CapitaLand's stk performance is unbelievably lousy. Down about 40% for the year 2011. Its earnings per share is expected to be down 40% (figure is coincidental) for 2011, according to Kim Eng Research recent report.
This blue chip has been taking blows from the Singapore and China governments' cooling measures. Still, the second liner property stocks such as Hiap Hoe and Roxy and Stamford Land have not done as badly.
Is CapitaLand looking oversold? Possibly. Its RNAV is $3.92, which means the stock ($2.21) is trading at about 44% discount to RNAV.
Sumer, while Hiap Hoe Ltd is terribly undervalued, the near-term action that management can undertake is to give a higher dividend. However, it has a dismal track record -- the dividend in the past FYs has been lousy. Looking at its balance sheet, there is only $13 m in cash and cash equiv, which is not like a fantastic amt to consider giving a higher div. Maybe next FY2012. What do u think?
Yes, Hiap Hoe has not been generous with dividend, for reasons which I can only guess (eg keeping cash for opportunistic land buys, not wanting to attract too much interest so that the share price stays low for bigger privatization meat, etc). But yes, I agree a good dividend payout is an additional boost for the counter.
I buy different stocks for different reasons, and in the case of Hiap Hoe, it's not for the dividend yield but for its undervaluation, its earnings figures the next couple of years, its exposure to the hotel sector, the prospects of the company monetizing its Zhongshan Park project, privatization possibility, etc. In the short term, I like the fact that construction at Skyline 360 and Zhongshan Park is pretty fast, with the former having reached the top floor, and ZP looks likely to be completed before Sep 2012, just nice for this year's F1 tourist arrivals. This completion date will be way ahead of the original expected target completion of 2014. I am content, at the moment, to be patient with this counter.
For high dividend yield, I am exposed to Chip Eng Seng and Ho Bee, for example. These stocks are also very safe because of their high RNAV. These 2 counters, and Capland and Kepland, are also my pick for short squeeze targets (because of their high liquidity). These counters satisfy the little desire I have for excitement.
Meanwhile, I like the BT news on Saturday about URA's approval for Hong Fok's plan to redevelop International Building at Orchard into a 670 room hotel. Based on a quick calculation, the redevelopment could push Hong Fok's RNAV to above $2. Imputing a $1,000 per room value for this new hotel will give a $670m valuation for the completed building, not taking into consideration additional value from retail space. Last year, a 99-year hotel at Chinatown was sold for above $900 per room. The new RNAV of close to $1.90 (depends on how much $ psf one imputes for Concourse office building as well) compares favorably with Hong Fok's present stock price of 47ct and present NAV of $1.37. I am adding to my holdings.
Further to my earlier note on how the stock market could have discounted a not-too-big drop in physical property prices, the price action of property stocks since the Dec 8, 2012 govt measures seems to support this view. Many property stocks have since rebounded and gone beyond their Dec 8 prices. I think this a good indicator that most property stocks have already discounted a good amount of bearish news, so that even if physical prices finally drop within a reasonable amount this year and next, the developer stocks may very well move the other way round.
Hong Fok has replied to an SGX query yesterday on its trading volume.
Part of the reply: "However, the Company and its subsidiaries (together, the “Group”) are constantly seeking to enhance shareholders’ value. One of the possible opportunities that the Group is looking into would be the potential redevelopment and/or enhancement of its properties. In this regard, the Group is in the process of exploring such opportunities on a preliminary basis, including a property along Orchard Road owned by the Group for which provisional redevelopment permission has been granted to build a hotel on the existing car park block at the property."
On Sat, BT reported that Hong Fok had gotten approval for a 670 room hotel in Orchard. What is interesting in yesterday's reply is that Hong Fok said the permission granted is for a hotel built on its "existing car park". This could mean that International Building is staying intact, and only part of the 45,466 sq ft land on which the International Building and the car park sit on is being used for the hotel.
While I do not have the breakdown of the car park and building sizes, assuming that the car park size is about 1/3 of the total land size, this will mean 15,155 sq ft. This can then be combined with the 9,023 sq ft empty land Hong Fok bought from the govt some years ago at a dirt cheap price of about $1,114 psf ppr (based on 6.2 plot ratio).
Adding these 2 plots up, we get 24,178 sq ft, multiply by 6.2 plot ratio, GFA = about 150,000 sq ft. Could 670 rooms be built on such a small plot?
Assuming an efficiency ratio of 85%, this means that each room size is then about 190 sq ft, which is pretty small, but still do-able if Hong Fok comes up with a creative mickey-mouse hotel concept (Some hotel rooms in Singapore are about 150 sq ft each). Also, the size could be larger if my estimate of the car park size is too low.
In any case, the interesting story is that a 670 room hotel could rise from the car park lot and the empty land, leaving International building intact. This means that there is even greater enhancement of asset value than I had expected earlier.
Having said that, more information will have to come from Hong Fok regarding this very material development, once things are firmed up.
At least 2 articles in the mass media today touched on the Sporean love for property investment --- and regurgitated the well-known reasons for the property trend -- ie, low interest rates, track record of rising prices, and stability of investment.
It's been a bubble getting bigger and I fear for those who got in in the last 6-12 months. They were late to the party. Property prices are going to slip and offer no capital gains for many a year. Rental yields, as they are, are pathetic -- no one really admits to buying property for the rental yields. It's truly always capital gains -- and these are turning into mirages.
My way of investing in property is to buy property stocks with huge discounts to RNAV. These developers have lots of unrecognised revenue which will enable them to report record profits for a few years to come.
This positions them to increase their dividend payouts, which can only boost their stocks' attractiveness. Or if they use their cash pile to buy land that is goingg to get cheaper, they will be in a sweet spot too.