The head honcho of Regency Steel Asia, Mr Gui Boon Sui, has become a substantial shareholder of Hiap Hoe. He could be the one responsible for the significant buying activities observed in the past few months which saw more than 20% increase since July. Perhaps he is banging on a possible privatization in the near future (I hope).
Based on my estimations, HH may be recognizing more profits from its Marina Tower project either last quarter (which has yet to be reported) or this current quarter. Based on the $28 million of deposits held on books (which is 10% of total sales), the total sale value of the residential project should be $280 million. And if the profit margin is 20% (based on my guessimation), this would mean a $56 million profit from the residential units alone. The Hotel comprising 273 rooms should be valued at between AU$350,000 to AU$400,000 per key (
), which gives a Hotel valuation of AU$95-110 million.
With the lack of new projects and the completion of the Marina Tower project, I opine that privatization of HH is likely in the near term.
1. Does HH recognise revenue of Marina Tower units upon completion of sale of specific units, rather than the other development? <<Revenue was not recognised at sale. Mr Teo said during the AGM that some were recognised in Q1 (he said there were some in the hotel block). He mentioned that the rest should be recognised in Q3 or Q4.>>
2. Where in the financial statement do you find the deposits of $28m? <<This is mentioned in note 23 on page 92 of the annual report 2016.>>
3. Emergence of new subst. shareholder is positive but how do you think that suggests privatisation is on the cards? <<The share offers 1+% returns p.a. and is very illiquid. Someone with millions like Mr Gui would have been better off investing in a REIT or bluechip stock but he chose Hiap Hoe. The only way out for such a substantial shareholder would be a privatisation. Other factors to consider are (1) HH has no more development projects planned, (2) Mr Teo mentioned that he is still open to selling other properties held by HH or spin off a REIT. HH is transforming into a pure investment holding company which does not need to raise any more funds from the market. It would be easier for the Teo family to avoid the hassle of complying with the listing rules by just taking the company private.>>
1. If "Revenue was not recognised at sale" -- why some sale recognised earlier in Q1 and the rest later? (I thought overseas project would be recognised in one go) <<Probably need an accounting expert to weigh in on this. Could be due to the fact that only 10% had been collected from the buyers. The rest of the 90% could be collect after TOP (i think).>>
2. got some sale recognition in Q1 of sale in hotel block? .what was sold in hotel block? <<I've attached a photo (credits:
) of the development as at 31 March 2017. I believe the portion under the swimming pool is actually part of the residential block that was recognised in Q1.>>