Wednesday, January 25, 2017

"This Singapore counter rise 30% over 3 days!"

As some of you have read, I have adjusted my investment methods this year in order to achieve my target gain of in excess of 10% for my portfolio by the end of 2017.

Other than looking at counters that pass my Enhanced Triple S Scorecard or the Dividend Scorecard Portion, I am also looking for counters with sustainable business model with catalyst that will ignite the share price significantly.

Last Friday I came across Singhaiyi Group Ltd. The share price was at 52 weeks low of 9.6 cents. By the end of Tuesday, the share price was at 12.8 cents. A 33% jump in share price within 3 days!
Profile In Short

As per their website, "SingHaiyi Group Ltd is a fast-growing and well-rounded real estate specialist with unique access to real estate opportunities in Asia and USA.

With our knowledge in real estate development, real estate investment and real estate management, we enjoy multiple income streams through our diversified portfolio of quality residential, commercial and retail assets.

Backed by a visionary and well-connected Board and management team with deep expertise, we have built a robust network and strong partnerships in Singapore, USA and Malaysia. As one of the first Singapore listed companies to build successfully in the USA, our strong local knowledge and solid connections will allow us to capitalize on future opportunities in this exciting market.

Our clear growth strategies for each geography and segment put us in good stead to capitalize on our potential for growth while exploring new opportunities."

But how did this counter caught my eye and why I decided to invest in it?

1. Expanded into USA and Malaysia

From the profile above, it is self-explanatory that the company have developments in USA and Malaysia.

In my opinion, development in USA is deem as positive in view that the current president of USA, Donald Trump, is also into real estate and the US dollar strength against the Singapore dollar.

As for Malaysia, I do not deem it as positive mainly due to the news of the excess supply of property developments in Iskandar and also the downtrend of the Malaysia Ringgit against the Singapore dollar.

However, the company mitigate this point, by not developing the properties on its own, but by investing in Malaysia Property through a fund. Furthermore, the fund is also not any other fund, but the ARA Harmony Fund III.

Therefore, I believe this is one of uniqueness of Singhaiyi Group Ltd, which differentiate itself from other smaller developers.

2. Significant Development Properties in place

Being a property developer, the company already have numerous property developments in place.

In Singapore, currently it has developed "The Vales" and "City Suites". The Vales has already sold 80% of the units prior to TOP in 1st half of 2017.

On the other hand, City Suites has only sold about 10%. But the company has tried to offload their entire share in this development since 2016, but was stopped by the Controller of Residential Property. Nevertheless, I believe the company will be able to offload their entire stake this year.

Although this maybe done at a loss, but the company will still be able to convert this whole stake into cash, increasing their cash portion significantly and escape additional charges.

In USA, the company will continue to develop Vietnam Town, as well as redeveloping an existing office building at 5 Thomas Mellon Circle, San Francisco, into a waterfront lifestyle residential property.

3. Increasingly Diversified Portfolio

Other than being a property developer in Singapore, the company also own TripleOne Somerset, which is undergoing AEI (Asset Enhancement Initiative).

It also bought Park Mall from Suntec REIT and started redevelopment in October 2016.

In USA, Tri-County Mall is also currently undergoing AEI.

After all these developments are completed, the portion of the company's rental income will increase tremendously.

4. Neil Bush as Chairman

The Chairman of Singhaiyi Group Ltd is George H.W. Bush's son, Neil Bush.

He joined the company in April 2013 and owns about 7.66% of the company as per 2016 annual report.

This relationship will have accelerated the company's continued growth in the USA, at that point, and assisted in the company's future growth!

5. Share Price at one of the lowest point over the last 5 years

Prior to the sudden rise over the last 3 days, the share price was at 9.6 cents. It is one of the lowest point over the last 5 years. At this point, the Price to Book ratio is 0.59 times.


6. Paid of $100 Million of Notes 

The company's recent announcement stated that it has fully paid of $100 Million of its notes and this is in addition to the payment of $121 Million of bank borrowings as per latest half year 2017 report. Thus, 2017 annual report will have reported lower debt borrowings and liabilities, which will have resulted in a stronger balance sheet.

7. Listing on Mainboard

The company intend to list on Mainboard. Does this meant that the management believes company will grow bigger in future? Is there something they know that we don't?

8. Recognition of Income

One of the main positive point is that, from all the recent quarterly reports, recognition of the Singapore revenue seems to be from past projects like "Pasir Ris One" and "Citylife @ Tampines".

The revenue from "The Vales" does not seem to be included. Therefore, this stream of revenue will most probably be recognised in 2017. This will push up the revenue and net profit significantly.

Although I have stated many positive points, but not all investment comes without its risks: 

1. In the event, the company is unable to offload "City Suites", it will require to pay a significant sum of charges at the end of 2017.

2. Furthermore, with Trump as President of USA, will the management be able to continue enjoy the network they have in USA?

3. Significant capital expenditure will be required with so many AEI going-on. Rental income will also be reduced.

4. Is the company able to continue to reduce its borrowings with so many developments in place?

In Short

Despite the issues the company could have faced, I believe it has enough catalyst to increase its the share price from the low of 9.6 cents. Therefore, I made purchases of the shares on 20 January 2017.

You can say I was lucky I caught hold of this counter prior to the rise in share price. However, I believe the share price can rise even higher in 2017. Thus, despite the slight drop in the share price today, I am still vested.

Current Price: $0.119 as of 25 Jan 2017.

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

Do note the author is vested in this counter/company. 

Oh... and do remember, please like our Facebook page (T.U.B Investing) and follow me on InvestingNote.

1 comment:

  1. Hi readers,

    Another positive factor is the close relationship between ARA and Singhaiyi. The latest 9 Penang Road collaboration is a prove of it.

    Regards
    TUB

    ReplyDelete