Engro Corporation

[sykn]

If viewed from the assets perspective, I agree with you completely. But if I evaluate from the earning power perspective, the picture doesn't look very exciting, unless there is something I am not seeing inside their business. I can't understand their venture into Brotzeit (F&B); this may be the reason for the spike in CAPEX in this last quarter to $2.52M when it is usually a fraction of a million.

[sykn]

SLC81, based on the analysis which you posted previously, I have extracted and analysed the business by segments:
1. Cement & Building Materials: slow but steady chugging along at around $10M of profit annually.
2. Specialty Polymer: losing money every year since FY08 with asset value down to 25% and should really be wound down.
3. Investments: I could not find "Juniper" in any of the ARs, but the profits are volatile ranging from $38M in FY09 to $2M in FY12; if we take out the one-off sale of assets in FY13, profit was only around $4M.
4. I could not find anything on the property development segment of its business.

I agree that one has to dig deep to uncover the nature of its business, but so far I have failed to detect the "deep value" you previously mentioned. But thanks anyway for the sharing which prompted me to dig deeper. (still vested)

I believe Engro is one of last few the deep value company remains to be discovered.
In fact, Engo has many business and it's value if breakdown would be worth much more than its current NAV 1.81 (around 190 Mils for the whole company), few notes.
1) It is in NET CASH with around more than 30 cents/share, zero debt.
2) It has:
2.1) GGBS cements, with substantial exposures to China. GGBS is green environmental friendly cement and it should trend for china tightening carbon emission. However because they depends iron slags from on steel mills so the slowdown on the china construction are taking its toll on Engro. (check profits from associates), this business segment could be worth as much as 180 Mils or entire Engro market cap.
2.2) property development., Engro has made good money joining with minority interest with Ho bee (in Singapore) and Hoo Bee, Yan Lord (in China). They still have money left (units unsold) in a Sentosa Project and equity interest in Tang Shan Nanhu Eco-city development. this could be worth another $50 Mils
2.3) Venture capital (Juniper Ventures Capital)
I estimated that Engro has around 40-50 Mil ($20 mils invested), $30 mils in cash recently injected and to be deployed. Most of capital are invested in US and they should be doing very well. In Singapore they have invested in few companies and i found few here:
2.3.1 QTVascular (Pre-investor , invested $ 1.5 Mil for 9.9 Mil shares, at the current market price, their stakes is worth around $3 mils or 100% profit
2.3.2 GreenKoncept, Not sure how much they invested but i thimk should not be less than $1.5 Mils, this company could be IPO in two years.
http://www.greenkoncepts.com/news-events...owth-plans.

2.3.3 Top-mix concrete : Not much value
2.3.4 Specialty Polymer: losing money business

Sum of all parts, Engro should be worth at $2.5/share at least or 100% more than its current share price.

[sykn]

My mistake - Juniper Capital Ventures is a wholly owned subsidiary of EnGro and its VP is sitting on the board of GreenKoncept. I found this in the AR and at the GreenKoncept website.

[ghchua]

Hi sykn,

For Venture capital funds, normally they invest before the company IPO and therefore you might not be able to find it in ARs of listed companies if they exit before IPO. However, you can still find them if they are still vested post-IPO.

For QT Vascular, you should be able to find them in the annual report:
13 JUNIPER CAPITAL VENTURES (PTE) LTD. 9,695,498 1.28

For property developments, they are mostly parked under HBS Investments Pte Ltd and HB Investments (China) Pte Ltd. HB Investments (China) Pte Ltd owns 50% of Yanlord Ho Bee Investments Pte. Ltd. (according to Ho Bee annual report), which in turn owns 100% of Yanlord Ho Bee Property Development (Tangshan) Co.Ltd. [PRC]. So, you can track from Yanlord annual report on the progress of those projects under Yanlord Ho Bee Property Development (Tangshan) Co.Ltd. [PRC].

Of course, for the progress of those projects related to Ho Bee, you can track them in Ho Bee annual report.

Hope that the above helps.

[sykn]

Wow, that's quite a fair bit of investigative work you have done! Thanks so much for the tip; I will have to go down the same route if I really want to see what's the value for each business segment in EnGro (which I do). Once again, many thanks.

[sykn]

Hi SLC81 and glchua, I have dug into the details (took quite some effort) and come to the same conclusion that EnGro's Earning Power Value is around $2.50, almost identical to what you shared! I must say that of all the companies I have analyzed, EnGro is the one with quite a big of "hidden" off-balance-sheet assets with pretty strong earning power. Thank you for the tips you both provided; I have bought back some more of EnGro shares recently, and if the price goes below $1.15, I might just pick up a little bit more. At least now I understand why the price kept going up in this last year!

[SLC81]

Until now that the market start to realized the Intrinsic value of Engro.

Load of cash.
Profitable Green Cement Subsidiaries in China VCEM
Venture capital investment in listed and unlisted technologies companies making good money
Property joint venture with Ho Bee made money too.

Got money, buy

[Shiyi]

Apparently, there has been a long-standing family feuds which held back the share price.
Not sure if any settlement has been reached.

[ghchua]

Apparently, there has been a long-standing family feuds which held back the share price.
Not sure if any settlement has been reached.

Hi Shiyi, 

I think we have to look at things from a perspective of business level rather than shareholder issues. Ultimately, what we are trying to do as a value investor is to attempt to buy businesses at a discount. Best is to buy a company that is doing well at a discount.

I see many things moving along very nicely for Engro going forward.

Construction demand for cement is recovering in Singapore, though at a slow pace. Their specialty cement operations in China had been doing well last FY despite a Covid disrupted year. Their specialty polymer business has turned around and is making inroads into EV segment. 

And finally, their investment segment is doing very well. Phase 2 of Tangshan project had been fully sold, with handover completed by 1H 2021. So, there is still some revenue yet to be recognized. Phase 3 construction is underway and will be launched in 2H2021. Turquoise project in Sentosa had been stable, and I think it might be relaunched soon. But really, the gem is their VC investments. Last FY had been a remarkable year for them. Exit levels via IPOs were high. The likes of Doordash and the recent Coinbase. 

NAV for the company had gone up for the past 3 years, they have also declared a special dividend this time round. Company also holds a decent amount of cash at holding company level.

[Shiyi]

Apparently, there has been a long-standing family feuds which held back the share price.
Not sure if any settlement has been reached.

Hi Shiyi, 

I think we have to look at things from a perspective of business level rather than shareholder issues. Ultimately, what we are trying to do as a value investor is to attempt to buy businesses at a discount. Best is to buy a company that is doing well at a discount.

I see many things moving along very nicely for Engro going forward.

Construction demand for cement is recovering in Singapore, though at a slow pace. Their specialty cement operations in China had been doing well last FY despite a Covid disrupted year. Their specialty polymer business has turned around and is making inroads into EV segment. 

And finally, their investment segment is doing very well. Phase 2 of Tangshan project had been fully sold, with handover completed by 1H 2021. So, there is still some revenue yet to be recognized. Phase 3 construction is underway and will be launched in 2H2021. Turquoise project in Sentosa had been stable, and I think it might be relaunched soon. But really, the gem is their VC investments. Last FY had been a remarkable year for them. Exit levels via IPOs were high. The likes of Doordash and the recent Coinbase. 

NAV for the company had gone up for the past 3 years, they have also declared a special dividend this time round. Company also holds a decent amount of cash at holding company level.

I have been holding this share for more than a decade. It has been traded consistently below its NTA. And imho, it's due to the family feud. Waiting for someone to unlock its value. Or else, it looks like a value trap.

Recent accumulation by Chua Wee Keng is promising.