2nd Liner Prop Stocks

Me bullish on HEETON HOLDINGS despite a $2.7 million profit versus $3.2 million previously. Importantly, the NAV moved up to $1.293. The stock price is at a massive discount! Only 69 cents!

The NAV should rise non-stop as the year progresses due to proceeds from projects sold. Heeton will pop up on investors' radar screen if the King Albert Park and Hong Leong Garden projects get launched soon and sell well. It's a little guesswork there as property investors are turning cautious.

Roxy Pacific ==> holding strong at 62 cents. Lots of revenue to be booked. I think that would exceed S$1 billion, now that Jade Residences have been launched and selling well. Will the company give an update on the orderbook even before the 1H results? After all, don't have to wait lah. If exceed S$1 billion, it's a good milestone to shout !

Hi Summer,

Today Hoe Hiap announced the valuation of real assets.

Retail Units of Zhongshan Properties : S$103,000,000
Office Units of Zhongshan Properties : S$ 67,000,000
Days Hotel Singapore : S$263,200,000
Ramada Singapore : S$268,800,000
Total : S$702,000,000

valuation of hotel is above expectation however the valuation of retail and office seem to be on the lower side. What is your view?

Regards
Yee

erelation wrote: Hi Sumer,

Re-calculate Zhongshan Park using the latest sales figure of bis Novena at Irrawaddy Road for $150 million or about $622,000 per room.


Zhongshan Park's value:

1) Total Room = 405 + 384 = 789
Assume $622k per room = $490.7 mil

2) Retail space: 55,000 sq ft X $5,000 psf = $275m
3) Office space: 65,000 sq ft X $1,600 psf = $104m

Total valuation = $869.70
Cost of land = $73.3m
Construction and other costs = $200m
Total cost = $273.4m

Valuation surplus = $869.7m - $273.4m = $596.3 mil

Superbowl's share (50%) = $298.15m
No of shares = 326.192m

Valuation surplus of ZP per Superbowl share = 91.40 cents

This exclude other business and properties under Superbowl.

34.8 (NTA 31 dec 12) + 91.40 (Surplus) = 126.20 cents

Share price now is only 46cents.

Hi erelation,

Hiap Hoe and Superbowl's revaluation of its Zhongshan Park at $702m gives an estimated surplus of $402m for the project, based on my estimate of $300m (higher side of my $270-300m cost estimate). Its $702m valuation is higher than my own personal estimate earlier of $624m, due mainly to the high values given to its 2 hotels.

Assuming $402m, and shared equally by HH and SB, this will mean additional NAV per share of 45.6ct for HH and 65.7ct for SB. In SB's case, the over-valuation is much higher than its present mkt cap.

My personal valuation estimates for ZP's office and retail spaces are higher than theirs, but I will not bump up my figures so as to allow for future upwards adjustments. My figures are $110m for retail and about $81m for office. They were probably conservative, taking into consideration only the rental yields, assuming that the 2 companies will not sell these assets. They are valuing the retail space at below $2,000 psf, which I think is highly conservative compared to recent transactions of retail spaces. This could, however, be due to the fact that HH/SB did not carve out ZP retail spaces into more bite-size lots.

As a result of the valuation exercise (which, btw, will probably not be reflected in its NAV but indicated as "a note" like what they do for SB's shops elsewhere), HH's present NAV of 67.1 ct will then be bumped up to $1.127 while SB's NAV of 35.2 ct will rise to $1.

In addition, HH has substantial unbooked earnings from (1) unsold units of Skyline 360 (2) sold but uncompleted units at Waterscape (3) future profit from its industrial project in Kallang Pudding. To be conservative, I am assuming zero profit for Treasure at Balmoral. These projects could yield another 25-30ct per share for HH. Total RNAV = about $1.40-50, depending on inputs.

For SB, it owns another group of undervalued assets - the retail spaces in a few shopping centres. A more up-to-date revaluation will probably mean an additional 30ct surplus per share, pushing RNAV to $1.30. Compared with Roxy, which also owns a hotel, has a RNAV of just about 90ct (including its revaluation surplus) and trades at above 60ct, SB does look cheap. However, Roxy is a more aggressive company and the market is apparently pricing it higher because of that.

Nevertheless, HH/SB's move to revalue their ZP assets is positive, and shows that management is not "hiding" its undervalued assets. It will be interesting to see what's the purpose of this move so soon after ZP gets full TOP. Perhaps it's in tandem with the establishment of a $500 million Medium Term Note yesterday. Could the company be getting its loan facility ready for some substantial acquisition, using the revalued ZP as assets to back up that facility? Or was the valuation requested by the father in the ongoing court case?

URA website info is that Roxy's project, Jade Residences, has sold 79 units out of the 100 launched in April 2013. That should mean about S$100 million in sales which will be added to its order book!

Sumer, this project will surely bump up your estimate of the RNAV of Roxy, right?

Hi Sumer,

Thanks for your insight.

I have cleared all my Superbowl at 53 cents and recently brought back some around 51 cents. Both counter are very quiet and will only move whenever there are news or new development. Probably only suitable for buy and hold strategy.

Seems like HH is forming a base around 69 cents level with large buy order while SELL order are seen at 70.5 and 71 cents to get the weaker holder to sell their shares.

What is your target price for both? I am still holding on to small stake for both.

Brought into Suntec Reit recently at $1.72 after the huge correction.. hope the $1.680 level can hold.

Cheers
erelation