Category: SG Stocks And Shares

Monday, April 9, 2018

MARKET OVERVIEW
– The US-China trade tiff will continue to dominate headlines and overhang sentiment with US President Trump’s latest tweet that China will buckle first on its trade policy, while investors await China President’s Xi’s keynote address at the Boao Forum tomorrow.
– At home, focus will be on the advanced 1Q18 GDP growth and MAS policy statement this Fri, with expectations for a shift from neutral stance to a modest appreciation of SGD.
– Technically, the STI is likely to trade within its downward channel between 3.370 and 3,480 in the near term.

CORPORATE RESULTS
*SPH REIT
– Flat 2QFY18 DPU of 1.4¢ met expectations.
– Gross revenue and NPI dipped to $53.6m (-0.8%) and $42.3m (-1.1%) on lower rental income from Paragon shopping mall.
– While both its properties continued to enjoy full occupancy, negative rental reversions were recorded in 1HFY18 at Paragon (-7.1%) and The Clementi Mall (-2.5%) for new and renewed lease, representing 16.4% of portfolio NLA.
– Portfolio WALE held steady q/q at 2.1 years, with 8.2% of NLA due for expiry in FY18 (1QFY18: 13.3%).
– Aggregate leverage stood at 25.4% with average tenor extended to 2.2 years (1QFY18: 1.8 years).
– Trades at an annualised 1QFY18 yield of 5.6% and 0.94x P/B.

POSITIVE NEWS
*KrisEnergy
– KrisEnergy appointed major shareholder Keppel Corp as its preferred contractor for offshore O&G work.
– The agreement includes newbuild, repair, conversion and upgrading of marine assets and/ or vessels, as well as leasing and chartering of marine vessels.
– Loss-making and trades at 0.66x P/B.

*Global Dragon (formerly TMC Education)
– Won the en bloc tender to acquire the freehold Katong Omega Apartments for $46.31m.
– Land area of the 18-unit property is 2,592 sqm with plot ratio of 1.4.
– Including development charge of $2.7m, and 10% of bonus balcony, the property may yield potential gfa of 42,959 sf, translating to a land rate of $1,141 psf ppr.
– Trades at 2.05x P/B.

NEUTRAL NEWS
*Keppel Corp
– The leniency agreement entered by Keppel with the Public Prosecutor’s Office in Brazil has been approved and has become effective.
– To recap, the group reached a US$422m global resolution with criminal authorities in the US, Brazil and Singapore in Dec ’17 in relation to corrupt payments made by the group’s former agent in Brazil.
– Trades at 14.3x forward P/E.

*M1
– Subscribed additional preference shares in Trakomatic via two tranches of $1.5m each.
– The group now holds 25% of the enlarged share capital of Trakomatic, which will become an associate of the group.
– Trakomatic is B2B video analytics solutions provider, powering smart sensors and big data and targets retailers and tourist attractions.
– Trades at 13.2x forward P/E with dividend yield of 6.6%.

*AusGroup
– Proposed a renounceable non-underwritten 2-for-1 rights issue at $0.35 each, attached with two detachable warrants with exercise price of $0.05 apiece.
– Maximum proceeds of $62.6m will be used for partial redemption of notes and working capital purposes.

Market Crash? What To Do?

Worries over intensifying trade war could return to the forefront as China rolls out new tariffs on meat, fruit and other US imports totaling 128 products, retaliation against US taxes on steel and aluminum.  The market has been in a whipsaw …

Whatsapp Group for SG Stock Sharing

When I started this blog, it is meant for my personal bookmarking and referencing. Not to mention, it helps to document my thoughts too. And as the years passed, the blog has evolved over time, becoming an online gathering point to meet acquaintances a…

Lee Metal privatisation deal – Congrats!

*Lee Metal- Received a pre-conditional offer from BRC Asia at $0.42/share, or 1.09x P/B.- The founding Lee family which owns 48.06% of share capital has given their undertaking for the voluntary offer.Seems like all the good companies are being privati…

3 Steps to buy Bitcoin in Singapore, or anywhere else?

Bitcoin prices set new records this year and forecast to continue to increase until the end of the year. Moreover, 2017 shows that digital assets, in general, have risen dramatically and created a tremendously large market cap of $66 billion. Of which, Bitcoin accounts for nearly 50%.

Bitcoin trading volumes in the world are increasing sharply every day, and are becoming an alternative investment channel for many people besides traditional channels such as real estate and gold. It is also a good time to get involved before the Bitcoin price bump at the end of the year.

There are a few ways to go about participating and be part of the Bitcoin craze. Personally, I followed it briefly in 2008 and gave up subsequently. It is only the recent years (2016?), Bitcoin and its counterparts came into limelight.

So there are a few ways to go about buying Bitcoin. I shall share the simplest and straightforward way to do so.


Step 1

Open a Remitano account HERE

After that, you can choose to buy USDT from a list of local sellers.

(Tether is pegged to the United States Dollar – it operates as a currency board, holding United States Dollar in reserve and issuing a cryptocurrency token for each reserve dollar. The exchange rate is 1 Tether (USD₮) to 1 United States Dollar (USD$).)


Step 2

Open a HitBit account HERE

Step 3

Transfer the bought USDT to HitBtc platform


Once you have transferred, you can do the buy and sell trades accordingly. And just like that you will be able to participate and join the crypto rally.

I have included the links with my referral links. It will benefit you and me.

Thank you all for your support.

Happy Lunar New Year!

SG market opens till 12pm today. Opens on 19th Feb. FYI. Happy Lunar New Year, May everyone happy and prosperous! Singapore Stocks to Watch * Low Keng Huat Singapore (LKH SP): Makes S$362M Enbloc Offer For Cairnhill Mansion*N…

Hock Lian Seng – trading at 5x Ex-(cash & investments) PE with 4 years of earnings visibility booked in

Our view: No TP on it, as liked HLS due to its good dividend yield, and as we hope to ride it as a proxy to the pick up in local construction demand. We believe current valuations are backed by the earnings visibility it has for the next 4 years, dividend yield of 3.6-5%, and strong cash/investments of S$0.29/share. Upside will come from sale of industrial property dev, and winning new contracts. 

Hock Lian Seng (HLS) is a BCA grade 1 contractor, with over 40 years of experience in the civil engineering and infrastructure projects in Singapore- with projects including MRT depots, bridges, expressways, water infrastructures and other specialised marine works.

Investment merits
An reputable civil engineering co. with over 40 years of experience and an established track record trading at 11.2x forward PE and ex(cash and investment securities) PE of 4.7x.

Strong balance sheet with net cash and investment securities of S$0.29/share (2016 mix: 84% corporate bonds, remaining in AFS equities) 

A near 100% cash company by end of 4 years? We estimate that the current orderbook if executed smoothly, may help HLS earn NPAT of S$22m/year for the next 4 years, and become a near 100% cash company by the end of the period, as it is trading at 4.7x forward ex(cash and investment securities) PE. (We assume HLS can sell out its industrial property shine@tuas which it is currently holding on its b/s at about S$96m- (believe will still incur more dev cost of about S$10-15m by the time it TOP), which will sort of net out the other liabilities in the balance sheet)

Positive industry outlook. (BCA projects the total construction demand to be awarded for 2018 to be between $26b-31b, up from $24.5b 2017E, driven by both private and public-sector projects. Major civil engineering contracts to be awarded include North South corridor, new MRT works and deep tunnel sewage phase 2 etc)- Link to BCA press release


Dividend yield of 3.6-5%. HLS has proven to be a good pay master in the past, steadily increasing its dividend payment over the years, with at least S$0.01625 DPS since 2010. In 2016, Management declared a total DPS of S$0.125 (S$0.10 special dividend, S$0.025 normal dividend). Assuming it maintain its normal dividend of S$$0.018-0.025, translates to yield of 3.6-5% (which is well supported by its strong balance sheet and good cashflow generation)

 Risks

Costs overrun, margins not as high as expected, inability to win contracts etc

Also noted that while historically the capex for HLS is quite low at S$1-3m/year, in 2016-2017, there is a huge rise in CAPEX as it purchase more PPE and build warehouse (mentioned for its ongoing projects)- not sure how much more it will still incur, which may reduce its cash pile abit, but if we view it positively, hopefully they are expanding their fleet too so they can bid for their other projects given the pick up in local construction demand and not just be tied down to the Changi airport projects. 

___________________________________________________________________


What we think HLS’s earnings will be in the next 4 years?

Changi airport JV project with SCI only started contributing significantly in 3Q17. In its 3Q17 comments, HLS mentioned that the main rise in revenue (qoq and yoy) was due to the revenue contribution from the Changi airport JV project with SCI (where its 60% owned JV won a $1.1b contract from Changi airport which will run through 2022). In its 2Q17 commentary, contribution from this Changi airport JV is not yet significant, so 3Q17 was the first real quarter where revenue contribution from the project really kicked in (even though it was awarded only in Aug 16)

YE 31 Dec

1Q16

2Q16

3Q16

4Q16

1Q17

2Q17

3Q17

Revenue

23.6

31.6

29.6

33.3

28.0

23.2

49.5

cost of sales

(22.2)

(30.1)

(23.0)

(12.6)

(25.6)

(22.0)

(42.0)

GP

1.4

1.6

6.6

20.6

2.4

1.2

7.4

Adjusted GP margin

6.1%

5.0%

22.3%**

17.0%**

8.6%

5.2%

15.0%

**Adjusted GPM for 3Q16 were higher due to finalization of accounts for a few completed construction projects at end of defect liability period, such as Ark@Gambas, Ark@KB. 4Q16 GP was also helped by a $15m writeback of maintenance cost provision for completed projects (which we have already excluded in our adjusted GP calculation) 


If we have a look at the quarterly results, prior to 3Q17, sales were about S$23-30m, which we believe should be from projects such as Maxwell station, stabling yard at Gali batu etc.  Noted that this is a huge step up in sales and gross profit from 1Q and 2Q17. In its 3Q17 commentary, HLS attributed the rise in revenue mainly due to the contribution from the Changi Airport JV project. Hence, our 2 cents view is, it is reasonable to believe that the Changi Airport JV project has a much higher GPM than the other existing projects that HLS is currently working on.


Back of the envelope calculation

Assuming 1Q17 and 2Q17 revenue were derived mainly from projects such as Maxwell station etc (minimal contribution from Changi airport JV project), and these projects continue to contribute to HLS in 3Q17, we estimate the revenue and gross profit contribution from the new Changi JV project in 3Q17 to be about S$24m sales and S$5.6m in gross profit, implying a GPM for the project of about 23.6%. 


  sales

GP

GP margin

Assumed average of 1Q17 and 2Q17 sales and gross profit (from other projects)

 25.6

1.8

7.0%

Assumed revenue contribution from new changi JV

23.9

5.6

23.6%

3Q17 results

  49.5

7.4

15.0%


Based on the current orderbook of S$830m, we assume the mix of the orderbook is currently 

orderbook

S$830m

Blended GP margin mix: 19.8%

Changi JV

S$640m

23.6%

We less off the assume revenue contribution from the project in 3Q17

Others (eg. Maxwell station)

S$190m

7.0%


Based on the back of the envelope calculation, we assume the following
  • S$50m of sales per quarter (this will last them about 16 quarters or 4 years based on current order book of S$830m)
  • Assume GPM margin of about 18% (vs assumed orderbook mix blended GP margin mix of 19.8%)
  • Other costs (distribution, admin, other operating costs etc) per quarter of about S$2m. (From 1Q16 to 3Q17, other costs excluding change in fair value has been about S$1m-1.8m)
  •  Other income of S$0.75m/quarter (HLS recorded interest income from loans, investment securities of S$3.5-4.5m/year for 2015-2016)

Based on a quarterly sales of S$50m, we estimate, HLS can recognised net profit of S$5.7m/quarter or S$23m/year. And the orderbook of S$830m, can last/provide earnings visibility HLS for another 4.2 years (assuming S$50m sales recognised per quarter)


Orderbook

830

no. of quarters it can be recog

16.8

no. of years

4.2

S$m

sales/quarter

49.5

GP/quarter

8.90

Assume GPM of 18%

other costs/quarter

(2.0)

6.90

increase in depreciation

(0.80)

PPE increased by S$16m in 9M17 due to acq of office units for own use, construction of warehouse, purchase of PPE to meet requirement of ongoing projects- We depreciate it over 5 years

other income

0.75

interest income about $3-4m/year in 2015-2016

PBT per quarter

6.85

17%

Tax

(1.17)

NPAT per quarter

5.69

11.5% NPM

annual NPAT

22.8







SGstocksandshares (SGSAS) 2017-12-14 07:42:00

Hi All, this is our first (official) fundamental stock pick as we seek to create a place with both fundamental and technical ideas for sharing with investors and traders reading our blog. Welcome any feedback and ideas from our readers. 

We will also be including it in our model dummy fundamental portfolio to track the performance of our investment track record (mostly for our own learning purposes). For fun reading and sharing. Happy holidays! 🙂


Hong Kong Land

About

One of the largest property developer and investment group in Asia, owning and managing almost 800,000 sqm of prime office and retail property in key Asian cities. Hong Kong and Singapore made up bulk of the portfolio with 452,000 sqm (56%) and 165,000 sqm (20%) respectively.

FY16 Operating income by segment:

Commercial property: 77.8% (should be mostly investment property rental income)

Residential property: 22.2% (should be mostly property dev profits)

Source: HKL

My View: 
  • While this is just an over simplistic way of looking at the stock, I see HKL as a good proxy to the property market in HK, with its Grade A office assets in Central HK, that may benefit from the booming Chinese economy. Valuations are also backed by its grade A prime office and retail properties such as (Exchange Square, Forum, Jardine House etc in HK, and 33% owned One raffles Quay and MBFC in Singapore). 
  • With P/B near a multi year low (0.5x), and potential for rise in dividend in the near term (given the dividend history and potential increase in rental income from contributions from new assets, and also multi year low net gearing), think HKL may be a good addition to my medium to long term portfolio at $7.22. 
  • While waiting, I get a dividend yield of 2.6 % (based on current DPS of $0.19- same as CPF – might as well)

Investment merits:

Trading At 0.5x P/B (with most of its assets at prime locations in cities such as Hong Kong and Singapore), which is near a multi year low and -1SD of its 10 year range. Also attractive when vs its peers like CK asset, Swire properties and Champion REIT who are trading at 0.6-0.9x P/B.
P/B is near a multi-year low and -1SD of its 10 year range.









Source: Bloomberg

Leasing momentum slowed, but overall rental growth still positive in HK. The vacancy rate for prime office space in HK Central rose to 2.4% in 3Q from 1.7% in 2Q, according to Colliers International. According to Colliers, Rents in Central/ Admiralty increased 0.4% QOQ, supported by sustainable renewal and new demand irrespective of the rising relocation trend. Hong Kong’s office area forms 48% of HKL’s total investment portfolio (by floor area).

  • ·   For 1H18, HKL’s HK central office portfolio as at 30thJun 17 maintained its high occupancy rate with only 1.5% vacancy rates. Average office rent rose to HK$106 psf vs HK$103 in 1H and 2H 16. Its HK central retail portfolio was 99.4% occupied with little change in base rents. There were some mildly negative rental reversions in its Sg office portfolio (S$9.1 psf vs $9.4 psf and $9.2 psf in 1H and 2H16 respectively), but occupancy rate remained strong with vacancy of only 0.2% as at end of Jun 17.

New contribution from Beijing retail mall coming on stream in 4Q?  (84% owned) WF Central (Beijing ) comprising luxury retail complex and 74 room Mandarin Oriental hotel is scheduled for completion in late 2017 and 2018 respectively.

Good free cashflow yield… As a result of its steady rental income from investment properties, HKL typically generates very good free cash flow of more than US$500m in the last 3 years (FY16: US$948m, translating to a free cashflow yield of 5.5%). This has helped it continuously pare down its net gearing to only 5.5%, which will allow HKL to scoop up good assets if investment opportunities arises. 

US$m

FY 2012

FY 2013

FY 2014

FY 2015

FY 2016

Last 12M

12 Months Ending

12/31/2012

12/31/2013

12/31/2014

12/31/2015

12/31/2016

06/30/2017

Cash From Operations

299

908

699

896

1,096

1,202

Capital Expenditures

(515)

(134)

(137)

(152)

(148)

(139)

Free Cash Flow

(216)

774

562

744

948

1,063

Net Debt To Shareholders Equity

12.5%

11.2%

9.6%

8.1%

6.4%

5.5%

Source: Bloomberg

and potential for rising dividends? Noted that dividend/share has been stagnant for 2014-2016 at US$0.19 (dividend yield: 2.6%). If you study the pattern of its dividend payment, DPS remained at US$0.16 from 2009-2011 (3 years) before slowly increasing DPS by US$0.01/year from 2012-2014. If 3 years is a cycle, can we potentially see management raising dividend again this year by at least US$0.01 (or best 1 shot US$0.03). This is considering the potential rise in core investment property rental income (from the potential positive rental reversion in its HK office rentals, new revenue contribution from the new mall in Beijing, WF Central (84% owned) which will be coming up soon in 4Q, and continuously decreasing net D/E which is now at 5.5% (lowest in years)

US$

FY 2008

FY 2009

FY 2010

FY 2011

FY 2012

FY 2013

FY 2014

FY 2015

FY 2016

Dividends per Share

0.13

0.16

0.16

0.16

0.17

0.18

0.19

0.19

0.19

Diluted EPS

(0.05)

0.78

2.02

2.27

0.61

0.51

0.56

0.86

1.42

Dividend Payout Ratio

19.8%

7.6%

7.0%

27.8%

35.6%

33.7%

22.2%

13.4%

Source: Bloomberg

Technically, prices have been consolidating between $7.10-7.80, after a strong rally from $5.95 at the start of the year. With prices near the low end of the trading range, and potential near-term catalysts such as the completion of the 84% owned WF Central in Beijing and hopefully higher dividends (my guess- prays), hopefully the stock will be ready to retest $7.80 and breakout soon.







SGstocksandshares (SGSAS) 2018

SGStockandshares has started more than 5 years ago. I meet very interesting people along the way, sharing trading ideas as a stockbroker and exchanging market views. Some are my clients and many my friends now, helping each other to network and achieve…