SPH

Singapore Press Holdings Ltd

Incorporated in 1984, main board-listed Singapore Press Holdings Ltd (SPH) is Asia’s leading media organisation, engaging minds and enriching lives across multiple languages and platforms.

Media

SPH's core business is publishing of newspapers, magazines and books in both print and digital editions. It also owns other digital products, online classifieds, radio stations and outdoor media.

Properties

On the property front, SPH owns 70% in a real estate investment trust called SPH REIT which comprises Paragon, a premier upscale retail mall and medical suite/office property in Orchard Road and The Clementi Mall, a mid-market suburban mall.

SPH also owns and operates The Seletar Mall. It built an upmarket residential condominium, Sky@eleven, at Thomson Road, and is developing a new commercial cum residential site at Woodleigh Road. It also has a stake in Chinatown Point.

Other Businesses

It is in the aged care sector and owns Orange Valley Healthcare with the acquisition of the nursing home provider for an invested amount of $164 million in April 2017, Singapore’s largest private nursing home operator.

SPH runs a regional events arm and a chain of Buzz retail outlets. It also invested in the education business - MindChamps to further strengthen its education portfolio and entering into a joint venture in August 2017 that involves investing up to $8.5 million in Han Language Centre. When completed, SPH will hold a 75 per cent share in Han Language Centre.

Singapore Press Holdings is also increasing its stake in Handshakes, the analytics platform that visually and interactively maps out relationships and events between companies and persons.

Wholly-owned subsidiary, SPH Interactive Pte Ltd (SPHI) has subscribed for an additional 5% in the total share capital of DC Frontiers (DCF), the operator of Handshakes, for $2.1 million. Following the completion of the transaction, SPHI's stake in DCF will increase from 20% to 25%.

As can be seen from the Past years gross revenue has been dropping from 1231m to 1018m.

Total page count decline moderated at -12.7% yoy. Based on our page count of Singapore Press Holdings’ (SPH) The Straits Times, total page count was down 12.7% yoy in 2QFY18 while the three segments (Recruit, Classifieds, Display) reported a 19%, 16% and 11% yoy decline in page counts respectively. The decline was driven primarily by the Display segment, which accounted for two-thirds of the total yoy decline on an absolute basis. The quarter’s decline represented a moderation from 1QFY18’s -13.6% yoy.

The drop in media (print ) may not be able to cover by the revenue generated by other businesses. It may take quite sometimes before we can see further improvement.

Net Income has been dropping from $404 million(2014) to $361 million (2017).

Dividend has been decreasing from 15 cents to current 9 cents. A drop of whopping 40%.

In my opinion,It seems that SPH has successfully diversified it's revenue streams away from it's traditional core print and media business. Now, property and other income segments contribute more profits before taxation than core print and media business to stem the overall fall in profits. Also, cost cutting measures are seeing results. Now, SPH is a true conglomerate that derives it's profits from different diversified sources and no longer heavy on it's core print and media business. 

Will this be the turnaround point finally for SPH?

Today the share price has again weaken by another 8 cents to $2.46. 

With NAV at $2.207, PE of 11.5X, Dividend yield of 3.6% is looking quite attractive.

Looking at the past dividend being payout. The average dividend for past 5 years is about 12 cents. I have roughly estimated the fair value is about $2.40.

The current price is just about 8 cents shy away from the fair value of $2.40 and roughly about 28 cents away from the NAV. It might be a good candidate / opportunity to have a second look on this true blue chips counter..

BreadTalk

BreadTalk -  these are my thoughts on BreadTalk Group. As always, do your own due diligence!. BreadTalk has grown tremendously since it’s first outlet in Bugis opened in 2000. It is now a large global F&B establishment with exposure to 18 locations in Asia and Middle East. It currently has four business divisions namely, bakery (includes BreadTalk outlets and Toast Box), food atrium (which are the food courts), restaurant (includes well known brand Din Tai Fung), 4orth (a newly started division that works on partnership with other F&B brands to bring in innovative food concepts) and others.

TA wise, I think is on a uptrend mode patterns! Looking good to re-attempt $1.98. Crossing over with ease may rise towards $2.00 to $2.10. Dyodd.

I shall look at BreadTalk recent 7 years growth since it’s recent FY17 financial report presented the past 7 years of it’s performance. First we explore how the total revenues of BreadTalk over the past 7 years have grown. It’s total revenues have grown at a compounded annual growth rate (CAGR) of 10.25% over the past 7 years. This shows that BreadTalk is still a growth company with a double digits compounded growth rate in it’s total revenues. It is not surprising considering how BreadTalk continues to release recent news of various partnerships with different partners be it F&B or non-F&B partners to grow it’s businesses. It is still in the vein of expanding and growing it’s overall business and has not slowed down it’s pace of desiring growth.

Next, we look at how the operating profits have grown. The operating profits have grown at a CAGR of 12.7%. This growth rate is higher than the growth rate of revenues. It showed that BreadTalk has achieved a good operating efficiency by growing it’s operating profits faster than revenues. A few years back, there were news of the profit margins of BreadTalk declining due to challenges faced by it’s businesses. However, in it’s latest FY17, BreadTalk has managed to reduce it’s distribution and selling expenses which were the largest operating expense to them thus resulting in a jump in operating profits y-o-y. If BreadTalk can continue to work on reducing their distribution and selling expense and even their administrative expenses, it will go well in improving their profit margins which have always been the challenge to them to maintain their profit margins even while growing their revenues.

Next, we look at how the net profit margin attributable to shareholders has changed over the past 7 years. The net profit margin 7 years ago was 3.72% and has dipped to lower margin levels below 2% but has recently recovered to 3.64% to match the margin 7 years ago. Hopefully, as BreadTalk management has mentioned before that they must not sacrifice profit margins for it’s expansion and growth. And they can continue to watch their net profit margin closely to strategise and work towards in all the best they can to decide prudently which areas of business interests to expand into and optimise their operations to reach better efficiency, scale of economy and reduce costs and expenses.
Next, we look at the earnings per share (EPS) growth over the past 7 years. EPS has grown at a CAGR of 9.95% over the past 7 years. Again, this reflects a growth company since it is very close to a double digit compounded growth rate. 

Next, we look at their growth in cashflows. Operating cashflows have grown at a CAGR of 9.2% over the past 7 years. This is in step with their CAGR in revenues though at about a 1% lower rate. If the operating cashflows CAGR growth lags the CAGR growth in revenues too much for a business, this makes one wonder where are all the cash going when the business is growing it’s topline and make sound a red flag because the business is not generating cash from it’s operations even while it registers good growth in revenues. However for BreadTalk, this is not a concern at all. Their CAGR for free cashflows is about 25.8% over the past 7 years. This is a good sign suggesting that BreadTalk is generating owner’s earnings at a high double digit growth rate (which Warren Buffett likes to look to free cashflows as owner’s earnings). 

I examined BreadTalk’s past 7 years trend in capital expenditures and found that it has remained relatively stable about same level 7 years ago and now. If their capital expenditures continue to be able to somehow be maintained at similar levels going forward while their operating cashflows keep growing, that would potentially make this F&B group very good at generating owner’s earnings (free cashflows growth). And real cash generated in the form of free cashflows is so wonderful to a business for various uses such as dishing out fatter dividends to shareholders or could be used to reinvest into the growth of the business without taxing too much leverage from borrowings. Quote: jeremyowtaip

BreadTalk’s leverage has gone higher in previous years probably due to taking on leverage to grow it’s overall businesses faster. This has also once been a concern for some investors. However, looking at their free cashflows CAGR which is high, true enough BreadTalk has the cash to reduce it’s once high financial leverage to now a lower leverage. The debt to equity ratio has reduced from 1.38 in 2015 two years plus ago when it was still at it’s highest leverage level to now at 1.14. Based on it’s FY17 balance sheet, BreadTalk generated a free cashflows of $47 million and had $41 million net debt. Thus, there is no liquidity issue for it even while it’s debt to equity ratio is still high. 

However, it seems like this group is never resting on it’s fast expansion and growth as it takes on another debt of a $100 million medium term note issued in Jan 18. While it barely has just got comfortable with reducing it’s debt to equity ratio level, it again increases the debt to equity ratio with this recent medium note issued. As long as it’s free cashflows are still fast growing through it’s expansion and growth, I guess there is still no cause for concern on their liquidity. It seems that this group is still setting it’s sight to keep expanding and growing it’s local and especially overseas businesses. 

Next, we examine the various business divisions to compare which are the better performing ones. For the bakery division, revenues have grown at CAGR of 8.2% over the past 7 years. The EBITDA margin has fallen from 11% to 7.8% over the 7 years. The number of bakery outlets have expanded from 395 to 871. It seems that even though number of outlets have more than doubled, the EBITDA margins have not been able to be maintained for this division. 

For the food atrium division, revenues have grown at CAGR of 6.8% over the past 7 years. The EBITDA margin has dipped down from 16.8% and has since recovered back to 16.8% in FY17. The number of food atrium outlets have grown from 32 to 60 over outlets and then reduced in number to 53 outlets over the past 7 years. The dip in EBITDA margins could be due to some of the food outlets not performing well and thus the group has scaled back and probably stop operating those outlets which were not performing well and thus managed to increase their EBITDA margin back to same level as 7 years ago.

For the restaurant division, revenues have grown at CAGR of 14% over the past 7 years. The EBITDA margin has increased from 9.5% to 21.4% over the past 7 years. The number of restaurant outlets have grown from 10 to 25. This clearly shows us that this restaurant division must be their strongest performing division because CAGR for revenues grew at a rate 14% which is higher than total revenue (all divisions taken together) CAGR rate of 10.25%. Also, the EBITDA margin is the highest among all the divisions.

For the 4orth division, the revenues did not grew but remained at about same level after 7 years. EBITDA margins were negative but have since recovered to positive territory in recent two years. The number of 4orth outlets have reduced from 8 to 5. This division used to own the 5 RamenPlay outlets which have now converted to So Ramen restaurants in Singapore. Hopefully with this conversion and revamp, the new So Ramen restaurants can perform better and improve on their EBITDA margin. Belonging to this division, there is also a partnership with Song Fa Holdings to bring their Bak Kut Teh cuisine to China and Thailand. Hopefully this also pans out well and this division can improve it’s performance going forward. 

Overall, I find that BreadTalk being a F&B group operates in a naturally competitive F&B environment where the operating costs and expenses are also keen with generally low single digit net profit margins. They have to strategise and play their game well in the markets they are expanding into. It seems that their restaurant division is the strongest division. Perhaps it may be good to focus resources on expanding this division more? The more they diversify into different markets with more F&B brand offerings and partnerships, the more resilient and better will be their earnings quality going forward. 

As usual, in any of their new markets they are entering, they may need some time to adapt to stabilise and then start to grow their operations and earnings. But, with their current size of operations and number of outlets in various divisions, any potential shocks from entry into the new markets should be very manageable. It appears that they can manage their current high debt to equity ratio even while they continue to take on more debts to fund their overseas expansion. This is due to their fast growth in free cashflows favouring their expansion into the various overseas markets.

Valuation wise, on the assumption of BreadTalk continuing to grow their EPS at historical CAGR of 9.95% going forward for next 7 years, using my method of estimation, the fair value of BreadTalk share price is $2.20. BreadTalk last traded (9 Mar) at $1.94 which the market is according a CAGR of 8.27% on it’s EPS going forward. I think that if one is conservative, then current share price is already fair to buy BreadTalk shares at. I will prefer to be conservative to have a lower assumption on it’s CAGR in EPS than historical growth rates to have a margin of safety. If the share price should trade even lower than $1.94, it becomes even more attractive to buy and own the shares of this F&B group which is still fast expanding into overseas locales and also fast growing it’s owner’s earnings (free cashflows) at high CAGR of more than 20%. 

PS: BreadTalk has announced they will do a 2 for 1 share split in near future. Thus, all the fair share prices I have mentioned we just need to halve them to look at after the share split.

ThaiBev

ThaiBev - here goes my thoughts on Thai Beverage.

Thai Beverage has grown tremendously over the years from making many acquisitions to now being the largest beverage group in Thailand and also the leading beverage group in Southeast Asia.
 Thai Beverage is a company operating in four different segments, namely, Spirits, Beer, Food, and Non-Alcoholic Beverages. One of their iconic acquisitions in recent years was the acquisition of Frasers and Neave, a large beverage group in Singapore. With this acquisition, Thai Beverage has cemented it's position as a leading beverage group in Southeast Asia.quote:Jeremyowtaip

Also, Thai Beverage not only expanded in size of operations through many acquisitions made, it has also diversified it's businesses to now owning four business segments namely spirits, beers, non-alcoholic beverages and food & restaurants. Another iconic acquisition made by them recently was the acquisition of all KFC franchisees in Thailand from Yum Brand to own a substantial stake in the food and restaurant business in Thailand.

I looked at their past decade trend in financials and my first impression even before I zoomed in on the specifics of each important metric is that I am 'wowed' by their trend in financials. Let us dissect this acquisition beast which have grown tremendously over the years to look at their interesting growth in the various metrics.

I will present their compounded annual growth rates (CAGRs) of the various important metrics below for the past decade from 2007 to 2017:
Total revenues CAGR = 7.26%
Gross profits CAGR = 6.95%
Operating profits CAGR = 5.6%
Net profits (adjusted for one-off items) CAGR = 9.7%
Total assets CAGR = 9.34%
Shareholders' equity CAGR = 9.21%
Operating cash flows CAGR = 6.05%
Free cash flows CAGR = 4.48%

Next, I will present a snap shot of some more metrics a decade ago in 2007 and recent in 2017:
Cash conversion cycle (days) = 138.57 (2007) vs 97.13 (2017)
Gross profit margin = 29.51% (2007) vs 30.58% (2017)
Net profit margin (adjusted for one-off items) = 10.33% (2007) vs 12.8% (2017)
Return on assets = 12.58% (2007) vs 13.4% (2017)
Return on equity = 19.32% (2007) vs 19.6% (2017)
Debt to equity ratio = 0.45 (2007) vs 0.47 (2017)

I will now discuss Thai Beverage's trend of financials over the past decade in the few important aspects of profitability, efficiency, liquidity and leverage to see how they have performed.

First on to their profitability. We see that the total revenues, gross profits, operating profits and net profits have all grown at mostly high single digits compounded growth rates over the past decade. Thai Beverage may not be a fast grower commanding strong double digits compounded growth rates, but it has grown at a respectable high single digits compounded growth rates in these metrics. If we look at the gross profit margins and net profit margins a decade ago and now, the margins are maintained and in fact net profit margin has become better. I took a deeper look at the trend for these two profit margins and indeed the margins have maintained well over the past decade with no sudden drops in between. This shows us that Thai Beverage does boasts of a stable and resilient profitability in it's overall businesses over time.

Next on to their efficiency. Thai Beverage's return on assets (ROA) and return on equity (ROE) have maintained well one decade ago and in recent 2017. In fact, I looked at their one decade trend in these two returns metrics and they have maintained well at current levels of ROA (above 10%) and ROE (above 15%). We must realise that it is not easy to maintain the ROA and ROE in any business while it is growing it's assets and shareholders' equity through time. To be able to maintain the same level or even increase the level of ROA and ROE would mean the business has high efficiency. Thai Beverage just demonstrated their high efficiency in their businesses. If they can continue to maintain these same levels of returns, I will be even much more impressed with them.

Now on to their liquidity. We see that Thai Beverage just got much better at their cash conversion cycle. The number of days in their cash conversion cycle has decreased significantly over the past decade meaning that it takes them much lesser time in number of days to convert cash on hand into even more cash through their operations. Also, their operating cash flows and free cash flows have grown over the past decade generating more cash flows albeit their free cash flows have grown at a lower compounded growth rate. Their free cash flows over the past decade have been on average about four times their capital expenditures in any single year. They are definitely generating hell lots of free cash flows from their businesses with such relatively low capital expenditures requirement. It is no wonder with their strong liquidity and cash flows that they have the means to maintain a high dividend payout ratio of at least 50% of their net profits..

Next on to their financial leverage. Thai Beverage's debt to equity ratio has maintained at 0.45 to 0.47 level over one decade period. However, lately, there were concerns of chalking up too much debts to make four recent acquisitions (see link below). The debt to equity ratio of Thai Beverage from their most recent 1Q results ended 31 Dec is now around 1.76. Good gracious! They have just leveraged themselves higher at slightly more than 3 times their historical average leverage level. The big question now on every shareholder's mind should be whether they have just chewed more than they can swallow? Will they choke on so high a leverage or are we simply getting too overly worried?

I did an estimation of how long their free cash flows at current level (assuming their free cash flows do not increase anymore) will pay back all their debts. It will take them approximately 9.6 years to pay back all their existing debts (both short term and long term debts) by their existing free cash flows. I think Thai Beverage will likely roll over some of the debts by refinancing while repaying some debts along the way to reduce their current high leverage. If we examine their current assets versus current liabilities, current assets stand at about 79 billion Baht while current liabilities stand at about 90 billion Baht. Thus, with another 24 billion Baht from their existing free cash flows, immediate working capital needs should be adequate for them. We must not forget also that the new acquisitions will also contribute to their cash flows and create another additional buffer for their liquidity needs.

All in, I think we should not fret out on their high leverage at the moment but continue to monitor their progress at this stage of their expansion to give them time to work things out to reduce their leverage gradually which they have the strong cash flows generation and enough resources to manage this high leverage.

Valuation wise is tricky at the moment with these new acquisitions and high leverage now taken to work out how the future growth in EPS will be like. Perhaps a few more quarters will paint a better picture on how the new acquisitions will impact their earnings and cash flows for working out any fair valuation for them. At the moment, I will just observe this beverage giant going forward for new developments on their earnings and cash flows.

Article from Bangkok Post: ThaiBev riding Asean acquisition wave 

As per mentioned in my comment, I have no fair value for Thai Bev until I can see how their earnings and cash flows for next few quarters change after these recent acquisitions.

However, just for interest sake, I did an estimation of their enterprise value per share using figures from SGX Stock Facts (assuming the figures presented there are accurate). It works out to be $1.79 per share. Enterprise value (EV) is often thought of as a more robust measurement than market capitalisation of the true value of a company in the event of a take over of the company.

Thus, if we look at the current share price, it is definitely trading below the EV per share. As I have mentioned, EV though being a more robust measurement of the true value of an enterprise will only be potentially realised upon a take over of the enterprise. I will thus refrain from commenting whether the share price is really cheap now based on an ongoing business basis and not being viewed as a near term potential take over target. I will wait a while more to see how things work out for them (in view of recent changes to their leverage and substantial acquisitions made) based on this full year's results before being able to work out a fair value per share on an ongoing business growth in earnings basis.

Jeep wise, maybe not so soon for me until I can work out a fair value for them. But, I have a hunch with the current drop in their share price, it does present a very tempting bargain proposition for many investors.

Yup TII, I think they must already know how much leverage they could have managed on their risk scenario and ROI analysis for them to be so confident to take on these 4 acquisitions within a short time. Afterall, they have been on a track record of many acquisitions done before and never had liquidity issues before. But having said that, history may not be 100% a guarantee of future. I think it is better to observe their performance for a while going forward how they manage their current leverage and how the acquisitions contribute to their overall profitability, cash flows and ROI before commenting on whether they might have chewed off too much than they can swallow. As of now, I am cautiously positive based on their existing profitability, cash flows and cash level that they might not have reached a stress breaking point yet with these acquisitions. We shall see going forward.

Yup! The lower price to jeep, the better! No hurry yet until things pan out clearer for them. If already vested, no worry too as I think they are strong enough to manage this current leverage .

Cash flows are key going forward for Thai Bev. I think the huge amount of goodwill and the interest payment for the loans may drag down the reported earnings. How much will depend on how strong are the cash flows from the new and existing businesses.

Being such a large corporation, their finance team must have run through extensively on the risk scenario and ROI analysis, for them to be so confidence to buy these 4 acquisitions within a short time span. All The Best!

From TA point of view, It is still on a downtrend mode patterns.

Last Friday touched the low of 81 cents with slightly higher volume transacted which could see further selling down pressure. If the recent low of 80.5 cents has been broken down then it may likely side down towards 75 cents with extension to 70 cents.

dyodd.

StarHill Global Reit

The share price has been drifting lowered each day from 76 cents to a low of 64.5 cents.
Looks like value is creeping up !
NAV of 92.2 cents.
DPU of 4.36 cents , yield of 6.7%.

Looks like undervalue it is surfacing now!

These are my findings for Starhill Global REIT. Starhill Global REIT as they described themselves on their website is a REIT which currently has a portfolio of 11 properties used primarily for retail and office uses. Their flagship properties are Wisma Atria and Ngee Ann City located in Orchard Road of Singapore. They have grown in their portfolio from their two flagship properties to now total of 11 properties located across KL Malaysia, Chengdu China, Tokyo Japan, Perth and also Adelaide Australia. Thus, they are now diversified into different geographical regions.

For this sharing, I will do a comparison of Starhill Global REIT versus CapitaMall Trust, a very familiar Singapore large retail REIT which is also the first listed REIT in Singapore. Since Starhill Global REIT derives majority of their revenue from retail tenants and less so from office tenants, it is still a reasonable comparison against CapitaMall Trust. I will compare their compounded annual growth rates (CAGRs) in three different important metrics over the past 11 years since 2006 to 2017. These three important metrics are net property income, distributable income and value of investment properties. The exact period of comparison may differ slightly due to different reporting timings of their full year results. Nevertheless, it is still kept to not more than half a year difference in both their period of comparison.

First, we look at the net property income growth. For CapitaMall Trust, it's net property income has grown at a CAGR of 7.42% over the past 11 years from 2006 to 2017. For Starhill Global, it's net property income has grown at a CAGR of 9.2% over a similar period.

Next, we look at the distributable income growth. For CapitaMall Trust, it's distributable income has grown at a CAGR of 8.02% over the past 11 years. For Starhill Global, it's distributable income has grown at a CAGR of 7.2% over a similar period.

We look now to the value of investment properties growth. For CapitaMall Trust, it's value of investment properties has grown at a CAGR of 6.1% over the past 11 years. For Starhill Global, it's value of investment properties has grown at a CAGR of 7.29% over a similar period.

Just to have some perspective on the size of these two retail REITs currently. The value of investment properties held by CapitalMall Trust as of Dec 17 is around $8.77 billion while the value of investment properties held by Starhill Global REIT is around $3.15 billion. We can see that the latter is less than half the size of the former in terms of the value investment properties held in it's portfolio. Thus, we are comparing a much bigger retail REIT player CapitaMall Trust which is focused on a Singapore retail mall market to a smaller global retail REIT player Starhill Global which is diversified across retail mall markets in different geographical regions.

In terms of net property income growth, Starhill Global has delivered close to 2% higher CAGR than CapitaMall Trust over the past 11 years which is significant. In terms of distributable income growth, Starhill Global loses marginally in less than 1% point to CapitaMall Trust in the CAGR of distributable income. Perhaps CapitaMall Trust is slightly more efficient in growing and managing it's cash available for the purpose of distributions despite producing a slightly lower growth in it's profitability as a retail landlord as compared to Starhill Global.

If we look at the growth in value of investment properties, Starhill Global REIT has been growing at a higher compounded annual rate at about 1% higher than CapitaMall Trust. This is not surprising due to the former which is a smaller retail player as compared to the latter with room to grow faster. The larger the investment property asset size a REIT owns, the slower growth it will likely experience as it needs to look to acquire more properties and also properties of larger value quantum as it grows larger in order to match it's previous growth rates. Also, the value of investment properties may fluctuate at times and properties in different geographical regions may be subjected to different valuations depending on the property market conditions affecting property valuations in the different regions and subsequently the growth in value of investment properties. A possible question to ask here is how do the valuations and the growth in valuations of retail mall properties in Singapore compare against that in KL Malaysia, Chengdu China, Tokyo Japan and the two places of Australia that Starhill Global REIT has properties in? Is a diversified strategy in this sense better than a Singapore focused strategy?

Other metrics of comparison such as overall occupancy rate and gearing are about similar for both retail REITs at more than 90% and about 30 plus % respectively. Thus on an overall basis, Starhill Global REIT a geographically diversified retail REIT player compares favourably to CapitaMall Trust a large established retail REIT based in Singapore.

Starhill Global REIT is currently trading at $0.72 and has a $0.91 NAV per unit and a distribution yield of about 5.99%. CapitaMall Trust is currently trading at $1.98 and has NAV per unit of $1.92 and distribution yield of about 5.64%. It seems that Starhill Global REIT is currently trading at a cheaper valuation versus CapitaMall Trust even though both are comparable in terms of their growth performance on net property income, distributable income and value of investment properties over the past 11 years.

Hi Sporeshare, I attached below a link to the Straits Times article which summarises what are the current developments in Starhill Global REIT which caused their overall drop in gross revenue, net property income and DPU for most recent performance.

The reasons given were due to:
1. the effects of straight-line rental adjustments.
2. higher withholding taxes for Malaysia and Australia properties.
3. weaker contributions from offices.

4. disruption of income from ongoing asset redevelopment works at Plaza Arcade in Perth.
5. lower revenue at Myer Centre Adelaide Australia.

The CEO of Starhill Global REIT commented that their Singapore retail portfolio has remained stable while new take-ups for office space were encouraging.

Also, the asset redevelopment works on Plaza Arcade and Lot 10 will likely be completed this first quarter meaning for the rest of this year, these two properties can start to contribute to revenue and net property income etc. again.

The chairman of Starhill Global REIT also made similar comment that earlier initiatives to rejuvenate the portfolio has been timely and the REIT will be in a good position to ride any retail sector upturn.

If we look at the reasons given for the recent few quarters weaker results and the replies by the CEO and Chairman, we should ask a question. Do these guys know what they are doing and are what the various actions they are carrying out currently for this REIT and unitholders make sense to grow the distributions for the long term?

As far as I can observe, some factors were not within their control to be fair to the management. Things like straight line rental adjustments and higher withholding taxes on Malaysia and Australia properties. This maybe one of the thing to look out for when investing in overseas properties. If Singapore has a comparatively lower tax on retail properties, then perhaps a Singapore focused retail property portfolio maybe better. But then again, there maybe certain tailwinds found in overseas retail mall markets which may not be present in Singapore especially if the growth element in retail mall market in our saturated tiny red dot is going to be limited going forward.

The CEO commented recent new office take ups were encouraging. Also, both CEO and Chairman thinks that sacrificing a few quarters of lower net property income and DPU to redevelop their Australian assets at this timely moment will ensure the assets there can capture the ride in retail sector upturn. Thus, I think it is only fair to give the REIT another few more quarters to see whether there is any improvement in their metrics such as gross revenue, net property income, distributable income and DPU. This will tell us whether what the management is doing currently really is of good foresight in terms of future benefits for the unitholders. Next few quarters, there are no more excuses such as asset redevelopment works affecting their performance. Let's see whether their performance picks up from here going forward in order to make a fair opinion on them. As of now, the various reasons given are reasonable in my opinion to explain why their various metrics are performing weaker.

Straits Times article Business section: Starhill Global Reit's DPU down in Q2 

http://www.straitstimes.com/business/starhill-global-reits-dpu-down-in-q2

To ride on the return to better profitability going forward......Let me also do a comparison against Suntec REIT to see how Suntec REIT pits against both CapitaMall Trust and Starhill Global REIT for the past 11 years. Then there is also Mapletree Commercial Trust also another touted good performer which is also a retail-office hybrid landlord to compare against. I am getting quite excited here.

I have tabulated Suntec REIT and Mapletree Commercial Trust's (MCT) growth performance to compare against Starhill Global REIT and CapitaMall Trust (CMT). However, for MCT, it was only listed from April 2011 onwards. As such, I have taken only the period from 2012 to 2017, a five year period of growth for MCT to compare against the rest.

Net property income CAGR for 11 years (5 years for MCT)
CMT = 7.42%
Starhill Global = 9.2%
Suntec REIT = 6.23%
MCT = 18.7%

Distributable income CAGR for 11 years (5 years for MCT)
CMT = 8.02%
Starhill Global = 7.2%
Suntec REIT = 9.71%
MCT = 25.5%

Value of investment properties CAGR for 11 years (5 years for MCT)
CMT = 6.1%
Starhill Global = 7.29%
Suntec REIT = 9.87%
MCT = 16.56%

The current gearings for these four REITs are quite close hovering around 35% plus minus 1 to 2 % points. Thus, they are financially geared about similar levels currently after rendering their respective historical CAGR growths in the past period considered.

If we ignore the duration of period considered, clearly the winner here is Mapletree Commercial Trust (MCT). But, it would not be a fair comparison since the period considered for MCT is only most recent 5 years which the retail and office markets long way back and recent 5 years may have seen changes thus affecting the growth rates at different periods in time. The big question is whether going forward can MCT continue to grow at current CAGR? This is because the property asset size of MCT is also by no means smaller than some of the rest in this comparison. Thus, to give it some fairness even if the period of growth considered is only recent 5 years, it really has made impressive double digits CAGRs on it's various metrics on a large property asset base.

Suntec REIT seems also quite good in terms of growing it's distributable income and value of investment properties at close to 10% CAGR over the past 11 years winning over Starhill Global REIT and CMT by a large margin. The only thing is that the net property income CAGR for Suntec REIT loses out to the latter two despite having grown faster in it's distributable income and value of investment properties. Perhaps, it is worth investigating further for interest why Suntec REIT did not grow it's net property income at higher CAGR over the past 11 years? Is it a matter of difficulty in keeping property expenses low? Is it the gross revenue are not growing as fast due to generally lower rental income rates on it's properties over the years?

In conclusion, I see Mapletree Commercial Trust as experiencing strong growths in net property income, distributable income and the value of their investment properties even though their growth considered is only most recent 5 years. If it can continue at current or close to current CAGR for these various metrics over next few years, it may really become a clear winner in this segment of retail-office landlord space. Starhill Global REIT may not be a stark winner against it's peers in this comparison. However, it is definitely also not a loser trailing behind it's peers in terms of growth performance.

My picks as follows according to their growth performance.
1st = MCT
2nd= Suntec REIT
3rd (tie up) = Starhill Global REIT and CMT

Reasoning as follows: I like MCT for it's current high growth rate. I look forward to it's future developments whether it can continue to maintain the current high growth rate from it's future growth strategies. If it can do so, this is really one of the best performer in this retail-office landlord space.

Suntec REIT I like how it has rewarded unitholders well over time in terms of it's high growth rate in distributable income and growing it's property asset base through itself and also forming joint ventures with others. The only thing I would wish they could improve upon is to grow their net property income in step with their overall growth. If I am considering Suntec REIT, I will watch their future net property income closely for signs that they are growing their rental income on their properties well and also managing their property expenses more efficiently.

Starhill Global and CMT are lagging slightly behind the above two picks. If their growth going forward can be more exciting with their ongoing growth strategies, then I will upgrade my opinion on either or both of them to be on par or higher than MCT or Suntec REIT.

These are the unit price, NAV per unit and distribution yield for these four comparisons currently.

Unit price vs (NAV per unit)
MCT = $1.56 vs ($1.37)
Suntec REIT = $1.92 vs ($2.119)
Starhill Global REIT = $0.72 vs ($0.91)
CMT = $2 vs ($1.92)

Distribution yield
MCT = 5.77% (annualised based on 9M results)
Suntec REIT = 5.21%
Starhill Global REIT = 5.99% (annualised based on 1H results)
CMT = 5.64%

In terms of trading at cheap valuations, this is the ranking I give based on unit price vs NAV per unit and also their current distribution yield.

1st = Starhill Global REIT
2nd (tie up) = Suntec REIT and CMT
3rd = MCT

This proves the point that good things do not come cheap. MCT may rank as best growth performer in it's various important metrics considered earlier, it also comes with a not so cheap price tag. But, a thing worth considering is that if MCT can continue to grow at current growth rates, perhaps at an annualised distribution yield of 5.77% is still worth some nibbling.

If a bear market should come soon, at least one will now know which are the strong growth performers that can be snapped up at a rare discounted price. There are certainly more REITs to compare against these few whether in similar retail-office landlord sector or other REIT sectors and I am sure this is not the end to the comparison in this REIT universe as one may just be surprised that there maybe even better performers out there than MCT.

PS: I will hope a bear market comes soon and then shopping for REITs will be a real bargain as discounts will be everywhere even for excellent REITs. My target buy-in prices will be the lower the better for these few REITs mentioned. {

jeremyowtaip}

some exchange discussion:

Gearing ratio is average relative to other similar players. Though I don't like to see it go up to max 45%.

But of cos if it's needed, they could still gear up for acquisition or even raise rights for funding, happy to participate as long as its yield lucrative.

To me most impt is the reit manager, a strong track records are impt.

To buy a retail reits under 1x PB is hard to find in current market environment and of course we cannot compare to capital mall reits, investor pay a premium for them.

For me buy a below 1x PB is always nice to have with a 5-6% yield.

Yup! For REITs, we look at their gearing. The allowed limit REITs can geared up to by MAS ruling is maximum 45% for credit rated REITs and 35% for non-credit rated REITs. Gearing is calculated by taking the total borrowings divided by total assets expressed as a %. These gearing limits have been revised to current allowed limit. It used to be even higher in the past. Thus, a lower gearing limit ensures REITs maintain a safe reasonable debt level and do not over leverage excessively which can be risky.

For Starhill Global REIT, it's gearing is currently close to 35% which is comparable to many REITs in Singapore too. There are some REITs with even lower gearing but around 30% to 40% is where you will find most REITs tend to maintain their gearings.

35.3 % gearing is normal. Other reits as high as Kepple Reit 38.7%, Viva Trust 39.8%, Soilbuild Reit 40.6%, MLT 37.8% etc..

Wilmar Intl

Wilmar Intl - NAV $3.304, Rolling EPS 0.306, PE 13.721.
Final dividend of 7 cents for FY 2017. Together with Interim dividend of 3 cents. Total dividend is 10 cents. Yield is 3.2% at $3.12 per share.

The recent share buying back by company director of 2.44m share at $3.103 per share & 79300 share at $3.18 per share may likely be a boost of confidence..

I have jeep small lots at $3.12 today..I am buying for the future growth and may be the listing of their China ipo.. dyodd.

Reply to @Sporeshare : Ah.....This is the golden big question! If Wilmar is really pushing for an IPO of their China operations in Shanghai exchange, I think can look at other similar commodity giants that are already listed in Shanghai exchange to see where are they trading now in their price to earnings multiple. That will give us a good gauge what types of multiples we are potentially looking at. Surely, we cannot expect Wilmar to list their China operations at too low a gap from their peer competitors on Shanghai exchange. If that is the case, why still push for IPO listing if the valuation it would fetch is not attractive at all? If want to unlock value by the IPO, might as well unlock it well.

I attached an article from TheEdgeSingapore which an analyst pegs a target price of $4.10 based on an attractive valuation now, strong crushing margins so far in FY18 and the anticipated listing of its China unit. You can read through the article to see the rationale put forth by the analyst. In any case, we are not trying to be precise in forecasting our target price. The analyst puts forth a possible listing of the China unit at up to 23 P/E ratio on the Shanghai exchange. 

Based on good common sense and my previous sharing, Wilmar's share price definitely has all the good catalysts as we can see currently going for it to reach a higher price level. My previous estimated fair price of $3.18 is based on a worst case scenario. Unless we think Wilmar will eventually fail in all accounts of the prospected catalysts in having weaker overall performance this year and anticipated listing of it's China unit falls through, then worst case scenario may pan out. Thus, the downside as I can see on probability terms is low while upside has high probability of happening. 

Therefore, if you ask me, is $4 you quoted likely to reach in future? My answer is even if not reaching $4, I think the probability of the share price rising higher from current level in view of all these potential future catalysts is surely there. How about a $3.60 price in future based on my "anyhow" guess? I think that will be already at least a good perk of 11.5% share price gain if it really happens by this year end. $4.10 will be even more "shiok" with a potential return of 26.9% if it really happens within one year's time based on the analyst's target price in this article by TheEdgeSingapore! I think it is a case of making either more or lesser returns from this bet here on Wilmar. As long as one does not chase at higher price if it should chiong but instead has already accumulated cheap in advance, one should be falling into the case of making more or lesser returns on this bet hopefully within one year's time frame.

https://www.theedgesingapore.com/wilmar-kept-add-valuations-strong-crushing-margins-and-upcoming-listing-china-unit

Wilmar International. The overall feel I have of this large agricultural international group is that it already has extensive and deep degree of reach in it's agricultural and related businesses in terms of many geographical regions they are in (about 50 countries as reported on their website with about 500 manufacturing plants worldwide) and also the entire value chain they are serving from upstream plantation and harvesting to mid stream processing and refining to downstream distribution and sales of their final products to consumers.

On a one decade time frame, Wilmar International has compounded it's revenues at a CAGR of 10.3% which is respectable and not surprising considering how significant this group has grown over the years. It's operating income has compounded at a CAGR of 8.1% over the past decade. It's net income has compounded at a CAGR of 7.7% over the past decade. It's EPS has compounded at a CAGR of 4.1% over the past decade. Again, this looks like a moderate to slow grower over the past decade just slightly better than SATS that we looked at previously in terms of the growth in it's profitability.

If we look at their past 5 years trend for the revenue, operating income, net income and EPS, there was a dip in all these metrics after FY12 onwards which only recovered in their FY17 results near to FY12 levels.

qUOTE : I checked up the palm oil historical prices and indeed it confirmed my thinking that this dip over the past 5 years which only recovered recently was probably correlated to the drop in palm oil price over the past 5 years. Currently, palm oil price has recovered from the lows but still it is now only two-thirds of the last peak price reached in 2012. The big question is whether the palm oil price will continue to recover towards the last peak price reached in 2012 going forward or continue to hold around current price and do a ding-dong in price, sometimes up and sometimes down but no clear up direction for the next few years? This I do not know as I think only insiders of the palm oil industry will know the dynamic factors of global supply and demand affecting palm oil prices. I consider this as outside my circle of competence. But looking at palm oil historical prices, it sure looked quite volatile to me and hard to grasp.{

jeremyowtaip}

As such, the various trend on their returns on assets (ROA), returns on equity (ROE) and returns on invested capital have also dipped over the past 5 years and have almost recovered in the latest set of FY17 results to close to same returns as FY12. However, the various returns are still single digits returns in %. For example in FY17, ROA is now around 3% while ROE is around 7.6%.

 If we stretch further backwards to compare their current returns against one decade ago which the various returns were higher in FY07 of ROA around 6.7% while ROE was around 13.8%, we can clearly see that Wilmar is now not a high return beast as it used to be a decade ago. It seems that it is not easy to attain the same returns as before anymore now that Wilmar has outgrown so much that at it's current size it cannot generate the same returns on assets and shareholder equity as before. Now again, the big question is how will the various returns going forward in future years be like? Will it remain around same level as now or become lower? Size is one thing which makes it increasingly difficult to generate the same level of returns. What if they can grow their revenue and profits further in future years should palm oil prices recover? Maybe there could be a chance to improve their returns though going back to double digits returns likely will be difficult. This would mean they have to increase their current net profits by another approximately 120% at current size of total assets for example to go back to previous decade ago record of ROA. A jump in 120% increase in net profits at current level of USD 1.22 billion for WIlmar next year based on core businesses and not through some non-recurring disposal of assets? One must be joking to ask the dog to jump over the high wall!

The financial leverage of Wilmar has been steady over the years managing their debts level and balance sheet well. Cash flows wise though can be volatile seems to still generate free cash flows at least enough to pay a dividends which has grown over the past decade.

Their CAGR for EPS over the past 5 years has been about 0% even though 10 years CAGR was 4.1%. I will factor in a best case scenario and a worst case scenario in estimating their fare share price value taking into account all the above mentioned details of this comment. If we make a best case scenario of Wilmar continuing to grow it's current EPS at CAGR of 4.1% going forward, then using my method of estimation, their fare share price will be $4.25. However, if we make a worst case scenario of a CAGR of 2% on their EPS going forward for next business cycle (7 years), then their fair share price will be $3.18.

This is mind-blowing! It all depends on the performance of Wilmar going forward. If they can parallel their historical compounded growth rates on their EPS, then it will be a bonus to buy their shares now at cheap cheap share price! However, should they grow at a lower forward CAGR about somewhere half in % terms on their EPS, then we are exactly getting Wilmar now at fair value $3.18 and it will not be cheap now to buy! This really requires an investor's forward opinion on how Wilmar will perform for next 7 years cycle to decide whether to put in his or her stake at current price. Will this be a value buy or value trap? Hmm

Wilmar International has since diversified their commodity businesses over the years into business segments including tropical oils, oilseeds and grains, sugar and biofuels and other investment businesses. This horizontal diversification and vertical integration tapping at all levels of the value chain has allowed Wilmar to grow to it's current humongous size despite being in a general low profit margin agricultural commodity businesses.

I forgot to mention another important piece of bright spot for Wilmar! I read up in it's most recent financial report that they are considering looking at an IPO listing of their China rice, flour and related consumer products operations in China.

http://sbr.com.sg/agribusiness/news/wilmar-eyes-china-expansion

 But things are still in the early stage of assessment. If that were to happen, imagine the craze of investors rushing in for this potential spin-off of their China businesses which will unlock value for shareholders. Then, buying at current share price is now cheap if we factor in this potential unlocking of value from such a future proposition which will increase their profits and returns by some substantial jump if that were to happen some time down the road. It may happen as early as 2019 based on a write-up by Singapore Business Review. Hmm....I am now starting to get somewhat interested after knowing this.

Some info on Shree Renuka Sugars I found out. It is the largest raw sugar producer in India and Brazil. As what the others have pointed out, the management was too aggressive in their overseas expansion bet in South America which didn't go well chalking up huge debts. This is because after year 2012, the sugar prices dropped from their peak reached and also correlated to Shree Renuka's operating losses from 2013 to now as sugar prices remain lower and now only recovered to two-third of the peak price reached in 2012.

Wilmar has this chance to acquire a controlling stake in Shree Renuka Sugars because the latter chalked up so much debts from their aggressive expansion to South America market which didn't pan out well. Thus, during this current debt restructuring exercise, Wilmar can take this opportunity to acquire a controlling stake in the equity of India and Brazil largest raw sugar producer Shree Renuka Sugars.

quote :I will need to examine the financial strength of Wilmar whether they can take on this acquisition without risking themselves too much. But, the offer to acquire a controlling stake in Shree Renuka Sugars by itself sounds to be a wonderful move. If sugar prices should continue to recover to previous peaks in 2012 and earlier, Shree Renuka Sugars may be able to return to better profitability again. The return on invested capital for Shree Renuka Sugars before they went downhill in 2013 are still good. If Wilmar after acquiring Shree Renuka Sugars can turnaround this largest sugar producer in India and Brazil successfully, it will be very good for Wilmar to further expand their sugar business significantly.

PS: Shall investigate whether Wilmar is strong enough to take on this acquisition without stressing their balance sheet too much. Get back to you again.

I did an estimation on the required amount for Wilmar to make the acquisition of shares in Shree Renuka Sugars based on regulations of Securities and Exchange Board of India after Wilmar converted it's convertible preference shares to common equity shares and triggered the regulations of the exchange to make an offer to acquire up to 26% of the emerging share capital of Shree Renuka Sugars. The cash outlay needed to acquire up to 26% of the emerging share capital of Shree Renuka Sugars is approximately USD 124 million. Wilmar has about USD 2.96 billion in cash and equivalents plus other bank deposits. It's current ratio stands at around 1.15 based on FY17 financial report. This acquisition requires very small cash outlay for Wilmar as compared to the cash and bank deposits it now has. However, after the acquisition of a controlling stake in Shree Renuka Sugars has been completed, I am not sure how much remaining debts of Shree Renuka Sugars Wilmar will carry as some of the debts owed to the lenders have been converted to equity in Shree Renuka Sugars.

I checked up Shree Renuka Sugars balance sheet as at Sep 17. They carried a total of about USD 1 billion worth of total liabilties on their balance sheet. With some of the borrowings of Shree Renuka Sugars converted to equity, the total liabilities should be lesser than this figure. Thus, with Wilmar's existing USD 2.96 billion in cash and equivalents plus bank deposits and if we consider Wilmar's current assets of total about USD 22.6 billion, Wilmar definitely has much more than enough resources to cover the liabilities of Shree Renuka Sugars even after Wilmar completes this acquisition of a controlling stake in it. There is no concern at all in acquiring a controlling stake in Shree Renuka Sugars for Wilmar. Instead, Wilmar would have gotten this India and Brazil largest raw sugar producer under it's wings.(jeremyowtaip)

But having said that, those few stocks we discussed about like Wilmar and Thai Beverage are good stocks to hold for the longer term as there are future potential catalysts in them. The potential listing of China operations for Wilmar which will unlock value for shareholders and may re-rate share price higher. The future long term contributions to earnings and returns from the new acquisitions for Thai Beverage will outpace the cost of their initial investment. The market position of Thai Beverage has strengthened as a leader in this Southeast Asia region with these acquisitions. The fair share price of Thai Beverage I cannot determine at the moment. But, in future the direction of the share price can only go one way which is up as the new acquisitions start to increase the overall profitability and cash flows further while the debts get slowly reduced over time.

For SATS, it is a steady slow grower. Just need a bear market to grab it cheap at fair value or lower than fair value and see the price will bounce back and trade higher than fair value due to so many favourables surrounding it which may continue for a very long number of years ahead.