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On Keck Seng,
Sorry that I didnt read the messages on board in order.
Baboon, could you also send me the pdf to mervynthh at google mail?
On the leverage part, I think more clarification may be needed. Margining of shares is usually for personal interests and I dont really get the feel of that when I met them. In fact the only thing they have been doing is they have been buying back shares and giving dividends. So unlike the Bakrie family in Indonesia, it seems the likelihood of foul play is small. Again, a double cross check is needed.
Nanyang/ Keck seng
Agree HK lsiting rules dont protect minority investors. But indeed the 10% hurdle is enough but often also not enough given various circumstances. For example the takeover done by Richard Li for PCCW.
To answer your questions:
1) I have troubles gettign my hand around it as well. My guess is they have to comply with the Basel issues which affects their financing costs. So after paying out huge dividends, Basel III is kicking in 2013 and they have to raise money to shore back an even higher capital pool to support the now higher Risk weighted assets.
2)I did a analysis of the banks for Will in a report posted on his website. You may find that helpful. The bank ( i have never heard of it too) is actually one of the larger units in Taiwan, I confirmed it while travelling there earlier this year. The family is closely related to the Nanyang board (Yung family) if you read their annuals and hence the investment offer. The stock is not listed and traded OTC in HK/Taiwan but has credit rating affirmed (though not to be fully trusted)
Link here: http://www.scsb.com.tw/english/2011.pdf
3)They are public due to their history and I suspect they are not comfortable being listed. I know the folks in the firm, also worked with them briefly, they are honest, conservative and opportunistic guys. Definitely not fradulent. Reason being if u dig their annuals, you will realise the immense scope of assets they own around the region, largely in the place where I am at, Singapore. As well as Malaysia and Hong kong.
4)Not sure on what you really mean here but from my experience, they shun from leverage.
I dont mind reading more about the interview, could you PM me or something. Im also keen to get to know you and find out more about your adventures. I need to get out there and do something more.
Cheers
MT
In response to earlier posts (sorry guys for the delay, was uber busy at work).
Newest evidence:
http://www.bloomberg.com/news/2012-11-19/olam-plunges-after-muddy-waters-carson-block-questions-accounts.html
The thing is the companies may seem very real but you never know if the accounts can be trusted. Also having worked in a long short firm, one can be sure that even if the assets and money is there, it doesnt mean you will have access to it, more so if it is held onshore and you are investing offshore.
Thanks Owl, I guess you would have read the report I post on Nanyang. Im still a holder and it has not run up as much.
Agree with Rjeezy that management comps is something they have to lower, its too high for the amount of performance they are giving me.
On the bank stake, my last thought I had was that why does the firm raise rights issue when it is well capitalised? The reason I could think of was Basel III which will kick in Jan 2013. Other than that, its properties are recorded at cost. The report I wrote also underestimated the value of the plot with that respect.
Owl, are you from the institutional side? I am thinking of meeting the Nanyang guys but I am too small on my own. If so you can PM me.
On the other hand for Keck Seng, I do know of how the management there operate and they have been fair in my opinion and very opportunistic in terms of investment. Also, they have some great teams as well as real estate advisors.
Appreciate any other new ideas you guys may have. I am still screening through the various opportunities while working the crazy hours...
Google spreadsheet questions
Just wondering, does anyone have any idea how to imbed google spreadhseet into the webpage while locking the cells that can be seen?
I cam embed the file on my blog but somehow its scrollable and I can see the unintended cells despite specifying the locked cells ranges.
0237HK Safety Godown
Remember this firm we talked about in HK?
Had some massive run up ...and I wonder why the run up hasnt hit Nanyang yet, their properties are far better than Safety Godown.
Ola everyone!
Finally I have fixed up a schedule for me to continue keeping up to date with this forum (clearly my favorite despite it not having that large a following). My work is mundane but very demanding of my time...
On KS, hey Will did you manage to meet up management?
I will go relook this firm to see whats going on.
Any other cool stuff to look at? I will get ready some of the new set of ideas im looking at to post here soonest.
1137 HK
Havent looked really in depth and their reporting is missing out some divisions, in particular real estate investments and developments.
But one thing im curious.
Given the HKD2bn+ in net cash after the HKD1bn in capex, how can we be certain the new channel and programs will be profitable in advertising revenues? Does that include the costs incurred to produce the programs as well? I vaguely remember various channels who went against TVB (incumbent) unsuceesfully. THink its StarTV or something. Not too sure but will check.
422 HK
Hey Will,
Sorry for the long hiatus, work has been a pain!
Anyway I have been following this counter for a while. Never really understood the real business operations of this firm and how it manages to maintain earnings. Heres some of my thoughts.
- Right now I think mkt cap is HKD 900m+ so still slightly above net cash value.
- seems funny that IPO in 2007, the firm never really did tap the cash until now, still untouched.
- firm doesnt seem able to control costs esp the cogs part
- you met anyone from management or someone who covers this name?
- any idea for the sharp sell off at March 2012? firm is rather thinly traded.
Oriental Press
Yup good call on this one.
GLW
Yes you are right on that, not used to this format. So in fact JV contribution is even smaller than expected.
GLW - Agree that this one is super interesting.
But anyway,
Samsung Corning JV is 50:50
- $1.47b profits +$0.27 in royalties=$1.74b
- profits fully paid out as dividends
- LCD substrate JV has 60% global market share
- $6b in equity (100% stake)
- management mentioned 30% dip in earnings so its approx $1b profits + $ 0.27 = $1.27b total cash inflow.
Dow Corning JC is also 50:50
- $0.44b profits, no royalties
- been through bankruptcy and equity stake did not record certain profits
- 50% of profits paid out as dividends
- about <$3b in equity (100% stake)
- $6b of long term liabiities for its silicon breast implants and others
This 2 equity accounted JVs are about all of the combined company's profits.
Market values this firm at $22b
- $2.9b net cash
- earns $1-1.8bn of fcf annually
- at 5x PE for both JV, its worth $6.35bn + $2.2bn or $ 8.55b
- so that means market is valuing the Jvs at (22-2.9)/(1.71)= 11.1x PE. Not cheap but for a quality brand, not expensive either.
Nanyang
Thanks buddy.
Owe you guys one for the post on the site.
just wondering whats the costs of operating and maintaining the site? you can pm me at my gmail.
Thanks again!
LXK
My bad, its Imation I was talking about. Mixed them up, bad effects of not sleeping.
Not bad Will, still have time to blog, thats great! Have not seen my report on your site, you guys being snowed under?
LXK
The firm would be interesting if not for selling a large part of their patents and licenses early last year.
Essentially they accelerated their death and yet have no new use for their cash. Cash burn is rather high, buybacks to me has value only if you think your business is solid and undervalued and having a lot of cash is not a good enough reason to say so.
806 Value partners
Its $7bn mkt cap for a fund with $2bn Equity
806hk Value Partners
Any reason to pay $7+billion for $2+ billion of AUM?
Esprit
LOL
Thats really funny cos i just realised my mum is a big fan of Esprit! That really speaks volumes...but then again in a world with an increasingly older population, perhaps its not that bad a thing.
550 hk : 1010 Printing
THis is the firm spun off from Recruit
Azone - Thanks Will!
426 One Media
Btw, not sure if i mentioned, this firm is owned by the Kuok Family so if you buying it, be aware that they have not privatised it since a while ago.
550 hk
The Spun off took place already didnt it?
330HK Esprit
For some reasons, the firm is losing its popularity for its products despite its not too expensive prices. I am more concerned for its mid to long term sustainability. Earlier it was trading at crazy prices which all the clothes retailers were a while back.
apparently not enough
18 HK
Forza, r u still at HK? What were you working as there?
Will the readership suffer from the long term declines many of the papers are facing?
AutoZone
Have never really understood the Eddie's rationale behind this counter. Growth has been good but not fantastic and not exactly recession proof either. On top of that high debt load and not that deep a moat.
If anyone knows, please post it on the board. THanks!
Dongxiang HK
I agree
Cheap but may get alot cheaper.
Same issue with autos industry in my opinion. the sectors got a boost from something cyclical like a explosion of youths focused on fashions and sports or like government subsidy on autos etc.
I think for Dongxiang the problem is even more acute as it only has one product which is Kappa apparel. Limited shoes and bags ...almost purely apparels. Not good.
Buy backs are one. Buy back intelligently is another issue.
KLCC
No particular view on it
For Msia, my advice is dont touch property companies especially if it is transacted oddly especially if tycoons and government is involved.
Petronas towers is famous. Bought and built at high cost by one of the Malaysian tycoons and sold back to the government. and now government entities are all in the building, including Petronas.
If you insist, a thorough check on their prices and assumptions are very very important. Cannot emphasise further. Malaysia is a odd place. Town planning is weird as there is no central areas and office locations are near suburbs sometimes. So seemingly prime buildings may not be in prime locations. Just my 5 cents.
1000 Hk Beijing Media
Hey Ryan,
Thanks for the quick reply.
My comments as follows:
- AUDITORS - agreed, no doubt but Shineway has been linked to several lapse of accountability such as Climax Intl (owner charged. What further worries me is that both overseas and local auditors are the same firm.
- This JV/assoc swings may hint at deeper problems operationally such as numbers management(I dont know for sure)but look at their gains on disposal of subsidiaries ..too coincidental isnt it and the recurrence is pretty high if not in other forms.
- CASH - u r right but dividends have been small vs total cash.
- CASH FLOW - think I expressed my views bad, sorry about that. What I am saying is that their huge cash hoard comes from their H share listing in 2004 at HK$ 18.95 per share and thus far, their cash flows have not been significant.
- Look at 2007-2009, although not large, the firm relied significantly on external financing while their operational cash flows are negative. That doesnt sound right if you talk about advertising industry which is abt 50% of the sales? Over the last 5 years, overall change to cash is a net outflow of RMB $75 million. Looking at equity, it actually rose in value, so that hints at numbers fudging. Although dividends may be a cause, I think it should still be a point to worry about.
- product - yes i know, but whats the arrangement? They dont own paper but provide ads? At that sort of margins of 14+%?? Its pretty opaque here.
- yes I am referring to H shares only. looking at A shares is not useful since companies like Cosco can also have fraud with such large insider ownership, i dont see why this cannot too. Being backed by a municipal government means little since they have been known to sweep problems under the carpet and most of the munis are deep in debt due to the efforts to expand infrastructure to boost GDP in 2009-10.
- as mentioned, performance in 2010 is one off and unlikely to recover.
- Also note the JV amount of RMB 118 million. They stated to enter into a venture capital JV of RMB 800m. With their cash of over RMB 1 billion, there is a high chance of throwing good cash (80% of total) for the bad. And problem is it hasnt showed up in the balance sheet. (Timing issue)
Many a times, numbers and stories are what management puts out. I think one has to go down on the ground to check things out. Looking at the big picture and following the trial will be more useful and logical than purely relying on numbers and annuals, thats where most people from the west fail to understand.
Capital safety is the key, remember Buffett's 2 rules?
1) Dont lose money
2) Dont forget rule 1
I would rather give up looking (and perhaps avoid a wipeout) at this than to risk it and try to gain 50+% (firm may not be a fraud). Personally I have taken some forensic studies at firms and emotions are generally what covers problems. It may be greed, other issues or simply excitement at a cheap company so I am trying to give an alternative view.
Hope this is helpful.
Asia operates very differently than in the US as John Paulson would know dearly.
Firstly, the listing may serve a function, such as cash extraction and interco purchases etc. Its not US, theres no SEC. In fact, listing allows these stuff to be perpetuated. So having 75% allows enjoyment of both worlds.
Secondly, if he can afford to wait for a price drip, why not?
1122 Qingling
I did in fact buy a small portion of this for the funds i managed as I was unsure of their operations. But have since exited at a decent profit.
all in RMB otherwise stated
- HK$6.9b mkt cap @ HK$2.78 per sh (2.48bn shares)
- Even though they have a JV, their utilization is awfully low
- They only do small to mid sized trucks
- They seem to do very very well for a product that is not niched with excess resources and capacity that is huge for a truck manufacturer
- Its easier to not look in per share values
- Cash is $5.3b with inventory more than doubled to $1.2b
- govt owns 50%, Isuzu owns 20%
More importantly the incentive for automobiles have been withdrawn and sales will be expected to slow down significantly
Keck Seng
Hey Will,
Good job on the report. Nicely done.
Anyone approached you on buying ideas?
Anyway I missed Shin Corp lolx...dammit the job hunt is killing me.
KS will be on my watchlist as always, the Malaysia counterpart has moved up and is now more fairly valued.
One point to note through my 1 year of managing funds is that sometimes things may be cheap but it can go cheaper. Same for KS and whats happening now.
1009 int'l entertainment grp
- Yeap, part of new world grp owned by a tycoon
- 1179.157235 mil shs @ $2.65 = $ 3.12 bil cap (ran up)
- net cash at $2 bn (net cash from disposal = $1.5b)
- net worth of assets disposed =$0.8b
- abt $0.15b of FCF annually
- net assets post disposal is $3.433b
IS it too late for the game?
18 HK Oriental press
This firm looks interesting (HKD)
- mkt cap $2.52b @ $1.03 per sh
- it revalues its PPE and includes in P&L???
- $1.96bil in cash (a bulk in USD), $0.01bil debt
- invt ppty $0.3 bil (interesting all in Australia, Sydney and NSW)
- abt $0.25 bil of FCF per yr
- really interesting, leading paper in HK
- but really interesting firm...will keep a close tab. Not sure why the large dip post dividend though
1000 Hk Beijing Media
I looked at this before, didnt buy cos
- Auditors are Shineway
- Sales faced a sharp decline in 2010
- huge swings in associates/JV contributions
- With close to RMB 1300 million cash, why is there RMB 65 million debt?
- Looking at past cash flows, firms was actually turning bad so I guess the huge cash came from listing I think
- their product is just plain odd - Especially the youth daily papers
- insiders own only over 35%
- more importantly, price is stagnating and 2010 results were actually the peak. approx 3-4x the mid results
163 HK Emperor
Thats right although I too subscribe to cash flows over everything else. Property in good locations indeed but shitty valuations.
And it strikes me that their buildings are also kinda badly placed for frontage and the age of the buildings.
1831 Shifang
when a firm is SPAC and now HK listed,its almosts certain not a good thing.
And where there are disputes on fees that negligible, I suspect theres something larger underlying. I.e things like paper distribution rights.
The losses will be
= deposits + prepaid fees + annual revenue from ads
And I think that could possibly worth more than the 25% drop.
AHP
No problem, certainly good to look at new ideas too!
For their properties, a bulk of them is in KL, especially near Damansara which is good location indeed. However those Sarawak and Sabah ones are not too central. Check this out.
http://en.wikipedia.org/wiki/Taman_Tun_Dr_Ismail
having said that, the town is old like most places in KL and most property firms rely on cash flows from construction or additions made donkey years ago.
I guess it is not good to have good locations but rather it is a minimum to have only good locations since theres a likelihood of value decline. Since they are all so old, it will be time to refurnish, which means cashflows may take a hit. But if price differs massively from the asset base, then it may be worth a look.
AHP - Amanah Harta Tanah PNB
One thing to note about many of the resource and land rich developing nations, land value may not necessarily rise in value over time and some of them have in fact declined sharply over last 5 years. For example, huge plots in putrajaya and some residential lands in Iskandar have faced this issues despite many attempts to improve security, facilities and overall appeal.
Many a times, execution of projects are the key risks and land is not in shortage.
Haha sure thing.
I have had a new position for the 2nd Qtr which is Nanyang holdings. Equally interesting. Do take a look and let me know your thoughts.