Forterra Trust (formerly: Treasury China Trust)

[holy grail]

overall seems like a decent set of results with little surprises, which is good
By the way anyone know what the upgrade and enhancement program of the office towers is about and any cashflow implication for that? Just caught it as part of their presentation posted on the website.

[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)

Rough Estimation of Yearly Gross Rental Revenue of The Place (TP) :

TP Existing ：
Gross Floor Area (sqm) = 188,675 (est.)
Office Area = 86,130 sqm
Retail Area = 69,780 sqm (est.)
Car Parking Space 732 (est.)
http://www.forterra.com/property/propert...type_id=22

TP3 (TP Extension)
Gross Floor Area (sqm) = 88,312 (est.) or = 88,312 / 188,675 = 46.8% of TP Existing
Office Area = ???? (Not given)
Retail Area = ???? (Not given)
Car Parking Space 416 (est.) or = 416 / 732 = 56.8% of TP Existing
http://www.forterra.com/property/propert...type_id=28

TP1 (Office) : Gross Rental Revenue (Actual)
3Q2014 = RMB 47.806 m (actual) ; Occupancy rate = 88.9% (actual)
Annualized = 4 x 47.806 = RMB 191 m per year
Average Daily Gross Rental/sqm = 191,000,000/365/0.889/86,130 = RMB 6.83 /sqm/day

Assume ：
TP Existing = TP1 +TP2
TP1 (Office) = 86,130 sqm
TP1 (Retail) + TP2 (Retail) = 69,780 sqm
Average Daily Retail Gross Rental = RMB 14.0/sqm/day
Occupancy Rate = 90% (Retail)
Yearly Gross Rental Revenue of TP3 (TP Extension) = 35% of TP Existing = 35 % of {TP1 (Office) + TP1(Retail) + TP2 (Retail)}

Yearly Gross Rental Revenue (Whole TP)
= TP Existing + TP Extension = 135% of TP Existing
= 135 % of {TP1 (Office) + TP1(Retail) + TP2 (Retail)}
=1.35 ( 191 m + 69,780 x 14 x 365 x 0.9) = 1.35 (191 + 321) = RMB 691 million

If Average Daily Retail Gross Rental is only RMB 10.0/sqm/day,
Yearly Gross Rental (Whole TP)= 1.35 (191 + 321 x 10 / 14) = 1.35 ( 191 + 229 ) = RMB 567 million

Current Management Guidance = in excess of RMB 500 million
Previous Management Guidance = in excess of RMB 700 million
Edison Research estimate for FY 2015 = RMB 349 million
Edison Research estimate for FY 2016 = RMB 504 million
Voyage Research estimate for FY 2015 = RMB 598 million
Voyage Research estimate for FY 2016 = RMB 753 million
Voyage Research estimate for FY 2017 = RMB 772 million

It looks like, even being conservative, RMB 500 million is no problem.

RMB 700 million is a bit ambitious but not impossible – ha-ha !

As always, an analysis is just as good as its underlying assumptions

(vested)

[kbl]

Good morning everyone.

MANDATORY CONDITIONAL CASH OFFER $1.85

http://infopub.sgx.com/FileOpen/New_Prec...eID=321770

[opmi]

Deep Value also useless when substantial shareholder can put a cap to the market price. And when it is time to harvest.

The rise in price before Offer seems to suggest leaky info. But what's new...

Good morning everyone.

MANDATORY CONDITIONAL CASH OFFER $1.85

http://infopub.sgx.com/FileOpen/New_Prec...eID=321770

Compulsory Acquisition. Pursuant to Section 40A(1) of the Business Trusts Act, Chapter
31A of Singapore, if the Offeror receives valid acceptances pursuant to the Offer or acquires
Offer Units during the offer period otherwise than through valid acceptances of the Offer, in
respect of not less than 90 per cent. of the total number of Units in issue as at the close of the
Offer (other than those already held by the Offeror, its related corporations or their respective
nominees as at the date of despatch of the Offer Document), the Offeror will be entitled to
exercise its right to compulsorily acquire, at the Offer Price, all Offer Units held by Unitholders
who have not accepted the Offer.

In such event, the Offeror's present intention is to exercise its right to compulsorily
acquire all the Offer Units not acquired under the Offer and proceed to delist Forterra
from the SGX-ST. The Offeror however reserves the right and discretion, if such event arises,
to assess the options available and there is no assurance that the current intention will be
carried into effect.

[HitandRun]

Boon san

Let's recap:

Under the UPA, each of Mr Richard Barrett and Mr Rory Williams has also agreed to assign to New Precise 2,675,000 and 375,000 existing unit options, respectively, which are currently held by them under the Forterra Unit Option Scheme (the “UOS”) at an agreed price per unit option of S$2.98 less the relevant exercise price of the relevant unit option of S$0.34816 (the "Unit Option Assignment").

The total cost of each share is obviously S$2.98. Can a person circumvent the rule so blatantly?

[opmi]

Boon san

Let's recap:

Under the UPA, each of Mr Richard Barrett and Mr Rory Williams has also agreed to assign to New Precise 2,675,000 and 375,000 existing unit options, respectively, which are currently held by them under the Forterra Unit Option Scheme (the “UOS”) at an agreed price per unit option of S$2.98 less the relevant exercise price of the relevant unit option of S$0.34816 (the "Unit Option Assignment").

The total cost of each share is obviously S$2.98. Can a person circumvent the rule so blatantly?

You still dreaming of $2.98? Go read the takeover code. It is obvious you did not read it in its entirety before. << this line sounds familiar to you???

[holy grail]

woahhhh above offer price now!

anyone think the cash-rich tycoon will raise the price more? Though they did not condition their offer on 90% / taking private seems to be limiting much further upside from here. Thoughts anyone?

[HitandRun]

You still dreaming of $2.98? Go read the takeover code. It is obvious you did not read it in its entirety before. << this line sounds familiar to you???

Ha Ha. If I am interested in your opinion, I would have asked you wor. But hor, please be patient lah, the show has only just started.

[Boon]

Hi HitandRun,

Ha-ha ! The prediction on the GO was correct but not the timing and offer price.

I am not an expert on the “Takeover Code”, but the way I understand it is:

The crossover of 30% was triggered by the EXERCISE of the options

But these options were ACQUIRED more than 6 months ago – hence the Volume-weighted average price (“VWAP”) applies.

That said, the offer price is way too low IMO.

I am not expecting the offer price to be at 2.98 but 1.85 is

- at 62% of 2.98
- at 47% of 3.90 (NAV)
- at 36% of 5.20 ( NAV of 3.90 + DTL of 1.30 )

I don’t think other SSH (PAG and APG) would sell at this price – may be you are right – the show has just only started.

(vested).

[HitandRun]

I am not expecting the offer price to be at 2.98 but 1.85 is

- at 62% of 2.98
- at 47% of 3.90 (NAV)
- at 36% of 5.20 ( NAV of 3.90 + DTL of 1.30 )

I don’t think other SSH (PAG and APG) would sell at this price – may be you are right – the show has just only started.

(vested).

Thanks, I just wanna bitch lah. I am thinking that an ultimate price is between $3 to $4 bucks. IMHO, the RNAV of $5.20 is way too low. My simple mind is still stuck at $6 bucks. Too many coincidences but here are my speculations (not that I am accusing NF of any misdemeanor) if I were NF:

1. Nicely wait for CB to be out of the way.
2. Conveniently write down property value for mid-year.
3. Conveniently have a 6-month inter-co loan (after privatisation, can easily square off mah).
4. Conveniently choose this period, which GO offer will end before 4Q results announcement.
5. After that, if Nan Fung city reports good occupancy, will have "no choice" but to revalue property upwards.
6. Conveniently don't appoint CEO, whatever for since will be absorbed into the mother ship.
7. etc.