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Avarga (formerly: UPP Holdings)
01-12-2018, 02:11 PM.
Post: #31
RE: UPP
Alternative view of Avarga:
https://fallscushion.wordpress.com/2018/11/29/avarga/

Priced at S$0.2, Avarga has market cap of about S$200M.
Price is what you pay, Value is what you get.
What Values?
1. Myanmar Powerplant business
What were the annual revenue recognised since then (exclude 2014, since it’s not full year):
Note: assuming tax rate is 20%
2015: S$11.9M, PBT: S$7.8M, NP: S$6.2M
2016: S$13.3M, PBT: S$8.1M, NP: S$6.5M
2017: S$11.7M, PBT: S$6.9M, NP: S$5.5M

Estimated based on 2018-9M revenue for future earning:
Revenue: S$10.0M, PBT: S$5.9M, NP: S$4.7M

2. Malaysia Paper Mill business (UPP)
Note: assuming tax rate is 20%
2012: S$48.7M, PBT: S$3.8M, NP: S$3.0M, NP Margin: 6.2%
2013: S$46.8M, PBT: S$3.8M, NP: S$3.0M, NP Margin: 6.5%
2014: S$47.8M, PBT: S$4.9M, NP: S$3.9M, NP Margin: 8.2%
2015: S$49.2M, PBT: S$6.4M, NP: S$5.1M, NP Margin: 10.4%
2016: S$50.0M, PBT: S$7.9M, NP: S$6.3M, NP Margin: 12.6%
2017: S$54.3M, PBT: S$8.3M, NP: S$6.6M, NP Margin: 12.2%

In recent years, the margins were abnormally high due to China’s ban of waste disposal which caused the waste paper price to be low (thence lower UPP cost).
I expect the margin to normalise to 9-10% (average of the last 6 years was 9.5%).

Estimated based on 2018-9M revenue (and average margin) for earning power:
Revenue: S$56.4M, PBT: S$6.7M, NP: S$5.3M
From the above, if the Margin reverting to Mean, the NP will be around S$5.3M.
The yield from this business unit is 2.7%

In total, from the 2 business units, we will get about 5% yield.
which is also about S$0.01 per share(also happened to be the dividend for the recent few years).

If the 1 cent dividend (total about S$10M) is sustainable (which I argue it is), it should provide satisfactory return to me.

My expectation is not high and the bonus should come from the result of Taiga Canada (the 3rd business unit).

Falls.Cushion_

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25-02-2019, 06:37 PM.
Post: #32
Avarga (formerly: UPP Holdings)
Announced 4.5c dividend (3c final + 1.5c special dividend).
The dividend yield on last price before announcement of about S$0.2 is over 20%.

This is rather mind boggling.
Even with today price it's still over 18% yield.

Noted that the 3c is actually final and 1.5c is special dividend from the divestment of Tuas building.

Do they have that much if free cashflow to sustain 3c? I pretty much doubt that, considering no dividend from Taiga (or maybe it is coming??)

and for now I wonder whether they have that much of excess cash to distribute out over $40M??

Your guess is as good as mine!
Get more debts?



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My views are your Gilbert & Sullivan's:
"The flowers that bloom in the spring, have nothing to do with the case".

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26-02-2019, 12:11 PM. (This post was last modified: 26-02-2019, 12:17 PM by ghchua.)
Post: #33
RE: Avarga (formerly: UPP Holdings)
Hi ksir,

Avarga invested in Taiga via common shares and subordinated notes. The income from their investment in Taiga comes from those notes, rather than common shares.

With the restructuring of subordinated notes, I guess Taiga going forward would be in a better position to pay dividends with reduced expenses from those notes.

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26-02-2019, 01:23 PM.
Post: #34
Avarga (formerly: UPP Holdings)
(26-02-2019, 12:11 PM)ghchua Wrote: Hi ksir,

Avarga invested in Taiga via common shares and subordinated notes. The income from their investment in Taiga comes from those notes, rather than common shares.

With the restructuring of subordinated notes, I guess Taiga going forward would be in a better position to pay dividends with reduced expenses from those notes.


yes, but as you mentioned, the subordinated notes are converted to taiga shares (at C$1.2).
They no longer hold any notes.
Their cash in from taiga will be merely from dividend.

Taiga didnt announce dividend this year due to major acquisition of exterior wood.
The business has not been performing well even since restructuring.


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My views are your Gilbert & Sullivan's:
"The flowers that bloom in the spring, have nothing to do with the case".

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26-02-2019, 03:03 PM.
Post: #35
RE: Avarga (formerly: UPP Holdings)
(26-02-2019, 01:23 PM)ksir Wrote: [Taiga didnt announce dividend this year due to major acquisition of exterior wood.
The business has not been performing well even since restructuring.

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When you said the business had not been performing well, which part of the business are you referring to? They are profitable for financial year ending 31 December 2018.
http://www.taigabuilding.com/sites/defau...t_-_q4.pdf

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26-02-2019, 03:09 PM.
Post: #36
Avarga (formerly: UPP Holdings)
(26-02-2019, 03:03 PM)ghchua Wrote:
(26-02-2019, 01:23 PM)ksir Wrote: [Taiga didnt announce dividend this year due to major acquisition of exterior wood.
The business has not been performing well even since restructuring.

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When you said the business had not been performing well, which part of the business are you referring to? They are profitable for financial year ending 31 December 2018.
http://www.taigabuilding.com/sites/defau...t_-_q4.pdf

Before the subordinated note restructuring, they have been able to pay 14% interest every year and while still earning abit of bottom line (bottom line still positive).

Now, if you take in 2018 bottom line and minus off the (supposedly) subordinated interest, likely will get negative!

Of course such is rough and not taking into consideration of tax deduction from subordinated interest expense.

In general, what I am trying to convey is that, the conversion reduced the company value of both the noteholders and shareholders.

The gist is that, they have been able to pay out 14% interest for years and expecting them to pay the same out as dividend is likely unlikely (at least at current slowdown in housing).



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My views are your Gilbert & Sullivan's:
"The flowers that bloom in the spring, have nothing to do with the case".

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