Sing Holdings

[bargainhunter]

Actually the comparison with Berkshire has been discussed many times in other threads.

The main issue is TRUST. Is the management trustworthy with cash pile and what is their historical track record. That's why a shell company with cash trades ~80% of cash cause management could pay out say 10% of NAV as directors' fees and salary or equivalent annually and suck it dry (which is why SGX require company with no business to delist within a period) ; not to mention even if liquidate there are lawyers' fees etc

That's why it is better to receive cash dividend (in addition to improved shareholder's cashflow) than share dividend or bonus (I'm sure many will disagree when the stock is hot); or to issue bonds after paying up your previous one rather than rollover. It's the signaling of the cash flow and management's opinion of OPMI, rather than a cash hoard that's sitting there year in year out that OPMI can't touch or worse becomes suspicious.

The Structure in A-B-S is important to OPMI.

Applying this to Sing Holdings, the company's 10 year track record has been to pay out on average 25% of earnings as dividends.  The remaining 75% has been retained in the business to grow its property development business, which is capital intensive.  As a result, they have never had to issue any bonds and in the latest annual report, the interest rate on their loans were between 1 and 1.6%.  The cash is not exactly hoarded as they have been using it in their daily business to both reduce interest expenses and to maintain a strong balance sheet should opportunities arise.  Neither have they been reckless in their land bids due to their strong balance sheet.  Over the last 6 years, they have only 2 projects and both projects are earning/likely to earn above average margins compared to other property developers.