Cogent Holdings

[CityFarmer]

Do they own Grandstand Mall or just managing it ?

(Not Vested)

The Grandstand is on short-term leased from authority. There still have 3 years lease till 2018.

(not vested, but monitoring)

[Greenrookie]

(Vested interest)

Cogent Q3 results show a stronger OCF and core 9M profits that already matches the whole of 2014.

It seems confidence of translating the LOI of logistic hub at jurong island to a tangible contract as it is mentioned again during the Q3 results, but repayment of debts is taking away a third of profits and wonder if it does get appointed will it be a case of short term pain before any gains?

Below taken from my blog before Q3 results 

-----
logistic company. I will not describe its operations, but you can read it here

I was first attracted to it due to its high dividend yield which includes a 1-off special dividend due to its disposal of asset.

My first attempt at analyzing the company didn't really excite me, although company is generating FCF most of the time, its short track records as a listed company see a U-shape yoyo in terms of revenue and profits. "Highly cyclical" I thought. Also, debt is not low.

When I read further, I got really interested.

There are 2 catalysts which I like.

1) The LOI for further expansion in Jurong Island. The deal if materialize will increase gross floor area for operation by almost one-third

2) The Contribution from one-stop logistic hub containers operation. (Details here)

But truth be told, what really wow me is really the qualitative story rather than hard numbers.

First, one logistic hub has a patented design, which I thought really value-add to customers in terms of both costs and time.

[Image: co1.png]

There is no need to move the empty container to a warehouse somewhere else, it can be stored.

There is also synergy in the 4 business. I investigate what cause the dip in earnings in 2010 and the main factor was increase in rental. Cogent like other players, rent warehouses from JTC and provide the services and earn from the services.

With the new logistic hub, it has "retired" 2 warehouses and might not renew a third in 2016. 

Another reason why I like it is Grandstand. I felt it has turn around a ghost town rather impressively, although I am sure the reason why it got involved is for the Used Car bus Businesses there, which should be providing some business for its automobile segment of business.

It has also start expansion to Malaysia Port Klang although I would rather not count on it. Malaysia is the only overseas operation contributing less than 10% of revenue. I actually prefer local operations which I felt is less volatile in terms of regulations.

Other things I like, the family owned about 80% of the business but liquidity is not too bad. Remuneration is clean and without options. The Family owned 70% of the business when it just IPOed. and there were frequent buying back of shares. Qualitatively, it seemed like a serious family (Son made CEO and Dad Chairman) with a succession plan. It was the son's concept for 1-stop logistic hub.

Since the logistic hub is the main draw, I calculate for the remaining lease of about 25 years, it need to generate 5.5 mio of NP for the next 25 years to get its cost back. Looking at the Q1 and Q2 results as compared to past year, assume results is generally the same for all segments and the steady improvement of 6 mio for both quarters from a year ago is due to contribution from this hub. Return of asset is about 10%. Nothing to shout about if u ask me. 

As for risks, there is plenty of warehouse supply coming in from
Now till 2016. Reading the prospectus, the concentration of a few major shipping customers for their business is a very real risk too. Both might affect earnings 


Now the numbers:

Cogent's Warehouse business numbers is "contaminated" by property development of Grandstand, it makes it Gross Margin of about 30% look super high when compared to peers like Vibrant, PTC and CWT. Margin for transportation services is 10%, comparable to the bread and butter of PTC.

ROE is 15-20%, good enough for me.  

2Q NP is already 11 mio, according to prospectus, containers and warehousing segment usually enjoy higher business activity in Q4. But just annualized the results it will be a improvement from last year 3 running record year of profits (17 mio excluding disposal profit of 7 mio)

At 22 mio, its EPS is close to 5 cents, which gave it a PE of 6-7. Not too bad

Final dividend is 2.58 cents last year. Which gave 7.3% yield. Special dividend will not be repeated.

Assume 2 cents dividend instead, they will need to pay about 9 mio which thought it will be rather sustainable.

[xLoR86x]

Good Analysis!

I believe that the current dividend payout will be sustainable.
This would be a good dividend stock with potential for growth.

If the project to develop Jurong Island proceed smoothly, the company will be able to benefit from it.

Not forgetting the cash-flow contribution from Grandstand. 

(Vested)

[GSG]

http://www.straitstimes.com/business/com...tenant-mix

Grandstand gets green light for more varied tenant mix

OCT 16, 2015
Jeremy Koh


The Grandstand mall has obtained approval to host a wider range of businesses.

Units at the Bukit Timah centre can now be used as offices, property showrooms, telco service centres, family-oriented karaoke outlets, certain medical centres and maid and travel agencies.

Cogent Land Capital, which is leasing the premises, wanted a greater tenant mix so it could fill the unoccupied 5 per cent of the mall, said Mr Benson Tan, chief executive of parent firm Cogent Holdings.

Mr Tan noted that the new category of tenants, such as maid agencies, could set up at the Grandstand for far less than it would cost to establish a restaurant. That would allow them to recoup their investment in a shorter time - an important factor, given that Cogent has only about three years left on its lease.

But Mr Tan does not foresee a significant change in the mall's tenant mix, adding that most tenants "have established themselves and are doing well".

"Currently we don't have any tenants that have indicated they are exiting. However, based on experience, in a three-year lease term there will always be about 5 to 10 per cent of tenants from various sectors that do not do well, which results in turnover."

MORE UPMARKET

We are now in the mid to high (income consumer) market, compared to perception that people had of Turf City, (which) was that it was a rundown place in the lower end of the (income) spectrum.

MR BENSON TAN, chief executive of parent firm Cogent Holdings, on Grandstand mall
Cogent's three-year tenancy began on March 1, 2012, and included the option of a three-year extension, which the firm has exercised.

Mr Tan said he does not know what the Government's plans are for the Grandstand site at the end of the lease term.

The Singapore Land Authority told The Straits Times that agencies are looking at whether the tenancy for the site can be extended beyond February 2018.

Cogent Land Capital has invested a lot in revamping the mall, which was formerly known as Turf City and seen as being rundown, Mr Tan said. It makes use of all seven floors compared with only two under the previous operator, he said.

It now offers a wider range of tenants, including food market Pasarbella, high-end restaurants, a supermarket and a taekwon-do school.

"We are now in the mid to high (income consumer) market, compared to perception that people had of Turf City, (which) was that it was a rundown place in the lower end of the (income) spectrum," Mr Tan said.

[CityFarmer]

The extension of Grandstand lease beyond 2018, is a big plus to the company, but it remains as an uncertainty at the moment. It seems there is a high possibility based on the SLA response in the article.

(not vested, but monitoring)

[Greenrookie]

The extension of Grandstand lease beyond 2018, is a big plus to the company, but it remains as an uncertainty at the moment. It seems there is a high possibility based on the SLA response in the article.

(not vested, but monitoring)

Agreed that the extension, if any, will be the significant contributor. 5% more occupancy is not actually a "big deal" even if they manage to pull in more varied tenants.

The funny thing is as usual ah gong's bureaucracy, you allowed offices, medical facilities etc, but then you are also saying I might stop renewal after 2 year plus hor... 

Wondered how the Jurong Island development project is in the bag a not, another price mover (not sure if it is up or down thou.. LOL), although even if they do not develop that project, they are going to cope just fine

(Vested interest)

[CityFarmer]

Agreed that the extension, if any, will be the significant contributor. 5% more occupancy is not actually a "big deal" even if they manage to pull in more varied tenants.

The funny thing is as usual ah gong's bureaucracy, you allowed offices, medical facilities etc, but then you are also saying I might stop renewal after 2 year plus hor... 

Wondered how the Jurong Island development project is in the bag a not, another price mover (not sure if it is up or down thou.. LOL), although even if they do not develop that project, they are going to cope just fine

(Vested interest)

A greater tenant mix, will likely increase the overall rental, thus increase the revenue/profit from the lease.

After the Logistics Hub development, Cogent net gearing is already more than 70%. When the Jurong Island development project is secured, the source of funding, is an uncertainty. The increased cash flow from Logistics Hub might not be sufficient. Most probably by equity, rather than more debt?

(not vested, but interested and monitoring)

[Greenrookie]

Agreed that the extension, if any, will be the significant contributor. 5% more occupancy is not actually a "big deal" even if they manage to pull in more varied tenants.

The funny thing is as usual ah gong's bureaucracy, you allowed offices, medical facilities etc, but then you are also saying I might stop renewal after 2 year plus hor... 

Wondered how the Jurong Island development project is in the bag a not, another price mover (not sure if it is up or down thou.. LOL), although even if they do not develop that project, they are going to cope just fine

(Vested interest)

A greater tenant mix, will likely increase the overall rental, thus increase the revenue/profit from the lease.

After the Logistics Hub development, Cogent net gearing is already more than 70%. When the Jurong Island development project is secured, the source of funding, is an uncertainty. The increased cash flow from Logistics Hub might not be sufficient. Most probably by equity, rather than more debt?

(not vested, but interested and monitoring)

Hi CF,

I believe given the already short lease, most of the existing tenants (at least the achor and F&B ones should be already in 3 years lease and any positive renewal if any, already fixed. If say, govt allowed another renewal then more renewals could make an impact

[CityFarmer]

It is more likely a seeking for interest of placement, to rise fund, IMO.

(not vested, but monitoring closely)

Cogent says evaluating buyout offers

SINGAPORE (Jan 29): Logistics company, Cogent Holdings ( Valuation: 2.40, Fundamental: 1.70), is currently evaluating its businesses and operations in relation to offers to buy out the company.

But it says that there is "no certainty that any transaction will materialise" from that evaluation process.
...
http://www.theedgemarkets.com/sg/article...out-offers

[hailstorm87]

Here is the WSJ article. 

http://www.wsj.com/articles/cogent-holdi...1453967600

(vested)