Forterra Trust (formerly: Treasury China Trust)

[greengiraffe]

I understand that many here are vested in Forterra. However, I would like to play devils advocate here. Given that NF is a substantial holder in Forterra, little will go wrong going forward. However, how to close the valuation gap between the mkt price and book value of Forterra remains to be seen.

I will based my analysis of NF's strategy towards Chinese properties via my experience with Metro over the last decade. Metro has several fruitful participation in NF led Chinese projects over the decade. Metro has made a lot of $ in these ventures.

However, apart from the NF led Tesco projects, they have little JVs left.

Given the well publicised Chinese economic slowdown, I think the era of substantial capital gains via developing and selling Chinese real estates could well be over. However, well located viable projects will generate improved yields as the restructuring of Chinese economy towards domestic consumption will underpin such a transition.

With its portfolio of largely matured assets, NF is probably looking for a REIT platform to monetise their assets over time. As we all know, REIT will only acquire assets from their parent/sponsor usually on an accretive basis and it is not uncommon for financial engineering to be involved before injection or post injection for such acquisitions to be viable.

Forterra in this instance may not have a good bargaining position given its poor historical track record. There is no doubt that Forterra is cleaning up the historical mess with the help of NF experience in China but Forterra has to be restore to a reasonable health and make substantial progress with their yet to be completed projects before any of the intended accretive acquisitions can materialise and hence it is my view that the restructuring todate are corporate moves that are necessary for a cleaner slates.

The ongoing restructuring and completion of projects under NF guidance will take time and until these projects stablise, I personally do not think NF can count on any of their contributions to help Forterra acquire.

If we draw a further experience of CRCT, a darling right after its IPO pre the GFC, it has taken the last 7 - 8 years for yield of its portfolio to stabilise and start achieving REIT style of organic growth. With all due respects to NF, if they can shorten the restructuring cycle for Forterra to less than 3 years of their strategic entry, it will by no means be a huge success given the tough China market that is not help by the current deceleration in economic growth.

Not Vested
GG

[Boon]

FT has released 1Q2014 results - the results are within my expectations.

But the sudden drop in the levels of disclosure is definitely a surprise to me – Wondering if it still meets disclosure requirements? And Why NF is doing this?

Compare to previous results announcements, in the 1Q2014 results, there are:

1) No more Results Presentation slides
2) No photos
3) No graphics
4) No Executive Summary
5) No Highlights
6) No reporting on Occupancy and lease renewal
7) No reporting on the tenant-fit out progress of The Place Phase 1 (HQ1) and leasing commitment status.
8) No reporting on the construction progress of The Place phase 2 & 3 and leasing commitment status
9) No update on the launch dates of The Place Phase 1, 2 and 3 (HQ 1, 2 and 3)

Very strange indeed !

(vested)

Executive Summary and Presentation are now posted on the Forterra Website. I don't know why they haven't been filed with SGX

Thanks.

Executive Summary used to be part of the result announcement - in one document. Now it has become two documents - one posted on SGX website and one on the company website. Wondering why?

Anyway, it is good to see that good leasing progress has been made on the Place.

(vested)

[Boon]

I understand that many here are vested in Forterra. However, I would like to play devils advocate here. Given that NF is a substantial holder in Forterra, little will go wrong going forward. However, how to close the valuation gap between the mkt price and book value of Forterra remains to be seen.

I will based my analysis of NF's strategy towards Chinese properties via my experience with Metro over the last decade. Metro has several fruitful participation in NF led Chinese projects over the decade. Metro has made a lot of $ in these ventures.

However, apart from the NF led Tesco projects, they have little JVs left.

Given the well publicised Chinese economic slowdown, I think the era of substantial capital gains via developing and selling Chinese real estates could well be over. However, well located viable projects will generate improved yields as the restructuring of Chinese economy towards domestic consumption will underpin such a transition.

With its portfolio of largely matured assets, NF is probably looking for a REIT platform to monetise their assets over time. As we all know, REIT will only acquire assets from their parent/sponsor usually on an accretive basis and it is not uncommon for financial engineering to be involved before injection or post injection for such acquisitions to be viable.

Forterra in this instance may not have a good bargaining position given its poor historical track record. There is no doubt that Forterra is cleaning up the historical mess with the help of NF experience in China but Forterra has to be restore to a reasonable health and make substantial progress with their yet to be completed projects before any of the intended accretive acquisitions can materialise and hence it is my view that the restructuring todate are corporate moves that are necessary for a cleaner slates.

The ongoing restructuring and completion of projects under NF guidance will take time and until these projects stablise, I personally do not think NF can count on any of their contributions to help Forterra acquire.

If we draw a further experience of CRCT, a darling right after its IPO pre the GFC, it has taken the last 7 - 8 years for yield of its portfolio to stabilise and start achieving REIT style of organic growth. With all due respects to NF, if they can shorten the restructuring cycle for Forterra to less than 3 years of their strategic entry, it will by no means be a huge success given the tough China market that is not help by the current deceleration in economic growth.

Not Vested
GG

In the NF/HSBC(Infrared)/Tesco/Metro deals, to my knowledge, NF did not actually play the lead role. NF was the LP and HSBC(Infrared) was the GP, it was the GP that played the lead role.

FT was formerly TCT
TCT was formerly CREO
CREO was launched in 2007 by the former controlling unitholders
CREO was transferred from London AIM exchange to SGX in 2010
It has been 7 years since CREO was launched
It will take a long long time for FT to stabilize ALL of its assets – but once The Place is stabilized, 82% of its total asset would be generating recurring income. And we are talking about end of 2014 (launch) + another 6 to 12 months the most to stabilize.

_________________________________________________________________
Forterra House (FH)
Carrying Value = SGD 146 million = 7%
= Stabilized

The Place (TP)
Carrying Value = SGD 1,654 million = 75%
Phase I (Office Portion) = Stabilized
Phase I (Retail Portion) = Transitional
Phase II (Retail) = Transitional
Phase III (Office and Retail) = Development
TP (all phases) should be completed and launched by end of 2014

Huai Hai Mall (HHM)
Carrying Value = SGD 165 million = 8%
= Transitional

Central Park Mall (CPM) =55% ownership
Carrying Value = SGD 406 million (100% ownership)
Carrying Value = SGD 223 million ( 55% ownership) = 10%
Phase I = Transitional (66,160 m2)
Phase II to IV = Development (250,774　m2)

% of Stabilized Assets (Projected Time Frame to Stabilization)
FH = 7% (Now)
FH + TP = 82% (2015)
FH + TP + HHM = 90% (2015 or 2016)
FH + TP + HHM + CPM = 100% ( Long time to develop 250,774 m2)

_________________________________________________________________

As to how to close the valuation gap between share price and NAV per unit, it depends on which of the following routes would NF lead FT into?

Route A : Delisting Route:
1) Liquidate all assets like MIIF
2) Privatize – NF make a GO

Route B : Listing Route : Maintain Listing Platform of FT
1) With Expansion
2) Without Expansion

Enough have been said on route A
Route B is an interesting one to explore – will leave it for another day.

(vested)

[cfa]

The 2 daughters and mother are fighting endlessly for the estate of the founder Chen, where is their energy for business.

[Boon]

The 2 daughters and mother are fighting endlessly for the estate of the founder Chen, where is their energy for business.

That probably explained why Antony Leung has been hired as the CEO of NF Group so that the sisters could have more time fighting - just kidding !

On a serious note,

I don't think the mother has any role to play in the running of the family business.

Angela, the elder sister, has been invloved in their US operations.

With Antony Leung on board as CEO, it would certainly ease up workload on Vivien, the younger sister.

[Ferns]

Pardon me for asking this potentially ignorant question, still trying to learn things here and there...

If the PB ratio is so low for this counter, then what other kind of risks should one worry about?

If it actually liquidates or dispose of any asset, then it would be a big gain on the investor. However, I suppose this is being speculative.

On the downside, if it continues to make a loss and not dispose of any asset, it could begin to build up debt and an investor would also bear the opportunity cost of placing their investment somewhere else that could actually give returns. Is that the "risk" that we should be concerned with?

I understand that as value investors, we should look at management and good returns before looking at price, but I'd like just to understand things from the price perspective and the risks involved.

Not sure if I made myself clear...

[Boon]

Pardon me for asking this potentially ignorant question, still trying to learn things here and there...

If the PB ratio is so low for this counter, then what other kind of risks should one worry about?

If it actually liquidates or dispose of any asset, then it would be a big gain on the investor. However, I suppose this is being speculative.

On the downside, if it continues to make a loss and not dispose of any asset, it could begin to build up debt and an investor would also bear the opportunity cost of placing their investment somewhere else that could actually give returns. Is that the "risk" that we should be concerned with?

I understand that as value investors, we should look at management and good returns before looking at price, but I'd like just to understand things from the price perspective and the risks involved.

Not sure if I made myself clear...

If NF chooses to lead FT down the liquidation route – and manage to sell off all assets at close to BV, then it would be a big gain to investors – this is a POSITIVE risk that could potentially happen.

IMO, being aware and recognizing that such POSITIVE risk exists should not be considered as being SPECULATIVE.

However, by saying that it would definitely happen (or not happen) would be considered as being SPECULATIVE.

On the flip side,

If NF chooses to lead FT into more debts; more expensive debts; more liquidity problem; no dividend payments etc – then share price would drop, and investors would suffer losses – this is a NEGATIVE risk that could potentially happen.

Similarly, being aware and recognizing that such NEGATIVE risk exists should not be considered as being SPECULATIVE.

However, by saying that it would definitely happen (or not happen) would be considered as being SPECULATIVE.

Opportunity cost is the cost of a foregone alternative – it is the benefits you lose by choosing one alternative over another one.

Choosing and deciding between one alternative over another investment has never been an easy process. It would be an easy decision if one knew the end outcomes.

The Risk/Return profiles of the two investments are different.

The risk appetites between investors are different.

If choice must be made between the two options, one would be best advised to choose the one that best suit one’s risk appetite/investment objective.

The share price of a very profitable company with top quality management team could be over-valued

The share price of a profitable company with average management team could be under-valued.

One should not necessarily look for the best companies (or the worst companies) – the key is to look for mispriced companies.

Value investors look for under-valued stocks with adequate MOS (margin of safety)

My 2 cents.

Hope it helps

(vested)

[Boon]

Latest analysts reports:

Shanghai is "The Place" to be - By nra Capital

http://media.corporate-ir.net/media_file...202014.pdf

"Steady Progress" - by Edison Research

http://media.corporate-ir.net/media_file...202014.pdf

"The Place" will be ready in 6 months - by Voyage Reserch

http://media.corporate-ir.net/media_file...202014.pdf

(vested)

[cfa]

RESIGNATION OF EXECUTIVE DIRECTOR AND CHIEF EXECUTIVE OFFICER AND ESTABLISHMENT OF AN INTERIM EXECUTIVE COMMITTEE

http://infopub.sgx.com/FileOpen/Resignat...eID=298818

[ahyu02]

The circumstance of this resignation seems strange to me. In another separate announcement, it is mentioned that mr. Seah Choo was appointed as CEO on 2013-11-04, which was just about half year ago.