King Wan Corporation

[desmondxyz]

I though they have only got 6mil investment left in DSC? So did they pour in 2 mil more during the period? Are they taking on more liabilities? Will there be more write-off on DSC?

Think KWC will sink below 20cts........

Extracted from Q3 results

Note 6 -Allowance was made in connection with the Group’s real estate development business in Dalian, China. In view of the continuing depressed real estate market in Dalian, China, the Group made allowance for doubtful receivables due from its associate, DLSC Singapore amounting to an aggregate of S$8.0million for the
nine months ended 31 December 2015.

Seems like the hole is deeper than thought.... Div cut coming

[dydx]

It appears there are a few holes here: real estate investment in Dalian, equity investment in SET-listed Kaset Thai International Sugar Corporation PCL, investment in "Supramax” bulk car­rier “Hai Jin” held under 30%-owned Gold Hyacinth Devel­op­ment Pte Ltd, 19% investment stake in Tuas South dormitory.

[GFG]

I though they have only got 6mil investment left in DSC?  So did they pour in 2 mil more during the period?  Are they taking on more liabilities?  Will there be more write-off on DSC?

Think KWC will sink below 20cts........

As of FY16 Q2, non current loans to DSC amounted to $8.35mil
So no, they did not extend any more loans to DSC, and the DSC loan is effectively written off completely
The 2 remaining phases of DSC, phases 8 and 9, are in cold storage and management has guided that they do not expect to launch it in the next 2 years. (sometime after 2018)
Of course the remaining exposure to DSC right now, is hidden somewhere then in the " Investment in associates and a joint venture " portion in the BS.
I do not have the breakdown, but this is an insignificant amount, if any at all.
As of FY16Q3, it is $5.8mil in total, and this includes all the other projects

Sure, the DSC is a lemon and KW got burnt.
But to put things in perspective, there wont be any more write downs after this regarding DSC.

[GFG]

It appears there are a few holes here: real estate investment in Dalian, equity investment in SET-listed Kaset Thai International Sugar Corporation PCL, investment in "Supramax” bulk car­rier “Hai Jin” held under 30%-owned Gold Hyacinth Devel­op­ment Pte Ltd, 19% investment stake in Tuas South dormitory.

How do you define "holes"?

- Dalian project: A lemon. There are 9 phases in this project, 1st 6 phases were launched and sold, phase 7 was in the midst of launching before the writedowns begun, and now phases 8 and 9 are kept aside for the next 2 years at least.
It seems KW is a casualty of the blow up in real estate in the tier 3 and 4 cities.
The 1st tier cities are unaffected and in fact, have even modestly appreciated

- KTIS: Surely this cannot be defined as a "hole"? Their initial investment got IPOed, KW received $50.2mil equivalent, (which has now been whittled down due to the falling price of KTIS), but this is held under their BS as an asset for sale. It doesn't require any CF, probably the only mistake is not selling out when KW had the chance to. KTIS listed at 10 baht and appreciated >20% immediately after listing.
KW sold some shares but its miniscule. They didn't forsee the subsequent collapse in price.
Which is IMO a bit disappointing because from my earlier calculations then, the PER was >30, and by several simple parameters, it just seems pricey to hold on to those shares. (I've indicated in a much much earlier post then, that I thought it's pricey and management should sell now, so there's no hindsight bias here)

- Bulk carrier: KW does not provide a break down, the earnings are parked under "share of associate results". However, since this also includes the earnings from all the other associates, particularly the skywoods condo project, I have extrapolated the results from it's JV partner, hock lian seng.
By subtracting the results (proportionally. since HLS owns 50% while KW has an effective stake of 20%), one can get an approximate idea on how its associates are doing. My verdict: the bulk carrier is either barely breaking even or operating at a loss.

- SI property (Bangkok): no visibility on this. Again, I suspect results are mediocre at best, since it's parked under the share of associate results too

- Dorm: hole?? It hasn't even started operating yet, and one cannot tell its results right now. From my understanding of dorms, I'd expect a regular linear depreciation over the expected lifespan of the dorm, with regular CF once the dorm reaches max occupancy, which can take as short as 3 months, to a year.

On the positive side, their core M&E business is doing well. both revenue and gross profit has increased, again +ve CF generated every quarter.
On the negative side, KW's management are terrible investors. I think they got it in their head after having had some success with KTIS, and subsequently tried to keep deploying cash generated from their CF generative core business. The smug replies to analysts after the KTIS listing shows a fundamental flaw that investors shouldn't make, but is practically impossible to avoid: being emotional.
I think it's ok if they deploy cash in related businesses like the dorm, but the bulk carrier is totally unrelated. It seems like the M&E industry is one that is stable, but provides little room for further growth.
Which is why many M&E players try to expand eventually to be full fledged developers, but doing so is a problem as well as their clients now become their competitors and nobody likes sending business to their competitors.
Share price hasn't really budged much since the negative news of the write down, I don't think I'm the only one who knows the Dalian writedowns are over.

[GPD]

I though they have only got 6mil investment left in DSC?  So did they pour in 2 mil more during the period?  Are they taking on more liabilities?  Will there be more write-off on DSC?

Think KWC will sink below 20cts........

As of FY16 Q2, non current loans to DSC amounted to $8.35mil
So no, they did not extend any more loans to DSC, and the DSC loan is effectively written off completely
The 2 remaining phases of DSC, phases 8 and 9, are in cold storage and management has guided that they do not expect to launch it in the next 2 years. (sometime after 2018)
Of course the remaining exposure to DSC right now, is hidden somewhere then in the " Investment in associates and a joint venture " portion in the BS.
I do not have the breakdown, but this is an insignificant amount, if any at all.
As of FY16Q3, it is $5.8mil in total, and this includes all the other projects

Sure, the DSC is a lemon and KW got burnt.
But to put things in perspective, there wont be any more write downs after this regarding DSC.

If my data is not wrong, Skywood should already be in the green. Starlight sale is not going on very well and the 2-year deadline for selling all units before penalties kicks in is looming.

Sugar price has recovered but KTIS price still in decline. When KTIS was listed, its valuation is well above its two major peers. It will take a spectacular performance on KTIS business tomove its price anywhere near 10baht.

Nothing much to say about DSC. Just a major disappointment.

Now I am now sure if the dorm business will be affected if the construction and O&G sector starts to decline.

So all-in-all, not so positive about KWC in the short to med-term.

[ozxinvest]

It appears there are a few holes here: real estate investment in Dalian, equity investment in SET-listed Kaset Thai International Sugar Corporation PCL, investment in "Supramax” bulk car­rier “Hai Jin” held under 30%-owned Gold Hyacinth Devel­op­ment Pte Ltd, 19% investment stake in Tuas South dormitory.

How do you define "holes"?

- Dalian project: A lemon. There are 9 phases in this project, 1st 6 phases were launched and sold, phase 7 was in the midst of launching before the writedowns begun, and now phases 8 and 9 are kept aside for the next 2 years at least.
It seems KW is a casualty of the blow up in real estate in the tier 3 and 4 cities.
The 1st tier cities are unaffected and in fact, have even modestly appreciated

- KTIS: Surely this cannot be defined as a "hole"? Their initial investment got IPOed, KW received $50.2mil equivalent, (which has now been whittled down due to the falling price of KTIS), but this is held under their BS as an asset for sale. It doesn't require any CF, probably the only mistake is not selling out when KW had the chance to. KTIS listed at 10 baht and appreciated >20% immediately after listing.
KW sold some shares but its miniscule. They didn't forsee the subsequent collapse in price.
Which is IMO a bit disappointing because from my earlier calculations then, the PER was >30, and by several simple parameters, it just seems pricey to hold on to those shares. (I've indicated in a much much earlier post then, that I thought it's pricey and management should sell now, so there's no hindsight bias here)

- Bulk carrier: KW does not provide a break down, the earnings are parked under "share of associate results". However, since this also includes the earnings from all the other associates, particularly the skywoods condo project, I have extrapolated the results from it's JV partner, hock lian seng.
By subtracting the results (proportionally. since HLS owns 50% while KW has an effective stake of 20%), one can get an approximate idea on how its associates are doing. My verdict: the bulk carrier is either barely breaking even or operating at a loss.

- SI property (Bangkok): no visibility on this. Again, I suspect results are mediocre at best, since it's parked under the share of associate results too

- Dorm: hole?? It hasn't even started operating yet, and one cannot tell its results right now. From my understanding of dorms, I'd expect a regular linear depreciation over the expected lifespan of the dorm, with regular CF once the dorm reaches max occupancy, which can take as short as 3 months, to a year.

On the positive side, their core M&E business is doing well. both revenue and gross profit has increased, again +ve CF generated every quarter.
On the negative side, KW's management are terrible investors. I think they got it in their head after having had some success with KTIS, and subsequently tried to keep deploying cash generated from their CF generative core business. The smug replies to analysts after the KTIS listing shows a fundamental flaw that investors shouldn't make, but is practically impossible to avoid: being emotional.
I think it's ok if they deploy cash in related businesses like the dorm, but the bulk carrier is totally unrelated. It seems like the M&E industry is one that is stable, but provides little room for further growth.
Which is why many M&E players try to expand eventually to be full fledged developers, but doing so is a problem as well as their clients now become their competitors and nobody likes sending business to their competitors.
Share price hasn't really budged much since the negative news of the write down, I don't think I'm the only one who knows the Dalian writedowns are over.

Hi GFG,

Thanks for providing all the insights for Kingwan. May I ask if you have any idea when would the QC penalty fee comes into effect for starlight suites, I'm not sure when is the T.O.P and I was wondering if there will be any impairment (how much?)  for this project since there are still like 32 unsold units? Some of the bigger developers have done that, like OUE and capitalland.

Would there be any possibility that they are not going to declare any dividend or cut the final dividend since EPS for nine months is only 0.36c?

I think the price dropped below 20c tells us that there is fear that dividend might be cut this year and also the MTP thing.

Vested.

[GFG]

It appears there are a few holes here: real estate investment in Dalian, equity investment in SET-listed Kaset Thai International Sugar Corporation PCL, investment in "Supramax” bulk car­rier “Hai Jin” held under 30%-owned Gold Hyacinth Devel­op­ment Pte Ltd, 19% investment stake in Tuas South dormitory.

How do you define "holes"?

- Dalian project: A lemon. There are 9 phases in this project, 1st 6 phases were launched and sold, phase 7 was in the midst of launching before the writedowns begun, and now phases 8 and 9 are kept aside for the next 2 years at least.
It seems KW is a casualty of the blow up in real estate in the tier 3 and 4 cities.
The 1st tier cities are unaffected and in fact, have even modestly appreciated

- KTIS: Surely this cannot be defined as a "hole"? Their initial investment got IPOed, KW received $50.2mil equivalent, (which has now been whittled down due to the falling price of KTIS), but this is held under their BS as an asset for sale. It doesn't require any CF, probably the only mistake is not selling out when KW had the chance to. KTIS listed at 10 baht and appreciated >20% immediately after listing.
KW sold some shares but its miniscule. They didn't forsee the subsequent collapse in price.
Which is IMO a bit disappointing because from my earlier calculations then, the PER was >30, and by several simple parameters, it just seems pricey to hold on to those shares. (I've indicated in a much much earlier post then, that I thought it's pricey and management should sell now, so there's no hindsight bias here)

- Bulk carrier: KW does not provide a break down, the earnings are parked under "share of associate results". However, since this also includes the earnings from all the other associates, particularly the skywoods condo project, I have extrapolated the results from it's JV partner, hock lian seng.
By subtracting the results (proportionally. since HLS owns 50% while KW has an effective stake of 20%), one can get an approximate idea on how its associates are doing. My verdict: the bulk carrier is either barely breaking even or operating at a loss.

- SI property (Bangkok): no visibility on this. Again, I suspect results are mediocre at best, since it's parked under the share of associate results too

- Dorm: hole?? It hasn't even started operating yet, and one cannot tell its results right now. From my understanding of dorms, I'd expect a regular linear depreciation over the expected lifespan of the dorm, with regular CF once the dorm reaches max occupancy, which can take as short as 3 months, to a year.

On the positive side, their core M&E business is doing well. both revenue and gross profit has increased, again +ve CF generated every quarter.
On the negative side, KW's management are terrible investors. I think they got it in their head after having had some success with KTIS, and subsequently tried to keep deploying cash generated from their CF generative core business. The smug replies to analysts after the KTIS listing shows a fundamental flaw that investors shouldn't make, but is practically impossible to avoid: being emotional.
I think it's ok if they deploy cash in related businesses like the dorm, but the bulk carrier is totally unrelated. It seems like the M&E industry is one that is stable, but provides little room for further growth.
Which is why many M&E players try to expand eventually to be full fledged developers, but doing so is a problem as well as their clients now become their competitors and nobody likes sending business to their competitors.
Share price hasn't really budged much since the negative news of the write down, I don't think I'm the only one who knows the Dalian writedowns are over.

Hi GFG,

Thanks for providing all the insights for Kingwan. May I ask if you have any idea when would the QC penalty fee comes into effect for starlight suites, I'm not sure when is the T.O.P and I was wondering if there will be any impairment (how much?)  for this project since there are still like 32 unsold units? Some of the bigger developers have done that, like OUE and capitalland.

Would there be any possibility that they are not going to declare any dividend or cut the final dividend since EPS for nine months is only 0.36c?

I think the price dropped below 20c tells us that there is fear that dividend might be cut this year and also the MTP thing.

Vested.

The QC penalty for starlight suites should be coming sometime in mid 2016, so around June. There are 31 unsold units.
I have queried management previously (last year), and their reply is a very generic one. Basically they said that is held by their associate, of which they have only a 35% stake, and that the associate is looking into ways to solve this problem. Havent seen or heard any progress on this issue since then. It's safe to say that they wont be able to avoid the QC charges seeing that it's only about 3-4 months away.

Sure, of course there's a possibility of no dividends. My guess is there'll be a dividend but it'll be cut further. (<1 cent)
Looking at the cashflow, it doesn't support the same dividend as prior years.

[LaurenceLau]

Skywoods 93% sold. Balance about 28 units.  Isn't that good news?  End of 2016 Skywoods TOP, so booking in Profit.

[GFG]

Skywoods 93% sold. Balance about 28 units.  Isn't that good news?  End of 2016 Skywoods TOP, so booking in Profit.

Skywoods revenue recognition is by percentage of completion.
Yes it is mostly sold. But the profit to be recognised upon TOP wont be that much as they've already been recognising it in phases

[LaurenceLau]

I thought Construction company booked in profit by % of completion of project.  Developer can only booked in profit on completion of whole project.