Was wondering if there are any pros here that can help to answer a question that I cant seem to figure out.
For Metro's FY14Q2, they announce that Nordevo Investments Limited (“Nordevo”), a 50% held jointly controlled entity of Crown Investments Ltd, a wholly-owned subsidiary of Metro China Holdings Pte Ltd, has entered into a Share Purchase Agreement and Deed of Novation (together, the “SPA”) to increase its 63.3% equity interest in China East Investment Ltd (“CEI”) to 100% (the “Investment”). CEI’s wholly-owned subsidiary, ECM Property Holding (Tianjin) Co Ltd, owns EC Mall at Zhongguancun, Haidian District, Beijing, PRC. Metro China Holdings Pte Ltd is a wholly-owned subsidiary of the Company.
The SPA provides for Nordevo to acquire 36.7% of the issued shares of CEI at approximately US$7.7 million, and to acquire the related shareholders loans of approximately US$36.3 million. The total consideration is US$44 million (approximately S$55.8 million).
Based on the NTA of CEI included in the latest announced consolidated accounts of the Metro Group as at 30 June 2013, the equivalent of a 36.7% interest would approximate US$12.0 million (S$15.2 million).
However, in the latest FY14Q3 financials, there is a "recognition of $19.1 million of negative goodwill, being the excess of the Group’s share of the net fair value over the cost of the investment, on acquisition of an additional interest in the jointly controlled entities owning EC Mall."
My question is, since the price paid for the acquisition ($44mil USD) is much HIGHER than the NTA of 12mil USD, there is a positive goodwill incurred.
How can they book a 19.1mil SGD NEGATIVE GOODWILL in the next quarter?
How can the value of EC Mall increased so substantially in 1 quarter?
Why is there a negative goodwill? I can understand if the price paid is BELOW the NTA, thus negative goodwill is present but this is the reverse situation.
Any pros care to explain?
This is one stock that one must have leap of faith. I once used to own a chunk of it hoping that they will take the opportunity to unlock shareholders' wealth - after they sold their Metro City.
However, Jopi has bigger plans with the cash hoard and went on to invest further with Top Spring, JV to develop with Top Spring and even came back to JV in Singapore @ Redhill.
Dividends are not bad but seriously not fantastic - possibly sufficient to keep loyalty amongst some shareholders.
The discount to book value has always been there and that could be due to their holdings in China properties - typically short duration (like ind REIT listed here) and doesn't really depreciate with the running out of lease duration.
Vested interests are better off gauging for themselves if their own interests are aligned with management's objectives.
Vested
Odd Lots
GG
(12-03-2014, 07:56 AM)greengiraffe Wrote: [ -> ]This is one stock that one must have leap of faith. I once used to own a chunk of it hoping that they will take the opportunity to unlock shareholders' wealth - after they sold their Metro City.
However, Jopi has bigger plans with the cash hoard and went on to invest further with Top Spring, JV to develop with Top Spring and even came back to JV in Singapore @ Redhill.
Dividends are not bad but seriously not fantastic - possibly sufficient to keep loyalty amongst some shareholders.
The discount to book value has always been there and that could be due to their holdings in China properties - typically short duration (like ind REIT listed here) and doesn't really depreciate with the running out of lease duration.
Vested interests are better off gauging for themselves if their own interests are aligned with management's objectives.
Vested
Odd Lots
GG
Yes, there has always been a substantial discount to book value, I think such a discount is typical to most property developers (metro derives 90% of its profits from property), except for the rare few.
A lot of their profits are also "lumpy" as they come from non recurring gains such as selling off certain properties after it has appreciated, booking in negative goodwill such as the most recent case etc.
This makes it inaccurate to view Metro financials on a single year basis, but on a multi year analysis, these should be included.
As for not distributing the cash hoard after the sale of Metro City, I guess it depends on how you value the management's capital allocation abilities. If you think Jopi's investments in TSI, ECmall etc are prudent moves, I dont see why its a worry.
My personal view is that too many people are looking out for dividends or some cash distributions of some sort. As a business owner myself, I see the value of retaining cash in the business for reinvestments or expansion. Distributions should only be done if there are no viable opportunities in the near future.
Of course, if you are looking at the short term, you would want as much cash payout as possible. Whether that's good or bad for the business then becomes a minor factor.
When the company continued to be very generous to JO for years despite heated arguments in AGMs, I sold all mine.
(12-03-2014, 12:34 AM)GFG Wrote: [ -> ]Was wondering if there are any pros here that can help to answer a question that I cant seem to figure out.
For Metro's FY14Q2, they announce that Nordevo Investments Limited (“Nordevo”), a 50% held jointly controlled entity of Crown Investments Ltd, a wholly-owned subsidiary of Metro China Holdings Pte Ltd, has entered into a Share Purchase Agreement and Deed of Novation (together, the “SPA”) to increase its 63.3% equity interest in China East Investment Ltd (“CEI”) to 100% (the “Investment”). CEI’s wholly-owned subsidiary, ECM Property Holding (Tianjin) Co Ltd, owns EC Mall at Zhongguancun, Haidian District, Beijing, PRC. Metro China Holdings Pte Ltd is a wholly-owned subsidiary of the Company.
The SPA provides for Nordevo to acquire 36.7% of the issued shares of CEI at approximately US$7.7 million, and to acquire the related shareholders loans of approximately US$36.3 million. The total consideration is US$44 million (approximately S$55.8 million).
Based on the NTA of CEI included in the latest announced consolidated accounts of the Metro Group as at 30 June 2013, the equivalent of a 36.7% interest would approximate US$12.0 million (S$15.2 million).
However, in the latest FY14Q3 financials, there is a "recognition of $19.1 million of negative goodwill, being the excess of the Group’s share of the net fair value over the cost of the investment, on acquisition of an additional interest in the jointly controlled entities owning EC Mall."
My question is, since the price paid for the acquisition ($44mil USD) is much HIGHER than the NTA of 12mil USD, there is a positive goodwill incurred.
How can they book a 19.1mil SGD NEGATIVE GOODWILL in the next quarter?
How can the value of EC Mall increased so substantially in 1 quarter?
Why is there a negative goodwill? I can understand if the price paid is BELOW the NTA, thus negative goodwill is present but this is the reverse situation.
Any pros care to explain?
Just to add on the above, this is in the FY14Q3 results:
"There have been no material variances with forecast or prospect statements issued for the period
being reported on other than the impact of the one-off recognition of $19.1 million of negative
goodwill on the acquisition of an additional interest in the jointly controlled entities owning EC
Mall on 15 October 2013 in 3QFY2014. Information regarding the fair values of certain assets
relating to the acquisition for the purpose of calculating the negative goodwill only became
available in late January 2014."
Within 1 quarter, the reported NTA for that stake has been changed from 12mil USD to now over 80 plus mil SGD
What material change or "information regarding this fair value" of the EC Mall asset can account for such a rapid increase?
Why the sudden price surge?
(21-04-2014, 10:40 AM)kayhian Wrote: [ -> ]Why the sudden price surge?
No idea
No news releases from the company
But they are due to release Q4 results soon
I am guessing someone who is privy to the results is doing some buying, either directly or indirectly. Happens all the time.
Expecting stellar results with a good dividend when it is released.
<vested - 276 lots>
(21-04-2014, 11:28 AM)GFG Wrote: [ -> ] (21-04-2014, 10:40 AM)kayhian Wrote: [ -> ]Why the sudden price surge?
No idea
No news releases from the company
But they are due to release Q4 results soon
I am guessing someone who is privy to the results is doing some buying, either directly or indirectly. Happens all the time.
Expecting stellar results with a good dividend when it is released.
<vested - 276 lots>
more like rotational interests amongst asset based companies that is trading @ steep discount to book value / RNAV. There is simply too much $ floating around in the market.
it is a deeply undervalued stock to begin with. Long overdue for some price correction.
Add the fact that metro pays decent dividend in may/june.
My only concern is the impact of the prince charles crescent project on the result of metro.
Vested
(21-04-2014, 11:28 AM)GFG Wrote: [ -> ] (21-04-2014, 10:40 AM)kayhian Wrote: [ -> ]Why the sudden price surge?
No idea
No news releases from the company
But they are due to release Q4 results soon
I am guessing someone who is privy to the results is doing some buying, either directly or indirectly. Happens all the time.
Expecting stellar results with a good dividend when it is released.
<vested - 276 lots>
Price surged due to increase in shareholdings by substantial shareholder Ngee Ann Developments to just above 10%