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19-04-2012, 08:58 AM
(This post was last modified: 19-04-2012, 08:59 AM by propertyinvestor.)
(19-04-2012, 08:22 AM)Behappyalways Wrote: nah i did not go because i realise you can't teach an old dog new tricks. Bythe way, did you enjoy the carrot cake? ^^
Such words of wisdom....nice to re-read and learnt from it
(26-02-2012, 05:18 AM)Behappyalways Wrote: A nice read on share repurchase
Charlie and I have mixed emotions when Berkshire shares sell well below intrinsic value. We like
making money for continuing shareholders, and there is no surer way to do that than by buying an asset – our
own stock – that we know to be worth at least x for less than that – for .9x, .8x or even lower. (As one of our
directors says, it’s like shooting fish in a barrel, after the barrel has been drained and the fish have quit flopping.)
Nevertheless, we don’t enjoy cashing out partners at a discount, even though our doing so may give the selling
shareholders a slightly higher price than they would receive if our bid was absent. When we are buying,
therefore, we want those exiting partners to be fully informed about the value of the assets they are selling.
Berkshirehathaway's letters on Share Repurchases
Share Repurchases
Last September, we announced that Berkshire would repurchase its shares at a price of up to 110% of book
value. We were in the market for only a few days – buying $67 million of stock – before the price advanced beyond
our limit. Nonetheless, the general importance of share repurchases suggests I should focus for a bit on the subject.
Charlie and I favor repurchases when two conditions are met: first, a company has ample funds to take
care of the operational and liquidity needs of its business; second, its stock is selling at a material discount to the
company’s intrinsic business value, conservatively calculated.
We have witnessed many bouts of repurchasing that failed our second test. Sometimes, of course,
infractions – even serious ones – are innocent; many CEOs never stop believing their stock is cheap. In other
instances, a less benign conclusion seems warranted. It doesn’t suffice to say that repurchases are being made to
offset the dilution from stock issuances or simply because a company has excess cash. Continuing shareholders
are hurt unless shares are purchased below intrinsic value. The first law of capital allocation – whether the
money is slated for acquisitions or share repurchases – is that what is smart at one price is dumb at another. (One
CEO who always stresses the price/value factor in repurchase decisions is Jamie Dimon at J.P. Morgan; I
recommend that you read his annual letter.)
Charlie and I have mixed emotions when Berkshire shares sell well below intrinsic value. We like
making money for continuing shareholders, and there is no surer way to do that than by buying an asset – our
own stock – that we know to be worth at least x for less than that – for .9x, .8x or even lower. (As one of our
directors says, it’s like shooting fish in a barrel, after the barrel has been drained and the fish have quit flopping.)
Nevertheless, we don’t enjoy cashing out partners at a discount, even though our doing so may give the selling
shareholders a slightly higher price than they would receive if our bid was absent. When we are buying,
therefore, we want those exiting partners to be fully informed about the value of the assets they are selling.
At our limit price of 110% of book value, repurchases clearly increase Berkshire’s per-share intrinsic
value. And the more and the cheaper we buy, the greater the gain for continuing shareholders. Therefore, if given
the opportunity, we will likely repurchase stock aggressively at our price limit or lower. You should know,
however, that we have no interest in supporting the stock and that our bids will fade in particularly weak markets.
Nor will we buy shares if our cash-equivalent holdings are below $20 billion. At Berkshire, financial strength
that is unquestionable takes precedence over all else.
* * * * * * * * * * * *
This discussion of repurchases offers me the chance to address the irrational reaction of many investors
to changes in stock prices. When Berkshire buys stock in a company that is repurchasing shares, we hope for two
events: First, we have the normal hope that earnings of the business will increase at a good clip for a long time to
come; and second, we also hope that the stock underperforms in the market for a long time as well. A corollary to
this second point: “Talking our book” about a stock we own – were that to be effective – would actually be
harmful to Berkshire, not helpful as commentators customarily assume.
Let’s use IBM as an example. As all business observers know, CEOs Lou Gerstner and Sam Palmisano
did a superb job in moving IBM from near-bankruptcy twenty years ago to its prominence today. Their
operational accomplishments were truly extraordinary.
But their financial management was equally brilliant, particularly in recent years as the company’s
financial flexibility improved. Indeed, I can think of no major company that has had better financial management, a
skill that has materially increased the gains enjoyed by IBM shareholders. The company has used debt wisely, made
value-adding acquisitions almost exclusively for cash and aggressively repurchased its own stock.
Today, IBM has 1.16 billion shares outstanding, of which we own about 63.9 million or 5.5%.
Naturally, what happens to the company’s earnings over the next five years is of enormous importance to us.
Beyond that, the company will likely spend $50 billion or so in those years to repurchase shares. Our quiz for the
day: What should a long-term shareholder, such as Berkshire, cheer for during that period?
I won’t keep you in suspense. We should wish for IBM’s stock price to languish throughout the five years.
Let’s do the math. If IBM’s stock price averages, say, $200 during the period, the company will acquire
250 million shares for its $50 billion. There would consequently be 910 million shares outstanding, and we
would own about 7% of the company. If the stock conversely sells for an average of $300 during the five-year
period, IBM will acquire only 167 million shares. That would leave about 990 million shares outstanding after
five years, of which we would own 6.5%.
If IBM were to earn, say, $20 billion in the fifth year, our share of those earnings would be a full $100
million greater under the “disappointing” scenario of a lower stock price than they would have been at the higher
price. At some later point our shares would be worth perhaps $11⁄2 billion more than if the “high-price”
repurchase scenario had taken place.
The logic is simple: If you are going to be a net buyer of stocks in the future, either directly with your own
money or indirectly (through your ownership of a company that is repurchasing shares), you are hurt when stocks
rise. You benefit when stocks swoon. Emotions, however, too often complicate the matter: Most people, including
those who will be net buyers in the future, take comfort in seeing stock prices advance. These shareholders resemble
a commuter who rejoices after the price of gas increases, simply because his tank contains a day’s supply.
Charlie and I don’t expect to win many of you over to our way of thinking – we’ve observed enough
human behavior to know the futility of that – but we do want you to be aware of our personal calculus. And here
a confession is in order: In my early days I, too, rejoiced when the market rose. Then I read Chapter Eight of Ben
Graham’s The Intelligent Investor, the chapter dealing with how investors should view fluctuations in stock
prices. Immediately the scales fell from my eyes, and low prices became my friend. Picking up that book was one
of the luckiest moments in my life.
In the end, the success of our IBM investment will be determined primarily by its future earnings. But
an important secondary factor will be how many shares the company purchases with the substantial sums it is
likely to devote to this activity. And if repurchases ever reduce the IBM shares outstanding to 63.9 million, I will
abandon my famed frugality and give Berkshire employees a paid holiday.
Boss Lee dont like to spend money to buy back shares that sit around in the company balance sheet and do nothing. He need money to buy land. As he mention that SH needs money to prepare themselves for opportunity, most likely there would probably be a bonus issue to reward shareholders in the near future.
(18-04-2012, 09:01 PM)ngcheeki Wrote: The following is what I'd noted based on my recollection and those who had attended the AGM please correct if there are any errors.
Projects sale status
====================
The Laurels
===========
Number of Units Sold: 216 out of 229
Percentage Sold by Units: 94%
Total Revenue: S$635.7 millions
Number of Unit Remains: 13
TOP on Q3 of 2013.
ROI: around 20 to 23% (someone asked the margin of The Laurels)
Question: Why there is a change from Q1 2013 to Q3 2013?
CEO replied that based on contract it is supposed to be completed on Q1 2013. However, due to weather condition and construction progress it is
better to revise to Q3 2013. The sale agreement with property buyer is on Q3 2013.
Cost of construction: 95 millions to 100 millions (Provision of raw material prie increase)
Customer statistics: 50% foreigner and mainly indonesian
Biz Tech @ Aljunied:
===================
Number of Units Sold: 31 out of 89
Percentage Sold by Units: 38,4%
Total Size 65,664 psf
Rental Rate: S$2.8 psf
Selling price at S$640 to S$780
Note: There are additional 2 units of Biz Tech sold since Dec 2011 at the price of $780 psf
Sing Holding will only sell off the remaining at the 'right' price and the company does not intend to lower the remaining units of Biz Tech to increase
sale.
Robin
======
200m from steven MRT completed by 2015 to 2016
Total price is S$176.33 million
Total Size: 135,462.4 square ft
land price: S$1,302 psf
Construction Cost: Around $450
Expected ROI: 15%
High end property construction cost is around $450 to $500 psf including show flat cost.
Launched date: Not Known
Reason: Construction of the new development will probably commence after Q1 2013. The company's is to complete the construction by the time the MRT is completed
by 2015 - 2016. However, the main reason of delay I speculate in launching the robin is because of 'reliable' information that Steven MRT station will be an i
MRT interchange for 2 MRT lines and there is a high possibility that the government will revise the plot ratio of the land. This is according to the
question asked by a lady who was a former stock analyst if I'm wrong from BNP Paribus. For your information, the current plot ratio is 1.4 and the neighour
ing unit is 2.1. The possibility of revision of plot ratio will only be known by Feb 2013. (5 Years Master Plan, last master plan was reviewed at 2008)
Question: What is the current earning per share (EPS) of the group as per End of 2011 and how much earning per share projected at the December end of the year 2012?
CFO Reply: Based on the current cash of 77,569 K the EPS is around 400,994,652 shares, the EPS is around 19 cents. The CFO said that based on the average
assumption of $4,000,000 cash inflow per month, by end of the year it will be having an additional cash of S$48,000,000 or 12 cents.
Question: Remuneration of CEO and directors have increase 100% (from 0.75 to 1 million to 1.5 million to 1.75 million) whereas the dividend only increase
33.33% from (0.75 o 1 cent). Are there any plan to enhance the shareholder value via bonus issues, special dividend and share buy back?
Answer: % of Dividend and directors renumerations are 2 independent things. He answered that the remunderation committee based on many factors
to decide the salary for the directors. When the company is doing well, there will be additional bonus paid to the them. As a result, the proportion of
bonus is much higher this year compared to last year.
On the issues of enhancing the shareholder value, the directors are exploring the options of measures to enhance shareholder value when the result is good
including using bonus share and special dividend like during FY 2007 with the issue of special dividend. However, CEO that share buyback is unlikely to be
happened because of 2 reasons: 1. Property development bussiness required a large amount of cash to pay contractor or buy land 2. Share buyback will decrease
liquity of the share and artifically prop up the share price. Loyal shareholder will suffer in the event that share buyback end when share price drop.
(18-04-2012, 05:08 PM)propertyinvestor Wrote: Seems like got fund managers interested in the counters!
Are you refer to the lady in blue? Based on what I overheard, she was formerly an stock analyst from BNP Paribas and she is now managing some funds? By the way, the guy with her if I'm not wrong was someone from AmFraser. There was a question asked by the lady on the stock coverage of Sing Holding and CEO replied that there was in 2008 by KE and philip security. There is a high chance that there might be coverage of sing holding based on their conversation with CEO.
Just my speculation only.
Yea the lady in blue who was talking to the Boss. I heard her say she was representing some funds?
Isnt AmFraser one of the top 20 shareholders?