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.


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