HupSteel

[camelking]

Hope I will be not "outcast" again for saying for these hard truths...

...
I give you a good example. For pure property counters, analysts also give a certain level of discount to RNAV valuation, sometimes the discount can be as large as 30 to 40%.
Hupsteel is not even a "pure property play". The discount should be even greater.

I guess this is something that many hupsteel supporters fail to realise

You do have some valid points...so, don't worry!

[paullow]

I think it is really up to each one's interpretation of the objective facts.

I think brattzz is getting a hang of the conservative style and he likes it. And I think its important to like what you buy and buy what you like.

And to add, the RNAV could be as much as 45-50c. So at current prices, i think it is not an expensive price. ?some 50% discount.

Also, this company has been growing at a rate of 7% PA over the past 20years. It was listed in 1994 with a cap of around 40M. Over the past 10years, the amount of dividends paid has grown nearly 10x. Look at the ARs for the dividends paid and you can see the figures.

Of course past performance is not an indication of future performance but the company has weathered a few crises.

What is emerging is the fact that this 6 kim chuan would be transformed into a 8 storey building by 1 years time.

The point about kim chuan being non-glam: well, true, it is not in a prime glamour area. It is just outside the Tai Seng area which the government plans to transform. But singapore is a land scare area. There is limited supply of freehold land. I think its a gem to keep forever. It is not as in Malaysia where the land area is so huge. Keeping it for the next 10-20years would likely see significant appreciation in value. Rental part, as what Nitro alluded to earlier, there will always be takers so long as the price is right.

There is still a more prime and nice numbered freehold 8 storey 38 genting lane which the company I believe will take its time to refurbish, and the Jalan Besar shophouses which could be rebuild to 4-5storeys. But this might be a long time more and that is hidden potential.

So this counter is for long holding. The main focus is still its steel biz, for without which I believe they will not be able to acquire so many properties.

Notably, ex DBS chairman Koh Boon Hwee has been sitting quietly holding on to his shares. I believe he also sees value in this company.

As usual, do your own research. If this counter is not for you, there are always better ones elsewhere.

Best Regards,

Paul

[brattzz]

Hello Stockerman!

of cos u won't be "outcasted"!, VB is a public forum, and everyone is free to voice out their points, do keep them coming! in fact what you have pointed out is quite true of the market's preception of a non pure property play...

My question is, should we follow market preception for HS or any other companies? that is not listed as pure-property play, BUT holds loads of free land? that's the key question, ain't it?

Think, no matter where/what disguises or puts the companies in the categorization, VALUE, if looked into deeply, can be found.
In the case of HS, it's free land!! + a steel biz.. (not very profitable at the moment)..

I believe the real value of HS will be actualized/realised when,
1) Completion of re-development plan of it's free land, one by one, slow and steady = rental revenue coming online
2) Upturn in the steel biz (cyclical), dividends increases!

All these take time, this is for long haul. and you want to have a good management, which HS has..
Also, conservative management = great value already to me since i am a conservative person.

This allows me to accumulate slowly too! not enough cash to buy enough %!!

[mrEngineer]

Why is there an assumption that cash is required for redevelopment of assets? Is it not possible to use leverage?

[brattzz]

Why is there an assumption that cash is required for redevelopment of assets? Is it not possible to use leverage?

normally yes, leverage up to a certain point....40%?
but for a conservative family biz, it's better to go step by step, no need to rush since cashflow is there and the asset is free land (land is not going anywhere)... organic growth reaps the BEST returns..

If i am HS's boss, i will do the same!
slow and steady!

Or! do a JV with lianbeng or LKH..etc and develop ALL the free land at once and REITS them! catch is 50% control lost and profits must be shared.
I don't think HS family will want to do that unless they spotted a good reason for a need for cash..

[paullow]

for those who are deep n serious investors, u could flip open the phone book n check where those lim directors r staying. such info is free n open to everyone.

its a little wonder why they r taking their time to developing those assets.

[Stockerman]

If Hupsteel is redeveloping a piece of very prime land (e.g. orchard road, Petaling Jaya Section 13 - "Next Orchard Road", etc) for commerical/mixed uses, I would agree wholeheartedly that Hupsteel is a super steal at current share price.

But, this does not seem to be the case for Hupsteel.

**************
KUALA LUMPUR: Fraser & Neave Holdings Bhd (F&N) will start seeing a new revenue stream from property development come its financial year ending Sept 30, 2016, as it will be launching a RM1.6bil mixed development in its ex-dairy premises in Section 13, Petaling Jaya, in June 2013.

“Currently this 13-acre land houses F&N's dairies production plant. Site preparation works will begin this September, and will see a mixed development which consists of an F&N tower, a hotel, offices, retail outlets and residential suites by June 2013,” F&N chief executive officer Datuk Ng Jui Sia told a media briefing yesterday.

For F&N Dairies Malaysia, production of its new Pulau Indah facilities in Klang has just commenced, and the shift from its plant in Section 13 to Pulau Indah is expected to be completed by September.

F&N is partnering FCL Centrepoint Pte Ltd, a subsidiary of Frasers Centrepoint Ltd (FCL), to develop this ex-dairy premises.

FCL is one of Singapore's top three residential property developers and retail mall owners and operators. It has also developed properties and malls in the UK, Australia, New Zealand, Thailand, Vietnam and China.

F&N had divested 50% of its interest in this development land to FCL and recognised RM55mil in the quarter to March 31, 2012, being 50% of the capital gain of RM110mil.

Meanwhile, most analysts concurred that F&N's earnings would pick up in the second half, but many were still uncertain of its prospects. While the soft drinks segment is doing well, the dairies segment both in Malaysia and Thailand is still uncertain, driven by high raw material costs, and downside bias from its flood recovery.

“F&N is an extremely well-run company and I think they are doing the best they can. However, Malaysia is also a pretty matured market for dairy products. We don't expect to see huge growth in these segments. It will be stable in line with market at best,” said one consumer analyst.

F&N's second-quarter ended March 31 net profits declined by 18.89% to RM107.06mil from RM131.99mil in the previous corresponding period as revenue dropped to RM730.43mil from RM1.01bil previously.

It also declared an interim dividend of 20 sen, which will be paid on Aug 1.

Ng said the key declines came mainly from the cessation of the Coca-Cola business, the 200-day flood disruption in Thailand and higher raw material cost and competitive pressure in the Malaysian dairy operations.

Sales in Thailand dropped by half as production stoppage disrupted supply to the market. The Rojana factory in Thailand recommenced operations in March and ramped up to full capacity in April.

Dairies Thailand's factory was affected by floods, leading to a 52% slump in its first-half revenue to RM231mil. As a result of the lower sales volume, the factory could not cover its overheads, causing an operating loss of RM30mil.

“Even though we should see a stronger second half as Dairies Thailand resumed production in March, we cut forecasts to account for pricier raw materials,” said CIMB Research analyst Foong Wai Mun.

F&N made a cumulative write-off of RM89.44mil for the current two quarters. Interim property damage insurance claims based on current replacement cost accepted by insurers and recognised to date were RM80mil, of which the insurers had disbursed RM74mil in payments.

On a half-year basis, F&N's net profits dropped by 37.7% to RM148.8mil from RM239.07mil on the back of lower revenue, which declined to RM1.47bil from RM2.04bil previously.

F&N mitigated the loss of the Coca-Cola contract by raising its soft drinks revenue without Coca-Cola) by 8%, driven by higher sales of Seasons, Redbull and its new products (Zesta and Clearly Citrus).

Ng added that F&N was rethinking its fruit juice segment as it was also not growing.

“Revenue was also helped by market penetration into Brunei and contract packing for exports to its sister company in Singapore. However, operating profit margins fell 7.6% to 9.3% due to higher commodity prices, especially for sugar,” said Foong.

Meanwhile, Maybank analyst Kang Chun Ee said that until the shift to Pulau Indah, expected to be completed by September, F&N would continue to see rising operating costs as a result of a duplication in operations.

A deferred tax assets (DTA) of RM55mil in relation to the halal hub tax incentive was granted to the plant and the estimated balance of RM21mil in DTA would be recognised in the second half of this year, said Kang.

[brattzz]

60 to 80m value sounds pretty prime to me no matter where they are ...
however, from owner's perspective, even if it's worth 200m also no much use, cos i'm not selling the building and killing the cashcow...(unless something BIG happens)
However, i am keen in the steady rental cashflow coming in to fund my other plans, which is property development as i have free lands....

Operate the steel biz well, Milk the dividends yearly..keep everyone happy, long term substainability!
Share buy back every now and then.. and hopefully, 1 day delist quietly without paying too much..

So good, this type of biz and management. slow and steady... no need to rush...

[paullow]

And to add to that,

in less than 1 years time, the freeholds: 6 kim chuan would be worth some 60-80M plus 38 genting lane, worth perhaps 40M, plus its jalan besar properties, some 10m would total up to at least 110M. Look at its current market cap now.

we still not added its enormous leasehold 32,663 sq metres jurong warehouse, its cash horde and last but not least, its 70 year old steel biz.

no wonder the management in increasing its share buy back.

do the sums, if this is not value for money, I don't know what else is.

[Stockerman]

market valuation of properties = $110mil or 18 cents

How should we value the steel business?