Chip Eng Seng

[safetyfirst]

If the new hotel at alex central is sold, try to imagine the windfall profits!!!

[Curiousparty]

yes.

even if it is not sold, the value creation will be reflected in a sub-component in Equity. (i.e. revaluation reserve?)

Plus recurring income from hotel room rental

Any accounting expertise to help on this pls?

$1mil per hotel room - $450mil.

I understand that PRC investment companies are keenly looking around for good hotel space to buy

If the new hotel at alex central is sold, try to imagine the windfall profits!!!

[Curiousparty]

The following news was published back in Feb 2013.

*******
Hotel room demand to outstrip supply growth by 2016

Supply growth will be 5.9%.

According to UOB Kay Hian, the latest tenders for hotel sites confirm hoteliers’ optimistic prospects for the sector. The latest tender for the Jurong Town Road site, which closed in Nov 12, saw strong participation from 11 bidders, with a record top bid of S$1,167psfppr (2.8x the minimum reserve price) from Genting Singapore.

These strong biddings are indicative of the tight demand-supply situation. Hotel valuations for a typical fourstar hotel have also increased 15-25% over the last one year to S$800,000-1,000,000/room key.

Here's more from UOB Kay Hian:

We forecast demand growth of 6% p.a. to outstrip supply growth of 5.9% p.a. over the next three years. We believe concerns over the hotel room oversupply are overdone.

Our forecast assumes a visitor arrival growth of 8% yoy in 2012 and 6% thereafter (historical 10-year CAGR), a flat average length of stay of four days, and hotel utilisation ratio (available rooms/total number of rooms) of 95%.

We expect RevPAR to grow 2-5% p.a. (2012 - 7%) over the next four years, underpinned by healthy occupancy levels of above 85%.
- See more at: http://sbr.com.sg/hotels-tourism/news/ho...00VuN.dpuf

[BlueKelah]

Good results are expected for the TOPs coming next few quarters. I am sure Mr. Market and all the value buddies knows by now, in fact the 30 cents may already be factored in since the big climb last year from ~50cents to 80cents++....

There are some risks though which should be pointed out for the newbies here.

there is a chance that a special dividend be given but if you look at dividend history, they have always only gave/raised div at the end of financial year, so profits could be kept till next year May, so maybe its better to buy more towards december time. However always be prepared as CES can do what Low Keng Huat has done and use the profits for reinvestment into buying investment properties for recurring income or replenish land banks in Singapore as per the latest quarterly...

Dispute with Colonial Range(chow family developing next door) may be ending but there could still be some trouble with progress as they are still "moving toward a resolution". The minister for planning Matthew Guy who approved this could unapprove it as well. He has changed his pattern in the past with regards to this rezoning issue..Read more here After TM, 5 more CBD projects have been approved for total 2000+ new apartments. This is causing some opposition on the politics side as it is very bad town planning, the Lord Mayor has been against it.'We don't want canyons': Doyle slams 'arrogant' Tower Melbourne developers

Also note company should have almost 30 million treasury shares now, good if cancelled, bad if given to bosses as "performance shares/share options"

With a large float, unlikely for any privatisations like the recent superbowl or guthrie so other counters like Hobee/LKH/Hongfok could be alternative value buys as usually privatisations really cause the stock to rise fast.

Just my not vested views, trying not to touch any property related stocks with china still bubbling away...

[swj80]

Hi guys,

Just a little info regarding the construction cost of Alexandra Central. The construction contract was awarded to Keong Hong for $101,000,000. This means that CES is unlikely to experience any cost overruns as it will be borne by Keong Hong. So adding the land cost + construction cost (189mil + 101mil) we get 290mil, 60mil short of the 350mil estimate. Of course, We have not taken in agent sales commission, stamp duty, interest expense, legal and architecture fees. Will this add up to 60mil ? unlikely, but I would say all in 320-330mil is quite reasonable.

Also, Junction 9 and 9 Residences are accounted for based on POC, so profits will be recognised throughout the construction phase unlike the other projects.

As for Tower Melbourne, even in the worst case whereby the project gets cancelled, only the profits will be forgone be since the land still has value, CES won't be losing much. CES, has clauses in the contract that prevent them from paying any compensation to the buyers of TM in the event where the project doesn't go through.

[Gregg]

http://infopub.sgx.com/Apps?A=COW_CorpAn...RUVT9LJPJC

Quite a substantial on mkt buyback but muted impact on share price unlike previously...

I wouldnt mind chip eng seng buying back most shares, excluding mine and management's, at 74 cents

Just to sum up again why the report by Phillip research had grossly understated the profit gain from Alex Central.
(probably done for obvious reasons, wink wink)

a. Hotel valuation per room for a recent 4-star hotel transaction is already in the region of $1mil per key. The chap only assumed $0.5mil per key. I only assumed $0.8mil per key (very conservative). This difference alone already accounted for 20 cents EPS.

http://www.bloomberg.com/news/2014-04-28...state.html


b. How can the construction cost be $600 PSF for retail and hotel segment (based on entire GFA). Don't think CES is building a MBS hotel or MBS-quality retail mall (restraining laughter.....). For this, I have used the recent published rate of construction in Spore for the 2 different segments (medium quality retail + 4-star hotel), with inflation incorporated to arrive at a very conservative rate of $440PSF for the entire GFA. As the retail units were all snapped up within a very short period of time, we can expect the marketing cost to be minimal.

Hi,
If not mistaken,the hotel is not treat as Investment Property ,so it won't reflect the actual value (valuation price) in the balance sheet or so call NAV ...it is under PPE which I would say hidden value .....so,when the hotel is in operation (2015),it's actual value is definitely higher than Balance sheet number (NAV)

[BlueKelah]

As for Tower Melbourne, even in the worst case whereby the project gets cancelled, only the profits will be forgone be since the land still has value, CES won't be losing much. CES, has clauses in the contract that prevent them from paying any compensation to the buyers of TM in the event where the project doesn't go through.

Not only profits forgone, there should be some cost associated with the marketing of the project as well as any agent's commissions already paid out if any were used. And some cost for development application and hire of contractors/staff to prepare for the project.

[tpooyee]

http://infopub.sgx.com/Apps?A=COW_CorpAn...RUVT9LJPJC

Quite a substantial on mkt buyback but muted impact on share price unlike previously...

I wouldnt mind chip eng seng buying back most shares, excluding mine and management's, at 74 cents

Just to sum up again why the report by Phillip research had grossly understated the profit gain from Alex Central.
(probably done for obvious reasons, wink wink)

a. Hotel valuation per room for a recent 4-star hotel transaction is already in the region of $1mil per key. The chap only assumed $0.5mil per key. I only assumed $0.8mil per key (very conservative). This difference alone already accounted for 20 cents EPS.

http://www.bloomberg.com/news/2014-04-28...state.html


b. How can the construction cost be $600 PSF for retail and hotel segment (based on entire GFA). Don't think CES is building a MBS hotel or MBS-quality retail mall (restraining laughter.....). For this, I have used the recent published rate of construction in Spore for the 2 different segments (medium quality retail + 4-star hotel), with inflation incorporated to arrive at a very conservative rate of $440PSF for the entire GFA. As the retail units were all snapped up within a very short period of time, we can expect the marketing cost to be minimal.

Hi,
If not mistaken,the hotel is not treat as Investment Property ,so it won't reflect the actual value (valuation price) in the balance sheet or so call NAV ...it is under PPE which I would say hidden value .....so,when the hotel is in operation (2015),it's actual value is definitely higher than Balance sheet number (NAV)

If normal investment properties, revaluation gain will go to profit and loss and retained earning, hence the EPS and NAV per share will higher.

But hotel will be group under property, plant and equipment, hence the revaluation surplus will go assets revaluation reserve (part of the equity), hence the NAV per share will increase but the gain is under other comprehensive income which will not affect EPS.

[swj80]

As for Tower Melbourne, even in the worst case whereby the project gets cancelled, only the profits will be forgone be since the land still has value, CES won't be losing much. CES, has clauses in the contract that prevent them from paying any compensation to the buyers of TM in the event where the project doesn't go through.

Not only profits forgone, there should be some cost associated with the marketing of the project as well as any agent's commissions already paid out if any were used. And some cost for development application and hire of contractors/staff to prepare for the project.

True, but I think it is negligible compared to the land value. In any case, CES management has stated that in the unlikely event that they lose the case, they could convert the building to a hotel, which would enable them to obtain double digit yield. So in any case, CES won't be suffering a drop in NAV if the project doesn't go through, no destruction of value there.

[swj80]

http://infopub.sgx.com/Apps?A=COW_CorpAn...RUVT9LJPJC

Quite a substantial on mkt buyback but muted impact on share price unlike previously...

I wouldnt mind chip eng seng buying back most shares, excluding mine and management's, at 74 cents

Just to sum up again why the report by Phillip research had grossly understated the profit gain from Alex Central.
(probably done for obvious reasons, wink wink)

a. Hotel valuation per room for a recent 4-star hotel transaction is already in the region of $1mil per key. The chap only assumed $0.5mil per key. I only assumed $0.8mil per key (very conservative). This difference alone already accounted for 20 cents EPS.

http://www.bloomberg.com/news/2014-04-28...state.html


b. How can the construction cost be $600 PSF for retail and hotel segment (based on entire GFA). Don't think CES is building a MBS hotel or MBS-quality retail mall (restraining laughter.....). For this, I have used the recent published rate of construction in Spore for the 2 different segments (medium quality retail + 4-star hotel), with inflation incorporated to arrive at a very conservative rate of $440PSF for the entire GFA. As the retail units were all snapped up within a very short period of time, we can expect the marketing cost to be minimal.

Hi,
If not mistaken,the hotel is not treat as Investment Property ,so it won't reflect the actual value (valuation price) in the balance sheet or so call NAV ...it is under PPE which I would say hidden value .....so,when the hotel is in operation (2015),it's actual value is definitely higher than Balance sheet number (NAV)

If normal investment properties, revaluation gain will go to profit and loss and retained earning, hence the EPS and NAV per share will higher.

But hotel will be group under property, plant and equipment, hence the revaluation surplus will go assets revaluation reserve (part of the equity), hence the NAV per share will increase but the gain is under other comprehensive income which will not affect EPS.

I actually hope less profit is recognised through the P&L and more directly added to the asset revaluation reserve. The more profit they recognise the more tax they have to pay, not in the interest of shareholders.