This article was contributed by "Free Wifi", a shareholder of Powermatic Data Systems. Its stock price has climbed 18% in the past 5 weeks (from $2.98 to $3.52) likely due to a buzz around a milestone reached in its property development project. Its showflat has taken shape at Level 2 of BreadTalk IHQ in Tai Seng Street, and a price guide and floor plans for the project can be found here.
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Key Thesis
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A timeline of events – What has PMD’s board done over the past 5 years to unlock value?
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Date |
Event |
Market Cap of PMD |
Remarks |
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31 Oct 2019 |
Announcement of review of Capital Structure |
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25 Aug 2020 |
Announcement of capital reduction of $0.286 (or return $10m back to shareholders) |
Share price $2.65 (28 Aug) Mkt Cap = 100m |
Post distribution NAV = $51.4m or $1.46 per share |
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11 June 2021 |
- Proposed a Dividend In Specie (DIS) of Harrison Property shares - & provide shareholders an option to sell their Harrison Property shares for $1.12 Point 3.3.2 of the SGX circular states that - the Group recognizes that, in order to provide value for Shareholders and to allow Shareholders and potential investors to value the Wireless Connectivity Business based on its financial performance, growth potential and underlying value, it is necessary that the Investment Property, which is a non-core asset, be demerged from the Company. |
Share price $2.68 (9 Jun) Mkt Cap = 93.8m |
Harrison Property worth $39m (bought at $19.5m in 2009) PMD commented in its SGX announcement that its wireless connectivity business is valued at $14.8m, “This represents a price earnings ratio of only 1.7 times (based on the Group’s unaudited profit before tax for FY2021 of S$8.9 million attributed to the Wireless Connectivity Business, for FY2021)” |
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27 August 2021 |
Proposed DIS (including the Cash Alternative) - not proceeding due to regulatory issues |
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6 Jul 2023 |
Proposed redevelopment of Harrison Road Property to become a food factory (where psf can be much higher)
Note: Old Harrison Building has total gross floor area of 79,073sqft and net usable (rentable) area of 61,171sqft. |
Share price $2.82 (7 Jul) Mkt Cap = $98.7m |
Valued at $46.3m as at 31 Mar 2023 (vs book value at $16.3m) If new building has total sellable area of 61,000sf (same as before), total GDV = 61,000 x $1500 psf = $91.5m |
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25 Jan 2024 |
EGM Minutes issued on 23 Feb: “The Lead Independent Director replied that as indicated in the Circular, the Board intends to distribute the net profits arising from the sale of units of the Redeveloped Property (if any) to Shareholders by way of distribution including dividends” “the sellable areas of will not be less than 70,000sqft. If the units can be sold for S$1,500 psf, the proceeds from sale would be approximately S$105 million After deducting the estimated development cost of S$28 million, there will be a profit of S$77 million.” |
Share price $3.06 (26 Jan) Mkt Cap $107m |
Gross Floor Area above 70,000 sf Net profit of $77m translates to $2.2 per PMD share |
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19 Jul 2024 |
Response to shareholder questions before AGM on 25 July “Management views the current uptick in the share price is due to both the monetisation of the investment property and consistent performance of the wireless connectivity segment.” “Market would be allowed to evaluate and value the wireless connectivity segment once the monetisation is completed.” |
Author estimates that PMD is able to distribute more than $3 from this redevelopment project |
Artist impression of food operations in a unit in Harrison Food Building.
Author’s estimate of PMD’s current valuation: (share price $3.50, Market Cap = $122.5m, with 35m shares)
Based on author’s estimate (& available marketing info on Harrison Food building)
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Description |
Estimates (1) |
Estimates (2) |
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Total Sellable Area (A) |
70,000 sf |
75,000 sf |
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Average Selling Price (B) ($1700-$2000 psf) |
$1,800 |
$1,800 |
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Gross Development Value (C) = (A) x (B) |
$126m |
$135m |
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Cost of development (D) |
$28m |
$28m |
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Agents Fee (3%) (E) |
$3.78m |
$4.05m |
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Estimated land value (50% of (C)) - Note that at initial purchase of Harrison Building in 2009 at 19.5m - land is valued at 10.8m or 55% of total value) (F) |
$64m |
$67.5m |
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General admin & marketing costs (1%) (G) |
$1.26m |
$1.35m |
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Tax payable on profit 17% X ((C) – (D) – (E) – (F) – (G) = (H) |
$4.92 |
$5.8 |
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Net Profit = (C) –(E) – (G) – (H) |
116m |
123.8m |
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Distributable cash per share |
$3.31 |
$3.53 |
- The author assumes that all cash proceeds after tax and expenses from the Harrison Food Building Redevelopment Project is distributable by PMD
- As PMD had $59 million cash on its balance sheet as at end-March 2024, it has $30m cash after putting aside $28m or so for its property development project. For perspective, its annual revenue is $30m (ie, cash = revenue !!)
- By some estimates, PM Data only needs $15m of working capital
Is PM Data still undervalued at $3.50? (Market Cap $122.5m, 35m shares)
- This feels like Déjà vu, as in 6 Mar 2018, CIMB analyst Wlliam Tng wrote an initial report stating that at $1.38, PMD was then valued solely on its investment property and its wifi (wireless connectivity business) came free!
- Now fast forward to 2024, PMD is trading at $3.50 (with both a better appreciated investment property and a growing wireless connectivity business) – it is history repeating itself again
At $3.50, It is not difficult to see PM data is currently valued only on the distributable cash/profits arising from its Harrison Road redevelopment project.
(However, the project will take 2 years or more to complete and for PMD to distribute the profits and excess cash from its balance sheet).
In the meantime, its wireless connectivity business comes FREE.
(ref: CGS CIMB’s initiation report issued on 6 Mar 2018 by William Tng, PMD share price $1.39)
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Lastly, the author believes that kudos are due to the Board of Directors for its shareholder engagement and for demonstrating a high level of commitment working for all shareholders. |
