HupSteel

[valuebuddies]

I am trying to convince myself that Hupsteel is a gem, but I still could not believe so unless the near-dead steel business is recovered. Some of the buddies here are simply too attached to the fact that the properties are significantly undervalued, but have someone trying to work out how much additional rental income would it get post-redevelopment?

Assuming that both Kim Chuan and Genting Lane properties are redeveloped, the GFA would be approximately 120k sqft based on the information available on its AR. Assume that NLA is 85% of GFA, then it would be 100k sqft. Assuming 100% occupancy and at better rental rate of S$3.00 psf, gross rental income per year would be S$3.6M. Net of tax and operating expenses, S$2.5M left? This is the best case scenario without taking into consideration of the lost of income from the existing properties from Kim Chuan and Genting Lane.

In fact, S$2.5M is merely 0.4c EPS.

During good years, steel business alone could generate more than 2c EPS, during the bad years like 2013, just 0.4c EPS.

For me, Hupsteel is a buy only if it could turn around the steel business or if it is willing to dispose the properties to realise the values.