Malaysia's Rich Man Robert Kuok Seeks To Take Allgreen Private For S$1.1B

This has to be the one bright spark in the ominous clouds of gloom today. Malaysia's Robert Kuok probably decided that enough is enough. Since the market does not appreciate the value that this baby has to offer, he took it upon himself to make a takeover offer of  $1.60 per share to take the company private. (that's a whopping 40% over the last traded price of $1.15)


For some keen observers of the local property counters, this does not really come as a huge surprise. Due to the strong run-up in property prices over the past couple of years, quite a number of local property counters are today trading at very attractive discount levels to their revised NAV. We at Kiasu investor could easily rattle off a full list of counters that are trading at very attractive valuations. The most commonly cited ones are of course counters like Wing Tai ($1.52), Wheelock Properties ($1.80), Heeton, Hiap Hoe, Ho Bee etc.


From this list, we like Wing Tai and Hiap Hoe the best due to various personal preferences (which we will elaborate in future posts). However, we think that the counter most likely to benefit from short term speculative activity generated by Robert Kuok's latest salvo should be Wheelock Properties. It's HK parent, Wheelock and Co Ltd,  had last year taken Wheelock Properties Ltd (HK), private for HK$6.9 billion ($889 million). This was at a 143.9 percent premium over the previous close and at 3.3 percent discount to NAV at end of 2009. Due to the booming property market prices in Singapore, if Wheelock SG can continue to sell off the remaining units of Scotts Square (currently > $4000psf) and Orchard View (currently > $3000 psf), the RNAV of the counter should be closer to $3 per share (versus last traded price of $1.80). 


Of course, we at Kiasu investors, do not truly believe that there is a high chance that privatization will take place in the near term (as the parent company is probably replenishing cash after taking the HK company private last year). But for those itching for a piece of the takeover action (choosing to ignore all the doom and gloom prophecies), Wheelock will probably be a good choice for a punt. (yes, we do equate this to gambling)

Post Election Updates: FJ Benjamin, United Engineers, Pac Andes, Oceanus

Fresh from our election break (despite the unbearably hot weather), we strive to bring you even "hotter" analysis and pictures from our Kiasu desk.


First, we kick off with a couple of results updates:

Hot contributions from new brand

1) FJ Benjamin announced higher earnings on record turnover for its third quarter ended 31 March 2011. This was due to a combination of strong consumer sentiment, higher tourist arrivals and contributions from new brand Givenchy. Improvements were seen across major markets of Singapore, Malaysia, Hong Kong, China and Taiwan. We expect the counter will continue to do well on the back of strong consumer sentiment and spending across the region.

2)United Engineers disappointed with a sub-par price-action performance post ex-date of dividend. (price dropped by 15 cts versus 10 cts dividend payout.) It went on to announce a decent but not too spectacular 20% increase in gross profit (10% increase in net profit).  Our kiasu instinct continue to get aroused by its huge discount to NTA (its NTA increased to $4.03 per share versus closing price of $2.35) and its relatively low PE ratio of about 3.5x. New hotels and retail space coming up at Vista Exchange (next to Buona Vista MRT) and UE BizHub East (next to Expo MRT) bodes well for the future recurring earnings of the group. In the meantime, we can only eagerly anticipate the awakening of this sleepy giant.

Former Specialists’ Centre/Hotel Phoenix and Orchard Emerald

3) Pac Andes announced plans for a listing of TDRs on Taiwan Stock Exchange at an indicative price of NT$18 (or 77 Singapore cts). Since each TDR unit represents 2 PARD shares, this works out to be around 38.5 cts each. This could potentially raise up to around S$219 million in a best case scenario (which we view as net positive for the stock due to its high gearing that we had pointed out in our earlier article). However, its share price continue to languish at $0.315 after a brief spike after the initial announcement. We might potentially see more favorable action subsequently if the market response to the TDR issuance is good (which we feel will be the case).

4) Oceanus directors had came out scrambling to issue an announcement (i.e. denial) that there weren't anything concrete behind rumors of an impending buyout by a private equity firm, KKR. We tend to believe otherwise and view the announcement as a "cover" to allow negotiations to continue in the background without too much disruptions in the share price.


Finally, if you had managed to bear with us through all our earlier ramblings, we reward you with our "hot" kiasu tip of the night.  DBS Group Holdings CEO, Piyush Gupta had made a maiden purchase of 100,000 DBS shares on 9-May at a price of $14.825 per share. This translates to a cool $1.5 million dollars! (Of course, this is "peanuts" compared to his >$8 million a year CEO salary, but still, we take it as a strong indication that the boss is confident in his own business). Also worthy to note is that tomorrow (11-May) will be the last day that the stock will be trading Cum-Div of 28 cts dividends. So what better time than now to try getting your hands on some? We at Kiasu Investors will definitely be giving it a shot...

Lunchtime Ideas: United Engineers

Like many other property and construction counters listed on SGX, United Engineers had recently announced an excellent set of results for FY2010. Today is the last day that the stock will trade Cum-dividend of 10 cents. This translates to dividend payout of 4% based on last traded price of $2.50.(certainly attractive enough to get picked up by our Kiasu antenna)

Of Cheap Air Tickets, Oceanus and Pac Andes

When we mentioned cheap air tickets, we are of course referring to the Singapore Airlines S$398 all-inclusive, promotional fares to Japan (Tokyo, Nagoya, Fukuoka and Osaka). After taking into consideration that typical taxes and fuel surcharges to those locations comes to around $350, the actual price of the round-trip ticket works out to be only $50! This is full-service SQ tickets at cheaper than budget airline prices! (ignoring the fact that budget airlines typically quotes one-way fares in their promotions)


So coming back to our original poser, what has cheap air tickets got to do with the two aquaculture stocks (i.e. Oceanus and Pac Andes Holdings) listed on the SGX?  For us at Kiasu Investors, it is a case of "alarm bells" ringing (BARGAINS) after the recent tsunami in Japan. Based on various reports, the giant tsunami wave that devastated the northeast coast of Japan had wiped out the region's coastal fishing industry, and cut the country's total seafood production by around a quarter. Similarly, abalone stocks were destroyed along the coast and it would take many years before new ones will grow to sizes large enough to be harvested.


Assuming the demand for fish and abalone were to remain fairly constant, the fishing industry in the rest of the world will either have to (1) make up the slack by catching and producing more or (2) the price of ocean catch will have to increase to compensate for the supply shortfall. In either case, companies such as Oceanus and Pac Andes (the two being major players in their own industry) would stand to reap the benefits.


We believe that savvy investors have already caught up to this fact and hence it was not too much of a surprise that there was a rumor last Friday that a private equity fund was arranging financing to buy out Oceanus (especially since private equity funds seem to be rather active of late. Refer to our previous post on another private equity fund active in Asia)

Fresh catch!

Of course, just like buying cheap air tickets, investing in bargains comes with it's risks. For Oceanus and Pac Andes, a large part of their operating costs are tied to energy costs and with oil prices hovering at elevated levels, investors would do well to take into consideration the impact to their bottom line. The other point to note would probably be the level of debt as both business are capital intensive in nature (this may not be a concern in low interest rate environment but may come back to haunt investors if interest rates were to rise too quickly). 


Lastly, we do hope our readers (like us) are enjoying a great Labour Day holiday! Below are more links for your reading pleasure.


http://www.bloomberg.com/news/2011-04-24/tsunami-speeds-terminal-decline-of-japan-s-fishing-industry.html
http://www.kansascity.com/2011/04/17/2806024/tsunami-devastates-abalone-fishing.html
http://www.singaporeair.com/saa/en_UK/content/local/SG/promotions/index.jsp