Forterra Trust (formerly: Treasury China Trust)

[Boon]

Putting the short term borrowing from NF's affiliate aside, which I still think is controversial - and if TP1 (retail) + TP2 could be launched in Dec 2014 without any further delay, I believe things could not get worse than my following projections and would improve rather signigicantly in 1Q2015 - and would be further improved with the launch of TP3 after.

Gross Revenue (SGD million):
4Q2013 = 15.173
1Q2014 = 15.039
2Q2014 = 13.427
3Q2014 = about 13.0 {contribution from FH + TP1(Office)} = Projection
4Q2014 = similar to 3Q2014 = Projection
1Q2015 = would increase significantly with contribution from TP1 (retail) + TP2

NPI (SGD million):
4Q2013 = 8.348
1Q2014 = 8.504
2Q2014 = 8.312
3Q2014 = about 8.0 {contribution from FH + TP1(Office)} = Projection
4Q2014 = similar to 3Q2014 = Projection
1Q2015 = would increase significantly with contribution from TP1 (retail) + TP2

Net cash generated from operating activities (SGD million):
4Q2013 = 8.873
1Q2014 = 1.008
2Q2014 = 1.382
3Q2014 = 0.0 (Projection)
4Q2014 = 0.0 (Projection)
1Q2015 = would increase significantly with contribution from TP1 (retail) + TP2

Interest Paid (Financing Costs) SGD million:
4Q2013 = 11.347
1Q2014 = 10.107
2Q2014 = 7.101
3Q2014 = 10.000 (Projection), exclude accrued interest payment of Forum Bond
4Q2014 = 10.000 (Projection)
1Q2015 = 10.000 (Projection), exclude accrued interest payment for short term borrowing

Cash & Cash Equivalent (SGD million):
4Q2013 = 108.244
1Q2014 = 82.480
2Q2014 = 124.825
3Q2014 = 124.825 + 33.0 – 10 = 147.825 (Forum CB + accrued interests repaid with short term borrowing = Projection
4Q2014 = 137.825 = Projection
1Q2015 = 137.825 – 100 (repayment of short term borrowing + interest) = 37.825 + incremental contribution from TP1 (retail) + TP2 = Projection

(vested)

[PekingDuck]

Boon, thanks. Agree the short term borrowing from NF affiliate feels too cosy - a 10% interest rate on unsecured borrowing for 6 months where the lender has (indirectly) almost 30% of the equity plus control over the trustee manager...seems rich.

The period of six months is interesting. The large loan refinance for TP falls due in June next year - this loan is through to March. Why not schedule the short term borrowing to mature in June and re-fix a consolidated amount with the lending on TP (secured, therfore cheaper)..? I don't necessarily believe they will repay the short term loan from cash - Miriam has been clear that the board want to hold onto this cash reserve as a necessary buffer. Plus, there will also be further marketing/promotion costs coming out of this pile in the next three quarters as phases 1-3 are launched.

I am more concerened by the sloppy performance of the third party proxt agent, Forterra's checks on the AGM results and the fact that the shares have traded for 4 months+ under the misconcpetion that the board could have authorised a dilutive equity raise (whether they did or not). The 'clarification' notice to address this should have been an 'error' notice - the former implies they were clearing up an uncertain issue, whereas they were admitting a huge error and the defeat of the board in its main AGM proposal. In the UK we would see this as a significant vote of no confidence. Our board seem not to be affected by such shareholder resolutions. It is a poor reflection on them.

[Boon]

Boon, thanks. Agree the short term borrowing from NF affiliate feels too cosy - a 10% interest rate on unsecured borrowing for 6 months where the lender has (indirectly) almost 30% of the equity plus control over the trustee manager...seems rich.

The period of six months is interesting. The large loan refinance for TP falls due in June next year - this loan is through to March. Why not schedule the short term borrowing to mature in June and re-fix a consolidated amount with the lending on TP (secured, therfore cheaper)..? I don't necessarily believe they will repay the short term loan from cash - Miriam has been clear that the board want to hold onto this cash reserve as a necessary buffer. Plus, there will also be further marketing/promotion costs coming out of this pile in the next three quarters as phases 1-3 are launched.

I am more concerened by the sloppy performance of the third party proxt agent, Forterra's checks on the AGM results and the fact that the shares have traded for 4 months+ under the misconcpetion that the board could have authorised a dilutive equity raise (whether they did or not). The 'clarification' notice to address this should have been an 'error' notice - the former implies they were clearing up an uncertain issue, whereas they were admitting a huge error and the defeat of the board in its main AGM proposal. In the UK we would see this as a significant vote of no confidence. Our board seem not to be affected by such shareholder resolutions. It is a poor reflection on them.

Hi PekingDuck,

The cost of short term borrowing of SGD 94 million (USD 75) for 6 months at 10% amounts to SGD 4.7 million – not a small amount - it is controversial and a concern to me and would be an even bigger concern if they don’t repay it when it is due at the end of 6 months – this is highly unlikely considering that revenue and cash flow are expected to improve significantly with the launch of TP1 (retail) and TP2 then.

There are certainly plenty of marketing and promotional activities one could do with SGD 4.7 million.

I think the Management needs to explain what they have done (or intend to do) with the increased borrowing of SGD 33 million for the HHM?

The sloppiness in conducting voting is also a big concern - but I have no problem with the dilutive effect of new share issuance of up to 20% - as long as they have been issued on an equitable basis.

(vested)

[PekingDuck]

Excerpt from a bloomberg story today - all of this seems to clash hugely with the comments coming from the board of FT regarding retailing in China and the direction of tenancy agreements. Our assets trade at 37% of NAV when prime retail properties are in huge demand - this is crooked...

-- In Asia’s real estate market, dealmaking just hit a record. More is coming.

Property deals in China and its Asian neighbors reached a record $34 billion last quarter, a turnaround from the global financial crisis. That tally includes $10 billion for a single site in Seoul’s Gangnam district by a Hyundai Motor Co.-led group and Singapore’s Frasers Centrepoint Ltd.’s bid of more than $3 billion, including debt, for control of Australand Property Group.
CapitaRetail China Trust, a Singapore-listed company with 10 malls in eastern China, is among the next possible targets as it trades below the $1.7 billion estimated value of its assets, said Standard Chartered Plc. Saizen REIT, another Singapore- listed trust that owns about 5,500 apartments in Japan, is also undervalued by that measure. For a global buyout firm or Hong Kong developer, buying a Chinese mall would be a way to profit as the country’s economy becomes more consumer-centric, said CBRE Inc.
“Being in retail is a natural way to frontrun that trend,” Marc Giuffrida, CBRE’s executive director for global capital markets in Asia, said by phone from Singapore. “We see very strong demand in all the key gateway markets for good- quality real estate.”
“Asian consumers have continued to expand spending, creating vast incentives for continued investments,” Priyaranjan Kumar, Singapore-based regional director of capital markets at property-services firm Cushman & Wakefield, said by phone.
Cities across Greater China are the most attractive Asia Pacific locations for international retailers, Jones Lang LaSalle Inc. said in a June report. Economists estimate retail sales will rise at least 12 percent in each of the next three years.

CapitaRetail’s Draw

CapitaRetail’s properties draw 73 million shoppers a year, more than three times the population of Beijing, the company’s website says. Almost every meter of CapitaRetail’s mall floorspace is leased to tenants including Wal-Mart Stores Inc. and fast-food chain KFC.
“Definitely, they could be a target,” said Desmond Chua, a market analyst at CMC Markets Singapore Pte. “It’s an appealing vehicle” to tap Chinese consumers, he said.
Earnings before interest, taxes, depreciation and amortization at CapitaRetail will jump 52 percent to about S$147 million in 2016 from last year, according to analysts’ estimates compiled by Bloomberg. Rental revenue at CapitaMall Grand Canyon in Beijing, the company’s biggest shopping center, may jump 26 percent between 2014 and 2016 as tenants sign up for more expensive leases, Standard Chartered said.
Shares in CapitaRetail have climbed 18 percent this year and traded 1.6 percent higher at S$1.57 at 10:43 a.m. in Singapore trading, giving the company a stock market value of
S$1.3 billion. That compares with Standard Chartered’s estimate of S$2.13 billion, or S$2.58 a share, for CapitaRetail’s revalued net asset value.
Potential acquirers include private-equity firms and real- estate developers, CBRE said. CapitaLand Ltd., CapitaRetail’s largest shareholder with a 19 percent stake, is also a possible buyer, according to Standard Chartered.

[holy grail]

bloomberg article headlines can be misleading sometimes...

http://www.cushmanwakefield.com/~/media/...h_2q14.pdf

The rise of new shopping malls has accompanied slowing
retail sales growth, placing upward pressure on vacancy rates
and downward pressure on net asking rents. High rentals on
Middle Huaihai Road have been driving out a significant number of
retailers. In order to draw the tenants back, many landlords in the
second quarter lowered asking rents and offered tenant incentives such
as rent-free periods. Landlords also focused on attracting traditional
Chinese brands that enjoy strong customer loyalty, such as Lao Da
Chang and Harbin Food Factory, rather than luxury brands. In parts of
Shanghai, landlords are also helping fuel the expansion of fast fashion
companies by offering hundreds of renminbi p

seems no luck for Shanghai anyways and CCP are relaxing purchase restrictions to save the property market there... not quite sure how big the hole is there to fill and save.

If in for the long run, current stock price seems a no brainer to buy, just not sure how long that will be.

[Boon]

Shanghai - Retail

3Q2014 By Colliers

http://www.colliers.com/-/media/BB4CB504...2C662.ashx

(vested)

[Boon]

Shanghai - Retail

3Q2014 By Colliers

http://www.colliers.com/-/media/BB4CB504...2C662.ashx

(vested)

TP (The Place) : Rental

The total projected gross rental of stabilized TP made by PREVIOUS management = in excess of RMB 700 million per annum with assumptions of
- average retail rents of between RMB13 and RMB14/sqm/day, and
- office rents averaging RMB8.35/sqm/day are expected for the new TP 3 office tower

Subsequently, the CURRENT management revised downward the gross rental from "in excess of RMB 700 million per annum" to "in excess of 500 million per annum".

The Place (TP) in situated in Hongqiao, Changning District.

According to Colliers Shanghai Retail Market report: 3Q2014 (see above link)

For Changning Retail market :
Vacancy Rate = 7%
Ground Floor rent = RMB 40 plus /sqm/day
Second Floor rent = RMB 20 plus /sqm/day

Retail rental seems to be holding up pretty well.

For Changning Office market, according to Colliers 3Q2014 report: http://www.colliers.com/-/media/3962F54E...D85E1.ashx

Vacancy rate = 12.1%
Office rent = RMB 7.2 /sqm/day (lower than RMB8.35/sqm/day)

Wondering if the “projected rental reduction” was due to “pessimism” in the office market rather than the retail market?

TP : Capital Value (Stabilized basis) projection
Rental = RMB 500 million per annum = SGD 103 million
Cap rate, assumed = 7.5%
Value = SGD 1,373 million
Debt (TP only) = SGD (537 + 90) = SGD 627 million, assume 90 m more to completion of TP.
Value (net of debt) = SGD 746 million or SGD 2.94 per share (Note: NF paid SGD 2.98 per share for its controlling stake in FT).

(vested)

[greengiraffe]

Heard that Forterra is looking for debt raising of at least 80m with an indicative costs of around 8%.

Road side source.

Not Vested
GG

[Boon]

Nan Fung eyes expansion of property portfolio in China

HK developer links with unit of Shanghai's city investment arm to gain Shanghaimart

Saturday, 27 September, 2014, 1:13am

Peggy Sito and Eric Ng

Nan Fung Development chief executive Antony Leung said Nan Fung is financially healthy and has no plan to seeking a listing status in Hong Kong.

Privately run Nan Fung Development has teamed up with Shanghai Industrial Urban Development Group (SIUD) to buy the majority owner of trade exhibitions venue Shanghaimart for US$579.3 million.

The deal marked the Hong Kong-based developer's major investment in Shanghai and the group said it planned to enlarge its investment portfolio on the mainland, even though the market has been weighed by rising housing inventory and sluggish sales.

SIUD is a subsidiary of Shanghai Industrial Holdings, the municipal government's listed investment arm in Hong Kong. SIUD's and Nan Fung's 51-49 joint venture Advantage World Investment has agreed to buy Continental Land Development, which has a 99 per cent stake in Shanghai World Trade, Shanghai Industrial said in a filing to Hong Kong's stock exchange.

Shanghai World Trade owns Shanghaimart, a permanent international trade mart in the Shanghai Hongqiao Economic and Technological Development Zone. Annual revenue of Shanghaimart was about 300 million yuan (HK$378.5 million) and the joint venture expected to increase this to 500 million yuan in the next two to three years, according to SIUD chairman and executive director Ni Jianda.

"We are optimistic about the mainland. We like first-tier cities, especially Shanghai," Nan Fung chief executive Antony Leung Kam-chung said. "Despite some analysts' concerns over the nation's property sector in the short term, we are optimistic about the future and plan to invest in the nation at a larger scale."

Leung, Hong Kong's finance chief from 2001 to 2003, stood down as China chairman at the United States-based Blackstone Group to join Nan Fung as its chief executive in February this year.

Leung said the group was optimistic on China over the medium to long term, as the mainland would be helped by its urbanisation drive.

However, some 68 of the 70 cities monitored by the National Bureau of Statistics recorded falls in property prices last month, compared with 64 cities in July. Xiamen was the only mainland city that recorded growth in new private housing prices.
Kong.

http://www.scmp.com/business/china-busin...o-mainland

(vested)

[Boon]

Heard that Forterra is looking for debt raising of at least 80m with an indicative costs of around 8%.

Road side source.

Not Vested
GG

http://infopub.sgx.com/FileOpen/Announce...eID=315086

FT had obtained an unsecured short term loan USD 75 million from one of NF's affiliate at 10% interest rate - I think it is the same one you are talking about - I even wrote to their IR questioning the need for a such loan - and I don't see a need to borrow another 80 million - ha-ha!

(vested)