LTC Corp (prev. Lion Teck Chiang)

[TUBInvesting]

What are ways that value can be unlocked here?

Actually I am recently vested with them as I think their margin of safety is quite reasonable. Understand they have huge pieces of lands in Malaysia, if any unlock of value is to happen, it will be in another 3 to 4 years time..i guess.. In between, we can only hope their steel business can grow back to how things were.

Unlock value?
Just sell and leaseback their FH industrial property at Arumugam road and based on the most recent valuation, the proceeds alone will cover the entire market cap of the company!
Everything else, the steel, the seven crescent units that r unsold, the Sogo stores, Malaysia land etc would b all free

Unfortunately, as with deep value situations like these, a catalyst is needed to unlock value.
If a deep pocketed activist could come in, this looks like a v easy situation to be an activist.

For a moment I do sound stupid here. Time to create more weightage comments.

But the FH industrial property seems to be their investment property - it does not make sense to do a sale and leaseback on yr investment properties right? Most of these sale and leaseback will be done via properties for your own usage.

Anyway, your guess should be right, an activist is required here to unlock any value.

[GFG]

What are ways that value can be unlocked here?

Actually I am recently vested with them as I think their margin of safety is quite reasonable. Understand they have huge pieces of lands in Malaysia, if any unlock of value is to happen, it will be in another 3 to 4 years time..i guess.. In between, we can only hope their steel business can grow back to how things were.

Unlock value?
Just sell and leaseback their FH industrial property at Arumugam road and based on the most recent valuation, the proceeds alone will cover the entire market cap of the company!
Everything else, the steel, the seven crescent units that r unsold, the Sogo stores, Malaysia land etc would b all free

Unfortunately, as with deep value situations like these, a catalyst is needed to unlock value.
If a deep pocketed activist could come in, this looks like a v easy situation to be an activist.

For a moment I do sound stupid here. Time to create more weightage comments.

But the FH industrial property seems to be their investment property - it does not make sense to do a sale and leaseback on yr investment properties right? Most of these sale and leaseback will be done via properties for your own usage.

Anyway, your guess should be right, an activist is required here to unlock any value.

1) not sure why you'd say that. A sale n leaseback just merely liquidates your asset and converts into capital. U can also sell n don't lease it n lease somewhere else. Why would whether it's "investment property" or otherwise affect such a decision? Think u may have mistaken the meaning of sale and leaseback. I m not saying that's the wisest thing to do now, but was replying to your qn on how to unlock value. The 4 blocks of industrial property is valued every yr, n its recent value alone account for the entire market cap
2) LTC is using it for own use. Most of it is leased out but LTC main office is there as well, hence my suggestion on sale n leaseback.

[TUBInvesting]

What are ways that value can be unlocked here?

Actually I am recently vested with them as I think their margin of safety is quite reasonable. Understand they have huge pieces of lands in Malaysia, if any unlock of value is to happen, it will be in another 3 to 4 years time..i guess.. In between, we can only hope their steel business can grow back to how things were.

Unlock value?
Just sell and leaseback their FH industrial property at Arumugam road and based on the most recent valuation, the proceeds alone will cover the entire market cap of the company!
Everything else, the steel, the seven crescent units that r unsold, the Sogo stores, Malaysia land etc would b all free

Unfortunately, as with deep value situations like these, a catalyst is needed to unlock value.
If a deep pocketed activist could come in, this looks like a v easy situation to be an activist.

For a moment I do sound stupid here. Time to create more weightage comments.

But the FH industrial property seems to be their investment property - it does not make sense to do a sale and leaseback on yr investment properties right? Most of these sale and leaseback will be done via properties for your own usage.

Anyway, your guess should be right, an activist is required here to unlock any value.

1) not sure why you'd say that. A sale n leaseback just merely liquidates your asset and converts into capital. U can also sell n don't lease it n lease somewhere else. Why would whether it's "investment property" or otherwise affect such a decision? Think u may have mistaken the meaning of sale and leaseback. I m not saying that's the wisest thing to do now, but was replying to your qn on how to unlock value. The 4 blocks of industrial property is valued every yr, n its recent value alone account for the entire market cap
2) LTC is using it for own use. Most of it is leased out but LTC main office is there as well, hence my suggestion on sale n leaseback.

No problem. Thanks for clarifying

[TTTI]

I have had time to finish studying the latest FY16Q3 results.

I too, agree that the valuation is near distressed levels. The industrial FH property at Arumugam road can be easily divested for a sum that covers the ENTIRE current market cap of the company based on the price right now.
The property has no debt attached to it.
What has not been mentioned though, is their acquisition of USP, which owns 90% of the sogo departmental stores.
The latest results are not good in this regard.

I dont understand what this current management is thinking. They seem to be content with lousy performance.
Instead of wasting $24mil acquiring a loss making business, they could easily give out many yrs of dividends with that sum, and that alone would bump up the share price very substantially.

I did a more thorough analysis of this company in my blog.

What I can say about LTC is that this is one company that taught me to not ONLY look at valuations, but to place equal emphasis on macro factors, qualitative factors and even technical factors. Honestly rather disappointed with this management.



https://thumbtackinvestor.wordpress.com/

[mulyc]

Very good analysis you've done on your blog, TTTI!

One thing not many people have covered is the plot ratio increment potential on their properties in the next white paper. Totally agreed this stock ha salon of value to be unlocked.

Vested.

[TTTI]

Very good analysis you've done on your blog, TTTI!

One thing not many people have covered is the plot ratio increment potential on their properties in the next white paper. Totally agreed this stock ha salon of value to be unlocked.

Vested.

Thank you for your compliment.

The potential plot ratio increase generated a lot of excitement in LTC back in end 2013/early 2014 just before the release of the URA Master Plan then.
The argument then was that the surrounding plot ratio of other industrial properties were 3.5 whereas Lion buildings were 2.5
The proposed relocation of Paya Lebar Airbase generated yet more excitement as people guessed that without an airbase, the buildings would be allowed to be built higher 

I kept these in mind while I was vested, but honestly, didnt put much emphasis on it.
It is foolhardy to invest based on some POTENTIAL plan, which may or may not happen.
Even if it does happen, such things take years. Many years.
And even if the plot ratio IS increased eventually, LTC would only have paper gains to show for it. To capitalise on it, they'd either have to redevelop the property, or sell them. 
Redeveloping requires a lot of further investment before any real gains can be realised
Selling the property depends on the property market then, bearing in mind that we are talking about a time frame that's many man years in the making. >5 yrs.

I would admit that I made a mistake then, by not considering that although I did not place any thought into this supposed plus point, the market then did. As much as it was undervalued then (based on financials), the price then already had some of this "excitement" baked in.
When the Master Plan was released and the plot ratio was NOT increased, the share price dropped.

I still wouldnt bother too much about such gov plans. If it happens and it's a catalyst, that's great.
If it doesnt, it wouldnt surprise me. There are way too many factors to be able to tell with any level of accuracy that would aid in making an investment decision.


I'd rather place my faith in more predictable things like the FCF generation, and monitor how the cash hoard that builds up is utilised.
Unfortunately for both of us, the management has helped to invest our $24mil in a business that has thus far been terrible, all in the name of diversification.
I'm still optimistic though, that the markets will get to realise and correct this undervaluation when the cash hoard builds up again. There are only this many stupid things that the management can do to FCF generative business.



https://thumbtackinvestor.wordpress.com/

[zz...]

was reading through LTC's AR and saw that Morph Investments Ltd has been holding 1.398m shares in AR12 to 2.161m shares in AR16, really very patient to wait

[Scg8866t]

Notice share price inching slowly up to 0.66 today. Full year result will be out end aug. Is it due time for LTC to give a bigger payout? No more excuses since they are now almost debtless and with a big cash buffer. See how it goes.

[TTTI]

Notice share price inching slowly up to 0.66 today. Full year result will be out end aug. Is it due time for LTC to give a bigger payout? No more excuses since they are now almost debtless and with a big cash buffer. See how it goes.

I'd be happy if that comes true, but don't bank on it.
IMO, that's highly unlikely.
They have zero debts to talk about, and large cash holdings and the business generates a ton of FCF every quarter.

Problem is the management deems it best to divert the CFs to their retail business in Malaysia.
They don't need excuses, the Cheng family has a large enough stake and the other major shareholders are dormant, so they get to do what they want.
Even if it doesn't make much business sense.

[Scg8866t]

Notice share price inching slowly up to 0.66 today. Full year result will be out end aug. Is it due time for LTC to give a bigger payout? No more excuses since they are now almost debtless and with a big cash buffer. See how it goes.

I'd be happy if that comes true, but don't bank on it.
IMO, that's highly unlikely.
They have zero debts to talk about, and large cash holdings and the business generates a ton of FCF every quarter.

Problem is the management deems it best to divert the CFs to their retail business in Malaysia.
They don't need excuses, the Cheng family has a large enough stake and the other major shareholders are dormant, so they get to do what they want.
Even if it doesn't make much business sense.

Hi TTI,

To be fair, they still have $12k of borrowings outstanding. Are you aware of Ltc's recent 40% acqusition of regata? The market value of the project is 125mil ringgit and they paid ard 26mil ringgit for 40%? Seems too good to be true. If gem residence(penang) is completely sold, Ltc will net ard 8-9mil sgd of profit, doubling their roi? I am not sure if debt is involved as the announcement  wasnt detailed enough.

Will be great to have your views on this.

Regards