From what I read, Raffles is worth a bet over the next 12 months as more news on its property venture is released. At the moment, the valuation however looks expensive and is not for value investors to get excited about. The quarterly result that is coming out in a few days or weeks time wont be hot either - so it's just a matter of anticipating the property project and how it will bring in lots of $ for Raffles. Anyone has a view on this ex-darling?
after the hoo-ha over its potential development of Oriental Uni land, Raffles has come down from $0.33 level in January to just 25 cents. Big drop - as a result of a dry up of newsflow on this catalyst .
The 1H results were not great but at least Raffles gave a small dividend to reassure investors.
The catalyst for this former market darling is really the property development - waiting for BNP Paribas to reiterate a buy and the possibility that Raffles is worth $1 ....
- Founder Chairman Chew Hua Seng bought
5 mln shares at 25.5 cents each.
- There is nothing unusual about CHS buying
shares, especially since Sept ’08 paying about 68
cents each, or for that matter the company
buying back its own shares.
- CHS last bought 2 mln shares at 27 cents on
Aug 31st ’10, while the company last bought back
2 mln shares on Dec 3rd at 25.5 cents each.
- The stock is close to the 23,5 cents record low
reached on Dec 21st, after hitting a high of 35
cents a month later.
To better reflect the value of REC’s underlying assets, we use the sum-of-the-parts methodology to value the stock. The core earnings from its education business remain pegged at 25x FY12F PER, in line with its regional peers. We have also revalued its investment properties, pertaining to the assets in OUC, to RMB3b after Malaysia’s sovereign wealth fund Khazanah Nasional paid RMB300m for a 10% stake in February last year.
To arrive at the NPV of its development profits, we apply a discount rate of 14%, which assumes that the property project would be recognised progressively over three years starting from 2013.
Our SOTP valuation suggests $0.22 per share for OUC and other earnings from property development, thus implying that the market is assigning only $0.04 (about 4.9x FY12 core P/E) to its education business at current price. We reiterate our BUY recommendation with target price of $0.40.
