2nd Liner Prop Stocks

When I first looked at CES , I was put off by their increasing liabilities and did not look further. However, when I returned to dig deeper, I realized 1) it is not rare to see property counters with relative high gearing and negative cash flow in a particular quarter, since they can only book profits when properties TOP now. Even blue chip status property stocks have hugh gearing and negative cash flow at some quarter or year, depending on the status of their developments. 2)The high gearing is due to a number of land purchases both in Singapore and Australia in recent years, with the most recent one at the Alexander site. Going forward, as CES harvest from its sold out projects over the next 2 years, gearing will go down substantially, unless there is a major land purchase again. I was actually quite happy that CES is the lowest bidder for EC land that went to sing holdings. It showed that CES is not overly aggressive in their bidding. Vested and very biased, do your homework and decide for yourself. 3) NAV is seldom static for property developers, and I expect CES NAV to increase over the next 2 years, and that even the discount gap is going to get bigger.

Check this out... www.heraldsun.com.au/news/victoria/state...frf7kx-1226533175370 It is approved! Land cost at 25.5 mil AUD, construction cost at 170 mil AUD, assuming average selling price at 800 psf, after deducting all the marketing and distribution expenses, financial and staff cost, less TAX, Tower Melbourne alone should contribute no less than 20 cents per share to its RNAV. Yes, from book CES NAV is only 64 cents, but as Sumer has pointed out, the RNAV should be in the range of 1.20 - 1.30. This is in the same range (maybe slightly lower) as Hiap Hoe NAV. Downside risk to this RNAV is very low as My Manhattan is more than 94% soldand Belvia is about 87% sold. Even CES sell the remaining units in these two projects at 10% lower to move the inventory, it won't have much impact to RNAV. Recent development from Grange Properties legal suit seems to be positive. Alexandra Hotel commercial space is selling at 4000 psf (big supermarket) to as high as 7000 (small shops of 10 sqm). This is super profitable, if all sold out, the revenue from sales of commercial space will be enough to cover the development cost and land cost of the entire project. That means the hotel is free. 33M, Belysa, Prive are fully sold, only 33M partially recognized (my guess is 70%), it doesn't make sense to be valued at more than 50% discount to RNAV. No wonder CES is buying back its share. It is deeply under value.

Thank you Edifice & Greenrookie: I do own CES shares (bought at 45 cents, & most glad to see it rise today to 54.5 cents) but it's balance sheet and business model don't inspire confidence in me to increase CES to a big % of my portfolio.

The risks associated with high gearing are always there  even if the high gearing can be found in most property devt companies.

Hi Bruno, U are right! I agree too. CES form only a small part of my portfolio and I will definitely not add on to my holdings as current prices. In investment, it always pay to be prudent. We are lucky in a sense that rotary play has come to mid- liner property counters, almost all sound mid liner are trading at 52 weeks high and beyond.

664,000 shares at 0.54, 3rd round already 664,000    3a Price paid per share# or Currency : S$   Amount : 0.54

4th round of buying back its shares, which hit 55 cents, a 52-week high.