Property, Plant and Equipment vs Investment property

Hi,

I read differing treatments of PPE and investment properties in property company annual reports and would appreciate some education from kind forumers.

The property as in PPE is a piece of property that is used for the day to day running of its business, correct? Is it carried at cost (-depreciation etc) or would there be fixed revaluation period in which its revised value would be updated in the annual report?

The investment property is a piece of property used to derive an 'other income' as opposed to its core business income, correct? Is it carried at cost (-depreciation etc) or would there be a fixed revaluation period in which its revised value would be updated in the annual report?

How to uncover properties whose to-day value is >> value reflected in the annual report?

Thank you.

(19-04-2014, 10:19 AM)BeDisciplined Wrote: Hi,

I read differing treatments of PPE and investment properties in property company annual reports and would appreciate some education from kind forumers.

The property as in PPE is a piece of property that is used for the day to day running of its business, correct? Is it carried at cost (-depreciation etc) or would there be fixed revaluation period in which its revised value would be updated in the annual report?

The investment property is a piece of property used to derive an 'other income' as opposed to its core business income, correct? Is it carried at cost (-depreciation etc) or would there be a fixed revaluation period in which its revised value would be updated in the annual report?

How to uncover properties whose to-day value is >> value reflected in the annual report?

Thank you.

I suggest you google and read up on "FRS 40 and FRS16 Singapore"

i had read a book (real happenings) about a company that went into insolvency after 2 or 3 years of operation because the amount of PPE depreciation/year for 5 years were underestimated. Do you believe it can happen?

(19-04-2014, 10:36 AM)Boon Wrote:

(19-04-2014, 10:19 AM)BeDisciplined Wrote: Hi,

I read differing treatments of PPE and investment properties in property company annual reports and would appreciate some education from kind forumers.

The property as in PPE is a piece of property that is used for the day to day running of its business, correct? Is it carried at cost (-depreciation etc) or would there be fixed revaluation period in which its revised value would be updated in the annual report?

The investment property is a piece of property used to derive an 'other income' as opposed to its core business income, correct? Is it carried at cost (-depreciation etc) or would there be a fixed revaluation period in which its revised value would be updated in the annual report?

How to uncover properties whose to-day value is >> value reflected in the annual report?

Thank you.

I suggest you google and read up on "FRS 40 and FRS16 Singapore"

Fair Value Model:
- Properties are carried at fair value determined annually by independent professional property valuers.
- BV (Book Value) = Fair Value (Market Value)
- Gains or losses arising from changes in the fair values of properties are included in profit or loss in the year in which they arise.

Cost Model:
- Properties (under PPE) are stated at cost less accumulated depreciation (less impairment)
- BV = Cost less Depreciation (less impairment) << MV (for properties whose capital value have appreciated over the years)

Your Question: How to uncover properties whose to-day value is >> value reflected in the annual report?

Logically, to uncover properties with MV (Market Value) >> BV (Book Value), one should look for companies that are still carry their properties on books using the “Cost Model”. That said, for some properties, BV (even though carried at cost less depreciation) could be at or close to Fair Value.

For St******, its hotel portfolios are carried at Costs less Depreciation whereas its office property in Perth (Dynon’s Plaza) is carried at Fair Value (Fair Value Model)

AS for Amara Holdings, even though its hotels are carried at Cost less Depreciation similar to St******, it also provides the fair values of these properties.

{see page 88 of AR2013: A desktop valuation on Amara Hotel was carried out by Knight Frank Pte Ltd, a firm of property consultants, on 31 December 2013 on the highest-and-best-use basis (2012: valuation carried out by Chesterton Suntec International Pte Ltd in December 2012). The surplus on revaluation of the leasehold land and building based on this valuation amounting to $307,220,000 (2012: $234,469,000) has not been incorporated in the financial statements of the subsidiary nor in the consolidated financial statements.}

Others buddies might have better approaches.

For those companies doing regular asset valuation, its market price might be already priced-in, even the book value is much less than its up-to-date valuation.

For e.g. SPH property assets before the REITs was spun-off recently.

(20-04-2014, 10:35 PM)CityFarmer Wrote: For those companies doing regular asset valuation, its market price might be already priced-in, even the book value is much less than its up-to-date valuation.

For e.g. SPH property assets before the REITs was spun-off recently.

i think in other words, thousands and thousands or even millions pair of eyes are always watching the markets for the first one to spot an edge. Isn't what we think we are trying to do here?