27-02-2015, 10:56 AM
Sounds good in theory, but doesn't apply often in practice. Lenders have incentives too, and so do the agents of the lenders. Whether an asset is ultimately productive is sometimes a matter of perspective as it requires a bit of crystal ball gazing, and incentives do distort the perspective of the lenders and their agents; just look back at the most recent sub-prime crisis for an example.
(27-02-2015, 10:00 AM)CityFarmer Wrote: [ -> ]Interesting definition on debt. I reckon all debts are borrowed with a good story e.g. productive asset, otherwise lender will not let go the money, right?
Unfortunately the story might be beyond borrower control, especially so amid the volatility and uncertainty nowadays...
Good or bad debt, should be determined by the structure of the debt, rather the way it is used, IMO
(26-02-2015, 10:52 PM)Curiousparty Wrote: [ -> ]Well said.
A lot of analysts/forummers just methodically compute the debt-equity ratio and then jump to immediate conclusion that CES's gearing ratio is high, without going one step further to analyze the true nature of debt.
(26-02-2015, 10:40 PM)daddy14m Wrote: [ -> ](25-02-2015, 09:49 AM)BlueKelah Wrote: [ -> ](25-02-2015, 09:30 AM)westin1 Wrote: [ -> ]Wonder why so weak, results so good yet cant fly... thought this is an undervalued gem but sigh... a pity...
This is called priced in, everyone who is buying property stocks will know about CES and TOP of Alexandra. A bumper 44c EPS and only 6c paid out.
Market is forward looking. Besides expectations of earnings is not very clear on the Aussie side. Had TM gone ahead and to complete on time, stock would definitely have moved more.
not forgetting despite the TOPs, CES debt and gearing is still skyhigh. depending on how interest rate trending as per USA FED, this could pose a big risk.
Change of CEO with such good performance is also quite a big thing. Sure the company can give any good sounding excuse they want but could it signify things in the company not so good such that they had to "golden handshake" first?
For me I classifying the debt as good debt and bad debt.
Bad debt is you loan money to purchase into some unproductive assets:
1. pay urself high salary
2. excess share buy back that aim to push the share price
3. invest to some unproven projects
4. any other bad things that unable to service the loan - u just name it
So, potential bad debt is mainly Australia properties. However, worst scenario just earn less money but not loss money.
Good debt is the one that invested on productive assets:
1. bring more recurring income with profit and able to service the loan
2. projects that bring more profit
CES is very good to manage the debt too. They don't aim to maximize the profit and thus sale it fast which mean offload the risk to buyers (I am sorry to CES buyers if this saddened you, however don't worry, CES never take all the profit...).
Good debt is like Alexandra Hotel & CES centre. Both got recurring income and high capital gain (especially the hotel).
Alexandra Mall & Junction 9 also considered as good debt. Selling and completing fast. No risk to pay the debt.
Do let me know if you spotted any bad debt that I had missed out..