(21-10-2013, 01:05 PM)Stockerman Wrote: what is the pt of waiting 10 years for apprecipation of NAV Hupsteel? if u need exposure to property markets, buy REITs, developer counters, etc
with its steel business in doldrum, it is a matter of time that dividend is cut further... rental from Kim Chuan will take at least 2 yrs from now to kick in. And are we assuming the occupancy will be 100%? (quite unlikely)...
REITS borrow extensively to fund their purchases. They get loaded with higher credit risk in exchange for potentially higher returns (n possibly mkt risk if rates are not fixed).
Hupsteel is almost always net cash.
ROE is crappy because of
1. strong competition in the steel products business
2. its inability to control steel prices(it is a price taker since it is not up the value chain), and,
3. a lack of financial leverage on its balance sheet since it has very little liabilities (higher financial leverage = higher ROE and some companies utilize financial leverage for the purpose of ROE magnification)
However, the management has shown itself to be pretty prudent over the years. It
1. does not do smoke and mirrors like offering dividends in the form of more units instead of cash
2. manages its balance-sheet conservatively
3. controls its expenses pretty well
4. offers a stable yearly ~4% dividend
5. buys back its shares from the market
6. has so far not done stuff that wrecks shareholder value like granting its BoD stock options as bonuses (REITS do this --> throw options at their fund-managers as a form of compensation)
The directors are basically signalling the market that they are as vested as common shareholders are in the company.
In the last year, its annual report stated that fund managers were hired to manage its excess cash. I hope these fund managers are not another cash-sink like so many have proven to be. The only other fear I have is that they will take the company private in a stock market collapse.
Vested for a pretty long time liao.
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