Saturday, October 29, 2016

"One With Dormitory Business"

As per my previous post, I will be writing about "One with the dormitory business".

I am not sure if your guess is correct. But the stock that I will be writing about is - Centurion Corporation Limited.

Do note that this is not part of my dividend series.

Profile In Short (Directly taken from AR2015)
Centurion Corporation Limited is one of Singapore’s largest workers and student accommodation owner-operators. It owns, develops and manages quality workers  accommodation assets in Singapore and Malaysia, as well as student accommodation assets in Singapore, Australia and the United Kingdom.

Established in 1981 as an audio cassette tape manufacturing business in Singapore, it became one of the market leaders in the optical storage media industry and was listed on the mainboard of the Singapore Exchange in 1995. Following a reverse acquisition exercise in 2011, the Group successfully diversified into the accommodation business to capture growth opportunities in this niche market.

Within a short span of time, Centurion has developed a strong portfolio of 16 operational accommodation assets totalling 50,072 beds, as at 31 December 2015. By 2018, upon completion of the development of one more workers accommodation asset in Singapore and three assets in Malaysia, the Group’s accommodation portfolio is expected to grow to over 74,500 beds.

In the workers accommodation space, Centurion has 27,600 beds across four workers accommodation assets in Singapore and 19,800 beds across six workers accommodation assets in Johor, Malaysia as at 31 December 2015, which are managed under the Group’s “Westlite” brand.

In 2014, leveraging its expertise in workers accommodation, the Group expanded into the student accommodation business with the acquisition of RMIT Village in Melbourne, Australia and four student accommodation assets in Liverpool and Manchester, United Kingdom, totalling 2,357 beds.

In 2015, the Group also won a bid to operate a 315-bed student hostel in Singapore. Besides exploring the potential to enhance these assets, the Group plans to grow its student accommodation portfolio in key educational hubs around the world.

I am attracted by this stock because after investing in Hock Lian Seng Holdings Ltd and TTJ Holdings Ltd, I realise how much revenue and net profit the dormitory business is providing for their respective companies. However, it was only now that I found Centurion Corporation Limited! Why have I been missing out on this stock all this while?

Based on Enhanced Triple S Scorecard with Dividend Scorecard Portion (Present Price of $0.340 as of 29 Oct 2016):

Yes, as per the pictures above, this stock fails the Enhanced Triple S Scorecard with Dividend Scorecard Portion. 

Then why am I still talking about it? What is so good about it?

TTJ Holdings Ltd and Hock Lian Seng Holdings Ltd are unable to renew their lease for their dormitory business - TTJ had a 5000 bed dormitory, while Hock Lian Seng had a 3000 bed dormitory previously. Both of their lease are not renewed. Thus, currently there will added demand for dormitory services and this can at least help to guarantee their occupancy rate in the near future. 

Economic Moat - One of the main positive point of this stock is the economic moat it has. In my opinion, it is the only listed firm in SGX and Singapore being so focus on foreign worker and student accommodation. It is not a "sexy" business, but being one of the main company that is fully focus on this industry puts it on top of people's mind when companies are looking for accommodation their foreign worker.

Number of Foreign Worker in Singapore - Apparently there are over 300,000 foreign worker (construction related) in Singapore. With the construction business booming (all the infrastructure projects that Singapore Government are throwing out), there is very little possibility that Singapore Government will reduce the number of foreign workers in Singapore. In this way, occupancy rate for Centurion Corporation Limited's Singapore dormitories and those nearby Johor Bahru dormitories will be guaranteed. Do note that Singapore business provided up to 65% of the 2015's Revenue.

High Net Profit Margin - This business is a high net profit margin business. In the notes on the segmented business revenue and net profit in 2014 and 2015, the dormitory business has been providing about 40 cents to 50 cents net profit for every $1 earned. That's how profitable this business is.

90% occupancy rate for Singapore Dormitories - The occupancy rate for Singapore dormitories is significantly high. Once a company places its workers in their dormitories, it will not unnecessary remove them. Thus, this will form recurring income for Centurion Corporation Limited.

Focus on Accommodation Business - Centurion Corporation Limited still have some businesses in providing optic disc. Nevertheless, from its latest report, it seems to be slowly stopping that business and totally focusing on the accommodation business. This should bring about better coordination and synergy within the company, most probably resulting in higher revenue and net profit.

Warrants with Exercise Price at 50 cents - It is important to note that Centurion Corporation Limited has warrants with exercise price of 50 cents that will expire in October 2017. This meant that the management team will probably push the share price to at least 40+ cents prior to the expiry of the warrants in October next year.

Paid off $100 Million of Notes - Base on the recent announcement, the company has actually paid off its $100 Million of Notes. This will have reduced its leverage significantly.

But why am I still hesitating?

Highly Leverage - From the scorecard, you can see that this stock is very highly leverage. Despite its ability to generate huge amount of free cash flow, Centurion Corporation Limited is still taking on huge amount of debt. This is due to its extreme growth strategy in expanding its accommodation business. It is developing a few dormitories, which will only be operational in 2018. Thus, during the next year, the stock will most probably continue to take on more debt.

REIT Listing - My initial thoughts of reducing the amount leverage in its financials, Centurion Corporation Limited can put up a REIT listing in SGX. However, further research shows that the stock wanted to propose a REIT listing in 2015. But it eventually pull out. It seems that there could be some road block ahead that prevents the stock from putting up a REIT listing. (Is there anyone who understands and can explain about "Chain Listing" in the announcement?)  

Tuas South Ave 9 Dormitory Expiring Soon - The stock actually will have a dormitory at Tuas South Ave 9 that will expire soon. From the looks of the recent progress in this industry, this lease may not be renewed. This will definitely impacted the revenue and net profit adversely.

Significant Additional Investment Properties - Although the scorecard indicates that the company produces high Free Cash Flow, but it does not take into account of the additional investment properties it invest in. If the additional investment properties is taken into account, the stock will produce negative free cash flow on an annual basis. Thus, Price to Free Cash Flow will become negative instead.

Unclear in Occupancy Rate in Overseas Business - Despite understanding that the Singapore Business has a high occupancy rate, I have been unable to find out the occupancy rate in the overseas businesses. 

In Short

Despite failing both scorecards, I was prepared to invest in this stock mainly due to its economic moat and business model. However, its extreme growth strategy and significant leverage has been deterring me to invest in it. After all, it is not like Fraser Centrepoint Ltd that has means to reduce the leverage significantly. Furthermore, Centurion Corporation Limited will definitely require to leverage more in the next 1 or 2 years. A REIT listing may still be possible in future but more understanding will be required, 

To answer my initial question, I have most probably ignored this stock up to 2 months ago, due to its high leverage.

Thus, my view is that at the current price and economy situation, I am unwilling to take on the risk involved. Furthermore, the opportunity cost is high now as the money can be put to better use by averaging down some of the good solid stocks in my portfolio or purchase other blue chips.

Do note that if the share price continue to drop I may still purchase this stock. But that will be for the future.

For those who are interested to understand and find out more about the Enhanced Triple S Scorecard with the Dividend Scorecard Portion, you can come for the 4th Sharing Session with T.U.B! If you are interested to attend, do not hesitate to contact me directly.

For those who intend to try the Enhanced Triple S Scorecard first before attending the sharing session, you can contact me directly as well

Oh... and do remember, please like our Facebook page - T.U.B Investing.

Thursday, October 27, 2016

Some Updates For T.U.B Investing Blog

Its been some time since I posted anything as I have been overseas.

Do you know which country is this?
I am also rather busy as I am creating an extended website for T.U.B Investing blog.
Remember the idea of producing a website full of Enhanced Triple S Scorecard with Dividend Scorecard Portion on all the stocks in SGX?
Yes. This is in the works and it will be named T.U.B Circle (means within this circle only). The initial phase of this project will only be available for participants of my sharing session with T.U.B. If you are interested to know more, you can come for the 4th Sharing Session with T.U.B on 18 Nov.
I have stated I will be more focus on Blue Chips now. Currently I am reviewing various blue chips;
  1. I will be putting up on an extended write up on Fraser Centrepoint Ltd with amendments to Far East Orchard Ltd (Thanks Desmond in pointing out my mistake) and with the addition of Wheelock Properties Ltd.
  2. I will also be writing about M1 Ltd since there is a drastic drop in its share price, after the recent announcement of its quarterly results.
For the others non-Blue Chips, I will also be stating my views on Sing Holdings Ltd's acquisition of the Melbourne Hotel.
Recently, I have also found some interesting possible unique small to mid cap stocks to invest in. Once I am assure of their strength, I will do a write up on them. The clues of these potential value stocks are:

1. One with the domintary business
2. A recently listed F&B Management Firm

For those who are interested to understand and find out more about the Enhanced Triple S Scorecard with the Dividend Scorecard Portion, you can come for the 4th Sharing Session with T.U.B! If you are interested to attend, do not hesitate to contact me directly.

For those who intend to try the Enhanced Triple S Scorecard first before attending the sharing session, you can contact me directly as well

Oh... and do remember, please like our Facebook page - T.U.B Investing.

Monday, October 17, 2016

My In-depth Analysis of Fraser Centrepoint Limited

Influenced by B’s post, I went into the in-depth analysis of Fraser Centrepoint Limited.

Actually, this stock has been on my watchlist for ages. But I decided to postpone it as I was busy at work and also busy with promoting the Dividend Scorecard as well as my sharing sessions.

Nevertheless, after my in-depth analysis, I made the purchase of Fraser Centrepoint Limited.

The reason of my in-action previously was that I am unable to find the answer to this question -

“Why choose Fraser Centrepoint Ltd over the other listed firms which are in the same industry?”

The 2nd question I had on my mind is that -

“Why not choose a REIT if you want a high dividend yield?”

I found the answer pretty quickly to the 2nd question:

In my opinion, REITs is mainly purchased for the dividend yield. But for a REIT to grow, it may need to do a rights issue, which may dilute my shares in future. This is something I am not keen on. Furthermore, some REITs tend to become a dumping ground for its Sponsors. Thus, how can I be assured of my returns in future?

Some of the bloggers had also stated REITs are very dependable on how the REIT managers perform. But this can only be access via past REIT performance, which I know nuts about.

At the end of the day, I am not an expert on REIT Investing and I am still learning.

To answer the 1st question, I took about 1 week to do up an in-depth analysis of Fraser Centrepoint Ltd and its major competitors.

Basically, I did an Enhanced Triple S Scorecard with Dividend Scorecard Portion on each of the listed firm and the summary of the information as per below:
Summary of my findings and Enhanced Triple S Scorecard with Dividend Scorecard Portion
I will have deem all the listed firms above as Blue Chips (CapitaLand Ltd, Fraser Centrepoint Ltd, UIC Ltd, OUE Ltd and Far East Orchard Ltd) and Blue Chips generally do not fare well for my scorecards. Thus, all of them failed both my scorecards.

(Just to clarify - Those cells highlighted in yellow are the ones that perform the best among its peers, while those cells in green are the ones that perform the worse.)

1. CapitaLand Ltd

CapitaLand Ltd is the most established firm against the competitors listed in the table. Thus, it is the most expensive and has the highest market cap.

I will ignore this stock as I do not believe that there is much value in this stock. 

The X factor I am looking for is a stock that intend to become "the next CapitaLand Ltd" and not CapitaLand itself.

2. Fraser Centrepoint Ltd

The stock seem to be very over leveraged and has a negative Price to Free Cash Flow Ratio.

However, I believe that it is overleveraged because it is only listed for a short period (Oct 2014) and the company intends to grow its portfolio. Note that this period is of low interest rate.

Similarly, as the stock intends to grow its portfolio, it makes negative free cash flow from 2011 to 2014. However, in 2015, it managed to turnaround and has started to make positive free cash flow.

The stock also performed the best among its peers, by having the lowest figure, for the last 12 months trailing price to sales ratio and the last 12 months price to earning ratio.

It did fairly well in paying dividend for the last 2 years (2014 & 2015) and getting a reasonable figure for Dividend Yield to PB (better than all of the peers, except OUE Ltd).

In addition, this stock is a sponsor to 4 REITs. If there is really a need, the company will have a better chance to recycle its assets by selling them to these REITs.

Finally, it is also fairly close to its 52 weeks low share price. Do note that $1.470 seems to be its all time low share price as well.

This stock continued to stay on the watchlist.

3. UIC Ltd

I remembered someone had told me not to buy UIC Ltd due to its links with UOB (It's parent company is UOL). They stated that this stock does not treat its minority shareholders well. This is emphasized in its dividend yield for the last 2 years.

Without analyzing the other figures, I decided to ignore this stock.

4. OUE Ltd

This stock seems to be performing relatively well. It has about 20% of margin of safety when you compared its NAV against its share price.

Its dividend yield for the last 2 years has also been relatively high (as compared to its peers) and scored the best for Dividend Yield to PB ratio.

Other than it being quite highly leveraged, it also scores well in other aspects.

This stock is added to my watchlist.

5. Far East Orchard Ltd

This stock actually performed quite well in terms of balance sheet strength. It has a 14% margin of safety when you compared its NAV against its stock price. Furthermore, its current asset are rather liquid and its debt to equity is only at around 16%.

However, the stock fares poorly in terms of declaring dividend for the last 2 years and the stock is not a direct sponsor towards the REIT that it seems to have links to.

Thus, I decided to ignore this stock.

So why was Fraser Centrepoint Ltd chosen in the end?

Fraser Centrepoint Ltd was chosen (as compared to OUE Ltd) is because;

- I believe, for Blue Chips, Price to Earning and Dividend Yield plays a larger part in determining future share price. Thus, since Fraser Centrepoint Ltd has the lowest Price to Earning Ratio as well as a decent dividend yield last year, it is chosen over OUE Ltd;

- Sponsor of 4 REITs as compared to Sponsor of 2 REITs;

- Current Price is very close to 52 weeks low and also historically low;

- In terms of ultimate shareholder, I prefer Thai Beverage over Lippo Mall.

In conclusion, I believe Fraser Centrepoint Ltd has a higher chance to grow to become "the next CapitaLand Ltd" over the other 3 listed firm.

Current Price: $1.485 as of 17 Oct 2016.

Please do your own due diligence before you invest in this stock.

Do note the author is vested in this stock/company at $1.490 

For those who are interested to understand and find out more about the calculations shown above based on the Enhanced Triple S Scorecard with the Dividend Scorecard Portion, you can come for the 4th Sharing Session with T.U.B! If you are interested to attend, do not hesitate to contact me directly.

For those who intend to try the Enhanced Triple S Scorecard first before attending the sharing session, you can contact me directly as well

Oh... and do remember, please like our Facebook page - T.U.B Investing.

Friday, October 14, 2016

4th Sharing Session with T.U.B

This will be my last Sharing Session with T.U.B for the year and it will be relatively different due to the following:

1. It will be conducted on a weekday evening.
2. The session will be shorten to 2.5 hours.

The reason for this change is because people have been requesting for weekday sessions and I decided to cater to it. However, since I will be working, the session can only be conducted in the evening. This resulted in the shortening of the session from 5 hours (excluding 1 hour for lunch break) to 2.5 hours.

Nevertheless, please do not worry about the lack of content as I will make sure that the full information be presented to the participants.

As for newcomers, who intend to come for the 4th Sharing Session with T.U.B, can also come for future sessions that I conduct next year, for recap purposes, for FREE. Repeat participants can come for free as well.

Similarly, to the 3rd Sharing Session with T.U.B, participants of this session will be able to understand the Enhanced Triple S Scorecard with the Dividend Scorecard Portion, which is a scorecard that is capable of finding value stocks that provides 5% dividend yield.

Details of the Sharing Session:

Location: 73 Ayer Rajah Cresent, #01-11/12, Singapore (139952). (Walkable distance from One-North Circle Line MRT Station)

Date: 18 Nov 2016 (Friday)

Timing: 7.15pm to 9.45pm.

Price: $68 (via bank transfer. Contact me for account number). Each confirm slot will be given upon the successful bank transfer.

Participants of this sharing session will eventually be receiving a soft-copy of the Enhanced Triple S Scorecard with Dividend Scorecard Portion, which I had only passed to the participants of the 3rd Sharing Session with T.U.B so far.

For the participants of this session, please have your dinner prior to the session!

If you have any queries, please feel free to contact me directly.

For those who intend to try the Enhanced Triple S Scorecard first before paying for this session, can contact me directly as well.

Oh... and do remember, please like our Facebook page too - T.U.B Investing.

Tuesday, October 4, 2016

My Plan Has Change...

The economy is sick.

Currently, it seems like no “bad” news is good news.

When Fed didn't increase the interest rate, the market seem to be in a sudden boom.

When oil price rise a bit, we become so happy and it seems like oil has rise to $80 again.

When oil price drop a bit, we become so scared.

But when a big firm, such as Hanjin or Deutsche Bank came out with major bad news, the whole world shakes in fear for A WHILE only. For we believe the governments will come to their aid.

What happens if there is no aid? Does the current share prices seem valid?

No longer are there any announcement of big projects that cause the share price to move.

Share price movement are influenced drastically by analyst nowadays. The effect will be sudden pump and dump. We are like drug addicts. We are addicted to analyst reports. Without any analyst report, no one dares to buy or invest.

Oh… and I can hardly find any good stocks.

Good stocks that consistently earn profits, give consistent dividend and has a strong balance sheet are being “discovered”, while others are getting delisted.

Yes, you can say I am too pessimistic.

But for someone that works "near the front line", I do not see the economy recovering in the near future.

My gut feeling is that the economy is still very weak and it will continue to last till 2017.

So I am changing my views and plan.

To survive through this period, my plan moving forward will be:

  • Ignore Deep Value Investing
I decided to forgo deep value stock investing. This is because I figured that if an apocalypse is to happen in the stock market “again”, deep value stock will naturally emerge.

I will be super focus on finding stocks that can pass the Enhanced Triple S Scorecard with Dividend Scorecard Portion. This is after almost 1.5 years of using and improving the scorecards. I realized stocks that pass these scorecards have their merits.

Even when their share price fall drastically, the initial view will help you endure through the hard times (This will only happen if you believe in the scorecard and understand it).

  • A portfolio of Blue Chips, REITs and stocks that passed my scorecards will give me better return.

This information was always in front of me. But I choose to ignore them. So now, I will also start to focus more on Blue Chips and REITs.

I have always ignore REITs because I believe they are constantly overpriced. But now, I realise the benefits of having them in your portfolio. It calms your mind whenever you receive the dividend from them every quarter.
Furthermore, their business model is easy to understand. Some REITs’ share price are currently in their 3 year to 5 year low due to rights issue or other “noises”. This creates an opportunity for me to jump in – and that's after understanding the reasons behind the low share prices. Obviously, if the low share prices is a result of bad situation, I will continue to ignore them.

As for Blue Chips, it's a love and hate relationship. I always deem them for short term trading due to their volatility in their prices. BUT after the significant drop in Aug/Sep 2015 and Jan 2016, there are actually some Blue Chips that has yet to recover. As usual, I will buy if I deem them to be of "value stock" at that time.

So its time to go hunting…

Therefore, for those who are also interested in finding quality value stock that can produce at least 5% dividend yield or to learn about the Enhanced Triple S Scorecard and the Dividend Scorecard Portion, you can come to the next Sharing Session with T.U.B! If you are interested to attend, do not hesitate to contact me directly.

Oh... and do remember, please like our Facebook page - T.U.B Investing.

Sunday, October 2, 2016

Sing Holdings Ltd - Latest Purchase of Residential Site at Fernvale Road

Being the advocater of Sing Holdings Ltd previously, I feel that I should provide my comments on their latest purchase of the residential site at Fernvale Road.

This plot of land seems to be besides or near High Park Residences, that was purchased and developed by Chip Eng Seng.

This purchase was also a collaboration between Sing Holdings Ltd (70%) and Wee Hur Holdings Ltd (30%).

Details of the Purchase as per below (The document is as per attached in this link.)

There are 2 discussion points which I believe I should address:

1. Is this a good purchase?

The bid works out to $517.03 psf (per square feet). As compared to High Park Residences, which Chip Eng Seng bought for only $438/448 psf for 2 times this plot of land. As discussed in valuebuddies forum, larger plots of land has cheaper construction and marketing cost due to bigger scale.

Despite the above, I believe this is still a good purchases due to 2 points:

- Collaboration with Wee Hur Holdings Ltd

This meant that construction will definitely be done by Wee Hur Holding Ltd. I believe with a share in this development, Wee Hur Holdings Ltd will definitely try to reduce the construction cost.

Furthermore, based on the estimated construction cost by BCA for high-rise average apartments, the amount is ranged about US$1,360 psm (per square metre) to US$1,560 psm. This works out about SG$177psf to SG$203psf.
(US$1 = SG$1.4. 1 sqm = 10.764 sq feet.)

In addition, I do not expect the marketing cost to be very significant as well - Thus, an estimated total cost should be between SG$800 psf to SG$850 psf.

- Selling Price PSF of High Park Residences

As per URA cavaet listing, High Park Residences sold ranges from $765 psf to $1,550 psf. However, as per 2016 cavaet lodged, it has been more than $850 psf.

Therefore, it can be stated that this project will definitely be able to earn at least 10% profit.

2. Is this a bad move by the management?

Since Sing Holdings Ltd has made this purchase, the company will take on more debt and continue to give low dividend. Something that many minority shareholders have been complaining.

However, being value investor and deeming that I own part of the company, we should note that a company has to keep moving forward. By purchasing this piece of land, I believe it will at least last the company another 1 or 2 years before it make any big moves.

Furthermore, the economy is still weak. This project will keep it busy for a well.

As stated by sgmystique:

Nevertheless, it is important for minority shareholders to note that the company will be collecting rent during these 2 years as well.

In Short

As per my thoughts above, I just felt that it is good that Sing Holdings Ltd has got a new piece of residential land to develop. All in all, if you have new project that can earn money, why not?

My belief is that in the next 1 to 2 years, we should be expecting a big move from Sing Holdings Ltd.

Thus, I will be holding on to my share holdings for now - unless the company leverage too much moving forward.

Current Price: $0.325 as of 2 Oct 2016.

Please do your own due diligence before you invest in this stock.

Do note the author is vested in this stock/company at $0.300.  

For those who are interested to find similar quality value stock that can produce at least 5% dividend yield, you can come to the next Sharing Session with T.U.B! If you are interested to attend, do not hesitate to contact me directly.

Oh... and do remember, please like our Facebook page - T.U.B Investing.