Sing Holdings: 43% discount to Net-Net Working Capital

singholdings
Source: Yahoo Finance

Key statistics:

Market Cap (SGD): 124,310 mil

52-week Low range: S$ 0.34-S$ 0.29

Rolling P/E: 3.03

Net Asset Value (SGD) : 62.9 cents

Price to Book Value: 0.493

Cash per share (SGD) : 17 cents

Total debt to Equity : 15%

Net-Net Working Capital (SGD): Cash (100%) + Receivables (75%) + Inventories (60%)

= 68,293 + (84,380 x 0.75) + (145,075 x 0.6)

= $218.623 mil

*** Note: I’ve altered the original formula to suit the nature of the business

Net-Net Working Capital per share (SGD): $0.545

Business

Sing Holdings Limited, an investment holding company, engages in the property development activities in Singapore. The company develops and leases residential and commercial properties. Its property portfolio includes landed houses, apartments, condominiums, office and industrial buildings, factories, and warehouses.

Completed properties for sale (Inventories)

Majority of the properties available for sale are unsold units of Robin Residences, according to its 2nd quarter announcement, 30% have not been issued option to purchase. The Group also owns BizTech Centre, with 47 strata units and a saleable area of 48,957 square feet in the industrial building. Of this, approximately 94% is tenanted.

With the current cooling measures in place and the uncertainties over the global economy, the Group expects buying sentiment in the Singapore property market to remain sluggish. Hence, by conservative measure, I have discounted the value of these unsold properties by 40%. I am aware that this is a conservative value for those assets but the main point is to provide sufficient margin of safety against a sluggish property market. The management has warned about the rest of 2016 in its earnings release.

“In the absence of new projects and with significantly lower revenue to be recognised from its existing properties, the Group expects to continue to report low profit, or loss, for the remaining two quarters of 2016.”

Therefore, I feel that a conservative valuation is justifiable.

Insider buying

Lee Sze Hao, Managing Director and Chief Executive Officer, added 400,200 shares to his name at an average price of $0.32 on 21 October 2016. On 25 October he bought 90,000 more shares via F.H. Lee Holdings (Pte) Limited. In total, Lee’s stake in the company increased from 38.33% to 38.45% as a result of the recent purchases.

Major concerns

The lack of new projects suggests that revenue will be significantly lower and the sluggish property market will be a major impact. The Company has been participating in Government land tenders to replenish its landbank but was unsuccessful. Evidently, the management could be under pressure to bring in new business or venture abroad to generate new flow of projects.

Recent Developments

Sing Holdings announced that the Company’s wholly-owned subsidiary, Sing Development Limited, together with Wee Hur Development Pte. Ltd, has on 27 September 2016 submitted a joint tender bid of S$287.1 million for a land parcel at Fernvale Road. If successful, Sing Development and Wee Hur Development will form a joint venture company in Singapore to undertake a condominium development with a gross floor area of about 51,588 square metres on the land parcel. The shareholding structure of the joint venture company will be as follows: Sing Development 70% Wee Hur Development 30%.

The Group has also announced that they have entered into a conditional Property Sale Agreement with GL InvestmentCo Melbourne Pty Ltd to acquire a hotel known as Travelodge Docklands in Melbourne, Australia. Travelodge Docklands is a freehold, 14-storey hotel located at 66 Aurora Lane, Docklands, Melbourne. The Hotel comprises 291 guestrooms, lobby, a food and beverage outlet, meeting rooms and other amenities.

The Hotel is currently leased to Medina Property Services Pty Limited on a long term basis. On completion of the Acquisition, the existing hotel lease agreement with Medina Property Services will continue to be in effect and all rights and obligations under the Hotel Lease will be transferred.

Why I chose Net net working capital value vs Net Current Assets value?

Sing holdings are light on fixed assets, 98% of its book value are in current assets. Hence, Net Current Asset valuation would be no different from Tangible book value. Due to the nature of the business and its balance sheet, there are only 3 assets that drives the most value, Completed properties available for sale, receivables and cash.

 

 

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2 thoughts on “Sing Holdings: 43% discount to Net-Net Working Capital

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  2. Dear Ruzaini, it is a decent blog that you have there. Your philosophy on deep value investing will pay off in the long haul because you are operating in a segment which is perhaps more contrarian than most investors. Deep value investors on the whole are few and far between especially in markets such as Singapore. Almost everyone you speak to is some form of a value investor. But if you look deep enough, they are chasing growth at obscene prices. I am myself a deep value investor and have had a good run with deep value stocks.

    I do blog at http://www.theholyfinancier.com . In any case, God bless and may you be blessed with prosperity and abundance!

    Like

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