Chip Eng Seng

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10 Aug 2014 14:47 - 10 Aug 2014 14:54 #20608 by potatolover
Replied by potatolover on topic Chip Eng Seng
Based on actual transacted data from URA, the average sales PSF for Nine Residences is $1063 PSF.
(Nine Residence project is making a net loss)


The actual data sheet is attached.
From that we can also derive the revenue.

sumer wrote: Note that 9 Residences’ NSA is 102% of GFA), construction and other costs of $380 psf, and average selling price (ASP) of $935 psf. The $935 psf selling price is about 10% discount from nearby projects.

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Last edit: 10 Aug 2014 14:54 by potatolover.

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10 Aug 2014 19:08 #20610 by gmj
Replied by gmj on topic Chip Eng Seng
Can you clarify about the Nine Residence being a net loss project...
Thought it was said it is 4mm profit.
Thanks for all the updates.wonder who are the big sellers in the hundreds lots in the last few days!

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10 Aug 2014 19:13 - 10 Aug 2014 19:49 #20611 by potatolover
Replied by potatolover on topic Chip Eng Seng
Yes, my updated figure for Nine Residence is that it is a slightly net loss project.

But the key profit centre came from Junction 9.

The project as a whole (retail + residential) will yield about 19 cents EPS.

The revenue from projects are estimated from actual transacted data with just some extrapolation. Hence, this is almost the closest we can get to the actual figure with every little margin of error in estimation.
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Last edit: 10 Aug 2014 19:49 by potatolover.
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11 Aug 2014 11:23 - 11 Aug 2014 11:32 #20613 by sumer
Replied by sumer on topic Chip Eng Seng
Hi potatolover,

If I am not wrong, you have misunderstood my writing on the Sengkang (Fernvale) sites.

I had written:“Net Saleable Area (NSA) of 536,171 + 562,327 = 1,098,498 sq ft (equal to the GFA as 10% free balcony space is allowed, hence allowing me to assume 100% efficiency. Note that 9 Residences’ NSA is 102% of allowed GFA), construction and other costs of $380 psf, and average selling price (ASP) of $935 psf. The $935 psf selling price is about 10% discount from nearby projects.”

The $935psf selling price refers to my projection of the selling prices at the Sengkang (Fernvale) sites, not that for 9 Residences.

I noted that 9 Residences’ NSA is 102% of allowed GFA, which indicates that there is no need to provide for 80% efficiency (like you did in your table), because of the 10% free balcony space allowed for most condo projects. Once you have the 10% free balcony space, the NSA can rise to as much as the GFA, if not more.

In the case of 9 Residences, my estimated ASP is $1,050 psf, which is close to the $1,063 psf figure you suggested.

Meanwhile, you may want to know that CES has already apportioned the land cost for the Yishun site as $66m for the condo and $146m the retail space. Since the NSA of the condo is 161,500 sq ft (higher than the allowed GFA of 158,480 sq ft), I then divide $66m by 161,500, giving me a land cost of $408 psf of NSA. Next, I estimate that construction and other costs add up to $380 psf of NSA for the condo, and arrive at a total cost of $788 psf. With an estimated ASP of $1,050 psf, I then have a gross margin of $262 psf, giving the condo space a gross profit of $42.3m.

Similarly, the retail portion’s land cost of $146m when divided by the actual NSA of 78,985 sq ft (much lower efficiency for retail) implies an average cost of $1,848 psf. I then estimated construction and other costs here as $69m, or $873 psf, giving me a total land + other costs of $2,721 psf. Against an ASP of $3,500 psf, I then derive a gross profit margin of $779 psf or $61.5m in total.

Total gross profit from 9 Residences and Junction 9 is then $103.8m, against your more aggressive estimate of $148m. DMG’s report recently estimated this development to yield $86m, which I think is net of tax. Working backwards, this implies a pre-tax profit of $105m, which is very close to my figure of $103.8m.

I reckon you did not apportion the land cost as per CES’ guide, leading to the “loss” in 9 Residences. However, this is just a cost-matching situation and does not affect the total project’s figure. Nevertheless, the $40m+ gap between your total profit projection and mine is due to cost assumptions.

Based on BT’s report on Friday on the Fernvale tender, analysts said the breakeven would be $850-890 psf, which would imply an even higher construction/other costs of above $400psf for condo units. I am comfortable with using $380psf at the moment, but am likely to raise it to $400psf in future in view of rising costs. You may want to note that psf construction/other costs for commercial space are usually much higher due to low efficiency and higher "other" costs.
Last edit: 11 Aug 2014 11:32 by sumer.
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11 Aug 2014 14:18 #20614 by gmj
Replied by gmj on topic Chip Eng Seng
Thanks for the comprehensive clarification on the subject.Was a little surprised on the sudden change in the forecast.

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11 Aug 2014 14:30 - 11 Aug 2014 14:41 #20615 by potatolover
Replied by potatolover on topic Chip Eng Seng
Yes, you are right. I will re-apportion the land cost as per stated :)

many tks for the guidance :)

My updated forecast EPS for the 3 projects are re-attached.

Just to further confirm that some of the EPS from Junction 9 and Nine Residence are already flowing into the current reported NAV based on the progressive recognition method of accounting for profit.

Then, my query is will the TOPing of Junction 9 lead to a one-off jump in NAV then?
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Last edit: 11 Aug 2014 14:41 by potatolover.
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