Posted by: donmihaihai | June 28, 2009

Buy at swamp price, sell at condo price

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.



  1. Hi donmihaihai,
    It’s a refreshing and thoughful article! Can you share the source of where you find the breakdown of Wheelock’s list of investments?

    Also similarly for UOL, UIC, etc’s property breakdown.

    With apprecaition, Mitchell

  2. Thank you mitchell.

    Go to their websites, search for annual reports then start reading from the earliest to latest report.

  3. Hi donmihaihai,

    Last year I looked at Wheelock’s balance sheet, concentrating on cash and near_cash items (in red) at

    I believe that the accounting terms like book value and NAV are meaningless in the real world. Only cash has any value!


  4. Well if book value and NAV are meaningless in real world, then you shoudn’t be looking at financial statements.

    If only cash has any value, then why bother to pay anything more than the amount of cash a company has?

    Cash is just cash nothing more, nothing less. But…
    100,000K to a spender is as good as zero.
    100,000K to a saver is as good as 100,000K after inflation.
    100,000K to a reasonable good investor is as good as his potential.

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