Isetan Singapore

[karlmarx]

Most 'deep value' or 'value trap' (depending on your perspective) require a very long holding period before the value is realised. They are so cheap because most investors have 'lost hope' in them. Isetan, like a number of property stocks which refuse to unlock value for opmi, is undoubtedly cheap.

The cure for this is to have a lot of these stocks in your portfolio, which will force you to reduce your attention on any one particular stock (having more attention on a stock works against those who are more impatient). If the portfolio is well curated (none of the stocks turn out to be duds or blow up) the strategy produces a high-probability of low/modest returns (5-8% p.a.), with low risk. This is the Graham style.

This may sound easy but it isn't for everybody, especially those looking for higher returns. Technical competence is also still required to avoid duds, because not all cheap stocks offer good and sure value. But it is easier than trying to model and forecast growth. As mentioned before, I think this is a very safe way to make above-average returns.

The WB style of identifying growth stocks require different skillsets, which are also harder to acquire. Compared to the Graham style, there is no formula. Terms like 'competitive advantage' and 'moat' mean different things to different people. And you're supposed to bet big when you identify such kinds of good stock selling at cheap prices. Given the difficulty of the task, and as such portfolios will be concentrated by design, there will be a lot more stress on the investor which is generally not so good for decision making.

The cure for this is to have a lot of growth stocks in your portfolio. But I think you will have to be some kind of WB-like genius to be able to pick so many 'sure win big' stocks. Either that or you're a very lucky investor.

I think new investors who are looking towards a lifetime of successful investing should start with the Graham style and pick up the skillsets along the way -- accounting knowledge, industry/business knowledge (breadth, depth, and historical), and emotional management -- before doing more WB style.

[dreamybear]

Thanks ghchua for the background info. I am heartened that there are activists shareholders for Isetan, generally I find activists shareholders a rare breed in SG stks.

There are many insights one can glean from WB's letters, actions, books on WB, etc - but fundamentally I think he invests only when he is sure(barring unforeseen circumstances) that he can make money. In this particular case, realizing value is a "difficult" process, i.e. not as straight fwd, albeit it could be just a matter of time.

While it is indeed admirable for those investors holding on for decades, there are dangers of the value trap outliving the investor; opportunity costs to consider; "temperament/utility value" consideration like karlmarx mentioned in the Tesla thread. Unlike WB who enjoys watching his money grow, personally as an investor, I have real use for the pot of gold I earn from my investments.

[ghchua]

There are many insights one can glean from WB's letters, actions, books on WB, etc - but fundamentally I think he invests only when he is sure(barring unforeseen circumstances) that he can make money. In this particular case, realizing value is a "difficult" process, i.e. not as straight fwd, albeit it could be just a matter of time.

I don't think there is any sure win kind of investments. Even there is, you won't be able to do it consistently. Fundamentally, a stock might give you a good outlook and prospects, but valuation might be expensive. You are paying for the good business outlook and future cash flow from those good businesses, unless you discover them very early. If you did, then most likely the stock is loss making or making very little profits and you must be able to have the foresight to buy then.

While it is indeed admirable for those investors holding on for decades, there are dangers of the value trap outliving the investor; opportunity costs to consider; "temperament/utility value" consideration like karlmarx mentioned in the Tesla thread. Unlike WB who enjoys watching his money grow, personally as an investor, I have real use for the pot of gold I earn from my investments. 

Isetan is not a value trap. For earlier investors, they would have gotten back most (if not all) of their capital from those special dividends to utilize those section 44 tax credits. Now, they are waiting for the next pot of gold, hopefully from selling Wisma Atria Podium Block.

[ghchua]

$7.20 per share scheme of arrangement for those who are still holding onto this "value trap". Will minorities be happy with this price? Let's wait and see.

https://links.sgx.com/1.0.0/corporate-an...2e74d5d7d9

[LionFlyer]

$7.20 per share scheme of arrangement for those who are still holding onto this "value trap". Will minorities be happy with this price? Let's wait and see.

https://links.sgx.com/1.0.0/corporate-an...2e74d5d7d9

Ancedontally, yes. One of my family members have held on for a while and was seriously considering to divest this when the Wisma Atria sale did not go through. 

The lack of choice to realise value is one of the key consideration.

[ghchua]

Ancedontally, yes. One of my family members have held on for a while and was seriously considering to divest this when the Wisma Atria sale did not go through. 

The lack of choice to realise value is one of the key consideration.

Hi LionFlyer,

RNAV of Isetan Singapore should be easily above $9 per share. As the offeror did not say that this is a final offer, I think there might still be room for upside. Yes, the lack of choice is one of the consideration that minorities might need to consider, and application of a liquidity discount on the RNAV value might be needed.

Let's see what the IFA is going to say.

[Scg8866t]

Quick answer:

- Isetan won’t pay out any sale proceeds coz they have dream of SG flagship
store. I assume the atas one like the one in JL

- JP taxes on dividends higher than SG. so even less for ISETAN JP.

value trap, I Guess.

All the more reasons to take it private.

7.20 scheme of arrangement. I believe its still not fair for opmi. The parent my guess is to plan to take isetan private at a hefty rnav discount, then sell wisma after the privatisation is done. 

But I am glad my thesis is finally proven and share price jumped 150% in a day lol

[weijian]

Let's recap a bit:

2014: Closure of Isetan Wisma Atria and convert their stratified ownership to "investment properties" for rental. This would be the trigger for the typical "value asset play" because its assets are now non-essential to operations.

2019: Holder of the other >70% stratified ownership of Wisma Atria, Starhill REIT approached them for yum-cha. No happy ending.

2021: At the start of the year, company appointed a property agent and became the one to look for people to yum-cha. Eventually, no happy ending.

2024: Decides to yumcha with minorities - offering to buy them out at 30% to "RNAV" and retains the future value creation themselves.

---------------------------

The main theme of this "value asset pray" (to quote vbScg8866t) by minorities was, for the company to sell Wisma Atria. And over the last decade, there were indications of so, starting from 2014 when it closed down ops. End of the day, it came in a buy-out by the company, with the fate of Wisma Atria relatively inconsequential.

How many 10 years do OPMIs have? Not a lot obviously but sometimes, happy endings as exceptions can and will happen. What is the base rate for happy endings for value asset prays?

Did something happen at the parent level such that they were ready to create value for themselves, with the happy ending for OPMIs a by-product? How can OPMIs study this happy ending objectively and improve our odds of avoiding sad endings?

[specuvestor]

Yes don't have so many 10 years to play with tycoons that don't care about OPMI. And this one is much more than 10 years with little dividend

My memory of Isetan is one that forfeited one of the most Section 44 Franked credits because paying dividends will incur a lot more tax for the holdco in Japan. Despite all the protests from minorities during AGM and many other companies demonstrating issuing dividends and raising rights to replace the cash outflow.

My personal lesson is that I don't hope on such companies and won't "Aiwan" if it doubles or triples thereafter. Ditto for the other end of the spectrum ie non fundamental ramp stocks

[ghchua]

Hi specuvestor,

My memory of Isetan is one that forfeited one of the most Section 44 Franked credits because paying dividends will incur a lot more tax for the holdco in Japan. Despite all the protests from minorities during AGM and many other companies demonstrating issuing dividends and raising rights to replace the cash outflow.

I think I have replied to you previously on the part about tax credits. Isetan Singapore did paid out some of them eventually via dividend. The fact that it managed to accumulate so much tax credit meant that it is not a bad company. If a company keeps on losing money, how could it had accumulated so much tax credits throughout the years?

And even if they paid out little dividends, profits will be retained in the company, which results in increase in NAV/RNAV. That will all be taken into consideration when IFA determines whether the scheme is "Fair and Reasonable" or not.

But if you look at the actual fact, recent years they have been barely profitable or making losses. That resulted in accumulated losses which meant that they could not pay out dividends unless they are profitable within a financial year. So recent years of low dividends is because of their performance, and not because that they purposely hold back dividends due to any other reasons.