30-08-2014, 10:47 PM
Far East Hospitality Trust's 2H results @30/6/2014 had reported average daily rate of $249 and occupancy rate of 87% for its 4 service residences (comprising Regency House @Penang Rd, Village Residences @ Clark Quay & Robertson Quay & Hougang).
Using FEHT's average daily rate of $249 and occupancy rate of 87% & input for Louis Residences Havelock, the results are as follows:-
Annual rental = $249 x 30 days x 12mth x 96 units x 87% occupancy = $7.5m per year
Assume profit margin 33% = $2.5m per yr
Corporate tax = 17%
Net profit after tax = $2.05m (i.e. monthly= $171k)
Comments:-
a) Using financial calculators on $171k per mth for 21 yrs compounded at 2.5% interest = $56.7m (future value).
b) Invested capital of Louis Residences = (purchase price $23.5m + refurbish cost $23.9m) = $47.4m (present value) at 2.5% compounded interest in 21 yrs = $79.6m (future values).
© comparing a) and b) shows that rental is unable to recoup its invested capital, mainly due to short remaining lease of 21 yrs.
(d) Lease top-up to 99yrs are normally granted for redevelopment cases. That could be the reason why approval by SLA is taking so long because it is refurbished only not redevelopment. The Havelock MRT station was aligned some time back so this cannot be the reason for holding back approval by SLA.
e) They hv spent more than the purchase price on refurbish cost ($23.5m vs $23.9m) without first securing prior approval for lease top-up which I find it reckless. Total invested capital of $47.4m is equal to its market cap. today.
Despite my negative comments above I still feel Pollux is a good buy on prospective RTO.
Another question I like to ask is this. Why didn't Nico exercise the warrants that expired on March 2013 (about 144m write-off). If it is so difficult to acquire new shares from open mkt purchase, he could hv exercised the warrant even if it cost 12c each, assuming RTO is his game plan.
Pl do your own research. My views may be wrong.
Using FEHT's average daily rate of $249 and occupancy rate of 87% & input for Louis Residences Havelock, the results are as follows:-
Annual rental = $249 x 30 days x 12mth x 96 units x 87% occupancy = $7.5m per year
Assume profit margin 33% = $2.5m per yr
Corporate tax = 17%
Net profit after tax = $2.05m (i.e. monthly= $171k)
Comments:-
a) Using financial calculators on $171k per mth for 21 yrs compounded at 2.5% interest = $56.7m (future value).
b) Invested capital of Louis Residences = (purchase price $23.5m + refurbish cost $23.9m) = $47.4m (present value) at 2.5% compounded interest in 21 yrs = $79.6m (future values).
© comparing a) and b) shows that rental is unable to recoup its invested capital, mainly due to short remaining lease of 21 yrs.
(d) Lease top-up to 99yrs are normally granted for redevelopment cases. That could be the reason why approval by SLA is taking so long because it is refurbished only not redevelopment. The Havelock MRT station was aligned some time back so this cannot be the reason for holding back approval by SLA.
e) They hv spent more than the purchase price on refurbish cost ($23.5m vs $23.9m) without first securing prior approval for lease top-up which I find it reckless. Total invested capital of $47.4m is equal to its market cap. today.
Despite my negative comments above I still feel Pollux is a good buy on prospective RTO.
Another question I like to ask is this. Why didn't Nico exercise the warrants that expired on March 2013 (about 144m write-off). If it is so difficult to acquire new shares from open mkt purchase, he could hv exercised the warrant even if it cost 12c each, assuming RTO is his game plan.
Pl do your own research. My views may be wrong.
(22-08-2014, 06:23 AM)kelvesy Wrote: [ -> ]Hope this is considered conservative, if not, acceptable rates and profit margins.
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