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

Lunchtime Updates: Oceanus, Pac Andes

Oceanus requested for a trading halt after price shot up in morning trading. Rumors are of a buy out deal from private equity firm.


Since Oceanus is halted, we switch to our Kiasu Analysis hat and target the next closest stock on SGX: Pac Andes

LVMH private equity fund eyes Asian brands

Most of us would probably have came across this piece of news in the papers over the past few days that a private equity fund that's part of luxury goods maker LVMH Group is aiming to invest $650 million in quality lifestyle brands in Asia.

The fund, L Capital Asia, has already invested $90 million in minority stakes in watch retailer Sincere, shoe store Charles & Keith and Chinese jeweler Emperor. It will likely invest another $200 million in companies this year, including a women's clothing chain in China and another in India within the next 60 days.


It was also mentioned that Ravi Thakran, the Managing Partner of L Capital Asia, expects the fund to eventually have investments in 14 companies that fall below the level of top global luxury brands but are above mass consumer goods.

Putting on our Kiasu Analysis hat, we tried to speculate on whether any of the counters listed on SGX could potentially be a target for some injection of funds.  In our opinion, we felt there were no compelling reasons to suggest L Capital Asia might be interested in any counters listed on the SGX, other than perhaps Hour Glass (why not, since they had no qualms about investing in rival Sincere Watch) and FJ Benjamin (often cited huge potential of company's RAOUL brand in US and Europe). Both counters have exposure to the Asian consumer retail segment which is expected to be well poised to benefit from increasing retail spending in the region.


Below is a link for your reading pleasure:

UOB KayHian starts FJ Benjamin at Hold; RAOUL the key
Tuesday, 22 February 2011

© 2011 - The Edge Singapore

Sabana REIT: Declares Bumper "Maiden" Distribution!

Sabana REIT announced first quarter results tonight after market closed. Management certainly did not disappoint as new shareholders were amply rewarded with a "maiden" distribution of 3.04 cents. As predicted in our earlier post on 17 Apr, this works out to be the highest distribution (in percentage terms) among all S-REITs this time round. With ex-dividend date set on 10 May, shareholders certainly have something more to look forward to in the coming weeks.

"Hot" on Hotung (Part 2): Countdown to 12% Dividend Payout

Hotung supporters can collectively breathe a sigh of relief today. The company announced improved FY11 1Q results after market closed today. However, it was probably the other announcement that got shareholders "excited". After having been made to "wait long long", shareholders can finally countdown to the book closure date for the NT$0.47 dividend payout, which is on 10 May (XD on 6 May next week). As mentioned in our earlier post, this translates to a "mouth-watering" payout of almost 12% based on last traded price of $0.17.

Ms. Tsui-Hui Huang, MD Hotung

For the benefit of fellow kiasu investors who are not already familiar with this counter, we have extracted a few statistics from the Q1 results announcement today:


Last Traded Price: $0.17
NAV: $0.326
Cash per share: $0.08
Short-term Borrowings: Nil
Long-term Borrowings: Nil


We are certainly looking forward to more "hot" trading action in the days ahead!