Posted by: donmihaihai | August 10, 2020

How could SPH lost so much?

Yeah. I got the title from a local blog. A blog that mainly write about investing in stocks. In fact he wrote about how much the fell in a number of well known stocks from 2012 to 2020.

I don’t know that particular well on these few stocks despite them being well known but I do know that over the same period, only a few of the current STI component stocks are trading at above their end 2012 price. Hard not to be as STI is down by more than 20% from their peak. But then there are always more when stocks are down by more than 50%.

An investment into stock is about being shareholder of a company and if the company is private, my return will be the money that thrown off by company. And if the company’s shares is quoted, then my return will include the differences between my buying and selling prices.

How much the company is able to thrown out on a long run depend on their long run ROE. Let not talk about exceptional businesses, an average business like our three local banks can generate good long term return. A long run ROE of 10% is very decent.

Because we are talking about quoted stocks, another key is buy and sell price. Take a look at the top 2, SCM and SPH written on the blog.


31/12/12 share price – 4.60, NAV- 1.20, P/NAV – 3.9X

Current share price – 0.38, NAV – 1.04, P/NAV – 0.37X


31/12/12 share price – 4.03, NAV – 1.39, P/NAV – 2.9X

Current share price – 1.07, NAV – 2.16, P/NAV – 0.5X

The above pretty much explain the drop. P/NAV, dropped by just over 90% from 3.9X to 0.37X for SCM. Almost the same as the drop in share price and the remaining is actually because SCM managed to reduce their NAV over the period. SPH increased their NAV over the period which is why the drop in share price(73%) is not as great as the drop in P/NAV (83%).

These 2 are extremes but even a drop of P/NAV of 2X to 1X mean lost of 50%. These representing the buy and sell prices. Something we as an investor has control and can control. If you do exactly as in buying at 2012 valuation and sell in current valuation, good luck.

What we can’t control is how well the company will do in the future. We can make reasonable assessment of the company future. It can be learned but it is not going to be easy. Everyone make mistake. I made mistakes and going to make more mistakes. When situation changed, decision changed. Just like WB with airlines.

This is what make investing interesting.

Looking at the local stocks or especially STI stocks, What will their businesses like in 2028? In 2028, we are unlikely to be still facing COVID 19 but that doesn’t mean their won’t be other challenges. But I can’t make the assessment of the businesses for you.

Are the current valuations attractive for the potential return? Neither can I do it for you but the writer of the blog wrote about P/B of selected stocks which are mainly STI components here

You can conclude yourself. Doing that is part of the reason why investing is so interesting.

Posted by: donmihaihai | April 26, 2020

Good news

Good news during crisis.

Good news from CDL. The younger generations are running CDL and I believe they are pretty aggressive. I don’t know if it is good or bad at the moment but well, a small piece of good news is its bought about 8% of IREIT Global at $0.49 per unit which is about 0.6XBV per unit. Total investment is just $25.5 million. Small changes actually.

Shortly after, CDL gives a better news, renegotiated the investment in Sincere Group with a bigger interests at a bigger discount. All in, invest about $1B for a 60% interest at a close to 50% discount to net assets value. This investment will like CDL says, provide a good entry into China and at a cheap price.

As in shareholder, I love this and it is easy to see in property companies. Example, I purchased CDL at valuation of 0.7X NBV. Now CDL purchase IREIT Global and Sincere Group at 0.6X and 0.5X NBV respectively. Which also mean that indirectly, I am buying IREIT Global and Sincere Group at 0.42X and 0.35X NBV respectively. Isn’t that good news? And It doesn’t stop here for CDL, because CDL privatised M&C about a year ago at good discount to NBV.

What is next? Hong Kong Land.

It purchase a good piece of land in Shanghai during the China Lockdown which is Feb 2020. I don’t know if Hong Kong Land over paid or what, but it is hard to believe that Hong Kong Land will overpaid for such a piece of land during the depth of China Lockdown. And That is USD4.4B for the land only. And as per Hong Kong Land, they will be building another Central in Shanghai.

This is good news.

Here is the bad news. Crude price crashed.

And then what?

Really good news. Oil get cheaper, good news for any company having old related input cost. And in longer run, people will use cheap oil more because it is cheaper. And it path the route for more usage in the future.

With the crash, it will push many marginal oil related companies down and shut up faster. Capex with everything else down. Now this is good new for survivors. It balance the demand and supply faster. Company like Baker Technology with enough resources will see light at the end of the tunnel.

Baker Technology, so unloved now at less than $50M market cap, was a favourite at more than $200M market cap. Time really changed. It is not that people don’t know that Baker Technology is cheap but who will buy it with the current gloomy outlook? But it is precising that the industry is so dark after so many years of darkness which make the crash of oil price to be good news.


Posted by: donmihaihai | April 10, 2020


COVID 19 increased the tension between landlords and tenants. I think everyone is going to take some pains. Some will be more painful than other.

Talk about Master lessee of hospitality REIT.

I have only read CDLHT before but I was thinking master lessee is crap to investors. I get the attractiveness of this structure. Capped the downside and ride along the upside. But for hotel, the upside can be very up. Extreme case will be UOL Myanmar hotel. Was hardly profitability until opening up of Myanmar resulted in extraordinary profits for the next few years until competition from new hotels. Now I would say if there is a master lessee, it will get a free ride on the upside. Not to forget master lessee does not provide the capital for the hotel.

The first reaction I have with hotel being empty due to COVID 19 is master lessee will walked. The fixed rate in the lease which is protecting the REIT will not always work. When the hotel is empty, how is the master lessee going to pop up the differences? Since master lessee is not providing capital for the hotel, it is a business that take a small portion of total income, ignoring the extreme case. A business like this will not be able to pop up the majority or fixed rate for long. Can’t be otherwise. A promise or contractual promise is only as good as the ability to pay. So REIT will share the risk.

Now I call it head (upside) I lose, tail I lose bigger.

The strong sponsor would likely to support the REIT when they are the master lessee mainly due to reputation or good business sense.

Now I OT a little. If a REIT needs their sponsor to support during bad times, then why are REIT being valued higher than sponsor? It doesn’t make sense.

As for sponsor like CDL, it will likely to support the REIT to a certain point but not to the point of harming the parent company. Well it is simple, which is more important? A REIT where their interests is in 30something % or …………………….. For a company like CapitaLand, it will be different because majority of their investment properties are REITed and they need their REIT to exit properties in their fund. The support level will be higher, not because they like it but out of no choice. Still support won’t be long as that is additional losses on top of operating losses. One punch become two punches.

I don’t see REIT being a better business model. In fact, I think it is at disadvantage against property company owning investment properties. The first thing is it doesn’t has reserves when it is paying more than 90% of income as dividends. A reasonable run property company is generally more safe than a REIT precisely because they are paying way less they earned as dividends. What has been retained can be used during rainy day like now and take advantage of opportunities that pop like now. REIT can’t do that, the lengthy duration for buying a new property and to issue new units at depressed price? It basically make no sense at all, REIT is shut when opportunities pop. From the day I look at Hong Kong Land, I have been looking forward to a day where it buy the remaining 2/3 interest of MBFC and OFQ from REITs at some cheap prices. It only make sense for it to happen but I don’t know if it would happened.

REIT will needs to share the risk, no question about it. Investors who depend on the dividend as income will need to think and go back to basic – reserves. You can’t live your life like a REIT, spend everything you earn (dividend) and think that money(dividend) will keep flowing in, good or bad times. Or in bad times hopefully that government will support you all the way. Good luck when government reserves is depleted……..

Actually, just like in 2008, now is actually a good time to look at REIT, especially those trading at a quarter or 0.5X BV or historical yield at 10% or more because their valuation make sense for sound investment and has to take any future capital calls into consideration.


Posted by: donmihaihai | March 23, 2020

Oh the market 2

Never like it more when the market keep dropping and in red. I am buying anyway.

I don’t know how far the market will drop or where is the bottom.

I don’t know how far the share price of co. I am buying will drop or where is the bottom.

I know that banks will yield a double digit(teens) return when buying below 1x BV and the yield increase with decrease in price. And I want this as long as I am buying.

I know that my each buy is lower than the previous and some of the co. I am buying is yielding double that of banks and I am looking to buy more.

The market is not there to guide me but serve me.

I know that when I lose money, it will be because I have made a mistake in evaluating the company. I have failed many times and will fail again.

I write this because I hope that retail investor is able to see what they know and what they don’t know.

Lastly, to anyone who try to give me advise. I don’t know who is the smart guy out there and who to listen so why listen? I do know that if he is that smart, he will be at minimum siting on big gain shorting STI from recent peak to now. Ok now I will listen.

Posted by: donmihaihai | March 18, 2020

Oh the Market

Lets start by quoting BH 2009 shareholder letter

We entered 2008 with $44.3 billion of cash-equivalents, and we have since retained 0perating earnings of $17 billion. Nevertheless, at yearend 2009, our cash was down to $30.6 billion (with $8 billion earmarked for the BNSF acquisition). We’ve put a lot of money to work during the chaos of the last two years. It’s been an ideal period for investors: A climate of fear is their best friend. Those who invest only when commentators are upbeat end up paying a heavy price for meaningless reassurance. In the end, what counts in investing is what you pay for a business – through the purchase of a small piece of it in the stock market – and what that business earns in the succeeding decade or two.

Finally the market is exciting. Wasn’t so for a long time and decent companies were selling at decent or if not at premium. I don’t need meaningless reassurance and yes I am buying. For individual company, I am buying not because the share price dropped but because the price make sense. Now I am not buying Micro Mech despite the drop from over $2 to about $1.5 because the valuation just don’t excite me. I like the businesses but valuation play a big portion of my decision.

So STI is down by close to 30% from the peak. First of all, I think STI is fairly valued or if not slightly undervalued at 3.5K. 3 local banks make up 35% of STI and top 5 reaches 50%. I am not good with these banks, but their ROEs are decent, about 11% to 13%. Buying them at say 1.3X BV will produce close to 10% yield on constant valuation. Not bad actually. Buying at current level of 0.8 to 0.9X BV will produce close to 15% yield on constant valuation. 15% is real good but still I am not good with bank and the closest I have is owning some Haw Par shares. Sadly, Haw Par like Micro Mech is not that cheap.

There are cheaper stocks around with some selling at yields of 20% of more. This is exciting.

I do invest my CPF OA in funds, now I don’t know which funds are good. So I follows the nerds, always buy on dips. Only dare to buy when market drop around 15% and this 15% must not from bubbliest top. For this, price is everything. The more it drop, the more I buy and never know when the recovery will be. Buying right is everything.

My crystal ball on market direction is lousy and my focus is always the same, focus on yield on individual stock and price for markets. Which mean I get excited with higher and higher yield and I am good at ignoring whether I am 20% or 50% underwater. As for the funds, just keep catching the falling knife.

A prolonged multi years bear market will certainty get my excitement to the next level.


Posted by: donmihaihai | January 13, 2020

Sanity or insanity.

Take CCT as an example. It has about 9.7B of total assets of which majority are investment properties. This 9.7B assets earned about 0.4B income in 2018 on unleveraged basis.

If I pay 9.7B for the whole of CCT, I am paying about 25X FY2018 earning. Ie PE of 25, or capitalisation rate of 4%. PE inversion mean earning yield of 4%.

Add in some leverage, fund 2.8B of the 9.7B assets with debts mean I need to fork out 6.9B of equity(money). The return changed. PE is now 21 and earning yield are at 5%. Cap rate doesn’t change.

The above is true if I buy CCT at BV or unleveraged basis. The market is suggesting otherwise. Currently PE is about 23X, earning yield of just above 4%.

With all the super positives of CCT, CCT DPU CAGR for 2014 to 2018 was just 0.56%. Inflation rate in Singapore for next few years is expected at 1.4%pa. CCT DPU CAGR from 2005 to 2018 was 1.9%. Just a little better.

What is the sanity of paying above 20X stable earning for a property company/REIT that hardly beat inflation? The market says YES.

Take Bund Center Investment Ltd as another example. BCI own the integrated Bund Center in Shanghai and Golden Center in Ningbo. Its NBV is about 0.4B while the properties are valued much higher at 1.9B. My guesstimate is BCI will generate 0.06B a year.

This make the 1.9B valuation at 3% Cap rate and a PE of 32X. The leasehold of the Bund Center will down to Zero in 26 years or so. Something is not right. Of course, I won’t know how much BCI will earn in the next 26 years. Nobody knows anyway. The rule of law in China for property is crap, at the end of the lease, taking back lands on a mass will resulted in all kind of troubles. So existing owners which include BCI might be able to extend the lease with another payment.

The valuer is saying that the 26 years leasehold integrated Bund Center is worth 3% cap rate or PE of 32X. The stock market says NO and give it a valuation of 0.45B. Look like insanity is the valuer and stock market is rather sane.

At 0.45B market capitalisation, earning yield is 13% and PE is 8X base on my guesstimated earnings. Add in information like BCI is sitting on 0.1B cash after netting off all liabilities, and compare to CCT, I am wondering whether I should say the market is insane.

This is stock market.

Posted by: donmihaihai | December 2, 2019

Currency risk. what currency risk?

We have a small domestic market. Most sizeable companies have overseas operation and that can’t be avoid. Hence there is always a currency risk.

Many years back, a friend told me, she won’t invest in Hong Kong Land share because it is quoted in USD. There is a currency risk. Company like Keppel, SIA, Sembcorp are fine because they are in SGD…….wxyz#$$%.

Of course, she trades and that explain on why. Understanding how Hong Kong Land, Keppel, SIA and Sembcorp generate their earnings will know that quoted currency doesn’t matter at all. At worse it just adds another small layer of fractional cost.

Recently, there are people who hit on Food Empire and Yangzijiang currency exposure with number from the currency risk of their AR. Oh from AR, the numbers are there and easy to pick up. But well, those number in the AR can be a stranger to people without a good understanding of accounting. The number is best understood when one learned it language(accounting) and use the language to read the numbers rather than reading the number base on individual language.

Unless there is an outright fraud, don’t blame the company that they are using a foreign language. Investing is the only place where I see people investing their life saving after doing due diligence on something they don’t understand because it is written in foreign language.

Back to currency risk and a quick look at Micro Mechanics, Food Empire and Yangzijiang.

Micro Mechanics. Note 19, foreign currency risk of AR2019. Basically, it says expose to USD, Yen and Peso. Using B/S figure of financial assets and liabilities, it presents a net exposure of USD4.6M and a 10% movement = USD0.469M. Easy.

But wait, this does not mean, a 10% movement in USD-SGD next year will resulted to somewhere close to USD0.469M. B/S net exposure is not P&L exposure.

Next, doesn’t it look strange? Micro Mechanics operates in Malaysia and China, 2 of their top 3 markets but there is zero B/S exposure? How can that be? Well, the only explanation is the amount there representing currency not in the functional currency of their subsidiaries and the AR has not clearly state it. And when a subsidiary functional currency is say RMB and it has balances in RMB, it means there is no risk (rightfully so at subsidiary level) and this will not be reflected in Micro Mechanics SGD financials. Now when RMB depreciate against SGD, the amount will not be calculated into the risk exposure. But this depreciation of RMB against SGD is REAL especially so when REAL money is being remitted.

In short, the information of Micro Mechanics currency risk is unclear and close to useless

Yangzijiang. Note 37. Currency risk of AR2018. Basically, it says expose to USD, EUR and SGD.

Started with financial assets and liabilities from B/S, where net exposure is shown followed by removing amount in functional currency then add in contract assets and highly probable forecasted transaction in foreign currencies, it says YZJ has net exposure of RMB18B in USD. A 11% movement net after tax will be close to the amount presented in YZJ AR.

So Yangzijiang has done what Micro Mechanics has not, clearly state the exposure is after removing amounts in functional currencies then add in highly probable forecasted transaction in foreign currencies. I don’t know how highly probable these amounts are and how far out into next year. While the intent is good, the result is likely to be nowhere near what the real exposure if a 11% movement happened. And most importantly, like Micro Mechanics, those that are not presented in AR are as real as those presented.

Food Empire. Note 37. Foreign currency risk of AR2008. First paragraph says it all.

The Group has transactional currency exposures arising from sales, purchases or operating costs by operating units in currencies other than the unit’s functional currency. Approximately 2.2% of the Group’s sales are denominated in currencies other than the functional currency of the operating unit making the sale, whilst 66.4% of purchases and operating costs are denominated in the unit’s functional currency.

It doesn’t matter whether operating units is a subsidiary or group of subsidiaries, basically, if the subsidiary functional currency is RUR and a 2.2% mean only 2.2% of the subsidiary sales are in other currency other than RUR (functional currency). Where is the risk?

But only about 66.4% of purchases and operating cost are in RUR. Sound good? Think why such high level of cost not in RUR? Where are their manufacturing plants? Indirect cost? Marketing related cost will most likely to be in the functional currency of the unit.

So, the number in AR does not address the main concern of many “investors” ie the devalue of RUR against USD or SGD. The figure doesn’t even show up.

To know the real currency risk of Food Empire, look at below.

Revenue – note 4 say main markets are Russia, Ukraine, Kazakhstan, CIS market and Indo China.

Trade receivables – note 24. Say outstanding 36M and the amount denominated foreign currencies add up to about 3M. Now this does not make sense, unless it is talking about amount not denominated in functional currencies of its entities. If not how is it possible that Food Empire has USD30M of receivables selling into Russia, Ukraine………. etc?

Cash – note 25. Same thing as note 24. Just replace receivables to cash

Trade payables and accruals – note 26. Now this time its finally say, other than functional currencies.

Loans – note 29. Mainly USD and SGD loan. Currencies mismatched!

Segment – note 33. 86M of inter-segment sales! Basically, it is saying the manufacturing is not in the sales countries. This can also be seen as non-current assets are concentrated in Singapore, Malaysia and India.

This risk presentation in AR is as good as useless for many companies and lot of errors as well.




Posted by: donmihaihai | November 14, 2019

How easy to forget

The recent 180% turn in the treatment of interest cost for property development resulted in substantial changes in the financial of companies like UOL and Oxley.

In short, borrowing cost for development property is no longer being capitalised into the cost of the development but expenses as incurred. Basically, it means higher gross profit and higher borrowing. Nothing changed except for timing differences and where the cost goes.

Watch out for companies that bark at the changes, these companies are likely to be the same that have been barking on their non recognition of revenue from sold overseas units until upon completion of the development.

Property development is inherently lumpy, so do the financial of property developers. The attitude of these developers says more about their financial health than their words. Those that keep pointing to their sold but not recognised units “forgot” that they are currently recognising the sold but not recognised units previously. What more they are still building the property. Developers who bark at the increased in borrowing cost “forgot” to say that they are benefiting from the expansion of gross profit margin due to the same changes in accounting treatment.

How easy to forget. REIT forgot to say that REIT work best when they are trading at a premium to their NAV. This is when REITs go shopping like crazy. Why not? When you have cheap money, almost any acquisition is accretive. All you need to do is to make sure that you give less than you take.

Using Keppel DC REIT scenario in recent acquisition announcement as example. The REIT is buying Data Centres at close to 8% yield with debt is taken into consideration, using money from placement at just over 4% yield.

How easy for REIT manager, when investors are like bees to honey giving the manager money at just over 4% yield allowing them to buy something with debts that produce close to 8% yield. Stupidity doesn’t need a reason. Oh yeah, at 4% yield, investor is paying close to 1.6X BV for Data Centres or REIT or investment property or property company.

When was the last time you paid 1.5X BV for a property company? That was the question I asked my colleague when he was so excited with it. Of course he was still excited. Why not, when share price jumped like crazy, why care about logic.


Posted by: donmihaihai | May 10, 2019

Money is always there, but the pockets change

Reading BH 2016 letter again and noticed that below is happening to Singapore.

You need not be an economist to understand how well our system has worked. Just look around you. See the 75 million owner-occupied homes, the bountiful farmland, the 260 million vehicles, the hyper-productive factories, the great medical centers, the talent-filled universities, you name it – they all represent a net gain for Americans from the barren lands, primitive structures and meager output of 1776. Starting from scratch, America has amassed wealth totaling $90 trillion. 

It’s true, of course, that American owners of homes, autos and other assets have often borrowed heavily to finance their purchases. If an owner defaults, however, his or her asset does not disappear or lose its usefulness. Rather, ownership customarily passes to an American lending institution that then disposes of it to an American buyer. Our nation’s wealth remains intact. As Gertrude Stein put it, “Money is always there, but the pockets change.”

 Hyflux and Tuas Spring

Since I am on Hyflux, let look at some statistics.

Statistics of perpetual class A preference shares as at 14 March 18.

13,572 preference shareholders hold 1 – 99 shares total 571,360 preference shares.

6,127 preference shareholders hold 100 – 1,000 shares total 1,461,300 preference shares.

388 preference shareholders hold 1,001 – 10,000 shares total 862,800 preference shares.

17 preference shareholders hold 10,001 – 1,000,000 shares total 1,104,540 preference shares.

That is about 20K perpetual preference shareholders and plus another 17K ordinary shareholders equal to what the press has been written about – 37K mom and pop investors.

Ignore equity shareholders because equity shareholder enjoy all the upsides and bear all downsides, the above says, on average 13,572 pref holders hold 42 pref share at $100 each, mean these 13,572 invested $4,209 in average. 6,127 pref holders hold 238 pref share at $100 each, mean these 6,127 invested $23,850 on average.

Of course these are average but it does say the amount invested by most investors are not significant and at least close to 75% of these pref shareholder invested less than $10K.

These stats actually paint a different picture from what are being printed in the news. Out of the total 37K investors printed on the news, the only one hurting from Hyflux should be less than 5K investors. Actually, logically speaking, only 405 pref shareholders (388 + 17) will be seriously hurt by Hyflux. It is a far cry from 37K so called mom and pop investors.

I can understand if one invested a lot into Hyflux pref share and finding all kind of ways to get back their money. But being the press, it has to exercise some sane thinking and professional judgement and not easily misled by other or trying to mislead other due to empathy.

Posted by: donmihaihai | April 18, 2019

Random Oxley

After reading news of Oxley for years, I was quite surprise that the aggressive property developer is telling the world that it is trying to de-leverage. I did not dive deep into Oxley and Oxley will never get pass my smell test, ie flip through the number and going into the details only if needed. I know what to look for in a property developer or owner so I actually spent lot more time pulling out number to write this article than doing my smell test.

Of course Oxley is highly leverage. Highest among the handful developers that I has seen or smelled. But the thing is, Oxley current leverage is near the lowest for whole of its listed history. 4.23X, 4.06X and 4.44X for FY2017, FY2018 & 1H2019 compare to 5X to 10X for FY2011 to FY2016. Debt to equity say the same, below 3X from FY2016 to 1HFY2019 compare to 3 to 6X for FY2011 to FY2015.

Doesn’t make sense, trying to de-leverage at the time when debts level is near the lowest? I know interest rate is going up and there is more strict regulation, and the company is taking on more projects recently. But except for interest rate, Oxley has always operates under stricter regulation since listed and while Oxley indeed is taking on more project, its equity base also increased, it is far from its hey days where it was taking on $9 to $10 dollar of assets for every dollar of equity.

If we leave interest rate out for a while, then Oxley must has made some wrong moves recently. I can guess. For a company who turn around their projects fast, taking on assets that doesn’t turn will pull down their return, especially if these assets are not as income generating or sell fast. You can’t just fuel it with debts for equity investment and over dose on debts for hotel and office. The return profiles are different from property development.

What I did not say earlier is that Oxley changed the way its account for Hotel, own use office and investment property from cost to fair value in FY2016. Fine here, nothing strange on changing accounting policies, but it has a positive impact on any leverage ratio. Now, leverage ratio also become a function of capitalization rate or direct comparison as well.

With the help of a pen, Oxley can tell other, hey our B/S improved. I have problem with co. revalue their properties sitting under PPE. Revaluation upward can easily capture gain yearly as long as the co. is pushing for cap. Rate compression and aggressive in using direct comparison. But it hurt future P&L. check Oxley hotel segment P&L, it is the worse segment within Oxley.

Another funny part on these that doesn’t make sense unless you put everything together. Hotel is depreciate within the lease period, well close to 100 yrs and own use office which is free hold, depreciate within 60 yrs. Doesn’t make sense unless it is to create a positive P&L for segmental results.

After writing so much about leverage but the most important thing to look isn’t leverage or debt to asset or debt to equity ratio. Most debts doesn’t get repay. Most get roll-over. It is the ability the service the debt, ie interest that is the most important. 3 to 5 X interest coverage is just good enough but not strong, if the company has a very stable revenue stream. Like rental. Most REITs are around 3 to 5X. Now, if one add in something like property development, there will be not much safety if the development sales is slow.

Stronger listed property has an interest coverage of 5 to 10X, these are pretty safe companies. Oxley belong to the opposite where cover is 1 to 3X.

But there are tricks here. Which interest expenses to use and which earning to use. For a company like Oxley, taking interest expenses and earning appear in P&L is useless. The P&L interest expenses reflect the loan portion for hotel, investment properties and other investment not development properties where interest cost is included in the construction cost under POC. Earning is the combination of everything. Now doing a coverage ratio blindly mean nothing.

Hey there is another trick. Taking on property development with JV or associate actually promote risk taking and present only the good stuffs. Ie. Remove debts from B/S and interest expenses from P&L. Oxley one liner income from associate and JV say superb profitability from investment in JVs and Associates. How much debts are needed to fuel these returns? What Hong Kong Land is doing should be the standard for property developers. Their calculation of interest coverage includes JV and Associate.

Hong Kong Land financial also tell a world apart on how they run their businesses through their interests in BFC and ORQ with REITs and non REIT. With REIT is way more aggressive. Something doesn’t make sense again, why do investor invest in REITs, taking a 5%++ yield and thinking that a REIT is safer than a company? The hunt for yield never stop.

Hong Kong Land financials, especially on associates and JVs is a world apart from Oxley where information is just not there. Oxley present a liner on the same thing what doesn’t tell the story. Granted, accounting doesn’t say what to disclose to be exact. How Oxley disclose is telling me what it doesn’t want to disclose. Easy.

Take one of the JV Oxley Serangoon Pte Ltd in which SLB Development has an interest as associate (one accounted as JV and another as associate??). SLB number say assets – 841M, liabilities – 837M and net assets – 4M. Haha. Don’t need to be smart to know what these numbers stand for. Oxley share of net assets is only about 2M. Oxley has close to 6B of assets and 1.5B of equity. If this development is counted as subsidiary. It will blow it B/S and how many more developments can Oxley take on? Easy answer.

So why do Oxley want to de-leverage? Oxley will never achieve the same profitability if debt-to equity ratio goes down to 1 and will never differentiate itself financially. From what I can see through the numbers, there are a few investments that is not working out at the moment.

Is Oxley trying to change from a debts fuel developer who sell project super well to something else or just go back to the good old days and make sure that its sell all units fast.



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