2nd Chance Properties

[changwk]

Hi,

Hope someone can educate me on this question.

I was doing some reading up 2nd Chance. I was reading AR2010 and on page 3, i quote "As at 30 June 2010, the Group has
$77.27 million in retained earnings, which can be
distributed as dividends".

i'm quite curious over this statement. Why does the chairman say that? i always thought that the ability to pay future dividend comes from the cash flow and cash balance.

also where in BS does retained earnings show up?

[em2nre5u]

retained earnings are accumulated profits from past years. it shows up in the shareholder's equity part of the balance sheet.

[freedom]

when the company liquidates eventually, it can pay out its past earning to its shareholders as dividend.

[camelking]

Technically speaking, when a company liquidates, the payout if any, is called capital repayment.
And it also covers the paid up capital of the company.

[piggo]

I quite like the idea of having a retail arm to generate cash, cheap bank loans for commercial property investments (mainly in Singapore). Perhaps it's a good idea to divest their securities and focus on property investments; it's not easy to valuate their securities based on the closing price... also couldn't find anything about the composition of stocks they hold. Their % of assets placed in securities have dropped from earlier years, so perhaps that's the direction that they're heading towards as well?

Cost of maintaining the shopfronts are going down marginally through the years which hints at consistently good management. However inventory is steadily increasing but understand that it's due to having additional shops. Initially I thought that being a retailer of gold, the company's earnings might be a good hedge against inflation... however that is not the case. I've also checked with my muslim friends that their gold jewelry is quite popular among malays; they don't charge workmanship. The quality of their clothing is questionable but it's very affordable; which may make them more resilient to bad consumer sentiments. All in all, the revenue generated from their retail arm is more than enough to cover their interest payments for bank the loans. Compared to REITS, I feel they are more resilient to an increase in interests rates/fluctuations in property valuations.

To maintain a yield of 9%, they need to pay out ~12m/yr and their profits only dropped below that level in 2009. Guess they should be able to maintain that payout which is good enough for me!

A bonus is that their investor relations have an impressive response time, it took them about an hour to reply me.

Vested

[changwk]

hi,

i have been thinking about how 2nd chance resolves their day to day cash flow issue.
the other possibility will be the rental income from the 71 properties (according to Fy2010 Annual report) they have. I assume the tenants pay 2nd chance on a monthly basis. so, it will be quite a substantial incoming of rental income at the end of the month or whenever the rental due date.

---

hi,

also not forgetting their dividend they received from their REITS investment. in Q3 FY2011 results, 1.26mil dividend was received from REITs. That works to be about $420K every quarter or $140K every month.

[piggo]

In their AR, under trade receivables, there's an amount for cash advance to suppliers or directors for purchase of inventories. I presume day to day operations does not require much cash, since process is more of converting inventories to cash. If 7/11 can survive with just $200 in the till, why not 2nd Chance? Anyway, how is that relevant to the biz?

[D123]

Flash crash?

Open 0.360
High 0.375
Low 0.071
Total value 75,220

(correct as of 10am, 22 Aug)

[cif5000]

Flash crash?

Open 0.360
High 0.375
Low 0.071
Total value 75,220

(correct as of 10am, 22 Aug)

Fat finger most likely. Keyed in the mother shares thinking it was the warrants.

[piggo]

Recently going through a series of share buyback... Insignificant in volume, but it is something the management said they'll do when they think it's undervalued