HL Global Enterprises

[secretinvestors]

A few facts as a result of the completion of this complex disposal in HL Global's LKNII which consists of 100% interest in Hutai that owns serviced apartment building Elite Residences located near Shanghai's central district and 60% interest in loss-making CHQ that consists of Copthorne Hotel in Qingdao near Qingdao's central business district:

http://infopub.sgx.com/FileOpen/Completi...eID=479492

1. The company will receive net proceeds in excess of S$100M from both deals, the bulk of it has already been received.
2. HL global will become a net cash company vs a net debt company previously.
3. HL global should have positive book value vs a negative book value previously.
4. The now positive book value should also be very much more than the current market cap.
5. The company will report a significant gain in earnings this year due to this disposal.
6. Main investments and properties of the group consists of 100% interest in Copthorne Hotel Cameron Highlands, 49% interest in a management services company to Equatorial Hotel Shanghai, a piece of land in Tengah Malaysia and 2 pieces of land (8,400sqm) in Cameron Highlands Malaysia.

I believe HL Global will use part of the huge cash proceeds for the repayment of the unsecured loan which has been one of the main causes of its losses the past few years via interest expense. Coupled with loss-making CHQ already out of the picture, HL global should be able to report reasonable earnings going forward, fulfill the financial exit criteria and be removed from the SGX-ST Watchlist. The substantial cash that remains even after paying the loan may be used to fund suitable acquisitions of new businesses and possibly the payment of a dividend.

[opmi]

will HLGE want to return the net cash? or reinvest into some other ventures?

look at the history of how SG Hong Leong Group got into HLGE and Thakral.
Maybe that will give hints to HLGE's future

[activistasia]

As expected, SGD60.4m cash on the balance sheet with 2m debt vs mkt cap of SG$43m.

The company still has cash flow positive assets in Cameron Highlands. Expecting 1) removal from watchlist 2) M&A to finally unlock value or bake in some rationality into the share price.

[opmi]

I guessed that HL Group want to buy things with this shell.
Not likely to return the cash.

That was the plan when they bought LKN-Primefield and Thakral.

Out of Watchlist even worse - HLGE better dead than alive.

To add, the Melaka land is land with abandoned building. Not exactly good neighborhood. Not near City Centre or Datawan Mall.

Dont think Cameron Highlands Hotel worth much. They bought over the minority stake some time back for less than Rm10m (?)

[activistasia]

I guessed that HL Group want to buy things with this shell.
Not likely to return the cash.

That was the plan when they bought LKN-Primefield and Thakral.

Out of Watchlist even worse - HLGE better dead than alive.

It does seem like it is more "ready" to be injected with a business now that it is loaded with cash. In the past, HL Global / LKN couldn't because a majority of assets are properties spread out in different countries.

But they did announce 3 cents divvie in the FY results. Not a bad start.

[secretinvestors]

A few facts as a result of the completion of this complex disposal in HL Global's LKNII which consists of 100% interest in Hutai that owns serviced apartment building Elite Residences located near Shanghai's central district and 60% interest in loss-making CHQ that consists of Copthorne Hotel in Qingdao near Qingdao's central business district:

http://infopub.sgx.com/FileOpen/Completi...eID=479492

1. The company will receive net proceeds in excess of S$100M from both deals, the bulk of it has already been received.
2. HL global will become a net cash company vs a net debt company previously.
3. HL global should have positive book value vs a negative book value previously.
4. The now positive book value should also be very much more than the current market cap.
5. The company will report a significant gain in earnings this year due to this disposal.
6. Main investments and properties of the group consists of 100% interest in Copthorne Hotel Cameron Highlands, 49% interest in a management services company to Equatorial Hotel Shanghai, a piece of land in Tengah Malaysia and 2 pieces of land (8,400sqm) in Cameron Highlands Malaysia.

I believe HL Global will use part of the huge cash proceeds for the repayment of the unsecured loan which has been one of the main causes of its losses the past few years via interest expense. Coupled with loss-making CHQ already out of the picture, HL global should be able to report reasonable earnings going forward, fulfill the financial exit criteria and be removed from the SGX-ST Watchlist. The substantial cash that remains even after paying the loan may be used to fund suitable acquisitions of new businesses and possibly the payment of a dividend.

Looks like most (if not all) of the points covered previously above came through. More details can be gleaned here:

http://infopub.sgx.com/FileOpen/HLGE_4QU...eID=490173
http://infopub.sgx.com/FileOpen/HLGE_201...eID=490167
http://infopub.sgx.com/FileOpen/HLGE_Boa...eID=490190

In summary:
1. Disposal of LKNII and CHQ went through and the >$100M is already received.
2. Part of the proceeds is used to pay off the full Venture Lewis loan.
3. The group's earnings will be relieved of the heavy interest expense burden as a result and we should reasonably expect positive earnings going forward.
4. Free cash flows remains positive this year. 
5. The company has applied for removal from the SGX-ST watchlist and they have also undertaken to provide a reasonable exit offer to minority shareholders should SGX-ST somehow rejects the application (i think this scenario is unlikely).
6. A 3-cents dividend is declared, giving a yield of 6.4% on current price of 46.5-cents.
7. The group is reviewing the proposed development of their Melaka property as well as sourcing for sustainable and viable businesses with the huge excess cash even after payment of the dividends.
8. There are some changes to the Board.

HL global has gone from net debt to net cash of about 60-cents per share. Book value went from negative to about +84-cents per share. Share price currently is just 46.5-cents. With much of the uncertainty already cleared up, I believe that even at this price HL global is still a reasonably safe bet!

[secretinvestors]

A few facts as a result of the completion of this complex disposal in HL Global's LKNII which consists of 100% interest in Hutai that owns serviced apartment building Elite Residences located near Shanghai's central district and 60% interest in loss-making CHQ that consists of Copthorne Hotel in Qingdao near Qingdao's central business district:

http://infopub.sgx.com/FileOpen/Completi...eID=479492

1. The company will receive net proceeds in excess of S$100M from both deals, the bulk of it has already been received.
2. HL global will become a net cash company vs a net debt company previously.
3. HL global should have positive book value vs a negative book value previously.
4. The now positive book value should also be very much more than the current market cap.
5. The company will report a significant gain in earnings this year due to this disposal.
6. Main investments and properties of the group consists of 100% interest in Copthorne Hotel Cameron Highlands, 49% interest in a management services company to Equatorial Hotel Shanghai, a piece of land in Tengah Malaysia and 2 pieces of land (8,400sqm) in Cameron Highlands Malaysia.

I believe HL Global will use part of the huge cash proceeds for the repayment of the unsecured loan which has been one of the main causes of its losses the past few years via interest expense. Coupled with loss-making CHQ already out of the picture, HL global should be able to report reasonable earnings going forward, fulfill the financial exit criteria and be removed from the SGX-ST Watchlist. The substantial cash that remains even after paying the loan may be used to fund suitable acquisitions of new businesses and possibly the payment of a dividend.

Looks like most (if not all) of the points covered previously above came through. More details can be gleaned here:

http://infopub.sgx.com/FileOpen/HLGE_4QU...eID=490173
http://infopub.sgx.com/FileOpen/HLGE_201...eID=490167
http://infopub.sgx.com/FileOpen/HLGE_Boa...eID=490190

In summary:
1. Disposal of LKNII and CHQ went through and the >$100M is already received.
2. Part of the proceeds is used to pay off the full Venture Lewis loan.
3. The group's earnings will be relieved of the heavy interest expense burden as a result and we should reasonably expect positive earnings going forward.
4. Free cash flows remains positive this year. 
5. The company has applied for removal from the SGX-ST watchlist and they have also undertaken to provide a reasonable exit offer to minority shareholders should SGX-ST somehow rejects the application (i think this scenario is unlikely).
6. A 3-cents dividend is declared, giving a yield of 6.4% on current price of 46.5-cents.
7. The group is reviewing the proposed development of their Melaka property as well as sourcing for sustainable and viable businesses with the huge excess cash even after payment of the dividends.
8. There are some changes to the Board.

HL global has gone from net debt to net cash of about 60-cents per share. Book value went from negative to about +84-cents per share. Share price currently is just 46.5-cents. With much of the uncertainty already cleared up, I believe that even at this price HL global is still a reasonably safe bet!

As discussed previously, HL Global had applied for removal from the SGX-ST watch-list. Yesterday, the company has received in-principle approval from SGX-ST for the removal from the watch-list and it is effective from today onwards:

http://infopub.sgx.com/FileOpen/HLGE_Ann...eID=496098

With the removal of the company from watch-list, a decent 3-cts dividends on CD (5.9% yield) and healthy balance sheet plus the fact that management's is taking further steps to improve the company's fundamentals, hopefully things will turn even better the next few quarters.

[opmi]

HLGE cannot pay 3 cents every year.

If Hong Leong Group want to keep the company live, quite hard to see the rest of the cash.
IMO, the assets probably have to take a big haircut before can see any buyers.

Maybe should sell off the listed shell or stick to the original plan of acquiring industrial assets.
But look at track record of HLA's Xinfei. Competed to death by the PRC white goods players.

It looks like a value trap to me.

Maybe should take money and run, while there are still value investors looking to buy.

Not vested since around May 2017

[secretinvestors]

HLGE cannot pay 3 cents every year.

If Hong Leong Group want to keep the company live, quite hard to see the rest of the cash.
IMO, the assets probably have to take a big haircut before can see any buyers.

Maybe should sell off the listed shell or stick to the original plan of acquiring industrial assets.
But look at track record of HLA's Xinfei. Competed to death by the PRC white goods players.

It looks like a value trap to me.

Maybe should take money and run, while there are still value investors looking to buy.

Not vested since around May 2017

Thanks so much for the feedback. With net cash of 60-cents and assuming FCF continues to be at least mildly positive (it had been doing so for the past few years and we can reasonably expect this to continue in the near future), I believe HLGE has the ability to pay 3-cents every year. The remaining businesses are also doing okay despite facing competitive pressures recently. 

Whether the management has the desire to pay the 3-cents is of course another issue and this is definitely harder to discern. So saying that HLGE 'cannot pay 3 cents every year' is probably not very accurate. What we know now is that the company is finally willing to distribute some of its cash - although not a lot as compared to its cash on hand - to shareholders. With a strong balance sheet now, I doubt Hong Leong Group has to worry about keeping the company live at least in the short-mid term.

I have to agree with you that the assets have to take a big haircut before any buyers will consider. However, if purchased at current prices the assets has already taken a substantial haircut. Value trap or not, its hard to know -- but safe or not is pretty clear at least to me.

[activistasia]

HLGE cannot pay 3 cents every year.

If Hong Leong Group want to keep the company live, quite hard to see the rest of the cash.
IMO, the assets probably have to take a big haircut before can see any buyers.

Maybe should sell off the listed shell or stick to the original plan of acquiring industrial assets.
But look at track record of HLA's Xinfei. Competed to death by the PRC white goods players.

It looks like a value trap to me.

Maybe should take money and run, while there are still value investors looking to buy.

Not vested since around May 2017

Thanks so much for the feedback. With net cash of 60-cents and assuming FCF continues to be at least mildly positive (it had been doing so for the past few years and we can reasonably expect this to continue in the near future), I believe HLGE has the ability to pay 3-cents every year. The remaining businesses are also doing okay despite facing competitive pressures recently. 

Whether the management has the desire to pay the 3-cents is of course another issue and this is definitely harder to discern. So saying that HLGE 'cannot pay 3 cents every year' is probably not very accurate. What we know now is that the company is finally willing to distribute some of its cash - although not a lot as compared to its cash on hand - to shareholders. With a strong balance sheet now, I doubt Hong Leong Group has to worry about keeping the company live at least in the short-mid term.

I have to agree with you that the assets have to take a big haircut before any buyers will consider. However, if purchased at current prices the assets has already taken a substantial haircut. Value trap or not, its hard to know -- but safe or not is pretty clear at least to me.

Hi guys, anyone went to the AGM? Any comments by the management? I was overseas and couldn't attend.