Low Keng Huat (Singapore)

[greengiraffe]

Looks like LKH in the $ liao with Westgate. At$1900psf vs Sim Lian's $2150psf for Vision Exchange phase 1 at a better location, LKH may also be able to do a copy cat to enhance their returns... who knows...

Once again, Capitaland is proven to be too quick on the trigger to offload.

Vested
GG

[greengiraffe]

ST reported that Sim Lian's average asking price for phase 1 vision exchange office @ $2150 psf is after 18% discount aka original price @ $2620 psf.

Really trying to set benchmarks for an unproven areas. Anyway, if they can pull off then LKH's Westgate office will definitely be a winner.

Vested
GG

[greengiraffe]

http://infopub.sgx.com/FileOpen/20140328...eID=288790

DPS shrunk back to the ordinary 3 cents. No more special.

10. Share of results of associated companies and joint ventures decreased by $55.3M to $39.5M during current year from $94.8M during previous year. It decreased by $26.1M to $7.9M in Q4 current year from $34.0M in Q4 previous year. The decrease was mainly due to lower contribution from the Minton. The Minton, launched in May 2010, is completely sold and received its TOP in Q4 current year.

Does it mean that there is no more profits from Minton following the TOP? I was still expecting some meaningful balance to be booked on TOP.

In line with the adoption of accounting standard INT FRS 115, the Group can only recognise the revenue and related costs of
development in Paya Lebar Square, a commercial development, and Parkland Residences, a DBSS development, when these projects obtain TOP. Both projects are expected to receive TOP by end 2014.
As of 18 March 2014, 96% of the office units at Paya Lebar Square were sold and 4 units were unsold at Parkland Residences.

Baring unforeseen circumstances, LKH's earnings outlook will be boosted by the expected TOP. However, given that large scale developments will be completing and LKH's recent move to transition to become a landlord, it appears that the shrinkage in DPS back to just the ordinary levels could be indicative of guidance going forward.

Vested & Uncertain
GG

[greengiraffe]

LKH's intention on Westgate alongside with the partner will be interesting to see in the months' ahead following the "positive" response to Sim Lian's Vision Exchange.

Westgate is in a better location than Vision Exchange.

Vested & Uncertain
GG

[greengiraffe]

I have just completed a quick results review on LKH. LKH has taken the opportunity of the completion of The Minton to signal to the market their base line DPS of 3 cents which they are comfortable with in the absence of lumpy development profits.

On their books, LKH is in the midst of completing 2 sizable development projects before transitioning to a higher quality recurrent income model driven by largely rental income from their 40% stake in Westgate Offices, 55% stake in the PL Sq Retail, Duxton hotel in Perth and hotel in Vietnam and F&B operations in Singapore.

Before we transitioned to the more stable income model, the following are the lucrativeness of the 2 remaining developments:

Parkland Residence (all but 4 units are sold), land costs $206ppr, average selling prices at least $530psf. I think LKH can make a pretax of 20%:

http://infopub.sgx.com/FileOpen/ANCE0112...eID=134877

http://parklandresidences.net/pricing/

Total salable area approximates 693124sf @$530psf (Gross sales proceeds $367.4m) and assuming construction costs of $225psf, pretax profits of $56m or $46m net can be expected.

PL Square (430,000 sf office average sale price $1750psf, 95000sf retail already capitalised @$3157psf see below. Land costs ppr $1115psf)

PL Square (Office sold 96%) - Total Salable 430,000 sf @ $1750psf (LKH 80% share of gross sales $602m)

Construction costs of PL Square could be around $300psf (could be better as LKH is the main-con). Capitaland Group's Westgate costs $1300psf with a land costs of $1012ppr:

Capland winning bid: http://www.valuebuddies.com/thread-1075.html
LKH Costs - http://infopub.sgx.com/FileOpen/20140103...FileID=320
Capmall net gain: http://infopub.sgx.com/FileOpen/CMTSPAAn...ileID=2692

Pretax Gains from PL Sq Office 430000sf @ $335 psf ($1750 - $1415) = $144m.
LKH 80% share of net $94.5m

PL Sq Retail:

http://infopub.sgx.com/FileOpen/20130611...leID=26719

LKH will retain 55% of the PL Sq Retail after being capitalised @ $3157psf from the transfer to another 55/45 jv with Sun Venture Group. Based on the announcement, LKH should realise a net profit of $22.5m on TOP of the mall in 2015. Upon TOP at the capitalised value, PL Sq retail will account for $0.223 per share of LKH.

In summary:

i) Parkland Residence to net $46m, $367m cashflow on completion FY1/2015
ii) PL Sq Office to net $94.5m, $602m cashflow on completion FY1/2015
iii) Minton project company (associate level) likely to be unwind FY1/2015 returning cash at least $100m
iv) PL Sq retail to net $22.5m, $75m cashflow on dilution of 25% stake upon TOP

Likely earnings boost $140.5m $0.19 eps FY1/2015, cashflow return easilt $1.069bn FY1/2015. Current total debts around $500m, ie net cash levels of at least $500m post closure of projects.

The ending of the era of profitable development projects will help explain why LKH decided to buyout Westgate with Sun Ventures taking a majority stake of 60%. On a ungeared basis Westgate will cost LKH only $232m.

With such a healthy net cash balance sheet and a portfolio of stable investment properties, there are plenty of options for Low family who controls 75% of LKH that may include a privatisation.

The dividend policy of 3 cents a share is a comfortable one for management and it remains to be seen if they will be declaring a decent one off should my estimates of Parkland Residence and PL Sq Office sales are correct.

Vested, Less Uncertain
GG

[Jacmar]

Hi GG, you forgot about the $19.2m that is going to come from the sale of Jln Conley. As I have expected they cut the div down to 3 cents , slightly lower than what I have expected(3.5c) and the div cut goes into investing into westgate. For FY14/15, I expect the div will go back to the >5 cents, 3 cents from recurring, >2 cents from jln conley sales. hope mr mkt misread the div cut and present me with an opportunity to buy more.

[yawnyawn]

Have to be patient with this counter. My observation is that when LKH goes XD, the fall in price has been greater than the announced dividend. It has been this case for the past 3 years.

[merxantia]

Have to be in for the long haul to possibly see results for this counter. Vested.

[greengiraffe]

My experience with LKH started at least 10 years ago. Unfortunately, I missed the golden era that covered GFC.

I remember I bought LKH around $0.60 before several rounds of stock split. The main reason behind my purchase of LKH was the sale of Chijmes to Suntec and several hotels that it used to own in Australia. Sold the stock around $0.90.

IIRC, LKH eventually had a 6-for-1 stock split to what it is today. Even at the peak that I sold, LKH is only $0.15 post stock split and assuming if I have held it till now, it would have been more than repaid via cash dividends.

LKH IMO remains a well run closely held family business. Apart from its remaining hotels, F&B business and construction business, they have made $ and moved on with several development projects mainly with veteran banker Wee's UOL or private entity Kheng Leong. Post the last major residential JV, LKH has since gone solo with Parkland Residential and PL Sq is the main and surprised commercial development that it roped in Guthrie GTS and Invesco backed Sun Ventures.

From my observations, Low family and LKH has greatly benefited from Singapore's asset inflation since 2005. They have been very prudent and hence have been able to pay senior management good performance bonus and shareholders good dividends while retaining sufficient profits to leverage themselves for bigger projects into the future.

Like many developers that have read the asset cycle correctly, LKH is also in the midst of transformation to become a landlord (like Ho Bee, Sim Lian and many others). While LKH may have threw a big surprise to buy Capitaland Group off their soon to be finished Westgate office tower in a 40/60 jv with Invesco Sun Ventures after almost selling off its largest development project embarked in its history, PL Sq, I think Low brothers is simply recycling their locked in development profits into a higher quality recurrent rental stream.

As in my previous threads, I think LKH is likely to be in net cash post the handover of PL Sq and Parkland and the settling of Westgate. If LKH remains a listed entity (no privatisation attempts), then it is keeping its powder dry to wait for bargain hunting opportunities to position for the next asset inflation cycle.

Will LKH be able to repeat it stellar performance in another 10 years - I think the main question will be the policy makers tolerance for asset inflation in Singapore. I think this will also be a burning question for many other stake holders in Singapore and the region (Malaysia).

Vested but reduced
GG

[ngcheeki]

ID Jimmy Yim and his spouse bought 200 lots of LKH @ 67.5 cents on 31 March 2014. This certainly is a vote of confidence for LKH.

http://infopub.sgx.com/FileOpen/_2014040...eID=289403

The following is short profile for Jimmy Yim from the AR.

Mr Jimmy Yim was appointed an Independent Director of the Company on 1 March 2009. He was last reelected
on 31 May 2012. He is the incumbent Managing Director of the Litigation & Dispute Resolution
Department of Drew & Napier LLC, a leading law practice in Singapore, established since 1889. He was
admitted to the Singapore Bar in 1983 and is one of the earliest batches of Senior Counsel, appointed
in January 1998. His practice covers a range of civil and commercial law, criminal law and international
commercial arbitrations. He is a fellow of the Singapore Institute of Arbitrators, a regional arbitrator with
the Singapore International Arbitration Centre, panel member of mediators for FIDRC of the Association
of Banks in Singapore. He is recommended by name in the various professional journals and ranking
agencies in the area of dispute resolution. Apart from Low Keng Huat (Singapore) Limited, Mr Yim sits
on the boards of a few private and public companies.