Sing Holdings

Hi Guys,

A group of minority shareholders have grouped together with the intention to draft and write a letter to Sing Holdings' Board of Directors and Management expressing their concern with the share price under performance.

If any of you owns Sing Holdings shares and agrees with the content of the draft. Pls express your support by joining in.

Thanks.

valuebuddies.com/thread-23-post-76019.html#pid76019

Here's the letter copied from Valuebuddies.com
I salute your move!

But since your key call is share buyback by Sing Hldgs, you will need more ammo to support it by citing studies/stats on the efficacy of share buybacks. W/o it, you could be told that you are suggesting a token move whose positive outcome, or strength of positive outcome, is anybody's guess.


**3 March 2014

Sing Holdings Limited
96 Robinson Road
#10-01 SIF Building
Singapore 068899

Dear Board of Directors and Mr Lee

We are a group of shareholders writing in to express our concern with the share performance of Sing Holdings for the past few years. We are disappointed with the Board and Management inaction towards the under performance of the share price. Shareholders' call for a share buy-back has been resisted by the Board and Management as you feel that cash could be better utilised. But after so many years, we do not feel that we had benefitted from the growth of the company as much as the management.

A share buy back mandate and when exercised would send a STRONG signal that the share price is undervalued and that the Board and Management support and share the minority shareholders' concern. With the current bearish property market sentiment, we feel that there is no better use of funds than to buy one's own undervalued shares. Therefore we strongly recommend a share buy back exercise.

With positive net current assets and receivables due from The Laurels Project, we hope you would seriously consider a sizeable dividend payout to reward shareholders' trust in the Board and Management over the past few years.

We deeply appreciate your time and effort in considering these suggestions.

Thank You.

Yours Sincerely**

The idea of "passive" minority shareholders getting together to give the management a wake up call is commendable. While its previous compatriots in the industry have been very active in adding value to the share price of their counters for the benefit of their shareholders, Sing Holdings has been sitting on the "laurel" of its crown and maintaining status quo, much to the displeasure of minority shareholders. They have watched Heeton, Hiap Hoe, and Roxy-Pacific grew from strength to strength over the past 5 years and distancing themselves further from Sing Holdings which remains in the "doldrums".

In the "draft" letter it was proposed that a higher dividend payout be made from income receivable from "The Laurels". There are 2 things to note, viz.:

(1) All the income (i.e. Sing Holdings' share of the project sales) has already been fully realised into its P&L since Sep 2013. The only income yet to be realised is from its share of project sales in the Waterwoods EC project (about 42 % sold amounting to $157m). However, this can only be recognised as income upon issuance of vacant possession after TOP is obtained (possibly in 2015). Sales for the development at Robin Road (Robin Residences) would only be launched in mid 2014 although construction works have already commenced in second quarter of 2013.

(2) Dividend of 1 cent (final dividend - tax exempt) and 0.5 cent (special dividend - tax exempt) have already been proposed for FY 2013.

As to the idea of using available funds to do share buy back (treasury shares), it may not necessarily be a good financial proposal. It all depends on the liquidity and cash situation of each individual company. Sing Holdings is not in a net cash position, and with a heavy burden of bank debts, such an exercise may not be appropriate since it has only a small cash float (vis-a-vis the aggregate bank debt).

One way of adding value for shareholders is to issue a warrant exercise at, say 1 for 2, at a very nominal price ( 1 or 2 cents per warrant) with conversion at 50 % of the price of its mother share. That way the benefits would be "win win" for both the group as well as shareholders. The group would receive funds from the warrant exercise as well as from the conversion at a later date, which would provide it with additional funds without the need for further drawdown on bank facilities ; and shareholders would have immediate benefit because the price of its warrant would have risen to half of the value of its mother share.

Just my two cents worth.

Q: Do you expect the gearing to come down by the end of the current financial year?

Lee Sze Hao: With the TOP of The Laurels, we expect our gearing to come down a lot. What level it goes down to depends on whether we reinvest the money into another project. As it is, our gearing is actually at a comfortable level.

For the Robin site, our purchase price was $177 million. We used $70-80 million cash to pay for it. For the Punggol project, the financing is also not very high

nextinsight.net/index.php/story-archive-.../6693-sing-holdings-


Hi CC Low

Thanks for your input.

As of 31/12/2013. The company's has a long term debt of $215m which is due to 2 plots of land, Waterwoods and Robin and construction cost. Both plots of land cost around $175m each bringing a total of $350m. The long term debt is pegged to the TOP of both projects of which Waterwoods has been launched and Robin expected to be launched in mid 2014. Looking at the long term debts and the cost of both plot of land, I can quote what Mr Lee said that the company gearing is at a comfortable level.

The company as at 31/12/2013 has a $117m receivables and $26.5m cash. A significant proportion of the $117m receivables are mainly due to The Laurels Project which TOP in 3Q2013. Based on 400m shares in the company, $117m is around 29 cents per share. Not to forget the $26.5m on hand.

A share buyback mandate of 5% of the total amount of shares would meant the company buying back 20m shares(5% of 400m shares). At 40 cents per share for example, that would cost around $8m.

To quote what Warren Buffet said, there is no surer way to make money for continuing shareholders than by buying own stock when you know it is worth at least the amount you paid for. Sing Holdings is definitely worth more than the present share price.

Land prices around the world has been surging. Quoting what Hong Kong Billionaire Li Ka-shing said, flour is becoming more expensive than the bread. Why go in pursuit of expensive flour and not return part of the cash back to the shareholders by doing a capital distribution and share buyback.

CC Low wrote: The idea of "passive" minority shareholders getting together to give the management a wake up call is commendable. While its previous compatriots in the industry have been very active in adding value to the share price of their counters for the benefit of their shareholders, Sing Holdings has been sitting on the "laurel" of its crown and maintaining status quo, much to the displeasure of minority shareholders. They have watched Heeton, Hiap Hoe, and Roxy-Pacific grew from strength to strength over the past 5 years and distancing themselves further from Sing Holdings which remains in the "doldrums".

In the "draft" letter it was proposed that a higher dividend payout be made from income receivable from "The Laurels". There are 2 things to note, viz.:

(1) All the income (i.e. Sing Holdings' share of the project sales) has already been fully realised into its P&L since Sep 2013. The only income yet to be realised is from its share of project sales in the Waterwoods EC project (about 42 % sold amounting to $157m). However, this can only be recognised as income upon issuance of vacant possession after TOP is obtained (possibly in 2015). Sales for the development at Robin Road (Robin Residences) would only be launched in mid 2014 although construction works have already commenced in second quarter of 2013.

(2) Dividend of 1 cent (final dividend - tax exempt) and 0.5 cent (special dividend - tax exempt) have already been proposed for FY 2013.

As to the idea of using available funds to do share buy back (treasury shares), it may not necessarily be a good financial proposal. It all depends on the liquidity and cash situation of each individual company. Sing Holdings is not in a net cash position, and with a heavy burden of bank debts, such an exercise may not be appropriate since it has only a small cash float (vis-a-vis the aggregate bank debt).

One way of adding value for shareholders is to issue a warrant exercise at, say 1 for 2, at a very nominal price ( 1 or 2 cents per warrant) with conversion at 50 % of the price of its mother share. That way the benefits would be "win win" for both the group as well as shareholders. The group would receive funds from the warrant exercise as well as from the conversion at a later date, which would provide it with additional funds without the need for further drawdown on bank facilities ; and shareholders would have immediate benefit because the price of its warrant would have risen to half of the value of its mother share.

Just my two cents worth.

Correction. Sing Holdings has a 70% stake in The Laurels project so its shares of $117m receivables is incorrect. Conservatively a 70% stake in the receivables would amount to $80m.

As I’ve long told you, Berkshire’s intrinsic value far exceeds its book value. Moreover, the difference has widened considerably in recent years. That’s why our 2012 decision to authorize the repurchase of shares at 120% of book value made sense. Purchases at that level benefit continuing shareholders because per-share intrinsic value
exceeds that percentage of book value by a meaningful amount. We did not purchase shares during 2013, however, because the stock price did not descend to the 120% level. If it does, we will be aggressive.

- paragraph from Berkshire Hathaway 2013 shareholder letters


Q: Do you expect the gearing to come down by the end of the current financial year?

Lee Sze Hao: With the TOP of The Laurels, we expect our gearing to come down a lot. What level it goes down to depends on whether we reinvest the money into another project. As it is, our gearing is actually at a comfortable level.

For the Robin site, our purchase price was $177 million. We used $70-80 million cash to pay for it. For the Punggol project, the financing is also not very high

nextinsight.net/index.php/story-archive-.../6693-sing-holdings-




Property is about leverage. Due to 'excess cash' the company does not need to maximise the long term loan for the Robin and Waterwoods projects. This meant that if need to, they can draw loans from the projects when they find a need for excess cash. What happens is that when you use too much cash on projects instead of using loans, your ROE will drop. To be fair it is less risky if you put up more cash rather than take up full loan but looking at the picture, it seems like company could not find any interesting buy at the moment hence using a lower debt/equity ratio to run the projects.

So the question here is why not return the excess cash to shareholders by doing a cash distribution or share buyback? Why settle for a lower ROE meaning using more cash then necessary to do the projects. When the proceeds from The Laurels is received, I guess in order to show that cash level is 'low' they will use the proceeds to reduce more debts and hence even lowering the ROE.(if they could not find interesting buy). Not to forget they will also receive more cash when Robin is launched.

Why not let shareholders decide how to maximise their returns by returning cash to them?

Take Share Buyback for example. NTA right now is 56 cents. If company does a share buyback at 40 cents. For every 1 lot($400) the company buys, it would be buying $560 worth of assets. That's making $160 per lot or a 40% return with just a click on the PC or a phone call to the remiser. Tell me where can you find a 40% return. Isn't it a better ROE than reducing debts? Yes the pie gets smaller with each buyback but the continuing shareholders will get bigger piece of the pie. One argument the mgmt. popped up is that share buyback will artificially push up the share price. Stock market is about demand and supply and if there is a share buyback and exercised, most probably share price will run up. If management is afraid of 'artificially' share price, why not spread the share buyback into quarterly. For example buying an average 5m shares per quarterly. They can also set up a maximum price which they target for share buyback. Let's say 0.8 NTA or 1 NTA after which they would not buy above the value. Share buyback is less risky than investment because you are buying your own company. Company you know best. Unless one doubt its own receivables and cash.

Why Warren Buffet willing to pay 120% above book value is that he feels that the intrinsic value of his company is worth more than book value. Is Sing Holdings worth more than book value(56 cents)? Well you have office units at cost and plot of land in Robin bought a few years back so my guess is that it is worth more than book value.

Which is why I am concern with the share performance. Why aren't they doing the obvious (share buyback) ? Or are they in the process of finding or found an investment that returns an above 40% return?

(I will stop writing and let's concentrate on getting more minority shareholders to join us)