I tried to look at Wee Hur the past few days. Perhaps i will write the verdict first.
At current price of 0.215 as of date of writing (7 June) , i think the student accomodation segment will have to grow its profits massively by at least 40 million to around 60 million operating profit for this company to be worth the risk. The workers dorm portion might not do as well. As such, the gamble will be on the revenue expansion and margin expansion of the student acco segement.
Introduction
Wee Hur is a construction company that has expanded into various fields of operations. As such, it can be broken down into these 5 business segments mainly.
1) Building Construction
2) Property Development
3) PBWD Operation
4) PBSA Operation
5) Fund Management
At price of 0.215, it represents a market cap of 201 million and a book value of 0.326.
I will be looking at various segments of it individually.
1) Building Construction
Looking at the above, it does not look good for this segment as we have seen losses in the past 2 years.
Management says they forsee a turnaround in the segment in the near future.
But for the conservative sake, lets just assume this segment will record -5 million in 2024.
2) Property Development.
In this portion, there are 3 things that are on-going.
(i) Mega@Woodlands, Completed but 96% sold. As such, around 4% (20 units) is left to be recognised. 600k looks to be an average price. As such, this segment is probably 12 million of revenue left to be recognised.
Looking at the margins of 37.5% in 2021 for property development when Mega@Woodlands is the only project, i think around 4.5 million can be recognised from this segment.
(ii) Bartley Vue, TOP in 2025/2026 with 90% Sold. The margins for this segment is slightly lower. Coming in at around 20% based off my estimates. According to annual report, around 123 million is left to be recognised. As such the profit coming in from the next 3 years is estimated to be around 24.6 million.
Considering TOP would have higher recognition, i would probably think that year we would see 8-10 million being recognised while the rest in latter years.
(iii) Mixed Used Development in Australia. Not being valued as details vague at this point.
As such, this year we should see hopefully. 12 million in profits.
3) Workers Dormitory
Now we are getting to the 'fun and interesting' part of things
The company has a 60% stake in the 15744 Beds Tuas View Dormitory
If we take a look at the rental income and expense, this segment contributed around 48 million in 2023. 60% will mean 28.8 million.
If we use the rate of $500 per bed per month that i have seen for Tuas View Beds Price, this 15744 beds equates to a revenue of 94.4 million in 2024.
Assuming Margin of 80% as seen above, we can get 77 million profit. 60% will be 46 million.
Wow What an impressive amount. Lets go buy Wee Hur and it can go to the moon already.....oh wait i mentioned in the conclusion that the workers dormitory might not do as well.
Firstly, there has been an extension of lease at November 2023...........
Unfortunately, it does not look good, seems like they have to pay 36 million a year. This means that even at 94.4 million revenue, their profit will be around 58 million at best. Well it is unknown what are the fees or structures involved in this. But if i were to wild guess, probably another 8-10 million in operating expenses.......this will mean a profit of around 30 million at 60% ownership.
As such i guess i will attach 30 million profits. In anyway, my expectation is that it is likely to be lower than what is earned in 2023.
4) Student Accommodation in Australia (50.1% Ownership)
This segment is definitely expected to outperform in 2023 compared to 2022 due to demand factors and students in Australia this year is at record high
2023 Revenue: 77.7 million
2023 Operating Profit: 20.6 million
Number of Beds: 5662
Implied Revenue Per Bed Per Week: 263
Centurion 1Q 2024 Revenue Per Bed for Aus Acco: 368
Implied Full Year Wee Hur PBSA Revenue: 108,348,032
Current Occupancy: 90%. Assuming some improvement to around 93%
Implied Revenue: 100,763,669
Implied Operating Profit Range: 26.6 million to 48 million
What are the things to look out for that might affect the profitability?
(i) Whether the rentals keep increasing, after all there are 2 school terms and this might be a difference maker.
(ii) Number of Weeks being rented out and the Price of each accomodation accordingly. This will depends on how deep the research and diving will be
If we based on this, then 47 weeks of AUD 659 or 590 SGD is sold out. This translates to a rate of 533 SGD actually and will result in a much higher revenue and profit estimate.
Bed Minimum Available Prices can range from A329 to A559 depending on locations......which makes the overall of estimating by each area tough due to the wide range in prices.
As such, I think a good estimate will be 40 million SGD Profit. 50% ownership translates to roughtly 20 million SGD.
5) Fund Management
Contributed 2.4 million in profit in 2023 while it was -2.3 million in 2022. As such a safe estimation of 3 million from this segment as this is largely dependent on whether any increase in management in the FY,
Conclusion
-5+12+30+20+3 = 60 million. 4.5 million interest expense in 2023. Borrowings doubled so assume 9 million interest expense
Total profit of around 51 million
Looking at current PE, it seems like it is trading at 4-5 PE. But there are just many things that can go wrong from the calculations.
For example, workers dormitory might not increase revenue as much in 1H 2024.
Also my main concern comes from the revenue increase of the student accommodation (too wide to estimate) and the increase in lease payments and whether operating expenses of dormitory will affect.
Of course there are some factors that needs to be credited, the ability to have the scale of 5000 beds and to sell the ownership to reduce leverage and make it profitable in 2023 is laudable. The fair value revisions have been good as well although it is unsure if this would become realised profits.
Like mentioned earlier, there has been a recent increase in share price probably due to some media coverage. I would be more comfortable with a gamble for the upside at around 3 PE as i believe there are too much holes in the analysis above.
Which implies an entry price of around 16 cents. But it still has made my imaginary portfolio nevertheless.
For my own portfolio, I guess i will just wait for the fish to appear at the right price before considering taking a bite
No comments:
Post a Comment