(15-02-2016, 09:01 AM)dydx Wrote: [ -> ]It appears there are a few holes here: real estate investment in Dalian, equity investment in SET-listed Kaset Thai International Sugar Corporation PCL, investment in "Supramax” bulk carrier “Hai Jin” held under 30%-owned Gold Hyacinth Development Pte Ltd, 19% investment stake in Tuas South dormitory.
How do you define "holes"?
- Dalian project: A lemon. There are 9 phases in this project, 1st 6 phases were launched and sold, phase 7 was in the midst of launching before the writedowns begun, and now phases 8 and 9 are kept aside for the next 2 years at least.
It seems KW is a casualty of the blow up in real estate in the tier 3 and 4 cities.
The 1st tier cities are unaffected and in fact, have even modestly appreciated
- KTIS: Surely this cannot be defined as a "hole"? Their initial investment got IPOed, KW received $50.2mil equivalent, (which has now been whittled down due to the falling price of KTIS), but this is held under their BS as an asset for sale. It doesn't require any CF, probably the only mistake is not selling out when KW had the chance to. KTIS listed at 10 baht and appreciated >20% immediately after listing.
KW sold some shares but its miniscule. They didn't forsee the subsequent collapse in price.
Which is IMO a bit disappointing because from my earlier calculations then, the PER was >30, and by several simple parameters, it just seems pricey to hold on to those shares. (I've indicated in a much much earlier post then, that I thought it's pricey and management should sell now, so there's no hindsight bias here)
- Bulk carrier: KW does not provide a break down, the earnings are parked under "share of associate results". However, since this also includes the earnings from all the other associates, particularly the skywoods condo project, I have extrapolated the results from it's JV partner, hock lian seng.
By subtracting the results (proportionally. since HLS owns 50% while KW has an effective stake of 20%), one can get an approximate idea on how its associates are doing. My verdict: the bulk carrier is either barely breaking even or operating at a loss.
- SI property (Bangkok): no visibility on this. Again, I suspect results are mediocre at best, since it's parked under the share of associate results too
- Dorm: hole?? It hasn't even started operating yet, and one cannot tell its results right now. From my understanding of dorms, I'd expect a regular linear depreciation over the expected lifespan of the dorm, with regular CF once the dorm reaches max occupancy, which can take as short as 3 months, to a year.
On the positive side, their core M&E business is doing well. both revenue and gross profit has increased, again +ve CF generated every quarter.
On the negative side, KW's management are terrible investors. I think they got it in their head after having had some success with KTIS, and subsequently tried to keep deploying cash generated from their CF generative core business. The smug replies to analysts after the KTIS listing shows a fundamental flaw that investors shouldn't make, but is practically impossible to avoid: being emotional.
I think it's ok if they deploy cash in related businesses like the dorm, but the bulk carrier is totally unrelated. It seems like the M&E industry is one that is stable, but provides little room for further growth.
Which is why many M&E players try to expand eventually to be full fledged developers, but doing so is a problem as well as their clients now become their competitors and nobody likes sending business to their competitors.
Share price hasn't really budged much since the negative news of the write down, I don't think I'm the only one who knows the Dalian writedowns are over.