Chip Eng Seng

[Curiousparty]

To further support your point, I went to take a good look at Aspial financials.

Based on its Q2 financial statements/results:-
"At current market prices, the Group expects to make substantial profits from its development projects, both locally and in
Australia, due to the good margins for most of these projects.
The Property Business is expected to continue to contribute significantly to the Group’s revenue and profitability due to the
following reasons:-
First, based on the units sold in its property projects as at the date of this announcement, the Group has locked in total
revenue of about S$660 million which will be progressively recognized in accordance with the stage of construction.
Second, at current market prices, the potential sales revenue from local and overseas projects is estimated to be in excess of
S$3 billion."

Assuming a net profit margin of 15% on total potential revenue of $3 billion = $450mil net profit.
Outstanding no of shares = 1817 mil shares
Potential NAV gain ~ 25 cents.

Current book NAV = 17 cents (as of 2Q 2014)
max RNAV = 42 cents.

At current market price of 45 cents, Aspial might be "overvalued"
In addition, only $660mil revenue out of $3billion (or 22%) has been "locked in". Mr Market seems to be paying a future price for this counter...

If Mr Market is valuing CES like Aspial, CES should be trading well beyond $1.50 - $1.60 at the moment because all its RNAV (up to $1.60) has been locked in due to close to 100% sales at Alex retail mall, Junction 9, Ninth Residence and Alex Hotel is ready to TOP in mid-2015.

So, pls be aware of counters like Aspial, Wee Hur and others who are already trading at future RNAV and especially if some or most of the potential profit has not been "locked in".

Yes. Just to see how the figures compares:

Aspial NAV is now 17.67 cent. Share price 44.5 cent. To trade at half of RNAV, which is what cheap prop shares like Chip Eng Seng trade at now, Aspial NAV has to go up to 90 cnet or 72 cent from all its future projects. Multiply 72 cent by 1.817 billion shares = $1.3 billion!!!

Aspial has to make $1.3 billion net future profits from all its projects in order to catch up with Chip Eng Seng!!

I think that will take 10 years maybe, assume $130 million a year. This half year it only make $40 million.

[BlueKelah]

Let me clarify why CES is trading as such a discount to its RNAV as CP has calculated.

CP you gotta seriously look at the reasons for CES undervalued instead of repeating 'ad nauseam' everyday that this stock is undervalued and should be worth more.

Let's look at a couple property companies I am more familiar with.

Why is WeeHur trading at such a good price?
WeeHur already has recurring income locked in for next 6 years from their now operational worker dorms, which would help maintain the juicy div yield 5%+. Also Kaki bukit and Parc centros locked in profit until 2016(FULLY SOLD) and NET CASH (38.38% of market cap) position. Even if a big property correction comes around as many are expecting, company fundamentals will remain ROCK SOLID. Investors are prepared to pay a premium for good earnings visibility and rock solid balance sheets. You are pretty good at doing NAVs, go add up the current 24c to the upcoming Kaki Bukit/parc centros, then add in the value of how much you think the dorm business is worth, see how much you get. You will then understand the value of WeeHur. If you are unable to do this, let me know, I will spend some time to post on the WeeHur thread.

Why is Low Keng Huat(66cents) also trading at a big discount to RNAV?
It has TOP coming soon on it's PL Square, its "potential" profits and subsequent NAV increase from that (RNAV 1.10 - 1.20), has been channeled to purchase of Westgate which will provide a good recurring income stream going forward but in the short term means no attractive special payout coming as was previously expected and hence the stagnant price there for now and the undervaluation.


Why is CES trading at such a discount to RNAV?
1) A simple explanation could be other than visibility of earnings from the projects mentioned, there remains uncertainty on future projects earnings. Markets do not like uncertainty and will often apply discounts accordingly If those developments do not go ahead as planned, it is unlikely share price will reach RNAV, without recurring income to support a dividend of 8 cents to match the "potential" share rise to $1.60 as you have postulated. As you can see, the recent rise in price from SBB is already compressing the previously healthy 5% yield down to 4%

2) Given recent property peak this cycle, you have to seriously question if CES should be looking at getting more recurring income props and better preparing itself for a likely downturn, instead of 'following the herd' and taking on more risks with overseas expansions. I would think the "old hands" such as those at LKH are taking a more sensible strategy by switching from developing to a safer model of recurring income.

3) Given the excellent management at CES, there is a possibility CES might do a "lowkenghuat" on shareholders and use the coming TOP profits to buy up something big for recurring income and there goes your expected special payout. Would you expect share price to reach the RNAV in such a scenario?

Investing in property counter is not as easy as calculating RNAV and thinking share price gonna match RNAV. You also have to think 'big picture', think 'longer term' and think about risks.

[Curiousparty]

For CES, the RNAV of $1.60 (as calculated by Phillips Capital, NRA, OSK and excluding all overseas projects) is from "locked in profits" from sold-out local projects and not "phantom" profits yet to be booked, unlike Wee Hur's upcoming projects and dorm business.

Does all the "phantom profit" from Wee Hur's upcoming projects and dorm business add up to 14.5 cents (i.e. current share price - current book NAV)? These profits are yet to be booked and Wee Hur is already trading at some "future price", similar to Aspial.

Hence, I have to wholeheartedly agree with the writer (at next in sight) that Wee Hur's investing appeal is limited and not compelling. I suspect many investors have already taken profits from Wee Hur...


http://www.nextinsight.net/index.php/sto...buy-can-we
"From a value investing standpoint, Wee Hur's investing appeal is limited given the profit to be recognised has already been “priced in” and the company does not appear to be trading at a discount to its intrinsic value."

[BlueKelah]

Yes Weehur is probably fairly/overvalued but with good reason. Dorm business is completed and ramping up so not "phantom". Kaki Bukit will TOP this year so not phantom. Parc centros income will also be coming in as building is completed also not phantom. What is "phantom"???

You have also failed to notice that LKH also has its profits LOCKED IN from PL Square coming TOP which brings RNAV over $1. I dun see the share price at that level.

Locked in profits does not == realisation of RNAV.

[Curiousparty]

Yes, that was why I was quietly already into LKH as well

But of course, I do recognize that LKH is quite "unfriendly" to minority shareholders, and its accounting structure for PL square is "complex" to the outside people (e.g. cross holdings, etc)

Yes Weehur is probably fairly/overvalued but with good reason.

You have failed to notice that LKH also has its profits LOCKED IN from PL Square coming TOP which brings RNAV over $1. I dun see the share price at that level.

Locked in profits does not == realisation of RNAV.

[Curiousparty]

"Locked in profit" does not mean "will realize RNAV" (agree)

But "locked in profit" is still better than "phantom profit" and "trading at future price"...

Yes Weehur is probably fairly/overvalued but with good reason.

You have failed to notice that LKH also has its profits LOCKED IN from PL Square coming TOP which brings RNAV over $1. I dun see the share price at that level.

Locked in profits does not == realisation of RNAV.

[BlueKelah]

WeeHur Dorm business is completed and ramping up so not "phantom" but very likely and will appear next quarterly report, Kaki Bukit will TOP this year so LOCKED IN. Parc centros income will also be coming in as SOLD OUT completed and LOCKED in also not phantom. What is "phantom"???

[Curiousparty]

Why didn't any analyst venture a calculation for RNAV of Wee Hur?

WeeHur Dorm business is completed and ramping up so not "phantom". Kaki Bukit will TOP this year so not phantom. Parc centros income will also be coming in as building is completed also not phantom. What is "phantom"???

[BlueKelah]

WeeHur market cap 345m, low volume stock. Already discovered and limited potential for price increase.

LKH Mcap 488m, low volume stock.

CES Mcap 571m, higher volume stock, better liquidity

It is well known that analyst like to cover stocks that are bigger market cap and good liquidity as they can then recommend this to their clients to invest and trading house profits from their research from the trading activity it generates. You can correlate that CES might be "pushed" pretty soon with so much coverage.

Smaller caps with low volume are not worth their time and sometime they cannot cover as lots of funds have rules for market cap cut off and liquidity.

[Curiousparty]

Alex hotel + San centre + Office space in Australia will bring in ~ 3 cents of recurring income. On top of this, CES has its bread and butter construction which can easily bring in another 3 cents per year. All in all, 6 cents of recurring income going forward (from mid-2015) This is more sustainable than say Wee Hur's 3+3+3 arrangement (max is 9 yrs).

After milking the recurring income from Alex Hotel, CES can still sell it later on when a good buyer emerges. (not sure if Wee Hur can sell its depreciated dorms after 9 yrs ?)

5-star hotel valuation has made a new high with CDL's plans to securitize its top-end property assets on Sentosa Island.
W Singapore - $1.65mil per key (CDL)
The Westin - $1.5 mil per key (Daisho Group of Japan)

Probably, it is LKH who has to learn from CES to be more friendly to minority shareholders....hahaha
(no puns intended)

2) Given recent property peak this cycle, you have to seriously question if CES should be looking at getting more recurring income props and better preparing itself for a likely downturn, instead of 'following the herd' and taking on more risks with overseas expansions. I would think the "old hands" such as those at LKH are taking a more sensible strategy by switching from developing to a safer model of recurring income.

3) Given the excellent management at CES, there is a possibility CES might do a "lowkenghuat" on shareholders and use the coming TOP profits to buy up something big for recurring income and there goes your expected special payout. Would you expect share price to reach the RNAV in such a scenario?