Metro Holdings

Ok. Understand what you mean.

ACQUISITION OF A 30% EQUITY INTEREST IN AN ASSOCIATED COMPANY FOR
THE PURPOSE OF ACQUIRING AN EFFECTIVE INTEREST IN 284 RESIDENTIAL
UNITS IN SHANGHAI, THE PRC, IN THE ORDINARY COURSE OF BUSINESS


Anyone has anything to say about the merits/problems with this deal?

(03-11-2013, 10:56 PM)GFG Wrote: ACQUISITION OF A 30% EQUITY INTEREST IN AN ASSOCIATED COMPANY FOR
THE PURPOSE OF ACQUIRING AN EFFECTIVE INTEREST IN 284 RESIDENTIAL
UNITS IN SHANGHAI, THE PRC, IN THE ORDINARY COURSE OF BUSINESS

Anyone has anything to say about the merits/problems with this deal?

I can think of worse things they can do, so will reckon it's a positive thing.

With some much cash on the books and a portfolio of malls with short leases left, Metro needs to branch off into something. I suppose with Jopie's connections in China and the greater story of the richer China+Shanghai liberalisation, this is probably a good story.

Much better than using the cash to do something they have absolutely no competence in.

(05-11-2013, 09:11 AM)AlphaQuant Wrote:

(03-11-2013, 10:56 PM)GFG Wrote: ACQUISITION OF A 30% EQUITY INTEREST IN AN ASSOCIATED COMPANY FOR
THE PURPOSE OF ACQUIRING AN EFFECTIVE INTEREST IN 284 RESIDENTIAL
UNITS IN SHANGHAI, THE PRC, IN THE ORDINARY COURSE OF BUSINESS

Anyone has anything to say about the merits/problems with this deal?

I can think of worse things they can do, so will reckon it's a positive thing.

With some much cash on the books and a portfolio of malls with short leases left, Metro needs to branch off into something. I suppose with Jopie's connections in China and the greater story of the richer China+Shanghai liberalisation, this is probably a good story.

Much better than using the cash to do something they have absolutely no competence in.

ACQUISITION OF ADDITIONAL 13.66% EQUITY STAKE IN TOP SPRING
INTERNATIONAL HOLDINGS LTD IN THE ORDINARY COURSE OF BUSINESS

How about this latest acquisition? Any expert want to give his opinion?

Personally I like how Metro is not sitting on its cash hoard but is redeploying cash from the recent sale of REIT securities into acquisitions.
The stated plan to make TSI an associated company and equity account their results is also a good move, shows there's a plan to expand into China property.

But I dont quite understand why block purchase of shares must be done with a price premium.
Cant Metro just buy the shares on the open market gradually bit by bit?
The premium is about 9% or so, not very high for block purchases (usually between 10-15%) but still cant understand why cant any purchase be done on the open market. TSI is not completely illiquid.

(09-12-2013, 11:32 AM)GFG Wrote:

(05-11-2013, 09:11 AM)AlphaQuant Wrote:

(03-11-2013, 10:56 PM)GFG Wrote: ACQUISITION OF A 30% EQUITY INTEREST IN AN ASSOCIATED COMPANY FOR
THE PURPOSE OF ACQUIRING AN EFFECTIVE INTEREST IN 284 RESIDENTIAL
UNITS IN SHANGHAI, THE PRC, IN THE ORDINARY COURSE OF BUSINESS

Anyone has anything to say about the merits/problems with this deal?

I can think of worse things they can do, so will reckon it's a positive thing.

With some much cash on the books and a portfolio of malls with short leases left, Metro needs to branch off into something. I suppose with Jopie's connections in China and the greater story of the richer China+Shanghai liberalisation, this is probably a good story.

Much better than using the cash to do something they have absolutely no competence in.

ACQUISITION OF ADDITIONAL 13.66% EQUITY STAKE IN TOP SPRING
INTERNATIONAL HOLDINGS LTD IN THE ORDINARY COURSE OF BUSINESS

How about this latest acquisition? Any expert want to give his opinion?

Personally I like how Metro is not sitting on its cash hoard but is redeploying cash from the recent sale of REIT securities into acquisitions.
The stated plan to make TSI an associated company and equity account their results is also a good move, shows there's a plan to expand into China property.

But I dont quite understand why block purchase of shares must be done with a price premium.
Cant Metro just buy the shares on the open market gradually bit by bit?
The premium is about 9% or so, not very high for block purchases (usually between 10-15%) but still cant understand why cant any purchase be done on the open market. TSI is not completely illiquid.

Just to add: From wikipedia about block trades
"For instance, a hedge fund holds a large position in Company X and would like to sell it completely. If this were put into the market as a large sell order, the price would sharply drop—by definition, the stake was large enough to affect supply and demand. Instead, the fund may arrange for a block trade with another company through an investment bank, benefiting both parties: the selling fund gets a more attractive purchase price, while the purchasing company can negotiate a discount off the market rates. Unlike large public offerings, for which it often takes months to prepare the necessary documentation, block trades are usually carried out at short notice and closed quickly."

why is there a premium in some instances and a discount off market prices in others?

The first round of Top Spring share which Metro paid was around HK6.00.

(09-12-2013, 11:39 AM)valueinvestor Wrote: The first round of Top Spring share which Metro paid was around HK6.00.

not exactly
Metro invested $50.3mil and TSI was listed at HKD 6.25 when it IPO-ed in 2011. But Metro didnt pay HKD6.00 per share.

(09-12-2013, 11:57 AM)GFG Wrote:

(09-12-2013, 11:39 AM)valueinvestor Wrote: The first round of Top Spring share which Metro paid was around HK6.00.

not exactly
Metro invested $50.3mil and TSI was listed at HKD 6.25 when it IPO-ed in 2011. But Metro didnt pay HKD6.00 per share.

Metro was one of the cornerstone investors.

I had a quick look on the company, soon realised that the profits of the company are mainly derived from other income and the fair value changes. Taking these out from the P&L, it generates 4.5M profit for year ended 2013, and 1.7M loss for 2nd quarter FY2014. And the other incomes are not recurring, it had 31M other incomes for FY2013, but only 2.7M for Q2 FY2014. So if we exclude these non-recurring extra-ordinary items, the EPS is approximately 0.5c for FY2013 and -ve 0.2c for Q2 FY2014. It used to pay good dividend (4c in 2013, 6c in 2012), but based on its earning powers, it seems that it has to continuously selling something every year in order to maintain the good dividend. I didn't go too deep on its business but what I can see it the retail segment is deteriorating, its making loss. Trading at 0.6 of NAV is indeed lucrative discount, but still couldn't convince myself to go on further, any fellow VB would like to correct/clarify me will be much appreciated.

(07-01-2014, 02:49 PM)valuebuddies Wrote: I had a quick look on the company, soon realised that the profits of the company are mainly derived from other income and the fair value changes. Taking these out from the P&L, it generates 4.5M profit for year ended 2013, and 1.7M loss for 2nd quarter FY2014. And the other incomes are not recurring, it had 31M other incomes for FY2013, but only 2.7M for Q2 FY2014. So if we exclude these non-recurring extra-ordinary items, the EPS is approximately 0.5c for FY2013 and -ve 0.2c for Q2 FY2014. It used to pay good dividend (4c in 2013, 6c in 2012), but based on its earning powers, it seems that it has to continuously selling something every year in order to maintain the good dividend. I didn't go too deep on its business but what I can see it the retail segment is deteriorating, its making loss. Trading at 0.6 of NAV is indeed lucrative discount, but still couldn't convince myself to go on further, any fellow VB would like to correct/clarify me will be much appreciated.

In "Security Analysis" by Ben Graham, he suggested there is a need to eliminate such non recurring items in a single year but these should be considered in a multi year analysis.
Think it's in chp 7.
Metro Holdings are IMO efficient capital allocators, their main business (property Dev) needs to be looked at in an annualized manner. Quarter to quarter fluctuations are useless. For eg. Metro is in the midst of doing an asset enhancement for metro Shanghai. They will thus get lower rev from metro SH for the entire FY 14, but will expect increased rent psf after that
Investments in Top spring n shui on land are all strategic long term investments. Quarter to quarter doesn't indicate anything
Their project in Nanchang has a long gestation period, on top of that, revenues are recognized in a COC (completion of contracts) manner
Even locally, their property Dev (the crest) at redhill, has seen several quarters of investment of capital without anything to show for yet, but once its launched they can then start recognizing profits