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In the absence of special dividends from asset sales, do buddies think that mkt will be happy with recurrent ordinary div of 2 cents, a miserable 2.63% div yield while watching Metro's huge cash pile "rotting" in an elevated inflationary environment?
In addition, mkt does not appeared to have answers on how Metro is going to narrow the huge discount to book value of $1.346. At least based on the signals that was provided so far, I suspect mgt remain clueless if posed a similar question during their annual lavish agm.
(30-05-2012, 11:28 PM)ngcheeki Wrote: Some hint from the performance Review section:
"General and administrative expenses rose to $13.1 million in 4QFY2012 from $10.1 million in 4QFY2011 mainly due to provisions for management performance bonuses relating to the disposal of the Group’s interest in Huamao"
Actually the 6 cents dividend declared is better than what I had expected, at least besides rewarding himself, JO also know how to reward minority shareholder.
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I wish that the discount to book value can be narrowed as well but let's be fair to Metro too, they are not the only property counter trading at a steep discount to NAV. The 2cts dividend seems kinda fixed but there is no saying that it cannot be increased. Maybe more clarity will be shed during the AGM.
I'm satisfied with the 6c dividend payout so no complaints there. Let's watch and see how they execute in the upcoming FY.
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ordinary dividend of 2 cents is largely supported by its operation from property and retail. absence of asset disposal probably would result in absence of special dividend.
on a separate note, would Metro distribute part of its cash hoard to its shareholders? The current situation is similar with what happened when they disposed Ngee Ann City. But at that time, there was S44 tax benefit which might push Metro to distribute more to shareholders in 2007.
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To quote Security Analysis:
"Common stocks in this category practically always have an unsatisfactory trend of earnings. If the profits had been increasing steadily, it is obvious that the shares would not sell at so low a price. The objection to buying these issues lies in the probability, or at least the possibility, that earnings will decline or losses continue and that the resources will be dissipated and the intrinsic value ultimately become less than the price paid. It may not be denied that this does actually happen in individual cases.
On the other hand, there is a much wider range of potential developments which may result in establishing a higher market price. These include the following:
1. The creation of an earning power commensurate with the company’s assets. This may result from:
a. General improvement in the industry.
b. Favorable change in the company’s operating policies, with or without a change in management. These changes include more efficient methods, new products, abandonment of unprofitable lines, etc.
2. A sale or merger, because some other concern is able to utilize the resources to better advantage and hence can pay at least liquidating value for the assets.
3. Complete or partial liquidation.
Discrimination Required in Selecting Such Issues.
There is scarcely any doubt that common stocks selling well below liquidating value represent on the whole a class of undervalued securities. They have declined in price more severely than the actual conditions justify. This must mean that on the whole these stocks afford profitable opportunities for purchase. Nevertheless, the securities analyst should exercise as much discrimination as possible in the choice of issues falling within this category. He will lean toward those for which he sees a fairly imminent prospect of some one of the favorable developments listed above. Or else he will be partial to such as reveal other attractive statistical features besides their liquid-asset position, e.g., satisfactory current earnings and dividends or a high average earning power in the past. The analyst will avoid issues that have been losing their current assets at a rapid rate and show no definite signs of ceasing to do so."
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if you are a practitioner of Buffett's investment philosophy, Metro would not be anywhere near a good choice. But if you are a practitioner of Graham's investment philosophy, Metro could be a viable choice if the price paid is right. the liquidation value of Metro is more than its market price and the return though not good, above 5% of ROIC should not be a big problem.
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based on market price, i am getting close to 8% annual yield. not bad.
i rather metro keeps those cash for opportunistic use for a strong balance sheet than pass them back to retail shareholder.
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it is not beneficial for the business to distribute the cash to its shareholders, but at least, the company should be active in buying back its own shares, not that would cost a lot of money due to its tight liquidity. Another great way to reward its shareholders.
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Share buyback is IMO an unsustainable way of rewarding shareholders. Value adds to EPS and NAV but it's just an illusion. Rather the company use the cash to generate other streams of real earnings.
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Based on the latest financial results, there is little doubt that Metro's recurrent cash generated from operations is around the ordinary dividend rate of 2 cents a share.
However, even after netting off the current of 6 cents to be paid, the net cash sitting on the books of 46 cents (which excludes another 20 cents in liquid short and long term investments) remains glaring especially relative to the last traded share price of 77cents and NTA post dividends of S$1.28.
Management's inaction with regards to strategies on narrowing the gap between mkt price and underlying worth of the company underlines the lack of value that is assigned to either the cash hoard or other assets sitting in the company.
While one can fall back on Metro's track record in realising value in China, the latest realisation of its biggest lemon, Metro City Beijing, can be viewed as a narrow escape for the company and probably the last in the next 3 years.
As the seeds sowed for future assets realisation have visibly slowed, it is hard to forsee how Metro can sustain special dividends unless they change their dividend policy or their approach to enhance shareholders' wealth through share buybacks.
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(04-06-2012, 08:48 AM)greengiraffe Wrote: Based on the latest financial results, there is little doubt that Metro's recurrent cash generated from operations is around the ordinary dividend rate of 2 cents a share.
However, even after netting off the current of 6 cents to be paid, the net cash sitting on the books of 46 cents (which excludes another 20 cents in liquid short and long term investments) remains glaring especially relative to the last traded share price of 77cents and NTA post dividends of S$1.28.
Management's inaction with regards to strategies on narrowing the gap between mkt price and underlying worth of the company underlines the lack of value that is assigned to either the cash hoard or other assets sitting in the company.
While one can fall back on Metro's track record in realising value in China, the latest realisation of its biggest lemon, Metro City Beijing, can be viewed as a narrow escape for the company and probably the last in the next 3 years.
As the seeds sowed for future assets realisation have visibly slowed, it is hard to forsee how Metro can sustain special dividends unless they change their dividend policy or their approach to enhance shareholders' wealth through share buybacks.
hi gg,
How much is their 30% stake in EC mall worth now?
Thanks!
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