Nice to see Chip Eng Seng rising higher every day --- now 82 cents. The company has been buying back its shares in the 74-76 cent range but ... stopped liao.
OCBC Investment Research came out with a report titled “Deep value in West Orchard could be unlocked”, in which it highlighted the redevelopment potential of HPL’s various properties as well as quite comprehensive reports on 4 counters exposed to this part of Orchard: HPL, Wheelock, Bonvests and Hong Fok.
Interestingly, OCBC put a value of $8.20 on the RNAV figure for HPL, which is near to my “above $8” estimate I last wrote on this thread on 29 May. Its price target for HPL is $5.32, based on a 35% discount to that RNAV.
The report said Wheelock’s RNAV is probably close to $3.40, and gave the stock a fair value of $2.38 based on a 35% discount. One point to note is that Wheelock’s stake in HPL has increased as a result of the offer, and with HPL’s stock price likely to rise over time due to a shortage of scrip, the HPL shares held by Wheelock via 68 Holdings will also go up in value.
For Bonvests, OCBC’s valuation for its assets seems rather low. The analyst gave a $72m surplus for The Sheraton. In my earlier report, I wrote that the hotel is only valued at $143.5m. If each room is valued at $1.34m, the 420 rooms at The Sheraton will be worth $420m, meaning a surplus of $276.5m. In any case, the analyst has a $2.17 RNAV figure for Bonvests, way lower than my estimate of $3.40.
OCBC’s RNAV figure for Hong Fok is $2.02.
I continue to like and own HPL (I tender part of my holding, changing if for Wheelock) and Wheelock. Bonvests and Hong Fok have probably been played up recently due to their deep discounts, and perhaps the idea that their major shareholders could take the companies private instead of having to face retail shareholders’ unhappiness during AGMs.
I believe Hiap Hoe has sold about 85% of the 461 units at Marina Tower Melbourne within one week. This, if true, is an impressive feat and shows that demand for Melbourne units is still strong despite worries otherwise. It also bodes well for HH’s other Melbourne residential project at Lonsdale Street.
Assuming average unit size of 600 sq ft, A$1,050 psf ASP, the gross sales proceeds could be about A$290 million. If gross profit margin is 20%, then HH could make a gross profit of about A$58m from this project. Note that the site, bought for only A$28.8 million, will also consist of a hotel (Four Points), probably bagging Hiap Hoe another hotel investment which could be revalued quite a bit upwards of cost.
Meanwhile, Hiap Hoe’s attempt to sell Treasure on Balmoral en bloc seems positive. Even if the company books a $10-20m loss as a result, the good thing is that it will lead to a substantial cash inflow of $191 million.
The sale attempt also suggests that Hiap Hoe may also consider monetizing the commercial space it now owns post the takeover of Superbowl, which is quite substantially undervalued. I reckon the retail space can fetch more than $150 million.
I am impressed with Hiap Hoe’s quick moves Down Under so far and hope it signals management's new zest to step up in the game.
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