Bonvest

[specuvestor]

bro lonewolf, was looking at this a long time back but drop it off. thanks for sharing this with us so that we can make better decision. appreciate it.

You're welcome. And I think you dodge a bullet there.

I think Bonvest is good example of a company that on paper looks undervalued becos of its attractive assets. But I think its clear that having the assets alone does not make it a good company to own.

Liat Tower is in a prime location but what has Bonvest do to enhance its value all these yrs? Absolutely nothing. Why?? Who knows? But in this sense it remind me of CK Tang which own a prime location but has zero interest in unlocking value or maxisming its potential. cfa is probably more spot on the probable reason.

So I think we need to be more discerning when it comes to valuing companies. Just because it own a few choice properties does not mean its undervalued. So we need to be careful with our assessment.

Good point. IMHO listed equity has at least 3 layers: the asset layer, the business layer and the structure layer. Frankly I think investment ethos don't actually cover that sufficiently or even realise that. Even Buffett saying that owning stock is owning a piece of the business is a tad simplistic and misleading.

Focusing on just either one and disregarding the rest will make any analysis incomplete and exasperating. Unfortunately most of the time people don't realise that until we learn from our mistakes, as I have Had been wanting to expound more on that if buddies are interested.

[gautam]

Hi specuvestor,
Since we are at this subject, if hypothecally, BV div yield were 4%pa, would one's view of the management change to that of being more small-shareholder friendly? Would that attract more investors? But then in all likelihood, its pb will not be as such.
I agree that buying shares is disalike to buying a part of a whole biz if there is not much sharing of gains by the company to everyone who hold stakes.

[specuvestor]

Let me try to explain myself in simple terms without referencing to Bonvest but hopefully you will know what I mean

Listed equity is at least 3 different layers:

Assets: People like to look at individual assets and so use Sum of Parts valuation. Unfortunately shareholders are buying the whole basket. REITS are very good at packaging good assets with bad to capitalise on this mentality. Unless you are a vulture or activist fund, it is difficult to realise the value as an OPMI without catalysts. This is also usually the mistake for value investors going into a value trap.

Business: The business model sometimes require high working capital, inventory turns or even incidental expenses. For example publishing companies need to lose money on the printing to generate revenue for advertising. Sometimes less profitable businesses exist to complement existing ones or for strategic purposes like vertical integration. Valuing businesses in isolation may not be optimal in understanding the overall business model, or intent of the management

Structural: We have to remember that listed equity in itself is a structured product per se. Most people don't realise that the entity they hold is actually the "company" in the AR, not the "consolidated" one, though the financial benefit is derived. It can be different in terms of dividends (eg preferred shares), voting rights (local and foreign tranches), optionality (eg CB and warrants). Most of all it is usually structured to favor the majority shareholder which have the controlling right over the other 2 layers, including paying dividends and determining the capital structure. Financial Engineering and holding company made full use of this layer.

Hope I am able to shed some light on some things that I've learnt through my experiences. So actually when people talk about assets, businesses and shareholders in unison, they sometimes don't realise they are actually talking about different things.

[axt]

http://www.businesstimes.com.sg/companie...15-million

BONVESTS Holdings has entered into an agreement with APHV Perth InvestCo to acquire the Four Points by Sheraton Perth for A$91.5 million (S$91.8 million).

The agreement was entered into by Bonaventure (Australia) as trustee for the Bonaventure (Australia) Trust. Both are wholly-owned by Henrick (Singapore) which is in turn a wholly-owned subsidiary of Bonvests Holdings.

The hotel is a 4.5 star hotel that was constructed in 1985 and was recently rebranded to Four Points after completing a comprehensive property improvement plan at the end of 2013. It sits on a 2,742 sq m freehold site and has 278 rooms. The hotel is managed by Starwood and the management contract runs until year 2027.

Bonvests said the acquisition will be funded by bank borrowings.

The hotel is currently held by HHR Perth as trustee for the HHR Perth Trust, and the acquisition of the hotel will be through the acquisition of all the issued shares in HHR Perth Trust and HHR Perth.

[greengiraffe]

Used to be owned by Hotel Grand which was sold to GSIC and now Henry Ngo takes over...

Per key about A$330k

Frankly its not a great Hotel apart from it facing Perth Arena...

http://www.businesstimes.com.sg/companie...15-million

BONVESTS Holdings has entered into an agreement with APHV Perth InvestCo to acquire the Four Points by Sheraton Perth for A$91.5 million (S$91.8 million).

The agreement was entered into by Bonaventure (Australia) as trustee for the Bonaventure (Australia) Trust. Both are wholly-owned by Henrick (Singapore) which is in turn a wholly-owned subsidiary of Bonvests Holdings.

The hotel is a 4.5 star hotel that was constructed in 1985 and was recently rebranded to Four Points after completing a comprehensive property improvement plan at the end of 2013. It sits on a 2,742 sq m freehold site and has 278 rooms. The hotel is managed by Starwood and the management contract runs until year 2027.

Bonvests said the acquisition will be funded by bank borrowings.

The hotel is currently held by HHR Perth as trustee for the HHR Perth Trust, and the acquisition of the hotel will be through the acquisition of all the issued shares in HHR Perth Trust and HHR Perth.

[greengiraffe]

Aug 3 2015 at 11:43 AM Updated Aug 3 2015 at 7:13 PM

Singapore's Bonvests snaps up Perth's Four Points by Sheraton hotel for $91.5m

The Four Points by Sheraton Perth hotel has 278 rooms, which retail for about $220 a night.


by Larry Schlesinger
Singapore-listed Bonvests Holdings has bought the Four Points by Sheraton Perth hotel for $91.5 million in one of the biggest hotel deals on the west coast.

Built in 1985, the 4.5-star hotel with 278 rooms on a 2742-square-metre freehold site on Wellington Street in the city centre was offloaded by the Government of Singapore Investment Corporation (GIC) and US real estate investment trust Host Hotels & Resorts through a joint venture vehicle, APHV Perth InvestCo.

It sold with a management contract in place with global hotel group Starwood, running until 2027. Rooms retail for about $220 a night with the hotel benefiting from its location, directly across from the Perth Arena.

The $91.5 million paid by Bonvests is eclipsed only by Hyatt Centre, which sold for $97 million in 1996, but which also included the car park and office buildings. More recently, the Esplanade in Fremantle sold for $88.5 million in 2012 to syndicator Primewest.

The Four Points by Sheraton sale in Perth is one of the biggest hotel deals on the west coast.
The Four Points by Sheraton sale in Perth is one of the biggest hotel deals on the west coast. Archer Imagery
GIC and Host Hotels paid $61 million in 2012 for what was then the Citigate Perth, acquiring it from the unlisted PFA Diversified Property Trust. They spent $22 million refurbishing it, a move which drew Starwood back into the Perth market.

COLLECTION OF PROPERTIES

Bonvests Holdings owns a collection of luxury hotels and commercial properties including the Sheraton Towers Singapore Hotel and resorts in Tunis, Mauritius, Zanzibar and Maldives.

In a statement posted on the Singapore Stock Exchange, Bonvests said the rationale for the acquisition was to build the group's portfolio of hotels to grow its revenue base "by adding resilient hotels in gateway cities".

The sale of the Four Points by Sheraton Perth was negotiated by Wayne Bunz and Rob Cross, of CBRE.

Mr Bunz said the sale was at a record price of $330,000 per room key for the Perth hotel market.

Despite suffering the impact of the resources slowdown, the Perth hotel market remains one of the best-performing in the country with an occupancy rate of 83 per cent and room rates just above $200 a night, according to recent STR Global figures.

BOOM OCCUPANCY RATES

At the height of the mining boom in mid-2012, Perth occupancy rates were above 90 per cent and room rates well above $200 a night.

Mr Bunz said these rates were unsustainable with trading conditions now returning to more normalised levels.

New hotel developments planned for Perth include two DoubleTree by Hilton hotels, a new Ritz Carlton as part of the Elizabeth Quay waterfront project to be developed by Hong Kong-listed Far East Consortium and a five-star Westin hotel to be operated Starwood on the FESA House site in the CBD.

[Scg8866t]

Bonvest is really a deep value play.

Sheraton is valued at cost and kept under richvien subsidiary valued at only 143mil
I did a rough calculation of its rnav pegging its freehold Sheration and Liat to market value and it comes out to ard $3.63 Rnav

At current price of 1.325 its 0.365x book.

We see daily share buy back by company at 1.30 these few days, wonder if there is anything brewing. Buy ques have also increased quite substantially.

The common complain about bonvest is their low payout, hence many deemed it a value trap but with Henry holding on to 82%, I would assume that he wouldn't want his investment to stay sub par for so long. He is aligned in terms of shareholding percentage, and it is only a matter of time before he decides to either unlock value or take his company private.

If we take a look at Wheelock's situation now with their zero debt and huge cash balance sheet, maybe its time for them to consider buying liat tower to optimize frontage for wheelock place? See how it goes.

[Scg8866t]

Sudden surge these few days to 1.435. Wonder whats happening.

[vingaard]

It seems the market is bidding up laggards. The same thing seems to be happening to Guocoland.

[lavue]

The good:

- Disposal of assets in FY 2016. Reaped gains of $30.087m from financial assets and $19.373m from non-core investment properties. The non-core investment properties are a HDB shophouse at Tampines West, 2 retail units at Midpoint Orchard and Yishun 10.
- Hotel operation in Bintan has commenced from Feb 2018. Second hotel in Maldives supposedly will commence from 3Q2018. New hotel in Douz, Tunisia will commence from 1Q2019.
- Crown jewel Liat Tower is conservatively valued. On the balance sheet, the investment properties (including shopping centre in Tunisia and 2 office buildings in Perth) are carried at $506m. In my view, Liat Tower alone is probably worth more than $500m. If the rejuvenation of west Orchard Road does happen, Liat Tower will be a clear beneficiary. Will Wheelock, Hong Fok, Hotel Properties, Shaw or Far East Group want to buy Liat Tower to expand their footprint?
- Second crown jewel Sheraton Towers is listed under PPE and the freehold land is held at cost of $143.5m under its Richvein subsidiary. The hotel contributes a chunk of the revenues/profits of their hotels business line. But what if the management decides to slaughter the proverbial golden goose, so to speak? They can apply for a change of use from hotel to residential, then strata-divide and sell out residential apartments. The residential development right beside, Reignwood Hamilton Scotts, has asking prices in excess of $3,000psf.
- Colex operates in an oligopoly in the public waste collection. The other 3 players are Sembcorp, Veolia and 800 Super. The country generates more and more waste every year. Unless the company screws up big time, I dont see why NEA will want to upset the apple cart. This steady business throws out $8-10m of profits annually.

The not-so-good:

- The balance sheet is deteriorating. Between FY 2013 and FY 2017, short term borrowings spiked from $38m to 81m, while long-term borrowings spiked from $83m to $133m. Cash and cash equivalents dipped to $28.6m. Current liabilities is also consistently exceeding current assets, by an increasing margin.
- They made a substantial investment in Bintan. Why? If they want to make an investment in Indonesia, why not Bali? I personally think that Bali is way more dynamic as a tourist destination, compared to Bintan.
- They are making a substantial investment into Tunisia, which is a country located at the northern tip of the African continent. Tunisia underwent a civil war/revolution in 2011, saw 3 terrorist attacks in 2015 and civil unrest in 2018. There is a high level of youth unemployment.
- Investment in Cordlife soured. How did this happen and how robust is their investment process?
- Notwithstanding the fact that he's been buying back shares, the majority shareholder maintains control and pays out a low dividend (<2%) every year.

I remained undecided about Bonvest. Any inputs from the more experienced Value Buddies here?