(26-05-2014, 11:02 PM)ahyu02 Wrote: The circumstance of this resignation seems strange to me. In another separate announcement, it is mentioned that mr. Seah Choo was appointed as CEO on 2013-11-04, which was just about half year ago.
Very strange indeed,
For a top Executive Employee such as a CEO to resign from his/her position, he/she would probably need to serve 3 to 6 month notice - so that the Employer would have sufficient time to source for a qualified replacement.
For an Employer to ‘fire” any Employee, the effect could be immediate provided the employee is fully compensated according to the employment contract.
IMO, the whole thing reflects poorly on NF’s inexperienced (including lack of qualified talents) in the running of a publicly listed company.
(vested)
Research, research and research - Please do your own due diligence (DYODD) before you invest - Any reliance on my analysis is SOLELY at your own risk.
(05-05-2014, 10:45 PM)greengiraffe Wrote: I understand that many here are vested in Forterra. However, I would like to play devils advocate here. Given that NF is a substantial holder in Forterra, little will go wrong going forward. However, how to close the valuation gap between the mkt price and book value of Forterra remains to be seen.
I will based my analysis of NF's strategy towards Chinese properties via my experience with Metro over the last decade. Metro has several fruitful participation in NF led Chinese projects over the decade. Metro has made a lot of $ in these ventures.
However, apart from the NF led Tesco projects, they have little JVs left.
Given the well publicised Chinese economic slowdown, I think the era of substantial capital gains via developing and selling Chinese real estates could well be over. However, well located viable projects will generate improved yields as the restructuring of Chinese economy towards domestic consumption will underpin such a transition.
With its portfolio of largely matured assets, NF is probably looking for a REIT platform to monetise their assets over time. As we all know, REIT will only acquire assets from their parent/sponsor usually on an accretive basis and it is not uncommon for financial engineering to be involved before injection or post injection for such acquisitions to be viable.
Forterra in this instance may not have a good bargaining position given its poor historical track record. There is no doubt that Forterra is cleaning up the historical mess with the help of NF experience in China but Forterra has to be restore to a reasonable health and make substantial progress with their yet to be completed projects before any of the intended accretive acquisitions can materialise and hence it is my view that the restructuring todate are corporate moves that are necessary for a cleaner slates.
The ongoing restructuring and completion of projects under NF guidance will take time and until these projects stablise, I personally do not think NF can count on any of their contributions to help Forterra acquire.
If we draw a further experience of CRCT, a darling right after its IPO pre the GFC, it has taken the last 7 - 8 years for yield of its portfolio to stabilise and start achieving REIT style of organic growth. With all due respects to NF, if they can shorten the restructuring cycle for Forterra to less than 3 years of their strategic entry, it will by no means be a huge success given the tough China market that is not help by the current deceleration in economic growth.
Not Vested
GG
In the NF/HSBC(Infrared)/Tesco/Metro deals, to my knowledge, NF did not actually play the lead role. NF was the LP and HSBC(Infrared) was the GP, it was the GP that played the lead role.
FT was formerly TCT
TCT was formerly CREO
CREO was launched in 2007 by the former controlling unitholders
CREO was transferred from London AIM exchange to SGX in 2010
It has been 7 years since CREO was launched
It will take a long long time for FT to stabilize ALL of its assets – but once The Place is stabilized, 82% of its total asset would be generating recurring income. And we are talking about end of 2014 (launch) + another 6 to 12 months the most to stabilize.
_________________________________________________________________ Forterra House (FH)
Carrying Value = SGD 146 million = 7%
= Stabilized
The Place (TP)
Carrying Value = SGD 1,654 million = 75%
Phase I (Office Portion) = Stabilized
Phase I (Retail Portion) = Transitional
Phase II (Retail) = Transitional
Phase III (Office and Retail) = Development
TP (all phases) should be completed and launched by end of 2014
Huai Hai Mall (HHM)
Carrying Value = SGD 165 million = 8%
= Transitional
Central Park Mall (CPM) =55% ownership
Carrying Value = SGD 406 million (100% ownership)
Carrying Value = SGD 223 million ( 55% ownership) = 10%
Phase I = Transitional (66,160 m2)
Phase II to IV = Development (250,774 m2)
% of Stabilized Assets (Projected Time Frame to Stabilization)
FH = 7% (Now)
FH + TP = 82% (2015)
FH + TP + HHM = 90% (2015 or 2016)
FH + TP + HHM + CPM = 100% ( Long time to develop 250,774 m2)
As to how to close the valuation gap between share price and NAV per unit, it depends on which of the following routes would NF lead FT into?
Route A : Delisting Route:
1) Liquidate all assets like MIIF
2) Privatize – NF make a GO
Route B : Listing Route : Maintain Listing Platform of FT
1) With Expansion
2) Without Expansion
Enough have been said on route A
Route B is an interesting one to explore – will leave it for another day.
(vested)
Let’s explore on route B-1 (Maintaining listing platform of FT with expansion)
Expansion means growing FT’s balance sheet by acquiring more assets
Firstly, to expand FT, more “equity” would be needed which could be raised via:
a) Private Placement of shares to NF
b) Private Placement of shares to third parties
c) Right Issues
For a) Private Placement of shares to NF - it would trigger a GO for which NF could seek “whitewash waiver” from unit-holders – New share issuing price is an issue.
For b) Private Placement of shares to third parties - it would have dilution effect on existing shareholdings – NF would risk losing its Trustee Management control if its stakes in FT falls below 25%.
For c) Right Issues - it would trigger a GO if non-controlling unit-holders’ rights are not fully subscribed – again, NF would need to seek “whitewash waiver”.
It seems like, if non-controlling unit-holders are not willing to come up with more equity and not willing to grant “whitewash waiver” for NF to acquire more equity in FT “cheaply”, there is little NF could do to expand on FT.
Assuming “whitewash Waiver” could be obtained and enough “equity at fair price” could be placed to NF, how could NF then possibly expand and add value to FT in order to close the valuation gap between share price and NAV ?
d) By acquiring from third-parties or injecting its own assets (Stabilized or Development assets) into FT.
For Stabilized assets, given the high cost structure/high management fees structure of FT as compared to Reits - this would be an unlikely workable business model – unless NF is willing to “sell” its assets cheaply into FT or being able to source assets from third-parties at bargain values, otherwise, it would be hard justifying putting such deals to FT on “accretive” basis.
If NF has the ability to source for stabilized assets at bargain values, wouldn't it better off for NF to acquire these assets and keep them under its private stable – why share it with FT’s non-controlling unit-holders – unless this is NF’s genuine intention - afterall, NF has an overall strategy of growing its assets in China.
Besides, FT would not be an ideal or efficient vehicle or platform through which NF could “monetize” or recycle its stabilized assets – simply due to the high cost and high management fee structure of FT - if NF ever has this intention in mind.
For injection of development assets into FT, through acquisition from third parties or NF, assuming this is a workable value accretive model, due to the long gestation period of development projects coupled with the fact that FT still has about 250,000m2 of greenfield development project at hands to be digested– this is not going to be a viable proposition on immediate to medium term basis..
In summary, I don’t see how NF could, on short to medium term basis, close the gap between share price of FT and its NAV, by embarking FT on an expansion mode – unless NF is willing to play Santa Claus – by acquiring more equity in FT at “fair price” and able to inject into or source for FT, stabilized assets on “accretive” basis.
(vested)
Research, research and research - Please do your own due diligence (DYODD) before you invest - Any reliance on my analysis is SOLELY at your own risk.
(01-06-2014, 06:07 PM)Boon Wrote: If NF has the ability to source for stabilized assets at bargain values, wouldn't it better off for NF to acquire these assets and keep them under its private stable – why share it with FT’s non-controlling unit-holders – unless this is NF’s genuine intention - afterall, NF has an overall strategy of growing its assets in China.
Besides, FT would not be an ideal or efficient vehicle or platform through which NF could “monetize” or recycle its stabilized assets – simply due to the high cost and high management fee structure of FT - if NF ever has this intention in mind.
NF has paid a high price for the previous management's stake and control of FT. If NF does not have the intention of monetising its asset via FT, what is the logic behind the price NF paid?
(01-06-2014, 06:07 PM)Boon Wrote: If NF has the ability to source for stabilized assets at bargain values, wouldn't it better off for NF to acquire these assets and keep them under its private stable – why share it with FT’s non-controlling unit-holders – unless this is NF’s genuine intention - afterall, NF has an overall strategy of growing its assets in China.
Besides, FT would not be an ideal or efficient vehicle or platform through which NF could “monetize” or recycle its stabilized assets – simply due to the high cost and high management fee structure of FT - if NF ever has this intention in mind.
NF has paid a high price for the previous management's stake and control of FT. If NF does not have the intention of monetising its asset via FT, what is the logic behind the price NF paid?
Given that Chinese commercial assets are presently low yielding, unless they are super prime assets - it will be difficult to find buyers like in the last few years.
I am purely basing on Metro's historical experience of making good capital gains on their asset disposal in China. Some of these assets are actually in JV with NF.
Hence, I think rather than sourcing for new assets, more likely than not FT is likely to be the pipeline vehicle especially after NF cleans FT up.
(01-06-2014, 06:07 PM)Boon Wrote: If NF has the ability to source for stabilized assets at bargain values, wouldn't it better off for NF to acquire these assets and keep them under its private stable – why share it with FT’s non-controlling unit-holders – unless this is NF’s genuine intention - afterall, NF has an overall strategy of growing its assets in China.
Besides, FT would not be an ideal or efficient vehicle or platform through which NF could “monetize” or recycle its stabilized assets – simply due to the high cost and high management fee structure of FT - if NF ever has this intention in mind.
NF has paid a high price for the previous management's stake and control of FT. If NF does not have the intention of monetising its asset via FT, what is the logic behind the price NF paid?
NF had paid SGD 2.98 per share for the controlling stake in FT.
Was it high price or low price? It is all RELATIVE.
Relative to the share price of around SGD 1.70 at that time, it was HIGH.
Relative to the NAV (SGD 4.68 per share) + DTL (SGD 1.55 per share), it was LOW or cheap.
It is anybody’s guess on NF’s real intention – but the possibilities are many – please refer to earlier discussions/postings.
Of course, monetizing assets via FT could be a possibility of their intention – but as I have mentioned earlier it is not going to work – due to the high cost structure/high management fees structure of FT relative to Reit platforms, it would not be a cost efficient vehicle or platform through which stabilized assts could be monetized or re-cycled - again, please refer to earlier discussions/postings – especially discussion between me and Nick..
Do let me know if you need further clarifications
(vested)
Research, research and research - Please do your own due diligence (DYODD) before you invest - Any reliance on my analysis is SOLELY at your own risk.
It just struck me that there is one 'developer business trust' that has seemingly worked as a yield play - Ascendas India Trust. What makes it so special compared to the rest of the group eg PRCT, FT, Indiabulls ?
Disclaimer: Please feel free to correct any error in my post. I am not liable for anything. Do your own research and analysis. I do NOT give buy or sell calls and stock tips. Buy and sell at your risk. I am not a qualified financial adviser so I do not give any advice. The postings reflects my own personal thoughts which may or may not be accurate.
I think Ascendas India Trust has developed assets in much more manageable proportions in relation to its portfolio and they strike me as quite proactively and good in managing capital to bring new assets onstream (ie placements to raise equity to match debt, retention of part of distribution to fund working capital). Therefore the impact on distributable income is much less.
Forterra on the other hand had a bunch of cash generating assets (which is already paying fees to the manager), which they then took down for construction / enhancement activities. Some (e.g. the Shanghai building) is huge relative to the size of the portfolio.
Fee structure wise Ascendas India Trust are actually quite similar to Forterra. If you check the document they even look like they are copied from the same template. However in Forterra's case, given they are still extracting the fixed fee even when the major asset is not income generating, it has taken a toll on available cash for working capital / development fund / shareholder distributions. Plus of course there are other things weighing down the trust like the interest from the convertible bonds, previously smelly sponsors, all the dramas around the various takeover, legal fights etc etc.
I do think that the extent of "undervaluation" of Forterra (i.e. share price vs net asset value) is bit of a red herring because the cashflow available for unitholders post structural extraction by the asset managers imply a certain NPV, which is somewhat less than the underlying full value of the properties that unitholders nominally own. But I think the price is now so far down that its below even that NPV.
On a more general note, for business trust to work there has to be a certain level of asset churn to realise locked value and generate additional cash to undertake developments / unitholder distributions. Standalone property companies may be better plays in such circumstances, but as they don't have a distribution mandate you have to find undervalued ones which are shareholder friendly and are proactive in managing their balance sheet. Easier to find?
(02-06-2014, 09:44 PM)thinknotleft Wrote: NF has paid a high price for the previous management's stake and control of FT. If NF does not have the intention of monetising its asset via FT, what is the logic behind the price NF paid?
NF had paid SGD 2.98 per share for the controlling stake in FT.
Was it high price or low price? It is all RELATIVE.
Relative to the share price of around SGD 1.70 at that time, it was HIGH.
Relative to the NAV (SGD 4.68 per share) + DTL (SGD 1.55 per share), it was LOW or cheap.
It is anybody’s guess on NF’s real intention – but the possibilities are many – please refer to earlier discussions/postings.
Of course, monetizing assets via FT could be a possibility of their intention – but as I have mentioned earlier it is not going to work – due to the high cost structure/high management fees structure of FT relative to Reit platforms, it would not be a cost efficient vehicle or platform through which stabilized assts could be monetized or re-cycled - again, please refer to earlier discussions/postings – especially discussion between me and Nick..
Do let me know if you need further clarifications
(vested)
I did read thro' the earlier posts.
I am inferring from NF's actions of
(a) paying $2.98 for the management stake of FT, vs that the traded price of $1.70 (as you put)
(b) not extending any takeover offer to minority investors
(a) + (b) imply that NF's $2.98 includes a premium for the control of FT. If NF felt that $2.98 is attractive relative to NAV, it will extend the same offer to minority investors.
Then, why wld NF want to have control of FT but not 100% ownership of FT, I wonder?
One possibility is to have the possibility of monetizing assets via FT. While FT structure is not as efficient compared to reits now, this does not rule out that FT cannot be a vehicle for monetizing assets. NF can re-structure FT, can't it? Or NF can make the asset injection more feasible (e.g. rental guarantee for a few yrs etc).
Another possibility -- If NF really finds FT attractive and want to 100% own FT but at a better price, NF can perhaps offer a slight premium to current market price to takeover FT in the future. (This may also have been mentioned in earlier posts.)
The other possibility of just stabilising FT assets (aka your B2) is less likely to me, as it does not really justify the high price of 2.98 paid. Of course, this is possible if the market conditions are not good for asset monetization via FT or NF does not have the funds to do a takeover or NF decides to focus elsewhere.
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