Chip Eng Seng

[mechu]

2 cents worth,we have some listed property companies trading at 40 percent discount to nav,I hope no one got carry away,what chip made is legacy profit,going forward there are not much things to look forward,in my personal view it is fairly priced

Sorry but I don't think it's right to apply the same discount to RNAV (or any discount at all for that matter) across the entire sector. All things being equal between 2 developers (number of projects/units and margins), I would apply a very different discount if one of them has only 50% of the units sold and the other with 90% sold. It's all about the perceived risks in realizing their projected value. Put simply, the RNAV becomes the NAV for a developer that has sold out all their projects. Would you still apply a discount in this case?

For CES right now, I think it's reasonable to consider all their launched projects as fully sold apart from Fulcrum (technically Nine Residences and 100 PP still has some unsold units but they are almost there). Fulcrum is still an unknown but it's not an overly large project (111 units to clear) so I am not worried yet. Believe they have some scope to cut prices without making a loss even in current market conditions.

For projects yet to launch, there is only one - Fernvale. Land cost for the 2 parcels are reasonable and I foresee that they will be able to price it at 920-950 psf and be able to move all units. This will still mean a decent EPS of around 12c based on my estimates.

For me the discount to be applied to CES is to the unknown of Fulcrum and Fernvale.

I am not considering Tower Melbourne for now because I already removed it completely from my RNAV estimate some time ago. My RNAV estimate including recurring income and construction contribution is ard 1.50 btw.

In the interest of disclosure, I have been vested in this counter for last 3 years plus even through the depth of the eurozone sovereign debt crisis when it fell to close to 30c I remember. I actually weighed taking profit at various points but this CES kept surprising me with compelling developments and I held on and even continued accumulating up till 80c. Ironically, the closest point of me getting out was when they paid 789 psf for the alexandra hotel site back in Dec 2011 lol. I was thinking then who in the right mind will think it's a good idea to develop a hotel there but who knew that they managed to recover the full development cost and partial land cost from just selling the commercial units alone.