Time & date: 10 am, 25 Apr 2014.Venue: Orchid Country Club
Notes from the AGM.
Artist's impression of Tower Melbourne -- if completed, the 71-storey project will be the tallest in the Melbourne CBD.1. Tower Melbourne (TM): Company says dispute with neighbor is on-going over the demolition of the existing building where the proposed Tower Melbourne (TM) is to be built. Company seems quite confident that it can be settled but, in the worst case scenario, and the proposed TM project is called off, Chip Eng Seng (CES) would keep the building for rental returns, which I think could fetch close to 10% gross yield.
There may be some investors who are uneasy with this development, but postings on forums over the past few months have already alerted many on this “negative” possibility. Hopefully, this means that any setback has somewhat been priced in.
2. Malacca site: Company says the plot ratio for the Malacca site bought last week is 5.6 (with upwards revision possible).
That could give a Gross Floor Area (GFA) of 248,344 sq ft based on a land size of 44,347 sq ft, and works out to about S$29psf ppr.
Although the land is leasehold, the site is sea facing, and very close to Mahkota Parade, Mahkota Mall and Mahkota Medical Centre. Malacca could get a boost from the High Speed Rail, as more tourists from the rest of Malaysia and Singapore will find it easier to visit this historic city, which has been designated a World Heritage site (together with Penang) by Unesco.
CES plans to develop a hotel and apartments on the site. Nearby Hatten Suites apartment units are selling at M$700-800 psf, I believe.
3. Singapore hotel: Company says it will probably revalue its hotel at Alexandra (in Singapore) but book any surplus into reserve rather than profit. I believe a $800,000 per key value for the hotel is probably fair at the moment.
CES does not seem averse to selling the hotel off if an attractive offer surfaces.
4. Residential sales: Sales figures for 2 of its projects have improved: 100PP is about 78% sold while Nine Residences is approaching 75%.
5. Melbourne project: CES could launch its Doncaster project in Melbourne this year, but the Victoria Street site would be in later years.
For prudence, I would not account for TM profit for now, pending an end to the demolition dispute. Despite this setback, CES is going to attain the Temprorary Occupation Permit (TOP) for 4 projects this year (and these will provide lump sum profits), with the prospect of an EPS of 30ct for FY 2014 remaining intact.
The company is also relatively shielded from a deteriorating Singapore property market environment as it has not too many unsold residential units.
Meanwhile, NRA Capital has re-initiated its coverage on CES. Hopefully this will give the counter a tad more visibility.
Click on video below to know more about Tower Melbourne.
Recent story: CHIP ENG SENG's Fair Value Is $1.04, SHENG SIONG, 68 c
Comments
Can we conclude that Mr Market has already priced in this event?
Re Ubi, I forgot to ask the co about it. But CES will occupy the top 2 floors of SAN Centre. I believe they are spending more than $20m to revamp the building, including putting up additional NLA after tearing down one stack of unused staircases (not sure what's the additional NLA from that).
Also, do they intend to do A&A to CES building in UBI or just rent it out since they are going to move to San Centre.
Thanks!