HupSteel

[evolance]

Sorry to ask ametuer qn,was looking ard for value stocks to add to my watch list, saw the PE for hupsteel at 41? Quoted fr bloomberg...

[paullow]

Sure.
High pe cos its steel biz is not doing well. But personally i believe it is highly cyclical like wat ben had pointed out earlier.
So no analyst will go near this now.

[safetyfirst]

Perhaps hupsteel is not only cyclical, it is also a commodity business, remember that hupsteel sells steel, customers dont order steel by brand, customers just want it cheap. I agree that customer relationships play an important role, while hupsteel should have found some loyal customers over the past few decades but there is a limit to the profits a commodity business can generate.

as for its investment properties, nothing good to comment, it rental yield compared to the property valuation is just so terrible, it reflects so badly on management. It so happens that they bought freehold properties many decades ago so now they have a chance to redevelop it. It is not like they bought land cheap during the GFC and is now redeveloping it, i just cant find something good to say that current management has added value to shareholders

[FatBoi]

Perhaps hupsteel is not only cyclical, it is also a commodity business, remember that hupsteel sells steel, customers dont order steel by brand, customers just want it cheap. I agree that customer relationships play an important role, while hupsteel should have found some loyal customers over the past few decades but there is a limit to the profits a commodity business can generate.

as for its investment properties, nothing good to comment, it rental yield compared to the property valuation is just so terrible, it reflects so badly on management. It so happens that they bought freehold properties many decades ago so now they have a chance to redevelop it. It is not like they bought land cheap during the GFC and is now redeveloping it, i just cant find something good to say that current management has added value to shareholders

Actually whether they bought the freehold properties many decades ago or during GFC is not the most important is it? The key is that there is hidden value waiting to be unlocked in those assets? Fair enough you might look to the past and lament if mgmt had added value to shareholders and for a good while prior to announcement of 6 Kim Chuan redevelopment, it is ok to accept the criticism that they might not have done so. So we complain the mgmt had not taken action in the past and now that they have, we are still complaining? Haa, they just can't win can they?

[Underdogger]

Unlocking properties value wise, isnt New Toyo a better buy?

Current tobacco packaging/printing provides good cashflow and stable dividend, with upside EPS growth as BAT consolidates and expands its stake in the developing markets.
Plus property re-development potential of Tien Wah. Best of both worlds

Its subsidiary - Tien Wah - have numerous plots of land, some of the them in Petaling Jaya Section 13. Tien Wah management has already mentioned before in their AR that they would be looking at rationalizing all their land holdings. Tien Wah has been consolidating their packaging/printing operations in Vietnam over the years.

http://www.valuebuddies.com/thread-2082.html

[paullow]

Hi Underdogger,

Let me try to address this: ( No offence to anyone-I will try to be as objective as possible)


( Key: Hupsteel HSH New toyo NT)


Similarities:

1) Both HSH and NT have a core biz
2) Both HSH and NT have ppty holdings

Differences:

Ppty:
1) HSH investm ppties are freehold
2) NT ppties in malaysia are leasehold and if my memory serve me right, perhaps 2 decades gone already; only the one in Australia is freehold (that's why I asked what's the potential of that piece of land in the NT thread)
3) HSH ppty value unlocking already in sight.
4) NT ppty value unlocking yet to be seen. Even if unlocking takes place, will minority shareholders be rewarded? That's a key question you need to ask.
5) Seeing is believing. More of us can just take a simple 30-45min drive down and see for themselves the ppties of HSH and check for themselves the location of the properties and even monitor the progress at 6 Kim Chuan, but the same cannot be said of NT. A drive to a fro KL takes 8hrs??


Core Biz
1) HSH solid track 60-70year track record.
2) Based on what the other forumers brought out : quality of NT management
2) NT biz is stable, strong revenues from TW
2) HSH biz cyclical, recovery timing is hard to guage


All in all, if ur investment sum is 100%, how much would you place in HSH vs NT?

In the end, you have to make a judgement call.

I hope this helps. (i spent 1/2hr putting my thoughts down)

PL

[Underdogger]

Hi Paullow, much appreciated m(x-x)m.

[paullow]

Hi Underdogger,

A point to add, if the much awaited special dividend from NT does not happen, I think it would not be unreasonable to draw parallel to the same outcome even if the value of the ppties in NT are unlocked.

For HSH, look at the dividend payout ratio, sometimes it exceeds the eps and payment is from its cash horde.

For NT, should this special dividend not be paid, unless they come up with a good explanation for hording cash, I don't think it is just fair for the minority shareholders just receiving that 1.5-2c dividend year after year when you know the real deal behind this.

Based on that, decide which company thinks of the welfare of the shareholders more. And if unlocking happens, the shareholders of which company are more likely to benefit from that.

I think the answer should be clear.

[BlueKelah]

guys correct me if I am wrong but from my calculations if we are talking about hoarding cash,

the so called cash hoard of hupsteel is ~25% of market cap, minus the debts which are ~21%+ of market cap is not a lot of net cash.

Same as New toyo, cash 28.75% market cap - debt 13.33% is a bit more than hupsteel net cash but also not a lot of net cash.

on the other hand Neratel / Riverstone have 20% market cap as net cash with 0 debt

Namlee, techwah, spindex which i previously mentioned all have 38%+ market cap as net cash.

So with hupsteel and new toyo i dun think cash on hand is of such high relavance to the valuation. Rather the businesses and unlockable values are their strong points...
and as I said above definitely doesn't look like hoarding much compared to other small caps. maybe new toyo is starting to hoard a bit...

[paullow]

no, we are not talking of a company hording cash per se.

cos most companies have some level of cash anyway. the ones which has nil cash, i think it shd raise red flags++ and we should question ourselves why are we looking into this company in the first place.

rather, a company which has increased its cash level by a significant level via disposal of some assets or injection of new biz etc. so this extra cash over that already present cash level...shouldn't the company think of returning some (of course, we don't expect all) to the shareholders?

(not forgettting that debt part is also impt to know the overall cash position)

If it doesn't, I think it is only fair that it comes up with an explanation for not doing so. Shareholders which can accept will continue to stay on, those cannot accept might just sell off their shares.