King Wan Corporation

(30-11-2015, 09:39 AM)GFG Wrote:

(29-11-2015, 11:29 PM)cif5000 Wrote:

(29-11-2015, 01:01 AM)GFG Wrote: If you believe the entire Dalian project will go to hell, all those physical commercial properties are not going to be worth the loans taken out to build them, and the associate will become insolvent and KW will be chased by creditors and will have to pay up, (it doesn't matter how much is the exact proportion of the liability), then of course you can forget about the RNAV calculation above.  the entire 60mil+ liability would be like 17 cents in book value alone. In such a doomsday situation, more than half of the NTA of KW will be annihilated.
If you think the Dalian project will eventually be worth something other than $0 or -ve, the associate wont go belly up, then at current valuations it is certainly still attractive. Based on the terrible scenario highlighted above, the RNAV is still slightly higher than current price.

I'm glad that you have come to realize that the worst case scenario for the Dalian Project is not simply a write-off and assigning a $0 value to it. That was exactly the point I wanted to make. 

Since KW has a foot (or more) into property development, it would only be fair to compare it with other property stocks. Many are trading below RNAV or even NTA, with stronger balance sheets and clearer development projects.

Thanks for pointing the liabilities out, but as I mentioned earlier, of the 2 groups, I belong to the latter where I don't think it's a doomsday scenario for KW.
In the latter scenario, even a complete write off to $0, plus a further write down of china investment properties (unrelated to DSC), still makes it worthwhile based on valuations. (you can also start analysing earnings/quality of earnings etc but that's another story there again)
Sure, if it's the 1st scenario, then KW is screwed. But that can be said of almost any investment. (eg. if oil goes to $10 and stays there, many many O&G are dead too). The key qn is an assessment of the risk/reward ratio.
In fact, IMHO, as soon as 2016 (FY17), KW's BS will improve substantially. DSC will still do poorly (management guided for 2 yrs for phases 8 and 9), but proportionally, DSC is not that significant after the writedowns. The bulk of the capital intensive projects (Skywoods, Starlight and worker's dorm) will TOP/be operational in 2016 (FY17) and start paying down the receivables once they are cashflow positive.
The time to be bearish (on hindsight) for KW should be 2-3 quarters ago, just before the writedown of DSC, not now.

It is now unclear to me the outcome of the DSC investment for KWC.  The property value is unlikely to go to zero although it may be depressed.  Can record as profit or loss and that's accounting matter but the problem is no real cash inflow contribution from DSC expected for at least the next 2-3 years.  Qn is will there be more cash outflow for DSC from KWC?   Can someone remind me of that?

Turning local, Skywood sale is still respectable but Starlight Suite is a concern.

KTI is hovering ard the 8 baht range.  Doesn't seems to matter much.

(30-11-2015, 10:00 AM)GPD Wrote:

(30-11-2015, 09:39 AM)GFG Wrote:

(29-11-2015, 11:29 PM)cif5000 Wrote:

(29-11-2015, 01:01 AM)GFG Wrote: If you believe the entire Dalian project will go to hell, all those physical commercial properties are not going to be worth the loans taken out to build them, and the associate will become insolvent and KW will be chased by creditors and will have to pay up, (it doesn't matter how much is the exact proportion of the liability), then of course you can forget about the RNAV calculation above.  the entire 60mil+ liability would be like 17 cents in book value alone. In such a doomsday situation, more than half of the NTA of KW will be annihilated.
If you think the Dalian project will eventually be worth something other than $0 or -ve, the associate wont go belly up, then at current valuations it is certainly still attractive. Based on the terrible scenario highlighted above, the RNAV is still slightly higher than current price.

I'm glad that you have come to realize that the worst case scenario for the Dalian Project is not simply a write-off and assigning a $0 value to it. That was exactly the point I wanted to make. 

Since KW has a foot (or more) into property development, it would only be fair to compare it with other property stocks. Many are trading below RNAV or even NTA, with stronger balance sheets and clearer development projects.

Thanks for pointing the liabilities out, but as I mentioned earlier, of the 2 groups, I belong to the latter where I don't think it's a doomsday scenario for KW.
In the latter scenario, even a complete write off to $0, plus a further write down of china investment properties (unrelated to DSC), still makes it worthwhile based on valuations. (you can also start analysing earnings/quality of earnings etc but that's another story there again)
Sure, if it's the 1st scenario, then KW is screwed. But that can be said of almost any investment. (eg. if oil goes to $10 and stays there, many many O&G are dead too). The key qn is an assessment of the risk/reward ratio.
In fact, IMHO, as soon as 2016 (FY17), KW's BS will improve substantially. DSC will still do poorly (management guided for 2 yrs for phases 8 and 9), but proportionally, DSC is not that significant after the writedowns. The bulk of the capital intensive projects (Skywoods, Starlight and worker's dorm) will TOP/be operational in 2016 (FY17) and start paying down the receivables once they are cashflow positive.
The time to be bearish (on hindsight) for KW should be 2-3 quarters ago, just before the writedown of DSC, not now.

It is now unclear to me the outcome of the DSC investment for KWC.  The property value is unlikely to go to zero although it may be depressed.  Can record as profit or loss and that's accounting matter but the problem is no real cash inflow contribution from DSC expected for at least the next 2-3 years.  Qn is will there be more cash outflow for DSC from KWC?   Can someone remind me of that?

Turning local, Skywood sale is still respectable but Starlight Suite is a concern.

KTI is hovering ard the 8 baht range.  Doesn't seems to matter much.

" Qn is will there be more cash outflow for DSC from KWC?   Can someone remind me of that?"

This, my friend, is the key question that I'm in the midst of trying to figure out.
If you think the property value is unlikely to go to zero, but stay depressed, then the next logical and very impt qn is whether more funding is needed for the DSC associate.
If its a scenario where more funding is needed, the construction is still ongoing etc, then KW will be expected to pour in more cash in the next quarters, and/or guarantee more loans for DSC.
If its a scenario where the construction funds are already accounted for, there are no major liabilities, (maybe some for marketing or maintenance expenses) and the associate is just waiting for better prices to breakeven or make a profit, then this scenario is obviously drastically different from the 1st scenario.
If its this 2nd scenario, I am sure the shareholders will be relieved because any "losses" would be limited to earnings and the BS writedowns, and not affect the actual cashflow of KW, which is the major concern at this stage.
I don't have the answer to this qn yet but it is the key qn.
Regardless, it is safe to say that yes, there wont be cashflow contributions from DSC at least within the next 2 yrs
The easiest and most reliable thing to do is for someone to go down to the actual site to see the state of ongoing construction....
Anyone going to Dalian?

For sure, the KTIS stake does matter. Its marked to market every quarter, if one is hardworking enough, you can calculate the share price that KTIS is booked in the balance sheet. The amount of shares held is not reported by KW, but annually you can see the stake in the AR of KTIS.
You can then track the carried amount in the BS of KW to derive an approximate value and adjust that every quarter based on the earnings from the sale (if any). Of course this is approximate, but its pretty accurate.

BTW, still on Dalian:
The earlier phases comprising residential units are all launched and sold.
The fact that the remaining phases of commercial units are unlikely to be launched in the next 2 years tell me that the residential component is likely to be a ghost town at this stage.
Many buyers are speculators hoping to flip or rent to what is now non existent demand.
If there are owner occupiers, the commercial units would be easily sold.
Dalian, particularly the Lu Shun Kou district, is actually a nice and scenic waterfront area. And the waterfront area is situated within a bay too.
There should be opportunities to develop this for tourists or holiday homes.

(30-11-2015, 11:51 AM)GFG Wrote: BTW, still on Dalian:
The earlier phases comprising residential units are all launched and sold.
The fact that the remaining phases of commercial units are unlikely to be launched in the next 2 years tell me that the residential component is likely to be a ghost town at this stage.
Many buyers are speculators hoping to flip or rent to what is now non existent demand.
If there are owner occupiers, the commercial units would be easily sold.
Dalian, particularly the Lu Shun Kou district, is actually a nice and scenic waterfront area. And the waterfront area is situated within a bay too.
There should be opportunities to develop this for tourists or holiday homes.

I take the ghost town argue as well which doesn't bide well for its remaining phases of commercial units.

For KTIS, I believe it matters more when KWC sold some stake and pass the proceeds dividend.  It is m2m but an accounting matter on the PL statement which doesn't translate to the special div people are led to hope for.  Problem is we wouldn't know until we see some clues from their quarterly statement.  Ofc people can take cue from KTIS share price for the probability of stake sale.

(30-11-2015, 01:03 PM)GPD Wrote:

(30-11-2015, 11:51 AM)GFG Wrote: BTW, still on Dalian:
The earlier phases comprising residential units are all launched and sold.
The fact that the remaining phases of commercial units are unlikely to be launched in the next 2 years tell me that the residential component is likely to be a ghost town at this stage.
Many buyers are speculators hoping to flip or rent to what is now non existent demand.
If there are owner occupiers, the commercial units would be easily sold.
Dalian, particularly the Lu Shun Kou district, is actually a nice and scenic waterfront area. And the waterfront area is situated within a bay too.
There should be opportunities to develop this for tourists or holiday homes.

I take the ghost town argue as well which doesn't bide well for its remaining phases of commercial units.

For KTIS, I believe it matters more when KWC sold some stake and pass the proceeds dividend.  It is m2m but an accounting matter on the PL statement which doesn't translate to the special div people are led to hope for.  Problem is we wouldn't know until we see some clues from their quarterly statement.  Ofc people can take cue from KTIS share price for the probability of stake sale.

In the interests of being open, I'll share a bit of my research.
DSC residential prices have fallen very substantially since it was launched in Oct 2014 (about a yr ago) (drop of 8.15% yoy)
In fact, it's currently the lowest in $ psf within the 水师营 subdistrict, which is within LuShunKou district, and has fallen the greatest amongst the private developments there.
http://xinjiapohuayuan0411.fang.com/jiage/
From >6000 yuan/m2, it is now fallen to 5500yuan/m2, and its still falling as for the most recent month.
Hence, the DSC could be delaying the launch of commercial properties as they may not get a good price at this stage.

(30-11-2015, 03:26 PM)GFG Wrote:

(30-11-2015, 01:03 PM)GPD Wrote:

(30-11-2015, 11:51 AM)GFG Wrote: BTW, still on Dalian:
The earlier phases comprising residential units are all launched and sold.
The fact that the remaining phases of commercial units are unlikely to be launched in the next 2 years tell me that the residential component is likely to be a ghost town at this stage.
Many buyers are speculators hoping to flip or rent to what is now non existent demand.
If there are owner occupiers, the commercial units would be easily sold.
Dalian, particularly the Lu Shun Kou district, is actually a nice and scenic waterfront area. And the waterfront area is situated within a bay too.
There should be opportunities to develop this for tourists or holiday homes.

I take the ghost town argue as well which doesn't bide well for its remaining phases of commercial units.

For KTIS, I believe it matters more when KWC sold some stake and pass the proceeds dividend.  It is m2m but an accounting matter on the PL statement which doesn't translate to the special div people are led to hope for.  Problem is we wouldn't know until we see some clues from their quarterly statement.  Ofc people can take cue from KTIS share price for the probability of stake sale.

In the interests of being open, I'll share a bit of my research.
DSC residential prices have fallen very substantially since it was launched in Oct 2014 (about a yr ago) (drop of 8.15% yoy)
In fact, it's currently the lowest in $ psf within the 水师营 subdistrict, which is within LuShunKou district, and has fallen the greatest amongst the private developments there.
http://xinjiapohuayuan0411.fang.com/jiage/
From >6000 yuan/m2, it is now fallen to 5500yuan/m2, and its still falling as for the most recent month.
Hence, the DSC could be delaying the launch of commercial properties as they may not get a good price at this stage.

Frowned when I see the name "新加坡花园".....a bit of a cliche isn't it.

(30-11-2015, 09:39 AM)GFG Wrote: The time to be bearish (on hindsight) for KW should be 2-3 quarters ago, just before the writedown of DSC, not now.

If $0.30+ was over-priced, I don't see how the current price can be a bargain after the impairment and with KTIS trading below the IPO price.

The $12m impairment was announced in May 2015. The Annual Report was published in mid July (providing details to the guarantees and a simple balance sheet of the Associate). The stock price maintained at around $0.28 until late July. Investors had plenty of time to take profit or cut loss, whichever the case may be.

IMO, the stock price is pretty efficient. Not instantaneously but it does settle down to the available public information. I like this kind of stocks because the slight lag in price provided the opportunities for those who bother to read up.

(30-11-2015, 05:46 PM)cif5000 Wrote:

(30-11-2015, 09:39 AM)GFG Wrote: The time to be bearish (on hindsight) for KW should be 2-3 quarters ago, just before the writedown of DSC, not now.

If $0.30+ was over-priced, I don't see how the current price can be a bargain after the impairment and with KTIS trading below the IPO price.

The $12m impairment was announced in May 2015. The Annual Report was published in mid July (providing details to the guarantees and a simple balance sheet of the Associate). The stock price maintained at around $0.28 until late July. Investors had plenty of time to take profit or cut loss, whichever the case may be.

IMO, the stock price is pretty efficient. Not instantaneously but it does settle down to the available public information. I like this kind of stocks because the slight lag in price provided the opportunities for those who bother to read up.

I didn't say it's a bargain.
I said the time to be bearish is earlier, not now because the risk-reward ratio is now more favorable than before. In other words, after the write downs n recent drop in share price, the risks of it falling substantially is lower compared to before.
Anyway, I guess I'm on record here saying that I'm vested and will remain vested at current price.
(Approximately $0.215) 
And can I say that you'd recommend not being vested, and if one is, to sell out now at $0.215?

It'd be fun to check back in 12mths.
This is just a friendly wager/competition. We have differing opinions right now, which is fine
In any case, even in 12mths, the result is not fully reflective either as there may be macro factors at work that nobody can predict but still a good exercise to do.
If I'm right then, I'd share my research that gives me confidence.
If I'm wrong, then I guess I won't!

Like to check if VB uses SOTP approach and on:
- core M&E
- property - local
- property - china
- property - other (Thailand, others?)
- KTIS
- Vessel
How do you value each component?

Wonder what was the price per sqm in rmb for the first phase of fully sold lushukou project with dsc