LTC Corp (prev. Lion Teck Chiang)

[Musicwhiz]

I thought that still applies? Increase in fair value increases the P/L under 'other comprehensive income' and also in the B/S under 'revaluation surplus', which is under equity/capital.

Well, you are talking about just the Credit side of the entry. The Debit goes to investmernt properties to increase the value of the asset.

So it has to either be Comprehensive Income (P/L) or Revaluation Surplus (B/S). But it cannot be both.

I believe the current practice places it under Comprehensive Income, which must be shown separately from "normal" income. But my gripe is that it should be in Balance Sheet under Equity.

[guru]

I think it still flows to Equity.

For revaluation gains, the current accounting treatment under Fair Value Accounting will be to recognise it in the P&L. Comprehensive income is in fact a summary of the P&L + any changes to the Equity during the period. This will indirectly flow into the Equity sides.

[Satchmo]

I thought that still applies? Increase in fair value increases the P/L under 'other comprehensive income' and also in the B/S under 'revaluation surplus', which is under equity/capital.

Well, you are talking about just the Credit side of the entry. The Debit goes to investmernt properties to increase the value of the asset.

So it has to either be Comprehensive Income (P/L) or Revaluation Surplus (B/S). But it cannot be both.

I believe the current practice places it under Comprehensive Income, which must be shown separately from "normal" income. But my gripe is that it should be in Balance Sheet under Equity.

Yes, u are right that it cannot be both, my apologies for the fundamental mistake heh.

Just realised u are talking about Investment properties, not that under PPE, so again u are entirely correct.

[valueinvestor]

I thought that still applies? Increase in fair value increases the P/L under 'other comprehensive income' and also in the B/S under 'revaluation surplus', which is under equity/capital.

Well, you are talking about just the Credit side of the entry. The Debit goes to investmernt properties to increase the value of the asset.

So it has to either be Comprehensive Income (P/L) or Revaluation Surplus (B/S). But it cannot be both.

I believe the current practice places it under Comprehensive Income, which must be shown separately from "normal" income. But my gripe is that it should be in Balance Sheet under Equity.

Yes, u are right that it cannot be both, my apologies for the fundamental mistake heh.

Just realised u are talking about Investment properties, not that under PPE, so again u are entirely correct.

Hi Satchmo,

Please help to advise what is PPE ? Thanks.

[Musicwhiz]

PPE = Property, Plant and Equipment. Essentially, it means "Fixed Assets".

[valueinvestor]

PPE = Property, Plant and Equipment. Essentially, it means "Fixed Assets".

Thanks MW.

[D123]

After selling the buildings, LCT will no longer have the rental income and the proceeds from the sales will have to pay back some loans, so it will be very much lesser than the 0.51/share.

Sure, but my main point is that at the last done share price of $0.51, Mr Market is giving away for FREE (1) the nett assets of the steel trading and residential property development businesses and their future earnings, and (2) any further upside gain from the sale or re-development of the freehold Lion Industrial Estate property/land plot.

Based on the latest 30Sep10 group B/S with the approx. $25.5m nett debt level and the remaining assets of the steel trading and residential property development businesses.....
http://info.sgx.com/webcoranncatth.nsf/V...90028A218/$file/LTC_First_Qtr_Results_Ann300910.pdf?openelement
, LCT can quite easily carry its present borrowings without the use of the freehold Lion Industrial Estate property/land plot as collateral. So conceivably, LTC could simply pay out substantially the sales proceeds of say $79.8m to its shareholders, if the freehold Lion Industrial Estate property/land plot is sold for cash.

another problem is that the company has never (at least since 2003) traded at book value. you can end up waiting a long time for it to be realized, while not earning much on the dividends front.

[dydx]

another problem is that the company has never (at least since 2003) traded at book value. you can end up waiting a long time for it to be realized, while not earning much on the dividends front.

In stock investing, can one just use the past to predict a "quantum leap" event in the future? Probably not. In this case, I think one would need a good dose of imagination and self-belief, patience, and some luck, to succeed.

We all know that if and when that piece of prime freehold land in Paya Lebar is re-zoned for re-development, each Lion Teck Chiang share will be worth quite a lot more than its NAV of $1.009 (as at 30Sep10). Let's say the re-zoned property would enhance the value of the share to say $1.20, how would Mr Market react to it?

If Mr Market decides to re-rate the share to $1.00 in such an event, those who have bought their shares at $0.50 would stand to reap a 100% gain on the share price alone; for those who have bought earlier at say $0.40, it would be a 150% gain.

If this event happens say 3 years from now, for those who bought at $0.50 their gain would equate to approx. 30%p.a. compounded; for those who bought at $0.40 their gain would equate to approx. 45%p.a. compounded. Even if this event only happens say 5 years from now, the resultant lower rate of return will still be attractive enough.

Of course, those who do not believe in the possibility and likelihood of such an evolution in Lion Teck Chiang should not bet.

[dydx]

I thought the following BT report will throw some light on what is possible on Lion Teck Chiang's prime freehold land and industrial property along Paya Lebar Road.....

"Published January 24, 2011
Freehold factory building sold for $36m

Family-owned concern said to have bought the Jalan Pemimpin property

By KALPANA RASHIWALA

SIN Cheong Building, an ageing six-storey freehold flatted factory building at Jalan Pemimpin, is changing hands for about $36 million.

A Singapore family- owned concern is said to have inked a deal to buy the property and is likely to tap the redevelopment potential of the asset, which is more than 30 years old.

The purchase price reflects a unit land price of about $343 per square foot of potential gross floor area. Analysts estimate the breakeven cost for a new strata industrial project at about $600 per square foot.

Nearby, Ho Bee is expected to launch more than 100 strata industrial units at its freehold project at 1 Pemimpin Drive in the next few months.

The units, which will have an average size of about 1,100 sq ft, will be priced at about $700-$800 psf.

Sin Cheong Building has a land area of 44,001 sq ft and is zoned for Business 1 use with a 2.5 gross plot ratio under Master Plan 2008.

The property can be redeveloped into a new project with a gross floor area (GFA) of about 110,001 sq ft - exceeding the existing property's GFA of about 80,000 sq ft.

HSR brokered the sale of Sin Cheong Building through a tender exercise, which closed on Jan 20, attracting seven bidders as well as a handful of other parties that submitted expressions of interest.

'The property attracted keen interest from mainboard-listed developers, building contractors, family-owned companies as well as private funds,' said HSR's head of investment sales Jeffrey Goh.

The building was sold by Sin Cheong Containers Manufacturing Company Pte Ltd, which is involved in the production of tin cans and containers. The company used to occupy the Jalan Pemimpin property but moved out many years ago to Gul Drive in the Jurong area.

The Jalan Pemimpin building is let to about 41 tenants, with a resulting occupancy rate of about 75-80 per cent.

The leases are said to expire within a year, paving the way for the new owner to redevelop the site.

'There seems to be a shift in investors' interest towards industrial properties as prices in this sector have not seen the same rate of increase compared with the residential sector,' said Mr Goh.

Other property agents also say that some wholesale property investors are switching their focus from the residential sector to the industrial segment. And the onset of the Jan 13 measures to cool the private housing market has led some investors that traditionally invest in the residential or office markets to make queries about putting their money in industrial buildings, said DTZ senior director of investment advisory services, Shaun Poh."

Essentially, the 30-year-old Sin Cheong Building on freehold land (area: 44,001 sq ft) at Jalan Pemimpin is being sold for $36.0m. Based on a revised permissable plot ratio of 2.5x, the property can be redeveloped into a new project with a gross floor area (GFA) of about 110,001 sq ft. The purchase price of $36.0m works out to a unit land price of about $343 psf of potential GFA for the buyer. Analysts estimate the breakeven cost for a new strata industrial project at about $600 psf, against the expected selling price at about $700-$800 psf of a similar project nearby for which Ho Bee is the developer.

Using just $343 psf as the basis, Lion Teck Chiang's freehold industrial property along Paya Lebar Road - area (GFA): 27,131 sq metre, or 291,930 sq ft - will have a derived market value of $100.1m (vs. a BV of $79.8m as at 30Sep10). The difference of $20.3m is equivalent to $0.13/share, based on Lion Teck Chiang's 156.453m outstanding issued shares.

As the Paya Lebar Road area is busier than Jalan Pemimpin, Lion Teck Chiang's freehold industrial property there could well be worth more than $343 psf.

[pianist]

i too had e same thought this afternoon when I saw this news and have 2 questions:
1)am i rite to say this buyer forked out (approx $818 psf) actualli paid more than that $700-800 psf of a similar project by Ho Bee..so he is buying more expensive than if he could buy a brand new project from developer like hoo bee..
2) HSR was arranging a tender exercise for such sale..i wonder where can i find out more about such exercise?