Of the three statements ie Profit and loss statement, Balance sheet statement and cashflow statement, I find that cashflow statement is the easiest to read among all. Or rather as compare to B/S and P&L, step 1 interpretation can be easily done. Example how much cash went to the taxman or what was the Capex compare to why this amount of expenses or that amount of receivables.

Unless the company expenses away, it doesn’t matter where the company record their journal entries(as someone pointed it out earlier), almost all cash movement is being shown by the cashflow statement, at different section. In fact, cashflow statement is just a reconciliation of mostly b/s movement and if cashflow statement is not being provided, which I believe that was the case last time, reader of financial statement can easily computed by their own.

But reading the financial statement of Ezra is a strange affair. While it ended exacting what I has been expecting, I still keep wondering why it happened. Anyway, I have not done with it and I will be expecting surprise when the Audited statements are out with supporting notes. 4th quarter results is just the beginning. And I am referring to Ezra unaudited 1Q, 2Q, 3Q and 4Q results. Unaudited is bolded because it is common sense that if someone want to game the system, do it while you are not closely watched. Being skeptical when reading unaudited statement is a must.

31st Aug 08, 30th Nov 08(1Q), 28 Feb 09(2Q), 31 May 09(3Q), 31st Aug 09(4Q)(‘000)

Bill payables to bank – 25,753, 59,691, 91,606, 81,096, 50,376

This numbers are taken from B/S. reconciliation can be done with respect to Ezra presentation will be

Repayment of bill payables, net(3mths, 6mths, 9mths and 12 mths) – 1Q +33,938, 2Q +65,853, 3Q +56,153, 4Q + 24,623

But the company came out with total diff changes for 1Q to 3Q with an acceptable 4Q changes.

Repayment of bill payables, net(3mths, 6mths, 9mths and 12 mths) – 1Q – net, 2Q +3,775, 3Q +27,196, 4Q + 24,719

This is a fairly easy movement in cash flow where increase in bill payables mean cash inflow while decrease mean cash outflow. The diff in 4Q is acceptable but for 1Q to 3Q is unexplainable especially with 2Q huge diff of 60,000k. Someone please tell me that I am wrong……..

Now let look at other movements. This time it is more complicated especially without the help of notes to accounting.

31st Aug 08, 30th Nov 08(1Q), 28 Feb 09(2Q), 31 May 09(3Q), 31st Aug 09(4Q)(‘000)

1) Fixed Assets – 185,598, 257,361, 290,276, 252,711, 298,874

2) Depreciation(3mths, 6mths, 9mths and 12 mths) – 1,294, 2,615, 3,943, 5,374

3) Purchase of fixed Assets(3mths, 6mths, 9mths and 12 mths) – 48,788, 58,216, 87,864, 176,717

4) Proceed from termination of shipbuilding contracts- 3Q @ 28,452, 4Q @ 27,575.

5) Loss on termination of shipbuilding contracts – 3Q @7,142, 4Q@ 10,006

6) Assets held for sale @ 31st Aug 08, 37,197 & 31st Aug 09 @ 16,433.

7) Gain plus proceed from sale of fixed assets at 31st Aug 09 – 37,838.

That should be about all except for number accounted in prepayment and post-payment which is not significant in this case as I went thru them. FA at 31st Aug 08 plus 1Q movement from 2) to 7) will roughly get me the amount of FA in 1Q2009. But that is not the case except 4Q2009 which like bill payables beautifully align back. If nothing else, just the movement from 3Q2009 to 4Q2009 is enough to blow my head. Purchase of FA increased by 88,853K while FA increased by 46,163K.

The differences in this case can be trace back to bill payables so no big deal right? If that is the case, then why account them into the book for? Why follow FRS? Why not you use yours standards, I use mine. Maybe I am wrong.. someone please tell me so……

With these and others, FY09 annual report will be a good read, it will tell the story of how aggressive their accounting and watch out for things like movement in FA, interests movement and capitalisation and related to the flow of debts plus bill payables. Of course and not forget about receivables and payables. Spend time wondering why it move in these ways. For example, just by looking at the amount of depreciation, working assets, new builds and operating leases tell a big story of this company.

Since I am writing about Ezra, there is no harm to talk abit more on their results. I believe the increased in profit excluding exceptional items, GP and revenues will be the talking point rather than the increased in trade receivables. But these 3 are interlocked that in any situation receivables increased significantly more than the increased in revenues and higher GP, one might want to ask if those increment for real, especially for GP margins. Working capital is investments that suck up cash and may or may not reflected in the P&L and it can have many consequences. As for Ezra? I would say for revenues and margins, its fluctuate. While I have not done a horizontal analysis on a spreadsheet, anyone do it will come up with the same conclusion.

Next do a horizontal analysis for receivables, the surge (main reason for negative cashflow) started way about 2 years back. Ezra investment in this area is really huge. Then payables tell another story. Ezra has been very promptly in paying their vendors, being an even better pay master when they are slow at collecting receivables. This is another contributing factor for the negative cashflow but unlikely going forward as it is down to very low level. There are many little tricks to show better cashflow. Drag and pay creditors when the date turned 1st Sep 09 is one of those simple trick. These promptly payments may tell a bigger story than just being a good pay master.

Back to receivables, increased from 87,004K to 182,722K, 110% while revenues increased by 23%. It doesn’t matter how one compute the number of days outstanding, it is a straight forward > 6 mths. So it is the norm for the industry receivables to be outstanding of > 6 mths? Well, Jaya a company having trouble with creditors has outstanding days of just over 1 mth….. Now the management blames it on new segments. While no one will know the exact situation but a quick look into segment revenues tells a different story.

31st Aug 08 : Offshore Support Services – 174,972K, Marine Services – 64,159K, Energy Services – 29,215K

31st Aug 19: Offshore Support Services – 190,509K, Marine Services – 92,703K, Energy Services – 46,225K

Interestingly, the comments on 1Q2009 was Energy segment contributed 39,9million to revenues, 2Q2009 was Energy services contributed 46.3million to revenues, 3Q2009 was Energy Services contributed 46.1 million to revenues and 4Q was Energy Segment contributed additional 17million to revenues.

If I take management words as true, then can I say all Energy segment revenues can be dump into bad debts since bulk of it came from 1Q2009. Even if that is the case, another 140 million of receivables are still outstanding where a big portion is likely come from Offshore support services. Talk about recurring revenues, good charter rate, long term contracts, steady cashflow, core business and usually a place where cash flow in on time. What if it core business is in trouble or heading toward one?

The timing is never better. Swiber announced that it is looking for 5 yrs convertible bonds that issue up to a total amount of US$100 million after I wrote “Do a Swiber”. Hmmm need to check where I bought my crystal ball. I can be in the business of selling crystal ball.

Let’s do a Ma Hou Pao.

Is Swiber fund raising exercises, 2 in total, back to back, raised US$49.8 million and US$100 million(if upsize) foreseeable? Yes!!! Timing and methods are unknown but there is no question on the need of capital. But the answer does not come from the management. The management painted a bright picture in 2008 AR by proudly said, “Despite the present banking crisis, Swiber’s capital expenditure for our new vessels is fully funded from sources that include sale and leaseback arrangements, secured bank loans and vessel disposals.” Did the management lie? I believe they believe in their belief.

2008 AR showed that Swiber is in massive capital expenditure mode with 17 vessels and barges to be delivered in FY2009 and 3 in FY2010. Total Capex unknown but 8 of these will be in sale and leaseback arrangements. But under commitments in Notes to financial statements, it stated that the committed Capex for FY2009 is US$309 million(it can be more). A quick check show that Swiber total equity stood at US$207 million and total assets at US$706 million. Since it is already highly leveraged with on-B/S items, don’t even need to look further for off-B/S stuffs. 

Here is the math. If Swiber is to generate all US$300 million through earnings, Swiber ROE in FY2009 will be 150% using starting equity. If US$150 million through Sale and leaseback, ROE will be at 72%, and ROE at 50% if Sale and leaseback at US$200 million. This is relatively easy, just flipping the number around, one can easily come up with any portion of equity and debt. Now the harder part, can Swiber generate return on equity of 50% in FY2009? One can look back to Swiber history and companies in the same industry. But the best option is to have a good understanding of this industry and what kind of ROE they are likely to earn in short period and on average moving forward. But whatever the number likes, it will be way lower than 50%. So logically, the answer is No Swiber can’t support it without new capital from outside.

At half time, 1H2009 results, Swiber total Capex for PPE spent was US$146 million with US$38 million on vessels for Sale and leaseback, about US$108 million on PPE. The next question is can generate another US$150 million in 2H2009 for Capex? And at this point of time, Swiber already raised US$49.8 million of capital.

The answer is simple. And this does not even take cashflow into consideration. Almost all players that I look into say situation is changing with collection being slowing, pressure in payment. This can be easily seemed by the shift in B/S.

So what next? If Swiber can get through FY2010, and with no new massive Capex, the pressure on this part will be lifted. But Swiber will face another new pressure, which is massive commitment to pay yearly thru their off-B/S items of which they got into in these few years — sale and leaseback contracts. These contracts doesn’t care how well Swiber is doing, Swiber has to keep pay and pay and pay. Chances are Swiber may unable to fulfill their financial covenants.

And the convertible bond, I think the Swiber is getting a good deal on this, better than Tat Hong. At anytime, I will sell Jaya at that valuation.

There is an article in The Edge Singapore noting that C2O Holdings is turning into an offshore play just like Ezion or Falcon Energy Group(WTF, I din even know Falcon Energy is another offshore play). What about C2O share price? From the look of it, it surge from around $0.1 to $0.535 before any movement of capital. Interesting, but this is just the right move, and I call it — “Do a Swiber”.

Company X ROE for FY2005, FY2006, FY2007, FY2008 and 1H2009 were 38%, 25%, 28%, 19% and 11% respectively. How do company X managed to grow it equity 42.5X from $6.8M to $289M in 4.5 years? Let do some math, company X equity will stood at $15.5M at 1H2009 if it retained all it earnings over 4.5 years. To increase from $15.5M to $289M in 4.5 years is what I call — Do a Swiber.

1) In FY2005, Company X earned $6.2M but equity increased by $9.6M from $6.8M to $16.4M. The other $2.8M? Company X rises $4.2M and paid dividends of US$1.2M.

2) FY2006, Company X earned $12.1M but equity increased by $32.6M to $49M. The other $20.5M was from issuing of equity.

3) FY2007, Company X earned $49.7M but equity increased by $128.5M. The other $78.8M was from issuing of equity.

4) FY2008, Company X earned $39.5M but equity increased by $29.5M to $207M. About $10M was knocked off from the equity due to movement in reserves and share buyback.

5) 1H2009, company X earned $31M but equity increased by $82M to $289M. Company X raising $51M in equity.

Beside FY2008, company X issued equity yearly and transform itself from a company with a net worth of “few millions” to over 1/4 billion of net worth. And Company X is Swiber. There is no secret here and it must be the common understanding among these players because the strategy being used by Swiber is not uquie, an old trick and is commonly being used by many OSV players here. So it is unfair to call it ” Do a Swiber” but I love it.

Before looking at the trick, one has to understand why it is common among OSV players.

1st of all, I don’t care whether it is a barge, AHTS, shallow water, deep water, subsea, construction vessel, drillship, rig or even an ECPIC as claimed by Swiber. Everything work in the same way, the company need to have the vessel either by owning it or chartered. And vessels are not cheap, they are capital intensive kind of business, capital must lay out 1^st. No one can change the logic behind this. No one will say, “here is the money, go and buy a few vessels and completed this project for me, repay me after that.”

Here is the trick.

Now, if C2O wants to enter into this industry, what it need 1st? Capital. Something that company like these empty shells does not have. But there is share price, these are nice currency if being used correctly and at the right time. The 1st time is ensuring news is out, speculator play and share price surge. The higher the share price, the better because the company can get more with less, get capital and buy vessels. With that, it become a growth company, plan for more expansion, more news, issue more shares. This is exactly what I call do a Swiber. It will work and continue to work as long as the share price is high and the unlying fundamental of offshore industry remain strong.

What happen if it stops working? Without new capital, growth will stalled, valuation will drop back to earth. Now the company must back to old fashion way of getting capital — earn it.

Before I end, here is one of the reasons why I call it “Do a Swiber”

How our world was created

On 8 Nov 06, after months of preparation and hard work, Swiber made a sparkling debut on the Main Board of the Singapore Stock Exchange. We successfully placed out 94 million shares at S$0.355 each, raising total net proceeds of approximately S$30.97 million for our future expansion. On our first day of trading, our shares opened at S$0.550, and closed at S$0.505, 42% above our issue price. Based on our closing price, market capitalisation of Swiber was approximately S$186.34 million.

I am delighted to note that, since Swiber’s debut, out shares continued to trade strongly between a premiums of 42% to 193% over our IPO issue price. This reflects the policy of this board, to continue enhance shareholder’s confidence and share value, in our Company.

By Mr Raymond Goh

Executive Chairman and Chief Executive Officer.

Just as I posted my lousy written “jumper post”, I am being tested on ARA Asset Management and Tat Hong. Convertible Bonds due 2016 issued by CapitaLand caught my interests and Tat Hong is a follow up.

Setting up Harmony fund by ARA to hold Suntec Convention and Exhibition Centre with Suntec REIT investing in 20% using debts. This is a small token for Suntec REIT and another small token for ARA Assets Management as its impact on earnings is likely to be under 10% on the long run. Still, it is going to be positive taken by many as ARA actually “tighten” its hold on Suntec City.

But does ARA willingly and eagerly trying to tightening its hold on Suntec City at this moment? Firstly, Suntec Convention and Exhibition Centre was an unwanted child during Suntec REIT IPO as it was being told as in a good way, that it does not have the cashflow to be include in the REIT, put it in another way is that owner does not want to sell it cheap. Actually if Suntec REIT holders notice, they are still paying the sellers years after it was being sold. Now from IPO till crisis hit, Suntec REIT had all the time and capacities to acquire this assets but it was not being done. Perhaps it was not available. But at this moment, it is not the right time for Suntec REIT to acquire it because in a way, debts are not available and equity is too expensive. Financially, Suntec REIT is not a willing buyer for the whole asset.

With ARA taking up part or all of the S$37 million mezzanine loan which stress it already stressed B/S, going round and round, to own this assets, its doesn’t look like a happy acquisition or expansion. Its look like they are being force to act with ARA taking the majority of the risk. The amount of risk is hard to quantify as it all depend on how much ARA is going to input into the mezzanine loan, the market and its intention on future Suntec REIT units received.

The question to ask is why risk — the B/S(whole?) of ARA now? When everything is over, this asset will likely be dump into Suntec REIT, but at this moment, it is worthwhile jumping around at seller camp.

Then there is Tat Hong. Rather than reading the happy, expansionist, blue sky(ocean) press release, it is worthwhile to jump and ask from the other shoe, which is raising capital shoe. From the structure of this convertible redeemable preference shares(CRPS), it looks like either Tat Hong is really desperate or the opportunities are abundant and juicy.

1) Firstly, Tat Hong has 50.7 million warrants that can be convert into share(1 : 1 ratio) at a price of $2.50, expiring at National day. If Tat Hong share price is over $2.50, it can bag >S$150 million, with dilution of 10%. It is impossible at the current share price, so here goes the S$150million.

2) 65 CRPS for S$65 million, dilution of 11.41 million. Unlike the carefree warrants, strategic investor AIF Capital has many demands (If I am AIF, I would love to has these demands)

- 10 annual return on compounded basis for AIF in case of breaches.

- Cost of investment is S$1 per share. Duration is 5 years. This is cheaper than Tat Hong current share price. Now if Tat Hong future is great and wonderful, who don’t want to buy it 5 years later at a price that is cheaper than current market price?

- Conversion only happen if Tat Hong share price crossed S$1.50 for 30 days. This will ensure that AIF in a winning situation as the cost of investment is just S$1.

- Shareholder got $0.05 dividend per share in FY2009 and $0.076 dividend per share FY2008. AIF will get what shareholder get. In that case, CRPS yield for FY2009 and FY2008 are 5% and 7.6% respectively if it was issued before year end FY2008. After 5th years, if the CRPS is not redeemed, preference dividend will be 25% of issue price, i.e $0.25 before any dividends can be declare to shareholder.

- Redeem at 115% in 5th year, 140% in 6th year(less any preference dividend received between 5th and 6th year) and 165% in 7th year(less any preference dividend received between 6th and 7th year)

- There are more but ultimately, the above are good enough for a simple look.

Because of the undertakings by control shareholders and structure of this CRPS, if Tat Hong future change and goes down hill, AIF is protected. Then, the preference dividend is so costly that it will effect how much dividends current shareholder will receive in this 5 years to 7 years. So Tat Hong is likely to declare little or no dividend going forward as long as CRPS is not converted or future is not that good. Even if the future is good, cashflow need to support additional CRPS.

If Tat Hong retained all future earnings, if Tat Hong next 5 years average ROE is 10%, NAV will reached $1.16 by 2014. and $1.45 if average ROE is $1.45.

Buying cheap anyone? Please be AIF Capital.

What advice will the financial pro offer to investors in the rough?

The best way to illustrate the lessons learned from the global financial crisis is captured in the accompanying chart of real-life investor experiences. These individuals, representing three broad types of equity investor, placed exactly the same amount of money in identical portfolios of global equities.

 A) There are investors who made a single lump-sum investment a few years ago and did nothing else subsequently. This approach is akin to a golfer aiming for a hole-in-one. Let’s assume in our analysis that this person invested $250,000 in a diversified portfolio of global equities in April 2007. Since then, the value of the portfolio has been shrinking. One course of action familiar to long-term investors is to hang on to their one-off equity investment in this tranche until the global market recovery runs its course; this could be a long wait to break even. If there are additional cash resources, now is the time to implement a fresh strategy as part of the plan to give the original investment a chance to recover.

B) Next, there are those who did ad-hoc top-ups to their portfolios. They picked the month in any given year to commit their cash savings to their equity investment portfolio. These are well- meaning investors who either wait for annual bonuses or attempt to time the market. For our exercise, let’s assume that this investor pumped $50,000 every April starting from 2005 plus $100,000 from a bonanza bonus in April 2008. No further top-ups since then, as this investor became rattled by the market meltdown. In social golf, this compares with a player who is not able to make a string of consistent shots for a decent hole.

C) Finally, we have the model investor – Ernie Els aka ‘The Big Easy’ – who has a regular investing plan. Let’s assume this individual invested $15,600 every quarter starting April 2005. From July 2008, this disciplined investor increased the frequency to monthly top-ups of $5,200 to the same globally diversified equity portfolio. In slightly over four years, this person contributed $250,000 to their core portfolio.

 All three investors are in the rough. It’s hard to make par for this hole without taking a risky recovery shot. Take out the 5-iron from the bag to be tactical instead of the 5-wood. Our model investor’s portfolio is 24 per cent below the aggregate investment of $250K. Market growth of 32 per cent is required to break even. The other two cases are looking at much higher returns or longer reconstruction period. Some measure of tactical asset allocation with a tilt to Asian equities and bonds may be required by all three investors to get back on track.

Discipline and patience are prerequisites for enjoying golf; the same can be said for investing in these challenging times. The score card is important, and yet there are enough holes left to play to your handicap for this round. The only way you will know you are back on the fairway is when you are swinging the club without being stressed about the next stroke. A golfer should not be upset about a previous bad shot but focus on what lies ahead. The consistent model investor will be rewarded not only when the game is over but all through the course of life.

Roy Varghese from Foundation Adviser ipac Singapore had written an extraordinary wonderful article on BT weekend tittle “From the rough onto the fairway” which talks about golf, properties and investing. It doesn’t really matter what he really up to but these 3 investor types, lump sum,  ad-hoc top ups and model investor “The Big Easy” demostrated  how one can maniplate data, presentation, etc to achieve the desire results.

This is an easy catch and it is entirely possible that the writer really don’t mind other “see” through as he got a “bigger massage” for his readers. But well, the outcome of the whole thing will change just by shifting the lump sum investment date. And if he invested in Apr 2005, chances are, he will be positive while the other adhoc top up and model investor taking hits. But what is the point of shifting the date of lump sum investor? I mean I know investor seldom invest at the bottom(what happen if I shift the lump sum investment date to Mar’09?) and while Apr 2005 was not a bottom, peoples are most likely to invest at the market top than any other times — those standard answers you know.

I don’t like to venture into that “hole” so let skip it, make a jump and look at it from a business angle. A lump sum investor is certainly not as profitable(or business opportunities) as a consistent investor investing for 20 to 30 years, and with all other possible business opportunities in the future. A good relationship can last a lifetime. And this article may targeted at those who invested during market peaked under the advise of “their competitors”. so he is giving signals, telling them, hey don’t be worry, we are smart, we know what happened, and we are able to offer you a recovery plan.

This jump is what CM put it down as the mental jump, or I believe it belong to the mental jump that CM eagerly talking about. The problem is, my jump is too easy so there might be more.

In stock investing, it requires many jumps as well. But what kind of jump? For what being presented in Financial statements(quarterly, half yearly, full years) and press releases to annual reports, the answer is fairly easy one — whats are not being highlighted are those the management doesn’t want “outsiders” to know or question which is the most likely case for most companies. Easy answer to write(type) out, hard part is at doing. So the easy routes many would take are 1) Everyone is saint, 2) everyone is devil until being proved otherwise. But well, it is not logical to think in this way just as call  all S-chips craps.

So the next easy answer is “What he, she or management wants”. Other than fruad and standard requirement from FRS, the “other” materials that being presented are at the option of the management. If they are an extraordinary, shareholder is always no. 1, then what we see will be what the management think owner must know. Even if I am able to make that jump, another bigger wall stay ahead. Do I have the knowledge to make that jump useful. That knoweldge come from business, industry and competitive landscape. Example for a fishing company, the most important information are, cost of vessels, area of operation and tonne catch per annual. And for oil companies, the most important information are, total amount of reserves and the cost(estimates cost) of taking them out.

Growth used to be very sexy. About 2 years back, as long as top and bottom line went up, boomed.. so did the share price. The faster or bigger % jump, the more “investors” gather around it. No one care whether this growth was fueled by equity, debts or internal generated cashflow. That was yesteryears.

Growth is still sexy. The problem that companies face now is it is hard to come by. And “investors” learned their lesson which is growth fueled by debt is “unsustainable”. With growth fuel by debt is out, growing companies usually choose 2 options that are new capital and pour back cashflow.

Some company even throws out the trump card, growth without any invested capital for assets (or little capital is required). Even companies like Microsoft or Sarin where their life depend much on IPs required capital. These capital doesn’t always capitalised to the B/S, huge amount are being expenses away yearly. A successful management company require little capital for assets but reputation and track record come with human capital that are being expenses away yearly. What about unsuccessful one? Look around, there are alot. If it is so easy, who want to do the heavy lifting of pumping capital for new hotel, new office or new vessel.

There is only 365 days in a year. A production plant can run 24/7. The most a vessel can charter out is 365 days, dido for property unit. To grow, addition plant, vessel and property is needed to be build 1st. This is the norm as many companies are in capital intensive industry which mean new plant, or vessel, or property need massive capital upfront, which usually only be partial fund by generated cashflow, that says, company has to borrow or raise new capital for the rest. Suddenly debt is out, raising capital is in. What a world, up to a point, debt is way cheaper. So by raising equity instead of debt, they are not making sense except that their share price cheer up by “season investors” who one or two things about debts.

Suddenly, I am the one that look stupid because emotion control behavior, action which represents movement of the share price of a fire fly. Ok I know the lifespan of fire fly is way shorter.

I believe this is what many property development companies like or wish to do. But that is not easy and many might just do the opposite of buy at condo price and sell at HDB price. Wheelock properties is well known for their luxury developer with floot prints at Ardmore and Orchard areas. Their records are impressive. In Year Ended March 2002, Shareholder Equity stood at $1.026 billion, after paying $0.188billion in dividends over the years and raising zero in capital, Shareholder Equity at 31st March 2009 was at $2.063 billion. Actually long term shareholder gained more during the period because all its section 44 tax credits were given to shareholder in a special dividend and right issue exercise during 2005.

How should I value Wheelock Properties? Taking the common and easy approach of buying at or below Book value(or revised book value throw out by property analysts) for property company is ok but that does not justify or differentiate good or bad management. And at least for Wheelock Properties, while their book value show no assets being “hidden” in the numbers, assets are not being tied up by loans and contract that is not unbreakable . This is significant because property is a good way to get cheap loans and almost every player is doing that and by doing little, Wheelock Properties is putting itself at disadvantage compare to its peers when generating incomes.

And what are recorded in the book? Investment properties, Wheelock Place and retail portion of Scotts Square. Scotts Square will only come online in another 1 to 2 years. Given a yield of 5%, these properties can easily worth at around $0.6 to 0.8 billion. Then its interests in HPL and SC Global can easily worth from $0.15billion to $0.5 billion. These investments, totally $0.75 to $1.3billion are not in “direct control” of the Wheelock Place Management. The properties are valuable even if lousily ran as they are right at the heart of Orchard Road. SC Global and HPL are being managed by their own respective management. Then there are other assets such as Cash, development properties and receivables, netting off all liabilities will give a net current asset of $1.027billion. With this I am leaving out all future profit from sold and unsold development properties already in the pipeline and assuming the loan taken using Scotts Square and development properties can be easily repaid. Adding them up, I can easily get a so call revised book value of $1.8 to $2.325 billion.

But what is missing? The ability to buy at swamp price and sell at condo price or doing just the opposite. If this is a lousy management, I don’t even want to pay at book value, I might even want a big discount to compensate the lousy management. Perhaps just for the investments. But for a management with a record of buying swamp and selling condos and with lot of cash plus good properties for cheap leverage. It value become a big unknown from at least book value to much upside. That is a problem because it depends on the abilities. But if I can pay for just the investment, it will be a home run. Surprising it did happen recently but I am unaware of it. Wheelock Properties was selling at below $1 for a period quite sometime back. If only I have do the homework and money.

A list of their investments.

1) Oakwood Residence Azabujuban, Japan on 29/09/04 for $85 million. Sold in FY2006-2007 for $123.1 million net.

2) Ground and 1st floor premises of 32 Grosvenor Square in London for $11.3million in FY2005-2006. Sold in FY2008 for $19.5 million

3) Purchase 66.6% of Hampton Group for $75.6 million making it a wholly owned subsidiary in FY2005-2006. Sold in FY2006-2007 for $230million.

4) Making gains from buying and selling investments over the years plus, Kim Reality – Did Wheelock Properties made gain from this ex-associate company? Hard to tell but I guess not as it was sold to their parent company. The amount is not material as it was below $10 million if what recorded was not artificially depressed. Sold in FY 2004-2005

5) Property developments. This is the place where Wheelock properties made it name with Ardmore Park. But there were properties where Wheelock Properties take in low margins like Grange Residences. But overall, Wheelock Properties made alot from Ardmore Park, Grange Residences, Ardmore view, The Seaview, The Cosmopolitan, Ardmore 2 and Scotts Square

6) The unknown – Orchard View, Ardmore 3, HPL and SC global.

Taking UOL as a standalone entity, which mean largely leaving out Other Wee’s related empire will spell — complicated or spider-web? Not too sure but with much document being available through the 4 listed companies UOL, Pan Pacific Group, UIC and SingLand, I only see lot and lot of documents to read rather than opaque. In fact, I believe the information is so good that a formal evaluation of the UOL can be done which also mean getting the valuation is not out of the question for investor good in property. The problem is it is labour intensive, not many will try to go through that pile of documents.

Companies like WBL and Noble Group are more complicated in my own opinion. For WBL, there are many non cash generating assets lying there, I believe accounted for cheaply, only clear to someone who able to know what assets WBL own and their likely market price. And Noble Group, which has been always view as a focus, single business company(some might complain that they are unable to know what Noble is doing — the defective is on investor side) where the key is to know how much profit Noble is generating yearly or perhaps quarterly. But is it the case? Noble has reached a point where only significant subsidiaries are included in the annual report, “others” are being left out. Other than that, there are huge piles of assets, mine properties, agricultural assets, interests in joint controlled entities, associates and long term investment can easily add up in excess of USD$1 billion. Most of them are being funded by borrowing and equity, doesn’t anyone want to know what are they, where are they or at least some breakdown?

UOL group with its main 4 listed entities consist of

1) UOL with market Cap of 2.587 billion, shareholder equity of 3.835 billion. Ignore recent share-buyback.

2) Pan Pacific Group with market Cap of 0.624 billion, shareholder equity of 0.767 billion

3) UIC with market Cap of 2.479 billion, shareholder equity of 3.298 billion

4) Singland with market Cap of 2.174 billion, shareholder equity of 3.973 billion

UOL owned 81.57% of Pan Pacific and 31.58% of UIC. As UIC own 72% of SingLand, UOL own 22.74% of SingLand. Add in share investment in UOB, UIS and Haw Par, UOL become “complicated” and being valued by many in a way that is adding up all interest in Pan Pacific, UIC, investments and development properties but with a discount. Simple but not logical. As in a situation where everything is being valued at depressed price, it will work wonderfully but in another situation where the environment is good, valuation is rich, adding them up without a discount or even a premium is a straight road to hell. Discount after discounted is sweet, premium after premium is insane.

Anyway I am more interested to write about what are those stuffs that UOL own.

Property – retail, commercial offices, hotel and residential

Under UOL

1) Faber House(exclude 1st storey) – 100% interest

2) Odeon Tower – 100% interest

3) United Square – 100% interest

3) 2 units in Eunos Warehouse complex – 100% interest

4) Pan Pacific Serviced Suites – 100% interest

5) Pan Pacific Orchard – 100% interest

6) Novena Square – 60% interest

7) One Residency(KL – under development) – 60% interest.

8 ) Sofitel Plaza Xiamen(China) – 100% interest

9) Hai He Huang Guan(China – under development) – 90% interest

10) Marina Mandarin Singapore – 25% interest

11) Pan Pacific Singapore – 22.67% interest

12) OUB Centre – 4.67% interest(?)

Under Pan Pacific Hotels Group

1) Parkroyal on Beach Road – 100% interest (P), 81.57% interest(UOL)

2) Parkroyal on Kitchener Road – 100% interest(P), 81.57% interest(UOL)

3) Upper Picker Street Site(under development) – 100% interest(P), 81.57% interest(UOL)

4) The Plaza(retained interest) – 100% interest(P), 81.57% interest(UOL)

5) Sheration Perth Hotel(Australia) – 100% interest(P), 81.57% interest(UOL)

6) Crowne Plaza Darling Harbour(Australia) – 60% interest(P), 48.94% interest(UOL)

7) Crowne Plaza Parramatta(Australia) – 60% interest(P), 48.94% interest(UOL)

8 ) Sheration Suzhou Hotel & Tower(China) – 100% interest(P), 81.57% interest(UOL)

9) Parkroyal Kuala Lumpur(Malaysia) – 100% interest(P), 81.57% interest (UOL)

10) Parkroyal Penang(Malaysia) – 100% interest(P), 81.57% interest(UOL)

11) Parkroyal Saigon(Vietnam)- 100% interest(P), 81.57% interest(UOL)

12) Hotel Sofitel Plaza Hanoi(Vietnam)- 75% interest(P), 61.18% interest(UOL)

13) Hotel Sofitel Plaza Saigon and Centre Plaza(Vietnam) – 26% interest(P), 21.21% interest(UOL)

14) Parkroyal Yangon(Myanmar) – 95% interest(P), 77.49%(UOL)

Under UIC

1) UIC building – 100% interest(UIC), 31.58% interest (UOL)

2) Stamford Court – 100% interest(UIC), 31.58% interest(UOL)

3) West Mall – 86% interest(UIC), 27.16%(UOL)

4) Sheraton Tianjin Hotel(China) – 36%(UIC), 11.37%(UOL)

5) Tianjin Jun Long Square(China – under development) – 51%(UIC), 16.11%(UOL)

Under SingLand

1) Singapore Land Tower – 100% interest(S), 22.74% interest(UOL)

2) SGX Centre 2 – 100% interest(S), 22.74% interest( UOL)

3) Clifford Centre – 100% interest(S), 22.74% interest(UOL)

4) The Gateway – 100% interest(S), 22.74% interest (UOL)

5) ABACUS Plaza and Tampines Plaza – 100% interest(S), 22.74% interest (UOL)

6) Marine Square – 53.1% interest(S), 12.07% interest(UOL)

7) West Mall – 50% interest(S), 27.16% interest(UOL)

8 ) Novena Square – 20% interest(S), 64.55% interest(UOL)

9) Pan Pacific Singapore – 53.1% interest(S), 34.74% interest(UOL)

10) Marina Mandarin Singapore – 26.5% interest(S), 31.03% interest(UOL)

11) Mandarin Oriental Singapore – 26.5% interest(S), 6.03% interest (UOL)

12) Beijing Landmark Towers(China) – 19.95% interest(S), 4.54% interest (UOL)

Is this a complete list? I don’t know but if there are few that slip pass, it will be most likely “hide” under the unquote equity investments and some overseas interests like “Success City”. And this list pretty much confirmed with Wee UOL interests in Marina Area where its interests as a whole greater than SingLand commercial offices. And with the interests disperse around, it will be interesting to know who own the rest of Marine Shopping Centre and 3 hotels. Interestingly, OUE own another 1/4 interests in Marina Mandarin and 50% interest in OUB Centre.

Investment – quoted and unquoted

UOL : UOB – 2.2%, UIS, Haw Par and others – 364.65 million as at 31/03/09

Pan Pacific Hotel Group : Unknown – 11.86 million as at 31/03/09

SingLand : Unknown – 12 million as at 31/03/09

Property development

The easy way to look at it is UOL has 1.347 billion of development properties as at 31/03/09 where it ownership crossed 50%. So it excluded a sustainable amount being accounted for under associated companies interests.

That is the same for UIC and SingLand where 1.052 billion of development properties as at 31/03/09 which also exclude a sustainable amount being accounted for under associated companies interests. Interestingly, UOL, UIC and Singland team up and develop properties, if consolidated under one company, the amount in development properties will increased but at current status, the way to look for earnings from these development will be return on investment through dividend payback from associated companies.

I guess this pretty much add up all the main points.

 

 

Long term contracts? Increasing market share? lucrative deep sea segment?

Demand > supply in the Offshore support industry is well known for years( Since 2001/02, 2009 is the no. 7th year since I heard of it ) but that doesn’t mean it is time for fairy tale.

The reality is all listed players here are tiny back then(exclude KeppelFel and SembMarine). That include Jaya and 2 local players bought by DryDock World. Other are not listed or yet to join in the fun.

Anytime, there will be another “Ezion” popping up — just like the latest Bee Mar LLC with its state of art new-build vessels. And wonder why biggest players like Tidewater and Seacor had a fleet of vessel with average age at over 20 years in 2006(from 2006 wrap up by marcon.com)?

Ponder why… the answer is obvious.

Lastly with every segment of shipping in over supply situation, the where is the honey pot?

Published June 10, 2009

In search of the happy median in oil price

The oil price is not the equilibrium between oil supply and demand, says Shell CEO

By RONNIE LIM
ENERGY EDITOR

IS THERE a Goldilocks oil price – not too hot, not too cold, but just right – to help global economies through the downturn?

True to form, Shell chief executive Jeroen van der Veer – who participated in a media dialogue on the sidelines of the Asian Oil and Gas conference in Kuala Lumpur this week – shied away from commenting directly on this. ‘We are very lousy at predicting prices,’ he has often said.

The current recession, he cautioned, masks various hard truths, especially that when the economic recovery comes it will be very difficult for the oil industry to supply all that extra energy needed. This doesn’t include the rising greenhouse gas emissions problem then.

The International Energy Agency (IEA) has said that investment in the upstream exploration and production (E&P) sector will fall by more than 20 per cent this year. And investments in renewables are falling even faster – by almost 40 per cent compared to last year.

‘All this points to new price spikes and volatility further down the road,’ warned Mr van der Veer.

Asked if he thought last week’s run-up in oil prices to US$70 a barrel denoted a market which had run ahead of itself, he said: ‘Shell’s key message is regardless of whether the oil price is high or low, or volatile, we simply monitor it to see if we can do a better job than the competition. If you know that, then you take the oil price as it is . . . so we see ourselves as a price taker.’

‘But having said that, in the long term the world will find difficulty securing supplies, so the oil price will not be really cheap. Short-term we don’t really have a clue on how oil prices will develop,’ he said. Just as the IEA has indicated, ‘it’s hard to forecast when the next oil price hike will come, as we don’t know exactly when the recession will end, and whether it’s U-shaped or V-shaped, and we don’t know what Opec will do, and what’s going to happen with energy efficiency, and whether the habits of consumers will change. Will people buy smaller cars, or the Chinese use Hummers?’

Mr van der Veer said that his short answer to the question of ‘What is a fair oil price?’ posed by Malaysian Prime Minister Najib Razak at the Kuala Lumpur conference was: ‘We don’t know.’

The oil price is not the equilibrium between oil supply and demand, he said. ‘I’ve learnt in life that that’s not correct, as the oil price is basically expected demand compared to expected supply and we’ve seen a lot of that in the derivatives market.’

‘The reason it is (the equilibrium between) expected demand and expected supply, is because both sides have huge uncertainties. That’s one of the reasons why you have a lot of volatility to come and that gives opportunity to derivatives markets, which thrive on this,’ he said.

Asked if he thought the recent rise in oil prices was indeed indicative of economic ‘green shoots’, the Shell chief said: ‘We follow it. We think that towards end-2008, when oil prices fell to US$35, it had to do with people closing positions in the paper market then.’

‘At this moment, when we look at the world, there’s still a lot of floating storage around, again it’s about expected demand and expected supply, and maybe people are being optimistic about economies turning. But I’m just a simple businessman and not a macro-economist.’

Be that as it may, what would Shell consider a ‘comfortable’ oil price to stimulate E&P again? Rival BP CEO Tony Hayward had indicated earlier this year that US$60-US$80 oil could do the trick.

On this, Mr van der Veer said that Shell is spending a net US$31 billion to US$32 billion on capital expenditures this year, adding that ‘indeed we screen all the projects from the viewpoint of relatively low oil and gas prices, otherwise we wouldn’t do it’.

The oil giant, he said, had delayed an extension of a very large oil sands project in Canada – but this was not because the low oil prices could not support the oil sands project, he explained, but because the project market (costs of construction and materials) was overheated last year.

‘So the point is you have to balance oil prices with construction and material costs, and at this moment you get more from lower (project) costs than outguessing the oil market.’

But doesn’t this still beg the question of how the oil industry is to reconcile the dilemma of low prices depressing investments and the need to do more to gear up for increased energy demand in future?

Responding, Mr van der Veer said that ‘first of all, we’re very glad we made our final investment decisions (on various big projects) before construction costs went up, so we could avoid the top of the market, for example like offshore rigs three to four years ago before prices shot through the roof. We still benefit from that today.’

‘For the next expected oil price spike, we expect that construction prices, while down now, may go up again, so it makes a lot of sense to continue to be a high investor at this time so as to benefit from lower construction costs. Besides, if you are a constant investor, then you have constant staff and engineers, and you do a better-quality job.’

Besides, the days of easy oil are over, and that huge investments and long lead times are needed to extract oil.

Shell’s Sakhalin LNG project – expected to produce four billion barrels of oil and gas – cost just a total investment of US$20 billion, or about US$5 a barrel in costs. This was because it started work on the project way back in 1977, and it is only now that the project is starting to produce, he said.

On the role of speculators pushing up oil prices, Mr van der Veer said he was more ambivalent today about them playing a major in this than he did previously.

‘Shell did a lot of studies on this last year, and compared to two years ago when I said that the extent of open positions in the market played a major role in pushing up oil prices, now we say: We don’t know.’

‘It’s a more complex phenomena. It’s chicken-and-egg but what’s the chicken and what’s the egg? What is psychology and undercapacity and overcapacity?’

‘The only thing we can say is that the size of the paper market compared to the physical or real market has now decreased. Yes, derivatives and open positions played a role in driving up oil prices, but we feel less sure they say they were the culprits,’ concedes the Shell chief.