(Long Post) Attempted Deep Dive at Bukit Sembawang Estates Limited (SGX: B61)

1 of my old-time acquaintance (Polar Bear 8888 ) asked me about this counter back in March. But I did not have much time to take a look at this counter until recently. 

It is a Property Developer listed on SGX that has more interest income than interest expense. 

On the first glance of this chart, I might have thought that the Singapore Property Price have dropped a lot or this Property Developer is undergoing the China Syndrome.

Alternatively, I might also have thought that maybe something else has gone wrong such as interest payments have gone skyrocket through the roofs.

 

However, none of these are true.

1)     Private Property Price in Singapore has been on a rise.

Compared to the levels seen in 2019, there has been around 30+ % increase from 1Q 2019 to 4Q 2023. Therefore, to associate Singapore Property Price has dropped is not the reason

2) Interest rates increase affecting the company.

Looking at the financial statements, FY 2022/23 and 1H FY 2023/24 have been positive in terms of financial income.

In fact, there is no borrowings but over 350 million of cash in the company as of its latest financial results.

What could be the real reason for the fall over the years?

1)      Dividend Record Unstable

Year	Dividend Amount
2019	0.22
2020	0.11
2021	0.33
2022	0.16
2023	0.10

 

2) Earnings Per Share Unstable

Year	EPS
2019	0.39
2020	0.29
2021	0.73
2022	0.32
2023	0.13

 

3) Higher Discount Rates associated with the story of the company.

Previously, the company is known to have 999-year land plots. 1 of these land plots have to pay a Land Betterment Charge for conversion into future residential development. As such, this might affect profitability moving forward.

 

Also, with each passing year of non-development, investors have to discount the landband further.

 

 

Prospects of the Company

 

Looking at its Projects. There are 4 projects ongoing currently. With 3 of them having started selling.

 

Liv @ MB – EST TOP 2025 1Q. Fully Sold

The Atelier – EST TOP 2024 2Q. Fully Sold

Pollen Collection – EST TOP 1Q 2026. 45% Sold.

Bukit Timah Link Residences – EST TOP 2028. EST Launch in Q2 2024 with Previewing Soon

 

The sales value currently of the projects are as follows.

Liv@MB – 717,957,580

The Atelier – 306,371,137

Pollen Collection – 222,611,000 . Implied Fully Sold Value could be around 489,744,200.

 

The tough portion is to estimate what is the margins / amount that has been recognized already in revenue. The base case should be most of it is not recognized yet since TOP is not done. 

 

In its most recent result, we can infer that the segment profit margin is around 10.48%.

 

How much left of revenue to recognize?

Looking at 37% of Completion for The Atelier, 19% Completion for Liv@MB. I would estimate around 250 million has been recognized. Along with the 256 million in 1H 2023/2024, I would have assumed that there is around 500 million left to be recognized.

However, looking at its AGM presentation details, we might have around 435 million left.

435 million is based on sales value of The Atelier * 0.5 + sales value of Liv *0.75 deducted by most recent revenue of 256 million.

Either way, if the TOP is as stated above, this means we will see only meaningful revenue recognized in 1H of next FY and next next FY as usually TOP and Completion will see a larger chunk of revenue recognized.

 

To add on, The Atelier’s land price was at $1626 psf while average selling price was 2683

 

For Liv@MB, the land price was at $1280 psf while average selling price was 2413 psf.

 

As such, margins wise, Liv should be better than Atelier. With more of the Liv left, this segment margin should trend upwards moving forwards.

 

 

Lastly, we should also not forget the main thesis behind its initial rise in share price, the severely undervalued landbanks. Pollen Collection will represent the company’s usage into its deeply undervalued landbanks yet again.

The segment profit margins should not be ignored because they are close to 30%.

 

The segment profit margins in 1H alone is at close to 31%.

 

Conclusion

The current drop in share price is probably justified given that the development of the undervalued land bank projects is slow and given higher discount rates in the markets, there are better alternatives.

Is the current price an attractive entry? Current Price of 3.31 SGD Implies 857 million of Market Cap.

Given Cash – Liabilities= 287 million

Hospitality Property = 208 million

Investment Property = 21 million

This implies that its development properties and land bank is currently valued at 341 million.

 

Development Properties

Liv + Atelier Implied Profit = 10% * 435 million = 43.5 million

Pollen Collection = 25%* 489 million = 122.25 million

Land Bank = 95,690 SQ m GFA

Looking at past projects where 39 Units took up 10002 SQM. This implies roughly 373 units left to build at current land bank

Considering the current sale price of Luxus Hills Project at 2000 -2663 psf / 4.15 mil per unit.

This implies a potential revenue of 1532 million or 1.53 billion. At 30% margins.  This implies around 459 million profits to be realized. However, considering that there were no new sales since covid, the margins can be higher as prices have gone up and segment margins back in 1Q 2020 where such projects were sold are 40% margin.

But at the same time, we have to consider the opportunity cost of waiting. As well as prices might keep going up as time goes by.

The stock is probably slightly cheap right now because the development properties will be done by 2026. As such against a potential value of 459 million profits, the 175 million left implied valuation is cheap especially considering there is still 100 million of other current assets. (Which means the present valuation is actually like 75 million)

However, if no new development is to occur from the precious landbank that made Luxus Hills, then this undervalued will lose attractiveness to any investors who are investing and hoping to make their money in the near term.

I would say if they decide to develop at least 25-30% of their current landbank by 2028, then it would be truly undervalued at current price.

If not i think it is just really undervalued on paper only. 

With planning for Luxus Hills Phrase 10 underway, i believe some value will start to surface again.

Having said everything, this is not going into my portfolio or the monthly updated imaginary portfolio any time soon.

However, i might be keen for my parents to pick up the stock and sit on it when the 75 million implied PV is 0. Which means a market cap of 782 million or a share price of around 3.01.

If i want a bigger margin of safety for them then i will slap a 25% discount on the hospitality property which means another 52 million discount. Making the entry price at 2.82. 

 

 

Portfolio Updates + Recent Thoughts (As of 9 April)

I just decided to post an update because there is a chance the returns might get lower as the year goes lol.

(Pretty and Cute)

Portfolio Returns as of 9 April 2024: 10.77%

The top 3 holdings of the portfolio remains largely the same trio. Dream, Huationg, San Miguel

San Miguel - Await May 1Q 2023 Results of its Parent Company San Mig Brewery. 

Currently, HK Beer Domestic Exports are up 14% in first 2 months of 2024 compared to 2023. Encouraging but March 2023 is a high export month so will have to continue to monitor as well.

As mentioned in my facebook post, the highlight of the annual report will be the rental amount is estimated to be higher in 2024 compared to 2023 and also a longer term rental lease is locked with the new anchor tenant.

Huationg - I have wrote up my view on the annual report in this facebook post. The highlight would be the refundable deposits being around 30% higher. This is usually a indicator for revenue moving forward as deposits are usually 2 months of rental. I hope i will be able to have time to attend the AGM.

Dream - I have mentioned in my previous post so i will not be talking much more about it. I will be attending the AGM and hopefully i will have more insights to share following the agm.

Recent Thoughts

HK Domestic Consumption 

In my recent trip to HK, it was a long weekend therefore a lot of Hk-ers were overseas. As such it seems pretty quiet and trains were less packed. I would say at least 60% of the people i see at restaurants / cafes / shops are mainland chinese.

The Harbour City was not packed on a Sunday Lunch Time. As such i am actually slightly worried about March Retail Sales and the whole tourism sector as a whole. It seems like the trend of HK-ers going China to buy cheap goods is growing while the reverse trend is not happening.

As such, F&B outlets, retail outlets, HK Reits are things that i was not keen on looking and after this trip i would still not be keen.

I am keen on EGL Holdings (HKEX: 6882)  A tour agency business in HK, but the gearing is too high making it scary and there are some financial loans from a related company as well.

Vietnam Consumption

From what i have seen, it seems like Vietnam consumption patterns have improved largely since Sept 2023.

(Positive Results Seen in Q1 2024)

(Affirmed by Bach Hoa Xanh (BHX), a Vietnam grocery operator, with 47% increase in revenue in first 2 months of 2024 vs 2023)

(Down 11% at December 2023)

(Down 16% YOY at Sept 2023)

1 way i try to assess how the economy is doing is to look at how Mobile World Investment Corp is doing.

It is a company that is Vietnam's No.1 multi-category retail platform by revenue and has different shops which sells mobile phones, electronics, groceries , medicines, kids products.

As such, looking at its revenue, it seems like domestic consumption has recovered.

This seems to echo the thoughts of Masan Group , another large conglomerate in Vietnam.

From its Earnings Release back in Jan 2024.

As such, a company that has re-entered the consideration list will be Golden Resources Development (Hkex: 677)

With convenient stores business in Vietnam, i wonder how much it will benefit from this recovery. 

Another company to consider is Luks Group (VN) (Hkex: 366) with its main business being cement production in Vietnam. Unfortunately, the property sector there is also undergoing downturn and the company's cement production is unprofitable in 2023. Looking at the Index of Industrial Production for Cement, the first 3 months of 2024 is still lower than 2023. This signals that a recovery is still some miles away.

(March 2024 Results) How i would invest in the singapore stock market if i had 100k of spare money

 

March 2024 Returns: -2.93%

Year to Date Returns: -0.07%

Since Inception (9 Sept 2020) Returns: 74.21%

There is nothing much to report about with regards to March as companies already reported their results in February.

One thought that i had in mind was whether to shift Huationg Global out of the portfolio in this imaginary portfolio as well as my real portfolio.

Why sell out?

-Despite decent results, one of the major shareholders was disposing shares and as such it might have proved tough for the stock to record any capital gains

-On the other hand, dividends was conservative and somewhat not really ideal.

Why not sell out?

-Does not make sense to sell out of a stock that is <2 PE and has good cashflow and reduced debt

-Increase in refundable deposit might signal higher dormitory revenue moving forward

-Effort needed to replace the stock. As always, if there is something else that caught my eye then it would make the switch more attractive. Push/Pull.

With this thought parked somewhere at the back of my mind, i embarked on a trip to Korea in March. After returning, my mind is pretty much set on not selling for the time being.

So what happened in the trip to Korea?

I met a fan who is also from Singapore. It happened just so that we were both there to support the same group and i had a chit chat with him.

Turns out that he works in a foreign owned construction firm in Singapore and in the finance department.

We then had some chit-chat with regards to the construction sector the past years and in 2023/2024. 

I mentioned that dormitory prices have been increasing and asked if he was aware of it. 

Turns out that he does know the prices of the dormitories that his company has been paying and the terms. This instantly sparked my interest to know more and i also treated him a meal as well.

(Huationg Global Dormitory Revenue from its Results)

It is always good to hear from a view of a customer.

From my understanding, some of the dormitories that they are paying could easily go up to 660 per bed per month. This is of course dependent on where they stay etc. 

z

After typing for so long, the question would be ? does he know anything about Coastal Dormitory? Turns out he does.....so i was able to get the rate that his company is paying currently as well as when was the last time the price was changed and more information such as prices in the past year etc.

Unfortunately Coastal Dormitory is actually one of the 'cheapo' dormitories around. As you can see from the 2H 2023 results, price per bed is only 395 when beds can be going up to 600+. Due to its inaccessible location and being located far from many construction projects apart from the T5.

I will not be saying the price that they are paying as it is sensitive information (lol). But all i can say is that i expect 1H 2024 Revenue to be higher than 2H 2023.

Low Teens increase(from 2H 2023) in revenue is something that i would expect to see based on my understanding. However this is subjective because some folks might have renewed earlier while some later and as such rates can vary for everyone altogether as well.

So for now i will be staying put and holding my position (at least until the AGM is over, which i hope i would have time to attend)

(Results Released Thoughts) Dream International

Back in January, i released a preview of my thoughts on the results.

The concise portion was what i wrote below.

Concise Version

2023 Revenue Fall Compared to 2022 is likely, with any growth in profits to come from margin expansion / revenue growth in Plush Stuffed Toy.

Revenue from Top Customer in 2022 will fall in 2023. For 2023 revenue, Japan and China should see revenue growth while US it should see revenue decrease compared to 2022.

I am still optimistic that we will see profit growth for FY 2023 compared to FY 2022.

Safe to say. Everything is correct. 

(This image probably describes my mood/emotions after seeing the results)

What I like about the results

1) Since everything i mentioned is correct, then there is nothing to point out. But something incredible would be......its increase in cash position. 

The company started 2023 with 761 million HKD cash and current liabilities of 1126 million HKD.

At 30 June 2023, it has 845 million HKD cash and current liabilities of 1003 million HKD.

At 31 December 2023, it has 1390 million HKD Cash and current liabilities of 896 million HKD.

This to me is some remarkable cash generation year.

(At 31 December 2023)

(At 30 June 2023)

2) Adaptability of its production. With its top customer in 2022 cutting its orders and resulting in a revenue fall of close to 1 billion hkd or 50%....Dream was able to claw back in some ways and tap on Customer A and C which contributed a gain of close to 400 million.

As a whole, revenue still fell by around 900 million or around 15%. This was kind of expected looking at the export data as well as how the toy companies have done in 2023 amidst a bad retail environment of overstocking etc.

3) Margins. 

A question on the minds of many will be whether the margins are a fluke in 1H 2023. After all with plush stuffed toys 30.17% margin , many might think that it is a one-off. While margins in 2H 2023 did not improve, it still is remarkable at 28% as it is the highest 2H margins. 

The 17% margin for its plastic figures is also laudable considering revenue for 2H is one of the lowest since Covid Started.

Interestingly enough, utilisation rate for 2023 is 84% with lower labour cost compared to 2022 which has higher revenue, higher labour cost but utilisation rate of only 80%.

So that is some food for thought.

Overall, 26.83% Gross Margin for 2H 2023 is the highest since 2018, and also i believe the highest in its history.

How about 2024 then?

Well at current stage, we are only about 3 months in. From whatever data that i have seen across the board, it is relatively mixed. Which means i am pretty sure there is no positive profit alert coming for now.

Funko's revenue guidance for 2024 is actually similar to 2023. Therefore, it is rather unlikely that we will see any revenue growth from that end. Even if there is, it might not be significant.

Theme Park Demand ? . I guess we have to see the guidance given from Oriental Land in April before making a more informed decision.

Export Data for Jan and Feb seems muted, lower than 2023 by around 20% . Though to be fair, 2H 2023 Japan Export compared to 1H 2023 was 40% increase but revenue is only 9% for Dream. Therefore the indicator's accuracy leaves much to be questioned.

For Industrial Index of Production (Manufacture of games and toys) 2024's first 2 months is about 4.5% higher.

There is also Customer C, which increased its revenue contribution by 30%....

It really is still early days i feel. 

K-Pop Pictures Spamming Time.

(It really is anyone's guess at this point)

(10/10 Results)

(February 2024 Results) How i would invest in the singapore stock market if i had 100k of spare money

 

February 2024 Returns: 3.51%

Year to Date Returns: 2.94%

Since Inception (9 Sept 2020) Returns: 79.47%

Main Companies that gave a positive return include UMS, Straco and Centurion

I believe the returns might look very different if i did the recording on 1st March as many companies reported result on 29 Feb itself.

Nevertheless. lets review the many companies that reported results

Straco - Perhaps the latest addition but i think the results is a big disappointment.

Q3 = 35m revenue and 16.3m profit

Q4 = 15m revenue and 2.9m profit.....

Moving forward, it puts some ? to how we should see and value this.

A company earning 12m per year vs a company earning 65m per year ....the range in between is too big. 

Score: 2/10

UMS - Always a stable dividend and results seem to be stable as well. With new factory operational in penang and expectation of uptick in order flow, nothing much to worry about as it has navigated poor semiconductor 2023 very well. Just have to see neighbor stocks *coughs* AEM to know.

Score: 5/10

Sutl Enterprise - Results Stable, Financial Position Improves. Have to see if 2024 is a year where overseas projects get traction. Locally, need to keep an eye on cost as expenses has increased more than revenue.

Score: 6/10

Haw Par - Big Thumbs Up from Me. I like the results very much. Revenue Increase from 148 million to 216 million

The increase in revenue of its healthcare goods is something very heartening to see.

1H 2022: Revenue 86.7m. Segment Profit 17.7m

2H 2022: Revenue 77.3m. Segment Profit 22.4m

1H 2023: Revenue 101.7m Segment Profit 29.1m

2H 2023: Revenue 111.7m Segment Profit 35.6m

Overall it remains a very deep value stock. In fact i think if it considers spinning the healthcare business it would look good. But the odds of such things are not high and it is not worth thinking much about. Full Year 40 cents Dividend is acceptable. Not Great but since the business has done well and shown good growth, there is nothing to worry about especially it is in very strong cash position.

Score: 9/10

Centurion - Stable. Not much Surprises. If core earnings can maintain or grow 10-20% would be great.

Score: 5/10

Huationg Global - This is actually tough for me to comment and give an honest take. Perhaps i talk about the negatives first. The same dividend amount is perhaps the most upset part of things.

The second most upset part of things will be the dormitory margins. In 1H 2023 , 8.8m segment profit

However, in full year it is 8m segment profit.

However if we were to include the 'Unallocated' expenses. 1H 2023 Segment Profit will be 3.862m while in 2H 2023 it will be 3.888m. Which looks like it remains stable despite slight revenue improvements.

3rdly, they moved backed the asset that was held for sale back to non-current assets again. Which indicate no near term intentions to sell the property again.

Moving on to the positives and maybes....... 73 million of Net Cash From Operating Activities. This is contributed by an increase of 27 million of trade and other payables. Could the additional refundable deposits indicate a higher rate moving forward?

1stly. Cash Position Improved from 23 million in 2022 to 70 million in 2023. Of course part of it is contract liabilities and part of it would be from the dormitory deposits. Nevertheless, this is a good improvement as the cash flow of the company has improved and if high payables is due to dormitory then it will be good.

2ndly. Improvements in Civil Engineering Contract Margins. 

This is coupled with an orderbook of 506.5 million. A huge increase from End of 2022 whereby it was 415 million. A slight increase from 30 June 2023 where it was 484.4 million.

Lastly. Overall Increase in Net Profit.

It is always good to see that profit before income has improved even after deducting other income.

Also, the lower loss allowance might signal a better business environment moving forward.

I would give this result.........7/10. Considering that the current PE is 1.83 and cash position improved with positive cash flow it deserves a decent score instead of a fail score. But i think there are a lot of questions to think and ponder about.