Global Premium Hotels

[shanrui_91]

Valuation opinion:

if you only look at value of land, which keeps increasing
from AR 2012,

latest value of freehold and leasehold land is 725.5m + cash 15.3m
total liability in the book 525.6m

net worth of land ONLY is 215.2m

value of cashflow received from room let yearly assumed: 20m yearly, cap rate of 5%
value = 20/5% = 400m

total value is 400+215.2 = 615.2m vs mkt cap of 284m

any takers? possible issues?
I haven't taken into account the possibility of future interest rate rise tho, yearly cashflow may decrease substantially as their borrowings are huge

but so far looks like an undervalue counter in my opinion

I believe the firm separated the hotel building from the free hold land in the PPE. The IPO prospectus show otherwise. However, if you sell a hotel, obviosuly you have to transfer the land right to the other party. So you are double counting in this instance. Either use cap rate or use the book value (hopefully the freehold land is depreciated to insane value like Low Keng Huat)

4 methods are used for valuation of property
1) Comparable Sales
2) Replacement cost - cost of acquiring land and construction cost
3) Capitalization rate - work like eanring yield
4) DCF

Your calculation of cap rate is faulty. You should have use NOI or NPI but your calculation of $20 million seemed to have included income tax and finance interest. Valation should not have taken into account such cost as it need to be fair across the market. A REIT don't have to pay for such fee though it has to pay for reit management fee which is also not included in NOI calculation. NOI is like your gross profit minus standard operating expenses and the property value should be the one that they can fetch on the market.

Excellent asset is rarely traded on the market and cap rate can be very low. The problem with cap rate is it can be so subjective that people has different valuation. For GPH with budget hotel, I supposed that their cap rate should be higher unless they are based in excellent location that everybody is fighting for. If we use CDL H-trust as a guide, cap rate will be around 6-7% for hotels. It is a good reference for their kind of asset since REIT is required to fair value it every year though they can choose to apply slightly conservative cap rate.

However, cap rate and dcf might not be a very wise choice for hotel since their income is not as stable as retail mall. Revpar and occupancy rate are also highly linked to state of economy. For CDl h-trust they can do so since their assets are all master-leased which means their income is much more stable though they are subjected to some fluctuation. For GPH, i think using comparable sales and replacement cost might be a better choice. Given that they just ipoed not too long ago, I supposed it is safe to assume what's on their book.

(not vested)

[greengiraffe]

I just want to be a wet blanket here on Fragrance, GP Hotel, Aspial and Maxi Cash.

Property companies that are trading way above valuation is a big alarm bell.

In addition,if anyone bother to look at how share prices of these companies have risen to such levels - there are a few unique characteristics:

- Insider consistently upping their stakes through open market purchases;
- consistent and regular stocks splits;
- consistent and regular dividend payments (no matter how small they are now);
- spinning off of listable subsidiaries to unlock and assign a market value, followed by consistent open market purchases
- spin off then buy back at higher than IPO prices.

Essentially, valuations are no longer cheap and that is a big fundamental problem.

I wouldn't try too hard on such fads since there are better alternatives else where.

I can turn long neck, face green or purple buying value stocks but i certainly won't risks my hard earned savings on darlings or unexplainable stock market theories.

[CityFarmer]

I just want to be a wet blanket here on Fragrance, GP Hotel, Aspial and Maxi Cash.

Property companies that are trading way above valuation is a big alarm bell.

In addition,if anyone bother to look at how share prices of these companies have risen to such levels - there are a few unique characteristics:

- Insider consistently upping their stakes through open market purchases;
- consistent and regular stocks splits;
- consistent and regular dividend payments (no matter how small they are now);
- spinning off of listable subsidiaries to unlock and assign a market value, followed by consistent open market purchases
- spin off then buy back at higher than IPO prices.

Essentially, valuations are no longer cheap and that is a big fundamental problem.

I wouldn't try too hard on such fads since there are better alternatives else where.

I can turn long neck, face green or purple buying value stocks but i certainly won't risks my hard earned savings on darlings or unexplainable stock market theories.

I am observing MaxiCash and Aspial, not for investment, but taking them as case study for learning

I do wonder on real intentions of the bonus issues and insider buying after IPO, and its impact on share price.

I agree it is un-explainable up to now, at least for me.

[greengiraffe]

I just want to be a wet blanket here on Fragrance, GP Hotel, Aspial and Maxi Cash.

Property companies that are trading way above valuation is a big alarm bell.

In addition,if anyone bother to look at how share prices of these companies have risen to such levels - there are a few unique characteristics:

- Insider consistently upping their stakes through open market purchases;
- consistent and regular stocks splits;
- consistent and regular dividend payments (no matter how small they are now);
- spinning off of listable subsidiaries to unlock and assign a market value, followed by consistent open market purchases
- spin off then buy back at higher than IPO prices.

Essentially, valuations are no longer cheap and that is a big fundamental problem.

I wouldn't try too hard on such fads since there are better alternatives else where.

I can turn long neck, face green or purple buying value stocks but i certainly won't risks my hard earned savings on darlings or unexplainable stock market theories.

I am observing MaxiCash and Aspial, not for investment, but taking them as case study for learning

I do wonder on real intentions of the bonus issues and insider buying after IPO, and its impact on share price.

I agree it is un-explainable up to now, at least for me.

Hi City Farmer,

I like your attitude. There is a famous Chinese saying, learn till we close our eyes.

Stock market is a beautiful thing. I always tell my friends that this is my life long PHD - its free and can make you a lot of money if you learn from others mistakes. However, that said - we must have the right attitude to learn and to learn from everyone even if the person sounded silly.

Let's just keep our eyes open for learning opportunities. Running a business is never easy but certainly stock market provides an easy way for us to learn running real businesses in an affordable way.

Keep the discussion and ideas alive.

GG

[CityFarmer]

I just want to be a wet blanket here on Fragrance, GP Hotel, Aspial and Maxi Cash.

Property companies that are trading way above valuation is a big alarm bell.

In addition,if anyone bother to look at how share prices of these companies have risen to such levels - there are a few unique characteristics:

- Insider consistently upping their stakes through open market purchases;
- consistent and regular stocks splits;
- consistent and regular dividend payments (no matter how small they are now);
- spinning off of listable subsidiaries to unlock and assign a market value, followed by consistent open market purchases
- spin off then buy back at higher than IPO prices.

Essentially, valuations are no longer cheap and that is a big fundamental problem.

I wouldn't try too hard on such fads since there are better alternatives else where.

I can turn long neck, face green or purple buying value stocks but i certainly won't risks my hard earned savings on darlings or unexplainable stock market theories.

I am observing MaxiCash and Aspial, not for investment, but taking them as case study for learning

I do wonder on real intentions of the bonus issues and insider buying after IPO, and its impact on share price.

I agree it is un-explainable up to now, at least for me.

Hi City Farmer,

I like your attitude. There is a famous Chinese saying, learn till we close our eyes.

Stock market is a beautiful thing. I always tell my friends that this is my life long PHD - its free and can make you a lot of money if you learn from others mistakes. However, that said - we must have the right attitude to learn and to learn from everyone even if the person sounded silly.

Let's just keep our eyes open for learning opportunities. Running a business is never easy but certainly stock market provides an easy way for us to learn running real businesses in an affordable way.

Keep the discussion and ideas alive.

GG

Fully agree. Learning from stock market, VB forum, and from your posting too.

[ikur1]

Valuation opinion:

if you only look at value of land, which keeps increasing
from AR 2012,

latest value of freehold and leasehold land is 725.5m + cash 15.3m
total liability in the book 525.6m

net worth of land ONLY is 215.2m

value of cashflow received from room let yearly assumed: 20m yearly, cap rate of 5%
value = 20/5% = 400m

total value is 400+215.2 = 615.2m vs mkt cap of 284m

any takers? possible issues?
I haven't taken into account the possibility of future interest rate rise tho, yearly cashflow may decrease substantially as their borrowings are huge

but so far looks like an undervalue counter in my opinion

I believe the firm separated the hotel building from the free hold land in the PPE. The IPO prospectus show otherwise. However, if you sell a hotel, obviosuly you have to transfer the land right to the other party. So you are double counting in this instance. Either use cap rate or use the book value (hopefully the freehold land is depreciated to insane value like Low Keng Huat)

4 methods are used for valuation of property
1) Comparable Sales
2) Replacement cost - cost of acquiring land and construction cost
3) Capitalization rate - work like eanring yield
4) DCF

Your calculation of cap rate is faulty. You should have use NOI or NPI but your calculation of $20 million seemed to have included income tax and finance interest. Valation should not have taken into account such cost as it need to be fair across the market. A REIT don't have to pay for such fee though it has to pay for reit management fee which is also not included in NOI calculation. NOI is like your gross profit minus standard operating expenses and the property value should be the one that they can fetch on the market.

Excellent asset is rarely traded on the market and cap rate can be very low. The problem with cap rate is it can be so subjective that people has different valuation. For GPH with budget hotel, I supposed that their cap rate should be higher unless they are based in excellent location that everybody is fighting for. If we use CDL H-trust as a guide, cap rate will be around 6-7% for hotels. It is a good reference for their kind of asset since REIT is required to fair value it every year though they can choose to apply slightly conservative cap rate.

However, cap rate and dcf might not be a very wise choice for hotel since their income is not as stable as retail mall. Revpar and occupancy rate are also highly linked to state of economy. For CDl h-trust they can do so since their assets are all master-leased which means their income is much more stable though they are subjected to some fluctuation. For GPH, i think using comparable sales and replacement cost might be a better choice. Given that they just ipoed not too long ago, I supposed it is safe to assume what's on their book.

(not vested)

Hey great learning point!!
Thanks so much

but I was thinking, if u use comparable sales, u will be blinded if there's a bubble ongoing in the market

if u had used the cashflow it gives out as valuation benchmark, it would be a much safer practice in the long run.

so in this case, i think it's not as undervalued as i had thought

[a74henry]

Currently, it is still below BV. Decent dividend yield.
This stock is tied to the tourists arrival.
Are you confident of the tourism market in Singapore?

I have invested with Fragrance when it IPO and it is the best performing counter in my portfolio.
I believe the management (the same as Fragrance) will not let investors down.

[pianist]

Currently, it is still below BV. Decent dividend yield.
This stock is tied to the tourists arrival.
Are you confident of the tourism market in Singapore?

I have invested with Fragrance when it IPO and it is the best performing counter in my portfolio.
I believe the management (the same as Fragrance) will not let investors down.

me too have been vested with fragrance since mid-2000s and it also happens to be my top 3 best performing counter (based on absolute $value gain). along with koh wee meng, (he became a new billionaire without chance), i picked up some pocket money. even when i divested some of the shares, it kept on giving me more of its shares...quite a unique relationship for close to a long 10 years already

just look at him, roll royce 3 point turn make some sound also have to sue - see the level of perfection he instilled in himself...i told myself if i ever buy one more private condo..it has to be from fragrance.

[tonyking]

SGX Announcement:
GP Hotel Chairman Mr Koh Wee Meng bought 4,000 lots via open market at $0.265, spent $1,060,000+ on the purchase. His direct stake increase from 3.9% to 4.28%, with deemed stake at 52.28%.
NAV: 38.46cent (based on 13Q1 report)
EPS FY12: 2.07cent (based on AR12)
PE Ratio: 12.8

My views: the huge discount to NAV against is current price $0.265 seems attractive, PE ratio seemed like a value, considering a potential EPS increase of 20% when its new hotel development at 165 & 167 Tyrwhitt Road adds another 270 beds, about 20% increase from its current 1,738 bed capacity. Not forgetting 87% of its hotel is on freehold land.

Caveat: I'm vested.

[pianist]

wow..1mio commitment in a single day...not a small sum by any count..