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.

Hanwell(DM0.SI) 

-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. 

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	Q3/18/19	Q4/18/19
Flatted Factories	$1.81	$1.81	$1.81	$1.79	$1.78
Hi-Tech Buildings	$2.65	$2.65	$2.76	$2.7	$2.84
Business Park Buidings	$3.8	$3.79	$3.8	$3.72	$3.76
Stack Up/ Ramp Up Buildings	$1.3	$1.31	$1.3	$1.3	$1.28
Light Industrial Buildings	$1.45	$1.44	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.

Conclusion

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........ 

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)	2014	2015	2016	2017	2018	1H 2019
Revenue	59,643	61,588	68,619	60,336	67,311	37,754
Profit before tax	43,958	58,247	71,782	35,348	220,148	20,019
Profit before tax (PBT) without revaluation	34,397	23,492	42,178	12,352	49,742	20,019
PBT excluding revaluation and associate	34,397	23,492	41,258	7280	40,734	20,922
PBT excluding above and govt grant	25,749	23,492	36,258	28,295	40,734	20,722
Margin	43.17%	38.14%	52.84%	46.7%	60.52%	54.88%
Dividend	NIL	8 cents HKD	8 cents HKD	8 cents HKD	12 cents HKD	5 cents HKD
Equity/ Liability Ratio	24.09	12.43	10.48	7.94	7.67	6.59

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?

Conclusion

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

A:Maybe

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.

Investing Mistakes and Making a Loss: PC Partners Group (Hkex: 1263)

Its not very often you see blogs talking about making mistakes and losing money. So here's one post of such.

PC Partners released an undesirable full year results on friday. The result definitely missed my estimates.

Key Highlights

-Revenue came in at 9122.3 million for Full year. 2H was 3583.9 million, 35.8% lower than 2H of previous year.
-Gross margin came in at 6.4% for 2H, one of its lowest margins ever since its ipo. Included was 120m provision for inventories(Due to markdown of value and obsolete inventory provisions)
-2H recorded a loss of roughly 70m hkd or 10 hk cents per share
-As a result, no dividends has been declared for 2H results.

Personal estimates

-Revenue to come in at 20-30% lower than last year 2H however this has missed as revenue came in at 35.8% lower. This estimation was made after looking at other graphic card manufacturer's sales.

-Gross profit margins to come in at roughly 8%. This was a miss as well as gross margins came in at 6.4%. The estimation was made after observing a sharp 30% drop yoy in gross margins of fellow graphic card manufacturers.

-All in all i had expected the company to record roughly 20 hkd cents of profit.

Had the provision and exchange loss been not accounted for, profit before tax for 2H would have came in at 70 million or 19 cents per share. Though that's not how investments research and assumptions should be done.

Personal thoughts

-My inability to account for such provisions and estimate earnings accurately has definitely result in a costly investment decision.

-I have decided to exit the investment at an average price of 2.467 hkd per share. Having made small gains from 'buying and selling' this counter back in 2017 and early 2018, this results in an overall loss of 27104 hkd from this investment. With most of losses already recorded prior to the sale, the impact of the sale is a decrease of networth by 12474 hkd

-Its easy to say these losses are only worth a few thousand sgd but from the perspective of mr working adhoc earning 1k a month, its safe to say this is one mistake i will remember for a long long while.

-One saving grace was that the value of the counter has already tanked so much that it only stood 12.88% of the portfolio and 9% of total net-worth. Which means if it was 0 value, it would mean that i would only lose 9% of my money.

-The decision of selling was a result of 2 causes. 1) Inaccurate estimations meant that the current method i have used for researching on this stock is useless and therefore it would be really pointless to continue researching. 2) This would allow me to take my mind off things and focus on other stuffs.

Thoughts on PC Partners moving forward

-Moving forward i believe the company will still have to clear the inventory of old graphic cards (finished goods is double of last year's numbers)

-The first 2 months of revenue in 2019 of a fellow manufacturer has been 34% of its 2H 2018, which seems to indicate that similar trend is very likely to continue.

-A profit warning will likely occur given how high the barriers have been set in 1H 2018.

It remains to be seen how the leasing servers joint venture will turn out.

Personal actions to take

-Safe to say estimating earnings has been more of a bane than a boon for myself. Producing more undesirable results than desirable ones. I would be better to stick to other methods such as special cases and book value investing more.

-Probably use whatever is left from the 'cut loss' to enjoy life more (e.g watch concerts or buy k-pop merchandise that i really wanted to buy but on many occasions i have been holding back to build up money to invest)

In life there would be times you hit and times you miss. Times you smooth sail and times you crash hard. There could be 101 other reasons that resulted in a crash or just simply one is incapable which resulted in the crash. 

My own takeaway would be how i approach my next venture out again and what i would do to prevent similar mistakes from happening again.

Uni-Asia Group Limited (SGX:CHJ) Results Briefing

Uni-Asia Group held its results briefing on 8 May. The turnout this time is surprisingly high, in my previous 2 times the number was around 10-20 but there were roughly 40 people this time round.

Key Takeaways from the briefing (Do note that i could have misheard some parts somewhere and noted down wrongly so do not take everything i say as 100% accurate)

These should be read in tandem with the results presentation and my previous write-up on it.

1. Results release for 1Q 2019 results will be on 15 May 2019

2. 1Q 2019 results will be the first time it incorporates IFRS 16 Leases into its balance sheet and income statement.
It will be interesting to see the impact it has on the overall income statement as well as on the hotel management segment (which has the most changes due to IFRS 16).
This is coupled by the seasonal factor of a lower occupancy rate in hotels in 1st quarter usually.  Management reiterated that it should be seen on a full year basis instead
The hotel numbers will 'unlikely be nice'

3. Fair value of containerships are 0 and management will  be looking to dispose them off at the right time.
Fair value for the rest of the portfolio which are dry bulk ships amounted to US$5.8 million.

4. Onerous contract for sale and leaseback was due to paying price for lease is higher than current charter rates. Management could have waited till towards end of contract to impair but decided to do so in end 2018.

5. The 3rd HK Property Project has finished constructing and there will be gains to be recognized this year but it is unsure how much as of now. The project is being inspected by government now and waiting for approval. Currently a rough estimation would be 2nd or 3rd quarter for the proceeds to flow in,

6. Hotel listed on balance sheet to be sold is the Hotel Vista Nagoya Nishiki, has been sold in Feb 2019 and according to management there should not be any impairments as the hotel has been money making.
Hotels are poised to ride the trend of increasing tourism in Japan. A forecast found on the Japan Tourism Board estimates that there would be a 13.8% year on year increase in tourist numbers as 2018 numbers were affected by natural disasters. Furthermore tailwinds such as Rugby World Cup are likely to contribute to the increase.

7. Company was awarded the first negotiation right of PFI Project in Wako City. Management explained that they have been trying to get such projects for quite some time hence it is a milestone to be awarded such project. The cost of construction will be borne by the government so the risk is close to no risk. The company will be paid a recurrent fee as a construction manager and asset manager upon completion. The sum is likely to be not significant but this opens up to more of such opportunities for the company to be involved in.

Conclusion

All in all i believe the fair value losses are likely a matter of the past and the maximum fair value losses to be recorded would be 5.8 million from the dry bulks but this would be compensated from the leases cost as a result of new accounting measures.
Hence it is difficult to assess whether the profit would improve as much in 1Q 2019.
Given past track record of the 1st hk and 2nd hk property investments, the 3rd hk property investments should come out with a investment multiple of 2 to 3 times hopefully.

Uni-Asia Group (SGX: CHJ) 4Q/ FY 2018 result write up

Uni-Asia released its financial statements and results presentation slides today. 

On the plain view, results do seem to be dire with q3 and q4 in losses.......but are they truly bad?

It is highly recommended to read the slides alongside this write-up. 

Details off the surface

Dividend declared of SGD 7 cents (6.25 ordinary dividend and 0.75 special dividend for its 2nd HK property gains). 

This gives a yield of 5.83% based on the closing price of S$1.20 on 1 March 2019.

Q4 was loss-making, mainly due to impairment of ships and provisions. 

This has resulted in NAV of 2.84 usd, a decrease of 0.05 usd from previous year. 

Against closing price of S$1.20, the price to book ratio stands at 0.3125.

Key observations

-Provision for onerous contract of $3m made for its Uni-Asia shipping which does chartering of dry bulks. If that was not included, Profit before tax would come in at $935 000, a 29% drop quarter on quarter but a 297% improvement over Q4 2017. As such, if the provision is not included, profit would have increased by 32.7%

-Daily Dry Bulk Chartering rates improved to 10500 in Q4, however operating days did decrease. While my own estimates are not as accurate, the uptrend in estimates and daily rates is still seen. For Q1 of 2019, March will be a crucial month as daily rates have rebounded close to 10000 in March 2018.

In  USD	1H 2018	Q3 2018	Q4 2018	Full Year 2018
Total Charter Income	15 078 000	7 515 000	7 684 000	30 277 000
Operating Days	1527	736	731	2994
Daily Rates	9875	10202	10500	10113
zzxbzz estimates from sources on the net	9220	10060	10323	9705

-Carrying value of containership in its fair value portfolio is 0, in Q4 the remaining  fair value($3.3m) has been valued down in Q4. Alongside is an impairment of $3m for its only containership held on balance sheet as ppe(which means that there would be depreciation and impairment losses only). 

As of the analyst briefing back in December, the book value of the ship was 14m while market value was 12-15m. While it was said that it was not at impairment levels then, it seems like it has reached impairment levels later that month. 

Following the impairment on its 1 containership held as ppe, the fair value loss on its 3 containerships held under the joint investment portfolio would not come as a surprise given that it has been recording fair value loss all along(refer to previous post)

-Despite borrowings falling from $216m to $180m(roughly 16%), finance cost has increased by 9%.

-Hotel of $22.7m has been classified as an asset for sale as it is marked for disposal in 2019. It will be interesting to see how this disposal pans out in 2019.

-Only $1.9m of fair value recognised for the 3rd HK project(K83 office building), alongside with gains still to flow in 2019 for the 2nd project, the property division ex japan should do well in 2019 since 95% of GFA of the 3rd HK project have been sold.

-Hotels operation in Japan have been proven to be profitable even at around 82% occupancy rate. Without opening expenses incurred, hotels generated $356 000, on a full year basis this would equate to roughly 1.4m or 3 cents per share. However with new accounting leases kicking in, it would likely see a worse off result in 2019 while cash flow is not affected.

Buy? Hold? Sell?

The considerations for sell would be 'anticipating a shipping downturn in 2019, leading to unprofitability and impairment loss of containership as well as dry bulks.' A slowdown in the japan economy is likely to affect business hotel usage and in turn result in a poorer performance.

Coupled with an increase in finance cost, this could be dire.

The considerations for hold would be 'increased dividends, ability to give a higher payout despite lower earnings coupled with lower borrowings and good cash flow (proceeds from 2nd hk project). This alongside huge fair value losses recorded already this year sums up the reasons to adopt a wait and see approach

The considerations for buy would be 'impairment loss would mean lower depreciation value and higher profits, with fair value at much lower.' Also with proceeds from the 2nd and 3rd project yet to fully be accounted for, it could provide a catalyst. Lastly, Tokyo Olympics in 2020 still remains relevant to its hotel play which has seen occupancy rates pick up to 82% a level that is profitable as of 2018 as new leases accounting are not yet in play.

Personally I am inclined to hold and perhaps add some if my circumstances and the price both align.

A thought in mind would be that continuous adding would likely be exposing more of the portfolio towards shipping which is a cyclical itself. On the other hand, the company does have other business segments to diversify income stream but would still leave itself to key risk of impairment and fair value losses from the shipping sector.