Global Investments

[l0nEr]

---

Aircraft: Sold forward at USD25,890,000

http://info.sgx.com/webcoranncatth.nsf/V...30081E0E3/$file/27_20111212AnnouncementOfTheForwardSaleOfTheCompanyTwoBoeing757-200Aircraft.pdf?openelement

According to the announcement, the sale of the two aircrafts would result in a net accounting gain of approximately US$2.65 million for the financial year ending 31 December 2013.

I am interpreting it as follow:

Sales proceed estimate = (Book Value – Debt) at 30-April-2013 + US$2.65 million

(Book Value – Debt) as at 30-June-2012 = S$30.48 million – S$15.614 million =S$ 14.9 million. By 30th April 2012, another 10 months, it will be around S$ 14.0 million, I guess.

Therefore, sales proceed estimate is about S$ 14 million + US$ 2.65 million = about S$ 17 million.

Please comment. Thanks.

I believe both of you are correct in principle - just that IoNer hasn't taken debt repayment into account.

I don't think we will see a decline in the net book value of the aircraft as your calculations has intended ie $14.9 mil to $14.0 mil. This is due to GIL retaining a small portion of the profit to reduce its liabilities ie depreciation expense < debt repayment.

B/S as of 30 June 2012:

Aircraft: $30.5 million
Debt: $15.6 million
Equity: $14.9 million

Based on FY 2011 results, the annual depreciation is $1.3 million while loan repayment is approx $1.8 million. Since the completion date is on 31 April 2013, we can extrapolate these figures by 10 months forward.

Proforma B/S as of 31 April 2013:

Aircraft: 30.5 - 10/12 (1.3) = $29.4 million
Debt: 15.6 - 10/12 (1.8) = $14.1 million
Equity: $15.3 million

This assumes USD/SGD rates remains constant. Small issue really since the numerical difference is barely US$1.0 million. Please correct me if I am mistaken.

What will be more intriguing is how STAM will use the sales proceeds and cover the sudden loss of cash economic income amounting to US$1.32 million from these investment !

Yepp, i considered the debt portion on the liabilities side of the Balance Sheet and did not computer them together when calculating the gains.

But instead of amortizating the loan, i thought it would be better to discount the USD25,890,000 back to the current balance sheet date, so as to compute the NAV for the fund at the Balance Sheet Date.

As of June 2012:
Cash: SGD78,674,000
Aircraft: Sold forward at USD25,890,000 <---- Discount it back from April 2013 Value.
Fly leasing: 1,051,010 shares x USD13.04 stock price as of 17 Aug = USD13,705,170
Debt: SGD15,614,000 <---- Kept at the 30 June 2012 Value.
Other liabilities: SGD739,000
Using just purely the above liquid assets at USD1=SGD1.25, NAV is already 0.135per share.

So the end question no matter what, is what the fund intends to do to invest the money? Without any concrete plans, it does not seem like they will be able to maintain the dividend payout. Though i still think the fund is trading at a significant discount to its more 'tangible' NAV.