Far East Orchard Limited aka Orchard Parade Holding

[Squirrel]

With the wave of EQDP lifting the boats and sparking a rally in the Singapore equity market, it's time again to look for the overlooked ones that were left behind.

With the Centurion Accommodation REIT listing today, I find it a befitting time to discuss the company Far East Orchard. Far East Orchard is a deeply discounted real estate company with an exposure to UK PBSAs. The Centurion Accommodation REIT carries such similar purpose built student accommodation in their portfolio.

https://www.thesquirrelsdrey.com/post/fa...ising-tide

Please feel free to discuss about the pros and cons of this particular company. I believe in the power of pooling ideas from a diverse crowd.

Can FEOR follow in the footsteps of Wee Hur and Centurion Corporation to monetise their balance sheet? Would equity analysts be able to pick up on this name before the company makes concrete actions towards such monetisation?

[weijian]

Based on my own notes, I looked at FEO about 1-1.5years ago. At the risk of some of my views been "expired, here are some of them:

(1) The peak of FEO share price came in 2012 when it did some value unlocking moves - First monetizing its controlling stake in Yeo Hiap Seng, and then using the proceeds to pay a special dividend (cash and YHS dividend in specie) and reduce debt to a single digit gearing level. Next, the rest of this proceeds were re-invested into hospitality and PBSA assets in the 2010s. Therefore, FEO has a history of value unlocking and it is not far fetch that history repeats itself.

(2) But before value is unlocked, it is trapped. As history would have it, post unlocking value, the share price -50% over the next decade and the book discount simply kept increasing. Maybe that is why Morph Investments has also appeared (owns ~0.6-0.7%). Sometimes, VBs look up to Morph Investments as a minority investor as a beacon. But I think it is more nuanced than that. By default, the appearance of Morph Investments is a red flag for me (it is my null hypothesis unless I can prove it wrong). That said, I am not saying Morph Investments isn't a great investor.

(3) The controlling shareholder Far East Org has taken up scrip all these years. In FY14, it own 59.85% and as FY24 annual report indicates, it has 63.85% ownership. By issuing new shares at a huge discount to NAV, NAV mathematically reduces. Looking at Far East Org's website, they have 4 listed entities - FEO, FEHT, YHS and SinoLand. Besides FEHT (Far East Hospitality Trust), the rest of the 3 provides scrip option for the dividend and Far East Org takes it. The ED/Group CEO Tang is largely paid a fixed fee and has zero skin in the game. Ditto his predecessor from 2014 till 2020.