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http://www.hkexnews.hk/listedco/listconews/sehk/2014/0819/LTN20140819855.pdf
No further clues about financing for the Sofitel NY. No properties were sold in Macau in the half, no significant changes to the balance sheet as of June 30.
The operating results were very good. TTM FCF rose to 275m from 253m at the end of 2013. Cash and deposits stood at 1,986m, after 51m was paid out in dividends during the half. Interim dividend unchanged at 3 cents.
Macau rental income increased 19% yoy and the investment properties were marked up to 700m from 600m. Macau Rental EBIT increased from 16m to 23m.
“During the first half of 2014, rental revenue of the Group’s properties continues to increase in line
with the robust economic growth driven by the strong visitors arrivals and construction activities
relating to the gaming and hotel developments. This trend is expected to continue for the next few
years.
Against this background, and with an objective to enhance shareholders’ value, the Group has decided
to continue its policy of adopting a flexible approach towards pricing and marketing of its properties
held for sale in Macau. Specifically, the Group will continue to be vigilant in monitoring market
developments and price movements in the luxurious residential sector with a view towards sale at
price points that will optimize profits for the Group. In the meantime, the Group will continue to take
advantage of the strength of the leasing market in Macau residential properties and lease out as many
of the vacant units as possible to ensure that there is a good return from these properties.”
DSEC recently released Macau average property transaction values in Q2 2014.
Taipa Overall Residential: HK$105,000/sqm (we marked Lot W at 82,000)
Second Hand Ocean Gardens Residential (older flats): HK$87,000/sqm (we marked at 59,000)
Office Overall: HK$119,000/sqm (we marked at 55,000 and 74,500)
Industrial Overall: HK$58,000/sqm (we marked at HK$33,000)
A number of major infrastructure projects, including a bridge connecting Macau to the HK airport, are continuing on schedule for early 2016.
Vietnam bounced back nicely, with EBITDA from the Sheraton up 25% yoy to 134m. Both hotels reported record first half profits, despite the anti-China riots in May.
W San Francisco occupancy held steady at 87%, ADR rose 11%, EBITDA rose 17% yoy to 56m. Based on recent transactions, the property's value could be roughly HK$2 billion.
Japan occupancy rose to 89% from 86%, ADR rose 7.8%, EBITDA rose 28% yoy to 8.5m, net income doubled.
China was the one weak spot, although revenue rose slightly, EBITDA dropped from 8m to 5m.
My estimate of NAV per share has increased to at least HK$25+, so despite the significant share price appreciation this year, discount to NAV has not changed much.
ha I wonder where this guy got his idea from ;)
Our post from February is now public on VIC, need an account to see the link:
http://www.valueinvestorsclub.com/value2/Idea/ViewIdea/114379
They are in a tough spot, weak market positioning, making motorcycles in a market that aspires to upgrade to cars. I don't have any insight on what they will do with this cash.
10-yr rates have almost doubled this year.
http://www.bloomberg.com/quote/USGG10YR:IND
http://seekingalpha.com/article/1942101-john-hussman-hovering-with-an-anvil
i've been praying for a really big market crash this year
just another expected event, i've been following for over two years now. this removes a significant potential off-balance sheet liability and means their vietnam business is safe.
Keck Seng Vietnam Litigation DROPPED
http://www.keckseng.com.hk/Files/Announcement/2014/LTN20140103345.pdf
yep, just don't bet the farm on this one. (ha!)
95% of my portfolio is in yellow warrants, wouldn't sell any, of course.
I see a likely scenario where MNI returns as much as yellow warrants over the next 9 years. MNI is a much more complicated animal than your back of the envelope numbers, which is of course one of the reasons it's so cheap. The debt is publicly traded with various maturities, interest rates, and prices; the earnings come from an evolving mix of subscription, advertising, "nontraditional", print, digital, and online classified equity investments; the balance sheet has pension liabilities which are very sensitive to interest rates and real estate that is held at cost and depreciated.
I think this is an inflection point for the company, where cash flow and the top line could start growing again, debt gets reduced or refinanced (trading at 110 now), cash starts flowing to the equity holders, and the stock is trading at 1x 2018 FCF.
Having never defaulted, nearing stabilization, domiciled in the US, and with debt trading above par, I think we will see a market that will be much more lenient about debt levels than we see for yellow pages companies around the world.
I'm buying more MNI today and will buy more if it goes lower. Very encouraging presentation from the CEO this week. Rising interest rates should be very positive for the pension fund deficit, and pre-tax cash flow should start to grow as they pay down more debt.
The debt due 2027 and 2029 trading at 70 is a no-brainer if you have access to it. Everything else is trading well above par... which tells me the stock could take off soon.
http://feronia.com/files/doc_presentations/FRN%20Presentation%20March%202013%20FINAL_v001_c61811.pdf
That looks like a very dilutive capital raise.
The underlying assets are worth 4-5x more, and the share price is almost completely covered by net cash, so I'm still a buyer. The Macau real estate market is still red-hot, they would have no problem selling these if they wanted to. If I have one concern, it's that their strategy is clearly to hold these as investment properties, yet they are being kept as held for sale at cost. Not only that, their investment properties which are supposed to be held at fair value are about 50% undervalued. When you follow the segment revenue, it's mismatched, so it looks like they are trying to hide the true value of the assets, for whatever reason.
They have been transferring cash to their Macau subsidiary, so it's possible we see a bid for reclaimed land near their existing site? If they could pour all this cash and cash flow into a no-brainer development in Macau, the stock could be a ten bagger in a decade.
If you assign a probability to the Vietnam outcome and estimate a time frame for the resolution (still two more appeals courts to go) then discount that liability back to the present, it's a lot less than HK400m.
haha that is a pretty dumb question. it's on the balance sheet and in the 10-K
I think about a few things for this. one, they have real estate that has been held at cost less depreciation over a long period of time for all of their newspaper headquarters. i think this value might actually cover the pension obligations in full. when they sold their miami headquarters a couple of years ago, the proceeds went into the pension fund.
the other thing is, the discount rate used to calculate the npv of pension fund liabilities is historically low due to the low interest rate environment. as the fed raises rates, i think this liability could shrink significantly.
i wonder if they could replace some higher interest rate debt with much cheaper mortgage debt backed by the properties.
Maybe Dex makes it, maybe not. My bet is yes... but I don't think the market will be fully convinced 2 or even 3 years from now. In that same time frame, I expect to make 5x-10x on the yellow media warrants. If it's time to sell and DXM is attractive then, I may switch.
I sleep well at night with my warrants.
Yellow Media commons shares and warrants.
ha, people are really rushing to get these shares now
Stick to making easy calls to look smart, that's all you gotta do
Skate to where the puck is going, don't worry about where it's been. I think the worst thing an investor can do is look at a stock chart to predict future performance. Focus on the cash, cash flow, future developments, earnings 3 years out, forward valuation.
Lai sun looks okay but we've got all our HK property company chips on the horse that's taking off right now ;)
A couple more mining stocks that look interesting:
G-Resources 1051:HK
Nevsun Resources NSU:US
Right now everybody in the industry is dealing with similar issues. An estimated 30-50% of junior miners will go bust and miners will rationalize operations by shutting down high cost mines. The industry as a whole is burning cash at current spot prices. However, the long-term fundamentals supporting demand for gold haven't changed. Demand should continue to grow from China and India, and governments around the world will continue to print money to solve their problems. As supply is cut and demand remains strong, prices will rebound, eventually. Companies that survive will do very well when the cycle turns.
The rational thing for ANV to do is to temporarily slow their expansion plans (which they are doing) until the crisis subsides, continue operating their existing mines while cutting costs to stay profitable (which they are doing), and use their excess cash and credit line to repurchase debt at a discount (haven't seen this yet, but they must be considering it).
Covenants were amended in June, could be amended again:
http://secfilings.nasdaq.com/filingFrameset.asp?FileName=0001193125-13-277281%2Etxt&FilePath=%5C2013%5C06%5C28%5C&CoName=ALLIED+NEVADA+GOLD+CORP%2E&FormType=8-K&RcvdDate=6%2F28%2F2013&pdf=
3:1 Interest Coverage, 3:1 Leverage Ratio
The term loans and capital leases are backed by the equipment, so you can actually take that out of the net debt calc. At 70 cents on the dollar, the debt is valued at $266m. The company had $248m cash in June, likely more now after decent production in the quarter (which looks like it should still be profitable).
Like I said, a breach in covenants and restructuring wouldn't be the end of the world. After looking at it a second time, it now looks like you are basically getting the company for free at 70 cents. To me it doesn't matter much if I'm getting one mine or a dozen mines, as long as it's profitable and I'm not paying anything for it. All-in costs in H1 were about $1,033/oz. Even if cash costs go up, all-in costs won't rise as much as there will be more production across a lower SGA cost base (cuts in the corporate office). It looks like they can ride this out for now.
Also, regarding cash flow... the discrepancy here between income and cash flow is ore stockpiled on leachpads, which counts as inventory.
MNI
Thinking about buying some more as this drops. With the refinancing at the end of last year, I think the debt is no longer a problem going forward. They have the cash to pay down the 2014 maturity when it comes due, ample excess free cash flow to take care of the 2017s within 2 years or so, and then nothing comes due until 2022. They should be able to refinance the 2022s at rates much lower than 9% as they reduce the principal.
Meanwhile, nobody is paying attention to their digital investments, which are doing extremely well, growing net income at about 20% annually. If and when Cars.com and Careerbuilder go public, they could easily trade for 20x earnings. For now, the major shareholders GCI, MNI, and Tribune are using dividends from these investments to pay down debt, but we could be approaching a point where it makes more sense for the companies to go public and the shares to be spun off. GCI has dug itself out of its debt problems, MNI is almost there, and Tribune has almost completed a restructuring.
At the current rate of growth, I think we can reasonably estimate that MNI's stake in the two companies will be generating $100m of net income. That stake could be worth $2B if spun out to shareholders. In five years, MNI's debt should be cut in half, and the core business will be stable enough to handle the debtload without the extra dividends. Current market cap is less than $250m.
Awilco Write-up: https://www.box.com/s/6hdv8nn9lg4zxfm37aja
Found a distressed bond that looks interesting:
ANV: Allied Nevada Gold
These are senior unsecured bonds, yielding 8.75% at par, maturing in 2019, trading at 70 cents on the dollar. The company is still profitable despite falling gold prices due to their low cash costs. A lot of capital has been going into an expansion project that has been slowed down due to the market downturn. It looks unlikely that the company will go bust with cash on hand of $250m and an undrawn credit facility of $120m. The company issued new equity last quarter, which strengthened the balance sheet and added more protection for bondholders, yet the bonds continued to drop. In a worst-case scenario, the company has to swap debt for equity, and you are basically paying $300m for a debt-free company with 50m ounces of gold in the ground and 2013 sales of between 225,000-250,000 ounces of gold and 1.5M-1.8M ounces of silver. Best case, you collect a 17% current yield and the bonds eventually trade back to par once the cycle turns.
http://www.alliednevada.com/investors/pdf/2013-rbc-conference.pdf
Well, Interactive Brokers announced that it would stop offering margin on the warrants several weeks ago, and phased it in over two weeks due to the low liquidity. I think it's pretty clear by the price action that some people were forced out of their positions at bad prices (me included). Lesson learned.
The debt redemption is great news, no reason not to expect more of that to come. Perhaps after a year or so of chipping away at the debt, they will go in for a full refinancing that doesn't put restrictions on dividends or share repurchases.
Take Gannett (GCI:US) as an example of what could happen. Several years ago, they had to refinance debt at 9-10%. After several years of debt reduction and revenue stabilization, they are now issuing debt at 6%. The stock is up 10x from the low, trades at 13x P/E with net debt around 1x EBITDA.
It looks like Yellow Media should be able to pull this off over the next several years. A $60 share price wouldn't be crazy once the cash starts flowing to equity, which puts the warrants at $30+.
I don't think we will hear anything about this for another year or two, and then it can be appealed one more time, and then it will take years to be paid even if the verdict doesn't change (unlikely). The NPV of the liability is actually very low if you assume it will be paid in 5 years, 50% probability that the ruling will be overturned, and a discount rate of 10%. Furthermore, it would be attributed to the subsidiary, which isn't holding much cash and would have to pay out from cash flow over time. I don't include the liability in my net cash calculation for these reasons.
I thought they were fine.
The W San Francisco was the bright spot; the hotel is now generating HK$50m annual FCF to the company on a total investment of only HK$340m. Annual EBITDA has roughly doubled to HK$100m since the purchase, and I think the market value of their investment has roughly tripled.
No apartments sold in Macau, I think they are waiting until the HK-Macau bridge is complete in 2015 to start selling again. Macau is generating about HK$30m annual FCF from rental income, and this number should grow as rents are increasing at double digit annual rates.
Vietnam revenues slightly down, but still generating a lot of free cash. LTM FCF attributable to the company is about HK$150m, about a 30% yield on their total investment.
I estimate the company has about HK$1.45B net cash at the parent level (1.895B cash, 830m total liabilities, but 330m debt is backed by the W). The company is generating at least HK$280m FCF without any Macau flat sales. This includes HK$30m of interest income at less than 2% rates, so as interest rates rise this should improve substantially. You have good growth coming from the US and Macau, with the potential for further asset sales or good acquisitions. Liquidation value is roughly 5x the current share price.
There is simply no downside at this price, and about 25% upside to net cash one year out. The stock is holding up well considering the rout that's going on in emerging markets right now. This kind of risk/reward profile is tough to find.
MNI
Pension Plan Matters
In the six months ended June 30, 2013, we made a $7.5 million cash contribution to our Plan to meet our required payment contributions for 2013, while in the six months ended June 24, 2012 we made a $40.0 million cash contribution.
As of December 30, 2012, the projected benefit obligations of our Plan exceeded plan assets by $587.9 million in our financial statements. Legislation enacted in the second quarter of 2012 mandated a change in the discount rates used to calculate the projected benefit obligations for purposes of funding pension plans under Internal Revenue Service (“IRS”) regulations. The new legislation and calculation use historical averages of long-term highly-rated corporate bonds (within ranges as defined in the legislation), which has resulted in the application of a higher discount rate to determine the projected benefit obligations for funding and current long-term interest rates.
In addition, the Pension Relief Act of 2010 (“PRA”) provided relief with respect to the funding requirements of the Plan. Under the PRA, we elected an option that allows the required contributions related to our 2009 and 2011 plan years to be paid over 15 years. As a result of these two legislative actions, we estimate that under IRS funding rules, the projected benefit obligation of our Plan exceed plan assets by approximately $153.0 million at the end of calendar year 2012. However, even with the relief provided by the two legislative rules discussed above, based on the current funding position of the Plan, we expect future contributions will be required.
While amounts of future contributions are subject to numerous assumptions, including, among others, changes in interest rates, returns on assets in the Plan and future government regulations, we estimate that a total of approximately $25 million will be required to be contributed to the Plan in fiscal year 2014. The timing and amount of these payments reflect actuarial estimates we believe to be reasonable but are subject to changes in estimates. We believe cash flows from operations will be sufficient to satisfy our contribution requirements.
I'm assuming you saw that this wasn't actually debt reduction but just accounting fiction.
I'm going to take a wild guess here...
$243m revenues
$107m EBITDA
"A new law on flat pre-sales came into effect on 1 June. Developers are required to finish projects’ basement and foundations and to complete temporary horizontal property registration before a sale is permitted. Sales of unfinished homes before 1 June will be unaffected, but re-sales of such dwellings will be allowed only after the properties are logged by the Real Estate Registry. Ricacorp, a local realtor, has said that the new law is creating confusion amongst buyers and sellers alike who are uncertain about its full implications. Supply is expected to tighten further and buyers may face additional delays in obtaining property titles, exacerbating a market with already limited supply. Most buyers are looking to the secondary market, adding potential upward momentum to prices. In April, however, prices were flat MoM, following a very strong first quarter, averaging HK$7,745 (US$1,000) per sq ft."
So it went from 83k to 98k to 75k per square meter. It may have to do with what kind of properties were sold in the period, or there may have been a rush to buy certain properties before the law was put into effect.
Well... Not really gambling if you get it for free
Yep, but there is still the question of how we get to book value with Keck Seng. I'm content if the shares just track net cash and the dividend keeps coming, you will make a decent return. With MPO, there is a shorter timeline, catalysts and a more predictable route to book value.
MACAU (MPO:LN, 184:HK)
"Home prices fell by 23% in June, data from the Financial Services Bureau shows. The average price per sqm of residential space dropped to US$9,431 (MOP75,448). 739 homes were sold in June, 45% less than in May. Prices reached a record peak of US$12,273 (MOP98,187) in May."
I've got bloomberg quotes for the debt from May 3rd, but I can't see anything before that. From 5/3 to 6/30, the Supermedia bonds traded between 75 and 86, but spent most of the time around 80, where they are currently trading. The terms of the bond are LIBOR +860bps, with a 300 bps LIBOR floor. So at 80, the current yield is about 14.5%. Very interesting investment in it's own right.
Some of the FCF for the quarter must have come from A/R collection, it looks too high otherwise.
Buy MPO:LN. Steep discount to a materially understated NAV and selling properties well above carrying values to buy back shares. No-brainer.
My favorite oil stocks are Dragon Oil (DGO:LN) and Mart (MMT:CN). HNR is also worth a look.
right, 10% of the minority shareholders can block a privatization attempt. The only obvious catalyst is that H1 should be very strong... google their hotels in SF and HCM and you can see the average room rates are well above last year, and articles suggest occupancy in these markets is up. Commercial real estate prices are up huge in macau which should result in a big revaluation gain, and rents are up significantly as well. I won't be surprised if they sell their Japanese hotel into what has become a very hot market. SF is hot as well, but they are generating a very nice cash yield on their original investment.