Nobel Design Holdings

[dydx]

Finally, Nobel Design has contracted to sell 16 Tai Seng St. to Cambridge Industrial Trust under a sale-and-leaseback deal for a princely total sum of $72.333m (inclusive of a $13.083m portion under Tranche 2 to pay for the total additional costs to increase the total GFA of the property by 22% to 19,878 sq m).....
http://info.sgx.com/webcoranncatth.nsf/V...0007E212E/$file/Announcement_NobelDesignHoldingsLtd_SaleLeaseback140312.pdf?openelement [Nobel Design's announcement]
http://info.sgx.com/webcoranncatth.nsf/V...0008293A2/$file/140312SGXCIT16TaiSengStreet.pdf?openelement [CIT's announcement]
Upon the completion of the sale, Nobel Design will lease back the whole of the property from CIT for a period of 6 years (for the existing GFA) and 5 years (for the extra GFA to be added) on undisclosed terms.

It is very clear who is the winner and loser in this kind of very much financially-engineered deal. I just wonder whether Nobel Design would pay out a jumbo dividend after collecting the $59.25m sales proceeds under Tranch 1?

[touzi]

Considering the existing rental by the other tenants, the rental that Noble would have to pay to lease back and the rental from the additional GFA after the A&A, the potential income to Cambridge could be around $5Mil p.a. Over 25 years ( the remaining lease of the building ), that is potentially $125 Mil. Doesn't sound like a bad deal to Cambridge.

[egghead]

In all business deals, the buyer and seller will both believe they have something to gain. Otherwise there can never be a deal as nobody want to be a loser.

Having said that, paying $72m to get back $125m over 25 years does not sound like fantastic return for CIT. Taking $5m as the number, the grodss yield is only 6.9%; and considering 4.75% interest, there is not much left for CIT. Perhaps CIT is betting on this property valuation to go much higher.

---

The price paid by CIT is about $338 psf.

URA is selling the site next to this property which will be connected underground to Tai Seng MRT across the road. Market is expecting successful bid of around $250 psf ppr.

[dydx]

Considering the existing rental by the other tenants, the rental that Noble would have to pay to lease back and the rental from the additional GFA after the A&A, the potential income to Cambridge could be around $5Mil p.a. Over 25 years ( the remaining lease of the building ), that is potentially $125 Mil. Doesn't sound like a bad deal to Cambridge.

Nobel's lease-back is only for max. 6 years. Nobel is only able to pay that kind of rent you are suggesting - and I agree with your guess! - because it has leased out the existing upper floors to 2 good-name parties (based on my last checking) and, more importantly, CIT is prepared to pay a price close to the latest professional valaution ($72.333m) by Colliers.

Frankly, I can see only another party willing to buy this kind of property at a full-valuation - another REIT run by a 'smart' financial engineer! No other industrial or type of property trade buyer would cut a deal like this!

[KopiKat]

Considering the existing rental by the other tenants, the rental that Noble would have to pay to lease back and the rental from the additional GFA after the A&A, the potential income to Cambridge could be around $5Mil p.a. Over 25 years ( the remaining lease of the building ), that is potentially $125 Mil. Doesn't sound like a bad deal to Cambridge.

Nobel's lease-back is only for max. 6 years. Nobel is only able to pay that kind of rent you are suggesting - and I agree with your guess! - because it has leased out the existing upper floors to 2 good-name parties (based on my last checking) and, more importantly, CIT is prepared to pay a price close to the latest professional valaution ($72.333m) by Colliers.

Frankly, I can see only another party willing to buy this kind of property at a full-valuation - another REIT run by a 'smart' financial engineer! No other industrial or type of property trade buyer would cut a deal like this!

I have a similar guesstimate but very likely a bit higher at ~$5.15Mil if I were to assume a higher interest rate of 4% for the ATFL (Acquisition Term Loan Fund) instead of their 3.3% Average Cost of Debt.

[yeokiwi]

The value of the building is not exactly zero at the end of the 30 years lease since there is an option to extend the lease for 30 years.
CIT is probably much eager to close the deal due to the compulsory acquisition of their assets in Tuas.

[dydx]

The sale of 16 Tai Seng St. has allowed Nobel Design to book a big gain in 1H.....
http://info.sgx.com/webcoranncatth.nsf/V...9003C88DC/$file/Nobel-Half_Year_2012_Financial_Statements.pdf?openelement
even after providing a big performance bonus - estimated to be over $6.0m - for the EDs.

Proceeds from the sale of the industrial property has given rise to a net cash balance of $63.2m at the parent company level, and $39.2m at the group level, as at 30Jun12. The gain has also raised NAV/share to $0.4227 as at 30Jun12. As by accounting rules a $17.15m portion from the gain has been deferred - and now captured as "Deferred Income" under current and non-current liabilities in the company/group B/S's - I guess it is reasonable to say that the latest NAV/share figure is under-stated, even though the actual gain from the sale has been substantially realised in cash.

I suppose that's why Mr Market is willing to price the Nobel Design share at a new record high of $0.48 today (12Sep12), possibly also in anticipation of a big dividend payment (?).

[jjlim84]

cash and cash equivalents are already bigger than the market cap, earnings are looking good so far for the past two quarters, is Nobel Design very undervalued??

[Dividend Hermit]

cash and cash equivalents are already bigger than the market cap, earnings are looking good so far for the past two quarters, is Nobel Design very undervalued??

Their debt is almost on par with the cash & cash equivalents.

[cyclone]

POTENTIAL CLAIMS AGAINST NON-EXECUTIVE DIRECTOR

The board of directors of the Company (together with its subsidiaries, referred to hereafter as the “Group”) wishes to announce that it has come to the Company’s attention that there is evidence to suggest that the Company’s Non-Executive Director, Choong Chee Peng Bert (“Bert Choong”) has conducted himself in a manner prejudicial to the interests of the Group and in breach of his fiduciary duties owed as a Director, to the Company.

More details at http://infopub.sgx.com/Apps?A=COW_CorpAn...uddies.com