HupSteel

[ngcheeki]

Finally, the news is out!!!

http://info.sgx.com/webcoranncatth.nsf/V...2002432BA/$file/Redeveopment_of_6_Kim_Chuan_Dr.pdf?openelement

[lavue]

a similar bare unit warehouse at 63kim chuan drive 6200sf is going for 6.3m. so i would estimate the freehold land is at least 800psf, making it worth around 26m. the genting lane 8storey building is more prime as it is closer to the city. it has a high plot ratio that it not maximised. the freehold land there is worth at least 20m. these 2plots cld be worth 45m. 2 jalan besar shphse say 3m each. plus shoplets in hoe nam. all in all these freehold assets cld be worth in excess of 50m.
with current market cap of 115m, i wouldn't say its small. it is nearly half of its market cap.

Hi paullow, you estimated a value of $26m for the 6 Kim Chuan Drive property. I did a back-of-the-envelop residual valuation and found that the property's worth could actually be closer to $38m.

To arrive at GDV
41 Kim Chuan Drive sold for $790psf in Mar 2011
31 Kim Chuan Drive sold for $722psf in Nov 2010
33 Kim Chuan Drive sold for $681psf in Nov 2010
Assume $800psf for selling price, which is very conservative.
The site has plot ratio of 2.5. After accounting for the efficiency ratio (80%), it yields a GDV of about $53m.

Minus cost of development of about $15m
Marketing fee at 1%, building costs at $140psf (RLB figures) for heavy industrial buildings (B2 zoning for MP2008), professional fees, contingency, gst, financing costs (although they can well afford to cough out cash, I assumed they use leverage to capitalize on the low interest rates).

This gives a value of $38m, 46% higher than paullow's estimates. Note that I conservatively estimated the selling price at $800psf (the industrial property market is very exuberant now and freehold land is especially valuable since the new sites are only 30-year leasehold) and the building cost at $140psf (could be lower if they partner up with a competent builder/contractor).

Thanks for pointing out the hidden gems on their balance sheet paullow. I will go and analyze the other sites at a later time.

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and look at last saturdays straits times on industrial ppty prices going up 60% since last yr. hupsteel is sitting on goldmine of more than 1 acre of freehold industrial land. its just matter of time before the market realises this gem though downside is the steel biz which seemed to be going thru a rough patch.
it won't be audacious to think that a big fish would attempt to makan hupsteel wholesale for the sake of its freehold land holdings in a land scarce singapore.

Big fishes are already attempting similar moves. Check this out.

In light of the redevelopment plans for 6 Kim Chuan Drive, perhaps it is a good time to revisit this earlier post regarding the redevelopment potential of that site. My estimated development cost of $15m is not too far off from their estimate of $14m

It was also revealed that the value carried on their books for this site is merely $596k. If the management decide to sell away all the strata units, this could add 6cents to NAV. I won't be too surprised should the share price rise by this corresponding amount come Monday morning.

[paullow]

yes, lavue, ur estimation is very close.
with 14m, construction cost, even if its steel biz half dead n no dividends paid out, it wld still have a healthy balance of nearly 30m n literally zero debt.
the new building will have a gross of 7690sm or 82000sf. assuming 1kpsf, this could add up to 80m in asset value to the company at the expense of 14m cash!
and i dun think lim family is keen to sell them as strata units. if so, rental contribution from its units could start from 2015.
i agree that price might see upward trend next week in response to the anouncement.
congrats bibi, kuku n nitro to this much awaited announcement.

[lavue]

$1k psf is unlikely, given how the site is quite far from Tai Sing MRT. If Mapex, which is just beside Marymount MRT, is fetching $1k psf, then at current price levels this site can at best fetch $800-850psf. However, if industrial prices were to continue to trend up, then the $1k psf mark may not be that unlikely.

[paullow]

gd point. even at a very conservative 800psf, that completed building could be worth 65m which wld mean nav up by 8-10c.

[nitro]

yes, lavue, ur estimation is very close.
with 14m, construction cost, even if its steel biz half dead n no dividends paid out, it wld still have a healthy balance of nearly 30m n literally zero debt.
the new building will have a gross of 7690sm or 82000sf. assuming 1kpsf, this could add up to 80m in asset value to the company at the expense of 14m cash!
and i dun think lim family is keen to sell them as strata units. if so, rental contribution from its units could start from 2015.
i agree that price might see upward trend next week in response to the anouncement.
congrats bibi, kuku n nitro to this much awaited announcement.

Hi Paul,

you can change your Lexus already.

do you have an exit price for this counter? if based on $1k psf, 80m asset at 14m cash,

nett - 66m /outstanding shares : 622,600,000 = $0.10

exit price at NAV $0.32 + $0.10?

problem - this counter is not covered by any analysts.

[paullow]

hi nitro,
no hurry. got 38genting lane still.
lets see how it goes.
congrats nitro!!!

[nitro]

hi nitro,
no hurry. got 38genting lane still.
lets see how it goes.
congrats nitro!!!

seems like you are waiting to upgrade lexus to Ferrari?

congrats to u and all patience investors

[paullow]

ferrari? no. i am sort of retired now. dun really hanker after such luxuries. besides my wife will kill me. she will think i am going after some young chick.

[lavue]

They have already maximised the plot ratio for 38 Genting Lane - a 7-storey building is standing on the site. The yields must be damn bloated for this building, assuming they purchased this back in the 1980s. Also, it would be a waste to demolish and rebuild, given how the building is not exactly very old and debilitated. At most they just need to do some A&A works, i.e. upgrade the cargo lifts, repainting the facade, renovate the toilets, then can ask for even higher rents. Although I would not rule out the possibility of them redeveloping 38 Genting Lane, it would make more financial sense to simply renovate it.