Clarification And Reminder
Firstly, to all my readers, I must emphasise here that although I am gloomy on the global economy, I had never, ever advise any friend to damp all equity immediately. We must be very clear here that we can only monitor the situation and make minor adjustments along the way until concrete evident emerged. For example, currently I feel that US economy is shaky or to put it correctly, uncertain, I will hold my stocks and limit any further investment regardless of the price movement. Some of my friends told me that it is stocks are cheap after correction and we may average down. The question is that it can be even cheaper. So how you define “low” in the first place? But of course if you are trading, then that is a different story.
Before global economy really goes into recession, there are definitely growth stories in certain industries or companies. Many of us know that this year, oil and oil-related companies are giving out 6 months bonuses to their employees. The US economy may be uncertain, but that does not change the fact that oil-rig providers like Keppel currently has more than $1 billion oil rig contracts on hand keeping their employees busy for next few years. What else do we have besides oil?
Koh Brothers – Under-priced
Another lucrative, billion-dollar project is the Integrated Resort. This is nothing new to Singaporeans. The whole IR project is expected to cost some $5 billions (can’t remember is in US$ or S$). As of 21 Dec 2007, as far as I know, the casino construction contract has yet to be awarded. So who will be awarded has always been my question. Discounting foreign conglomerates, locally, only those with substantial size (manpower, finance) and with good track records stands a chance. And in my opinion, the following companies may stand a chance especially if they join hand:
- Lam Chang
- Koh Brothers
- Ho Bee
- Lian Beng
Among these four companies, one of them, in my opinion, is mis-priced – Koh Brothers. As at 21 Dec 2007, Koh Brothers’ share was last done at $0.38. This price, in my opinion, is undervalued. The following points are my justification:
1) In a Business Times report dated 5 July 2007 (titled - Heeton expects bonanza from prime project), analyst assessed that Koh Brothers’ JV project with Heeton (The Lumos) would fetch Koh Brother approximately $0.24 a share net profit from the sale of the condo. The following is an excerpt of the article:
“Property group Heeton Holdings could recoup its entire initial investment in its exclusive The Lumos condo by selling just two penthouses and a few mid-sized units during this weekend's pre-invitation launch.
The company is confident that over a third of the 53 units at the prime Leonie Hill site will be snapped up at this Saturday's 'by-invitation-only' event for special guests.
'We have not issued any price list,' said Danny Low Yee Khim, the Sesdaq-listed company's executive director and chief financial controller. 'But I expect property agents will have indicative prices benchmarked against neighbouring properties in the vicinity. Some are apparently coming with blank cheques from their invited clients.'
Key among these 'neighbouring properties' is SC Global's Marq On Paterson Hill, which set a new record last week when a unit was sold for $5,100 per square foot (psf). And all 21 apartments in the first phase of that 66-unit luxury development - just down the road from Lumos - have been taken up at an average selling price of $4,137 psf.
Market watchers reckon units at The Lumos could fetch well over $3,000 psf. At this price, Heeton and Koh Bros (each has a 50 per cent stake in the project) stand to make some $220 million - or $110 million each - in profit.
This works out to about 50 cents per share for Heeton, and 24 cents per share for Koh Brothers.
The two firms bought the site - previously Hilton Towers - in April 2006 for $79.2 million, or about $880 psf per plot ratio, including a development charge of about $3.9 million. Coupled with construction cost, the total cost is said to be well under $1,200 psf…..”
2) In Jun 2007, Koh Brothers announced that it has formed a consortium with a few big players including Heeton and acquired prime freehold site at Newton road.
3) In Nov 2007, Koh Brother announced that it has acquired freehold sites at prime Bukit Timah road and another one at Changi road.
4) In Dec 2007, Koh Brothers was awarded a project from MOE for the construction of River Valley High school and hostel.
The Integrated Resort (Casino in Singapore) Contract
In my opinion, current price of $0.38 a share is under-priced with
existing contracts plus those newly awarded particularly The Lumos condo. Assuming that the analysts are correct, at $0.38 a share, you are actually paying $0.14 for Koh Brother’s business. Let’s not drift too far away from my most interested topic – the IR project. Among the four companies that has the potential of tendering and carry the IR project, I chose Koh Brothers. Ok, may be I should say I bet that Koh Brothers might get it and since I believe that its price is undervalued, I had a safety margin.
In Dec 2007, Koh Brothers announced that it has formed a JV with Lian Beng to tender for the casino tower. Its share price surged to a high of $0.49 but subsequently retreated to $0.38. I hold on to it. I wanted to continue the game until I see the last card.
Koh Brothers 1H2007
In Koh Brothers’ interim report, gross profit grew by 42% to $14 million. However, property revaluation caused Koh Brothers’ interim profit to jump 2,225% to $30 million. As such, I am expecting better performance and more good news especially with existing and new projects awarded. I will do detail analysis of Koh Brothers financial report separately.
In my opinion, Koh Brothers’ current price of $0.38 is cheap. And I am not even talking about IR project here. The IR project will be a great catalyst. Therefore, I don’t think investors are not paying a lot for $0.38 a share and thus offering good safety margin. How much is the safety margin I don’t know. And don’t ask me what’s my expected price of Koh Brothers. This is because I don’t know and I never set price target; never in any of my article. At $0.38 a share, I call a buy on Koh Brothers.
Firstly, to all my readers, I must emphasise here that although I am gloomy on the global economy, I had never, ever advise any friend to damp all equity immediately. We must be very clear here that we can only monitor the situation and make minor adjustments along the way until concrete evident emerged. For example, currently I feel that US economy is shaky or to put it correctly, uncertain, I will hold my stocks and limit any further investment regardless of the price movement. Some of my friends told me that it is stocks are cheap after correction and we may average down. The question is that it can be even cheaper. So how you define “low” in the first place? But of course if you are trading, then that is a different story.
Before global economy really goes into recession, there are definitely growth stories in certain industries or companies. Many of us know that this year, oil and oil-related companies are giving out 6 months bonuses to their employees. The US economy may be uncertain, but that does not change the fact that oil-rig providers like Keppel currently has more than $1 billion oil rig contracts on hand keeping their employees busy for next few years. What else do we have besides oil?
Koh Brothers – Under-priced
Another lucrative, billion-dollar project is the Integrated Resort. This is nothing new to Singaporeans. The whole IR project is expected to cost some $5 billions (can’t remember is in US$ or S$). As of 21 Dec 2007, as far as I know, the casino construction contract has yet to be awarded. So who will be awarded has always been my question. Discounting foreign conglomerates, locally, only those with substantial size (manpower, finance) and with good track records stands a chance. And in my opinion, the following companies may stand a chance especially if they join hand:
- Lam Chang
- Koh Brothers
- Ho Bee
- Lian Beng
Among these four companies, one of them, in my opinion, is mis-priced – Koh Brothers. As at 21 Dec 2007, Koh Brothers’ share was last done at $0.38. This price, in my opinion, is undervalued. The following points are my justification:
1) In a Business Times report dated 5 July 2007 (titled - Heeton expects bonanza from prime project), analyst assessed that Koh Brothers’ JV project with Heeton (The Lumos) would fetch Koh Brother approximately $0.24 a share net profit from the sale of the condo. The following is an excerpt of the article:
“Property group Heeton Holdings could recoup its entire initial investment in its exclusive The Lumos condo by selling just two penthouses and a few mid-sized units during this weekend's pre-invitation launch.
The company is confident that over a third of the 53 units at the prime Leonie Hill site will be snapped up at this Saturday's 'by-invitation-only' event for special guests.
'We have not issued any price list,' said Danny Low Yee Khim, the Sesdaq-listed company's executive director and chief financial controller. 'But I expect property agents will have indicative prices benchmarked against neighbouring properties in the vicinity. Some are apparently coming with blank cheques from their invited clients.'
Key among these 'neighbouring properties' is SC Global's Marq On Paterson Hill, which set a new record last week when a unit was sold for $5,100 per square foot (psf). And all 21 apartments in the first phase of that 66-unit luxury development - just down the road from Lumos - have been taken up at an average selling price of $4,137 psf.
Market watchers reckon units at The Lumos could fetch well over $3,000 psf. At this price, Heeton and Koh Bros (each has a 50 per cent stake in the project) stand to make some $220 million - or $110 million each - in profit.
This works out to about 50 cents per share for Heeton, and 24 cents per share for Koh Brothers.
The two firms bought the site - previously Hilton Towers - in April 2006 for $79.2 million, or about $880 psf per plot ratio, including a development charge of about $3.9 million. Coupled with construction cost, the total cost is said to be well under $1,200 psf…..”
2) In Jun 2007, Koh Brothers announced that it has formed a consortium with a few big players including Heeton and acquired prime freehold site at Newton road.
3) In Nov 2007, Koh Brother announced that it has acquired freehold sites at prime Bukit Timah road and another one at Changi road.
4) In Dec 2007, Koh Brothers was awarded a project from MOE for the construction of River Valley High school and hostel.
The Integrated Resort (Casino in Singapore) Contract
In my opinion, current price of $0.38 a share is under-priced with
existing contracts plus those newly awarded particularly The Lumos condo. Assuming that the analysts are correct, at $0.38 a share, you are actually paying $0.14 for Koh Brother’s business. Let’s not drift too far away from my most interested topic – the IR project. Among the four companies that has the potential of tendering and carry the IR project, I chose Koh Brothers. Ok, may be I should say I bet that Koh Brothers might get it and since I believe that its price is undervalued, I had a safety margin.In Dec 2007, Koh Brothers announced that it has formed a JV with Lian Beng to tender for the casino tower. Its share price surged to a high of $0.49 but subsequently retreated to $0.38. I hold on to it. I wanted to continue the game until I see the last card.
Koh Brothers 1H2007
In Koh Brothers’ interim report, gross profit grew by 42% to $14 million. However, property revaluation caused Koh Brothers’ interim profit to jump 2,225% to $30 million. As such, I am expecting better performance and more good news especially with existing and new projects awarded. I will do detail analysis of Koh Brothers financial report separately.
In my opinion, Koh Brothers’ current price of $0.38 is cheap. And I am not even talking about IR project here. The IR project will be a great catalyst. Therefore, I don’t think investors are not paying a lot for $0.38 a share and thus offering good safety margin. How much is the safety margin I don’t know. And don’t ask me what’s my expected price of Koh Brothers. This is because I don’t know and I never set price target; never in any of my article. At $0.38 a share, I call a buy on Koh Brothers.
