Low Keng Huat (Singapore)

[bookworm]

Hello! yeokiwi, Jacmar

Agree on the lower cost of borrowing and ease of equity raising. Keeping companies listed also provide an avenue for existing shareholders (2nd or 3rd generation) in the family to exit, to attract more professionals, institutionalizing the business and so on. Interestingly, LKH has many loyal shareholders who will gather every year at AGM for free lunch, free-flow some more. Keng Boon seems happy to see them. So, your gut feel may be right - no privatization yet.

Even so, LKH’s illustrious track record is probably the best local builder in town. Have been in LKH since it started divesting the hotels in Australia, along the way pared down, increased stakes, till now. Currently my top pick for its predictable and sustainable high yield (>7% excluding special payouts), low risk (since all projects sold) and large discount to RNAV (my back-of-envelope computation shows >$1). Hard to find such stocks nowadays...

Cheers!

[UK Investor]

Hi All,

I'm an investor from the Uk looking to buy my first holding in a Singapore company. After research I really like the look of LKH. The Singapore market seems pretty fairly valued (certainly cheaper than UK), but LKH seems incredibly cheap. On a PE of just over 4.0 and yielding over 6% and at a discount to book value. I've done a fair bit of research and cannot find anything untoward. If something is so cheap, there is usually a good reason.

Given your local knowledge, have I missed something?

Cheers.

[money]

Hi All,

I'm an investor from the Uk looking to buy my first holding in a Singapore company. After research I really like the look of LKH. The Singapore market seems pretty fairly valued (certainly cheaper than UK), but LKH seems incredibly cheap. On a PE of just over 4.0 and yielding over 6% and at a discount to book value. I've done a fair bit of research and cannot find anything untoward. If something is so cheap, there is usually a good reason.

Given your local knowledge, have I missed something?

Cheers.

Dont think u missed anything, it is good!

[UK Investor]

Dont think u missed anything, it is good!
[/quote]

Good to hear, Thanks!

[Jacmar]

Hi All,

I'm an investor from the Uk looking to buy my first holding in a Singapore company. After research I really like the look of LKH. The Singapore market seems pretty fairly valued (certainly cheaper than UK), but LKH seems incredibly cheap. On a PE of just over 4.0 and yielding over 6% and at a discount to book value. I've done a fair bit of research and cannot find anything untoward. If something is so cheap, there is usually a good reason.

Given your local knowledge, have I missed something?

Cheers.

I am vested for the last 3 years and have collected the juicy dividends. expecting at least 4 cetns again this year and won't be surprise if they give 5 cents given that they have sold out their condo project, expect to fully sold their govt (dbss) project which is 70% sold in last reporting, fully sold their office project and holding back the launch of the retail units for better pricing.Management is pretty solid and trust worthy and shareholder friendly as evidenced by the track record of dividends.

[UK Investor]

Thanks for this Jacmar. It's good to get long term investors opinion. The metrics for this stock are exceptional. However, worries I had were:

[1] Is Singapore property market in a bubble.
[2] Are the Low brothers getting too old to manage the company effectively.
[3] Free Cash flow seems very erratic, but I guess that's the nature of the business.
[4] Problems with tax in Vietnam.

I guess worries about number 1 are probably what is keeping the stock so cheap. Reading between the lines on the financial reports, the company seems to be suitably cautious going forward. It's comforting to know that the company has many years experience in the Singapore property market.

[Jacmar]

Thanks for this Jacmar. It's good to get long term investors opinion. The metrics for this stock are exceptional. However, worries I had were:

[1] Is Singapore property market in a bubble.
[2] Are the Low brothers getting too old to manage the company effectively.
[3] Free Cash flow seems very erratic, but I guess that's the nature of the business.
[4] Problems with tax in Vietnam.

I guess worries about number 1 are probably what is keeping the stock so cheap. Reading between the lines on the financial reports, the company seems to be suitably cautious going forward. It's comforting to know that the company has many years experience in the Singapore property market.

IMHO, yes singapore property is in bubble territory. For LKH they don't have much unsold property. the DBSS project is a small project for them and even that it is already 70% sold. so not much worries there. yes they are very cautious and conservative and have not seen them bidding for new projects which is good. The senior Low has passed the baton to his son and the other brother is not that old. FCF is erratic as it is the nature of property developer. fortunately for them they have 2 hotels and their F&B is generating good fcf.the tax issue is manageable and has already been accounted for.

as usual pls do your own research as my opinion is biased.

[UK Investor]

Thanks Jacmar.

[greengiraffe]

http://info.sgx.com/webcoranncatth.nsf/V...3000FBF11/$file/20121127_LKHS_DisclosureOfInt_FORM1-V4_9_1_LKB.pdf?openelement

No muddy waters around LKH, simply clear vote of confidence by CEO Low Keng Boon.

CEO Low bought 152k shares @ 0.48 on 22 and 23 Nov and the notice was filed on 27 Nov.

Last time a company executive bought shares was in Aug 11 when Marco Low bought 591k shares between 0.34 and 0.35.

Low family is in control of total stake in excess of 70%.

Vested

[greengiraffe]

DMG posted an update on LKH today:

Scoop of the Day: Our recent meeting with Low Keng Huat suggests the
company is sitting pretty after chalking up robust sales for its commercial
and residential developments, with good earnings visibility over the next few
years. At Paya Lebar Square, its commercial and retail project next to the
Paya Lebar MRT interchange, the strata-titled office space of 430,000 sf is
over 90% sold at an average price of $1,750 psf, while the 95,000 sf retail
component achieved leasing commitments for more than 60% of the space
available at rates of $16-17 psf pm. Parkland Residences, its DBSS project
at Upper Serangoon Road, meanwhile, has issued options for 70% of the
680 units available. And its earlier JV residential project with Kheng Leong,
the Minton, is 100% sold. All this suggest a steady stream of profit
recognition over the next 2-3 years: The Minton in 2012-2013, followed by
Paya Lebar Square and Parkland Residences in 2014-2015. Beyond
property development, LKH is one of the largest general building and civil
engineering companies in Singapore as an A1 registered general building
contractor and owns hotels in Australia and Vietnam. The company has
generated pretax profits of over $100m p.a. for the past two years, and we
expect earnings to remain robust going forward underpinned by the healthy
pre-sales for its property projects. This should enable it to sustain its
dividend payout of 4 cts per annum, translating to an attractive yield of over
8% at the current price. Trading at a 56% discount to our RNAV of $1.09, we
think the counter is attractively-priced on all counts. (Goh Han Peng)