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19-07-2017, 03:10 PM
(This post was last modified: 19-07-2017, 03:12 PM by Squirrel.
Edit Reason: corrected to include only related trans
)
(30-05-2017, 10:29 AM)Squirrel Wrote: Trying to look deeper into the valuation for the Shanghai Plant and hoping valuebuddies here can help with taking a look and give their thoughts. Here are the points related to the Shanghai Plant
- 47,035 sqm of gross floor area
- plot ratio unknown
- 32 more years of lease expiring in 2049
- Has undergone at least 3 phases of construction
- Phase 1: 11,293.67 sqm
- Phase 2: 8,647 sqm
- Phase 3: floor area disclosed in the financials, for warehousing purposes
- valuation cert in the YHI prospectus has the buildings valued at $4,607,000 (Phase 1 + 2) as of Dec 2002
Then comes the part in the attempt to determine the value of the plant. In the 2016 AR, its stated that the YHIMS is holding the Shanghai plant at $20,700,000 out of which $11,600,000 is the value of the land and buildings. With a straight line depreciation on the buildings, the value can be estimated to be the following breakdown.
Land: $8.65m
Buildings: $2.95m
This is potentially undervaluing the building as Phase 3 is not included in the estimated building value.
As extracted from the Shanghai property transactions site for transactions in Xinzhuang Industrial. These are properties sold by the Shanghai Municipal Planning and Land Resources Administration (name of the dept as translated by Google Translate)
http://www.shtdsc.com/2016/tdjy/jyjg/crjg/[url=http://www.shtdsc.com/2016/tdjy/jyjg/crjg/][/url]
Land Area (m2) Planned Built up(m2) Plot Ratio Price (RMB) Per m2 Lease per m2 per Yr Transaction date
Plot 239 4,746.40 8,401.13 1.77 ¥7,150,000 ¥851 20 ¥42.55 11-May-17
Plot 240 29,287.30 46,859.68 1.6 ¥35,610,000 ¥760 20 ¥38.00 28-Dec-16
Plot 235 7,289.00 14,578.00 2 ¥10,250,000 ¥703 20 ¥35.16 19-Dec-16
Plot 211 6,919.70 12,386.26 1.79 ¥9,150,000 ¥739 20 ¥36.94 01-Nov-16
Plot 223 10,747.50 21,172.58 1.97 ¥12,340,000 ¥583 20 ¥29.14 02-Dec-15
Plot 232 4,700.10 8,413.18 1.79 ¥5,080,000 ¥604 20 ¥30.19 12-Nov-15
Plot 224 19,577.00 23,492.40 1.2 ¥25,120,000 ¥1,069 50 ¥21.39 18-Dec-14
Plot 217 14,112.00 17,075.52 1.21 ¥18,000,000 ¥1,054 50 ¥21.08 18-Dec-14
Plot 225 10,131.00 26,239.29 2.59 ¥16,830,000 ¥641 50 ¥12.83 18-Dec-14
Plot 222 20,676.00 27,499.08 1.33 ¥26,370,000 ¥959 50 ¥19.18 18-Dec-14
Plot 226 20,785.00 41,362.15 1.99 ¥29,310,000 ¥709 50 ¥14.17 18-Dec-14
Plot 227 9,246.00 18,307.08 1.98 ¥13,040,000 ¥712 50 ¥14.25 18-Dec-14
Plot 214 10,132.00 26,343.20 2.6 ¥16,720,000 ¥635 50 ¥12.69 18-Dec-14
As you can see, the more recent plots post 2014 have shorter leases of 20 years compared to earlier ones.
- Mean and median plot ratio of the above is at circa 1.8
- Average per sqm per year of lease is at RMB38.16 for the last 4 transactions (2016 - 2017)
Assumptions under valuing the Shanghai Plant (Land only)
- Taking a conservative plot ratio of 1.5 (planned built up area of 70,522.5 sqm)
- Average transacted price of 38.16 per sqm per year of lease
- Remaining lease of 32 years
- SGDCNY rate of 4.951
The Shanghai plant will be valued at $17.4m, which is roughly $8.75m markup from book value. Not really meaningful if the management thinks that there is more upside and not intending to sell it yet. However it will lend some base to the rental income analysis that is coming up next.
Anything that i have overlooked here? Appreciate any inputs from the forum buddies
Just an update of more transactions during this period of time in the Xinzhuang area. Seems like management view of further upside in the property might be right.
Land Area (m2) Planned Built up(m2) Plot Ratio Price (RMB) Per m2 Lease per m2 per Yr Transaction date
Plot 250 7,297.60 14,595.20 2 ¥15,400,000 ¥1,055 20 ¥52.76 03-Jul-17
As usual, please do your own due diligence.
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The Executive Director is buying shares in the open market. That has not happened in the past few years and hopefully that's a sign of confidence!
Change in Interest Announcement
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The Executive Director continues to buy from the market.
http://infopub.sgx.com/FileOpen/_YHI-eFO...eID=462420
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YHI has released its latest financial report
http://infopub.sgx.com/FileOpen/YHI-FY20...eID=466659
Some takeaways from the report
Income
- Revenue down mainly on cessation of production at Shanghai factory
- Distribution revenue is up year on year for the 3rd consecutive quarter by 3.3%
- Net profit attributable to Shareholders is up 32.9% year on year if you look at it at face value
- If non recurring losses due to impairment loss and retrenchment costs is removed, for Q2 the net profit after tax and non controlling interests spikes to $3.5m from $1.9m. Year on year profits is up 143.9%!
- Gross profit margin has been improving - FY2016 -> 21.6%
- 1Q2017 -> 23.4%
- 2Q2017 -> 24.1%
- Expect gross profit margin to improve further as it has been announced that "the Group has moved majority of the production capacity to Suzhou and Malaysia factories". 3Q will be the first quarter of full contribution of a trimmed and lean operation
- The Group has "successfully leased out the factory to an interested third party for a lease period of 10 years with rental income to start from 1st November 2017. The rental income is not expected to contribute materially in this financial year but is expected to contribute positively in subsequent financial years."
Balance Sheet
- Borrowings remained largely the same as last quarter
- Payables, receivables and inventories all increased on the quarter. Company still put their emphasis on the "3R" initiative
- Cash hoard continues to increase to $59.3m from $57.0m last quarter
- NAV: 82.85 cents per share
- NCAV: 52.11 cents per share
Going forward?
- Would expect more cash to come in as the group states that "The remaining plant and equipment will be sold locally". There was a total of $9.1m of plant and machinery on the books as of Dec 16. Assuming sale proceeds of $842k and impairment of $1,386 are all related to the Shanghai Factory, there is still a value of $6.872m to be converted into cash, raising the NCAV of the company
- The probability of a sale of the Shanghai Factory increases with a 10 year lease inked. In this yield hungry world, if there is a reliable stream of income attached to the property, it would boost the sale-ability and valuation, barring knowledge of how much the exact rental is.
- Further reduction in interest on borrowings, which still stands at $841k for 2Q. That's an extrapolated $3.36m of interest expense that can be worked on
With this set of results, I can understand why Tay Tiang Guan, Executive Director, was buying shares in the open market.
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YHI has released its 3Q financial report
http://infopub.sgx.com/Apps?A=COW_CorpAn...cement.pdf
Income (3Q)
- Revenue down marginally year on year (Distribution revenue dipped while manufacturing revenue gained)
- Net profit up 133.6% year on year!
Updates
- "With regards to the progress of the leasing plan, the tenant has taken vacant possession of our Shanghai factory on 1st November 2017.". Looks like we can start to see how well the rent contributes to the bottom line in 4Q report
- "Net profit after tax and non-controlling interests attributable to shareholders of the Company increased by 45.5% (or $1.9 million) to $6.0 million in 9M2017 from $4.1 million in 9M2016. Excluding the expenses relating to the cessation of production at Shanghai factory, net profit after tax and noncontrolling interests would have been $8.3 million in 9M2017 compared to $3.6 million in 9M2016."
- Net profit to shareholders at 6.0m. Extrapolating its performance to next quarter, if the company sticks to paying 50% of profits as dividends, we are looking at about 3.4% dividend yield for 2017. That's not taking into account yet the rental income that will be taken in fully in 2018. Taking away one time expense relating to the cessation of production at Shanghai Factory + rental income in 2018, it's not a pipe dream to be looking at a 5% dividend yield at current prices.
Please do your own due diligence. Any reliance on my posts is at your own risk.
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As it stands, notwithstanding still a tough trading environment and the not so well positioned wheel manufacturing business - which was downsized recently - in China, YHI as a group is still an approx. $450.0m business in revenue, fully capable to deliver a normal PBT of approx. $15.0m and to generate an aftertax operating cash flow in excess of $20.0m in a year. After having streamlined its business operations over the last few years, YHI's B/S now is rock-solid for a regional distribution business with an established wheel manufacturing operation spanning China, Taiwan and Malaysia.
As an established and old business, YHI's latest NAV of $244.5m could well be a conservative number, bearing in mind just the industrial properties alone may carry quite a nice hidden reserve. The current low market capitalisation of only $125.7m (based on last done share price at $0.43 and the 292.3m outstanding issued shares) and its big gap when compared with the latest NAV of $244.5m, points to a potential profitable opportunity to study into.
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It’s interesting as well that the amount of cash available in the company is more than sufficient to take out the free float and privatize the business. As time goes by, the > 20m cash flow per year is just going to make the prospects more and more enticing. Personally, no harm in holding such a deep value stock while getting a 5% dividend yield (expected 2018 div) and waiting for catalysts (sale of shanghai plant, privatization, revert to 7% net profit margins at peak etc) for revaluation.
Please do your own due diligence. Any reliance on my posts is at your own risk.
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(27-02-2018, 10:33 PM)bargainhunter Wrote: http://infopub.sgx.com/FileOpen/YHI-FY20...eID=490556
hi bargainhunter,
please follow good posting ethics by at least elaborating something with the link.
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