Emperor International Holdings (0163)

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Price look so cheap (high dividend, low price earning). Somebody know why?
The company ( 0163.hk) has just reported its interim results for 6 months to 30 Sept 2012 and latest eps at $0.74 and declared int div at $0.052. It seems about 3/4 of the declared profit comes from changes in fair value of its property portfolio and 1/4 from revenue.

If any of you guys visit Macau , take look at the lobby of the Emperor Hotel for its rather novel attraction . My Visit to Macau about 2 years ago, I remember seeing in the Hotal lobby , the floor has 35 or 38 gold bars laid in glass covered recesses ( presumably armoured glass plate).
One local paper has tipped the share now standing at $2.12 with a target price of $2.80, justifying his target price by pointing to the recent good Interim result - eps up 64% .
share price $1.74
NAV/share $6.37
P/B 0.27
Market Cap HKD 6.39B

Company has not traded above 0.6x P/B since listed. I wonder if it is a value trap? However it has not missed a dividend payout since being spun off in 2008. At current price, it is yielding 6.3%. Getting 6.3% p.a. and waiting for Mr Market to take notice of this counter sounds like a fair deal? I did not list down the P/E ratio as it is all skewed due to revaluation gains.

Brief background on the business is divided into 3 segments,

Property Investment
Hong Kong - Company has the largest shop-front coverage at the street-level shops at Russell Street, which is ranked No.1 in terms of rental price per square foot globally and close to 100% occupancy. The Pulse is a multi-functional beach-front shopping complex with a gross area of approximately 167,000 square feet in Repulse Bay. To be launched in 2014.

Macau - Reveloping Nos. 71-75 Avenida do Infante D. Henrique & Nos. 514-540 Avenida da Praia Grande to a multi-storey shopping complex to enjoy stable rental income and long-term rental increment on the intrinsic value of this property investment upon its redevelopment completion in 2014.

PRC - 2 major projects in Beijing and Shanghai.
Chang’an Avenue East in Beijing to be developed into a Grade-A office tower with a total gross area of approximately 1,000,000 square feet. Completion in 2016.
Yuyuan, Huangpu District, Shanghai, Emperor Star City will be developed into a shopping arcade and hotel or service apartment complex at the prime site adjacent to the Shanghai M10 subway route. With an expected total gross area of approximately 1,300,000 square feet, the complex will include a multi-storey shopping arcade as its major component.

Hospitality - owns 2 hotels, Grand Emperor Hotel in Macau and Emperor (Happy Valley) Hotel in HK. Company is going to redevelop Emperor Hotel(Happy Valley) into residential units upon completion of the hotel in Portland St.

They are building 2 more hotels. 1 in Queen’s Road East, Wanchai, with a gross floor area of approximately 115,000 square feet. It will be built as a 29-storey hotel with about 300 rooms with leisure, dining and parking facilities with target completion in 2016. The second one is located at Nos. 54-60 Portland Street, Kowloon, with a gross floor area of approximately 48,000 square feet. It will be built as a 30-storey hotel with about 200 rooms, which is expected to commence its business in 2015.

Property Development - They have various projects in HK with total GFA of 312,600 sqft unsold+yet to be launched at a book value of HKD 2.32B.

Total segment profit(excluding revaluation gains and before tax) for 1H/2014 was HKD 754m. Extrapolating that, we can expect FY segment profit(after tax) to be HKD [754x2x(1-0.165)] = HKD 1259m. At current market cap of 6390m, it is trading at 5.1x earnings. I have not taken into account rental growth from The Pulse, the Macau shopping complex and also the new hotels which will allow the company to increase earnings in FY15 onwards.

Downside risks - the company is linked to Albert Yeung. Quite a controversial figure in Hong Kong from what i have read about him online.

Any valuebuddies vested do share more information, thanks!

(in my watchlist)
Emperor-led team rule at Shouson Hill
Karen Chiu
Thursday, May 15, 2014

A consortium led by Emperor International Holdings (0163) has won a luxury residential plot on Shouson Hill Road West for HK$30,889 per buildable square foot. It is believed to be the fifth most expensive site on Hong Kong Island, with selling prices to reach HK$80,000 per square foot.

The consortium - in which Emperor holds 40percent - splashed HK$2.71 billion to acquire the 116,897 sq ft plot, outbidding 15 rivals such as Sun Hung Kai Properties (0016) and Henderson Land Development (0012). Other partners of the consortium are Shimao Property Holdings' (0813) chairman Hui Wing-mau and Mingfa Group International Co (0846).

The site, with a maximum gross floor area of 87,672 sq ft, is located at the junction of Shouson Hill Road West and Wong Chuk Hang Path.

Emperor's executive director Donald Cheung Ping-keung said around 20-30 townhouses will be built measuring 3,000-4,000 sq ft each. "Around HK$1 billion will be invested for construction in the coming 36-42 months," he added. Surveyors expected the plot to fetch between HK$2.63 billion and HK$3.3 billion, or HK$30,000- HK$37,600 per buildable sq ft.

Vincent Cheung Kiu-cho, national director of Greater China at Cushman & Wakefield said the price paid for the plot is reasonable. He was referring to a recent transaction carried out at Shouson Peak, which was around HK$79,784 psf.


land price - HK$30,889/psf
construction cost - HK$1b/87,672sqft = HK$11,406/psf
total cost - HK$42,295/psf

assuming ASP at HK$65,000/psf,
emperor's PAT for project = (HK$65,000 - HK$42,295) x 87,672gfa x 40% share x (1-0.165 tax) = HK$665 million
EPS = HK$665 million / 3.67b shares = HK$0.18

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