Sunday 28 April 2019

Short AGM review + some personal thoughts on Sutl, Hanwell and Uni-Asia

SUTL Enterprise(BHU.SI)
-Attendance roughly 20 
-A shareholder mentioned about the vitality around the marina being 'low'. For e.g restaurants keep folding. Management says that its up to sentosa development corp to do the leasing and keep the area vibrant 
-Current lease left at Sentosa is about 19 years left , after which its probably a need to do some discussing to see if the leases will be extended, but similar to golf courses at sentosa, it will be 30 years basis. With the sentosa cove properties around the marina, its 'hard' to see the marina being changed into something else according to management. 
-Malaysia's new marina will be 2 times bigger. Interest checking has begun but pre-sale has yet to begin 
-For US and China's operations it will be management contract basis. Whereas in sg, msia and thailand(i think) its an ownership basis. 
-1 shareholder highlighted the need for local partners to avoid getting 'chopped' which the management replies they have been doing that and cited the msia one as a joint venture as an e.g 
-Lastly one asked when the foreign operations will reflect on P&L, the answer is that the proceeds of membership pre-sale should enter the cash flow this year but there is no clear infos. 
-Had a chance to have a 3-4 lines chat with one of the management guys who was seated at front row. He says us operations should start in 2 weeks.
Personal Thoughts: I believe 2019 should see some sales progress on the marina in malaysia as well as some management fees coming from the usa operations and hence we could get a better sense of its future operations. Singapore is likely to come in stable as the membership sales are on a long term basis. The cash on hand and cash flow from the marina is pretty decent at current price considering it has 19 years of lease left. The concern I have would be the business risk in Malaysia and possibly Thailand.

-Attendance roughly 50 
-A shareholder asked about the Capex in the upcoming year. The reply is that most likely its on the side of Tat Seng only 
-Tat Seng will cease operations at Nantong Hengcheng and move operations to new plant at Nantong Tatseng which is more hi-tech. The current land at Hengcheng is on rental basis. 
-Differing views among shareholders, one sees Tat Seng as capital intensive and would rather Tat Seng be divested while another has the complete opposite view. 
-Management said they are pretty satisfied with Tat Seng's results in what was a harsh and competitive environment. 
-Capital Reduction 100% passed, the deputy chairman says out of so many he chairs, its rare or was it the first time its 100% something along those lines and everyone can go celebrate.
Personal Thoughts: Hanwell still remains a very asset based play, this year has been a big breakthrough in terms of distributing cash and having a good dividend. As for Tat Seng, it remains to be seen whether they will continue to grow and contribute more profit to hanwell via the new plants. A key information in the auditor statement is that the fair value of the golf course is actually higher than the carrying value of Million Cube, the holding company. Therefore even if the money is not obtained and the deal falls, the risk is not big. 
Uni-Asia Grp(CHJ.SI) 
-Attendance roughly 50 
-Started with a presentation by CFO on the results 
-Proceeded with reiterating that despite the impact of leases they remain fairly confident of 1Q results which would be out in May. 
-Dividends will be distributed on a semi-annual basis. 
-1 shareholder asked if the asset for sale that has been sold in Feb according to AR will book a full 5+ million usd profit (which is roughly 10 cents eps). The answer was there will be a gain but its not full gains as due to the leases effect some of the gains will be deferred as well. 
-Another shareholder questioned the placing which is met with the answer of growing the pie for all shareholders. 
-Another shareholder suggested for share split as according to him the optimal number of shares should be 200 to 300 million but the current number of shares is about 50+ million only. This was met with the answer of options are being assessed. 
-A shareholder asked why the finance cost are quite low, the reply was that the company had good ties with banks in Japan such that even if they borrowed in USD it was low.
Personal Thoughts: Past few quarters i have many misses with the estimation of the company's different segments. I would really wait till the 1Q results to appear before knowing whats the impact of the new leases on the company's profit and loss statement. Having said that, the divestment of a hotel at above book value in February as well as gains from Hong Kong 3rd Office Property Project should still happen sometime this year. 

Just sharing kpop photos as usual below.

Buying thoughts for those who actually scrolled down :)
I probably would wait till 1Q results of Uni-Asia Group before deciding if I should add my position.
As for SUTL, i believe it would be a long wait and if i decided to go for a longer time frame i might add more of it.
As for Hanwell, i do not think that Tat Seng's results might be good in 1H due to high benchmark set in 2018. Its all eyes on the 2H. As Tat Seng's results generally decide most of Hanwell's profits that would be crucial. If the gap between share and book value continues to widen in Tat Seng, it could be good chance to add more Tat Seng. I bought Hanwell shares as i was unable to attend the Tat Seng Agm in the afternoon. 

Monday 22 April 2019

Quick and Short thoughts on Mapletree Industrial Trust's Results (SGX: ME8U)

Just saw Mapletree Industrial Trust (MIT) results and decided to pen some thoughts.

Below information are taken out of MIT's slides.
Passing Rent
Q4 17/18
Q1 18/19
Q2 18/19
Flatted Factories
Hi-Tech Buildings
Business Park Buidings
Stack Up/ Ramp Up Buildings
Light Industrial Buildings
No info
No info
No info

Generally, passing rent is on a downtrend apart from Hi-Tech Buildings.

To illustrate things in detail, we will use 2 charts. On the Y-Axis is the amount per square foot.

Flatted Factories

What I think would happen

Passing Rent would continue to fall as new leases are way below current passing rent. Although renewal rents have been above passing rent in first 3 quarters,  the point of inflection seems to have been achieved in Q4.

It is not stated that how much of revenue is obtained from flatted factories but flatted factories accounted for 33.1% of MIT's portfolio. Which is why its passing rents would have a huge impact on its revenue.

Hi-Tech Buildings

What I think would happen

Passing Rent would likely fall as the average new leases per square foot renewal from Q2 to Q4 amounted to $2.54 per square foot on average whereas the passing rent at end of Q4 is $2.84. The average passing rent is much lower due to a huge amount of lease being renewed in Q2, which had a low rate of $1.75.

Hi-Tech buildings stood for 43.3% of MIT's portfolio which is why its passing rents would have a huge impact on its revenue.


Based on these info above which indicates negative reversion in rates, I am not too optimistic with regards to organic growth coming from the trust in the upcoming year. 
As this is my first time taking a look at Mapletree Industrial Trust, there might be a chance that I might be wrong with my analysis but after taking a look at the results over the year.
I would not be a fan of this trust. Even though when this trust is up 9.4% year to date when the STI is up about 10.5%.

That concludes the quick thoughts, following my previous post, i will upload some kpop pics that is not related to the post at the end as well........ 

Monday 1 April 2019

Is OUC Holdings (Oriental University City Holdings, Hkex: 8067) worth a purchase?

A friend(Domodaddy) suggested to me that I should get my back into doing research following the booking of a heavy loss in my previous post. I have decided to heed his friendly advice(i guess?)

Today's focus will be on OUC Holdings  (Hkex: 8067)

What's the company about?
The company owns a plot of land at Langfang Development Zone with a medium term lease expiring in 2049 (30 years time). The company has educational facilities on this plot of land which has site area of 487,270 sqm. That's about 68 football fields.     
It then leases education facilities to college, schools and universities. Examples of types of facilities include teaching, dormitory and retail.
To give lay man examples
Teaching = Classrooms, Dormitory = Onsite campus places to stay , Retail = Supermarkets
According to its prospectus, education facilities leasing fees are received based on estimated student enrollment for upcoming academic years. 
Student enrollments are not disclosed in annual results nor annual reports.

Who are its Shareholders?
People might be familiar with Raffles Education, a stock listed on SGX. It holds 25% of OUC Holdings. Overall Mr Chew Hua Seng the Chairman and CEO of Raffles Education owns 75% of OUC Holdings.

Financials (Company first listed on Jan 2015, with financial year ending June 30)

(In RMB'000)
1H 2019
Profit before tax
Profit before tax (PBT) without revaluation
PBT excluding revaluation and associate
PBT excluding above and govt grant
8 cents HKD
8 cents HKD
8 cents HKD
12 cents HKD
5 cents HKD
Equity/ Liability Ratio

What I like about the company
- At a trading price of 2.02, its trading at a historical PE of 9 if before tax figures are used. The price to book value is also at 0.3135. Considering there is 30 years to the lease expiry, this valuation is undemanding.

-Revenue has been slowly trending up across the years, this has been accompanied by an increase in profit margins. With 1H 2019 recording a 13.4% increase in revenue compared to 1H 2018, could we foresee a revenue breaking year?

- Dividend has been increasing and consistent in prior years. In fact cash generated from operations has been consistent around 30 million for 2017,2018. A 12 cents dividend would require only roughly 18-19 million.

My concerns for the company

-Customer risk, the largest customer accounted for 64% of the group's revenue.

-Credit risk, 1H 2019 had good results but it came along with a 18 million increase in trade receivables and prepayment. With 16 million coming from trade receivables and 15.6 million is 3-6 months due. A pretty alarming situation considering this has not happened in previous years.

-Acquisition of  Zhuyun Education Land from Raffles Education. This acquisition has the word 'wrong' on all aspects.

1) The price was arrived at a 'willing seller, willing buyer basis'. As mentioned earlier on its shareholding, this sounds like left hand and the right hand doing a puppet show. Although a valuation report is done.

2) Funding of the purchase is largely done by a conversion note(176 million at rate of 2.48%) which entitles the note holder to convert at a price of 2.30 hkd per share. A maximum of 88,565,306 shares can be converted which is a dilution of 49.20% of current shareholdings.

3) The properties generated a net loss of S$251,000 in FY 2018. Anyone in the right frame of mind would probably not acquire something that is loss making unless they are confident in turning around the business although OUC holdings in theory is under Raffles Education?


Q: Would this be the company that sets me in the right foot towards recouping my losses?

Q: Would this company pass my valuations?
A: It does pass my valuations, though I am not a fan of actions of the company as well as its recent balance sheet concerns in trade receivables.

Q: Would I buy the shares of the company?
A: No, having been through last year, I am more skeptical of taking a 20-80 or 10-90 chance. I would buy the company if trade receivables convert into cash in the next quarterly report and the acquisition does not happen. The big draw is that the price: book value is well below the current rate and the profits have been decent. But it is likely to change should the acquisition happen and it would put a ceiling on the share price as well. 

Food for Thought

Raffles Education has attempted to issue rights in December 2018 to raise 27 million SGD which has been cancelled in March 2019 as the trading price of the share( 9 cents) is below rights price of 10 cents. This rights 'action' would align to why they would sell the properties to OUC Holdings. 

Though i would wonder why did they not want to divest the whole OUC Holdings as its net assets are recorded on balance sheet to be 1,159,632,000 RMB or roughly 234 million SGD. OUC Holdings recorded a 170 million RMB revaluation which is already above the rights amount to be raised.

That concludes the first stock I decided to share. Would try to put up more when I have the time to do more research and writing. 
Currently more busy with watching shows and listening to k-pop........yup you guessed it right, the write-up is done while listening to k-pop as well.