Lum Chang Holdings

[ngcheeki]

Lum Chang 20% stake in Esparina EC has already obtained TOP as stated in their AR 2013. Their profit will be recognized on the coming Q1FY2014 which will be announced on 7 Nov 2013. By the way, Lum Chang final dividend of 1.25 cents will be Ex-Div 6 Nov 2013.

AR2013 wrote:

PROPERTY
The Group’s joint venture residential development,
Twin Fountains, was launched in April 2013 to strong
response. The 418-unit Executive Condominium (EC)
project situated in Woodlands was the first EC
development launched in Singapore in 2013. It was
well received by the public with 78% of the units sold
to date. Our other joint venture EC development,
Esparina Residences, has just recently obtained
its Temporary Occupation Permit. In line with the
Singapore Financial Reporting Standards, the results
from both developments will only be recognised upon
project completion.

I did a rough estimation on the net gain from their share in Esparina and this work out to be around 6 to 7 cents. Please feel free to correct me if there is any errors in my computation:

Esparina
psm(land) 56,643.00 (Source AR2012 of F&N)
psm to psf 10.7639
psf(land) 609,700.1541
Total land Cost $193,280,000.00
Price per square feet 317.0083

Total construction cost (psf) $119,400,000.00 (Source Lum Chang AR2013)
Construction Cost psf $195.8340
Total Cost $512.8423
Approx Total Cost 540.0000 (Promotion+Financing)

Total Number of Shares ('000) 372,464.60
Average Selling Price (psf) $743.00
Total cost of development (psf) $540.00
Profit (psf) $203.00
Total profit $123,769,131.29
Lum Chang Holding Stake 20.00%
Net profit attributable to Lum Chang Holding $24,753,826.26
EPS $0.0665

I'd only estimated Lum Chang's share on their property development profit. Since Lum Chang is the construction contractor it should also contribute to their bottom line on construction segment.

Lum Chang AR2013:
http://infopub.sgx.com/FileOpen/LCH%20An...leID=19630
F&N AR2012:
http://infopub.sgx.com/FileOpen/F_N-AR20...ileID=3537
F&N FCL presentation:
http://infopub.sgx.com/FileOpen/Investor...eID=254083

Vested

[Behappyalways]

I had this company under my watchlist for years but not vested......

something that I noticed.....

1. Higher construction contracts does not equate to higher profits....so hard to gauge earnings
2. Their share buyback is used to write off the share options that were exercised......something that I don't like....

2 cents worth

[ngcheeki]

I had this company under my watchlist for years but not vested......

something that I noticed.....

1. Higher construction contracts does not equate to higher profits....so hard to gauge earnings
2. Their share buyback is used to write off the share options that were exercised......something that I don't like....

2 cents worth

Hi Behappyalways, thank for your comments . By the way, during the recent AGM the chairman said the company will try to maintain the dividend of 2 cents per share or 5.7% yield for the next few years. Dividend for 2 cents is more or less guarantee. FY 2014, main earning will be coming from Esparina EC, accounted in Q1FY2014. FY 2015 main income will be from their 51% owned Malaysia Development properties (mainly Bungalow and semi-D) in Twin Palms Kemensah (30-acre) and Twin Palms Sungai Long (126-acre) which will obtain their TOP in FY2015. By the way, the 49% partner is Standard chartered bank. Going into FY 2016, the main income will be coming from their 30% stake in Twin Fountains EC which is around 82.5% sold.

[Behappyalways]

Yes the property segment is a 'predictable' biz segment but hard to predict their construction biz division. If professional like Yongnam(not vested) could come out with a cost overrun profit guidance announcement, it is quite hard for us amateur to predict their construction segment performance hence the company performance.....quarterly or half yearly result would then be kinda tikum tikum whereas company could report higher profit than expected or vice versa....

Cheers and Be Happy Always ^^

[ngcheeki]

Indeed construction business division may be one of the bugbears for Lum Chang, hence cost control is one of the big challenges for this sector. As one of the oldest construction firms(74 years) in Singapore, hopefully their construction experience in tendering and managing the project will help them in avoiding the cost overrun problem.

[NTL]

I did a rough estimation on the net gain from their share in Esparina and this work out to be around 6 to 7 cents.

The result is out! The share of profit for Esparina is $12.5M, half of your estimated amount. I suppose they already received the rest before TOP?

The EPS for the quarter is around 3.7c, NAV raised to 50c, or ~48.8c after deducting the dividend.

[ngcheeki]

I did a rough estimation on the net gain from their share in Esparina and this work out to be around 6 to 7 cents.

The result is out! The share of profit for Esparina is $12.5M, half of your estimated amount. I suppose they already received the rest before TOP?

Based on the article quoted by CFO Tong Fong on revenue recognition of Esparina, there will be more profit coming in the next 2 quarters!!

"The bulk of the profit attributable to Lum Chang will be recognised in its 1QFY2014 results to be announced on Nov 7, said Mr Fong.

It's not quite 100% recognition as a small amount will be recognised in the next quarter or beyond, depending on when the keys to the condo units are handed over to the owners. In addition, a small number of buyers has defaulted on their purchase."


http://www.nextinsight.biz/index.php/sto...ugh-market

[NTL]

Default means can sell them once more at full price, and collect full payment in 12weeks. Don't think there will be much over the next 2 quarters. The development is under progressive payment, right?

[ngcheeki]

Default means can sell them once more at full price, and collect full payment in 12weeks. Don't think there will be much over the next 2 quarters. The development is under progressive payment, right?

Yes, you're right it is under the normal progressive payment. However, I'm not sure how much profits will there be in the next 2 quarters. Perhaps, the cost of development per square feet is much higher (i.e. 600 psf instead of 540 psf)!!

http://esparina.com/details/

[NTL]

If I am not wrong, progressive payment at TOP is 40%. So if 40% make up $12.5M, then their profit from the development is actually higher than your estimate.