LHT Holdings

[dydx]

Checked my bank account this morning and noted a nice credit from LHT's $0.003/share Final dividend for FY11. Feeling good!

I just hope that LHT will continue to expand/improve its already well-established business and pay out more and more dividends - already on an increasing trend in the last FY's - in the years to come.

[dydx]

On 5Sep11, ED Ms Yap Mui Kee added 128 lots and paid $0.084/share.....
http://info.sgx.com/webcorannc.nsf/Annou...endocument
This purchase has also raised Ms Yap's holding in LHT to 21,962,130 shares, or 10.31%. Certainly, this is no small financial commitment for a lady! A relevant question: Is Ms Yap a good investor, from whom perhaps we can take a cue?

On 15Aug11, LHT signed an agreement with TP Utilities P/L, a subsidiary of Tuas Power Ltd, to supply woodchips over a 15-year period which is expected to bring in for LHT an annual revenue ranging from $900k to $5.4m.....
http://info.sgx.com/webcoranncatth.nsf/V...C003EBC5F/$file/LHTH-TP-Woodchips-Purchase-Agreement15Aug2011.pdf?openelement
More info on Tuas Power (now a member of China Huaneng Group).....
http://www.tuaspower.com.sg/index.asp

[dydx]

I am happy to note that last Friday (9Sep11), LHT closed up $0.015 at $0.095, with only 56 lots transacted.

I wonder how far would Mr Market re-rate this consistent and improving - since FY09 - performer, bearing in mind LHT's latest NAV (as at 30Jun11) was $0.1554, and based on the strong set of results for 1H-FY11.....
http://info.sgx.com/webcoranncatth.nsf/V...A003CC743/$file/LHT-Half-Year-Results-30June2011-FINAL.pdf?openelement
the company is poised to deliver a higher NP and an EPS close to $0.02 in this FY11 (than last FY10's $3.144m), and may declare a higher Final dividend (vs. last FY10: $0.0025/share; and FY09: $0.002/share) when FY11 full-year results are announced by end-Feb12.

[dydx]

On 27Sep11, ED Ms Yap Mui Kee added 290 lots and paid $0.08/share.....
http://info.sgx.com/webcorannc.nsf/Annou...endocument
With this purchase, Ms Yap now holds a 10.45 % interest in LTH.

[dydx]

LHT closed the Year 2011 on 30Dec11 at a high $0.098 mainly because of yet another large purchase - 295 lots at $0.098/share - by ED Yap Mui Kee.....
http://info.sgx.com/webcorannc.nsf/Annou...endocument
With this purchase, Ms Yap now holds a 11.18% interest in LTH.

Assuming H2's results are as good as that of H1.....
http://info.sgx.com/webcoranncatth.nsf/V...A003CC743/$file/LHT-Half-Year-Results-30June2011-FINAL.pdf?openelement
we can reasonably expect LHT to close FY11 with a NP of approx. $4.0m and an equity of approx. $34.1m. Based on the company's latest 212.98m issued shares, this would give a FY11 EPS of approx. $0.019, and a 31Dec11's per share NAV of approx. $0.16. Quite obviously, a share price of $0.098 giving a current market cap. of just $20.9m is not doing enough justice to this well-established and profitable niche local business with quite a large net cash reserve.

Let's see how LHT's management would reward shareholders when the company releases its FY11 final results by end-Feb12?

[dzwm87]

I remembered looking through LHT after repetitively seeing some open market purchase done by ED Yap MK. In total, she bought around $180K and checking directors' remuneration in 2010, all 7 directors received less than S$250K. So Yap MK has waged in around a year of her remuneration in LHT. A substantial investment? Probably.

But digging further, for a wood pellet business, I can't see much edge or significant change to it which can allow dramatic revaluation. Probably LHT may grow through business expansion.

Looking from their historical margins, it has been pretty inconsistent. No doubt gross margin has been consistent but net margin has varied rather significantly. Net margin can hit a high of 12.3% in FY09 and a low of 3.5% in FY08 - factoring away GFC in 08, then the low will be 8.1% and 3.6% in FY07 and FY06 respectively. Such variation is largely affected by its 'Other Income' contribution, which was a mix of rental income and waste collection income. Factoring away the entire 'Other income', LHT has been making a loss from FY08 -FY10.

No doubt LHT has been in a net cash position but they have already been in a net cash position ever since FY08. With no change in their share capital (212.98m shares), their net cash per share has been increasing gradually and this has also been reflected similarly to their share price movement since FY08. In other words, what is LHT going to do with their cash amount?

On a better note, LHT has been generating positive FCF and its yield on sales is pretty good with a 6-year average of 7.5%. But again, what is LHT going to do with such free cash?

I haven't read much into the company yet but IMO, their business seem mediocre but perhaps the positive is that LHT does have lots of cash and this does ensure a high probability of dividend payment for the subsequent years.

dydz, maybe you can explain more on LHT business and what are the major catalysts for it?

thanks!

*not vested*

[dydx]

LHT's main local based business of selling/renting wooden pallets is getting stronger, as evidenced by the rising revenue and profits in the last few quarters. The improved profits have also strengthened the company's/group's equity and net cash reserve positions. The company is now in a position to pay out higher annual dividends.

The recently signed 15-year contract to supply woodchips to TP Utilities/Tuas Power Ltd - expected to bring in an annual revenue ranging from $900k to $5.4m - should add to profits, as it does not require much new capex, and LHT pays vey little for wood wastes collected or delivered to its crushing plant in Sungei Kadut.

Moving forward, additional revenue - and hopefully profits as well - from LHT's participation in a green project in Tianjin Eco-City, China, is expected to kick in 2012 onwards.

On the assets side, the group owns and operates from 2 large plots of leasehold industrial land in Sungei Kadut, which should be worth a lot more in CMV. So there is quite a big hidden reserve in the B/S which could add a few cents to per share NAV.

As LHT has only 212.98m outstanding issued shares, and as the counter remains substantially under-priced against its fair intrinsic value, if the company decides to pay out a large dividend from its cash reserve or announces other positive corporate actions, it should not require much market capital or buying to lift the share price upwards.

[dydx]

On 11Jan12, ED Yap Mui Kee made her first purchase this year and added another 56 lots at $0.10/share.....
http://info.sgx.com/webcorannc.nsf/Annou...endocument

[dydx]

LHT's investment property at 44 Sungei Kadut Street 1 has been independently valued to have a CMV of $10.0m (vs. BV of $6.932m as at 31Dec11), and this throws out a $3.068m valuation gain.....
http://info.sgx.com/webcoranncatth.nsf/V...E00330B9E/$file/LHT-Holdings-44-Sg-Kadut-St-1-Valuation-final.pdf?openelement

Based on LHT's 212.98m outstanding issued shares, this valuation gain should add $0.0144 to per share NAV, which should hit approx. $0.18 as at 31Dec11. We will have confirmation of this when the company releases its FY11 full-year results by 29Feb12.

[dzwm87]

Got "alerted" by this announcements as well.

But throughout my investing journey, I have also realised whether the market will always value a stock based on the exact value of its investment property? FOr sure, we are certain LHT won't be selling off this investment property, hence some discount has to be applied to it.

Not sure about using "hidden value" of investment properties as an investment thesis for undervaluation. Anybody has experienced buying a stock based on hidden investment property value and saw it being realised? It seem like very often, it may be realised either through takeover bids or liquidation of properties though I maybe wrong.

*not vested*