. I tend to believe that Boustead would have secured long term leases, for their DBL projects. Not likely their income would drop out of a sudden, since the DBL jobs would have a component for the long term leases and this mitigates risk of uncertainty in rental return.
However, those units under BP and not leased out would present a potential problem. The extent of which would be surely be interesting to know.
This is rather interesting. With BDP being an investor in BP's DBL projects, this increases the size of DBL jobs which BP can take up. Potentially, there is more capacity to take the higher value and higher end DBL jobs. This indeed enhances the amount of "financial firepower" available. "The parties (BP and ADIC) will contribute a combined S$250 million of equity to the BDP which, with leverage, is expected to allow for an initial investment target in excess of S$600 million.", cited from the same article (link above).
On top of the existing 1.97m sqft of properties, this additional S$600m of "initial investment target" is massive. If one were to use CP's mkt valuation of S$743m, then this additional $600m forms a sizable war chest which will be of very interesting use, assuming that BP is able to bring in more DBL jobs. If we were to look at the current market cap of S$276m, a S$600m war chest is not small sum. In periods of liquidity shortages and uncertainty, this gives BP a powerful advantage over other DBL solutions providers which may not have ready access to such funding. Also, considering that Federal reserve will likely raise rates in Sept or in due course, ready financing is certain to make a difference between getting the deal and going home empty handed.
Very interesting. But, it will take time for Mr Mkt to realise this.
Vested and accumulating.
The thing I am scared most is not nightmares or market crashes..... Its my greed that I fear the most.
When people ask what is my target price, I never have any good answer for it because Philip Fisher said before (in Common Stock Uncommon Profit) that the best time to sell is never. Equity investment is buying into ownership, not betting slips.
The path to greatness and wealth is necessarily dangerous.... because greed is a fearsome fore that threatens your success at every step.
Nothing new as BP was part of Boustead Sing and the initiative was hidden under the parent.
Since that partnership, BP has been able to build up its DBL portfolio.
However, the reality is so tough now that without such a partnership, BP won't even stand a chance to bag anything.
DBL project returns are no longer as attractive as it used to be but it remains an essential part of business - ask yourself who would give up projects (that used to be 20% IRR) which is yielding 10% IRR when the contracting work load is also declining due to stiff competition?
Clients are also not stupid as there other other established competitors that are eager to offer good if not better terms to get into DBL.
Just monitor BP's upcoming performances and it will be quite clear.
To me the next jump for BP is post the next crisis. When BP can take advantage of their and the parent's financial strength to grow inorganically. As for the timing, only time can tell.
Vested
GG
(01-08-2015, 04:39 PM)vesfreq Wrote: Dear fellow BP investors,
This is rather interesting. With BDP being an investor in BP's DBL projects, this increases the size of DBL jobs which BP can take up. Potentially, there is more capacity to take the higher value and higher end DBL jobs. This indeed enhances the amount of "financial firepower" available. "The parties (BP and ADIC) will contribute a combined S$250 million of equity to the BDP which, with leverage, is expected to allow for an initial investment target in excess of S$600 million.", cited from the same article (link above).
On top of the existing 1.97m sqft of properties, this additional S$600m of "initial investment target" is massive. If one were to use CP's mkt valuation of S$743m, then this additional $600m forms a sizable war chest which will be of very interesting use, assuming that BP is able to bring in more DBL jobs. If we were to look at the current market cap of S$276m, a S$600m war chest is not small sum. In periods of liquidity shortages and uncertainty, this gives BP a powerful advantage over other DBL solutions providers which may not have ready access to such funding. Also, considering that Federal reserve will likely raise rates in Sept or in due course, ready financing is certain to make a difference between getting the deal and going home empty handed.
Very interesting. But, it will take time for Mr Mkt to realise this.
[I am not here to promote any stocks. Please always do your own research before embarking on any investment decision. I will not be liable for any of your own decisions. Your use of any information or materials is entirely at your own risk. It is your responsibility to ensure that any products, services or information meet your specific requirements. I do not produce material which meets the objectives of any specific financial and risk profile of investors.]
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