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.
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.
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