LHN Group

[¯|_(ツ)_/¯]

ACQUISITION OF THE BALESTIER PROPERTY for $18.1m
The Balestier Property is located at 320 Balestier Road, Singapore 329924, comprising of a four-storey corner building, with a total land area of approximately 406.7 square meters. The first floor of the Balestier Property has been leased to the tenant by the Vendor with a tenancy term of two years from 10 July 2020 to 9 July 2022, for which all Vendor’s rights and benefits will be assigned to the Purchaser on the Completion Date. The second, third and fourth floors will be delivered with vacant possession.

The Group intends to operate the Balestier Property as a co-living space. As such, the Balestier Acquisition will expand the Group’s portfolio of properties under the co-living business in Singapore, increase the brand value of COLIWOO, provide potential capital appreciation to the Group and provide additional opportunities to generate revenue.
https://links.sgx.com/FileOpen/20200916%...eID=631934

Stay home and stay safe, everyone.

[¯|_(ツ)_/¯]

LHN FY2020 Result as at 30 Sep 2020
Rev $134m (vs 111m)
GP  $ 63m (vs  5m)
NP  $ 24m (vs  8m)
Div 1cts  (vs 0.5cts)

The Company will make further announcement(s) as and when there are material development(s) to the proposed acquisition of the property at 320 Balestier Road, 40 and 42 Amber Road, carpark at Bukit Timah Shopping Centre and the effects of the introduction of the Re-Align Framework Bill, released by the Singapore’s Ministry of Law, on the Group’s Space Optimisation Business.
https://links.sgx.com/FileOpen/20201127%...eID=640781


Stay home and stay safe, everyone.

[dydx]

The latest financial performance numbers are indeed very impressive!

[¯|_(ツ)_/¯]

Dividend also sweet too.

Stay home and stay healthy, everyone.

[ongweehiang]

Positive profit alert.

https://www1.hkexnews.hk/listedco/listco...001109.pdf

Follow us @ www.weightedresearch.com

[weijian]

LHN Group listed on the Catalist in 2015, and dual listed on HKEX in 2017. In 2023, it has proposed to upgrade its Catalist listing to the Mainboard. Could this be a prelude to cancel its HKEX listing, as a couple of SGX-listed companies have done?

RESPONSES TO QUESTIONS RECEIVED FOR EXTRAORDINARY GENERAL MEETING TO BE HELD ON 23 NOVEMBER 2023

Question 2:
As LHN is already listed on the Main Board of the Hong Kong Stock Exchange which is a much larger exchange than SGX, please explain why this is insufficient to provide LHN with greater visibility and recognition in the market and amongst investors (including institutional and overseas-based investors)?

Company’s Response:
The Company’s core investor base remains in Singapore, and our move to the SGX Mainboard is strategic, allowing us to tap into a wider pool of institutional investors, including, among others, investors who have mandates restricting investment in Catalist-listed companies. The SGX Mainboard listing is anticipated to increase our exposure to these investors and increase our Company’s prestige. Despite the size of the SEHK Mainboard, the sheer number of listed companies there can dilute our visibility.

https://links.sgx.com/FileOpen/e%20Respo...eID=778493

[weijian]

LHN Group recently announced its 1H24 results. It has a couple of business units - from managing facilities/carparks to become a master tenant (or owning the property outright) to sub-lease out space. Recently, it managed to win a contract to operate lodging facilities for foreign nurses in Spore, and property re-development for some buildings bought via auctions.

(1) Great margins?
1H24 revenue= 54,547
1H23 revenue= 42,883
1H24 PATMI = 13,258 (24.3% NPM)
1H23 PATMI = 15,551 (36.2% NPM)

1H24 NPM has reduced by over 1000bps but at 24.4%, these are still nose bleed margins! Generally, these margins are only sustainable for companies who are able to capture large TAMs with low/zero marginal cost type of product/services.

(2) Adjusting the margins - Since there are FV gain/losses, associates' share of results and also 1 time events (disposals) which affects the final PATMI, these have to be accounted for:
1H24 revenue= 54,547
1H23 revenue= 42,883
1H24 adjusted PATMI (minus associate and FV gain/loss)= 13,258 - 3,767 + 4,965 = 14,456 (26.5% NPM)
1H23 adjusted PATMI (minus associate and FV gain/loss and 1 time gain)= 15,551 - 1,404 + 3,852 - 7,753 - 6,653 = 3,593 (8.3% NPM)

So after the relevant adjustments, 1H24 has obviously outperformed 1H23. The 26.5% NPM looks really "juicy". With such margins, is it only a matter of time that competitors figure out how to make similar juice?

But wait a minute! After looking through the CF statement, LHN as a master lessee seems to have slightly different accounting standards - the existence of financial lease receivables (received from sub-lessors) and lease payments (paid to property owner as a master lessee). These numbers are huge but are not part of the P/L or OCF.

(3) Adjusting the PATMI to account for financial lease receivables and lease payments:
1H24 revenue= 54,547
1H23 revenue= 42,883
1H24 adjusted PATMI = 14,456 (26.5% NPM)
1H24 adjusted PATMI = 3,593 (8.3% NPM)
1H24 adjusted PATMI with lease receipt/payment = 14,456 + 9,806 - 19,017 = 5,245 (9.6%)
1H23 adjusted PATMI with lease receipt/payment = 3,593 + 10,607 - 20,276 = -6,076 (-14.1%)

So there we have it - the juiciness seems to be gone as 1H24 shows much "down to earth" NPM. Matter of fact, 1H23 is "actually a loss" if the timing of the lease receipts and payments do not have much mismatch.

1H24 results: https://links.sgx.com/FileOpen/e%20LHN%2...eID=803254
1H24 ppt: https://links.sgx.com/FileOpen/e%201H24%...eID=803410

[dzwm87]

The payments for lease liabilities are recorded on the P&L as depreciation of right-of-use assets and interest on lease liabilities. I suppose the inverse (as income) should also be true for finance lease receivables. Your adjusted PATMI is more on cash profit which is lumpy.

[weijian]

The payments for lease liabilities are recorded on the P&L as depreciation of right-of-use assets and interest on lease liabilities. I suppose the inverse (as income) should also be true for finance lease receivables. Your adjusted PATMI is more on cash profit which is lumpy.

hi dzwm87,
Thanks for pointing out my error. There is a good chance that "ROU depreciation" is a subset of the lease liabilities and so it should be accounted for. Have made some adjustments below.

Now it looks like a Master lessee has really good business economics of renting long term and leasing out short term! (At least when the economy is doing good).

(3) Adjusting the PATMI to account for financial lease receivables and lease payments:
1H24 revenue= 54,547
1H23 revenue= 42,883
1H24 adjusted PATMI = 14,456 (26.5% NPM)
1H24 adjusted PATMI = 3,593 (8.3% NPM)
1H24 adjusted PATMI with lease receipt/payment = 14,456 + 9,806 - 19,017 +  5,940 = 11,185 (20.5%)
1H23 adjusted PATMI with lease receipt/payment = 3,593 + 10,607 - 20,276 +  6,402 = 326 (0.8%)