Isetan Singapore

[specuvestor]

Yes that was the modus operandi. So end of the day Isetan Japan was still not keen to use that structure to max out benefit to OPMI cause they will have to record taxable income and subscribe equity.

That said maybe after 15 years it's time to take another look

Thanks ghchua for the info. Frankly after that AGM I can't be bothered with them anymore So all the S44 credits were used to fullest? Cause I still distinctively remember a newspaper article list out the listed companies that have S44 credits that will expire, and Isetan was one of them

I don't think so. There should be some tax credits left expired but they did pay out some of it. Companies which utilized all their tax credits during that time used the dividend plus rights issue combination to take back those dividends that had been paid out via rights issue. Effectively, they are not really paying out those dividends, just using rights issue to get them back.

For Isetan Singapore, they just paid out dividends. No rights issue was called. Obviously, that will result in a lower amount of tax credit being utilized.

[edragon]

With the current negative interest rate in Japan, Isetan Sg can leverage their imports using the almost zero interest rate and group buy discount of their HQ.
FYI, 2020-12-18 03:45 AM BoJ Interest Rate Decision -0.1% (negative 0.1%)

[edragon]

Yes, you got it, the "Yen carry trade" where one borrows Yen at zero interest and deposit in Sg M_ _ _ Bank and earn FD interest and it been done for more than 10 years as Sg used to have "appreciation" bias by MAS policy.

[ghchua]

Yes that was the modus operandi. So end of the day Isetan Japan was still not keen to use that structure to max out benefit to OPMI cause they will have to record taxable income and subscribe equity.

End of the day, there are two sides of the coin. Would you prefer to just take a one off special dividend (and enjoy lesser tax credit) or maximize all the tax credits without getting any dividends (since dividend would have to almost certainly pump back into those rights issue as rights issue prices were priced very low purposely to get back the dividend)?

Remember I mentioned previously here that Isetan Singapore has no share issue mandate. They have not issued any shares or options for as long as I can remember.

[CY09]

https://www.msn.com/en-sg/lifestyle/othe...d=msedgntp

One by one Isetan is closing its stores. To me, its the right thing to do. They have to downsize as they are unable to compete. Just not sure when will this company wind down for the last puff of cigar to be enjoyed by shareholders

[opmi]

Maybe just have 1 big one Orchard like 新光三越 ... the mothership is Mitsukoshi Isetan BTW...

[CY09]

That's the strategy i would adopt too! Close down serangoon/tampines and focus only on its Isetan Shaw outlet. Sometimes a good management is not one who can turnaround the business but one who recognizes the difficulty in running it and waves the white flag; thus preserving the value for shareholders.

However when the Isetan Singapore CEO returns to Japan, he may be sent to his final retirement job and remain there forever.

[BlueKelah]

This stock crossed my radar many eons ago and had what look like very good value, but its actually a very classic example of value trap. Dividends paltry as well. not a good investment.

[dreamybear]

All in, I think we cannot expect a perfect management. Otherwise, the company will be trading above book value. Obviously, there are flaws in their running of the business, but as value investors, we have to be patient if we see value in a stock.

Sometimes, things are cheap for a reason indeed.
While patience is indeed a required trait for a value investor, as fellow buddies hv pointed out since 2015, there is a possibility of it being a value trap.

If I were to take away some lessons from WB, I wld only consider investing in this type of scenario if I can :
- take an influential stake in Isetan to ensure the company is working to realize value for shareholders   
- buy the whole company outright and then realize the value myself  

Obviously, as retail investors, we probably do not have the financial resources to do the above, and likely have limited financial and other resources to invest meaningful amts into only a handful of stks. As such, it cld be a gd idea to evaluate this stk vs other stocks that can give surer / higher returns instead.

Just to be clear, my intention is not abt whether Isetan is worth buying but more of discussing the merits/risks of investing in such undervalued stocks.

Based on Isetan AR2020, I don't see any 3rd party substantial investors being listed that can help rally the minorities. Perhaps shareholders cld sound out the 3 independent directors. 

https://store-knrdocushe.mybigcommerce.c...%20%20.pdf

[ghchua]

Hi dreamybear,

Value trap or not, one could not deny that Isetan Singapore balance sheet is conservatively managed with zero bank loans. Yes, they have made losses lately but it is well-contained. Which is one of the merits of investing in undervalued companies. The downside is limited by their undervaluation. Though the share price might did nothing since 2015, investors who invested in the stock then would not have suffered huge losses too. In fact, there are opportunities to invest in the stock since 2015, when its share price corrected due to Covid-19 concerns. As in any investment, one should not just buy a stock in 2015 and forget about it since then.

As for unlocking of its asset like Wisma Atria Podium Block, the company understood shareholders' concerns. Various issues had been bought up by minority shareholders at AGMs, which had been noted by the independent directors. You might not have noticed any substantial shareholders besides their holding company in Japan in the top 20 shareholder list of the company, but that doesn't mean there isn't any activist shareholders in the company. In fact, some of the shareholders are involved in writing to the company to encourage them to utilize those section 44 tax credits many years ago. Some are patient investors holding the company shares for decades.

As mentioned before, patience is needed when investing in deep value stocks. Sure, other stocks might give you higher potential return, but they come with higher volatility and other issues as well.