Lee Kim Tah Holdings

[D123]

Does anyone know the exact share of JP that LKT holds in terms of lettable area? their 2009 AR says 61,527 sqm or 662,031 sqft, but the jurong point website says that the whole JP only has 750,000 sqft of space. I'm trying to figure out a better estimate of the value of their JP holding...

Anyway, based on the gross revenue from investment properties of $43mn (average of 2009 and projected 2010) and a gross rental yield of 8%^, the properties may be revalued to $537.5mn. At end of FY09, the joint venture that manages JP has recorded investment properties of $454.3mn and net assets of $225.4mn. Assuming the properties are revalued and everything else stays the same, net assets will be revalued to $308.6mn. So if the project were spun off at NAV, and proceeds distributed, then shareholders can see $0.61 in cash?

I'd like to cross check the valuation of the property via other methods though, so if anyone knows what the lettable area of JP is, please let me know!

^using CMT's and FCT's past figures as a comparison.

[lavue]

Based on the current rental rates - running at $10.92m/quarter, or approx. $44.0m/year - see Note 1, p3, of the latest Q3-FY10 results announcement.....
http://info.sgx.com/webcoranncatth.nsf/V...8002F90AE/$file/September2010Results.pdf?openelement
- LKT would have collected approx. $220.0m in gross rentals in the next 5 years on its shares of JP1 nad JP2!

We have to also bear in mind Jurong is a large area and has a growing population catchment. Already with the main bus-interchange in Jurong integrated into the mall, JP should continue to serve as the main MRT-bus connection point in Jurong for many years to come.

When the MRT Tuas extension is finished and running in 5 years' time, people who travel from other parts of Singapore to Jurong to work in factories/offices nearby the new MRT stations will likely use the MRT and avoid JP. As well, some residents in Jurong may find it more convenient to travel to the new MRT stations to catch the train for other parts of Singapore, thereby also by-passing JP. Apart from these 2 groups, and unless another large shopping mall is built along the MRT Tuas extension, JP should remain as the main connection point in Jurong and the best place to meet, eat and shop.

However, I think we should all learn from this change that even a well-positioned shopping mall has a certain economic life, and its fortune may change over time due to market/population dynamics or a change in the transport infrastructures supporting the flow of visitors/shoppers.

Hi dydx,

I think the reason that JP was highly successful in the past is due to the fact that it was the only shopping mall in the west which was serviced by a bus interchange and mrt station. Two other competitors are IMM Building and West Coast Mall (both owned by CapMallsTrust), neither of which are serviced by extensive public transport in the same way that JP is. IMM Building is positioned more as a warehousing mall. The retail outlets arent very attractive (at least in the words of my female friends). "They're more like factory outlet shops". The management even had to waive parking fees at night to pull in the crowds. West Coast Mall seems to have a problem achieving high occupancy rates, given how I observed several shop spaces left empty over a long period.

I think that Clementi Mall (opened in Jan 2011) and a potential mall by LendLease@Lakeside (tentatively to be ready by 2015) will serve as serious competition, instead of creating synergistic energies for the region as was implied in this report. Clementi Mall has strong backers in the form of SPH, which has prior experience managing Paragon, and NTUC. Lendlease manages the highly popular 313@Somerset and Parkway Parade Malls.

To further illustrate my example about the Jurong Lake district not benefitting JP, I highlight the example of the malls along the North East Line (Heartland Mall@Kovan, HougangMall@Hougang, and Compasspoint@Sengkang). I do not think these malls complement one another. Each is located along a station on the NEL and each aims to capture the traffic from its surrounding catchment area. Tenants can easily shift from one mall to another if rents at a particular mall gets too high. Even if this does not happen (JP having strong branding/Management having good working relations with its tenants), at the very least, the increase in suburban retail space so near their doorstep will soften rents.

Other Factors to be Concerned About:
1. The Queensland investment properties being affected by the Australian floods.
2. The SIPCOT project being delayed indefinitely

[Yang_Li]

I have done a little calculation to see what can the company make from its fixed-income segments.
In 2010, there was a slight improvement vs. 2009 but results are quite consistent:
Investment Properties Revenues = 44.3M
Hotel Operations Revenues = 10M
Other = 1M
So total revenues came at 55.36M during 2010. The expenses, as I calculated them were 28.44M Which leaves us with a pre-tax income of 26.92M.
I took the tax at 17% so the net income that is attributable to the "fixed-income" segment comes at 22.34M. On a market cap of 257M it reflects a PE of 11.5 just for the income derived from rent and the hotel operations. Those assets are mainly high quality ones so I feel safe to assume low risk for that income.

It will be helpful if someone who knows the company better than I do will shed some more light about the development pipeline and expected income from the development segment. That is the missing peace in the puzzle to better understand whether the current price reflects a buy opportunity or the company is priced at a fair value.

[dydx]

Just reviewed the latest FY10 (ended 31Dec10) AR which makes interesting reading.....
http://info.sgx.com/listprosp.nsf/07aed3...200336b39/$FILE/LeeKimTah_AR2010.pdf

Key points noted -
1) The capital value of LKT's stake in JP has gone up - by $31.25M in FY10 - to $480.25m as at 31Dec10, equivalent to $0.95/share (based on the 505.443m issued shares outstanding). This prime asset alone generated most of LKT's rental from investment properties and related income in FY10 of $44.313m, +7.1% yoy.

2) LKT's 31Dec10 net debt position was down by $58.07m, to $186.25m, vs. $244.32m as at 31Dec09. This is mainly attributed to the solid recurrent rental from JP and sale of some residential units in Australia in the FY.

3) NAV/share as at 31Dec10 has gone up to $0.65, from $0.59 as at 31Dec09. Quite obviously, this number is grossly understated. Just one item alone - the 74,51%-owned, 42.13 hectares (1 hectare = 10,000 sq.m) piece of freehold development land located at Plot-K1, SIPCOT Information Technology Park, Siruseri, Tamilnadu, India - should be worth many times over its corresponding BV. [Refer details in Note 15, p58.]

[dydx]

LKT's Q1 (ended 31Mar11)-FY11 results (first released on 11May11) makes interesting reading.....
http://info.sgx.com/webcoranncatth.nsf/V...D002EF75C/$file/March2011Results.pdf?openelement

It is relevant for LKT shareholders to note that per share NAV has increased by a good $0.0508 in Q1, to reach a new record of $0.7004 as at 31Mar11, mainly because of the increase in market-based valuation of Jurong Point. The mall has continued to deliver higher rental and related income to its owners, and in Q1 contributed $11.293m (+4.56% yoy) - i.e. at a running rate in excess of $45.0m a year - to LKT's total revenue of $14.518m and profits.

[dydx]

Just checked my bank account this morning and noted a nice credit from LKT's $0.01/share Final dividend for FY10. Feeling good for a rather lethargic Friday market day!

It is a little strange to me that this time round the Lee Family did not re-start buying more LKT shares from the market after the announcement of the Q1-FY11 results on 11May11. Is it possible that something is going on in LKT and, as a result, the Lee Family as insiders is prevented from dealing in the shares in the interim?

[dydx]

For no reason LKT's share price has gone up $0.035 today, to close at $0.55. From the transactions record, someone took the lot up to $0.56 in the first transaction in the morning, and the same party or others continued to accumulate at the $0.55 level throughout the day, which saw a total of 129 lots done. Something positive coming soon?

[memphisb]

I remembered there is a high of .57 last yr.

[Musicwhiz]

For no reason LKT's share price has gone up $0.035 today, to close at $0.55. From the transactions record, someone took the lot up to $0.56 in the first transaction in the morning, and the same party or others continued to accumulate at the $0.55 level throughout the day, which saw a total of 129 lots done. Something positive coming soon?

Perhaps a GO coming soon? You have a good track record of picking such companies!

[RBM]

Sincere apologies for not earlier attaching the piece I referred to. Dementia worse than I thought. But the "analysis" doesn't add much IMHO. RBH

I read the following, so-called, analysis by Lim & Tan Securities on Lee Kim Tah. It is negative on the stock. I am not so down about it - for a start, much more than indicated below is in hands connected with the Lee family - only a tad over 20% is in public hands according to their last Annual Report. And I believe LKT has a good asset base, with sound management who are putting their money where their mouth is by gradually buying up stock........ with the potential upside of a GO. Looking at some of the numbers mentioned earlier in this thread I believe Lim & Tan are missing a point. I'll be going in.

******************************************************
LIM & TAN SECURITIES PTE LTD
20 CECIL STREET, #09-00 EQUITY PLAZA
SINGAPORE 049705

LEE KIM TAH - S$0.55-LKTS.SI

www.remisiers.org/cms_images/DReview_LT_09062011.pdf